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Monday, Dec 5, 2022

SchoolsFirst Sees Growth Potential in California

State's largest Credit Union Moves Into New Tustin HQ

Since William Cheney became chief executive at Tustin’s SchoolsFirst Federal Credit Union in 2014, its assets have almost tripled to $28 billion.

“A lot of the growth is organic,” Cheney told the Business Journal.

“People ask me all the time about our credit union growth strategy. We look at growth as an outcome of great service and that’s worked very well for us.

“Our No. 1 priority is member service. It sounds corny but it’s true.”

SchoolsFirst has grown into the state’s largest credit union and the fifth-largest in the nation, with 1.2 million members. It’s by far the largest credit union on the Business

Journal’s annual list, as No. 2 Nuvision Federal Credit Union of Huntington Beach reported assets of $2.9 billion for the period ended June 30.

SchoolsFirst accounts for 68% of ranked firms’ assets, similar to last year’s list (see story, this page).

SchoolsFirst has big plans for growth in California and in the past year has moved into a new 180,000-square-foot headquarters, located on a 1.8-acre site just off the Costa Mesa (55) Freeway near Edinger Avenue.

The city of Tustin held a dedication ceremony on Oct. 18, attended by Mayor Austin Lumbard and other city officials.

The building is oval in the shape of an eye, with an open-air courtyard in the middle. A main cafeteria is on the ground floor and kitchens are spread around the facility. A nearby four-story car garage has rooftop solar panels and charging stations for electric vehicles. The architect was the SmithGroup and the builder was C.W. Driver.

“I love this building,” Cheney said. “It’s a modern design. There’s a lot of space for collaboration where team members can see each other in the halls.”

The credit union’s total real estate footprint in the area is now more than 380,000 square feet.

Teacher Heritage

A group of teachers at a Santa Ana school began the credit union in 1934. In 2005, it changed its name from Orange County Teachers Credit Union to reflect its growth statewide.

Cheney joined SchoolsFirst in 2014 when he was hired as CEO and president. One of his biggest moves was in 2020 when SchoolsFirst merged with Sacramento’s Schools Financial

Credit Union, which added $2 billion in assets, and helped it expand in Northern California.

While the credit union could technically expand outside the state, Cheney plans to stay in California, saying there’s room for growth in areas such as Los Angeles, the Inland Empire and Northern California.

“It’s a big state with a lot of people,” Cheney noted.

Its largest deposit growth ever was in 2020 due to COVID-19; it reported asset growth climbed 35% for the year ended June 30, 2020.

“Our members didn’t have anywhere to spend it. They couldn’t travel, couldn’t visit malls, couldn’t go out to eat.”

The credit union has 2,700 employees and plans to grow in the 6% to 10% range annually, consistent with its membership growth, Cheney said.

It will continue offering branches, a strategy different from many banks that are cutting back because of online technology.

“Our members use them and tell us they like to have them,” Cheney said. “When we talk to our younger members, they use our mobile apps more, but they also use our branches. When they want to discuss a serious matter like buying a home, they like to come into the branches.”

Son of a Banker

Cheney, who was raised in the Dallas area, has long known the financial industry as his father was a banker.

“I didn’t dream of being a banker,” he quipped.

After he graduated with a degree in finance from the University of Texas, Cheney worked as a consultant at Arthur Anderson, the predecessor of Accenture.

His career in the industry started in 1987 when a credit union client in San Antonio offered him a job.

Cheney’s witnessed the number of banks and credit unions decline from about 42,000 in the late 1970s to around 10,000 nowadays because of consolidation.

Many credit unions have broadened their focus from company employees to communities to attract more customers. SchoolsFirst intends to continue focusing on teachers for memberships, he said.

More banks are being formed than credit unions because “there’s not the investor for-profit incentive to start a credit union.”

Profit is the biggest difference between the two industries.

“There’s an old saying in the credit union movement: Not for profit, not for charity, but for service. We’re here to serve our members.”

Hence, SchoolsFirst can offer services like more slowly raising interest rates on customers.

“In a rising rate environment like right now, we’re doing everything we can to increase our rates as slowly as possible on our loans to help our members.

“We can focus on servicing our customers. A bank wants to serve its customers, but it also has to deliver a profit for its investors. That’s an advantage for us.”

Credit Unions Face Slower Asset Growth

Orange County’s credit unions this year reported assets climbed at a slower rate than prior years.

The 17 credit unions on the Business Journal’s annual list reported a 7.4% increase to $41.1 billion in assets for the year ended June 30. That compares to 16% growth in 2021 and 26% in 2020.

All 17 credit unions maintained the same ranking as last year’s list.

The biggest grower was Anaheim’s Credit Union of Southern California, which climbed 10% to $2.4 billion.

No. 1 SchoolsFirst Federal Credit Union of Tustin had the biggest increase in dollar terms with a $2.19 billion boost to $28.1 billion.

The biggest decline was 9% at Brea’s AdelFi Credit Union, which fell to $563 million in assets.

The credit unions reported net income increased 20% to $144.1 million for the first half ended June 30.

Employment at credit unions was up 7.7% to 4,154. The firms reported
OC memberships increased 3.7% to 798,726.

— ­Peter J. Brennan

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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