They grow ‘em big down in Texas – FOMs that is

Big Tex statue at the State Fair of Texas fairgrounds.

Jeremy Garza has been the CEO at Gulf Coast Federal Credit Union for eight years; he’s worked at the credit union for a total of 18 years. Now, the credit union is making history as the first credit union to convert from a community charter to a multiple common bond charter to obtain a larger and entirely inclusive community by adding multiple underserved areas.

A lot has changed over Garza’s time at the credit union, including additional competition from larger banks and credit unions moving into the Corpus Christie area. Southern Texas has been a hot bed of growth, but Gulf Coast FCU couldn’t really capitalize on that when its community charter-based field of membership population was just 375,000. 

“In the last four years, we had a few multibillion-dollar credit unions come into this area. We needed to see how we could expand our service area,” Garza stated. 

The credit union’s community charter was not going to allow the credit union to achieve the growth Garza and the board felt it needed to succeed long term. A few years ago, the CEO worked nights and weekends on a FOM expansion into Kleberg County, which was successful, only to have it revoked a month later following the American Bankers Associations successful lawsuit against the NCUA.

Garza and Gulf Coast weren’t going through that again.

Know What You Don’t Know

“In Texas, our cities are really far apart. They’re not like other states where they’re really close,” Garza explained, so its community charter serving Jim Wells County (TX), Nueces County (TX), and San Patricio County (TX) really wasn’t feasible for future growth nor to reach the low-income consumers the credit union wanted to serve. The credit union might have been able to add a couple other counties, but working with CUCollaborate, Gulf Coast FCU was able to get all of that, plus, by converting from community charter to a multiple common bond charter, added a few groups and three underserved areas. The underserved areas alone covered every area it could possibly have gotten as a community charter and more.

The process also helped the credit union access Cameron County (TX) (pop. 423K) and Hidalgo County (TX) (pop. 869K). And, as the credit union penetrates its new field of membership over time, it can still add more groups, associations and even new underserved areas. For example, Austin, San Antonio and Houston are in play down the road, and Gulf Coast also has the option to merge in any credit union in the U.S. or buy a bank.

Garza added that Gulf Coast FCU hadn’t really experienced the pinch of increased competition yet. “We’ve grown quicker than we ever have with those credit unions being in the area. In the last seven years, we’ve grown from $145 million to $277 million,” he said. “I believe the larger institutions, although they have a lot of money for marketing, they don’t really know the area. Corpus Christie is a unique area; Texas is a unique area for its demographics. The income levels and credit levels here are a little bit different.”

In fact, according to Garza, while the income levels are decent in Corpus Christie, it has one of the lowest average credit scores in the country. “We like to work with our members that have those lower credit scores.”

By converting from a community charter to a multiple-common bond charter, Gulf Coast didn’t lose a thing – only gained potential members. “We were looking to serve a certain area of Texas to assist the consumers over there who we think needed some financial assistance,” Garza outlined. “The biggest thing was we noticed other areas we wanted to incorporate as we went through this multiyear process.”

Gulf Coast’s CEO said if the credit union believes it can help members, it wants into that area. Because it’s more familiar with Southern Texas than the larger institutions that are pursuing an efficiency-minded growth strategy, Gulf Coast understands the people and how to serve them, which Garza credited for the credit union’s growth despite increased competition. 

“It’s not rocket science. You have to look past the score,” Garza explained. Was the credit score decreased by a one-time circumstance? Do they have strong employment records? He continued, “You have to look at the positives in the deals with our members. It does take a lot of time to give that kind of service.” Gulf Coast is considering and has considered various loan-automation technologies, but automation didn’t fulfill the credit union’s “need to find ways to say ‘yes.’”

FOM Strategy

Garza noted that his board of directors is very progressive in its growth mindset, so once board said yes, Gulf Coast had to figure out how to capitalize on its new FOM approval, coordinating cross-disciplinary teams including compliance, marketing, IT, operations and more.

When considering this type of FOM expansion, credit union leaders must consider:

• ROA impact
• Budget
• Marketing
• Technology (Gulf Coast will begin a core conversion shortly.)
• Security
• Branches
• Contact center
• Staffing

Garza, the board and the Gulf Coast team dug through all the numbers. “When we looked at it – putting pencil to paper – everyway we looked at it was positive, even if we don’t go all digital down there,” he said. “It really is about making the right decision for the credit union to grow and not just stay stagnant.”

Stagnation is a struggle facing many smaller credit unions. “I talk a lot about competition, nothing negative about that,” Garza acknowledged, “but when you’re one of the smaller credit unions, use people who have knowledge or technology. We’re doing both with Sam Brownell, founder/CEO of CUCollaborate.” He explained that Brownell knew what NCUA would request, how to package it, input needed from the credit union, and the time and who should be involved.

Recalling his college days, Garza quipped, “If there’s someone smart in the class, get them in your study group.”

The CEO concluded, “The process was amazing. The only thing that slowed the process down at all was COVID. At the end of the day, it was wonderful working with them. I would recommend it to everyone.”