Carefully Consider A Charter Change

Regardless of charter type, it's product and services that drive long-term success.

Jim Regan, CEO, Digital Federal Credit Union responds to the 1Q 2012 CUSP Theoretical Case Study: Exploring A Different Charter.

KAREN, MY ADVICE IS: DON’T JUMP INTO A CHARTER CHANGE until you understand your institution’s market position. Regardless of the charter, product and service offerings are the primary driver of long-term success. Although your charter definitely plays a role, your ability to serve members will be the foundation of your success. As the dynamics of your membership change, so must your products and services. This remains an ongoing focus for my own credit union DCU many years after our move beyond our original sponsor, Digital Equipment Corporation (DEC).

In a way, we were not unlike you. We were the credit union for DEC, headquartered outside Boston in Maynard, MA. We had more than 30 branches inside DEC facilities in New England and around the country. This was our primary point of contact for the majority of our membership. But DEC fell on hard times in the mid-90s; it was bought by Compaq, which later merged with Hewlett-Packard. These changes forced us to change how we interacted with our members.


Members who retired or left DEC found it difficult to access branches inside company facilities, and hours of operations were inconvenient when not working in a facility (Monday – Friday, 8 a.m.-4 p.m.). Our transition involved creating a call center that provided evening access, and we expanded our other delivery channels. This included our ATM network, shared branching, and electronic home banking. Finally, over a span of approximately five years, we closed remote branch locations and moved local branches outside company facilities.

As part of our transition, DCU expanded the number of SEGs we serve to augment our field of membership. Former DEC employees who maintained their membership after leaving the corporation referred a significant number of these SEGs. We now have hundreds of SEGS to which we offer DEC membership. Additionally, NCUA granted us permission to serve two underserved areas in Massachusetts, Lowell and Worcester where we have opened branches to serve these communities as well as existing members.

Karen, we have become a kind of hybrid. We are SEG-based but also have the underserved areas. We’re not a community charter, but a large number of residents in the communities we serve are eligible for membership.

Karen, although I have discussed some of the steps we took, there are many options for Blue Lakes’ to consider. In the end, I go back to the strength of your product and service offering as well as your financial strength. Underperformance in either area will make these decisions more difficult. DCU has not been active in the merger market, but should not ignore this alternative.

Ultimately, I encourage you to look at what is in the best interest of your membership.

May 28, 2014

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