WINSTON-SALEM, N.C. -- AT&T Family Federal Credit Union's expansionist dreams haven't been derailed by bankers' lawsuits.
If all goes according to plan, it will nearly triple its assets to $1 billion and double its members to 250,000 by the year 2000.
For Clyde O. Padgett, board chairman for 10 years and interim chief executive for the last year, the credit union is fulfilling a modern version of manifest destiny.
"We feel an obligation to bring credit union services to everyone within our sphere of influence who is looking for them," said Mr. Padgett, 57. "I would like to see bankers tend to their banking and let us tend to our credit unioning business."
AT&T Family's strategy consists of adding employee groups, marketing aggressively, and expanding relationships with members.
That's roughly the mix that management has followed since the mid-1980s, when it decided to diversify membership after seeing the problems affecting credit unions with floundering single sponsors. With the blessing of the federal regulator, it started taking on employees of other companies with no connection to AT&T.
When the first employee group was added in November 1986, the credit union had $153 million of assets and 27,700 members; it now has $370 million of assets and 125,000 members in 50 states.
This expansion reaped the wrath of local bankers, who resented the increased competition from a tax-exempt institution.
The credit union, with loan rates generally running a quarter-point to a half-point below those at banks, has been snatching bank customers, said James M. Culberson Jr., chairman and chief executive of First National Bank and Trust, Asheboro.
"They're doing a lot of auto financing and have sizable deposits," Mr. Culberson said. "Where else would they be getting it?"
Mr. Padgett doesn't deny this charge.
"We've probably taken some of their business, but you have to ask yourself why people would leave," he said.
In 1990, four North Carolina banks, including First National, sued the National Credit Union Administration in the U.S. District Court for the District of Columbia. The banks, backed by the American Bankers Association, were seeking to roll back the membership expansions granted to AT&T Family.
The district court initially ruled bankers lacked standing to sue, but that decision was reversed on appeal in 1993 -- giving bankers in eight other states the go-ahead to sue over credit union expansions.
Last month the district court upheld the NCUA's liberal interpretation of field of membership, but bankers have appealed to the U.S. Circuit Court of Appeals.
Mr. Padgett said he was "dumbfounded" when the bankers sued, but litigation hasn't stopped AT&T Family from expanding its membership base. It now embraces nearly 200 employee groups, Mr. Padgett said. About 75% of all members live in North Carolina.
The recent addition of the North Carolina Jaycees riled Thad Woodard, who is president of the North Carolina Alliance of Community Financial Institutions.
"I guess the common bond there is that Jaycees do a lot of talking on the phone," he said.
But what's bad for the bankers has been good for the credit union. In 1993 membership grew by 23% and loan growth, driven by new members, was 18%. Currently the credit union is trying to enlist stable companies whose employees earn an average of $30,000, according to Mr. Padgett.
Besides being a tough competitor for loans and savings products, the credit union also has branched out into nontraditional lines of business. For the past two years it has offered an auto-buy program and car leasing through a wholly owned subsidiary. For three years it has offered insurance and investment products through Plan America, a subsidiary of CUNA Mutual Group.
As of Jan. 1, it will be selling those services through American Express. "They offer us more versatility, an expanded product line, and planners in every state," Mr. Padgett said.
The ability to provide these instruments to members is key to becoming a members' principal financial institution, he said. Nearly 40% of AT&T Family's members do most of their banking through the credit union. "We aren't anywhere near where we will drive ourselves to be," he said.
The credit union has been making gains, Mr. Padgett said. Seeing checking accounts as the key to developing relationships with members, the credit union has been pushing those. At the beginning of the year, 40% of members had a checking account; now 45% do.
Offering insurance products also is a way to increase noninterest income, which is more important as margins continue to shrink. The credit union wants to generate sufficient noninterest income to cover operating expenses -- without depending on fees.
"Fees will be a small percentage," Mr. Padgett said. "We don't have a lot of fees and most of them are relatively small. We're looking at the products and services we offer through our subsidiary to generate income."
To increase convenience for its nationwide membership, AT&T Family is an advocate of "shared branching," where a group of credit unions jointly operate a facility. It is one of 32 shareholders in the North Carolina network, which currently has four branches. The state network, in turn, is hooked up to systems in 16 states, involving about 150 institutions.
Ultimately, the program will lead to a nationwide branch system, Mr. Padgett said. Such a network would be a boon for AT&T Family because it wouldn't have to build as many of its own facilities to reach its nationwide membership. It already has 20 branches in six states, and plans to have about 30 in place by the year 2000.
For members who don't want to leave the house, the credit union plans to offer home banking services in 1995, Mr. Padgett said."
Also next year AT&T Family plans to become a vendor, offering mortgage origination and check processing services to smaller credit unions. "It's extremely difficult for smaller credit unions to do a number of things larger size and resources allow you to do," he said. "It behooves those of us who can to help those of us who can't."
Currently, state leagues provide these services to credit unions, but that may change, Mr. Padgett said.
"I don't know whether we would ever do away with the leagues, but you might find larger credit unions doing some of the things leagues are currently doing," he said.
"In some areas credit unions are better able to do things than the leagues."
Mr. Padgett, a 39-year AT&T veteran, had never managed a financial institution before former president David Daetwyler left AT&T Family last December. Nevertheless, the credit union has been operating according to the strategic plan it laid out three years ago.
"It's difficult, obviously," he said. "But if you have developed management skills and a leadership style, it can stand you anywhere you go." He added that the credit union has an excellent staff, including some former savings and loan employees.
The credit union has found a chief executive, and is now conducting background checks. If all goes well, the new person should be in position by the beginning of 1995.
Mr. Padgett summed up what the board was looking for by saying, "He has to be a visionary." AT&T Family Federal Credit Union At a Glance Headquarters: Winston-Salem, N.C.Chairman: Clyde O. PadgettMembers: 125,000Employees: 201Assets: $370 millionLoans: $319 million
