Georgia CUs Take Careful Steps With Residential Common Bond Expansions

ATLANTA -- Georgia credit unions have moved cautiously regarding residential common bond charters even though a 2005 state law change gave them the flexibility to do so.

According to the Georgia Department of Banking and Finance, 25 credit unions have been approved to serve a neighborhood, community or rural district, which can also include a municipality or county. Nearly a dozen of the approvals came this year. The department is averaging one residential common bond application a month, said George Reynolds, senior deputy commissioner at GDBF and chairman of NASCUS.

"We've had a fairly level number of applications for each month," Reynolds said. "The numbers [for 2008] might be a bit deceptive. One of our senior staffers is retiring, and some of the credit unions wanted to get their applications in before he retired."

In 2005, Georgia Gov. Sonny Perdue signed Senate Bill 82, which modernized the state's Credit Union Act for the first time since 1974. Among the key provisions was a clarification that an existing credit union's field of membership can be composed of multiple groups, including communities, associations and occupational groups. Georgia Credit Union Affiliates was instrumental in gathering research to codify the act, including hiring a lobbyist, identifying a sponsor of the Senate bill and even meeting with the state's banking associations.

"As with any change in existing laws and rules, it can take a while for credit unions to see exactly how they can benefit. As credit unions warmed up to the growth opportunities available through adding residential groups, more began to make the change," said Anita Paul, director of communications at GCUA.

The $1.5 billion Atlanta Postal Credit Union was approved in February for a residential common bond to serve Bibb County, Ga. The Macon area is not new to the credit union as it has served the U.S. Postal Service and federal government employees in two zip codes since 1991, according to Dianne Yost, vice president of marketing at Atlanta Postal. In September 2007, the credit union relocated to a bigger facility in downtown Macon. The newly granted bond is one more extension of its 83-year reach to postal employees.

"It is not our goal to expand outside of who we are," Yost said. "We are a postal credit union, and that's what we will continue to be."

Cutting ties with its longtime sponsor Atlanta-based Emory University was not even an option for $92 million Emory Alliance CU, which was approved for a residential common bond in June, said Chris Culberson, president/CEO. Before applying, the credit union first had to switch from a federal to a state charter. Doing so would allow Emory Alliance to serve residential and occupational, Culberson noted. Going community charter would have meant giving up Emory University, a private university founded in 1836 with 12,000 students and 3,000 faculty members.

"They are a strong sponsor and not likely to go out of business," Culberson said. "Emory has a lot of affiliates and we serve those affiliates as well. Under a federal charter, we would have had to give up Emory [when applying for the residential common bond]."

Emory Alliance was approved to serve DeKalb County, one of the largest counties in Georgia. The university sits right on the DeKalb/Fulton county lines and with many Emory students living in DeKalb, the expansion was the right move, Culberson said. The credit union is looking at other Georgia counties where Emory University has a presence including in Newton County, which is home to Oxford College, a two-year undergraduate division on the school's original campus in Oxford, Ga.

"In today's environment, credit unions have so many communities, it's very difficult to be a single common bond," Culberson said. Everyone out there could potentially be your members. Our members can join a number of credit unions."

Still, Culberson said a credit union's size is not an issue because they're still small players in a huge and competitive financial services marketplace.

"The biggest competition is clearly large banks and community banks. No [credit union] would welcome an attack on their group but at the same time, everyone is trying to grow," Culberson said.

Reynolds at Georgia's DBF said the department has seen two types of residential common bond requests: smaller credit unions interested in serving a common bond of residents in a primary county, and a few other larger credit unions that have applied for multiple common bonds such as the $2.5 billion Delta Community CU. Select employee group applications are still the most popular requests from Georgia credit unions, he pointed out.

"Each common bond they have applied for has to stand on its own," Reynolds said. "We had the credit union codification in 2005, and it made clear in the statute that credit unions could have multiple common bonds."

Indeed, in their residential common bond applications, credit unions are required to establish "well-defined" criteria for a neighborhood, community or rural district and delineated on a map. Within that definition, the parameters for defining a neighborhood, community and a rural district take into consideration factors such as the credit union's financial and managerial capacity to serve the proposed common bond and projection of the expected size and penetration into the target market over a three-year period, according to Georgia's DBF.

GCUA said the work that went into modernizing the Georgia Credit Union Act was well worth it to at least give the state's credit unions another option to reach more potential members.

"In 2004, the Georgia league visited credit unions across the state to get their input about the Georgia Credit Union Act and its implementing rules. The response of the credit union leaders was to have more opportunities for credit unions to grow," Paul said.

--msamaad@cutimes.com