Tech tool supports formulating how much to distribute in a given year and your marketing efforts.
In March, Preferred Credit Union awarded to members its first-ever patronage dividend, a total of $200,000 to 18,330 members—or roughly 75% of its 24,500 members.
“We had a terrific year, and [because of] that, along with the money we received back from the NCUA Share Insurance Fund, we felt it was only fair we share the rewards with our members,” says CUES member John Yeomans, CEO of the $170 million CU in Grand Rapids, Michigan.
The credit union, a client of CU*Answers, a CUSO in Grand Rapids, used the company’s software to calculate various possible payouts.
“This was particularly helpful, knowing that we could tweak the payout,” explains Yeomans. “We ended up selecting the parameters so that any member who had earned interest on the deposit side or paid interest on the loan side would receive a dividend. We decided on awarding 2.25% of the interest paid on a member’s loan balances and 2.25% of the interest received on their deposits. The minimum payout was $5, capped at $250 per member. We also paid a minimum of $5 to all of our youth members.” The payout was accompanied by an explanation of the program. Members loved it, says Yeomans.
The software Preferred CU used for its patronage dividend decisioning—CU*BASE patronage technology from CU*Answers (and also offered by sister CUSOs CU*Northwest, Liberty Lake, Washington, and CU*South, Fairhope, Alabama, has been helping credit unions award patronage dividends for almost a decade. The software has multiple possible configurations, including a dividend based on a member’s average annual balance or interest received on deposits—or a combination of variables. The credit union can also specify exclusions, such as members with delinquent accounts.
Keegan Daniel, VP/professional services for CU*Answers Management Services, explains how his company’s structure has helped drive this offering.
“Our 265 member credit unions are the owners (of the three sister CUSOs); their CEOs sit on our board and help drive our business. We’ve always paid a patronage dividend to our member credit unions, so offering a software solution enabling them to pay a patronage dividend aligned perfectly with our own cooperative philosophy.”
CU*Answers also offers guidance to CUs in using its patronage dividend product.
“While credit unions can use and tailor the software independently, we can assist with predictive modeling and forecasting to help determine if paying a patronage dividend makes sense,” continues Daniel. “We also help credit unions to capitalize on their efforts by using patronage dividends as a differentiator in their markets. We have seen successful email campaigns (and even print pieces) using a ‘thank you’ approach.”
Credit unions can leverage patronage dividends to attract new members as well. “Stress how and why you’re different—that a bank will not return a patronage dividend to its customers,” adds Daniel. “Many credit unions pay a patronage dividend on an annual basis and budget for the dividend at the start of the year. Others may see a successful year underway and decide to award the dividend mid-year or at the year’s end, based on financial performance.
“Regardless, maintain a conversation with your senior leadership and board,” stresses Daniel. “If you’re not currently offering a patronage dividend, stay open to the idea and use it to spur your imagination on how to take the philosophy of member ownership to the next level.”
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs and served in mentorship roles before launching her business. As owner of Fab Prose & Professional Writing, she assists CUs, industry suppliers, and any company wanting great content and a clear brand voice. Follow her on Twitter @fabprose.