ViewPoint Bank arises from Community Credit Union.

When Community Credit Union officially became part of the banking industry on Jan. 1, it passed out of the land of mostly tax-free business (as a state CU, it had not been exempt from state sales tax) and into the land of taxable banking.

President and CEO Gary Base may or may not have

winced-he didn't say-but he already knew what the toll on his new road would cost, give or take a few thousand dollars. Before his conversion, he'd had an estimate made, and he says ViewPoint Bank's 2006 tax bill should come in somewhere around $2.4 million, a bit more if you count state taxes it was already paying, as a credit union.

This toll doesn't appear to be keeping Base up at night. Indeed, he's been too busy making and carrying out plans to take his 650 FTE staff into the organization's new industry with gusto. There's a minority stock offering slated for midyear for instance-Base hopes to raise $100 million in fresh capital-and that capital will require careful seeding as the organization moves forward.

"I felt the change was necessary," Base explains.

Competitive pressures win out

Bankers frequently complain about credit unions' narrowing their options for business, or downright usurping them.

But part of the reason Gary Base decided it was time for his credit union to convert to a mutual savings bank was the heavy competition in auto loans.

For much of the credit union industry, it hasn't been unusual for car loans to make up more than 60% of the portfolio, says Base. However, increasing sources of competition have made it much harder to maintain, let alone grow, a portfolio of A- level auto credits. And management didn't feel comfortable reaching down into subprime lending.

"We wanted to be able to go after quality opportunities instead," says Base.

Sure, a credit union could dip its toes in residential mortgages and business lending. And it could expand its reach with a community charter. But Base still considered these options to be limited opportunities for the credit union at a time when major infusions of new revenues were more appropriate.

Such thoughts were part of the building case being made in Base's mind for conversion to ViewPoint Bank. Adding to there was the uncertainty of legislative expansion of credit union abilities.

"We didn't know if the legislative process would happen on a timely basis for our institution," he explains.

Making change happen

If you put aside the sturm und drang of the last year or so of actually navigating the conversion process, moving from a credit union life to a banking life has not made for a "wrenching change," Base says.

A 35-year veteran of the credit union business, Base says that "this was a very large credit union," and now, at $1.4 billion-assets, "we're all of the sudden the 15th largest bank in Texas."

"There was not much difference between our type of operation and that of a bank," says Base. While he believes many credit unions would have difficulty with such a transition, he says his institution has long been something of a hybrid, and that its size should enhance adaptability.

ViewPoint, which began life as the Collins Radio Credit Union in 1952, has been booking business loans, mortgages, and other banking-style credits for years. The Collins Radio Company's sale led to an early community charter.

With its main operation being a savings bank under the Office of Thrift Supervision, ViewPoint will be concentrating much more of its activity on residential mortgages. OTS requires a high percentage of mutual thrifts' portfolios to be in real-estate lending. This includes commercial real estate lending.

Mortgage lending is not new turf to ViewPoint. Nine years ago, Base recalls, the company sold off its credit card portfolio, and redirected those assets in mortgages. At the same time, the credit union started a title company, which handles both in-house and outside assignments.

Commercial real estate lending doesn't represent a major new challenge, either. The typical ViewPoint business loan has been a real-estate-secured credit, usually with the business' location serving as the collateral. The bank has been doing there for some time. It already has some experience in unsecured business lending as well, chiefly in such forms as credit lines.

Handling transitions

Base expects to expand the ViewPoint employee force by about ten positions, in the course of getting up to speed.

Taxes, regulation, and other administrative areas will create some of the need. The bank will be adding two slots to compliance to cope with the Bank Secrecy Act alone. In addition, the bank plans to open mortgage loan production offices in the near future and mortgage lenders will be hired to staff those locations. "We intend to triple our mortgage business," says Base. The bank currently has 35 offices in four counties and plans to expand.

Lessons learned on the way

"Credit unions are going to have some big decisions to make in the years ahead," says Base, "especially if they are given expanded powers and are able to move beyond traditional lines." Sitting things out may not be a real option.

ViewPoint isn't above using the appeal of both its past and its future to win customers. Billboards placed around its markets early this year announced:

"Attention of a credit union. Resources of a bank. (Endless possibilities.)"

Indeed.