COMPTON, Calif.-All those stories about consumers flocking from banks to credit unions are just that-stories. Or at least that's the case for two small CUs in the Golden State.

Melia Keller, CEO of $24.5-million, 5,700-member Mid Cities CU, said her credit union barely felt a ripple either on 2011's Bank Transfer Day or in the six months since. Mid Cities originally was a schools-based CU but converted to a community charter in 2008.

"We did not get much of anything," she said. "We put an ad in the paper and got one family. It mostly was the large credit unions that benefitted from that effort. The major press mentions large credit unions by name, but does not mention small credit unions as an option."

Mary Freeman, CEO of $60.2-million Prospectors FCU in Diamond Bar, Calif., told a similar tale. The SEG-based credit union is not open to the entire community, but it has an underserved charter for more than 100 ZIP codes in its service area. It has 5,725 members.

"In 2012 we have not seen any significant growth," she said, noting in July 2011 the CU merged with West Covina FCU, which brought in some new members. "We do notice people coming in from time to time, telling us they are unhappy with Chase taking over from Washington Mutual. Looking at our new accounts, from September through December 2011 we opened about 25 accounts each month. From January to April 2012, we have had about 25 accounts per month. Of these, 40% to 45% are community members and the rest from our SEGs."


The Marketing Challenge

Both Keller and Freeman said marketing their respective CUs is a challenge. Freeman said Prospectors recently has had the added distraction of a core processor conversion, which has taken away SEG marketing time from its staff.

According to Keller, small CUs need to be more cooperative in their marketing efforts.

"We should band together so we have a voice, perhaps do some cooperative advertising," she suggested. "Really, credit unions as a whole should do cooperative national advertising."

Keller said lending at Mid Cities is "doing well" in 2012. "As is the case with many credit unions we are hurting for auto loans. And in this environment we need to be doing more loans, not just staying even."

One new product Keller said has shown promise involves placing a GPS tracking device on a car, allowing the CU to remotely shut down the vehicle if a payment is missed. The program is offered to members with poor credit or a restored repo.

"We are in a primarily low-income area, so this comes up," she said. "The program requires 10% down and GAP insurance. Members can get loans for cars and we have the security. We are hoping this will help us get out auto loans back up. It is tough with interest income dropping from investments and loans, but we are making money this quarter so we are happy."

Mid Cities is privately insured through American Share Insurance, Dublin, Ohio. Data available from ASI show had net income of $60,187 in the first quarter of 2012. In 2011 it had a loss of $275,813. In 2010 it lost $376,001. In 2009 it had a loss of $868,997.


Members Wanted (If They Will Borrow)

At Prospectors FCU, Freeman said she we would like to have member growth, "if they would want loans."

"We are closing a number of dormant accounts we picked up in the merger, but we cannot shrink our way to greatness," she said. "We would like more new members, but we do not have a branch on every corner. The large credit unions got a lot more members out of Bank Transfer Day because they have more branches. We do have a good reputation among our members, which helps a lot. We appear at a lot of events in and around the area. We are trying to track how many people are coming to us from events versus finding us on the Internet."

In addition to the compliance burden on small CUs, Freeman said they face a great deal of competition. She said small CUs simply have to find a way to get their marketing messages out, either to a community or to SEGs.

"It is hard," she said. "The rules and the regulations make it difficult. We have been focused on converting our core processing system, but we plan to focus on loans. With that said, all credit unions are focusing on loans and it is difficult right now. The local economy is picking up a little bit, but our members are still cautious about taking out loans. We have a lot of small businesses and blue collar workers, and many people lost their jobs. Fewer people are asking for reduced loan payments, which is a good thing, but we have a long way to go."

In March 2012 Call Report Prospectors FCU had $42,873 in net income. Its net worth ratio was 11.77% ("well capitalized").

In 2011 it generated $406,302 in net income prior to assessments. It paid $93,836 to the Corporate Stabilization Fund, leaving it with $312,466.

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