The Path From 'Very Humble Roots' For 1 CU

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SAN DIEGO-During the six-year period after San Diego County Credit Union moved to a community charter serving the entire county, SDCCU's cumulative growth in total assets was 203%.

Teresa Halleck, SDCCU's president and CEO, told Credit Union Journal, "Clearly, this phenomenal asset growth reflected successful execution of market growth strategies largely fueled by the credit union's added ability to freely serve the local community in an effective and efficient manner."

San Diego County CU began with "very humble roots" in 1938 by serving employees of the County of San Diego, Halleck explained. Over the years that followed, numerous SEGs were added as a means of facilitating further growth and expansion. She said this approach was embraced within the local business community as a "wonderful employee benefit."

In 1997, the County of San Diego was added to the credit union's field of membership as a community charter area. Halleck said this began SDCCU's "official ability to fully serve the greater San Diego area in an efficient and effective manner." In 2004 the field of membership was expanded to include Riverside County, and in 2007 Orange County was added as a community charter area.

Prior to community charter fields of membership, SEG-based growth was the norm and Halleck said SDCCU did a "wonderful job" of taking advantage of what was then the "best-available strategic opportunity."

"However, from my perspective, SDCCU's migration from a SEG-based entity to that of a community charter field of membership for the County of San Diego was its strategic hallmark," she declared. "This strategic vision, to migrate to a community field of membership during the late 1990s under the leadership of former President/CEO Rod Calvao, provided SDCCU an unprecedented growth opportunity. As locally based banks vanished over the years from the San Diego market, SDCCU remained the home town place to 'bank' and capitalized nicely on that strategic opportunity through focused execution of efficient growth strategies coupled with exceptional service."

Halleck became president/CEO of San Diego County CU in August 2010 after nearly eight years as president and CEO of $7.2-billion The Golden 1 Credit Union, Sacramento, Calif.

What The Numbers Show

The effect the credit union's migration to a community FOM charter had on growth is illustrated in numbers provided by Halleck:

• SDCCU's total assets as of Dec. 31, 1997, had grown to $813 million. This was achieved over a 59-year period with the "previously limited" FOM.

• As of Dec. 31, 2000, SDCCU's total assets exceeded $1.3 billion, reflecting nearly 60% asset growth in the short, three-year period following the San Diego county FOM being added.

• As of Dec. 31, 2003, SDCCU's total assets had further grown to more than $2.4 billion, nearly 84% additional asset growth in this subsequent three-year period (2001-2003).

• SDCCU's total assets totaled more than $5.2 billion as of May 31, 2011.

"Even today, our community charter field of membership remains the key to continued strategic growth and success," Halleck asserted. "The impact community chartering has had on SDCCU is tremendous. Our community field of membership has fueled our strategic initiative to thrive and lead the local market through opportunistic growth."

Looking long term, Halleck said it is the community FOM that will continue to allow SDCCU the market opportunities needed to continue to successfully grow and expand. She said its current FOM of San Diego, Orange and Riverside counties equate to "continued market growth opportunities."

After posting a loss of $14 million in 2008 as it placed $41.8 million into its allowance for loan losses, SDCCU rebounded the following year with $62.1 million in net income even as its ALL was increased $90.8 million.

In 2010 it had net income before assessments of $67.7 million. After paying $5.1 million to the NCUSIF and $5.6 million to the corporate stabilization fund, it was left with net income of $56.9 million.

In the first quarter of 2011 SDCCU posted net income of $27.1 million. Its net worth ratio is 11.86%, making it "Well Capitalized" by NCUA standards.

Community FOM Helps CUs Compete

According to Halleck, community charter FOM options have enabled many credit unions to continue to survive long term while others "have not been as fortunate or strategically minded."

"Over the years, the industry landscape has been impacted by credit unions that failed to remain forward-looking and ultimately became casualties of SEG-related downturns and/or failures," she assessed. "In today's environment, diversification is an important risk management tool that applies to fields of membership as much as it does operational segments of our business, such as the loan portfolio, investment holdings, business partners, and other factors. It is essential that the industry continue to seek field of membership diversification opportunities to ensure continued growth and success, and relevancy in the minds of today's consumers."

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