Navy Federal Credit Union's switch puts rivals on notice

When Navy Federal Credit Union threw open its doors to members of the Army, Air Force and National Guard last week, it sent shudders through some other credit unions in Hampton Roads.

At Langley Federal Credit Union, “there is concern that we may lose some potential members” to Navy Federal, Brett Noll , senior vice president of marketing at the Newport News-based credit union, acknowledged Tuesday. Navy Federal, he noted, previously opened branches near some of Langley Federal’s branches in Hampton.

Langley Federal’s primary field of membership consists of service personnel and employees at Langley Air Force Base, and half of its 160,000 members have ties to the military, Noll said. “We’ve got a strong relationship with the Air Force and our members at Langley,” something that should protect the credit union, he said.

With assets of $35 billion and 3.1 million members, Vienna-based Navy Federal is the world’s largest credit union. When it announced that it expanded its field of membership to members of the other armed services and to Defense Department employees, Navy Federal also disclosed plans to double the number of its branches from 150 to 300 during the next five years. It now has 22 branches and 300,000 members in Hampton Roads.

Other Hampton Roads credit unions serving military personnel probably won’t feel the pressure from Navy Federal’s expansion immediately, said Paul Lucas , a marketing consultant in Fairfax who has worked with credit unions in the region. However, the pressure will surface eventually, he predicted. Because of its financial resources, Navy Federal “can do just about anything they want to do” when it comes to adding branches and personnel, Lucas said.

In contrast to commercial banks, credit unions are owned by their members and are exempt from most taxes. These tax breaks enable credit unions to pay higher interest rates on deposits and charge lower rates on loans.

Because of the concentration of military bases in Hampton Roads, the region once had several credit unions that served only military personnel and their families. However, the steady relaxation of rules defining who is eligible for credit-union membership has spurred consolidation and greater competition among the surviving credit unions for new members.

Carl Ratcliff , president and chief executive of ABNB Federal Credit Union, played down the possibility that ABNB will face greater competition from Navy Federal for members.

“We’ve had them in our backyard forever,” he said of Navy Federal. ABNB evolved from credit unions that served the Little Creek and Norfolk Navy bases.

However, the rapid expansion of Navy Federal’s branch network could be a threat, Ratcliff said. The Chesapeake -based credit union changed its charter in 2003 from one for specific workplaces to a community charter for serving South Hampton Roads because its members wanted branches closer to where they lived, Ratcliff said. Adding those branches, he said, required having a broader field of membership. One positive development is that Navy Federal’s expansion will call attention to the availability of credit unions to consumers, Ratcliff said.

Ten years ago, Chartway Federal Credit Union would have been vulnerable to Navy Federal’s expansion drive, said Ron Burniske , president and CEO of the Virginia Beach-based credit union. However, the mix of Chartway’s members has changed during the past decade, and today, fewer than 15 percent of its members have ties to the military, he said.

Chartway, which evolved from a credit union that served military personnel and workers at the Norfolk Naval Air Station and the air station’s now-shut Naval Air Rework Facility, has diversified its mix of members by expanding to 10 states, and “we’re trying to get to California,” Burniske said.

With assets of $1.4 billion, Chartway is the largest credit union based in Hampton Roads, and slightly fewer than half its 160,000 members are outside the region. Like Noll at Langley Federal, Burniske called attention to nearby evidence of Navy Federal’s new expansion effort. Navy Federal opened a branch last year across the street from Chartway’s headquarters on Newtown Road.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com