Two moves in the first quarter of this year have positioned Jacksonville, Fla.-based VyStar Credit Union for significant expansion, and one analyst suggested there could be valuable takeaways for other institutions planning to broaden their footprint.
After adding 27 Florida counties to its field of membership last year, in January 2019 the $8.2 billion-asset institution
“People travel back and forth across the state lines for shopping all the time,” explained President and CEO Brian Wolfburg. “By adding the counties in Florida and expanding into Georgia, we are growing from 22 counties, with roughly 6 million people, to a total of 53 counties with roughly 12 million people. This was all connected to our business plan. It was well-thought-out.”
VyStar was chartered in 1952 and originally served a large military base in Jacksonville, and the expansion will connect it to another base in Georgia. Wolfburg said that when he took over as CEO in 2017, the credit union already was already making inroads into the Orlando market, which he noted is four times the size of the Jacksonville market.
“I wanted to ensure we continued to grow in multiple directions,” he said, adding, “We are fast approaching $10 billion. As we go over that there are added costs from increased regulation, so we wanted to achieve operational efficiency. At the same time I wanted to improve our geographic footprint to diversify some of our risks and give us more levers to pull as we grow.”
‘Playing on the road’
Steve Williams, president of Cornerstone Advisors, a Scottsdale, Ariz.-based consultancy, said the area into which VyStar is expanding is one of several around the United States where “state lines do not define communities.” He pointed to Portland, Ore., and parts of southwest Washington state that are just across the Columbia River as one example, along with Spokane, Wash., and its nearby neighbor to the east, Coeur d’Alene, Idaho.
“In those areas, the border does not define people’s lives,” Williams assessed. “Growth across the state line can give a credit union a community presence. A credit union might see a cluster of members in a community across a state line and establish a branch there. It is important to look for growth potential before you make the investment.”
But, he cautioned, CUs need to understand the markets they are getting into before committing to expansion.
“When a credit union wants to cross a state line to access a growth market, that is like a football team playing on the road,” Williams said. “It can be harder to grow in a new market, because you do not have the advantages of your home market. It is important to have a clear strategy and know your niches. You might not grow all product lines. We have seen some credit unions do just indirect lending or just mortgages first, and then grow from there.”
Williams said CUs must keep a number of factors in mind when expanding across state lines.
“The biggest pitfall would be if the board and management team is going after growth for growth’s sake,” Williams said. “If you do not have the metrics, there is a greater than 50 percent chance of failure – and you will not know until it is too late.”
For example, Williams said, many FIs have tried to go into Miami or Dallas and failed.
“A growth market in and of itself will not lead to success,” he declared. “Crossing into a new state can lead to credit unions competing in the same towns. Even though those credit unions might be ‘rivals,’ most of the market share is still large banks.”
Measuring success
As VyStar moves into cities and counties where it has not been before, Wolfburg said he and the management team see the future as still requiring brick-and-mortar branches. These branches do not need to be as close as they were in the past, he added, and will be supported by a “very robust” online and digital platform.
As for its marketing and advertising strategy for the newly acquired Georgia counties, Wolfburg said because there is “a lot of overlap” in the markets, the VyStar name already is familiar. The credit union serves up ads across multiple platforms in a variety of media markets that serve both sides of the state line.
Wolfburg said VyStar will be keeping a close eye on membership growth throughout the expansion process.
“We are monitoring penetration rates for households,” he explained, noting the CU has maintained a membership growth rate of approximately 9 percent to 10 percent for the past two-and-a-half years. Before that time, it had sustained membership growth of about 7 percent.
“We would like to see our membership rate grow at or above 15 percent each year, inclusive of mergers and acquisitions,” he said. “We will always be trying to achieve north of 10 percent of market share in the major markets we serve. We want to do all of this while adding to our net worth.”
Asked if there is a plan to continue to expand in Georgia beyond these first four counties, Wolfburg said that while the credit union is open to additional opportunities, no one at VyStar is getting ahead of themselves.
“We have nothing planned, but we do see ourselves as a regional credit union,” he said. “We want to get big enough to have the operational efficiencies to be competitive with banks so we can provide our members the best rates and fee structure. We want to grow, but we think it is important to maintain a connection with the field of membership. Of the counties we have added, including those in the Florida panhandle, there is not a county that does not see people travel back and forth. I could see us doing more counties in Georgia when the time is right, but we have a lot ahead of ourselves.”
