Aerospace community credit union

Any shopkeeper knows it's not easy to persuade passersby to stop and step inside. You can open the doors wide, but unless you give people a compelling reason to enter, they'll probably walk right by.

When a credit union obtains a community charter, it faces the same challenge. Credit unions with a community charter typically can serve anyone who lives, works, worships, or attends schools within a specific area. While the doors of these credit unions are now open to everyone, it takes skillful marketing to get potential members to explore what's inside.

Spreading the news

Credit unions are steadily converting to community charters. The National Association of Community Credit Unions (NACCU), Washington, D.C., says the National Credit Union Administration (NCUA) approved roughly 100 charter conversions annually from 2000 through 2003, allowing 397 credit unions to convert to a community charter. That expands to 520 by including credit unions expanding their community of service or adding low-income areas. Both totals exclude conversions granted by individual states.

Most credit unions seek a community charter to diversify their membership and serve broader community needs, says NACCU Executive Director Marc Selvitelli. The desire to offer member business loans is another common factor prompting credit unions to seek NACCU resources.

Selvitelli says the biggest barrier for community credit unions is the misperception that membership is limited to certain groups. So some credit unions change their name. Strategies include either introducing the word "community" or developing a brand-new identity.

Firstel Federal Credit Union, Maple Grove, Minn., became TopLine Federal Credit Union after its charter change in 2002. Katie Pitman, chief marketing officer for the $215 million asset credit union, says telephone surveys and focus groups indicated area residents believed the then Firstel Federal's financial services were restricted to telephone industry employees. The credit union gained a community charter in July 2002 to serve the 1.1 million residents of Hennepin County and moved to the TopLine name four months later.

Pitman says the new name helps TopLine Federal reach a wider audience. It also helped employees and volunteers make the "macro shift" from serving a well-defined audience of 300 select employee groups (SEGs) to reaching a broad cross-section of the community.

"The challenge is to stay focused on a well-defined brand message," Pitman says.

With that strategy, TopLine Federal added 4,000 new members in 2003, compared with 2,400 new members in 2002. Half of these 4,000 new members joined due to TopLine Federal's participation in indirect auto lending. TopLine Federal contracts with CU-Save, Minneapolis, to manage indirect lending relationships with roughly 100 dealers.

"The program wasn't widely successful until after the charter change," she says.

After the switch, CU-Save representatives called on dealers to inform them of the charter change, Pitman says. The credit union also updated the print materials dealers use when they present TopLine Federal's financing options to car buyers. The visits and materials reduced dealers' confusion about eligibility for TopLine Federal membership, which previously hampered efforts to promote indirect auto loans.

"The easier you make it for the dealers to understand, the more likely you are to get their business," Pitman says.

Besides bringing in many new members, indirect auto loans helped improve the credit union's loan-to-share ratio to 83.6% at year-end 2003 from 70.9% at year-end 2002. "We achieved this increase without writing mortgages," Pitman says. The credit union began offering mortgages in January 2004.

TopLine Federal's promotional efforts also include weeldy advertisements in a large-circulation daily newspaper, the Minneapolis Star-Tribune, and direct mail using purchased lists. Pitman hopes a methodical approach to marketing expenditures will support balanced growth.

"You can choose to fire all your guns at once, or you can follow a detailed, well-thought-out marketing plan," Pitman says.

Staying focused

Staying focused is also the key to long-term community success at $390 million asset Telesis Community Credit Union, Northridge, Calif., says Grace Mayo, president/CEO, and NACCU chairwoman. Telesis Community operated as Teledyne Credit Union until 1993, when a hostile takeover eliminated its sponsor, Teledyne Aerospace Inc. Soon the new owners asked the credit union to remove automated teller machines and branches from plants being downsized or closed.

"We quickly saw the handwriting on the wall and diversified," Mayo recalls. The credit union focused on building SEG relationships and developed member business lending to help down-sized Teledyne employees become entrepreneurs. In 1994, it selected the Telesis name to provide community appeal while keeping the credit union's "T" logo and its position in alphabetical directories.

Mayo says trying to build membership while turning away people who didn't qualify was often awkward. In 1998, shortly after California repealed the franchise tax affecting credit unions, Telesis Community gained a state community charter.

But marketing to the community can be expensive in a fast-growing urban area. Telesis Community began using print advertising, but Mayo says the credit union's budget was too small to create the necessary impact. To increase its recognition for fostering community relationships, Telesis Community invests in community involvement.

An employee team annually picks charities that will receive the credit union's support. Employees can give up to four hours of paid time each month to a sponsored charity, with 58% of employees participating in 2003. The program has generated free publicity, positive word-of-mouth, and awards, including the local chamber of commerce 2004 Business of the Year Award.

Mayo says Telesis Community "owns the good-will position" in its market, where competitors include more than 20 credit unions and numerous banks, insurance companies, and other financial service providers. Telesis Community, which has eight branches, plans to add a branch in a low-income neighborhood in 2004. "Our overall goal is to do well and make income so we can support and subsidize efforts in the communities that need credit union help."

Seeking added exposure

While most credit unions must apply for a community charter, Truliant Federal Credit Union in Winston-Salem, N.C., added a community field of membership (FOM) to its membership base of 800 SEGs through a December 2003 merger with Victory Masonic Mutual Credit Union, also in Winston-Salem. Truliant Federal, with $940 million in assets, gained the right to serve residents in a 50-mile radius as part of the merger.

Two major benefits come with the merger, says Bill Reynard, senior vice president of marketing. First, Truliant Federal now can expand the legacy of the Victory Masonic Mutual Credit Union brand to a greater portion of the African-American community it was created to serve. The Victory name still identifies the former Victory Masonic Mutual branch. Second, the entire community gains greater access to Truliant's affordable services.

Reynard says Truliant Federal is resisting the temptation to try to be "all things to all people" in a competitive market where residents already are bombarded with financial messages. Instead, the credit union is creating awareness among targeted segments of the community FOM, he says.

"There has to be a balance in how you expand access and services to ensure financial stability," he says. "From a marketing standpoint, you have the challenge and expense of communicating more aggressively through selective mass media channels to improve awareness and establish the credit union's brand/value proposition to an audience that has had limited exposure."

Going head-to-head

Overcoming confusion created by overlapping FOMs is another benefit of a community charter. ORNL Federal Credit Union, Oak Ridge, Tenn., gained a community charter for the 16-county Knoxville area in December 2002. Larry Jones, vice president of marketing and electronic services, says the SEG market in the area had become so saturated that it was difficult to reach potential members.

The $711 million asset credit union already served about 3,000 SEGs, so most people could find a way to join. Yet many people didn't realize they were eligible. A community charter helps ORNL Federal overcome that barrier through more advertising and public relations. Mass media advertising accounts for most of the additional marketing effort, along with greater use of direct mail.

"The main purpose of our increased spending is to increase membership enrollment, and that has been hugely successful," Jones says. "The change to the community charter immediately doubled the annual membership enrollment." Approximately 18,000 new members joined in 2003, bringing year-end membership to 93,355.