Salmon said the credit union strategically set out to build its business deposits up first as a "competitive advantage" to foster long-term relationships. It helps that credit unions can offer dividends on deposit accounts unlike banks, which cannot, but still navigate by offering sweep accounts, he added.

"We want to keep it simple," Salmon said. "Credit unions are thrift institutions. We're supposed to foster savings. We can keep dividend structure simple and don't have to get complex with sweep accounts."

The small business services division started out as a pilot in the D.C. area and later expanded to the Hampton Roads, Va. area and then on to Jacksonville, Fla. and Southern California last summer-all major markets for Navy Federal. There are early discussions to expand to some of its smaller markets such as Pensacola, Fla., Jacksonville, N.C. and possibly Seattle, but rollout will be predicated by demand for services in those areas, Salmon said.

Expanding the division also has some limitations that come with Navy Federal's distinctively defined field of membership, which includes personnel in the Department of the Navy, contractors, officer candidate programs and United States government personnel assigned to Navy installations.

"We are a natural person credit union and that provides unique challenges and opportunities in and of itself," Salmon said. "We have a very defined charter and we have to abide by it."

That often means going after "the very small business owner," typically start-ups, Salmon said. But it doesn't stop the credit union from doing all it can to retain business members. For instance, sometime this fall Navy Federal plans to soft launch a MasterCard for businesses that will allow multiple employees to use it with multiple credit limits. Members can also look forward to a relationship program that will offer choice loan rates based on the number of accounts at the credit union. "It goes back to being the members' primary financial institution," Salmon said. "There's definitely a wall between the consumer and business side. We don't necessarily want to break down that wall because they are two different [entities]. We just want to make that wall more transparent."

Navy Federal is able to accommodate its business members through its 21-employee department. Salmon readily admits, like many credit unions, hiring experienced business development officers "is something we have struggled with." But to meet that challenge, a training network with Newtek, Baker Hill, SBA and other vendors along with two training summits held each year has paid off. As for compensation, which often hurts credit unions when it comes to being able to woo talent, Salmon said this has been a dilemma too.

"Our structure is nowhere near what standard industry practices are," he offered. "But our people have a very entrepreneurial spirit. I treat them like professionals and they have the flexibility to run with their markets. [As an industry] we're still going to have to find ways to keep those people happy."

The Credit Union Regulatory Improvements Act or CURIA has long pushed to raise the current 12.25% of assets threshold on member business loans to 20% of assets and allow NCUA to increase the threshold for defining a member business loan from $50,000 to $100,000. Salmon said Navy Federal doesn't have to worry quite yet about bumping up against that 12.25% cap, but industry wide, it might hurt smaller credit unions that hire commercial lenders from banks.

"They're used to doing really big deals and before you know it, they've reached that cap," Salmon said, adding loan participations and CUNA Mutual Group's CU System Fund, which allows CUs to buy business loans from credit unions and sell shares in them to other interested CUs, are "creative and viable" ways to stay below the cap.

Meanwhile, Navy Federal will continue to foster and build new relationships, mainly on the deposit side first, Salmon said.

"It's not as popular as the lending side but it promotes better stability," he suggested. "The deposit side is more important to the business owner and to the overall longevity of the credit union." [email protected]