Texas-Sized Challenge for Small CUs

DALLAS-Everything is bigger in Texas, including some of the challenges for its smallest CUs.

This concept is well illustrated by CUs operating as very small fish in very large ponds, yet also finding niches in which they can prosper in the Lone Star State's largest markets-Houston, San Antonio, Austin and here in Big D. Despite the fact many smaller credit unions across the country have given in to the pressure to find economies of scale and other advantages often associated with mergers, several Texas CUs told Credit Union Journal they are not close to throwing in the towel.

In fact, Suzanne Chism, CEO of Texas Health Resources CU, here, said all credit unions "have a responsibility" to help their smaller brethren survive.

Small CUs Largest in Number

"Small credit unions represent the largest number of credit unions here in Texas, although the large ones have the most deposits," she said. "I just believe there is a niche for small credit unions, and we have been very beneficial to the movement. We are a strong advocate for cooperatives and the difference between banks and credit unions, and it is easier for legislators to identify with small credit unions."

Norma Garza, director of small CUs for the Texas CU League, said despite a difficult economy, the state's smallest CUs are holding their own. "All in all, these small credit unions are doing well," she assessed. "Of course, all credit unions are worrying about the corporate restructuring and how things are going to shake out. Small credit unions have fared well and are well capitalized, but not without struggles."

As was the case with every person interviewed for this Special Report, Garza pointed to the unprecedented groundswell of popular support for CUs that has arisen as a backlash against banks.

"There is a lot of opportunity and they know that, so they are positioning themselves to take advantage of consumers wanting to go with local institutions and away from big banks. Credit unions are the way," Garza added.

In Houston, Cindy Hester, CEO of Union Fidelity FCU, said it should not be seen as a given that small credit unions have to merge. The key, she said, is for the big CUs to help the smaller ones, the small ones to help each other, and for all to take advantage of assistance that is available.

Tools Available for Those in the Know

Hester said there are many tools out there for those who know where to look. "It is not easy, it is a struggle every day, but all credit unions are struggling right now," she said. "It is important to have partnerships, such as our mortgage CUSO, which allows us to offer mortgages to our members."

Labor union-based Union Fidelity operates with only three employees. Hester said it saves money on expenses via several strategies, such as partnering with another small CU to have a shared compliance audit from TCUL, which cut the cost in half for both credit unions.

"Other times we have bought marketing materials in bulk-three or four small credit unions together-which allows us to market the way large credit unions do for a lot less money.

"That is the only way smaller credit unions will survive-by helping each other," Hester continued. "All small credit unions in Texas get tremendous support from the league. The league gives us marketing ideas, policy creation and audit questions. Each chapter has a representative who hosts monthly meetings. Tonight [March 25] we will have someone...who does a bond review once a year for all the small credit unions in Houston. It is free of charge; all it costs is your time. It is a great opportunity to review bond coverages and make sure you have enough."

Harlene Johnson, CEO of Light Commerce CU in Houston, said the key for her credit union is providing financial education for its membership.

Proving Small CUs Don't Have to Merge

Asked if the success of Light Commerce is proof small CUs don't have to merge, Johnson replied without hesitation, "Absolutely!" "It is a matter of continuing to give support," she said. "Our goal for 2010 is to increase the brand of the credit union. Our sponsor is our church, so we want to increase the awareness of the credit union as a first option. Our deals are better than what members can get elsewhere. Not all of our loans are to people with bad credit, many are 'A' and 'B' paper, but they just don't think about us."

At $6.2 million Express News FCU in San Antonio, CEO Linda Tudyk believes small credit unions will stick around because they have a special place in the lives of those they serve.

"We survive as a small credit union because we know our members and they are very comfortable with us," Tudyk said. "When someone wants to buy a car they come to us and we sit down with them, look at their bills, and help them figure out if they can afford it.

"Smaller credit unions' place is their personal touch and the comfort zone we can offer our members," she added. "We don't have the branches or ATMs others have, but members come to us because they feel comfortable with us. We know them, we know their families, so that's why I feel small credit unions will always be around."