From Mountain High to Valley Low

The old adage “You can’t be in two places at once” doesn’t ring true for credit unions. Whether they are serving members with differing religious, occupational, or social affiliations or serving a membership that spans neighborhoods, cities, or states, credit unions are often required to be in two places at once.


Security Service Federal Credit Union ($6B, San Antonio, TX) has 36 branches, or “service centers,” located throughout Texas and 19 service centers in Colorado. Its strategy for being in two places at once boils down to one overarching focus: Understand and meet members’ needs, wherever those members may be.

Before it moves into a new market, one of the initial points it considers is whether the needs of the members in the new market are congruent with SSFCU’s services and whether the credit union can deliver those services in a sustainable way. Security Service’s movement into new markets is largely driven by acquisitions, and with that strategy, Security Service must consider whether its presence will benefit all members.


Before you move into a market, look at your membership base, both in that market and nearby, whose needs are not currently being addressed. Make sure you establish a brick-and-mortar presence only in places your members need it.

Provide staff the opportunity to demonstrate their abilities and excel in their individual performances. Provide a career path so employees can follow in your footsteps. Today’s teller might be tomorrow’s branch manager or vice president.

Empower employees to take ownership of community involvement. From your local Chamber of Commerce to national foundations, there are opportunities to make your mark and establish your brand locally.

“We have a responsibility to explain to our current members why moving into a new area and serving a new group of members benefits the institution,” says Jim Laffoon, executive vice president and chief operating officer of Security Service.

When it moves into a market, SSFCU offers its full suite of products and services. Such a goal helps it establish its brand and encourages new members to think about the credit union in a positive light. The brand, however, isn’t just products and services, it’s also people.

“We place an emphasis on serving members of modest means,” Laffoon says. “Over the course of the past decade, as we’ve moved from a single market to a dual market to multiple markets, we see a lot of similarities in terms of member needs, their income, their expectations, their satisfaction levels.”

When the credit union moves into a new market, it looks to these similarities to build a solid foundation. It prides itself on its member service and does not reinvent the model to provide it. Instead, the credit union relies upon lessons learned and best practices developed over more than 50 years. That knowledge informs a variety of decisions for a new location, such as the impact on the balance sheet, how to train staff, and how to assimilate into the larger community.

Balance Sheet Impact

Large-scale expansion via mergers or acquisitions requires different kinds of considerations than more organically driven growth. As Security Service considers whether a new market is conducive to doing business and whether the market’s needs are consistent with what the credit union can deliver, it is also evaluating the long- and short-term economic impact to the credit union.

For Security Service, one of the long-term benefits of having a presence in different markets is the ability to operate as a cooperative. Being in multiple markets reduces its concentration of risk and allows it to maximize the strengths of differing locations. For example, a market with an older population, higher deposit balances, and less need for loans complements a market with young, growing families.

“Some areas tend to be more of a source of deposits, and some areas have higher loan volume,” Laffoon says. “So the true spirit of the cooperative works better, in some cases, in multiple markets.”

For example, the credit union runs the largest credit union indirect lending program in the country. In the fourth quarter of 2008, “our indirect business was really booming,” says Greg Stroud, vice president of sales and marketing. The credit union needed a way to balance those loans — its average auto loan is $23,000 — with deposits. Its answer: create a 15-month CD with an attractive rate to use as the go-to product for promotion.

“That product has done extremely well,” Stroud says. “It remains one of our largest deposit products.”

For credit unions moving into a new market for the first time, determining a pricing strategy is a crucial first step because the process of pricing one market versus two or more could be different. At the onset, it is a delicate field to navigate. How do you quote rates for members? How do you handle member inquiries? How do you gracefully determine the member’s correct market?

“Security Service positions itself to be a price leader,” Laffoon says. “If prices for loans and deposits are a little different in Market One than they are in Market Two, then our prices are going to be a little different.” Unlike the cycles in other credit unions, where loan and share growth counter each other, Security Service uses its multiple market presence to balance its loan and share ratios. Since third quarter 2007, Security Service’s loan growth and share growth numbers have both topped 7.5%.

Part of this balance can be attributed to Security Service’s strong indirect lending program. Auto loans comprise 78% of its overall loan portfolio.

Moving into a new market is no easy task, and it is one the credit union does not take lightly.

“To understand all the risks, all the tricks and traps that might exist, we analyze and overanalyze and beat each other up over what we do when it comes to risk-to-earnings, risk-to-retained earnings, and service to members and how that could be impacted,” says Howard Baker, senior vice president and chief of staff.

To manage enterprise risk, Security Service makes sure all senior staff understands the risk in what they are doing. What are the risks? How does the risk impact the current members? Is the risk good for the institution? What does the risk do for the institution? Why would the credit union want to accept such risk? Does the credit union fully understand the risk? The answers to these questions help Security Service succeed on a day-to-day basis.

Although an increased market footprint means increased risk, there are also plenty of benefits in expanding a credit union’s reach. One of those benefits involves asset liability management. Security Service employs a rigorous model to evaluate the loans in its portfolio and stay on top of the interest rate risk in its balance sheet. For this model, the credit union’s market diversification doesn’t have much of an impact from an ALM perspective.

“It’s a matter of sticking to your strategies and replicating those as part of your growth model,” Baker says. “Do what you do and do it well.”

Another benefit of operating across various markets is freedom to try new things. In this way, size can be an advantage; however, Security Service is still prudent in its approach.

“There are no home runs in our business anymore,” Baker says. “What we have here is pretty much a commodity, so when you’re looking to swing for the fence, you have to be careful.”


To keep processes and procedures consistent, Security Service puts all employees through the same training. Regardless of what location they’ll eventually work in, the training curriculum is uniform. For beginners, training classes last approximately two weeks and are conducted outside of the service centers so employees can get a handle on equipment and systems without the pressures of performing in front of members. Employees learn about Security Service, the credit union movement, and how to properly do their jobs in a classroom environment.

When the employees are on the job, they still have easy access to information about the credit union’s products, transactions, and processes. Security Service keeps its training manuals online via a comprehensive web-based system. This makes updating and disseminating information easy and uniform. It also makes employees feel more comfortable when they have to refer to a manual while helping a member, as they can do so without the member knowing they are referencing additional information.

“When I first started we had paper manuals so you’d flip through the book with the member in front of you,” says Stacy Montoya, a senior operations officer at the Fort Carson branch in Colorado Springs. “Now we show the new employees how to maneuver without the member realizing you’re searching through the manual.”

It might seem like a minor detail, but it enables employees to answer for themselves any questions they might have about a transaction, and it allows members to walk away with confidence in the transaction and SSFCU staff.

Market Assimilation

Moving into a new market presents its fair share of challenges, even if the area has a credit union presence. For Security Service, its dedication to philanthropy and community service is one way it establishes its brand outside of the financial services sphere.

“Every member of senior management is expected to take a leadership role in some community organization, cause, service, or activity,” says John Worthington, senior vice president of corporate communications. “That’s part of the evaluation every senior manager, AVP and above, is graded on.”

Security Service employees are involved in organizations such as the Leukemia & Lymphoma Society (the credit union is a National Partner), American Heart Association, the Red Cross, the Susan G. Komen Race for the Cure, Habitat for Humanity, and more.

“We’ve been successful because of the communities we serve,” Worthington says. “It’s important for us to give back and let them know we appreciate their support.”

The credit union’s commitment to service is not relegated to the upper levels of management. Roughly 781 non senior management employees participate in the Volunteer Corps; that’s more than 50% of Security Service’s total employee base. In San Antonio alone the corps is active in 25 to 30 events a year.

“When we go into a new market we immediately start making sure we associate ourselves with charities and organizations and our employees get involved,” says Mike Martinez, senior vice president of member service. “The membership sees that.”