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Bethpage, N.Y. – Being granted access to 2.7 million potential new members is great, but going after those members without all the pieces in place isn’t. That’s why Bethpage FCU didn’t start aggressively going after its potential new members until about April of this year. Last September NCUA approved a community charter for Bethpage that allows it to serve almost the entire population of Long Island. Specifically the charter was for those who live, work, worship or go to school in Nassau County and 98% of Suffolk County. Bethpage went through a data processing conversion in November and CEO Kirk Kordeleski said though it went smoothly, it took a few months to get all its channels going at full strength. Bethpage converted from AFTECH to OSI. “We didn’t think we could market during that period of time. We were investing in technology so we would be able to support our growth,” he said. “Come about the April-May timeframe we started to market on radio and in newspapers and have seen substantial growth.” Bethpage just eclipsed the $2 billion mark. So far this year, its membership is up 12% to 132,000; shares are up 21%; and loans are up 16%. About four years ago Bethpage knew it had to do something if it wanted to keep growing. Major companies in its FOM like Grumman and Computer Associates weren’t the large employers they once were. “Long Island is a small and middle-size business economy. For us to continue to grow and thrive, we had to have access to more members. At the time three or four years ago we didn’t know the community charter would be available,” said Kordeleski. It eventually benefited from NCUA’s willingness to grant multi-million member charters, but it needed to build its brand. At the core of that brand is the credit union difference. Kordeleski said Bethpage is relentless about driving home to consumers that as a cooperative it can give them a better deal than banks. “We market the heck out of being a different type of financial institution and having the best rates in the market. We live and die by that,” he said. Case in point. In September two large area banks promoted their savings rates of 2.5%. Bethpage decided to up its premium savings account to 2.75%. That helped it bring in $100 million in September alone. Simultaneous of its marketing campaigns, it started sponsoring community events, working with area charities and meeting with business leaders. Bethpage has won charitable awards and is now a known entity in the business community and with consumers, which wasn’t always the case. He said in 2000 the CU did a branding study that showed it had about 8% name recognition in the market. It did another study this year and recognition jumped to 50%. So how is Bethpage doing in carrying out the business plan it submitted to NCUA when it was seeking the community charter? Kordeleski said branch building has been slower than expected. It planned to build six branches in two years, and so far has added just two. However he notes it’s a two-year plan, and the CU is still hopeful to hit its goal. One of its new branches is in an underserved area, also part of its initial proposal – to reach out to specific underserved areas. NCUA examiners have been at the CU since the conversion, but Kordeleski said he was unsure how much they reference the CU’s original conversion plan to keep score so to speak. Like many fast growing credit unions, Bethpage could run into capital problems. Kordeleski said it’s imperative that credit unions be given a risk-based capital system. “We’re going to have to increase our income significantly in order to grow if this capital issue isn’t changed. We’ll have to manage expenses more effectively, which means fewer new branches. Or we’re not going to be able to have the significant difference in rates we now have,” he said. Both of those things are bad for members, he said, and it doesn’t have to be that way. Bethpage currently has 10% capital, but if it was under a risk-based system, Kordeleski said it would be about double that. “Why is it OK for every other financial institution in the United States, really the world, to have risk-based capital, but not credit unions?” He said Bethpage will look for more fee income, but will try to avoid the penalty fees. One of its strategies is to generate more fee income from one of its seven CUSOs. It has CUSOs in the areas of title insurance (which Kordeleski described as a major money maker that all CUs should look into), investment products, business services, realtor services, and others. More business for these CUSOs means more income for the CU. Bethpage also plans to launch courtesy pay to generate new fee income. However Kordeleski said the CU will still offer its traditional overdraft program where the CU first taps other accounts and lines of credit before bouncing a member’s check. Only after those other options are exhausted, will Bethpage offer the member the courtesy pay option. Kordeleski is hopeful about Bethpage’s future and the possibility of some day seeing risk-based capital come to credit unions. “We’re thrilled to be growing. We’re excited.” As for risk-based capital, he said, “There’s movement with meetings at NCUA. CUNA, NAFCU and more and more people are coming to a similar conclusion about risk-based capital. The stars are starting to align for it.” -

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