When I arrived at LFCU in 1989 as CFO, the Credit Union had roughly 100,000 members. When I left briefly in 1993, LFCU had roughly 100,000 members; and when I returned to LFCU in 2001 as CEO, we still had roughly 100,000 members. In fact, from the late 1980s until 2010, the credit union’s total member population remained relatively constant, at about 100,000.
Beginning in 2010, a number of factors, including the unprecedented “Bank Transfer Day” movement in 2011, converged to radically change our membership growth results.
We certainly gained our share of new members from the anti-bank sentiment, and in 2012, when we changed our name to “Logix,” we eliminated a major hurdle to member growth – the widely held perception that the general public wasn’t eligible to join an institution named “Lockheed Federal Credit Union.”
Due to these factors, since 2010, growth percentages in areas near our branches have been in double-digits, and we now have a total of 160,000 members. If you are one of our new members, welcome! We’re thankful you’re on-board.
As a member-owned credit union, growth is required for sustained, long-term profitability . Economies of scale enable us to afford new services and technology; and when members participate actively, the pool of money available for loans becomes larger.
Excessive growth, however, or growth primarily with members who do not contribute to the Credit Union’s financial strength, can become a burden on operating expenses, as well as member service. You may have noticed, for example, that our Call Center hold times have increased slightly as hiring and training of new reps lags call volume.
Our all-volunteer Board of Directors recently approved Management recommendations to ensure long-term viability of the Credit Union. In essence, we will continue to grow membership, but at a slower pace, and with emphasis on relationships that contribute to our financial strength. Our focus will shift to retention and growth of existing members, in keeping with our mission of helping members thrive.
So, what will members notice in 2016?
First, members should immediately see results of efforts to increase member convenience and service speeds, with addition of:
- New technologies like Samsung Pay and Android Pay, a new mobile app, and enhanced online banking functionality
- New branches, particularly in the Burbank area
- A new relationship management system to maintain highly personalized service
Members will also notice efforts to encourage all members, from the new to long-tenured, to contribute to a mutually beneficial relationship. These efforts will include:
- Changes to checking account pricing and minimum balance requirements, in particular the ease with which “Free Checking” is currently available
- Changes to the member referral bonus, so the bonus is earned only when the new member has a minimum loan or deposit balance, and only after a specified retention period
- Renewed focus on deposit growth
- Increased balance requirements to avoid the Low Balance Fee (Read more here.)
- Changes to Relationship Rewards to ensure balance requirements justify the benefits for each tier
- Changes to the Loyalty Dividend payout structure, which favor those households which use Logix as their primary financial institution
As a result of the tactics above, members can expect to experience:
- An even higher percentage of calls answered live (currently 80%)
- Reduced wait times in branches
- Increased service levels, due to lower volumes of contacts from new members, and due to increased average tenure of employees as the pace of hiring slows
- Continued outstanding financial value in our products
In summary, since excessive growth can be destructive to our business model, which emphasizes financial value and high-quality service, we will be less aggressive seeking new members. We will take steps necessary to ensure an equal exchange of value between members, so that fewer low-balance members are subsidized by those who maintain strong balances with Logix. These steps may generate some complaints in the short-term, particularly from members who may now be subject to a fee or ineligible for a Relationship Rewards benefit, for example, but this plan will ensure our long-term ability to provide value and service to members who contribute to our financial strength.
Thank you for reading this letter, and for active membership in your Credit Union. I welcome your feedback in the Comments section below.