Aggressive Growth Puts Credit Unions in Bankers’ Crosshairs | Business Observer
In Florida, 2022 could become the year of the credit union. An explosion of organic and inorganic growth, along with consolidation in the banking sector, has seen credit unions flex their muscles and spread their wings like never before.
According to the latest data from the Credit Union National Association, the average total assets per credit union increased from $360.1 million in 2015 to $776.5 million in 2021, up 115.63%. The number of members per credit union increased during this period from 5,215 to 6,645, an increase of 27.42%.
Meanwhile, some 93.8% of Florida credit unions posted an increase in assets in 2021, down slightly from 98.4% in 2020, but up significantly from 82% in 2015.
At the top of the pyramid is Tampa-based Suncoast Credit Union, with total assets of $15.33 billion through Dec. 31. “and that gives us the opportunity to be more efficient; it gives us the ability to have better negotiations with suppliers, which puts more money in our arsenal, which gives us the ability to give more money back to our members.
Including Suncoast, four of the state’s 10 largest credit unions — MidFlorida Credit Union in Lakeland and Grow Financial Credit Union and GTE Credit Union, both in Tampa — are based in the Tampa Bay area, while Achieva Dunedin-based Credit Union is No. 11 on the list. And then there’s the trend of newly emboldened credit unions, both in Florida and out of state, buying up community banks.
Not everyone is thrilled with the rise of giant-sized credit unions. The Florida Bankers Association has for years lobbied the government to force credit unions that have total assets over $500 million to pay federal and state income taxes.
“We have a national debt of $30 trillion,” FBA President and CEO Alex Sanchez said in an interview with the Business Observer. “Why are we giving tax subsidies to multi-billion dollar financial institutions? Why does a family of four pay more state and federal taxes than a multi-billion dollar credit union? »
With the pandemic-induced influx of people moving to every corner of Florida, a credit union would have to be utterly inept for not experiencing organic growth in recent years.
“We are fortunate to live in the state of Florida,” said Steve Moseley, president and CEO of MidFlorida Credit Union. “We have significant net growth here. In some of our smaller markets, like Highlands County, a lot of national banks have pulled out. We invest and stay in small markets, so we naturally recruited a lot of members. When banks close branches, people have to get banking (services) somewhere.
Moseley says MidFlorida has set a goal of adding 66,000 new members this year and is ahead of the pace it will need to reach that milestone of about 4,000 accounts. Organic growth, he adds, is coming from “everywhere,” citing disruption and bank consolidation as a major factor, as well as MidFlorida’s indirect lending program in which car dealerships write loans that direct buyers. of cars to the MidFlorida ecosystem.
“And we keep adding branches,” adds Moseley, “and that’s also creating new members for us.”
Achieva Credit Union COO Jennifer Galley, meanwhile, identified some intriguing trends in her institution’s recent organic growth spurt. While migrants to Florida make up “a large portion” of Achieva’s cohort of new members, “we are seeing more and more snowbirds come down and stay longer, or not return home at all. And we’ve had a Hispanic (marketing) initiative for several years now. We are seeing this population really starting to grow within our membership ranks.
Galley says Achieva’s membership base grew 11% year-over-year, and like MidFlorida, much of that increase comes from indirect lending, such as auto loans. “It adds a lot of new members,” says Galley. “We’re trying to put more resources into converting people who don’t really understand what a credit union is, or what membership means to them, into more engaged, multi-product members.”
On the hunt
With more out-of-state banking players entering the Florida market, credit unions, to maintain and grow market share, have also accelerated the pace of acquisitions. In doing so, some credit unions are targeting the shrinking supply of state community banks.
A direct acquisition of a credit union bank was virtually unheard of as recently as 2015. But that year, Achieva ignited the trend by buying Calusa Bank, based in Punta Gorda. In 2018, Achieva purchased Fort Myers-based Preferred Community Bank, which at the time had $116 million in assets, for an undisclosed amount.
Both movements greatly expanded Achieva’s footprint. Still, the deals came with unique integration challenges, Galley says.
“When you acquire a bank, employees and customers may not understand what a credit union is, how it works and how it is similar and also very different (from banks). For some members, they are actually very scared not understanding what a credit union is, or even the word “union” can be intimidating. They associate it with unions and all sorts of other things.
Converting bank customers into credit union members can also be tricky, as they are required to proactively register. Sometimes, says Galley, some education, guidance and above all patience is needed.
“It’s important that each of the customers understands what this means and is comfortable completing this onboarding process,” says Galley. “What we’ve found is that for the handful of people who don’t understand or are uncomfortable with the idea, we ask them to give us a try. And if, after meeting some of their banking needs with us, they aren’t satisfied, we can pick up the conversation, and usually, we’ve won them over. But there are no conditions to give us a chance.
MidFlorida Credit Union is another bank hunter. In 2019, it acquired Ocala Community Bank & Trust of Florida, a $730 million asset bank. It also purchased the assets of First American Bank of Iowa, whose holdings include a $240 million portfolio of commercial and residential mortgages, primarily in the Naples and Cape Coral markets.
Moseley says MidFlorida targeted Ocala Community Bank & Trust out of a desire to expand its services, not just its geographic footprint. The bank had a strong treasury department, and adding that to MidFlorida’s offerings was a source of “good, solid growth,” he says.
What size is too big?
However, as credit unions have grown larger, they have clashed with bankers and industry advocates, like Sanchez, who is quick to point out the vast majority of credit unions – 80% to 85%, depending on his estimate – don’t fall into the “too big” category. These are not the ones that concern his organization.
“It used to be that the milkman’s union was for the milkman,” he says. “But the Navy Federal Credit Union is over $150 billion. They are bigger than our regional banks. They say, “We are non-profit. No, no, no, you’re a bank and you make a lot of money. And you must support the needs of our country, our society and our state.
Credit union leaders, meanwhile, argue that such characterizations miss the point — that there are fundamental differences that separate banks from credit unions and, as Galley points out, those differences are often poorly known.
“Credit unions have a volunteer board of directors,” she says, “and their sole purpose and motivation is to help people be financially independent. I think anything that threatens that design doesn’t position us to help empower our members.
Sanchez agrees there is a clear need for credit unions. But he disagrees with the way the industry uses small “mom and pop” credit unions to represent itself in Congress.
“I’m not talking about them,” Sanchez said, referring to small credit unions. “Leave them alone. Put them aside.
Sanchez talks about Jacksonville-based Vystar Credit Union, which has total assets of more than $12.3 billion. Last year, Vystar acquired Heritage Southeast Bank, a Jonesboro, Georgia bank with $1.5 billion in assets. At that size, Vystar had purchased a bank that, if based on Florida’s west coast, would easily be one of the largest in the region. Sanchez is also critical of Dearborn, Michigan-based DFCU Financial, which agreed to a deal in early May to acquire First Citrus Bank of Tampa.
“They went way beyond their mission,” he says, “and quite frankly, our country can’t afford that kind of corporate welfare anymore.”