Arrowhead Fallout Vons CU Exec Turns Banker Discard Into Shared Branching Solution
Thanks to a good relationship with its sponsor group and a stroke of luck, the $330 million Vons Employees FCU opened a full service, in-store grocery branch in Hesperia, Calif. July 6 after discovering a build-out hidden behind drywall.
Donna Young, executive vice president and chief operating officer at the El Monte-based credit union, said area credit unions were searching for a way to fill a shared branching void left by Arrowhead Credit Union when it sold four branches to Alaska USA FCU; Alaska USA discontinued the service as of June 28.
Young asked her primary sponsor group if space was available in its Hesperia store and learned that Wells Fargo had vacated the space just weeks prior in favor of a stand-alone branch.
"I came up here quickly to do a site survey, and found an entire branch hidden behind the wall," Young said. Ten days later, the credit union had hired two full-time employees, repainted in corporate colors, and opened for business. Young reported members waiting in line for the branch to open on its first day and said it received steady business that morning.
One day of serving members is too early to know when, or even if, the branch will break even, she said. Only four of Vons 300 grocery stores are located in California's high desert region, and only 500 of the credit union's members were affected.
Still, Young said, "We had to work very hard to get those 500....We felt they were being deserted."
According to an email from Financial Service Centers Cooperative Executive Vice President Bonnie Kramer to member credit unions, Arrowhead's branches in Hesperia, Apple Valley, Victorville and Big Bear served 30,000 members from 196 FSCC-participating credit unions. Alaska USA closed the Apple Valley branch completely and will not offer shared branching in the three remaining branches. In all locations, Arrowhead was the only shared branching location in the community.
Young said her motivation was to support her members and the credit union movement, and any noninterest income the credit union may gain above operating expenses is secondary. The location is even marketed as "a Credit Union Service Center courtesy of Vons EFCU," she said.
"We're part of a cooperative. We were all in trouble, and we needed a fast solution," she said. "This is not about us; it's about the strength of the shared branching network and keeping members in credit unions. These members could go away, either to a bank or Alaska USA. I don't mind people joining Alaska USA if we're both in the fight together, but when you take away the ability for 196 credit unions to serve their members, that's a game changer. We needed a solution and we needed it fast."
FSCC provided some financial support for the location, and Young said she will be asking other local credit unions to pitch in with costs. Concerned credit unions met to brainstorm branch solutions when the Alaska USA deal to buy Arrowhead's branches was announced and discussed sharing the expense of opening a new location.
"We had to open so quickly, I didn't even have time to campaign for help with start-up costs," she said.
Alaska USA is a member of the FSCC shared branching network, but it decided against shared branching service at locations purchased from Arrowhead, said Senior Vice President Dan McCue.
"We are sensitive to the whole thing, and we know that it looks unusual. We're not trying to be bad guys," he said. Alaska USA cut a deal with Arrowhead management, currently on paid administrative leave after NCUA's conservatorship of the institution, that would have allowed Alaska USA to expand its footprint in the area while providing Arrowhead with some balance sheet assistance. "It's not like we were cherry picking accounts," McCue said.
As part of its agreement with Arrowhead, Alaska USA is running "dual operations" to serve both its members and Arrowhead's through Aug. 31. McCue said the brick-and-mortar deal did not include deposit accounts. Arrowhead's 24,000 affected members must choose to open an account at Alaska USA by Aug. 31 or access their Arrowhead accounts elsewhere.
"We've never said we'll never consider it ever," McCue said. "Right now, we just can't deal with extra members. I wish we could help but we can't."