Mi Casa Es Su Casa: San Diego Credit Unions Share Branch Space for Mutual Benefit
SAN DIEGO -- If people can help people, why shouldn't credit unions do the same?
That's the conclusion Joe Schroeder and Robin Lentz have come to, after the CEOs swapped excess branch space to create two new branches for next to nothing.
Schroeder heads up $290 million San Diego Metropolitan Credit Union, a community charter institution that still gets plenty of support from its core group of city workers, which include airport workers, police officers, firefighters, and employees of the world-famous San Diego Zoo.
Lentz has been president/CEO of $160 million Cabrillo Credit Union for 27 years, another community charter that still gets plenty of support from its core group of county employees. Cabrillo gained about 4,000 members in a merger with a hospital-based credit union in 2003.
The executives met when they were young CEOs in San Diego; Schroeder was CEO of San Diego-based Point Loma Credit Union 15 years ago and the two kept in touch.
So about six months ago, when Schroeder was brainstorming how his mid-sized credit union could afford a new branch in one of the most expensive real estate markets in the county, he called Lentz and asked if she would ever consider sharing the cost to build a new branch.
"I said sure, but we weren't ready to open any new branches right now. But maybe in the future, sure," Lentz said.
Here's where the story gets interesting.
At the time, Lentz was trying to find a solution to a problem nearly every seasoned CEO has faced at one time or another: a jobsite branch, inherited through the still somewhat-fresh hospital credit union merger, didn't have the transactional volume to support itself.
"We couldn't just shut it down, so we were looking for a more economical way to serve those members without having to open a branch," Lentz said.
Lentz's best hope was to move the branch to a cost-effective location not far from the hospital and near the health care provider's administrative office.
Turns out, she was looking in Schroeder's neighborhood.
"I called him and said, 'we have extra space in our branch, can we have space in yours?'"
As it turned out, each credit union branch had one extra teller station and one extra desk. Once the required data and phone lines were installed, and each credit union relocated one teller and one new accounts representative, the new branches were born.
Both CEOs credit their operations VPs for working together to find solutions to logistical and IT challenges. "It's unfortunate we're not both on the same system [he's on XP, she's on Symitar], that would have made it easier," Lentz said with a laugh. Each credit union installed its own data and phone lines, and charge each other $1 rent per month. Both boards supported the idea, because they recognized the cost savings. Lentz has to wait out a lease at the old branch location, but was able to sublease the space and almost breaks even. "Once that lease is up, we will definitely be profitable," she said. Branch employees have also been supportive of the change, although Lentz said "we spent a lot of time talking to them about it and getting their feedback...we didn't just spring it on them." Members have been positive about the change, with Lentz only hearing from one member who preferred the hospital branch's earlier opening time. While both CEOs admit Lentz got the better of the deal in the short run, Schroeder said Lentz's location in the popular Scripps Ranch neighborhood of north San Diego County is perfect for his strategic long-term growth plans.
"You can't afford the real estate you need in California unless you're huge, and even KFC, which is a stronger brand than any credit union in California, has decided that you just can't get all the good locations," Schroeder said, referring to the chicken retailer's strategy of sharing space with other fast food companies like Taco Bell and Long John Silver's.
As for the million-dollar question--is either CEO worried about member poaching--both leaders insist they have 100% faith in the other's integrity.
"We've made that very clear, the thing that makes this work is our trust in each other. We're not out to steal their members; they're not trying to steal ours. I think many of us who have community charters know that," Lentz said.
"Robin is not my biggest competitor in San Diego, and I'm sure I'm not her biggest competitor. Both of us lose more business to Bank of America in three months than we lose to each other in three years," he said.
If the two seem suspiciously buddy-buddy, put aside any merger suspicions. Both CEOs strongly stated they have no merger aspirations.
In fact, both seem a little surprised by all the attention. After all, they pointed out, credit unions regularly shared space in the 1960s.
"Everyone thinks that their service is so spectacular, it will be ruined if they do it in front of someone else or in another place, and that's just hooey," Schroeder said.
If the arrangement continues to be beneficial for both credit unions, the two CEOs will look for other ways to save on branching costs. For example, Lentz's location is on the CUSC network, but Schroeder's is not. But, he said, he might consider bringing the vendor in so the two could share a teller.
Both CEOs say they would welcome future branch sharing proposals from other credit unions in the area.
"As a credit union CEO, you have to ask yourself, why would somebody have a checking account or a CD at a bank, when the rates are just terrible? Convenience is the answer. Credit unions have not traditionally been that convenient. We've got some large credit unions that have 20 branches in San Diego county, and that's great, to see credit unions with that kind of exposure. But I can't afford that, so I have to cheat and find ways to have branch locations without paying for them," Schroeder said. --firstname.lastname@example.org