Arrested Development | Worcester Police credit union looks for bigger piece of the pie
Imagine for a moment that you're running a business that survives and grows by enrolling members. You can only accept members from a pre-defined organization or place of employment. And the number of people that falls within those groups is shrinking.
Sound difficult? Employee-based credit unions in Central Massachusetts are facing that particular challenge. They're chartered specifically for police officers, firefighters, local union chapters and employees of various companies and institutions.
Most employee-based credit unions in Central Massachusetts are fairly small, with one branch, less than $20 million in assets and between 600 and several thousand members.
Take the Worcester Police Department Credit Union. Under its charter with the state Division of Banks, the WPDCU can accept employees of the Worcester Police Department and their immediate family members. It has 948 members and $9.4 million in assets, according to its financial filings.
The 65-year-old police credit union is well capitalized and has grown its assets 73 percent since 2001. It has also added 180 members over that time.
But Julie-Anne Przypek, the WPDCU's manager and treasurer, wrote to state regulators this summer that she's wary of cuts and layoffs in recent years that have shrunk the size of the city's police force to 330 from 408 a decade ago, creating "dwindling new membership" at the credit union.
Goal: Grow And Move
The WPDCU has asked regulators for permission to extend its membership base to employees and family members from police departments throughout Worcester County. It also wants to move its headquarters from Grove Street to a larger building on West Boylston Street and is prepared to invest $1.1 million to buy and renovate property to accommodate an expansion.
Przypek declined to be interviewed about the credit union's plans, noting that the state's decision on the application is still pending.
But she wrote to regulators that the credit union faces "heavy competition" from other financial institutions in a challenging economic environment. The countywide membership expansion, she wrote, could boost both deposits and membership at least 20 percent.
A spokesman for the Division of Banks said in an email that both applications are being reviewed. The division's commissioner has the authority to approve them or schedule public hearings.
The police are not the only ones thinking about the future of their small credit union.
The Worcester-based Teamsters Union Local 170 Credit Union has lost nearly one-third of its members since 2001 and now has a membership base of 1,433. It has lost money in each of the past 15 quarters.
"We're trying every which way we can to get out of that slump," said Kathy Valeri, who manages the credit union. "It's hard to get those numbers down."
Valeri said her credit union is well capitalized and has low rates of loan delinquency. But the board of directors has been talking about asking chapters from other area unions to join.
The Teamsters credit union has just one branch that serves members as far north as Salisbury, as far south as Wareham and as far west as Warren. That presents its own challenge. Union members may join the credit union but aren't likely to use it as their main options for savings and checking accounts.
"People that live in those far areas are not going to bank in Worcester," Valeri said. "It's difficult because of where they live."
Unions have faced declining membership for years, according to U.S. Census Bureau data. And Valeri noted that fewer young people are joining, which makes it hard to attract members of what many credit unions see as a vital demographic group for growth.
A merger isn't in the cards yet for the Teamsters credit union, but Valeri said it could be in the future if it fails to attract new members from other unions in the area.
Capital Challenge
Even profitable, small credit unions face a slate of challenges in today's market, said Constance Anderson, principal of New Jersey-based consulting firm Constance Anderson & Associates.
"For a credit union of that size to be able to compete with Bank of America, Chase Bank or even probably some community banks, they are really going to have to have more capital," Anderson said.
Compliance costs have increased over the past decade, she said, and consumers, especially younger ones, expect conveniences like mobile banking and numerous ATM locations.
Anderson said a fraternal credit union like the WPDCU is wise to try and extend itself to others who are part of that fraternal order in the region.
"I do like concentrating on a particular group as long as you can get a big enough potential market," she said. "It allows you to develop products that appeal to that niche."
Daniel Egan Jr., president and CEO of the Marlborough-based Massachusetts Credit Union League, an advocacy organization, said credit unions need to grow their capital to grow business. But competition from large banks with many branches and ATM locations can be a particular challenge for a small credit union, he said.
One upside, Egan noted, is that new fees and other banking industry turmoil in recent years have created an opportunity for credit unions to grab market share.
"They grow on that basis," he said.
Worcester Fire Chief Gerard Dio, treasurer at the Worcester Fire Department Credit Union, agreed with that statement.
"The banks have been a great help there," Dio said. "They're saying 'We don't want you, get outta here.' "
But Dio said his department's credit union is not considering expanding its reach countywide.
"At this point in time, I feel we're doing fine," he said.
The WFDCU began accepting firefighter spouses about a decade ago, he noted. And partly because of that, the credit union has grown even though the number of firefighters in the city has shrunk from 470 a decade ago to 398 today.
Indeed, the WFDCU has been one of the most profitable employee credit unions in Central Massachusetts, averaging nearly $190,000 in net income per quarter since the recession hit in late 2007. And it has nearly doubled its membership over the past decade, to 1,966.
Dio attributes the growth to a combination of the credit union's products and services and firefighters' loyalty to the institution.
"They want to be in the credit union," he said. "The brothers are in it and the sisters are in it."
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