Justice Federal Credit Union ($596.5M, Chantilly, VA) was charted in 1935 to serve the U.S. Department of Justice. Now, it also serves employees and family members of Homeland Security, U.S. and District of Columbia courts, the Georgia Department of Public Safety, 11 law enforcement groups — such as the National Sheriffs’ Association — and many private contractors who serve the national law enforcement community. It has 58,000 members, 22 full-service and boutique branches, and nearly $600 million in assets.
Here, CEO Pete Sainato reflects on the opportunities Justice FCU has taken advantage of over the past few years and how the credit union plans to proceed to retain its positive momentum.
How are things at Justice Federal Credit Union?
Pete Sainato:We see a great future at Justice FCU. We have a firm foundation and strong momentum. The years 2010 to 2012 were the best years in our history. We planned cautiously during the years before the credit crisis. When the credit crisis hit the economy, it was much harsher than we anticipated; however, we were more prepared. We proceeded with cuts, as did nearly all credit unions, but we never trimmed back on efforts to retain the closeness and support of our members.
So the dark years of 2008 and 2009 offered you some opportunities?
PS: Some Fortune 500 companies trimmed back on what they were doing to support law enforcement during the recession. We kept up with our sponsorships and remained visible to the national law enforcement community.
In addition, while other large financial service providers raised fees and showed they were not as welcoming, we showed we cared and worked diligently to assist our membership. We demonstrated not only that we had been around a long time but also that we were strong enough to stay the course. Our members are smart, skeptical, examining people, and we believe they saw firsthand the value in what Justice FCU has to offer.
You’ve also been expanding? Some of that by merger?
PS:Yes. Lately we have had as much business — or more — as we can handle. We acquired the former Georgia Department of Public Safety Credit Union through a merger last year. That provided exposure in Atlanta. We’ve also expanded our reach in Chicago, San Diego, and West Virginia.
How does the rest of the year look?
PS:For the remainder of this calendar year we anticipate earnings to be slightly lower due to the interest margin squeeze. However, we continue to work our ALM strategies and be proactive. For example, when mortgage interest rates first rose in May, we quickly hedged our exposure so we could continue to make profitable mortgages.
We expect mortgage lending to continue to increase. We are seeing more people anxious about rising mortgage interest rates, and they have begun to take action. This is a positive sign for Justice FCU and the economy. We want to be ready to welcome this stream of business.
We are also closing more business loans than we have in the past and expect this to continue. Compared to previous years, we are seeing larger companies coming to us for member business loans. With interest rates at a historic low, we anticipate healthy lending in this area.
Auto lending is solid, though this year might not be as strong for us as last year when our auto loan growth rate was more than 20%.
One of our most popular loans on the consumer side is the consolidation loan. Members are unhappy with paying high interest credit cards elsewhere and have been coming to us to switch out of them.
What struggles do you expect ahead?
PS:Justice FCU’s loan-to-share ratio has been 80%, and we work hard to maintain this healthy ratio. It is a daily struggle, but we expect to hold it, for one, by increasing our wallet share from our members’ eligible family.
We have also experienced a sizeable increase in loan pay-downs, which shows there is anxiety about the future of the economy among members. We believe this unrest might be due to their worries about the sequestration of federal funds and expected furloughs.
CR: So what positive signs do you see for Justice FCU in this economy?
PS: Our member satisfaction rankings have been rising since 2008. In fact, they have risen to levels we had not imagined — 2012 was an all-time historic record for us. We believe through the rough economic times, members experienced the value we provide and always have provided. Members have demonstratively acknowledged this in our service satisfaction rankings.
Your 12-month member growth as of March 31, 2013, was 9.02%. Where are new members coming from?
PS:We believe a high percentage of new growth will come from people giving up their existing bank relationships. We realize it’s tough for people to surrender relationships built over years. People seem to have to go through five or six bad experiences before switching. However, as noted earlier, our potential members are from the law enforcement community, people who recognize value. They realize we have a growing presence at their conferences and elsewhere. This growing presence demonstrates we are increasingly the tested and trustworthy financial service provider for the law enforcement community and their families.
How do you retain new members?
PS: We concentrate on service. We understand people who come to us from other financial service institutions could leave us if we do not seal the relationship. That is just one reason we pay so much attention to our member satisfaction rankings. When service testimonial letters arrive — and we normally receive one a week — we post them on our intranet so all staff can read about the excellent level of service. I make a point of personally reaching out to each of these employees and thanking them for their exemplary service.
How are you going to “face the public” for the rest of the year?
PS:We will continue to market heavily to our affiliates. We have learned that marketing within our affinity groups is an efficient way of reaching potential members. Our marketing efforts consist of direct mail, email, and national media campaigns consisting of radio, online, print, and posters in transit systems such as the Washington, DC, metro. Our newsletter, Justice for You, is popular with our members; in fact, it is one of the most-read products we distribute. And we will continue to have a high profile presence at law enforcement conferences through sponsorships and interactive display booths.
What about new technology?
PS:We’ll be investing in our branches in the future. We’ll be moving away from the traditional branch to a more concierge-like environment; there will be biometrics, more support for mobile devices and the like — more high-tech, high touch, services.
Do you have advice for other credit unions for the remainder of the year?
PS:To be a strong credit union these days, it’s simple — take care of your members and take care of your employees. If you have to ask for sacrifices from employees — as we did during economic tough times — pay them back. We made 2012 the “Year of the Employee” to recognize the sacrifices our employees made to bring us through the toughest years in our history. We gave back in numerous ways and paid the highest employee incentive payout in our history.
Lastly, don’t be so cautious that you miss opportunities as the economy is improving. Look at rising interest rates for the opportunities they will afford.