Billion-Dollar Credit Unions Continue to Become the Norm as Definition of `Big' has Changed over the Past Decade

In 1992, $325 Million in Assets Earned a Credit Union a spot on the top 100 Ranking, Today it’s at least $994 Million. WASHINGTON – In 1992, being among the top 100 credit unions in assets was an easier route to take. At the minimum, a credit union only needed to have $325 million to make the list, according to Callahan & Associates. The average asset size was $664 million for those within that national ranking. Fast forward 12 years to 2004 and the makeup of the list has changed considerably with 99 credit unions surpassing the billion mark compared to just 11 in 1992. The top 28 credit unions alone have more than $2 billion in assets. Every other credit union has between $1 billion to $1.9 billion in assets. The $994 million Chartway FCU was the 100th largest in the nation as of December 31, 2004. For many credit unions, growing for the sake of growth has never been a strategic plan. Filling a void, be it in member business lending or trust services or opening an extra call center or branch in an underserved area, are all a part of the reasons why a growing number of credit unions currently have more than a billion dollars in assets. Looking at the rankings in 1992, Navy Federal Credit Union topped the list with nearly $7 billion in assets. Today, with its 225,000 members and nearly 100 branches worldwide, the single-sponsor credit union has $22 billion in assets. Navy Federal’s most recent aid in its growth came in 2003 when NCUA revised its chartering and membership rules in 2003 that removed numerous overlap clauses which had previously prevented the credit union from serving the Department of Navy’s personnel on military bases that were already being served by an existing credit union. “That helped us a great deal in places like San Diego and Jacksonville,” said Loren Carson, Navy Federal’s public relations manager. “We’ve remained focused on our common bond and have penetrated the group really well.” The world’s largest credit union also touts its growth over the past decade to the success it’s had in online banking, branch expansion, with the addition of more call centers and with its debit and credit card operations, Carson said. “Our membership is very transient in their lifestyle and we’ve understood that clarity of cause since the beginning,” Carson said. Looking at the rankings in 1992 and in 2004, it’s interesting to note that the top 10 credit unions saw some shakeups. Navy Federal and State Employees Credit Union in North Carolina remained in the number one and two spots for both years. Pentagon Federal Credit Union, which was ranked fifth in 1992, moved to number three in 2004 bumping Alliant Federal Credit Union (United Airlines Employees FCU) out of that spot. Others that moved out of the top 10 ranking include Kinecta FCU and Alaska USA FCU. Suncoast Schools FCU moved up to the seventh spot while Patelco Credit Union shot up 13 notches to become the eleventh largest in the nation with $3.5 billion in assets. The San Francisco-based Patelco shifted its focus on more productivity and holding down expenses, which has led to the credit union’s growth over the past decade, said Andrew Hunter, president/CEO. Being able to navigate those two areas has allowed Patelco the ability to offer higher savings rates, especially with special certificates and money market offers and to become innovative with its lending operations, Hunter said. “Ringing the (San Francisco) Bay” with new branches has also helped. Patelco has gone from 22 branches in 1992 to 37 branches today. Scott Waite, Patelco’s senior vice president and CFO, said much of Patelco’s success can also be traced back to strategic partnerships. As a result, the credit union “has added wonderful new products and services through collective efforts.” Waite also commends Hunter as well as the “leadership and passion” of former CEO, Ed Callahan. “Ed was determined in making sure that Patelco provided excellent value for its members,” Waite said. California, which is home to Patelco, appears to grow them big. In both 1992 and 2004, that state had the nation’s largest credit unions with more than 20 making the list for both years. Expanded charters have been the rage over the past few years. It appears that more than t30 made the leap and diversified away from their original sponsor group, changed their names and sought out more sources to woo members. Among the top 100 ranking that went in this direction were Hudson Valley FCU (formerly IBM Hudson Valley Employees); Wescom CU (formerly Telephone Employees); Vystar CU (formerly Jacksonville Navy); South Florida Educational FCU (formerly Dade County Employees CU); and Credit Union of Texas (formerly Dallas Teachers). Several of the credit unions that had ties to the military expanded their charters as bases realigned and closed around the nation. Space Coast FCU in Melbourne, Fla., was originally chartered in 1951 to serve the Patrick Air Force Base. It has since expanded to serve members in four counties. It is among the handful of credit unions that have the distinction of moving up 13 spots in the top 100 ranking – from 76 in 1992 to 63 in 2004. Ironically, it was a contraction in field of membership and branches that ultimately led to Space Coast’s growth from 1994 until today, said Tom Baldwin, executive vice president and CFO. As a result of mergers prior to 1994, Space Coast had a statewide field of membership because members wishing to join could do so by joining a statewide association. The credit union’s last merger in 1993 brought “a significant” membership in the county just north of Space Coast’s county of origin, after merging with a small credit union that was headquartered there. In 1997, it contracted its FOM from a statewide reach to membership serving its immediate four-county area. Space Coast also closed four outlying branches in the mid to late 1990s. “We embarked upon our mission to create value for existing members as opposed to growing anywhere and everywhere at any cost,” Baldwin said. Over the past decade, Space Coast has added 10 branches, more than 20 ATMs, and added money market accounts and high yield checking, which now represent $176 million of its deposits. Two of the credit unions in the top 100 ranking that have ties to major airlines have since expanded their charters and changed their names: Alliant (formerly United Airlines Employees) and Wings Financial (formerly NWA FCU). Delta Employees Credit Union (DECU) has held firmly to its airline sponsor and managed to remain among the top twenty largest in the nation. It went from 17 in 1992 to 21 in 2004. “Our success and assets since 1992 was primarily paralleled to the success of Delta Airlines,” said Todd Marksberry, DECU senior vice president of operations. “It was a major company with highly-paid, highly-skilled employees. Our growth until recently, paralleled their growth. Fortunately, we have diversified over the years.” Marksberry said DECU’s growth is also attributed to “well above” market averages for savings and deposits and a singular focus on consumer loan growth. “During that 12-year period, we’ve grown leaps and bounds in deposits and loans,” Marksberry said. Earlier this year, DECU paid its 165,000 members $8 million in savings dividend bonuses and loan interest refunds. In 1992, the bottom 20 of the top 100 ranking had under $356 million in assets. By 2004, most had moved up the list while a few actually dropped completely out of the ranking including US Alliance, which was ranked eighty-fifth in 1992 and Charter Oak FCU, which held the eighty-seventh spot that same year. Groton, Conn.-based Charter Oak FCU remains steadfast in its commitment to members, said Ray Currier, assistant vice president of marketing and business development. The credit union’s growth still comes from an array of areas including technology enhancements, having its own CUSO, insurance company, and serving members of low and modest means through a check-cashing program and a payroll-based debit card. “We work really hard to put a sales culture into this institution,” Currier said. “We brought shared branching to Connecticut. We’re constantly looking to expand our business opportunities.” More than a decade ago, the definition of what was considered big and which factors contributed to growth closely mirror today’s criteria. A strong emphasis in growing membership continues to be key, according to a Filene Research Institute study, Asset Growth at CUs: Growth in Membership vs. Assets per Member. Among fast growers in the $5 million to $500 million asset group, size was not shown to have a strong connection to either the growth rate of members or assets per member. But at credit unions with more than $500 million in assets, membership growth was more than three times as important as growth in real assets per member. When divided into fast growers and slow growers, a credit union’s size did not have a strong relationship to growth rates, the research found. The smallest asset category grew about as fast as the largest, and across all asset sizes growth rates in real assets fell into the 9%-11% range. Said Bob Hoel, Filene’s executive director, “nothing inherent in smaller size necessarily hinders subsequent growth. Many small credit unions can and do grow as rapidly as their larger colleagues.” [email protected]