Operations

What CU Leaders Need to Know for the Coming Year

Planning should include mobile, antibank sentiment, awareness, earnings, and staffing.

June 07, 2012
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The economic recovery remains slow but is gaining momentum.

That brings some good news for credit unions, who can expect stronger earnings for the first time in many years, according to CUNA’s newly released 2012-2013 Credit Union Environmental Scan. Allowances for loan losses should decrease as lending demand picks up and credit quality improves.

The wave of new members spurred on by Bank Transfer Day means a greater emphasis on your onboarding efforts and member retention strategies, too.

The E-Scan identifies 10 issues as critical for credit union strategic planning discussions. In the first of a two-part series, the first five topics are examimed including: mobile banking, antibank sentiment, consumer awareness, earnings rebound, and staffing.

Monitor the implications of these issues, and develop strategies to address them in the coming year.

Mobile banking

Mobile banking is going maintstream, but it won’t completely replace online banking. Mobile banking is listed as the top technology priority for credit union CEOs. If your credit union doesn’t currently offer mobile banking, it should be on your priority list for the upcoming year.

About 50% of the mobile devices in the U.S. are smartphones. Members will want to use PCs and online banking at home for basic services such as budgeting and money management. But they’ll also want access via mobile devices when they’re traveling.

Your mobile banking system should integrate with your online banking system to ensure a consistent member experience between channels.

Antibank sentiment

Trusted Strategic Planning Resources

Although budgets are tight, forcing tough spending decisions, strategic planning is not the place to take short-cuts. The future of your credit union depends on it!

Gain all the resources you need with the Credit Union Environmental Scan (E-Scan) — the trusted resources for credit union strategic planning for more than 25 years.

E-Scan Report: Purchase a copy for all board members and senior management so everyone comes prepared and focused.

PowerPoint Presentation: Prepare detailed PowerPoint presentations by selecting from over 100 slides filled with content and graphs from the E-Scan Report.

DVD: Use this fast-moving 35-minute overview to present the insights of the E-Scan Report in a concise way that is sure to stimulate discussion.

E-Scan Research & Advice Portal.

E-Scan Newsletter: Receive strategic updates each month!  Stay up-to-date on industry developments and trends by subscribing to this newsletter.

Visit our E-Scan website for more information.

Bank Transfer Day brought credit union onboarding strategies to center stage. After years of anemic membership growth, most credit unions were ill-prepared for the influx of new members. About half of consumers’ attempts to open and fund credit union accounts online fail, according to Javelin Strategy and Research.

Regardless of whether your credit union is focusing on new or existing members, your product penetration could be better. Your members still do a lot of their financial business with your competitors.

It’s time to convince new and existing members to move beyond solitary account relationships to multiple relationships.

Consumer awareness

Among a disturbingly large portion of the U.S. population, credit unions are still the best-kept secret. About 37% of all nonmembers are “not at all familiar” with credit unions. And that percentage skyrockets to 69% when you ask consumers younger than age 25.

This doesn’t bode well for long-term membership or loan growth. Increasing your credit union’s awareness, especially among young nonmembers, must be a top priority.

Earnings rebound

Return on assets will increase to 0.9% (after stabilization expenses) in 2012 and 2013. Lower loan loss provisions will increase net income in 2012, as credit unions let their allowance for loan loss accounts decline.

Loan delinquency and charge-off rates will fall as job growth accelerates. Provisions for loan losses as a percent of assets will fall to 0.4% in 2012—below the 0.43% recorded in 2007.

NCUA assessments should equal nine basis points (bp) of insured shares in 2012 (an approximate 10 bp improvement over 2011) and loan growth should help boost asset yields slightly.

Modest growth and stronger earnings will mean capital-to-asset ratios will increase from 10% today to approximately 11% by year-end 2013, approaching the record level of 11.5% set in 2006—the year before the onset of the recession.

Staffing

Layoffs, cutbacks, salary freezes, and other belt-tightening measures have left a legacy of low postrecession morale. As essential as these painful measures were a few years ago, they’re making it difficult to motivate employees today.

There could be consequences—lower productivity, less engagement, poor member service, and an exodus of top talent—if you don’t offer incentives and take workplace stress down a notch or two.

Fewer employees quit their jobs in the first nine months of 2011 than in any comparable period in the past 50 years. Expect to see a slight increase in employees changing jobs during the months ahead, but turnover is expected to remain low until hiring picks up.

In the second part of this series the final five topics are examined including: lending, governance, membership growth, technology, and compliance.

Resource

CUNA: 2012-2013 Credit Union Environmental Scan: 100-page report, DVD, PowerPoint, Strategic Planning Guide, and monthly newsletter.

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