Teachers Federal Credit Union has an extremely rare charter that allows it to add new members from anywhere in the United States, without restrictions.
And the $9.1 billion-asset institution is now ready to take advantage of it.
"We're looking to capitalize on and maximize our open charter and bring that to more members," President and CEO Brad Calhoun said in an interview. "Our goal is to continue to expand across the nation."
So as the Hauppauge, New York-based credit union prepares to celebrate its 70th anniversary, it is also planning its first-ever out-of-state expansion.
Teachers FCU said Wednesday it will open a branch in Tampa, Florida, later this year.
Calhoun said the move to Tampa will jump start the credit union's national expansion plans in a market where it already has a built-in membership base after years of preparation. Teachers FCU has seen a migration of many of its New York members into the Tampa market.
"There's a strong New York-Florida connection," Calhoun said. "We're seeing a lot of natural migration — be it retirement or whatever — where our members are moving to Florida or splitting their time between Florida and New York."
And Tampa is also a high-growth market, he said. The city had a population of 396,000 in 2020, roughly 18% higher than it was in 2011.
Teachers is permitted to move around the country basically at will due to its "open" charter that allows anyone nationwide to join.
A National Credit Union Administration spokesman said only three credit unions have an open charter — Teachers FCU, Bethpage Federal Credit Union and Pentagon Federal Credit Union.
Teachers landed the charter with its acquisition of Melrose Credit Union in September 2018, when the NCUA liquidated the institution.
PenFed recently put its open charter to work and kicked its membership growth into overdrive. The McLean, Virginia, company
PenFed
Banking trade groups, not surprisingly, have voiced complaints about what they see as unfair advantages of the open charter for years.
Robert Flock, vice president in the office of strategic engagement for the American Bankers Association, said service to people of modest means within well-defined communities is the cornerstone of the credit union movement and the basis for the federal tax exemption.
"Teachers FCU's national expansion flies in the face of that notion," he said. "This unchecked, taxpayer-subsidized growth into new markets does a disservice to the local areas it was originally intended to serve, especially without any of the requirements taxpaying banks have to demonstrate their reinvestment in those communities that need it most."
Flock said policymakers should use Teachers' announcement to reflect on the original purpose of credit unions and whether the "unbridled growth" of ultra-large credit unions meets that test.
With 425,000 members, Teachers is already a top-30 credit union in the U.S. But Calhoun said Teachers FCU has been working for the past three years on a "big transformation" that included infrastructure improvements and enhanced digital offerings.
"Part of what is driving our national expansion is our ability with the open charter to do more and bring the value of Teachers to more members," he said. "We're not looking to put branches on every corner, but we do want to have some anchor branches."
One of the untapped values of the open charters is how they can be used as a conduit to the credit union industry through loan participations or correspondent banking business models, said Sam Brownell, founder of the consultancy CU Collaborate.
"Fintechs would love to leverage that kind of technology CUSO because of credit unions' lower cost of funds and superior pricing for consumers," Brownell said.
For Teachers, the retail expansion to Florida works with the extension of its national mortgage lending platform in the past year. It went from operating in seven states to 43, Calhoun said.
"We're seeing some good traction in higher growth states," he said of the company's mortgage business.
The credit union believes it has plenty of room to run in Florida and then will set its sights on other markets. Calhoun said the credit union will likely fill in some spots along the East Coast, including in Virginia and the Carolinas, and then could move into Texas and California.
He said he would not rule out entering some new markets via M&A. "But we're not waiting for that perfect opportunity to align," he said.
Calhoun, who worked at Bank of America for 18 years before entering the credit union industry with First Tech Federal Credit Union in 2013, said the death of branch banking has been predicted for years. He said branches are evolving but will never completely leave the landscape.
"The old school retail environment in the banking world is dying for sure," he said. "But this is about having expertise all in one place and being there for member problems."
