SAN DIEGO-As president and CEO of the largest locally-based credit union here, $5.7-million San Diego County CU's Teresa Halleck said the biggest challenge is standing out in the crowd.

"San Diego is a challenging market, that is for sure," she said. "It is a great market, but financial institutions have to do something different to stand out. Everybody wants to be here, so there are a lot of large banks and credit unions. We all have commodity products, so it is difficult. But there is an opportunity to grow because it is a strong market."

In its effort to achieve differentiation, SDCCU advertises on TV, radio, print, billboards and online. Halleck said the goal is to create a distinct brand as it builds around its tagline, "It is not big bank banking, it is better." Each December it sponsors a college bowl game that bears its name.

"We offer all the modern conveniences, and if Chase is on TV offering mobile deposit, we are on TV letting people know we offer mobile deposit."

All of the large CUs in the San Diego market, other than Navy Federal, are local, which Halleck said resonates with the community.

"San Diego is the biggest small town you'll ever find," said Halleck, who came to San Diego from Sacramento, where she was CEO of The Golden 1 Credit Union. "But in this market I do not sense a lot of collaboration. Marla Shepard [CEO of California Coast CU] leads the troops when it comes to political matters. There are several large credit unions that are doing their own thing. Not that we wouldn't look at something if it was viable, but the more likely opportunity would be collaborating with partners outside of market, so there is no conflict of interest."

For example: Colorado's Ent CU and SDCCU have a partnership because Ent has extra capacity in its data center. Halleck said San Diego County CU has equipment based at Ent in the case of a broad disaster that affects the entire San Diego area.

"Long-term, when Ent is ready, it will put equipment in our space," she said. "This partnership has strengthened the ties between the two credit unions, and there is no conflict. It is a little difficult to find other examples, but we would look at anything that helps our members."


'Customers' vs. 'Members'

San Diego County CU uses the term "customers" in its press releases, and has been doing so for years. Halleck said this is a "strategy."

"A press release does not go just to the trade press and we don't want someone to perceive a barrier," she explained. "When you put the word 'member' out there a lot of people assume it is something they cannot be part of. When we communicate just with our membership we use the word 'members,' but when talking to a broader audience it is important not to put in a barrier. People still think they cannot join credit unions."

San Diego County CU's efforts to let locals know they are eligible to join-and to play on public dislike of large banks-were seen in two dramatic promotions late last year. Over Labor Day Weekend "big banker" characters from SDCCU's television commercials who had a particular fondness for high fees invaded several area beaches. The "bankers," or at least the actors portraying them, waved picket signs that included such slogans as "My Big Bank Account Thanks You," "Caviar Doesn't Grow On Trees," and "High Fees Are Good For My Bottom Line."

Later, in conjunction with Bank Transfer Day, SDCCU hosted a "Shred Your Bank Debit Card" promotion that Halleck said "drew quite a bit of attention."

"We are out there in the media a lot. We are visible and let people know if they are disgruntled we are top of mind. Us, Cal Coast and Mission are all on TV, so people are hearing about credit unions. The common theme I see is, 'We are nice people who will treat you well.' The small credit unions in the area benefit from the big three credit unions being on TV."

The big banks "want this area," Halleck continued, which is "why Chase is building so many branches." She noted California is a big state with lots of demographic groups represented, and San Diego is a plum target.

"There is an intense focus on this area by out-of-state banks, which is why there are hardly any community banks," she said. "I wasn't here, but when S&Ls crumbled, this was a big S&L town, which gave an opportunity to credit unions."


Continued Growth, For Now

In 2011 San Diego County CU posted $76.9 million in net income prior to assessments. It paid $10.7 million to the Corporate Stabilization Fund, leaving it with $66.1 million in net income. Its net worth ratio was 11.67% ("well capitalized").

In 2010 it had $56.1 million in net income after paying $10.7 million in assessments. Its net worth ratio was 11.49% ("well capitalized"). In 2009 it had $62.1 million in net income, with a net worth ratio of 10.6% ("well capitalized").

In 2008 it lost $14 million but its net worth ratio remained "well capitalized" at 10.38%. In 2007 it had $53.6 million in net income, with a net ratio of 11.85%.

Through the first five months of 2012, San Diego County CU is seeing continued growth, "for now," Halleck said. One factor holding back growth is its members are still interested in a flight to safety.

"There is a lot of money parked in financial institutions for safety as people are rate-insensitive," she said. "It will be really interesting to see how long the Fed keeps rates down and once they start moving, how fast they move up. The Fed has to balance inflation concerns versus the fragile recovery."

Another challenge in the San Diego market is the long-term impact of the recession, Halleck continued. She said the key question is: are consumers going to go back to spending patterns that support growth?

"Every financial institution wants loans, but consumers are not borrowing enough. Auto loan volumes are still low, and many homes do not have equity."


Pretty Good News, Providing...

SDCCU is holding its loan portfolio "pretty flat." Halleck said it has "a little room" to add mortgages, but it strives to add adjustable-rate loans while selling most fixed-rate first mortgages to Fannie Mae. On the latter, the CU maintains servicing in-house to keep the relationship.

"Things are going very well overall," she assessed. "Membership growth is not as good as the October-December time frame, but it is still good. There is a lot of refi mortgage activity because rates are still low. Auto sales seem to be picking up, although the captives and the manufacturers get a lot of that. The good news is consumers still view used cars as an alternative. We advertise our rates to our members to let them know the value. The price of gas will be interesting to watch. Will it motivate people to buy more fuel-efficient cars?"

Among Halleck's concerns: the economy in general. She said she tries to be optimistic, "but there is always that thought about what if something bad happens? What are the unknown factors that could pop up? Look at investments that were AAA rated, and then they went bad. We make budget projections, but there are things totally out of our control. The key is to be nimble and ready to manage things immediately. Something in the global economy could impact us right here in SD, so we have to be ready."

Halleck said San Diego is a "great place to live and work," so the future is "pretty bright for the credit unions here, absent some disaster."

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