VyStar Charges Ahead After Online Stumble

VyStar Credit Union announced Tuesday that it had opened its first branch in Georgia, and the first outside Florida for the nation’s 13th-largest credit union.

The achievement was even more noteworthy because it occurred two months after the Jacksonville, Fla., credit union’s more than 822,000 members suffered a prolonged disconnect from their credit union’s website.

VyStar ($13 billion in assets as of June 30) held a ribbon-cutting ceremony on Monday for the new branch in Thomasville, Ga., 160 miles west of Jacksonville and 34 miles north of Tallahassee.

VyStar says the Thomasville branch is the credit union’s 67th full-service branch location. NCUA data shows VyStar had 84 branches on March 31, all in Florida and including 18 high school branches, a drive-thru and its headquarters. That was an increase from 83 locationss in December 2021 and 79 in December 2020.

In the first quarter, the credit union opened a new branch in Titusville, Fla. It opened branches in The Villages and Melbourne earlier in the third quarter, and will open branches Lake Mary and Tallahassee later this year.

Earlier this year, VyStar expanded its field of membership in Georgia to include 26 counties in the south, southeast and metro Atlanta regions with a population over 4.7 million. Its NCUA call report has not changed its potential membership, and the credit union declined to say how many members it expects to add.

“We are actively exploring opportunities and negotiating agreements involving a number of new branch locations in Georgia. We plan to open at least 25 branch locations across Georgia in the next several years,” VyStar said.

VyStar EVP/COO Chad Meadows said the opening of its Thomasville branch “marks an incredibly meaningful day for VyStar.”

“As we take this next step into the Southeast, we look forward to growing our 70-year history as a strong financial institution by building new partnerships, making meaningful connections and strengthening the communities we serve,” Meadows said. “In doing so, we live out our purpose, which is to Do Good.”

However, its operations didn’t do so good last spring.

On Friday evening, May 13, VyStar shut down its online system for a planned two-day outage as it switched over to a new online and mobile banking platform. But it persisted. As of May 20, there were more than 13,444 comments posted on the VyStar Facebook page about the outage. Many were furious.

Comments on VyStar’s Facebook page included: “I will definitely be leaving VyStar after this! Ridiculous!” and “As soon as the dust settles I am definitely moving to another bank and I know many people that are doing the same thing.”

While membership growth might have slowed from March 31 to June 30, it didn’t drop. VyStar reported to the NCUA that it had 829,287 members on June 30, up from 822,455 members on March 31.

A year earlier, from March 31, 2021 to June 30, 2021, membership rose 1.8%. It rose an average of 1.9% per quarter though March 31 this year. However, the gain from March 31 to June 30 this year was only 0.8% — only two of the 12 larger credit unions had gains that low or lower. Average second-quarter growth for the Top 10 was 2.5%.

VyStar’s “OMB Update” page on its website last updated Aug. 20 said major failures from outages have been restored. It detailed some bugs that remain, such as a possibly confusing way the system shows one-time bill payments, and the lack of connectivity for Quicken desktop applications.

VyStar proactively refunded fees that it charged members from May 14 through June 9 as a result of failures in its online and mobile banking conversion. Fees eligible for refunds included those for non-sufficient funds (NSF), overdraft and courtesy pay, credit card, wire, consumer and commercial loan late fees.

It’s hard to find signs of this spring’s turbulence anywhere in VyStar’s second-quarter results.

VyStar generated $18.2 million in net income in the three months ending June 30, or an annualized 0.57% of its average assets. That was down 38 basis points from 0.93% a year earlier and 0.61% in the first quarter.

VyStar’s ROA was lower than the 0.96% average for the nation’s 10 largest credit unions, but the difference had more to do with some large shifts in loan loss provisions and asset markdowns than with operations.

Like other credit unions, much of VyStar’s 38-bps drop in ROA from a year ago was the result of lower net revenue.

On the expenses side, its non-labor operating expenses contributed to the income drop.

Growth in spending on employee compensation lagged average asset growth, so it benefitted ROA by 7 bps.

However, non-labor operating expenses grew 24%, or by $11.1 million, dropping ROA by 10 bps from a year earlier.

From the first quarter to the second quarter non-labor operating expenses grew by $4.6 million.

Out of all the NCUA categories of operational spending, the most significant negative impact on earnings was “Office Operations Expense.”

VyStar spent $34 million on this category in the second quarter, $7.8 million more than a year earlier and $4.3 million more than the previous quarter. It dragged down ROA by 11 bps from a year earlier and by 8 bps from the first quarter.

Also, VyStar had significantly higher non-labor operating costs in relation to assets than the Top 10 credit unions.

Among the Top 10, non-labor operational expenses were $1.1 billion, about the same as the first quarter and an annualized 1.13% of average assets, down 4 bps from a year earlier.