TIP Charters Not Taking Off, but Those Credit Unions That Have It, Love It

ALEXANDRIA, Va.-After 14 months in effect, NCUA has only approved eight TIP, or trade, industry, or profession, fields of membership. The last field of membership and chartering update, effective May 15, 2003, permitted single sponsor federal credit unions to begin converting to TIPs, but the move has not created anything anyone would call a trend. Even with just a handful approved and a couple in the pipeline, those that have taken advantage have nothing but raves for it. Central Florida Health Care Federal Credit Union, the first TIP approved, just kicked off its advertising campaign in February with radio advertisements and billboards, according to Senior Vice President Sandy O’Hern. “The response has been overwhelming from interested people,” she said. There has been an 8% uptick in membership growth since the ads began O’Hern stated. They have gotten a 3% response rate from direct mailings to local doctor’s offices alone. “We made a commitment to NCUA that it would be slow and controlled growth,” she explained. O’Hern added that she has been fielding about two calls a week from other credit unions seeking advice on the TIP process, from small credit unions all the way up to $600 million in assets. “I wish that there had been a template for us to use. That’s what everybody’s been asking me for,” O’Hern said, adding that she has created an executive summary of Central Florida Health Care’s business plan for those credit unions that are interested. “The good thing is we were able to pave the road.” O’Hern also advised, “The credit union has to decide if it’s in their best interest. Being able to add a geographic charter rather than SEGs just opened up a world for us.” She explained that many doctors’ offices in their area had already been scooped up as SEGs to other credit unions. Omaha Police Federal Credit Union was just approved for a TIP in April, which the board chose not to put into effect until July 1. The credit union ran into a bit of a snag when it learned it could no longer serve the field of membership of a credit union it had merged with in 1987 and wanted to give those who wanted to join time to do so. “Be very organized and make sure you’re looking at the whole picture,” Omaha Police President and CEO Mary Johnson recommended. She added that NCUA was very accommodating as they went through the process. It did take from October 2003 through April to get approved, but Johnson attributed that to the newness of the charter. Central Florida Health Care had a similar FOM situation that it discovered the day its board was going to vote to approve the TIP conversion but was able to add those members through an underserved area adoption with just a couple months interruption. The credit union could continue to serve the members of record, which was already about 50% of the potential members, in that area. Omaha Police is using the various police departments to get the word out about the new membership expansion. “We’re having good luck with cooperation from the different departments. They let us put fliers at their sites,” Johnson explained. She added that staff also plans to spend a lot of face time at the various departments. One larger one even allowed the $36 million credit union to put their fliers in the pay stub mailings. Johnson admitted the credit union decided on a TIP because they wanted to expand. “We’re looking for some growth. You know everybody is struggling for loans,” she said. “We’d rather be loaning money to our members rather than investing it.” She added, “Because it was within law enforcement, it felt OK.” “We’ve got eight counties now with a lot of small law enforcement departments that only have 10 employees.we’re going to go after those and the larger ones as well,” Johnson said. With some industries, the TIP charter just makes sense, American Airlines Federal Credit Union President and CEO John Tippets said. “I think the TIP is a good FOM” and it particularly makes sense for airline industry credit unions, he explained. He described his TIP as “multiple small communities called airports.” Whatever you do though, Tippets advised, do not do anything to diminish the credit union’s relationship with the core membership. He said the TIP has added around 1,000 new members and over $1 million each in loans and shares, which he called “a nice little bit of business,” but “more important is how it matches up with who we are.” “Truth is we have a great relationship with American and in fact it is no less.We’ve had nothing but support,” Tippets said. O’Hern expressed the same sentiments about Orlando Regional Health Care Systems. “Our sponsor has been wonderful, very supportive,” she stated. According to NCUA Examination and Insurance Program Officer Lynn Markgraf, the agency had divided expectations for the TIP charter concept. “We might have expected that we might have had more, but given the trend with community charters, it’s really not that surprising,” she commented. Plus interested credit unions may hold off until they get a better sense of the regulation. “As we approve more, we’ll probably get more,” Markgraf predicted. “I think credit unions would like us to approve them faster,” she said, but there is a reason behind the deliberateness. NCUA wants to ensure all i’s are dotted and t’s are crossed. The exact language of the TIP is crucial from the legal standpoint and business and marketing plans must be thorough so the agency is confident that the credit union is able to serve the new field of membership. Geographic limitations are not a requirement, but, “Typically, the credit unions limit themselves to what they think they can serve effectively,” Markgraf explained. “Actually, the credit unions are doing a pretty good job of getting the information to us,” she said. Many are contacting their regional offices first to discuss the specifics of what is needed before they really dive in. In drafting the updates to the chartering manual, NCUA kept much of the TIP provisions open-ended to allow for differences in the needs of the diverse credit union community and possible TIPs. Though the banking industry filed a number of comments at the time-strongly opposing the TIP-they were taken into consideration but probably not adopted, she said. The banking trade associations have noticed that. “The whole idea that you can be in a profession and you can be in a credit union, it really is an anathema,” America’s Community Bankers Senior Vice President of Regulatory Affairs Charlotte Bahin said. While the concept has not taken off in the credit union community, even one TIP is too much. “Ultimately, we’re happy that not a whole lot are using it.” she commented. “The fact there aren’t 108 or 1,008 is good news, but the fact there is eight is annoying.” American Bankers Association Senior Economist Keith Leggett disputed the numbers. “I think that the numbers are understated,” he said. “For example, I would classify Navy (Federal Credit Union) as a TIP, even through they’re not.” And, you still have to look at state charters as well. He said that Service Credit Union in New Hampshire just adopted all of the Department of Defense employees and retirees. Leggett claims that it “hasn’t gone over well” with the real single common bond credit unions. “When you look at it, the bigger complaint I’m hearing about it is the traditional single common bond credit unions,” he stated. [email protected]