By Ray Birch
LOS ANGELES—While a state charter is often viewed as more advantageous for growth, Firefighters First Federal Credit Union said its recent conversion to a federal charter was done to achieve greater economies of scale.
As CUToday.info reported, NCUA has granted FFFCU Share Insurance Fund coverage and a federal Trade, Industry and Professional (TIP) charter serving the nationwide firefighter community, the first such TIP charter.
“With a state charter we were able to serve our members when they moved out of state, but the charter did not allow us to expand and serve new members across the country,” said CEO Dixie Abramian. “To effectively serve all firefighters nationally, we felt we had to go to a federal TIP charter.”
Abramian said that the credit union, with $1.2 billion in assets and 38,000 members, could not achieve the economies of scale it desires within the state of California.
“We are looking long term,” said Abramian. “I think everyone is watching the consolidation within the industry and sees all of the competition from inside and outside the movement. We are not certain how regulations will impact us down the road, nor are we sure how the firefighter industry in California will fare in the coming years. Long term, we had to reach outside the state.”
While Firefighters First has been able to serve members when they moved outside California, as they have a strong digital banking offering, there were issues, noted Abramian, with the state charter.
“We were state chartered and privately insured, so there was not a regulatory way to expand nationally with that type of charter, as American Share Insurance is only in certain states,” noted Abramian. “We had the option of going to a state charter with federal insurance, but there were complications in that as well. It also meant we would have two regulators.”
Dixie Abramian
No Specific Growth Goals
Abramian told CUToday.info that Firefighters First has no specific growth goals other than to expand in reach and size to achieve the scale to offer more competitive products to its current members and to firefighters across the country who need the services.
“We also want to be able to continue the annual dividend giveback, if not increase it,” said Abramian. The credit union currently gives back 20% of its net income to members each year.
More merger opportunities, as well, are not a reason for the expansion, added Abramian, who said the credit union will grow organically.
Branch expansion will be limited, possibly adding about one location per year, and only in areas in which there is a large pocket of potential members without a firefighters CU serving them. The credit union currently has seven locations across California. Offices are small, about 1,600 to 2,000 square feet, and are not focused on transactions. Member service desks replace teller lines, and offices average about four employees.
Abramian emphasized that the TIP charter was the best fit for the credit union since it wanted to stay focused within the firefighter community.
“Our mission is to improve the financial lives of firefighters and their families, and we want to be true to that mission, which is why we did the TIP charter,” said Abramian, adding the CU does not want to move to a community charter or add additional SEGs.
NCUA also approved the credit union’s request for the designation of being chartered for the purpose of granting member business loans, which allows the CU to exceed the current 12.5% of assets MBL cap.
“That was critical,” said Abramian. “Our membership has a lot of MBL needs. Many of them have second jobs and they often invest in real estate, such as apartments. We wanted to be able to fully serve the business lending needs of our members and help them keep their second lines of business.”
Two Years
It took two years to get the final nod from NCUA, explained Abramian, who said that amount of time was needed to get a new type of TIP charter created and to address the MBL needs of Firefighters First. Since the process began years ago, Abramian said that the new FOM rules, which have helped to make the federal charter more attractive, had no impact on the credit union’s decision to move away from a state charter.
“I think each type of charter, federal and state, have their advantages and disadvantages,” said Abramian. “I think your opinion on each is simply based on what your goals and strategies are. For example, if you have the field of membership expansion opportunities within your state, then the state charter could be best for you. It’s a great model. But for Firefighters First and our goals, the federal TIP charter is the best move.”
The credit union obtained federal insurance in 1975 but converted to private insurance in 1984 and changed its name to Firefighters First Credit Union in 2014.