Q&A talks about the state of the credit union industry with American Eagle FCU CEO Bill Dokas, who is retiring Jan. 2, 2015.
Q: You’re retiring after 42 years with American Eagle. What is the biggest change you’ve seen over more than four decades?
A: I would say it’s the evolution of banking as the result of technology. When I first started it was a passbook type of business. It started with the transition from passbooks to computer mainframes that recorded real-time online transactions. Improvements in communication systems have also enabled customers to use credit cards and debit cards to either generate loans or access checking accounts for the purchase of goods at merchant locations or cash withdrawals through ATMs. It’s really put a tremendous amount of pressure on financial institutions to remain viable and offer the services customers are looking for.
It seems like every time you turn around it’s something new. Our transaction levels are going down at our brick-and-mortar locations; however, market research indicates that we will see physical locations still being necessary in the near-term for account opening. Even techies are coming to branches to open their accounts and then using technology afterwards to transact business.
Q: American Eagle’s assets climbed from $270 million in 1990 to nearly 104,000 members and $1.4 billion now. It has 13 branches in Greater Hartford. What have you done to drive this growth? Was it through acquisition or organic or a combination?
A: It was more organic growth. It was a response to changing business conditions. Our roots were with Pratt & Whitney back to 1935. Things were great in the ’70s and ’80s, but we saw declines in the 1990s. In 1993, Pratt announced a 25 percent reduction in its workforce. As a result, the first thing we did was reach out to other employer groups to add to our membership.
Then in 1996, we changed our name from East Hartford Aircraft Federal Credit Union to American Eagle Federal Credit Union because we felt it was necessary to better reflect our business strategy of adding new employer groups to our membership.
We also realized that we had to build publicly accessible branches for our Pratt members who were no longer working there. We had a large number of in-plant branches, but no publically accessible branches. We began our publicly accessible branching strategy in 1997 in Vernon. Then in 2000, we added two more locations and subsequently added additional branches until we reached the current number of 13.
Around 2003, we realized [adding] select employer groups wasn’t cutting it, so in 2004 we [received regulatory approval] to open up membership to anybody who lived, worked, worshiped or attended school in Hartford, Middlesex or Tolland counties. That fueled our growth.
We also merged with Kaman Federal Credit Union in 2001 and Hartford Postal in 2012.
Q: Overall, how has the credit union industry evolved over your 42 years?
A: Credit unions have evolved tremendously. At the start, credit unions were plain vanilla with just a simple savings account and simple personal loans, but in the late ’70s, everything changed with deregulation.
Credit unions were permitted to offer checking accounts and more sophisticated savings products, along with residential mortgages, credit cards and business loans at later dates. This paved the way for credit unions to become full-service financial institutions and be able to compete with banks and remain viable. This had to be done to meet the financial needs that the customer was demanding.
Back in the 1970s there were about 23,000 credit unions in the country and that’s down to 6,000 because small credit unions can’t compete any longer. They have merged to remain viable. I see it continuing to happen. Credit unions are going to have to consolidate to remain competitive. That’s a fact of the marketplace.
Q: How has Connecticut fared compared to other states around the country?
A: Connecticut has also seen a decline in the number of credit unions. They are currently down to about 150 and at one time, there were over 500. It has dropped significantly over the last 20 years. The business has changed because of the more recent recession. Net interest margins have shrunk from 4 percent to 2.5-3 percent. This is a result of historically low interest rates, which have affected the returns we get on investments and returns we can get on loans. The sluggish economy in Connecticut has also put the damper on members’ borrowing.
Another factor has been the decline in real estate values and property values in various areas of the state. This has reduced the ability of customers to use their home equity to borrow and that’s had a significant impact on members borrowing to pay for college education or financing home improvements. For us, that was a major lending vehicle that has dried up.
Q: What’s one change you would implement immediately in the credit union industry either here in CT or across the nation?
A: I would think permitting a more liberal field of membership is important for credit unions. You see banks consolidating into larger regional institutions. Credit unions have to be able to do the same thing to remain competitive and continue to grow.
The consolidation is a fact of competition that will continue. Credit unions have to be able to expand their membership areas. Currently the policies are fairly restrictive. Not knowing what the future holds with mobile banking, we need to have the ability to reach out to other markets. Banks’ markets are getting bigger and reaching out further to grow. If our regulators don’t allow the same thing it’s going to handcuff us.
