First Citizens' Federal Credit Union: Growing with a new consortium
by Glenn RittWhile credit unions are quite common in Plymouth and Bristol counties, they are almost unique to the Cape, where Fairhaven-based First Citizens’ Federal Credit Union is making an aggressive stand – with branches in Falmouth, Hyannis and Orleans.
Competing directly against nearly a dozen banks, CEO Charles Simpson sees First Citizens’ as an increasingly attractive option because of its intimate membership model, which literally gives customers a voice and ownership stake in the institution’s success.
His challenge is to make the public aware that anyone can join and do business with the credit union as easily as with a bank. All it takes is opening an account with as little as $1. Customers need not be part of a big company, association or affinity group, as is the common image of credit unions, he explained. They must only live or work within a six-county radius.
To extend First Citizens’ reach across the Cape, Simpson has moved on several fronts:
• He participated with eight credit unions across New England to organize a jointly owned company, Octant Business Services, to scale up commercial lending beyond the capacity of any single one of them. Octant’s scope –which has grown dramatically over the last year – lets these smaller credit unions credibly compete against bigger banks for business borrowers.
• It has created the First@Work program, which lets a small business – even a self-employed individual – essentially have its own credit union. Employers offer the program to their employees as part of a benefits package. The biggest value proposition: discounted consumer loan and auto rates. The program touches about 400 businesses.
• It has opened its own insurance agency, joining several larger banks like TD Banknorth and Eastern.
• It is marketing third-party partnerships, such as its relationship with Cape-based College PayWay, which specializes in college loans and consulting with families to help them plan for this large expense.
• It has aggressively invested in technology and Internet-based banking – for example, its mortgage center, where customers can go to the computer, write their own mortgage and have it approved or rejected in an expedited fashion.
“The only way that we can level the playing field is with technology,” said Simpson, noting that the online mortgage initiative has allowed First Citizens’ to write more home loans and disburse more money than ever before – despite the slowing housing market.
Fifty percent of its mortgage business now comes via the Internet, he pointed out – a logical outcome given the proliferation of online mortgage companies that have rapidly taken market share from local lending institutions across the country.
Meanwhile, expanding into commercial lending and insurance has been particularly critical for First Citizens’ given the Cape’s economy. Here, more than nine out of every 10 businesses are very small companies, employing 10 or fewer people. As a result, it’s more likely that a financial institution can gain both personal and commercial business from company owners or managers.
“It was becoming increasingly counterproductive for us to refer our members to other banks that could handle their commercial business,” said Simpson. “We couldn’t continue to send them into the marketplace and hope to keep their personal business.”
Within a four-month period early last year, Octant Business Services attracted $7 million worth of business loans. (Located in Littleton, it also serves Bridgewater Credit Union, Digital Federal Credit Union, Eastern Corporate Federal Credit Union, Jeanne D'Arc Credit Union, Rockland Federal Credit Union, Northeast Credit Union and Granite State Credit Union.)
Since then, Octant has grown continually every month and is registering year-over-year double-digit growth. Meanwhile, it is adding smaller correspondent credit unions that can benefit from the holding company’s scale, but not hold equity.
With just over $400 million in total assets, First Citizens’ is dwarfed by the Cape’s banks. It employs about 125 full- and part-time staff and serves about 50,000 members. But when deposits of all eight credit unions associated with Octant are added up, the picture is different. “The consortium represents more than a $7.4 billion credit union operation,” said Simpson.
In building out its commercial lending business, First Citizens’ works most frequently with companies with annual revenues up to $5 million.
“Every commercial loan comes back to the individual credit unions with a recommendation from the experts at Octant,” explains Simpson. “The final say is made by us. And the loan assets also belong to the individual credit unions. We provide service directly to the member.”
That lets First Citizens’ think globally and act locally in what is an increasingly complex environment.
Size alone may not be so critical on the Cape, anyway. The smallest financial institutions here have been the ones gaining market share over the last two years amid the latest round of mergers and consolidations.
Moreover, Simpson believes the banking industry is undergoing profound and permanent changes that will require far more nimbleness and entrepreneurial skills than ever before.
“As a manager, I need to be concerned that every one of my senior managers understands we will not return to what it was,” he emphasized. “We will have to do business differently than we ever were expected to do before. Creativity and innovation cannot be an offshoot of our jobs. It must be fundament. We must reward it, risk it, applaud it, challenge it.”
With a membership model, First Citizens’ emphasizes household accounts – with an ability to serve auto loans, mortgages, education loans and insurance needs.
Simpson also sees a strong relationship between family and business accounts – especially on the Cape where nine out of ten businesses are micro in size.
“We have gone into business banking slowly,” he said. “We are starting to walk, but not run yet. But one thing is clear to me: If we can get the business account, we most probably will get all the retail business from that particular family.”
What is critical for First Citizens’, insists Simpson, is to focus purely on its model and not get too concerned about bigger banks. “Yes, I do compete with them,” he acknowledged, but inevitably, he is leading an institution owned by its members.
“I am only in this position as CEO because members have allowed me to stay,” he said. “When I go out to look at a particular relationship, that is my stockholder I am trying to help. That is not a customer I am trying to make money on to satisfy a faraway shareholder or my boss. I work for the people; I am not the king. Mutual savings banks can say the same thing.”
First Citizens’ has what Simpson calls a “fairly aggressive” expansion plan over the next five years, although he remains close to the vest as to where that expansion will occur on the Cape.
Published in Cape Business May/June 2007
Glenn Ritt Glenn Ritt is editor and co-publisher of Cape Business Publishing LLC. He is the former publisher of Cape Cod Community Newspapers and editor of The Bergen Record in New Jersey. 
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