What’s Next For Kansas In Wake Of Expansion Constriction?

By Christian Mullins

Last week, Kansas Governor Kathleen Sebelius signed a bill into law restricting state chartered credit unions from expanding into all corners of the state. Federally chartered credit unions, already restricted from a statewide charter, are exempt from the legislation.

Titled Substitute for SB 535 as it passed through the Senate, it restrains a credit union’s ability to expand beyond one metropolitan area, and Kansas has three: Wichita, Topeka, and Kansas City. In addition, credit unions located within these metropolitan areas can expand into contiguous counties only until the total population of those counties reaches 1,000,000.

The new law will affect 9 out of 60 state chartered credit unions when it goes into effect on July 1, but its real power will come 10-20 years from now, when population trends further inhibit expansion. While this is far from a ‘fatal blow’, Kansas credit unions need to find new ways to build their membership. Fortunately, the means necessary to do so already exist.

The overwhelming majority of credit unions focus primarily on adding new members, with a secondary focus on member retention. In Kansas, with a finite ability to expand into new population areas, member retention can no longer remain an afterthought. Two ways to retain membership are to join a shared branching network and join a shared ATM network.

In the 21st century, it’s almost a sure bet that the city you currently live in will not be the city you retire in. People change addresses for a wide variety of reasons, and if their credit union has a location near their new address, the likelihood that they will change financial institutions decreases. Shared branching, with the ability to have locations all over the state and country, can serve that purpose. However, with only 4 shared branches in Kansas, all in Wichita, there’s a lot of work to be done. It isn’t impossible to add a lot of locations in a short amount of time, though. Maine was able to add 80 shared branches, all within existing credit unions, in four years. Today, 28 credit unions in Maine have more locations than the largest bank, and there’s no reason to believe Kansas can’t achieve the same results. Reducing lost members by even 10% should have a noticeable positive impact on overall membership growth and its benefits.

ATM networks operate along the same principle. If a credit union belongs to an ATM network, their members can generally use any of the network ATMs without paying a surcharge. CO-OP Network, with 25,000 ATMs nationwide, already has a strong presence in Kansas, meaning members that move away from their credit union can still access cash without a fee, even without a prominent shared branching network in place.

The legislation in Kansas is only the first salvo, as bank-supported legislators are sure to introduce similar bills in other states. If successful, credit union expansion can be curtailed, but with shared branching and regional/national ATM networks, it will fail to stop credit union growth.

CU News Briefs - 4/15/08

By Christian Mullins

Executive Summary:

Expecting to be inundated by mortgage loan losses, Wachovia, the fourth largest bank in the U.S., has begun to take drastic steps. They’ve already set aside $2.8 billion, and, preparing for future losses, will attempt to raise an additional $7-$8 billion in capital, as well as cut its dividend by 41%, saving them another $2.1 billion in 2008.

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As adjustable rate mortgages increase their rate, foreclosures are increasing as well. The rate of foreclosure has jumped 57% compared to March 2007, and with about $460 billion worth of ARMs scheduled to reset, the crisis is far from over. Presently, 1 in every 538 U.S. households are in some stage of foreclosure, with Nevada (1 in 139), California (1 in 204), and Florida (1 in 282) leading the nation. Further devaluing home selling market is news that 2.5 million foreclosed homes will be on the market this year and 2009.

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Robbed:

• Beaumont Municipal CU, Beaumont, Texas, Monday. A man wearing an orange baseball cap passed a note to a teller before leaving with an undisclosed amount of cash Monday morning. No weapon was shown and no one was injured.

Arrested, Arraigned, Charged, or Sentenced:

• Steffano Roberts, 25, of Tallahassee, Florida, has been sentenced to 15 years in prison for the robbery of Tallahassee Memorial CU in March 2007. Some of the funds were immediately spent to pay for his insurance and apartment rent.
• A man wanted in the robbery of Greater El Paso CU in El Paso, Texas in March of this year was arrested Monday at the Paso del Norte border crossing. Ramon Adrian Aguirre-Gueta is a Mexican national living across the river in Ciudid Juarez, Chihuahua.