CHICO, Calif.-Not all small credit unions in the Golden State are struggling to attract new members, as STAR Community Credit Union, here, and San Luis Obispo-based SLO CU are welcoming new faces.

Joe Kelly, CEO of $35.2-million STAR Community, told Credit Union Journal the difference before and after 2011's Bank Transfer Day is noticeable.

"We are seeing good membership growth," said Kelly. "On a monthly basis, going back to 2010, we typically added 25 to 30 new accounts per month. In October 2011 and the five months since we have opened an average of 40 accounts per month."

Kelly said STAR had significant "momentum" for a while, but it is "tailing off a little bit." It currently serves 3,159 members.

"The good thing is the new norm is higher than it was before," he said. "The whole Occupy movement increased awareness of credit unions, and our advertising is striking a chord with people that we are an alternative to banks. We do billboards plus we place ads in weekly news publications."

Since November, STAR's deposit balances have gone from $28.9 million to $31.4, Kelly said. "That is about 10%, and much higher than normal for such a short period."


Positive ROA

Suzanne Leedale, CEO of $32.8-million SLO CU, which serves 2,077 members in the beachfront town of San Luis Obispo, said membership growth, "for the first time in a long time," was positive 1% in the first quarter.

"We do onboarding surveys to determine where they are hearing about the credit union," said Leedale. "We wanted this information, because we knew in the second quarter we would be launching a marketing campaign that is more robust than in the past. What we are finding is many people are coming back to the credit union-they previously had accounts but closed them, and now they are re-establishing their membership. A few people have indicated we have a good location in downtown, while others say they are more aware of credit unions and wanted to join one."

STAR's Kelly said it is possible for a small credit union to pick up growth in the current climate, but acknowledged his community is "more in tune with social movements" than other locales.

"There are about 100,000 people in the community and 200,000 in the county, and this includes a college population that is socially aware," he explained. "In a metropolitan area credit unions may not get the same results. The people here really support local credit unions and community banks."

One thing that isn't unique to the market is deposit growth is outpacing loan growth. Investments are "not bringing in much," he said, which is putting "stress" on STAR's net worth ratio.

"Our emphasis has not been on deposit growth, but asking people to bring their loans to us from other institutions," he said. "We have an auto loan promotion in which we guarantee to save people 2%, if they meet conditions. If we can't beat it, we give them $100. This will run through the summer. If we get people in the door, we try to cross-sell them a checking account."


It's No Secret

Kelly's advice to other small CU's echoed the old real estate saw about the importance of location, location, location.

"Loans, loans, loans," he said. "Try to get more auto loans, or offer a variable-rate home equity product. Some credit unions should even look into short-term first mortgages for people who want to have their mortgages paid off when they retire."

In its March 2012 Call Report, STAR reported $6,467 in net income. Its net worth ratio was 9.22% ("well capitalized").

In 2011 it reported $231,744 in net income prior to assessments. It paid $68,383 to the Corporate Stabilization Fund, leaving it with $163,361.

In 2010 it had $266,266 in net income, prior to assessments, which reduced its net income to $205,471. In 2009 it had $202,384 in net income before paying $163,295 to the NCUSIF, which left it with $39,089 in net income.

SLO CU's Leedale said she believes in the future of small credit unions, despite the challenges.

"I think it is possible for small credit unions to succeed," she declared. "The larger ones get economies of scale, but the smaller credit unions get the economies of scope. We re-evaluated our products and services to make sure we were not offering things that members did not want."

Lending continues to an issue for SLO, which derives much of its income from investments. Leedale attributed the paltry loan demand in part due to a lack of awareness of the loans it offers.

"We need to do a better job of letting members know," she said. "We are still using social media for outreach. Not many people join because of social media, but it is a good additional channel for communication with existing members."

SLO CU is one month into a television, radio and newspaper campaign, which Leedale said is designed to point out the differences between a "big box" bank and a credit union. She said the multi-media campaign is "piggybacking" on the Move Your Money and Bank Transfer Day efforts.

Themes covered by the ads' messages include traditional credit union fundamentals, she explained.

"We say credit unions are democratic, of the people and for the people," she said. "There is a secondary message that we can save people money. We are keeping the ads fairly general, not focusing on one product. We have never done this type of advertising before, and we are hearing a lot of member response. People see the ads and they are giving us feedback."


Keeping Costs Down

To keep costs down, Leedale wrote the copy herself, kept production simple, and the credit union received production space for free from a company that assists non-profits. Total production expense was $2,000 for the TV spots and just $300 for the radio ads, plus the cost of air time.

One hurdle SLO CU has to overcome is it remains a SEG-based credit union, which Leedale pointed out limits the effectiveness of its advertising.

"We are weighing opening up our field of membership," she said. "At least two people have contacted us about joining, but they were not eligible."

In its March 2012 Call Report, SLO CU had $36,287 in net income prior to assessments. It paid $12,338 to the Corporate Stabilization Fund, leaving it with $23,949. Its net worth ratio was 15.38% ("well capitalized").

In 2011 it reported net income of $258,621. It paid $66,730 to the corporate stabilization fund, leaving it with $191,891. In 2010 it posted $299,046 in net income prior to assessments, $232,356 after assessments.

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