THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, February 12, 1996 TAG: 9602100167
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY TOM SHEAN, BUSINESS WEEKLY
LENGTH: Long : 183 lines
With his checkbook in hand, Carl Haga was about to make a deposit at Chartway Federal Credit Union when the credit union's president walked by.
Ronald L. Burniske, president and chief executive officer of Chartway, stopped to ask how the Virginia Beach retiree was doing.
But instead of talking about his health and finances, Haga, a retired estimator and planner at the Norfolk Naval Air Station and Norfolk Naval Base, had a question.
``Why did the credit union change its name from Naval Air Federal?,'' Haga asked.
The old name really didn't represent who the membership was,'' Burniske replied. Fewer and fewer members, he said, had ties to the Naval Air Station or to the Navy.
Since late January, an elaborate campaign announcing the name change has provoked questions - and complaints from a few long-time members. And some members have taken offense at not having a voice in the process.
``I'm supposed to be a member, and I wasn't asked about changing the name,'' said Scott Hessek, a Virginia Beach resident who joined the credit union in the 1970s.
``It was a surprise, and I don't particularly like it,'' Hessek added.
Burniske said the credit union has received about 500 calls from members about the name change. Although a few have been irate, 88 percent of the callers thought it was a positive development, he said.
Whatever the reactions, the name change was a long time coming. For more than a decade, the credit union has been expanding aggressively beyond its roots at the Norfolk Naval Air Station.
Most of the 74 credit unions based in Hampton Roads have continued to limit their fields of membership to a single employer group, such as a city government, military installation or factory.
Chartway, however, has broadened its membership eligibility to employees at hundreds of companies in the region, including the Norfolk-based supermarket chain Farm Fresh Inc. and Sumitomo Machinery Corp. of America in Chesapeake.
The expansion drive has taken the credit union into two other states: Texas, where it absorbed a Houston credit union in 1983, and Rhode Island, where it absorbed a financially troubled credit union last year.
Since 1986, Chartway's membership has swelled by 65 percent to 132,389, while its assets have more than doubled to $482.15 million.
Still, its ``Naval Air'' identity hampered the credit union's effort to attract non-military individuals who have been eligible to join, Burniske said.
Discussion about changing the Naval Air Federal name began with a strategic planning session that the credit union's directors held two years ago in Duck, N.C.
``In the process of asking ourselves, `Does everything we do reflect our core strategy?' we said our name didn't reflect where we wanted to go,'' Burniske recalled.
For help, the credit union's 10 directors and five executives turned to a New York consulting firm that specializes in corporate names and identities, Lippincott & Margulies.
After interviewing each of the directors and executives about the credit union's goals and values, the consulting firm came back with a list of 300 possible names.
Over a seven-month period last year, the directors and executives whittled the number down to 25 and then to five. They discarded names like Horizon, Fourpoint, Navus, Corvance, Primax and Vancer before settling on Chartway last October.
``It was the most detailed, methodical process that I've ever been involved in,'' said Burniske, who came to the credit union in 1984 as executive vice president and chief financial officer. He became its CEO in 1987.
The consulting firm spent two months devising a compass-rose logo to accompany the new name. The logo was an effort to reflect the credit union's naval heritage.
Burniske declined to say how much the search for a new name and the advertising campaign have cost the credit union, other than to describe the cost as ``reasonable.''
Name changes have become routine among the nation's 12,200 credit unions. Although their combined membership has grown by almost 30 percent during the past decade to 70 million, the number of credit unions has been steadily shrinking.
Cutbacks in corporate payrolls have forced some credit unions tied to single plants or offices to seek partners. In other cases, smaller credit unions have decided to merge with larger organizations that offer a broader array of financial services.
But membership growth at larger credit unions like Chartway has provoked the ire of many bankers, especially the heads of smaller institutions that compete for consumer deposits and loans.
There may be some basis for their concern. The share of household savings held by credit unions last year rose to 8.5 percent from 8.1 percent in 1994 and 7.7 percent in 1993, according to the Credit Union National Association, a Madison, Wisc.-based trade group.
For years, government agencies, the armed forces, municipalities and corporations encouraged the formation of credit unions as vehicles for their employees to accumulate savings while providing inexpensive loans to fellow employees.
In most cases, membership in credit unions was restricted to persons working for a specific employer and their family members.
That began to change in the early 1980s when the federal agency that regulates credit unions, the National Credit Union Administration, began loosening its ``common bond'' restriction on credit-union membership. This didn't sit well with some bankers, who complain that expansion-minded credit unions enjoy a competitive advantage over commercial banks and thrifts because credit-union profits are not taxed.
In their drive to restrict the field-of-membership rules for credit unions, bankers have at least a half-dozen lawsuits pending around the country against credit unions or their federal regulator, the National Credit Union Administration.
One lawsuit was brought against the Credit Union Administration in 1990 by five North Carolina banks and the American Bankers Association. The banks and their trade association objected to the expanded eligibility for membership at the AT&T Family Credit Union in North Carolina.
Organized in the 1940s to serve employees at Western Electric plants in western North Carolina, AT&T Family had broadened its membership to employees at several unrelated facilities, including Goodyear Tire & Rubber Co. and Black & Decker Corp. plants in the state.
When their case was tossed out by a lower court, the bankers took it to the U.S. Court of Appeals in Washington, which heard arguments last year.
But Chartways' Burniske argues that the bankers' energies have been misdirected. Larger organizations like Chartway still deliver on the credit-union movement's mission of providing lower-cost financial services, such as no-fee credit cards and free checking accounts, to members, he said.
It's clear that bankers' efforts to redefine the eligibility rules for credit union membership have not dampened Chartway's expansion plans, Burniske said.
Beginning in the 1980s, the credit union mapped out a strategy for establishing a physical presence in different regions of the country as a way to protect itself from possible cutbacks at military installations in Hampton Roads. Absorbing credit unions in Houston and Rhode Island were part of that plan, Burniske said.
But consumer interest in the delivery of financial services through new forms of technology, such as home banking via telephone and desktop computers, may change that strategy, Burniske said.
In a survey of its members last year, the credit union learned that more than 20 percent were interested in having access to home-banking services.
In early 1995, Chartway posted a description of its services and eligibility requirements on the Internet. (The address is http://www.chartway.-com.) The credit union expects to offer a form of home banking, including the ability to check account balances and to borrow money through the Internet, later this year.
However, its use of new vehicles for delivering service hasn't reduced Chartway's reliance on the conventional way of gathering deposits and making loans: operating branches. The credit union, which already has 10 branches in Hampton Roads, is building a new one in the Greenbrier section of Chesapeake and is shopping for a branch on Great Neck Road in Virginia Beach.
Chartway also expects in June to move its Lynnhaven Parkway branch in Virginia Beach to a new facility being built across the street.
And the credit union's branch on East Little Creek Road in Norfolk is scheduled to move to a new site in the Southern Shopping Center in November. ILLUSTRATION: [Cover, Color photo]
RICHARD L. DUNSTON
The Virginian-Pilot
Ronald L. Burniske, President and Chief Executive Officer of
Chartway
Graphics
CHARTWAY FEDERAL CREDIT UNION
CREDIT UNIONS IN THE UNITED STATES
SOURCES: Chartway Federal Credit Union; Credit Union National
Association
Research by TOM SHEAN, graphic by ROBERT D. VOROS/The
Virginian-Pilot
[For a copy of the graphic, see microfilm for this date.]
CHARTWAY FACTS
Headquarters: Virginia Beach
Organized: 1959
Original field of membership: Members of the military and
civilian employees at the Naval Air Station, Norfolk
Existing field of membership: more than 400 employer groups in
Virginia, Texas and Rhode Island, including Farm Fresh Inc. in
Norfolk and Sumitomo Machinery Corp. of America in Chesapeake
Assets: $482.15 million
Loans: $269.33 million
Shares (deposits): $440.09 million
Members: 132,389 (80,000 in Hampton Roads)
Offices: 13 (10 in Hampton Roads)
Employees: 400 (300 in Hampton Roads)
by CNB