Big Challenges Confronting Small Credit Unions

The entire CU movement is building a broad base of support to help small CUs survive and thrive.

March 1, 2012


It’s tough to fight economies of scale. Huge factory farms are replacing small family farms. Malls are replacing Main St. We’ve become a nation of Wal-Marts, chain restaurants, and national retailers. Fading fast are the neighborhood grocery stores, delicatessens, bike shops, and hardware stores.

Small credit unions face the same daunting challenges. Many of them have merged with larger credit unions to offer their members a wider array of products and services. Other small credit unions are surviving by doing a few things extremely well.

Today, approximately 40% of all U.S. credit unions have less than $10 million in assets, meeting NCUA’s definition of “small.” CUNA defines “small” as those with less than $35 million in assets. Nearly two-thirds (63%) of all credit unions would fit within CUNA’s definition.

Whatever the definition, small credit unions face enormous challenges in the current marketplace and economic environment. Some of the more pessimistic observers go so far as to say the challenges are insurmountable. But others see a brighter future.

“Small credit unions fill a niche large credit unions just can’t fill,” says Frank Michael, president/CEO of $21 million Allied Credit Union, Stockton, Calif., and chairman of CUNA’s Small Credit Union Committee. “Large credit unions do a great job of providing multiple services efficiently. Small credit unions excel at member service because we know our members. There’s a need in the marketplace for both.”

The entire credit union movement remains committed to ensuring that small institutions thrive. One strategy is collaboration.

Driven to collaborate

The slogan “We’re better together” sums up the purpose of the Southern California Credit Union Alliance (SCCUA), says Jon Hernandez, who founded the group in 2008. He’s president/CEO of three California credit unions: $8 million asset City of Downey Federal Credit Union; $25 million asset Mattel Federal Credit Union, El Segundo; and $58 million asset CalCom Federal Credit Union, Torrance.

Hernandez says SCCUA exists for two reasons. “One is to reduce operating expenses,” he says. “The second is to do things we couldn’t afford to do otherwise, some of which now are being mandated.”

About 60 credit unions belong to SCCUA. Membership is open to credit unions of all sizes, but most members have less than $100 million in assets. To belong, members pay $50 per meeting or $200 per year.

The format of the quarterly meetings includes a morning executives-only forum at which participants discuss concerns and devise ways to collaborate. “Our meetings follow the ‘Las Vegas Rule,’ ” Hernandez says. “What’s said here, stays here. We want to be able to talk openly.”

Vendors join the meetings in the afternoons. Participating vendors have agreed to provide discounts to SCCUA credit unions.

Collaboration possibilities among members are numerous: electronic funds transfer processing, loan processing, conducting due diligence, and marketing. One of the major successes so far is partnering with an insurance company to lower the costs of employee benefits. “Our credit unions have saved from $1,200 to $25,000, depending on their number of employees,” Hernandez reports.

SCCUA members also gather for two free training events each year, and this summer will mark the group’s first conference, where attendance will be open to members’ volunteers, as well as nonmember credit unions. “It will be a sort of SCCUA expo,” Hernandez says, “so people can come see what we do.”

Next: On a mission

On a mission

After a small New York City credit union closed in August 2010, Joy Cousminer jumped into action. She called an emergency meeting that resulted in the formation of an alliance of about 30 small community development credit unions, called We Care. This alliance earned a 2012 Dora Maxwell Social Responsibility Community Service Award.

“We decided to create an organization that would serve and inspire small credit unions in our area,” says Cousminer, president/CEO of $23 million asset Bethex Federal Credit Union in the Bronx.

We Care members gather monthly for meetings that bring in experts on various topics: new products, corporate reorganization, risk management—“virtually everything our credit unions are interested in,” Cousminer says. Most participating credit unions are church-based and have assets ranging from $200,000 to $7 million.

“Our goal is not to maintain the status quo,” Cousminer says, “but to help credit unions grow.” She encourages them to pursue new revenue streams, such as selling money orders and buying participations in Small Business Administration loans. Bringing in more income enables these credit unions to extend business hours, hire part-time bookkeepers, or take other steps to attract new members and improve operations.

For example, one Brooklyn credit union faced repeated subpar examiners’ reports, and only one of four board members was actively overseeing the credit union. After an embezzlement was discovered and the credit union suffered a robbery, failure seemed imminent.

But after working with We Care advisers for seven months, the credit union has turned it around. It now has seven involved board members, an active supervisory committee, a part-time paid bookkeeper, and improved policies and practices. Its most recent annual meeting drew 43% of its roughly 180 members.

This success inspires the 86-year-old Cousminer and her We Care colleagues. “We feel we can save any credit union that wants to be saved,” she says. “If you do it once, you can do it again.”

A marketing boost

A CEO’s day at a small credit union is consumed by operations, finances, serving members, and putting out fires. “Marketing—and the development of marketing plans—often get put on the back burner,” says Sandi Carangi, director of credit union marketing services at the Pennsylvania Credit Union Association (PCUA).

As a result, Carangi is starting to hear from CEOs of small credit unions that NCUA examiners are looking for marketing plans as an indicator of small credit unions’ viability and sustainability. She’s leading a new program at PCUA—launched in October 2011—that helps small credit unions meet that need.

To design the program, Carangi, the 2010 CUNA Marketing & Business Development Council Business Development Professional of the Year, drew on her years of experience conducting marketing workshops for NCUA’s Office of Small Credit Union Initiatives (OSCUI).

“Our program offers a cost-effective way to give NCUA examiners what they’re looking for,” she says, “without small credit unions having to hire additional staff.” The focus is primarily on credit unions with less than $100 million in assets. These credit unions pay fees for services on a sliding scale according to asset size.

“I’m finding that every credit union we work with is different,” Carangi says. “But a common thread is that credit unions need help with their marketing plans.” 

Credit unions can choose a six-month or 12-month contract, or a per-project arrangement by the hour with a 10-hour minimum. Carangi works closely with the credit union from start to finish to develop marketing plans, carry out the plan’s objectives, and measure the return on investment.

“I suggest marketing strategies that are low-cost and not time-consuming,” Carangi says. “I’ll advise, for instance, that instead of spending X dollars here, they can spend half that much and get the same return.”

Next: Augmenting visibility

Augmenting visibility

In Michigan, the collaborative spirit is fueling an effort to create a shared storefront brand among credit unions, led by the Michigan Credit Union League. “The idea is to create a strong, Desjardins-like brand for credit unions of all sizes in Michigan,” says Dave Adams, the league’s president/CEO.

Small credit unions especially will benefit from shared branding, Adams notes, because they often lack marketing dollars. In a survey the league conducted before launching the shared-branding consortium, 44% of respondents said they’d consider this kind of joint effort. That figure rose to 69% among credit unions with less than $100 million in assets.

“People are intrigued with the concept,” Adams says, “and show a willingness to give it a try.” CUcorp, a league subsidiary, is subsidizing the expenses of adopting a shared brand.

Even with shared branding, participating credit unions keep their own name and culture. But participants must adhere to predetermined quality standards for member service, signage, and products. Collaboration also could include offering common products, such as Save to Win and Invest in America, that have proved popular among Michigan credit unions.

Adams points out that shared branding is only one of the league’s initiatives to support small institutions, which comprise nearly half its 319 affiliated credit unions. Other efforts include dues reductions and rebates and free strategic planning facilitation. It also purchases copies of CUNA’s Credit Union Environmental Scan for all small credit unions.

Shared branding gets underway this year with a pilot project in Jackson, Mich. Plans are to have one or two more pilots in place soon in other parts of the state. “It takes pioneers to get this rolling,” Adams says. “We hope to hit a good critical mass of credit unions within the next five years.”

Bridging gaps

Small credit unions often find it difficult to toe the regulatory line, and it’s no secret that resentments can surface. People who run small credit unions sometimes feel examiners simply don’t “get” how their institutions differ from larger ones.

Meanwhile, NCUA faces a difficult balancing act: fulfilling its duty to ensure the financial soundness of the entire credit union system, while also seeing to it that small credit unions remain viable.

The agency’s OSCUI attempts to deal with this dilemma. “Our office jumps into the breach,” says OSCUI Director Bill Myers. “We don’t have examination authority. We’re here to offer assistance and advice to small credit unions” and thus help them stay on examiners’ good side.

Myers is no stranger to the challenges small credit unions face. He founded Alternatives Federal Credit Union, Ithaca, N.Y., in 1979 and led the institution until 2007.

During his tenure, the credit union grew to a $50 million institution serving 8,700 mostly low-income members. It now has $72 million in assets. He also recently served as interim CEO at Santa Cruz (Calif.) Community Credit Union, where he reorganized staff, redesigned the product portfolio, and refocused the credit union’s mission.

OSCUI’s services fall into four main categories:

  1. One-on-one help;
  2. Loans and grants;
  3. Partnerships and resources; and
  4. Training.

Myers reports that his office trained about 5,000 credit union staff and board members last year. The 2012 schedule includes a full-day workshop to be presented at 20 different sites nationwide.

“We cover the issues we hear about from the field—the issues that are most important to small credit unions and where examiners see them slipping,” Myers says.

One-on-one help comes in the form of OSCUI’s economic development specialists, who have extensive credit union experience. “Our office has the largest consulting group inside the industry for small credit unions, and we’re free,” Myers says.

He also believes OSCUI gives small credit unions an opportunity to be heard when, for example, NCUA makes decisions about its examination process or designs new regulations. “This office has all the elements to be a strong voice for small credit unions throughout the movement,” he says. “Not that I expect that voice to carry every single day, but it will be part of the decision making.”

Next: Speaking up

Speaking up

Another vital piece in the small credit union support system is CUNA’s Small Credit Union Committee. “CUNA wants to make sure small credit unions’ needs are heard and addressed,” says Committee Chairman Frank Michael. “That’s where the committee comes into play.”

Topping the committee’s agenda are four key issues, often called the Four C’s:

  1. Compliance, or regulatory burden;
  2. Collaboration;
  3. Corporates; and
  4. Continuity, or succession planning.

Not only does the committee draw CUNA’s attention to small credit unions’ concerns, but it also has established a dialogue with regulators. “We’ve had face-to-face meetings with NCUA Chairman Debbie Matz that have been very productive,” says John Graham, committee vice chairman and president/CEO of $59 million asset Kentucky Employees Credit Union, Frankfort. “We don’t go in criticizing and whining, but we say here’s an issue and here’s a potential solution. She’s been open to listening.”

Also on the committee’s radar is NCUA’s restructuring of corporate credit unions. Small credit unions rely heavily on corporates for their back-office functions. “We have to make sure those functions will still be provided at a cost small credit unions can bear,” says Michael, who also serves on CUNA’s Corporate Task Force.

This year, the committee is shining the spotlight on collaboration. A new website (
collaborate) will be a repository of credit union collaboration practices, which others can then replicate. To encourage people to submit their ideas, the committee is introducing a new national collaboration and cooperation award. (Visit the website for details.)

“CEOs of small credit unions are so busy meeting the day-to-day needs of their membership that it’s hard for them to focus on ways to collaborate,” Graham says. “We want to heighten awareness of collaboration and make it easier to do.”


  • CUNA:
  1.  2011-2012 Credit Union Environmental Scan
  2.  Training resources for small credit unions