Dave Koch likens gaining deposit share to running a “Tough Mudder,” complete with metaphorical mud and razor wire.
“But it’s fun, right?” Koch asks attendees at the 2019 CUNA Finance Council Conference in New York City.
The credit union movement faces tightening liquidity due to higher loan-to-share ratios and lagging deposit growth, says Koch, managing director, advisory services at Abrigo.
“We became complacent on deposits after the Great Recession,” he says. “We ate up deposits in a heartbeat after the last recession.”
While many predict a recession to occur during the next two years, he’s not convinced that will bring the related “flight to quality” surge in deposit growth previous recessions have brought.
“Who will supply this money?” he asks. “The only way to get money right away is with rate. We haven’t had price increases that get members excited.”
Koch offers six keys to effective funding:
1. Develop a plan for deposits. Determine how you’ll grow deposits on a continuous basis.
Most credit unions lack such a plan, he says. “How can we not have a plan for our supply chain? This should be a focus for your strategic plan this year.”
2. Build the strategy. Successful financial institutions compete for deposits via scale or strategy. Credit unions can’t compete with large banks on scale, so they should focus on strategy.
He suggests focusing on “early savers,” or those under age 40.
3. Be flexible to changing conditions.
4. Assign accountability. “Whose job is this? Who manages deposits in your shop? You need someone to be accountable for this,” Koch says. “We all have loan departments with processes. That’s the output. Who handles the input?”
5. Implement the right measurements. “It’s better to have poor measurements and try than to not try at all,” he says.
6. Act now. “You need a plan for deposits.”
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