Today on twitter, Sarah Snell Cooke(@cookeoncus) posted a CU Times article about SC based Founders FCU giving out its largest dividend ever ($10 million). It got me thinking about the effectiveness of dividend payments as a way for credit unions to utilize excess funds.
Tradition? Yes. Effective? Maybe.
It is an admirable effort on the part of Founders FCU. $10,000,000 is a lot of zeros as a lump sum. However, let’s do just a touch of math, shall we?
Founders FCU has a total of 190,000 members between which that $10 million will be split. That nets the member/owners of FFCU ~$52 each. Not bad, that sure beats the return on most savings accounts (probably their own).
Which begs the question, why not use some of that money to offer a higher savings or CD rate; on the other side, a lower auto loan rate? I understand the concept of staying within market for rates, but seriously? Savings/CD rates are at a pitiful low and a bump could bring in some new business or move some of your more fringe members into a stronger PFI relationship.
A lower set of loan rates could grab some of that important business from the influx of new members that credit unions have been experiencing.
And that’s just the obvious stuff.
Dropping the largest dividend in your history is a wonderful achievement, but I wonder if there aren’t more creative ways to use the surplus.
Community programs, innovative tools, new products; hell, spend some of it on research so you actually know what your members want.
You might find that it’s $52 in their pocket at the end of the year…
I don’t think dividends should disappear, but I urge credit unions to focus on improving their lackluster efficiency, technological shortcomings, and the disconnect with their members before quietly dropping a dividend and claiming success.