Credit unions seek new ways to build membership

NORTHSIDE -- At Vystar Credit Union's recent Northside branch opening, the city's largest credit union unveiled a program to waive all closing costs on new home mortgages and refinances. The plan follows an earlier Vystar initiative to roll out home equity loans to its members.

Community First Credit Union, Jacksonville's second-largest credit union, is now incorporating financial service-oriented waiting rooms in each of its new free-standing branch locations.

Both credit unions want to emphasize lending programs to small businesses in what officials for both defined as "underserved growth markets."

For the two largest credit unions in Jacksonville, growth isn't about adding checking and savings accounts anymore.

Instead, Community First Credit Union and Vystar are looking toward income not tied to interest rates -- like the certificates of deposit that have long been a staple of credit union sales pitches. The largest credit unions are diversifying into areas traditionally occupied by banks and third-party financial consultants, brokerage and wealth management firms.

"Anytime you can create a business that's sustainable in any interest rate environment, it's going to be useful and a valuable way to grow," said Arnold Heggestad, a banking professor at the University of Florida.

Since 1995, noninterest income has increased for credit unions nationwide from 14 percent to nearly one-third of their income, according to the National Credit Union Association.

Local credit union executives and financial industry analysts attribute the shift to the extraordinarily low interest rates of the past five years, coupled with the consolidation in the financial services industry that has pushed operating margins ever tighter.

Community First's fee income more than doubled from 2000 to 2005. Vystar's fee income increased 350 percent from $9 million in 2000 to $40 million last year.

Vystar's mortgage closing-cost waiver promotion, known as "American Dreams," will be available first at the newest Northside branch, then the rest of the credit union. CEO Terry West said that, like any new financial product, Vystar would evaluate it after 90 days and then decide whether to continue the program.

Vystar's new mortgage campaign, at least initially, is tied to the credit union's new branch-marketing plan.

Community First's approach is more passive, looking to sell financial services to existing members as a "sticky" program that keeps more of an individual member's deposits and services within the credit union. The services are part of a larger marketing initiative by the credit union to position it as a full-service financial institution.

The program is highlighted by Community First's "Financial Room," located in every new branch the credit union opens.

Filled with shelves of various daily business newspapers and monthly business magazines -- Bloomberg TV also is displayed on a television hanging prominently on the wall -- the room is part of the credit union's larger effort to sell high-end financial services to customers.

CEO John Hirabayashi said 3 percent of Community First members use the credit union's investment services. The credit union controls $60 million in investment assets.

The long-term goal for Community First's investment business, Hirabayashi said, is $200 million, or 10 percent of the credit union's total deposits.

"When I first came here a decade ago, we had few mortgages, no financial services and no business services," Hirabayashi said of the then-Educational Community Credit Union. "But now these are central services to our growth and serving our member-base going forward."

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.