Charter Change Is Only Beginning
OMAHA, Neb.-Ask Kevin Parks about the pros and cons of going to a community charter and he will side on the positives. But the CEO of Centris FCU admits the move is not a growth slam dunk.
"Going community has opened a lot of avenues for us over the years," said Parks, whose $449-million credit union changed from a multi-SEG charter in 2000.
The results are apparent in the numbers: Over the last five years membership growth has averaged 1.3% annually and asset growth 5.9%, Parks reported. "I think that compares favorably with the rest of the industry."
Moreover, CFCU's assets grew by $194 million since it changed to a community charter, whereas during the 10 years prior to the conversion Centris grew by $90 million.
When the credit union changed charters it also changed its name from Bell FCU, which reflected its original FOM serving local telephone and communications companies. "Changing our charter, obviously, has allowed us to reach out to a broader segment of the marketplace with more products and we are attracting many relationships that we could not have otherwise," said Parks. "It has also allowed us to expand our brand here by moving away from our affiliation with the phone company, which had been beneficial to our success. But to adapt to a changing economy, marketplace, and financial environment, and to position the credit union for the future we had to make the shift."
The move has leveled the playing field with competitors, according to Parks, who suggested its former multi-SEG charter limited the CU's ability to compete. "Our new charter also is consistent with our philosophy about being deeply involved in the community. Being community based there are many more things we feel we can do now to be part of the areas we serve."
But the big issue with going to a community charter, observed Parks, is that the credit union must be willing to step up its game and take on bigger challenges. "Now you are dealing with all other financial institutions in the marketplace. That requires having enough branch locations, a broader range of products . . . now you have to really set yourself apart from other competitors. All these things are disadvantages at first if you are not prepared for them. They are challenges to be dealt with."
The issue of creating uniqueness is a challenge, offered Parks. "A lot of people don't understand what a credit union is and how it is different from a bank. When you move to a community charter that blurs the distinction even further. You have to have a strong marketing message and branch presence."
While the new charter gave Centris greater member reach, it limited the growth potential of two of its far-flung offices that were grandfathered in when the new charter was signed.
"The offices really don't fit within the community designation we have today, which is the Omaha metro area," said Parks. "What do you do with those offices? Besides an inability to really grow those branches, you have challenges in terms of extending your marketing and advertising, and your support. How those offices fit within our strategic direction is an ongoing challenge."
Parks acknowledged that numerous credit unions remain with the SEG-based approach to business. "In many ways it allows them to be more price competitive. On the other hand, when you are in a marketplace that does not have a large SEG population you have to look at a community charter. When you get down to it, it is really a matter of who you want to be and what you want to be, and then making a charter decision and moving forward with it."