FARMINGVILLE, N.Y. -- Teachers are arguably considered to be some of the most resourceful persons as they traditionally have to do more with less in their classrooms.
When school is out for the summer, many of them start small businesses to tide them over until classes start up again in the fall. For the $2.6 billion Teachers Federal Credit Union, offering businesses services to teachers as well as the educational community made perfect sense.
"For us, it's always about looking to what the members want," said Robert Allen, president/CEO of Teachers. "Small business is one of the biggest growth areas."
The credit union has an extensive business deposit program that includes business checking, money market accounts, savings and share certificates. Launched in 2004, the 2000 business checking accounts have a little over $5 million in deposits, Allen said. While Teachers also offers business loans, credit cards and commercial vehicle financing, by far, most small business owners gravitate to the deposit accounts first.
Founded in 1952 by a group of teachers, the credit union has since diversified its membership to include all Suffolk County schools and universities and hospitals. Seventy school districts are now served by Teachers. Doctor's offices are now a large segment of businesses served, Allen said. The gamut also ranges from attorneys to floor covering installation and landscaping businesses. This in a county with 1.4 million residents.
"The big strength is we get diversification from some of those other groups. Hospitals are here to stay and school systems are here to stay. So we don't have tremendous concerns about the stability of our membership," Allen said.
Teachers deliberately started out with business deposits first seeing the entry as a faster way to build relationships. Business lending and leases soon followed. The credit union has had to beef up its business development staff to keep with demand, Allen said. Most new accounts come from referrals. Yet, as with any new offering it had undertaken, Teachers took a slow and conservative approach with business services.
"Back in the 1990s, we went into mortgage lending and even after that, members didn't know we did mortgages. Then there was the refinance boom," said Allen, who has been at Teacher's helm for 20 years. "That's the way I kind of see it here [with business services]."
What has also helped to build Teachers' business deposits is the proliferation of mergers that have swept the area. Seven de novo banks emerged in 2007, Allen said. Commerce Bank had an edge with service available seven days a week, but it just merged with a competing bank, he added. Another major bank was acquired by Capital One. In their wake, competition has intensified, particularly as surviving banks go after the small business market.
"We're usually the better deal. Our rates are going to be better than average. With the commercial accounts, the fee structure is a big item," Allen said. "Bank mergers, takeovers and changes in accounts and fees cause people to shop."
Allen said while business accounts are profitable, "right now we could go for commercial loans" with a loan-to-share ratio in the 50% range and strong capital and return on asset levels. Most of its real estate is performing well because of Teacher's local and residential investments, he pointed out. Still, as the case at many credit unions, there has been an uptick in consumer bankruptcy filings, he noted.
"Nationally, Florida, California and Nevada have taken some hits. Most credit unions have the capital to withstand it, but it has made us a little bit cautious," Allen acknowledged.
All those factors have not affected deposit growth, which "has been hard to keep up with." Teachers is now considering adding remote deposit capture and mobile banking to its fold. These decisions were made after a survey revealed that many county residents did not know they were eligible to join the credit union. As a result, more outreach to businesses, especially on the deposit side, will continue.
"We're constantly looking at what's available in the marketplace," Allen said. "People are shopping more. For us, [business services] is a just a natural progression of what we do. Members will certainly tell us if something is working by their utilization."