Over the next five years, Texas Dow Employees Credit Union is expecting all of its CUSOs to continue to represent a significant portion of the cooperative’s overall earnings.
The $1.7 billion financial institution in Lake Jackson, Texas, recently made a step in that direction by forming an entity to align its four subsidiaries for growth and expanding their respective business lines. Through the launch of TDECU Holdings LLC, the credit union has brought TDECU Insurance LLC, TDECU Wealth Advisors, TDECU Real Estate LLC and Century Oaks Title LLC under one management roof. With the new structure, the credit union’s interest in the CUSOs will be held by the holding company, which is scheduled to debut Jan. 1, 2012.
The goal is to make management of the CUSOs more efficient and transparent, said Timothy Belton, who will serve as president/CEO of TDECU Holdings as well as CEO of TDECU Insurance Agency and TDECU Real Estate.
“We wanted to apply some of the industry’s best practices toward the management of the CUSOs, which are primarily wholly owned,” Belton said. “Rather than have independent satellites with the CUSOs operating on their own, by putting them into a holding company, we can better structure management and better manage the investments. In the end, we think it will be a more efficient way to serve the members.”
All of the CUSOs have experienced a strong growth year amid a down economy, which has enabled TDECU to gain the capital it needs to serve more members, Belton said.
Despite a lackluster housing market, Belton pointed out that TDECU Real Estate continues to show strong performance in volume and market share. It ranked as the top real estate firm in Lake Jackson and Brazoria counties for the third quarter, eclipsing the number two real estate broker by more than 40% for units sold, according to the credit union. The most current data showed the real estate CUSO had the largest market share in Lake Jackson at 25% and in Brazoria County at 13%. TDECU Real Estate was acquired by the credit union in May.
TDECU agents also accounted for three of the top 10 agents in Brazoria County for units sold and sales volume during September. TDECU Real Estate is also serving members in Brazoria County, Greater Houston and the Victoria Crossroads market, where it plans to open offices in the near future.
Marking its one year anniversary, Century Oaks Title is also expanding into the Greater Houston and Victoria markets. Belton said one of the key drivers for growth is a credit union program that will pay for a TDECU member’s closing costs if that member is selling a home to another member. Plans are in place to expand to a bigger office space to accommodate the suite of title services. Century Oaks Title is jointly owned with Allied Solutions and TDECU is the majority owner, Belton said.
While he did not release financial data for TDECU Insurance, Belton said the CUSO is also is poised for growth with Wesley Wolff, who was hired as president in August. Two agents recently joined the team and the agency is exploring acquisitions to cultivate further growth and expand its service area. Belton said an acquisition has been approved and is scheduled to close by the end of the year.
“The main reason for the acquisitions is to increase scale and first and foremost, to serve the members,” Belton said.
TDECU Investments, now operating as TDECU Wealth Advisors, is planning to add 10 to 15 more financial advisors in the Houston area over the next 12 months. Belton did not provide financial data on the CUSO.
Belton is no stranger to TDECU. He came to the credit union in November 2009 as a strategic planning consultant on a scenario-based project and then as full-time consultant in 2010 to help aid the member business lending program, which had been temporarily suspended by the regulator, Belton said. His role was to help shore up some underperforming areas and restructure others. In March 2011, he was hired as director of diversified services before transitioning to his most current roles.
The discussion to form TDECU Holdings came about before Belton started at the credit union in 2009. When the idea started to take shape, Belton was included in talks on how the company would form and function.
“We wanted to meet the spirit and letter of the regulations while maintaining a strong sense of ownership,” Belton explained.
One aspect still being worked out is the holding company’s board structure and the makeup of the boards at the various CUSOs. Belton said he anticipates having the right persons with the related experience in place by next spring.
Meanwhile, TDECU has had a busy year. It completed a merger with the $80 million Bluebonnet Credit Union Oct. 1. Another merger with the $60 million San Jacinto Credit Union was scheduled to be done Dec. 1. Belton said both moves will open up a window of opportunities as neither cooperative offered any of the services currently available through TDECU’s CUSOs.
The credit union also partnered with a new corporate, Corporate One Federal Credit Union in Columbus, Ohio, after considering several other alliances. Belton said while the partnership is not expected to impact TDECU Holdings, it will give the core credit union “less to worry about and our CEO [Ed Speed] is very pleased with that.”
Earlier this year, TDECU severed ties with the Texas Credit Union League and CUNA for several reasons including a lack of volunteer governance on the league and national boards, a decline in educational content and what it considered to be too close ties with industry groups promoting credit card and bankruptcy reform.
Looking ahead to 2012, Belton said while there aren’t any plans to launch new CUSOs, they wouldn’t be ruled out.
“The lens we look at is what our members needs and their financial well-being,” he explained. “There’s a saying here. You can have a growth problem or a liquidation problem.”