By Ray Birch
EL PASO, Texas—evolve FCU is now paying 5% APY on its ePriority Checking account, a move the credit union made only after streamlining operations and letting some members leave so it could deliver the sky-high rate to members.
evolve FCU is reporting it spent several years working to create efficiencies, including closing several branches, replacing teller lines with ATMs that deliver greater functionality, encouraging members to use more online services—and letting members leave. evolve FCU shed more than 10% of its members in 2015 and again in 2016.
The $309-million credit union went from eight branches to five, and now more than 75% of its membership use online services, with 55% using digital almost exclusively, said PR Specialist Shanon Woodruff.
“All this started in 2015 as we began moving our members to electronic services—some of them kicking and screaming—but we are still headed in that direction,” Woodruff said. “We closed several branches, removed lobby tellers and added new ATMs that can do the same thing. So operating efficiency has improved significantly due to these moves. This has allowed us to pay the high-yield checking rate and also a Patronage Dividend in the last two years to those members who have accepted the change and stayed with us while we transition to a more economical business model.”
Some Members Left
The 25,000-member CU accepted that it would lose some members as it made the changes. But according to Call Report data, many among the 15% of its membership that it lost in 2015—the first year of its service evolution–were unprofitable.
Since that time the givebacks have stemmed the tide and membership losses have slowed in the last two years. evolve had negative ROA in 2016 (-0.32%), but that number was positive (0.29%) through Sept. 30, 2017. evolve FCU improved its operating expense to average assets from 4.16% in 2013 to 3.49% through September. Net worth is 11.33%.
But Woodruff said that members, and the community, are understanding now how a cooperative works and how participating with the credit union to help it save money through digital services leads to getting more in return.
In the past year, evolve FCU paid a $2-million patronage dividend based on deposit and loan relationships.
ePriority Checking is an online account that requires e-statements, use of electronic bill pay as well as e-deposits. Now, evolve FCU has bumped up the interest rate to 5% from 3%, which was already the highest rate on checking in its El Paso, Texas market.
“Really, that 5% is higher than any other deposit instrument in the local market,” said Woodruff.
Changed Biz Model
The 5% is paid on the first $10,000 on deposit, with the remaining balance rolling into a money market account that pays close to 1%, Woodruff said.
“We changed our business model to go back to what we believe is the true credit union model, where the members help the credit union and in turn the credit union helps the members,” said Woodruff. “So the high checking rate is a way to encourage use of our online services and is also a way of saying thank you for helping the credit union.”
ePriority Checking also encourages debit swipes, which brings in a significant amount of non-interest income. ePriority Checking requires members to perform 30 debit transactions a month to get the high rate, more than double the average debit swipes required by many credit union high-yielding checking products.
“The 5% rate is designed to encourage debit card usage,” said Woodruff. “The more debit card usage the more interchange income we earn.”
While maintaining debit interchange levels is a concern for many in a post-Durbin market, so, too, is checking runoff as rates rise. Economists have shared concerns that checking funds at FIs will leave as money market accounts and other offerings—especially online accounts—boost rates noticeably as rates rise.
Woodruff said that Evolve is paying attention to that possibility, but emphasized that is not the reason for the high rate.
“The rate was not designed to hold onto checking account dollars; we have something that no one else has locally,” said Woodruff, who acknowledged that national competition for deposits is increasing as more consumers look to the web. “But our focus is the local El Paso market . . . Rates are not going to rise fast enough to have an impact on money moving into money market accounts. We have actually seen more money move into the stock market than anywhere else.”
Members Get Back More
Woodruff said that Evolve feels that in the long run the move to streamline operations and then give more back to members—while difficult for some—will benefit the credit union and membership, more so than the old business model.
“Reaction to the high rate from our members so far has been that they love it, some are even shocked,” said Woodruff, who said that it is too soon to gauge results from the high rate that was instituted Jan. 1. “Members and the community tell us they can’t find anything like this offer locally, which was the entire point behind what we are doing.”