A Lesson In Strategic Aggression

Member One aims to triple its assets within a decade. But to achieve that goal, it needs a team that can balance risk and reward across the organization.
Drew Grossman

Some individuals are good with people, others with numbers, and still others with technology. But how many excel in all three?

Building a team with that combination of skillsets is exactly what Frank Carter planned to do when he left Grow Financial Federal Credit Union to helm Member One Federal Credit Union ($665M, Roanoke, VA) in 2008.

The philosophy at Member One is one of strategic action, with Carter and his leadership team seizing opportunity as is required for the serious growth they envision securely and in line with the needs of the institution’s member-owners.


MEMBER ONE Credit Union
data as of 12.31.14

  • HQ: Roanoke, VA
  • ASSETS: $665M
  • EMPLOYEES: 205
  • 12-MO SHARE GROWTH: 9.7%
  • 12-MO LOAN GROWTH: 19.1%
  • ROA: 1.18%

Sometimes controlling growth is easier said than done, says Alan Wade, chief financial officer, but that’s our goal.

Indeed, the six years since Carter’s arrival at Member One have included significant growth to the balance sheet without any evidence of growing pains.

This growth is even more impressive given that Roanoke’s population has fluctuated by barely more than a hundred people over the past five decades, according to U.S. Census data.

Everyone is trying to get a bigger piece of the pie here, Carter says.

Instead of branching out, though, the credit union has been doubling down in Southwest Virginia, where it holds a 21% penetration rate among potential members compared to 4.3% for its asset-based peers.

Yet these numbers tell only a small piece of the story of how Member One became the thriving institution it is today and why it has such ambitious goals for tomorrow. In fact, to truly understand the inner workings of this organization requires a close look at its people, its balance sheet, and its operational strategies.

Assets $360 million $665 million
Total Loans Outstanding $227 million $511 million
Total Shares $329 million $598 million
Indirect Auto Loans Outstanding $51 million $222 million
Year-Over-Year Membership Growth -11% 11%

Source: Peer-to-Peer Analytics by Callahan Associates

The A-Team Comes To Town

Leaders must orient themselves before they can guide others, which is why Carter spent his first weeks as CEO meeting one-on-one with every branch manager and department head to identify their strengths, listen to their ideas, and brainstorm areas for development.

I learned a long time ago, anytime you start with a new company, keep your mouth shut and listen, Carter says.

From these conversations, three high-level employees stood out as key counterparts to Carter’s own marketing background. Tim Rowe, a chief lending officer who would later become chief risk officer; Alan Wade, chief financial officer; and Paul Economy, director of retail, all had worked at Member One for more than 25 years.

In addition, Carter hired Jean Hopstetter and Kimberly Braswell two former colleagues from Grow Financial as his chief operating and chief administrative officers, respectively, and hired a chief information officer named Jeff Wieczorek from Fairfax County Credit Union.

I knew if I could build a team with the right players, we would have the infrastructure to continue growing, Carter says. However, I had also inherited 12 direct reports from the previous CEO, and with the addition of these new hires, our previous reporting structure was not a viable long-term option.

Sometimes controlling growth is easier said than done, but that’s our goal.

Today, Carter has cut his direct reports to just Wade, Hopstetter, and Rowe. Working together, these three individuals connect Carter to events and issues across the organization.

Once Carter squared away his leadership, Member One turned its attention to the rest of the organization.

As of third quarter 2014, the credit union had more than 200 employees, much higher than its asset-based peer average of 180. However, it also has a higher net income per employee than peers $38,688 versus $31,074 indicating a more productive staff.

To keep moving the staff forward, Member One started keeping a list of talent profiles it calls the dream sheet. Dream sheets track the skills of employees to make sure no crucial, already-available resource is wasted. The sheets also serve a duel benefit by encouraging employees to think long-term about their career plans and how those might fit with the trajectory of Member One.

Additionally, the credit union created what it refers to as a Process Improvement Team (PIT), which is a group of employees who use process mapping to break down each step, system, and user in even the most menial tasks to identify fixes, efficiencies, and better alternatives.

You can go into Sears to buy a TV, sign the swipe pad, finance your purchase, and get a Sears credit card in the mail three weeks later, Hopstetter says. So when our employees have those types of experiences or see what other folks are doing and wonder if we could do the same, they share it with the PIT crew.

Next: Does The Balance Sheet Match The Mission?

Does The Balance Sheet Match The Mission?

Although people are the primary focus at Member One, there’s no shortage of attention paid to the numbers. The credit union follows a strict methodology for setting and reaching its financial goals, but it’s also careful to leave room for maneuvering should the unexpected occur.

For example, all departmental planning budgets are funneled to Wade, the CFO, who sets the budget based on input from other C-level executives and the credit union’s board of directors. These plans rarely extend further than three years because, according to Wade, today’s financial services environment doesn’t easily lend itself to longer-term goals.

But that’s not to say Member One doesn’t have such goals. In fact, two of its primary objectives, both of which are on an indefinite timeline, are:

To reach $1 billion in assets.

To post a consistent net worth ratio of 10%.

I don’t have a date in mind for that $1 billion mark because when people fixate on asset size, they’re losing the perspective that you need to have quality, managed growth, Carter says.

To maintain a balance between aggression and caution, Member One is focusing on creating financial symmetry, with assets, shares, and loans all growing at the same clip and earnings trending in the same direction.

You always want to have consistent earnings to match the growth, Wade says.

Without earnings, other metrics such as the net worth ratio, which is currently at 9.70% compared to a peer average of 11.0%, could deteriorate.

On the loan side, most of Member One’s growth comes from autos, which make up more than 52% of the loan portfolio, well above both state and peer averages.

Much of this is the result of the credit union’s indirect program, which has more than quadrupled over the past four years. As of 3Q 2014, more than 43% of the credit union’s loans were made through the indirect channel. That is notably higher than the national peer average of 19.7% and more than four times the average for Virginia credit unions between $100 million and $1 billion in assets.


If this sounds risky especially considering the credit union holds just 35% of its loan portfolio in first mortgages and other real estate, compared to the more than 50% held at both state and peer institutions Rowe says think again.

These loans are spread across thousands of members, so we get interest rate risk protection, he explains. The portfolio rolls so rapidly, it almost acts like a variable rate portfolio. We manage our credit quality, and although we lend to the full spectrum, we have percentage limits for the lower end.

In anticipation of the fact that this portion of its business might not always grow so aggressively, the credit union is diversifying its offerings with additions such as a high-yield checking account and is identifying other sources of capital growth.

We were looking at a cap of 10% for asset growth last year, and we hit that right on the head, Wade says. That’s important because it ties into so many of our other goals, such as growing net worth.

Optimizing The Operation Through Technology

Managing growth on the balance sheet is one thing, but adapting operations to support the accompanying influx of activity across different contact points is another beast entirely.

Having already posted an 11% year-over-year growth in membership in third quarter 2014 more than twice the average growth reported for its asset size Member One knows it must invest in new resources today if it wants to be prepared for the growth it anticipates tomorrow.

We didn’t come here to stagnate. We came here to grow.

The credit union is in the middle of converting its core system to Symitar, a process that has required nearly two years and should be complete by May 2015.

Once finished, the new system will open the floodgates to a host of vendor partnerships not previously compatible under its legacy system, says Wieczorek, the credit union’s chief information officer.

Credit union developers will also have more freedom to create additional systems for loan origination, merchant services, or even bleeding-edge capabilities like mobile wallets, if and when Member One decides to go that route.

Additionally, the credit union is constructing a new administrative building across the street from its headquarters. Set to open in 2015, the building will house several departments including marketing, products and services, lending, accounts, collections, and property administration.

The space for these departments in the current headquarters building is functional enough for today’s level of activity, Hopstetter says, but incorporating future staff would prove tricky. Leadership views the new location as a way to reaffirm the crucial role support services will play in the future of Member One.

We want the bulk of our employees who do all the behind-the-scenes work to have a space that is equally as nice, if not nicer, than what we have anywhere else, Hopstetter says.

Finally, the credit union will continue to filter all brick-and-mortar investments through the lens of whether such expenditures will allow it to serve more members in a more efficient way.

Taken as a whole, Member One has made some significant investments in its future and there are no signs the organization will be slowing down anytime soon.

We didn’t come here to stagnate, Carter says. We came here to grow.

January 22, 2015

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