AUSTIN, Tex.—What’s it like to operate credit unions in some of the fastest-growing and slowest growing cities in the nation?
Credit Union Journal decided to find out.
WalletHub, a personal financial website, recently reported that nine of the 10 most rapidly-growing cities in the United States are located in Texas – a state with low unemployment, and state taxes, which helped it get through the great recession better than most. (The other city is Kent, Wash.)
Five of the 10 slowest-growing cities are located either in the Midwest (which suffered an epic collapse in manufacturing) or in one of the sunny “sand” states (which bore the brunt of the mortgage meltdown).
WalletHub compared 515 cities of varying sizes in the U.S. and evaluated unemployment, population growth and other socioeconomic figures to compile a cumulative list based on their proprietary methodology.
The fastest growing cities in Texas are (in order of growth): Odessa, Frisco, Midland, Mission, College Station, Killeen, Bryan, Austin, and Round Rock.
“Each of the nine Texas cities in the Top 10 has shown growth on the job front, regional GDP, number of businesses and median house price growth,” said Jill Gonzalez, an analyst at WalletHub.
The 10 slowest growing cities are: Carson, Calif.; Yuma, Ariz.; Westland, Mich.; Sunrise Manor, Nev.; Detroit; Decatur, Ill.; Deltona, Fla.; Skokie, Ill.; Albany, Ga.; and Parma, Ohio.
“It’s clear that these cities, along the Rust Belt, are still battling the effects of the recession and they are still recovering,” Gonzalez noted. “We found that all of the cities have shown a significant decrease in population.”
Here’s how some credit unions in these areas are working under some very different economic conditions.
Decatur: Rust Belt Blues
Decatur is located in central Illinois, about 180 miles southwest of Chicago. As manufacturing companies have left the region, the city’s population has plunged from an all-time high of 94,000 in 1980 to 75,000 today.
The Decatur-area’s unemployment rate stood at 6.8% in August, down from 8.4% in August 2014. Almost one-quarter (23%) of the city’s residents live below the poverty line, vs. 14% for the rest of the state.
Chris Phillips, vice-president of marketing at Land of Lincoln Credit Union, a $219-million institution based here noted Decatur has always been a manufacturing town.
“We have lost many of our major corporations here [like Bridgestone/Firestone] and the work has gone with them,” Phillips said. “Demographically, the city is aging and retaining and attracting professionals to the community has been difficult. Economically, the city is somewhat depressed, but companies like Ameren, ADM [Archer Daniels Midland] and Caterpillar do provide some stability and growth for our community.”
Barry Schmidt, president of $267 million Decatur Earthmover Credit Union in Forsyth, noted that Decatur has been a “blue-collar” town for decades. “When the economy is good, we have seen success and growth,” he said. “While we still have a few larger manufacturing companies—they have all seen fluctuations in their respective workforces over the last 10 to 15 years.”
Decatur’s declining population is a concern for Earthmover’s executives. “We have always tried to maintain our focus on the local market and our members in the area,” Schmidt said. “The realities are now changing and we will be forced look outside of the Decatur area to find growth.”
Some things are looking up for Decatur, according to Phillips, noting that ADM has recently invested a large amount of resources into a “Midwest Inland Port.”
“This new feature of our community could be a major attractor for new companies to locate to our community, and it will position Decatur as a major logistics hub in the future,” he noted.
Nonetheless, Phillips admits that Decatur’s economic issues “definitely pose a major challenge” for the continued growth of Land of Lincoln.
“More and more competitors are entering the market, and since the pie doesn’t get any bigger, to get your slice you must be ultra-aggressive,” he explained. “That’s not to say that the market is a bad one to be within. Actually, there is considerable wealth in our community and small-business opportunities continue to offer opportunities in commercial lending if we can ‘steal’ it directly from the banks. The shape of our hub market and competitiveness of the area does make consolidation and new product development much more important.”
Also, Land of Lincoln has had to get creative. For example, Phillips notes that Decatur is surrounded by rural markets that Land of Lincoln has entered (through mergers) as a way to compensate for the decreasing population in Decatur.
“In these markets, competition is less fierce, and we have been able to gain a foothold in these areas using a Decatur as our hub,” he added.
For the near future, Land of Lincoln will have to become “more strategic” in its branch site selection.
“Obviously, when it comes to where we want [to establish] a branch, things like traffic counts, the local economy and growing populations are crucial to our decisions,” he said. “This is why we have entered two markets in Springfield and Bloomington, in Illinois, in 2014. These markets are growing both in population and economically. While competition is dense and established, we know that moving into these areas will give us more opportunities than some of the smaller rural markets we have chosen.”
Other Illinois credit unions still see measured opportunity in Decatur.
Citizens Equity First Credit Union (CEFCU), a $5.2-billion institution based in Peoria, Illinois, has a branch in Decatur, 90 miles to the southeast.
Dianna Hunter, a vice president at CEFCU, told Credit Union Journal that her institution has seen “steady growth” in membership and loan volume in Decatur over the past three years, attributing that expansion largely to “word of mouth” efforts. “We have even invested in the community, by upgrading the facility, fixing the roof, improving the parking lot and adding ATM machines,” she said. “Our members in Decatur comprise a pretty diverse lot – with both white-collar and blue-collar residents.”
Even Schmidt harbors some cautious optimism. “There are still opportunities for a credit union to succeed in Decatur,” he said. “There are still good employers in the community (Caterpillar, ADM, Tate & Lyle, two hospitals) and an economic upturn will see growth for many of these companies. Our community is lucky to have several community chartered credit unions to choose from which makes for a consumer friendly marketplace. It will mean credit unions will have to differentiate themselves from their competitors and bring value in multiple areas to maintain and grow their business.”
Las Vegas: Dark Days on the Strip
Another of the slowest-growing cities, Sunrise Manor, Nev., is a township of some 190,000 people in the Las Vegas metropolitan area, which suffered mightily from the subprime mortgage disaster.
Greg Barnes, SVP of marketing at One Nevada Credit Union, a $757 million institution based in Las Vegas, describes Sunrise Manor as a “mature” area of Las Vegas with a large Hispanic and immigrant population with lower socioeconomic characteristics than the newer suburbs around town. (According to the 2010 Census, almost one-half of the township’s population was Hispanic.)
“Because of its location and limited physical growth capacity, there is not much open space to add additional housing and retail in the area,” he said.
Nonetheless, Barnes said One Nevada’s branch in Sunrise Manor performs well “with positive membership and loan growth.”
“We not have experienced any real challenges with our branch except those that come with having a location in an older part of town - maintenance issues, older facilities, etc.,” he added. “It is a profitable branch for us.”
In addition, he asserted that the credit union’s product mix fits the area very well. “We offer a payday loan alternative product, a second-chance checking product and a new start mortgage loan program, all of which were developed for this type of market,” he said.
One Nevada, he further noted, has very specific requirements for selecting new or closing down branch locations. “We prefer high-traffic, big-box centers where we can lease a small space and install a drive-up ATM - along with other proprietary criteria,” he stated. “We continually assess the profitability of our branches (along with member behavior and trends) and close branches where/when appropriate.”
Austin: Everything Is Big in Texas
The Lone Star State is booming—including the area around its capital, Austin, where the $742-million Amplify Credit Union is headquartered.
“Austin’s population and economic growth have been factors in Amplify Credit Union’s overall development, which has helped us provide expanded opportunities for our members and the Austin community,” said Kendall Garrison, executive vice president of Amplify.
Indeed, in 2014, Amplify’s assets grew by 9% and over the last five years, the credit union increased its membership by more than 10,000 members [to 52,600 at present], he added.
“Through this growth along with other initiatives, we’re able to put 95% of every dollar that our members have on deposit back into lending opportunities, providing a much higher return rate than the industry average which falls around 70%,” Garrison noted.
Austin’s significant expansion prompted Amplify to develop several innovative programs to meet the growing needs of the marketplace. “As more homeowners moved to Austin, we saw a growing population with unique lending needs and researched more than 188,000 Austin households to gain a broader picture of their financial requirements, loan default rates and other key variables,” Garrison said. “This led to creating Amplify’s Homeowner Express Loan that offers significantly lower rates than traditional unsecured loans.
This loan helps homeowners improve their homes and potentially increase return on investment through projects ranging from window replacement to deck installation or even debt consolidation.”
But, ironically, fast growth in the surrounding area, can produce some unexpected drawbacks. For example, Garrison noted, with an unemployment rate of only about 3% in Austin, it can be hard to attract and retain enough employees.
“We’ve grown significantly internally and went from 170 employees in 2010 to 219 today,” Garrison said. “Austin also attracts several competitors in almost every industry, including financial services. It’s a thriving market and everyone wants to enjoy the growth.”
