Credit unions cash in on bank woes
The year was 1979 and Michael S. Vadala, a recent college graduate from Brighton, was having a hard time finding the Chautauqua County credit union he was supposed to audit.
Finally, Vadala stopped at a house he kept passing and asked for directions. The house was the credit union. As he audited the books on the manager’s dining room table, she ran to answer the doorbell several times. Members of the credit union were coming to make deposits, withdraw money and get loans.
Thirty years have brought credit unions and Vadala a long way.
From tiny offices in homes, car trunks and hidden-away rental spaces, today’s credit unions look as solid and expansive as banks, and one is even changing the face of downtown Rochester’s southeastern gateway.
And Vadala sits in a corner office as president and CEO of Summit Federal Credit Union’s headquarters in Greece, about to complete the largest credit union merger in upstate history. In January, when Summit finishes merging with the Syracuse Federal Credit Union, Summit will have more than 80,000 members across western and central New York and its assets will amount to $625 million.
Originally the credit union for employees of Rochester Telephone Co., Summit also completed a smaller merger with Buffalo’s Kenton Federal Credit Union in October, its second Buffalo-area deal.
Spurred by changes in legislation and regulations governing credit unions, these nonprofit financial institutions have grown from being a fringe benefit tied to employment at a particular workplace to being active competition for banks. Once limited to small personal loans, they now handle home equity loans and mortgages, car loans and even business loans.
Driving some of the recent popularity of credit unions has been the growing unpopularity with large banks that consumed many locally owned banks and then started to stumble so badly that they threatened to topple the U.S. economy in 2008. While those developments have driven more customers to smaller community banks, credit unions also are getting a boost.
“They are moving into places where they see there are voids,” said Bonnie Sklar, a spokeswoman with the Credit Union Association of New York. “Not just Summit, but some of the others … are adding more brick-and-mortar branches, filling voids where some banks have shuttered branches.”
The grass-roots structure of credit unions, which must answer to their member customers rather than shareholders, is attractive to some.
“We’re owned by the members and the members each have a vote,” said Christine A. Peters, president and CEO of Family First of New York Federal Credit Union, based in Penfield.
While commercial and savings banks have consolidated ownership, so, too, have credit unions, said David L. Fiedler, chief executive of ESL Federal Credit Union. In June, the state had 461 credit unions, with Summit as the third largest in the Rochester area and the 28th largest in the state. Fifteen years earlier, New York had 739.
But while credit unions have consolidated, they’ve grown in size, territory and visibility.
ESL, which began as a savings and loan for Eastman Kodak Co. employees and became a credit union in 1996, now counts about one-quarter of the 1 million people in the Rochester metropolitan area among its members, according to Fiedler. Its 18 branches (with six more planned) and 18 ATM kiosks (with five more planned) rival any bank’s accessibility.
And when ESL opens its new downtown headquarters across from Strong National Museum of Play next year, it will be the first time a Rochester-owned financial institution has been headquartered inside the Inner Loop in years.
One of several branches Summit has on the drawing board will be in the city, too. It recently opened new free-standing offices in Irondequoit and Brighton, replacing smaller plaza branches in those towns.
“Eighty percent of the loans we make are in underserved areas,” said Vadala, and a similar percentage of its members live in those areas, including the cities of Rochester, Buffalo and Syracuse and town of Greece.
People in the industry say that despite their growth in size and visibility, credit unions haven’t strayed far from their roots.
“Credit unions are still doing what they started out doing, which is being there for the everyday man,” Sklar said. Customers are still attracted to doing business in a place where they’re recognized by the tellers.
Unlike banks, which often raise capital to attract a buyer or to buy other banks, credit unions aren’t looking to expand to make more money, Vadala said. And Summit hasn’t been looking to expand; other credit unions came calling with proposals for Summit to absorb them, he said.
Sklar said consolidations are typically about credit unions trying to find ways to keep offering or add services that members seek, such as drive-up tellers and online banking services. In some cases, she said, a small credit union may feel it can’t keep up with member expectations so it seeks a merger with a larger credit union that can deliver the goods.
As the credit unions get larger, they take on many of the trappings and sophistication of banks, Fiedler said, affecting even the kind of hiring they do.
“When we were still part of Kodak, the real priority was on quick processing,” so a customer could complete a transaction on a break and return to work quickly. Therefore, tellers who could handle numbers efficiently were the most highly valued. Today, though, they need more people skills, as the relationship with members has deepened, Fiedler said.
“We’re trying to understand the consumer needs — our members’ needs — and meet those needs,” he said.
DCARTER@DemocratandChronicle.com
