Lessons Learned At Lunch: What 1 Person Didn't Know

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Editor's Note: Paul Nadler is a columnist for The American Banker and primarily writes about banks and banking issues. In this recent column, Mr. Nadler wrote of his encounter with a credit union executive.

Bankers complain that things have changed drastically since the days when credit unions served employees of a single company or individuals who had something else in common.

Now a credit union's "common bond" can be an entire county or even multiple counties. As a result, credit unions have stand-alone offices that look like banks and offer many of the services banks offer. This is a far cry from the days when a credit union had one room or even just one desk in a non-financial company's headquarters building.

What burns the bankers most, of course, is that despite their growing similarity to banks, credit unions still need to generate earnings to pay dividends and are not subject to the taxes that banks must pay. This explains how they can afford to offer better rates on deposits and loans.

With bankers' animosity toward credit unions intensifying, I decided to take a look at competition from the credit unions' point of view, to see how they look at bank competition.

To do this I arranged a lunch with Dick Romano, vice chairman of the $1.3-billion Affinity Federal Credit Union in Basking Ridge, N.J.

Perhaps the most startling thing I learned from him was that there were 40 applicants for seats on the board this month, with only two places available. This is noteworthy because credit union directors receive no compensation and board meetings can take up four or five days of a director's time each month.

What makes people want to work for no pay? Mr. Romano said they truly want to serve the organization and the community. As a result, the basic goal of this nonprofit is service. The CEO's bonus is not based on earnings but on success in meeting members' needs.

To learn whether it is doing so, Affinity distributes surveys regularly and has quarterly focus groups.

Affinity, which started as an AT&T-affiliated credit union, has expanded to include employees of about 500 other companies, large and small. It now has 118,000 members and operates 19 branches.

Service is its hallmark. When I asked Mr. Romano how long it takes to get a mortgage approved, he said, "We tell members we can get a loan approved in two days and have the check ready at the end of the second day if they are willing to stay home the first day so the appraiser can come at his convenience."

One Surprise

I was surprised to learn that Affinity's directors don't' pay much attention to competition from banks. The implications of Bank of America's deal to buy FleetBoston have never been discussed at board meetings, Mr. Romano said, and the credit union's officers and directors don't worry that Commerce Bancorp of Cherry Hill, N.J., keeps its branches open seven days a week.

"We did a survey and found our people want good service, not Sunday hours," Mr. Romano said.

I have long felt that "credit union movement" is a misnomer. Credit unions to me are profit-seeking businesses like any other.

But when I talk with Mr. Romano and see how dedicated he is to Affinity, despite the long hours without compensation, I have to conclude that there is still a lot of "movement" feeling in the organization, even with the operations and services becoming more bank-like every day. It is almost a religion.

He said, for example, that the credit union cannot pay as much as banks for non-management jobs but has little trouble hiring. His explanation: There are people out there who don't want the pressure of working at banks, many of which now require tellers and other front-line employees to provide leads to sales people. "We must be doing something right, because we have virtually no turnover," Mr. Romano said.

Credit unions are a formidable foe and will probably remain so. And if community bankers were to visit with Mr. Romano they might learn that, despite what bank trade groups might lead us to believe, not all credit unions are out to steal banks' business.

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