A Blueprint For Long-Term Efficiency

APCO Employees Credit Union keeps its operational edge through economic booms and busts.


APCO Employees Credit Union ($2.3B, Birmingham, AL) has an unusual claim to fame: It has managed to keep its efficiency ratio lower than that of many of its peers, no matter what the economy brings.

Formed in 1953, this institution has since grown to include more than 66,000 members, 94 full-time employees, and fifteen branches, making it the second largest credit union in the state of Alabama.

Despite its large footprint, APCO Employees’ efficiency ratio is roughly 30% lower than both the national and state credit union averages. It is also at least 22% lower than the average for credit unions with more than $1 billion in assets. This is particularly impressive because the credit union primarily earns income from its investment portfolio, which represented $1.78 billion of the credit union’s total assets as of December 2012.

The decline in investment yields that all credit unions experienced during the financial crisis caused APCO’s efficiency ratio to spike dramatically during 4Q 2008 and 4Q 2010, but even then, its ratio remained more efficient than many of its peers and competitors.

© Callahan & Associates | www.creditunions.com


Generated by Callahan & Associates' Peer-to-Peer Software.

In all, the credit union’s active expense management and focus on the long-term has kept APCO’s operating expense to average assets ratio hovering at 0.50% for the past ten years.

© Callahan & Associates | www.creditunions.com


Generated by Callahan & Associates' Peer-to-Peer Software.

Although some of APCO’s circumstances are atypical, credit unions can learn much from this institution’s frugal management of long-term expenses, which starts by keeping a vigilant watch over costs.

“We discuss expense management at every board meeting and at every meeting of our assets and liabilities committee,” says APCO’s vice president and chief financial officer Blane Mink. “We intentionally run very lean as an organization and are careful about building additional branches.”

Nearly all of the credit union’s 15 branches were based on a single concept and have not had extensive facelifts or remodeling.

Big Value Without A Big Price Tag
Like its branches, APCO’s business philosophy is about keeping things simple to minimize costs. A self-described fast follower of technology, APCO offers mobile and online banking, including bill payment, and just about any other remote service its members might need. But the credit union’s most important tool for keeping costs down is its people.

APCO’s leadership and staff all understand that the credit union’s low expense ratio allows it to do more for its members, including paying deposit rates that are well above the market’s. The credit union’s regular savings account, for example, yields an annual 1.26% in interest and requires an opening balance of only $25. Even APCO’s checking accounts pay interest, and members with at least a $2,000 balance earn up to 0.50%. At a time when free checking is a rare perk at many big banks, which typically charge a monthly fee for checking accounts when balances fall below a set minimum, APCO keeps its expenses low so that its members can benefit the most.

On average, each of APCO’s 94 full-time employees serves 712 members compared with an average of just 417 members per employee for peers in the same asset size.  APCO employees also produce $4 more in revenue for every dollar earned in salary and benefits than employees at similar institutions ($7.77 versus $3.77).

According to CEO Merrill Mann, the credit union hires only people who possess the three A’s: aptitude, attitude, and availability.Employees must have the right mix of attributes and a can-do attitude to satisfy APCO’s exacting standards.

Field Of Membership Makes A Difference

Another key factor that has helped the credit union continue to expand products and services while maintaining a low expense ratio is its closed field of membership. APCO does not have a community charter and is able to focus primarily on employees of the Alabama Power Company and its parent institution, Southern Company.

This SEG presence means the credit union does not have to advertise as aggressively as peers or build branches on every corner to effectively serve its membership, which tends to consist of well-educated and well-compensated individuals. Given the 3.27% increase in average member relationships — i.e., the total dollar value of accounts and loans, excluding business loans — APCO achieved in 2012, it is clear that these profitable, engaged individuals play a key role in the institution’s success.

The credit union’s relationship with the Alabama Power Company has also had a positive effect on expenses because several branches and ATMs are housed at the company’s facilities. A business development officer meets with employees on site regularly and introduces them to the credit union, a practice that helped drive APCO’s 3.88% membership growth in 2012.

“Our members are the key to everything,” Mink says. “They help us stay the low-cost leader in our market.”




April 8, 2013


  • Savings clubs don't require much expense, nor do they require many employees. Credit unions are in the business of providing members what they need or want. Obviously the APCO membership is not looking to borrow from their credit union. A credit union with a borrowing membership will generally incur greater expense and require more employees.
    Dick Smith