Credit Union Health After A Name Change

Ny Name Is...

There have been a number of noteworthy credit union name changes as of late. The trend resulted in some internal curiosity at GC about the health benefits of name changes and associated rebranding. In this post we explore changes in the health of eight credit unions following their reinvention. Names have been changed to protect the innocent…

Approximately two years ago a slate of credit unions made news with noteworthy changes to their names. The justification each gave for their decision was to establish relevance to new markets and, ultimately, to inspire growth. We took at look at the health of these credit unions using our HealthScore metric to determine whether any are better off than before their transformation. Specifically, we evaluated year-over-year changes in scores and compared those changes to industry averages and each credit union’s own past performance.

The table below, which illustrates the year-over-year percent changes in credit union HealthScores for the industry and for each of the credit unions that executed a name change, shows that while not every credit union experienced substantial improvement in health (CU1 and CU3 have experienced health declines), the majority do show above-average improvement.

HealthScore Year-Over-Year %Change
Date Industry CU1 CU2 CU3 CU4 CU5 CU6 CU7 CU8
03/2011 1.45% 27.98% 8.34% -6.26% -12.13% -3.71% 6.90% 0.00% -3.71%
06/2011 2.90% 19.97% 4.35% 3.23% 0.00% -24.99% -13.77% 11.78% -12.88%
09/2011 0.95% 33.32% 4.77% -9.97% 14.79% -19.34% -15.40% 0.00% 3.45%
12/2011 2.47% 23.05% 5.27% 7.15% 18.49% -10.32% -4.00% 0.00% 23.05%
03/2012 2.74% -6.26% -19.25% 30.00% -3.45% 7.66% 9.69% 2.78% 3.85%
06/2012 3.57% 13.35% -20.85% 28.12% -3.45% 8.34% 27.98% 5.24% 3.67%
09/2012 5.62% 6.26% 4.55% 48.11% -12.88% 0.00% 27.25% 17.63% -3.34%
12/2012 4.18% 3.13% 5.01% 33.33% -12.51% -11.55% 29.15% 0.00% -9.38%
03/2013 -0.62% 16.69% 0.00% 10.27% -14.26% -10.69% -5.89% -10.82% 7.37%
06/2013 -1.47% 2.94% -5.27% -7.30% 0.00% 7.66% -6.26% -14.99% 3.58%
09/2013 -1.69% 5.89% -17.41% 5.01% -3.71% 11.97% 3.58% -25.00% -3.45%
12/2013 -1.36% 6.07% 0.00% 10.01% -7.11% 21.71% -3.23% -13.90% 3.45%
03/2014 1.80% 0.00% 9.53% 0.00% 12.51% 52.00% 12.51% 3.03% 3.45%
06/2014 1.65% 0.00% 11.12% 10.51% 0.00% 25.03% 20.02% 5.89% 17.26%
09/2014 2.93% -2.78% 0.00% -7.15% 15.36% 32.18% 13.81% 23.36% 21.45%
12/2014 4.04% -2.86% 33.32% -15.90% 7.66% 32.18% 23.36% 19.38% 16.69%

Now to a critical question…

Is the improvement so many are experiencing due to the ability of a new name to command market visibility, or is it due instead to the internal excitement and rejuvenated focus inspired by the name change effort? The answer matters. If the “newness” was a catalyst for heightened staff focus on results then you could argue that credit union leadership could have driven the same above-average performance without the costs associated with the name change through … well… better leadership.

As they say, time will judge. Those that are relying on “something new” as inspiration will likely see performance level off as what was once new becomes the status quo. If improvement is due to real market connections, however, then we should expect to see sustained health improvements year-to-year well into the future. We’ll check back with these same credit unions next year and see where they are in relation to today’s level of health.

In the meantime, we do think the early evidence suggests that in a few cases the name change has inspired a real connection to new markets. The “evidence” is the turnaround in membership growth. A component score of our HealthScore metric is membership growth, and the table below shows average membership growth scores for each credit union for the seven quarters before, and for the seven quarters after, the name change.

Membership Growth Score Averages
Measure CU1 CU2 CU3 CU4 CU5 CU6 CU7 CU8
Pre-change average 0.857 0.714 2.429 4.429 0.000 0.000 2.857 0.857
Post-change average 3.286 0.286 3.143 1.143 3.000 0.714 2.143 1.000
+/- Score Difference 2.429 -0.429 0.714 -3.286 3.000 0.714 -0.714 0.143

The data shows that five of the eight credit unions included in our analysis improved performance in membership growth, with two of those five truly accelerating growth well above their past experiences. If membership growth is a proxy for measuring the impact of a name change, early evidence suggests that for some of these credit unions the new name is fulfilling expectations. Of course, for those declining in score a name change has not offered hopeful improvement – and in the case of CU4 may have been a detrimental strategic miscalculation.

This leads to another question, however. How can some credit unions have improved health without improved membership growth while others have improved membership growth without improved health? The most likely answer? While the names may have changed, workflow, processes, etc. likely did not. Circumstances that contributed to, or detracted from, health before the name change may still exist today. For example, though membership growth accelerates, a credit union that was, and is, ineffective at relationship development will experience rather empty growth, growth which will contribute not to improved health but rather to declines in health (increased expenses serving more members, declining loan/deposit relationships, and perhaps declining ROA).

As noted, we’ll continue to report on the progress of these credit unions to see if their “new names” result in worthwhile, positive, sustained improvement in health over the long haul – but we do think there is a lesson to learn even at this early stage of analysis… name changes must be accompanied by complementary adjustments to the operating environment, especially with regard to business development and sales processes. Otherwise, you’re simply putting a flimsy veneer on a foundation not structured to withstand the weight of new expectations.

Want to know how your credit union fared in our latest HealthScore calculations? Order a Glatt Consulting HealthScore Report. In exchange for a nominal fee you will gain insight into how your credit union’s HealthScore compares to various segments of the credit union community – including those in your own home town.

Photo Credit: “Hello My Name Is…” by Robert Occhialini is licensed under CC BY 2.0

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