Arkansas Federal Credit Union is on a five-year financial roll that not even a pandemic could disrupt. The state’s largest credit union plowed through a COVID-infused 2020 to end the year with a $13.4 million profit.
That historic earnings performance came as a pleasant surprise to the executive team at the $1.6 billion-asset lender and set the stage for even bigger things in 2021.
“We had record net income last year, which we didn’t expect,” said Eric Mangham, Arkansas Federal’s senior vice president and chief financial officer. “That’s the fifth consecutive year of record net income.”
Arkansas Federal is on track to extend that run and double its 2020 earnings after posting a six-month profit of $14.4 million this year. In addition to producing another round of record net income by year’s end, the credit union also will relocate its headquarters from Jacksonville 25 miles southwest to Little Rock.
The former FamilyLife Building is undergoing a $5.4 million facelift to transform the 97,000-SF office building into its flagship location and operations center. The work includes converting ground-floor space for retail banking, full-service branch No. 20 for the credit union.
“This [headquarters relocation] had been part of our strategy sessions for years,” said Rodney Showmar, president and CEO of AFCU.
The move, put in play by the $12 million purchase of the FamilyLife property in January 2020, could start as early as October.
However, the remodeling work is subject to the lingering effects of the coronavirus on the supply chain. The availability and delivery of building materials are overshadowed by the vagaries of production and shipping logistics now so common these days.
“It’s in flux,” said Showmar of the move-in timetable. “But we hope to be in by the fourth quarter.”
Poised for migration are 150-175 staffers from the credit union’s three-building complex on the edge of the Little Rock Air Force Base in Jacksonville. The new quarters will position the corporate crew under one roof with room for more.
“The big thing is having everyone together and collaborating,” said Terry Vick, executive vice president and chief lending officer.
After the headquarters moves to Little Rock, 25 or so staffers will be scattered around the credit union’s two-story, 33,088-SF headquarters-bank branch combo at 2424 Marshall Road in Jacksonville and adjoining 8,424-SF building housing call center and facilities personnel.
Retention of the branch is part of the long-term picture. The future of the current headquarters office space and separate building is uncertain.
A neighboring 14,085-SF building at 1701 General Samuels Road and nearly 4.8 acres are under contract to sell to an unnamed buyer. The project is home to Arkansas Federal consumer loan operations and IT personnel.
Founded in 1956 to serve military personnel, the credit union now operates in a playing field that extends statewide.
“We are able to accept anyone as a member who lives in Arkansas,” Showmar said of the nonprofit cooperative’s marketing reach for customers.
Since 2015, the tally of Arkansas Federal Credit Union members has grown from 92,638 to 124,658. Six years ago, the headcount of full-time staffers was 250. Today, that number stands at 340.
“We were bursting at the seams,” Mangham said of the need for more space.
Once relocated, Arkansas Federal will become the second-largest lender based in Little Rock. The headquarters of No. 1, publicly traded, $27 billion-asset Bank OZK accounts for a slice of the western vista from Showmar’s future third-floor office in west Little Rock.
A new curb cut will provide direct access to Cantrell Road and result in a new address tied to the more familiar thoroughfare. In function, the front of the building will flip from 5800 Ranch Drive to 17500 Cantrell Road.
Arkansas Federal has carved out a sizable niche in consumer lending. Of particular note is the auto lending portfolio it has built and services.
By its reckoning, the credit union makes more auto loans to in-state motorists than any other lender based in Arkansas. That’s a position held since 2014, according to staffers.
During 2020, AFCU made 14,794 auto loans. Its book of 37,442 auto loans totaled more than $791 million as of June 30.
“We’ve had tremendous growth and change,” Showmar said of his tenure leading Arkansas Federal.
Showmar served as vice president of marketing and business development from 2001 to 2008 and vice president and chief operations officer for six years after that.
He succeeded Larry Biernacki as president and CEO on July 17, 2014. Biernacki is remembered for setting a 10-year goal of tripling the credit union’s 2005 total assets of $405 million.
Arkansas Federal didn’t hit that $1.2 billion target until the second quarter of 2019. Showmar said reaching that number is a byproduct of a more important consideration.
“The member experience will never be greater than the team experience,” he said. “If we do that consistently over time, more people will do business with us. That’s what’s led to our success. We don’t start with numbers and metrics.
“Our team is maniacally focused on making a difference in lives. That’s our purpose, and what we focus on. We’re in the people business.”
As an example, Showmar cites an anecdote of a staffer helping a member resolve a problem with a troublesome debit card purchase at a pharmacy.
“She ended up buying the medicine for him, and we sorted it all out later,” he said. “The real issue was him getting his medicine. We encourage our team members to act like an owner. What would you do to solve the problem?”
Arkansas Federal still hasn’t struck a deal to expand its franchise through a bank acquisition, something talked about since 2017. And such a deal could have a northwest Arkansas angle.
“We’re leaning toward the acquisition side, but we just haven’t found the right opportunity, yet,” Showmar said. “And I emphasize yet.
“We were looking at northwest Arkansas 15 years ago, and we’ll be looking at it 15 years into the future. That’s been on the radar forever. It’s the most competitive market in Arkansas.”
For now, a Rogers branch represents the only northwest Arkansas piece of the credit union’s footprint.
Arkansas Federal is conducting a string of pandemic-delayed, ribbon-cutting celebrations for three branches opened last year. The deployment of ceremonial scissors was set for July 15 in Maumelle at 12211 Maumelle Blvd., opened in March 2020; on July 16 in Benton at 1114 Hwy. 35, opened in April; and on July 22 in Sherwood at 301 E. Kiehl Ave., opened in June 2020.
“Just when you expect to take two steps backward, we take two steps forward,” Showmar said of encountering success through the pandemic. “We had no layoffs, no furloughs, no lost wages and no lost jobs.”
Arkansas Federal had trained six new hires for branch personnel in March 2020 when everything changed.
“What do we do?” Showmar said. “We onboarded them the best we could and basically paid six employees to stay home and do nothing for a time. We told our team members these are the things we can control: getting you paid every other Friday and you continuing to get benefits.”
Before COVID-19 erupted, between five and 10 Arkansas Federal staffers worked from home regularly. That number grew to about 30 after March 2020, and as many as 120 did their job from home for at least part of a day during any given workweek.
“People enjoy the social aspect,” Showmar said of the staff’s strong preference to come into the office. “This made us take a hard look at it. Who can work at home? What does it take from an IT standpoint to work efficiently at home?”
The flexibility of working from home notwithstanding, he said staffers are looking forward to convening regularly at the new Little Rock headquarters later this year.