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Credit unions may have unique opportunity ahead

Katie Tabeling
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Del-One Federal Credit Union invested heavily in technology in the pandemic and itsleadership is prepared to leverage that and its products for consumers moving ahead. PHOTO BY JACOB OWENS

Del-One Federal Credit Union invested heavily in technology in the pandemic and its leadership is prepared to leverage that and its products for consumers moving ahead.| PHOTO BY JACOB OWENS

With concerns of inflation and interest rates still weighing heavily on financial institutions, leaders of some of Delaware’s top federal credit unions have an eye on growth in members and loan portfolios.

“There’s tremendous opportunity in the sector, simply in the fact that the experience is going to be very different,” Del-One Federal Credit Union President and CEO Ron Baron said. “The biggest thing is that credit unions are not very well understood by the public. There’s a thought that you must qualify for some of them when it’s not the case. What makes us different, I believe, is our ability to go above and beyond for the individuals, assess what they need and how we can help.”

Credit unions operate like commercial banks, but are member-owned nonprofits that return earnings through their products: lower loan rates, higher deposit rates and sometimes lower and fewer fees. 

For example, five-year certificate of deposit accounts had an average national interest rate of 1%, compared to 0.74% for banks, according to a 2022 report from the National Credit Union Administration. The average interest rate on credit cards issued by credit unions stood at 11.32%, compared to 12.35% at most banks. Two-year used car loans have an average interest rate of 3.06% at a credit union, while banks average around 5%.

At times when consumers are watching for more signs of a recession, they may be looking for ways to stretch the dollar as far as it can go. And history may bear out that small businesses may turn to federal credit unions. 

Between 2008 and 2016, small business lending more than doubled from $30 billion to $60 billion, according to a 2018 U.S. Small Business Administration report. Commercial bank lending to small businesses over the same period has declined by almost $100 billion.

“At a high level, we all have concerns about this difficult interest rate environment. But remaining competitive for a federal credit union looks different when you’re competing against the big banks,” said Dover FCU President and CEO Janell Upton, who has served in three credit unions since 2001. “The prime difference is that our income comes back to our membership in better branch locations, hopefully better dividends and better yields on loans.”

Del-One FCU, which has the largest share of assets among credit unions in the state, has averaged between 3% and 5% annual membership growth in the last five years. But deposits grew faster in the early years of the pandemic, something Baron attributed to federal stimulus funds.

When the federal and state checks stopped coming, higher interest rates and inflation started to change the picture. Del-One ended 2022 with $598 million in deposits, and there were 37,734 loans secured at $441 million, with much of it tied to homes and car loans.

Diversifying the loan portfolio was one of Baron’s top priorities when he became CEO in 2019. Back then, car loans were the biggest market share.

“As we saw with the supply chain issues, if you’re dependent on one area, you’re going to be in trouble,” Baron said, pointing to the chip issues with new car manufacturers that spurred a frenzy of used car purchases.

Technology also presents an opportunity to reach out to new members, but also a challenge when matched against larger competitors. Del-One has responded by investing in about 15 live teller machines at the height of the pandemic, as well as changing its core technology to add more features to online and mobile banking. Another point of pride for the institution is its Express Auto Loan, which allows members to apply online for a loan, walk into the branch and receive a check.

“We’re also looking into enhancing our approval process online and hope to make more improvements with serving our members quickly through artificial intelligence,” Baron said.

Meanwhile, Dover FCU is weighing its customer base a little more carefully and leaning on more community-oriented programs such as financial literacy and first-time homebuyer programs.

“There’s some relationships I want to deepen, because that might be the member where we have a savings account and a loan. And we want to broaden that,” Upton said.

 

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