Escheatment Skews Net Membership Data
March 27, 2012
March 27, 2012
When the National Credit Union Administration (NCUA) released the certified net total of new U.S. credit union memberships for 2011, there was a one-minute pause to absorb the data before bank-related blogs and Twitter feeds began reporting their elation that 2011 was just an average year for credit union memberships—not much better than the two years prior.
The meme “Bank Transfer Day Failed” was trending.
Those reports were correct that credit unions nationwide netted 1,344,936 new members, in aggregate in 2011—a gain of about 1.5 percent. More than 30 percent of those—398,732—came in the fourth quarter.
These are great net numbers, but they don’t tell the whole story. Fourth-quarter membership gains (and losses) are affected by a special set of factors, including seasonal consumer trends and a mandated process of purging inactive member accounts. These factors dulled what was, when compared to past fourth-quarter numbers, an outstanding quarter in terms of credit union membership growth.
Washington was a leader in growth last fall as one of the states with the highest number of new members, adding 104,000 for the year for an increase of 3.7 percent. More than 38,000 of those new members joined in 2011’s fourth quarter.
Oregon was right in line with the national trend and increased its credit union membership by 1.5 percent after adjusting for an interstate merger that caused some 162,000 Oregon credit union members to shift under a technicality to another state. More than half—11,400—joined in the fourth quarter
So, yes, taken as a whole, 2011 was an average year, but the fourth quarter was anything but average. And those credit unions that saw significant membership gains are continuing to see higher-than-normal volume on their front lines.
Perhaps more interesting than the significant net fourth-quarter gain in 2011 is the historic data that indicates that the year’s final quarter is traditionally the slowest quarter of the year for new members. As consumers focus on family and the holidays, it is very common for credit unions to post a net loss in membership during the fourth quarter. Clearly, that did not happen in 2011.
In addition to consumer trends affecting fourth-quarter net membership gain or loss, escheatment also takes a toll. Escheatment refers to the process of identifying dormant and abandoned accounts after three years of inactivity, at which time a credit union must remove the member from its roll and remit funds attached to that membership to the state. Escheatment occurs in Oregon and Washington like clockwork every fourth quarter, meaning all of those now-inactive members came off the books last fall, denting the quarter’s membership growth. Escheatment accounting varies from state to state, so other states may have mandated escheatment during other quarters.
Unfortunately, there is no system-wide mandate in place to account for escheatment losses. The data is not required by the NCUA and is only collected on the state level. And that’s unfortunate because a credit union that enrolled 1,000 new members (gross) between January and the end of August could have the bulk of those new memberships essentially wiped away, as far as the data is concerned, if escheatment affects just 300 accounts. If that happened, the net new total that the NCUA would report on the year for that credit union would be just 700.
Focused on net values, the 80-plus years of certified NCUA data that does not adjust for escheatment is invaluable to the credit union movement. Regrettably, it does not provide a complete picture of real membership gain, especially in states or at credit unions where that escheatment was significant. And according to reports, escheatment can wipe away as much as 40 percent or more of fourth-quarter gross new-member totals.
If escheatment affected, say, as little as 15 percent of gross new membership totals in Washington and Oregon, an additional 7,400 new members joined a Northwest credit union than was reported by the NCUA. Unfortunately, there is no easy way to identify exactly how many new members credit unions lost last fall to escheatment, and until there is, the NCUA will continue to be the most consistently reliable source available for new membership data.
Questions or Concerns? Contact Matt Halvorson, Anthem Editor: email@example.com.