When John Graham goes to the grocery store, chances are he’ll pick up milk, eggs—and quite possibly an auto loan.
“I’m always amazed how people will come up to you in the store and say, ‘I have this financial problem and I need some help,’ ” says Graham, president/CEO of $63 million asset Kentucky Employees Credit Union in Frankfort, and chairman of CUNA’s Small Credit Union Committee. “Or you’ll run into a member who’s buying a car, and before you know it, you’ve got a new car loan when you just went to the store for groceries.”
This closeness and familiarity with members is par for the course at many small credit unions—and a characteristic that’s hard to duplicate once a financial institution reaches a certain asset threshold.
That personal touch is one of the few advantages small credit unions have over their larger brethren. Flexibility is a close second.
Graham likens large credit unions to battleships and small credit unions to jet skis. “It takes a long time to turn a battleship around, but a jet ski can turn on a dime,” he says, adding that his analogy isn’t a criticism of large credit unions, just an observation that it’s harder to maneuver when an organization has more moving parts.
Take marketing, for example. “If you have a staff of five and you want to roll out a new campaign, it’s easier to do so than it is in an organization with 1,000 employees and several branches,” Graham says.
Still, he doesn’t discount the many challenges small credit unions face. On average, small credit unions lag their larger counterparts in the areas of loan and membership growth, asset quality, and earnings.
Many small credit unions simply lack the resources to invest in new products and services, technology, employees, and to navigate an increasingly complex regulatory landscape.
Compliance issues are especially troublesome, Graham says. “We’re not a big shop, but we’ve had to hire someone just for compliance. Her position is an added expense for the credit union, but she’s essential to our success.”
The answer to small credit unions’ lack of resources lies in identifying their needs and creating partnerships to help meet those needs, Graham says. “You can’t outsource due diligence, but there are many ways credit unions can work together. We need to ask small credit unions what they need and get to the root of the problem. Once we do, there are a lot of credit unions that are willing to help.”
Kentucky Employees, for example, provides compliance, lending, and other assistance to a nearby credit union. “When that credit union has a compliance issue, they call our compliance person. If they have loan questions or need other assistance, we’re always willing to share any knowledge or staff we can. A lot of medium and large credit unions are willing to help, but they might not know what’s needed. We need a conduit to bring small and large credit unions together.”
Technology can be a great equalizer among financial institutions, Graham says, adding that his credit union is a fast follower when adopting new technology.
“We might not be the first on the block to offer a certain service, such as remote deposit,” he says. “That takes a lot of money, research, and development to pull off. But once a service has proven itself and members want it, we figure out a way to get it.”
The credit union sets aside a certain percentage of the budget each year for technology development, Graham says. “Our members don’t necessarily know or care how big we are as long as we give them the products and services they want. You can do that through technology.
“Make sure you’re relevant to your members and that your members know you care for them,” he adds. “Take advantage of any training opportunities or offers of assistance from other credit unions, your league, CUNA, and NCUA. That way, it won’t matter who moves in down the street— whether it’s Bank of America, Chase, or whoever.”
NCUA Chair Rick Metsger told CUNA that the agency has begun the process of consulting industry practitioners to assist in the transition as credit unions work to implement the new current expected credit loss accounting standard.
CUNA’s inaugural Fair Lending Workshop took place last week in Denver, leading to valuable discussions on compliance with the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act and more.