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Monday, Feb 6, 2023
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Credit Union’s Success Only Part of Story

San Diego County Credit Union passed $3 billion in total assets during the past quarter, more than every other credit union and commercial bank based here except for one.

And yet, to Chief Executive Officer Rod Calvao, it’s really not that big of a deal.

“Yes, we let our employees know in our newsletter that we reached another milestone, but this is nowhere near as important as the service that we offer our members,” Calvao said.

In fact, the credit union has been one of the region’s fastest-growing lenders during the past decade, increasing its assets from about $650 million in mid-1995 to $3.1 billion as of Sept. 30.

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In the last 10 years, the credit union has experienced an average annual growth rate between 10 percent to 20 percent, Calvao said.

The driving force behind the credit union’s growth is simple, Calvao said: great customer service.

“Most of our new customers come to us from word-of-mouth. It’s one customer who’s pleased with the service they’ve received telling another person to check us out.”

Many would also cite the credit union’s charter that allows anyone who’s a resident or works in the county (and this year, in Riverside County as well) to join. In the past, membership in credit unions was contingent on where a person was employed. But a 1998 federal law relaxed charter restrictions that allowed credit unions to provide services to communities that were traditionally under-served by banks.

Calvao said because so many of his members moved to Temecula and other areas of Riverside County, the credit union’s charter was amended about a year ago to encompass residents and employees working in that county. Today, the credit union has two branches in Riverside and will open a third office by mid-2006, Calvao said. In all, it has 23 branches.

Another component behind its expansion is the credit union’s aggressive marketing and advertising campaign. According to its most recent financial report through September, it spent more than $3.2 million on promotion and advertising, and should reach about $4.3 million on this item by year-end, said Chief Financial Officer Bob Marchand.

Next month, it will take its promotions to another level through its title sponsorship of the inaugural San Diego County Credit Union Poinsettia Bowl on Dec. 22 at Qualcomm Stadium. The college football bowl game between Navy and Colorado State University is being televised nationally on ESPN2.

Calvao won’t say how much the sponsorship cost, but reports about other second-tier bowl games estimate bowl naming rights at about $1 million.

The reason behind the credit union’s involvement in the game is the institution’s ongoing support for the Make-A-Wish Foundation, Calvao said. The credit union is donating a dollar for each ticket sold. Organizers say they expect at least 40,000 fans for the inaugural game.

Calvao downplays the size of his credit union, but the continued growth of the credit unions have been a thorn in the side of smaller commercial banks that complain the credit unions’ nonprofit status gives them an unfair advantage in competing for customers.

Camden Fine, president and CEO of the Independent Community Bankers Association, a Washington, D.C.-based trade association for smaller banks, said in recent years credit unions have strayed from their charter purposes of providing financial services to traditionally underserved communities and are taking customers away from smaller banks.

“Today more than 100 mega-credit unions each have $1 billion or more in assets. These institutions often supply the wealthy and the broad middle class with financial services, offer a wide range of sophisticated banking products and business loans and compete directly and aggressively against taxpaying community banks.

“Yet these same institutions don’t pay taxes and don’t bear the same regulatory burden as community banks,” Fine said.

Calvao said if all the assets of all the credit unions in the nation were totaled, it still would not compare with the likes of Bank of America and Wells Fargo Bank. According to the National Credit Union Administration, at the end of 2004, a total of 9,014 credit unions reported aggregate assets of $646.9 billion, up 6 percent in 2003 when 9,369 credit unions in the nation reported total assets of $610 billion.

As of June 30, BofA reported total assets of more than $1.25 trillion, the second largest commercial bank behind Citibank’s $1.5 trillion, while Wells Fargo & Co. at No. 5 held total assets of nearly $435 billion.

Calvao also rejected the notion credit unions aren’t paying taxes, saying the only taxes it is exempt from paying are income taxes. Unlike for-profit entities that use part of their earnings to pay dividends to shareholders, nonprofit credit unions use their earnings to increase the interest paid on members’ deposits and reduce the interest rates charged for loans.

The credit union’s loan portfolio is dominated by mortgage and home-equity loans, which made up $1.3 billion of its $2.2 billion loan portfolio. The rest consisted of new and used car loans, credit cards, and only a smattering of business loans totaling about $203 million, according to its most recent financial report.

San Diego’s two other $1 billion-plus credit unions also showed asset growth. Mission Federal Credit Union stood at $1.99 billion as of the end of September, up from $1.8 billion at the end of 2004. North Island Financial Credit Union was at $1.5 billion at the end of September up from $1.49 billion for the same time in 2004.

California Bank and Trust, a subsidiary bank of Utah-based Zions Bancorporation, and headquartered in San Diego, reported total assets of $9.7 billion as of June. San Diego National Bank, a subsidiary bank of First Bank of Oak Park in Illinois, held total assets of 2.1 billion as of the same time.

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