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SCOTTSDALE, Ariz. – Chip Filson was taken aback one day last April during a planning session with a credit union. One of the directors asked “if credit unions did not exist today, would we create them” and “what need would they serve.” Filson, president of Callahan & Associates, Inc. and a former NCUA official, known for his intricate knowledge of the movement, admits he was at a loss for words. After some thought, his reply was simple. “Until we can get a clear answer,” Filson told the director, “we will be bank-like.” Speaking to attendees at the Participation & Business Lending Symposium during an April 4 afternoon session, Filson honed in on the best ways for credit unions to grow. Among them are traditional organic growth, serving niche groups and through mergers. Credit unions are facing a new era that means practically every American can join, charters are now considered “open,” and the industry is gaining more exposure in the public eye, he said. Resources are also more abundant with $30 billion in “excess” capital. Entities like the House Ways & Means Committee have also recognized the significance of credit unions, Filson pointed out. “We’re now on the same platform. The eyes of Congress are on everyone now,” he said. With more of the spotlight on them, credit unions still face another challenge when it comes to competition – becoming the competition to beat the competition. “It’s important to recognize that we are pygmies in the land of trillion dollar banks,” he said. “We’re never going to catch them if we play their game.” One of the tie-ins to that distinction is the growth of member business lending within the credit union loan portfolio. In 2005, MBLs were the fastest growing loan segment at 34% but still only represent 3.7% of all loans. Participation loans are even smaller at 2.1% of all loans outstanding but the compounded growth rate of MBLs has fueled their growth, Filson said. The number of credit unions with participation loans increased 16% last year and most of those came from those within the $250 million to $1 billion asset range. During his presentation, Filson looked at three business services case studies – The Cypress Group, LLC, a networked start-up, Texans Commercial Capital, a “do it yourself,” and Business Partners, LLC an “industry innovator.” Each one dealt with the challenge of strategic transformation, which Filson defined as “a way for the industry to evolve that would allow a credit union not to be large.” “The presumption is being bigger will finally get you there,” he said. “When I was at NCUA, once you got $100 million in assets, you made it. Now, it’s $1 billion.” Cypress Group, for example, learned that each of its seven owners have different strategies and focuses and adjustments are necessary because the market tends to develop slowly, Filson said. Texans Capital, the wholly-owned CUSO of Texans Credit Union, capitalized on the downsizing in the Dallas tech sector, which has led to small business start-ups. Business Partners, with its $1.5 billion in assets under management, has taken on a bigger mission of establishing a forum for expertise to develop and producing leaders who have vision. Having that vision for business services and lending as well as in other areas has led to what he calls “the real 21st century credit union charter – building common wealth.” Translation: credit unions taking on the task of doing “something banks can’t do” and “something banks won’t do.” “The legacy is to serve future generations,” Filson said. “Banks can’t own real estate agencies or pay interests on deposits, credit unions can. We are on the cusp of being able to use cooperative models.” Some of the industry’s new growth paradigms include driving critical activities such as digital intelligence, more than focusing on financial goals like capital levels, Filson said. Credit unions must also work harder to double member contact outlets through networked resources and join networks that bring volume, not just extend reach and range, he added. “Grow what you do, not what you own,” Filson advised. -

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