Steve Bugg is the CEO of Great Lakes Credit Union($1.0B, Bannockburn, IL). Here, he discusses the enduring impacts and lessons from 2020, the largest opportunities for the industry, and how they’ll measure organizational success in the year ahead.
Steve Bugg, CEO, Great Lakes Credit Union
How did 2020’s challenges impact the credit union industry?
Steve Bugg: The pandemic impacted the credit union industry in many ways; however, the impact varied from credit union to credit union.
Pandemic plans as part of the credit union’s business continuity planswere, in many cases, not as strong or agile as they should have been. That provided competitors an advantage. The industry was viewed as lagging in communicationand not as sophisticated as larger competitors especially for those who did not have robust digital channels or call centers to handle an increase in volume.
On the other hand, credit unions were faced with the balancing act of keeping employees safe while they worked to serve members as an essential business. That took time, energy, and effort, and demanded human resources and leadership dedicate focus inthis area.
Credit unions in crisis rise to the occasion, and the industry did just that, working on ways to assist members in their time of need by waiving fees, enhancing skip-a-payment programs, and working with borrowers on assistance programs, modifications,or forbearances. That’s to say nothing of community aid work, which, while the right thing to do, certainly strained resources.
Financially, income and ROA were affected by adding funds to the provision for loan loss to protect against a worst-case scenario, traditional fee income took a hit as overall consumer spending tapered down, and many credit unions saw their net worthratios decline due to COVID-19 relief programs.
But for many credit unions, the challenges of the pandemic led to opportunities and silver linings such as a renewed focus on our valued employees and an enhanced look at how to better serve our diverse communities. With the Black Lives Matter and broadersocial justice movements that occurred last year, lessons were learned and proactive credit unions started to have conversations around diversity and many have formed meaningful DEI strategies and teams.
Always look for the silver lining and remain optimistic in tough times.
What lessons do you hope the industry learned from last year?
SB: A credit union needs to be agile and willing to take advantage of opportunities when they arise and beware of signs that indicate a change is needed.
Strong communication across all stakeholders is paramount to the credit union’s successes. This includes the board, staff, key partners, members, and the community.
Credit unions need strong BC plans that are reviewed and tested on a regular basis. In addition, worst-case scenario planning tools and advanced financial modeling serve a credit union well since they set triggers that indicate a need to be aware of theimpact from the current operation or to review alternatives if a change of course is needed to drive different results.
Employees are the driving force of our movement and credit unions learned they need to take care of their key asset and have adequate plans in place to assist employees when emergencies arise. Strong recruiting, hiring, onboarding, development, and retentionis the foundation for success.
CU QUICK FACTS
Great Lakes Credit Union
Data as of 12.31.20
HQ: Bannockburn, IL
ASSETS: $1.0B
MEMBERS:81,456
BRANCHES:12
12-MO SHARE GROWTH: 13.6%
12-MO LOAN GROWTH:8.2%
ROA: 0.62%
What’s the largest opportunity credit unions have in 2021?
SB: Always look for the silver lining and remain optimistic in tough times.
Building member engagement through aggressive direct and targeted marketing to existing members will resonate as members look for their next loan or credit card as the economy starts to recover. Focus on mortgages and gaining active checking accounts.Additionally, increasing interchange will be paramount to the success of many credit unions.
There is opportunity for all credit unions to enhance their story and educate the general public, within their field of membership, on the value their credit union brings to members.
What is your outlook for the credit union industry in 2021?
SB: Mergers and acquisitions will achieve new highs with more credit unions purchasing banks or merging with credit unions that bring a different perspective from their own. Diversity of balance sheets and the expansion of the brand intonew markets will be the focus for many in 2021.
Look for an increase in field of membership changes, increased regulation and oversight, and an increased emphasis on employees or teams focused on the regulatory and cybersecurity environment.
Many credit unions will evaluate the need for their branch network and consider how brick-and-mortar can be aligned with digital delivery channels. Look for channel diversification to take place.
Cultural transformation due to the past summer’s social injustice awareness will lead to stronger DEI efforts.
Financial performance will improve from 2020 as the economy opens back up and consumers start spending.
Finish this sentence: The credit union industry will be successful in 2021 if
SB: It’s not a matter of if it’s going to happen as the economy opens back up, unemployment declines, and consumers start to shop and spend. Loan opportunities will slowly increase later in the year. However, mortgageproduction will lead the charge. If delinquency and charge-offs remain flat or only rise a bit, this will allow some credit unions to recover from adding provision expenses.
If credit unions do a better job educating members and non-members on the distinct value and advantage we bring, we’ll continue to grow.
This interview has been edited and condensed.
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