FAA CU Says New Charter Flies
OKLAHOMA CITY, Okla.-FAA Credit Union has tried several field of membership models, but the preferred FOM by far is a community charter.
Steve Rasmussen, president and CEO of the $485-million credit union, said from 1946 to 1993 it was a single-sponsor credit union serving, as the name implies, the Federal Aviation Administration, plus families of employees. In 1993 it began adding SEGs, most related to aeronautical companies that contracted with the federal government.
"The SEG model was a lot of work for just a few members," Rasmussen recalled.
In 2001, state-chartered credit unions in Oklahoma worked with the state's regulatory agency to create a community charter system. Originally, there were six counties designated as being in the Oklahoma City area (that number is up to eight today), and credit unions could apply to serve from one to all six. FAA CU had opened its first branch outside the FAA building in February 2001 to serve SEGs, and it expanded on that model to serve all six counties in the OKC metro area.
According to Rasmussen, the switch to a community charter has been good for FAA CU on multiple levels. He said it gave the credit union a chance to reach a potential market of more than one-million people, and it became more involved in the community, including the chamber of commerce.
"We changed our whole way of thinking," he said. "We built a much larger marketing department and created direct mail pieces, which we never did before. We have done TV and radio advertising to reach the area. Instead of being focused on our single sponsor or just our SEGs, we started competing with every bank out there, and it has proved to be successful."
The switch to a community charter has spurred FAA CU to be "much more competitive" and "much more member service oriented," Rasmussen continued. He said he tells his staff all the time the credit union does not have any product that other financial institutions don't have, so the only way to be competitive as a community charter is by offering exceptional member service.
"Rate plays a factor, too, but it can't be the only factor," he said. "The only way to compete is by building one relationship at a time. Being a community charter gets the competitive juices going, and gives a mentality that we can't be a little closed-in group. We have to get out there and try to get business."
FAA CU posted net income of $652,000 in 2008, despite placing more than $1 million in its allowance for loan losses. In 2009 it boosted ALL to $2.4 million and paid $536,000 to the NCUSIF, but still had $2.1 million in net income.
In 2010 it had $3.5 million in net income before assessments. After paying nearly $500,000 to the NCUSIF and $517,000 to the corporate stabilization fund, it was left with $2.5 million in net income.
In the first quarter of 2011 it posted $231,000 in net income. Its net worth ratio was 7.72%, making it "Well Capitalized" by NCUA standards.
Added Benefit Of Expansion
After the terrorist attacks on Sept. 11, 2001, as was the case with many federal buildings all access to the FAA facility was closed. Fortunately, because the credit union had opened a second branch outside the FAA building nine months earlier, it was able to serve its members.
"Without that, we would have been in crisis mode," Rasmussen said.
The switch to a community charter has been "very worthwhile" overall. Rasmussen said he is certain it would not has been as successful in growing accounts and getting exposure in the community had it continued its SEG-based strategy over the last 10 years. He recalled the struggle to sign up a SEG, only to have the company close or undergo changes to management.
"Being SEG-based was a lot of work. By going community, you just go after the marketplace and it depends on how aggressive we want to be to be competitive. We are more impactful as a community charter, and I think it has made us a better institution because of it."
Rasmussen said having the community charter option has given all credit unions, not just his, "much more exposure."
"It has changed public perception of credit unions. No longer are we seen just as a mom-and-pop store that serves FAA. And no longer are we seen just as a place to have a savings account and a car loan. We do real estate lending now, and even business lending. We would never have considered doing business lending before we got a community charter."