Accomplishing More with Less Many major retailers are closing stores because of poor performance, but credit unions (CUs) are excelling with fewer institutions. There were 206 fewer federally insured credit unions as of 9/30/18, but total assets increased 5.6%, to $1.44 trillion. Credit unions’ popularity and service excellence are also reflected in the 4.9 million new members, comparing the years ending Q3 2017 and Q3 2018, and now totaling 115.4 million. The number of deposits increased 4.5%, to 219.6 million. Total loans were $1.02 trillion as of 9/30/18, a 9.5% increase from 9/30/17, or an additional $89.2 billion. Gross income for the industry was $73.0 billion, a 13.0% increase, and net income was $13.6 billion, a 30% increase.

2019 Won’t Be Quite As Easy Despite significant increases in most major performance categories through 9/30/18, just 48% of CU executives said they were optimistic about 2019, compared to 77% for 2018, because of economic headwinds, a stalled housing market, etc. Although the Federal Reserve has paused its interest rate increases, the lack of inventory in housing (new and existing homes) will make the mortgage sector more competitive, so refinancing for home equity loans may be a more robust market. Increasing their share of deposits will also challenge CUs during 2019, as more than half of CU executives cite this as their top concern, according to a January 2019 Cornerstone Advisors survey.

Excellent Loan Performance Of the $1.02 trillion in total loans as of 9/30/18, real estate loans had the largest share at CUs, or 49.3%, a total of $789.9 billion. First mortgages’ share was 40.9%, or $424.6 billion, and all other real estate loans, 8.4% and $87.0 billion. Auto loans (see below) had the second-largest share, or 35.2% ($365.3 billion). Smaller categories were unsecured credit card, 5.8%/$59.9 billion; other unsecured loans, 4.1%/$42.5 billion; student loans, 0.5%/$5.0 billion; and other loans, 5.1%/53.2 billion. Although the average loan balance during Q3 2018 was $15,269, the delinquency rate for all loans was 67 basis points, compared to 79 during Q3 2017. The delinquency rate for fixed real estate loans also decreased during the 12-month period.

Thriving with Auto Loans With consumers still flocking to auto dealers and buying more expensive light trucks (SUVs, CUVs and pickups), auto loans at credit unions increased 10.8%, or $35.8 billion, to a total of $365.3 billion for the year ending Q3 2018. Q3 2018 was also the first quarter CUs’ auto-loan market share exceeded 20%, or 20.6%, specifically. By comparison, CUs’ share of all mortgages was 8.4%, and all credit cards, 6.0%. Loan delinquency rate for new vehicles declined from 0.42% for the year ending Q3 2017 to 0.39% for the year ending Q3 2018. Used auto loans’ delinquency rate also declined during the same period, from 0.79% to 0.74%.

New Target Audiences Millennials are much more likely to engage with credit unions with proactive content marketing programs than their traditional marketing messages. Utilizing the mobile channel, and especially short videos, is the best method. Credit unions would also be wise to target multicultural audiences, as they account for 61% of the increase in credit union membership since 2014. In addition, approximately 50% of this audience is in the middle- income category, which is optimum for CUs. According to a 2018 report from CUNA Mutual Group, Latinx American and African American consumers are 10% more likely to view their financial accounts at least once per day than Caucasian Americans and Asian Americans.

More Effort Required in the Mobile Channel Although a joint October 2018 study from CO-OP Financial Services and Mastercard found 87% of credit unions executives responding to the survey said they offer some services on a mobile app, more than 10% of credit unions do not have a mobile app. Mobile banking is a financial service more consumers expect from their bank or credit union, but just a bit more than 40% of credit unions offer card-control features, such as activating a card or declining specific transactions. It’s safe to assume credit union customers are frustrated by the lack of card control, as fewer than 10% of credit unions have been able to convince members to use this service, but they could improve the use of this service by actively marketing it digitally.

Advertising Strategies With African Americans spending almost two hours more per day watching live TV than the national average, TV is an excellent medium for credit unions to reach this important multicultural audience, especially for student loans. Credit unions should also allocate a significant amount of their advertising dollars to promote refinancing for home equity loans, as the stalled housing market is likely to convince more homeowners to renovate than buy a new home. As the sales of light-vehicles will contract somewhat during 2019, credit unions should be very proactive about marketing their auto loan products, so they can retain, and even, increase their share of this lucrative portion of the lending market.

New Media Strategies Since Millennials are more responsive to content marketing than traditional advertising messages, credit unions should use social media, and short videos, specifically, to provide tips and advice about personal finance and establishing good practices at a young age. Regardless of size, credit unions will find it more difficult to compete without a mobile app, so that is the first order of business. Then, they must implement robust promotions, especially in social media, to tout the benefits of using their mobile app. Research confirms that any local business, and credit unions in particular, will benefit significantly from a very active involvement in their communities. Inviting members to join them, and then promoting that involvement on social media, is an excellent strategy.