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Credit union celebrates birthday, looks forward to growth
By Dan McCue
Staff Writer
As the South Carolina Federal Credit Union celebrates its 70th anniversary this year, it stands poised to significantly expand the membership base it serves.
By year’s end, the credit union, which has more than $1.2 billion in assets, will open new offices in Moncks Corner and Manning, the county seat for Clarendon County.
The credit union will also put the finishing touches on a branch opened last year in Orangeburg and is looking to open additional branches in Columbia.
Not bad for an entity born on Jan. 31, 1936, when 14 Charleston Naval Shipyard workers each contributed $5 to form a financial cooperative to meet their check-cashing and other monetary needs.
“We’re big on expanding into underserved markets,” said Scott Woods, the credit union’s president and CEO.
And while economic growth and reaping benefits for its members are two factors driving SCFCU’s market decisions, the other equally important influence is the ever-changing regulatory climate related to credit unions.
A credit union is a democratically controlled not-for-profit cooperative with a volunteer board of directors whose decisions must adhere precisely to the guidelines set out for them by federal regulators.
Beyond that, and its tax-exempt status, the other factor that distinguishes a credit union from a bank is that at a credit union, all earnings beyond capital accumulation are returned to the membership in the form of lower fees, lower loan rates and higher deposit rates.
SCFCU’s most recent growth activity was fueled by regulators granting it permission to expand into communities they deemed underserved by financial institutions.
But the thunderclap for all credit unions actually occurred about 20 years ago when the rules governing them were changed to allow them to open their membership to “multiple employee groups.”
This meant that for the first time, credit unions did not have to limit their membership to individuals who belonged to the same type of organization or worked in the same industry.
“Historically, credit unions have stayed close to where their members were,” said Woods. “It just made sense. In our case, initially we were located at the shipyard, then across the street and then, as the rules changed, we started picking up employee groups that were not affiliated with the shipyard at all.”
In 2003, SCFCU was granted a community charter by its federal regulator, which allows it to accept anyone as a member in the specific community, as long as the individual lives, works, goes to school or worships there.
No matter how the credit union has grown, however, Woods said its core principles remain the same.
“First and foremost, we want to continue to take care of our members,” he said. “What you’re seeing now is our effort to pick up economies of scale so we can continue to offer more products and services at better prices than we do today. But that doesn’t mean we’ve forgotten the members who have been with us all along and have allowed us to have the growth we’ve enjoyed over the years.”
Before beginning his career in credit unions, Woods worked a few years in public accountancy, finding that the hours the work demanded conflicted with his newlywed status at the time. He spent more nights on the road than at home, he said.
Still, the accounting experience is something that continues to serve him well today, he said.
That knowledge base may well prove important in the year ahead—a year in which an industry expert predicts that market forces may propel it and other not-for-profit financial institutions like it across the country into new arenas.
“Make no mistake, credit unions across the country enjoyed another banner year in 2005,” said Patrick Keefe, vice president of communications for the Credit Union National Association, a Washington, D.C.-based trade association. “But for that trend to continue, credit unions have to grow and, in some cases, change, while remaining true to their core mission of providing excellent service and value to their individual members.”
According to the CUNA, which represents about 90% of the credit unions nationwide, credit union savings growth will increase 6% nationwide in 2006 due mainly to rising interest rates and slowing home price appreciation. The association predicts this trend will accelerate in 2007 with savings growth reaching 9%.
At the same time, it predicts credit union loan growth will taper off somewhat in 2006 to around 8% as rising interest rates and low consumer demand reduce members’ need for loans.
But Keefe said that figure is misleading.
“Lending actually picked up in the last year or so, so when you see us forecasting a decline in demand for lending, a little perspective will go a long way toward explaining the reality,” he said. “Right now, the ratio of all loans to all savings for credit unions nationwide is about 80%, which is a phenomenal number. Even with the decline we’re predicting, a ratio of 72 percent to 75 percent is still a pretty hot loan demand.”
Credit unions that do see a sharper dip in demand will respond in a number of ways, Keefe said. Some will simply put more emphasis on generating consumer loans. Others might begin issuing credit cards, something about 50% of credit unions do today.
Some credit unions, more likely the larger institutions in the country, will begin to look at new products, such as commercial loans, a market that regulators opened to the institutions in 1997, Keefe said.
“Most credit unions don’t do business loans because our traditional members are people, not corporations,” he said. “As a result, our bread-and-butter has always been things like car loans and home loans.”
Still, Keefe said, in the past 10 to 15 years, demand has been growing among credit union members for business loans and related services.
“Mainly it’s come from people who are already members of a credit union who have left a large employer and decided to strike out on their own,” he explained. “They’ll logically go to their credit union and say, ‘You know me. You know my credit history. Can you give me some seed money?’ Those credit unions that respond favorably to such a request tend to be the larger partnerships, those that have the skill sets among their current employees to handle those kinds of loans.”
Business loans made by these institutions, which Keefe said are comparable in size to SCFCU, typically range from $110,000 to $120,000.
Although SCFCU does not currently offer commercial loans, Woods said, “We are constantly looking at ways to provide more services to our members.”
For now, however, one priority for SCFCU is expanding its North Charleston operations into the former Circuit City site on Rivers Avenue. Renovations should be complete later this year.
“We reached capacity in our five-story Rivers Avenue headquarters about four years ago,” Woods said. “Since then, we’ve leased a nearby building to house some of our back-office operations, but when we found out the Circuit City building was for sale, a building right next to our current location, we jumped at the chance of having all of our operations in essentially one campus location.”
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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