WARRENVILLE, Ill.-Natural-person credit unions are still skeptical about their corporate counterparts, and one person said much of that boils down to the options available to small to mid-size CUs.
"I think some large credit unions have found alternatives already," said John Fiore, vice chair of the recently launched Alloya Corporate FCU. Going forward, "I think the fact that they've gone out and found alternatives, it's going to be pretty unlikely that they're going to come back and bring that business back."
Fiore, like many others who spoke to Credit Union Journal, posited that most corporates will find themselves battling over small to mid-size CUs, something echoed by his colleague and Alloya CEO, Charles Furbee.
"That's the sweet-spot for corporates," said Furbee, pointing specifically to $150-million to $200-millon CUs.
Alloya, which officially opened for business in late October following an NCUA conservatorship, was chartered from the remnants of Members United Corporate FCU. Alloya currently serves just over 1,100 CUs (Members United served as many as 1,800) and its capital ratio stands at 5.51%, with about $92 million raised from member CUs.
'Where Did They Go?'
Furbee said that after performing a post-mortem of Members United, it was mostly larger CUs that have chosen not to renew with the corporate, but overall "our percentages didn't change. We have the same percentage of mid-tier credit unions, as well as larger ones-there were just fewer large ones to begin with. Where did they go? I would say most didn't go to another corporate," but instead went to the Fed or other providers.
"There are very few credit unions that haven't already invested capital somewhere," added Furbee, but "there won't be mass movements short of mergers or acquisitions. That's where you might see a substantial number of credit unions move as a block, and the reason is that they have already capitalized."
More Consolidation Projected
Both Furbee and Fiore predicted further consolidation across the CU spectrum. "Because there are different models out there among corporates, you're going to see fewer corporates long term," said Furbee. "So one of the challenges that Alloya has is to be positioned best to be one of the longer-term corporates."
The strategy for doing that lies in both growth and technology, including products such as remote deposit capture.
"I think most corporates during this whole episode had put most of the expansion of technology on the backburner," said Fiore. While that was acceptable during the reshuffling of the corporate landscape, now that things have calmed, "we know how technology moves, so you have to adapt pretty quickly."
Furbee added that price protection will also help Alloya, pointing out that the corporate has not had "major increases in our prices for over three years." The exception, he said, was when service providers such as the Fed have increased prices, which then get passed on to the CUs the corporate serves. Additionally, he said, new lending products are also in the works, though he declined to go into specifics.
"I think we're still in a bit of a honeymoon," said Furbee. "There's still a bit of a glow, but now we're in November and it's time to head north into the wind and make sure we're a survivor and, more than anything, make sure that we retain the capital those members decided to reinvest with us."
