VyStar continues quest to be 'the credit union of the Southeast' - Jacksonville Business Journal (2024)

2022 was supposed to be a year of triumph for VyStar Credit Union, Jacksonville’s largest locally headquartered financial institution.

If all went according to plan, what is now the 13th-largest credit union in the nation would have completed the largest acquisition in its history and would have rolled out a new digital banking system, putting it on the cutting edge of its industry.

Instead, the merger was called off amidst regulatory concerns and the rollout of the new system floundered, leading to weeks of bad headlines and online angst.

So what’s next for the organization?

Despite the setbacks, VyStar CEO Brian Wolfburg, who has overseen the credit union’s stratospheric growth since he joined in October 2017, is undeterred in his ambitions for VyStar.

“We still have a path forward that we think is a really strong path forward to help us execute on being the credit union of the Southeast,” Wolfburg told the Business Journal recently during a wide-ranging interview.

Embarking on that path, VyStar is going to continue seeking aggressive growth, which it plans to achieve through expansion into Georgia, as well as additional markets throughout Florida. With additional members and assets, VyStar hopes to advance economies of scale, offering higher-end technology, better services and lower costs to its members as a result of its size.

Growing after 'disappointment'

After about half a century of slowly expanding from its roots serving personnel at Naval Air Station Jacksonville, VyStar’s growth curve began ramping up in 2002, after the organization gained permission to serve members across the First Coast.

That growth was turbocharged in 2017, when Wolfburg took the helm at VyStar.

In September 2017, the credit union had about $6.9 billion in assets and 581,000 members. As of June 30, when the most recent quarterly reports were filed with the NCUA, VyStar reported $13 billion in assets — an increase of 88% over four years and nine months — and 829,000 members, an increase of 43% over that period.

The acquisition of Heritage Southeast Bank, announced in March 2021, would have ramped up that growth even more — not just by adding the bank’s customers and assets but by paving the path into a new marketplace for VyStar.

Instead, the deal languished, waiting for regulatory approval from four separate agencies — federal regulators for banks and credit unions, and Florida and Georgia state regulators — for an agonizing 14 and a half months.

Wolfburg doesn’t hide his disappointment that the merger had to be called off.

“That deal would have been very transformational for us as an organization,” he said. “We’re all disappointed, in the end, that we weren’t able to execute on what we both set out to do — us and HSB.”

VyStar didn’t just stand around during that long stretch of time, however, waiting for the acquisition to be consummated.

Since the 2021 deal announcement, VyStar grew its assets 21% to $13 billion — adding more organically than it would have by adding Heritage Southeast’s $1.8 billion in assets and making it the nation’s 13th largest credit union.

The credit union also went ahead with the processes necessary for expansion into Georgia. That included expanding its field of membership — which legally defines who is eligible to become a member — to 26 counties within Georgia.

With the merger now behind it, VyStar plans to use its newly granted field of membership to open branches next year throughout southeast Georgia, as well as into the Savannah and greater Atlanta metro areas. This is in addition to the branch it opened in Thomasville in July.

“We’ve got a lot of organic growth that lies ahead of us in Georgia,” Wolfburg said.

Digital disaster

While VyStar searched for its entrée into Georgia, it also looked to enhance the services it was offering existing members by rolling out a new digital banking system.

What followed was a fiasco.

In mid-May, the credit union’s online and mobile banking systems went dark for more than a week, following a planned weekend outage in which those features were being updated. While VyStar representatives say most banking functions were available through its website within a little over a week, many members continued to report difficulties using those services more than a month after the outage.

While the issues with digital banking may have been less systematically important than the merger to VyStar and its growth plans, the online and mobile banking debacle was far more public. Online vitriol directed at the credit union continued for weeks during the crisis, often in response to commentary by VyStar leadership and communications teams.

“With this amount of stress and inconvenience I think I’ll be moving on to another credit union,” wrote one Twitter user on June 3 in reply to a VyStar post about its online and mobile banking platform.

“It’s basically the same regurgitated stuff for the last few weeks with nothing new and absolutely no clarity,” reads another comment on the same post. “It’s like you’ve completely given up.”

If there was anything the credit union could have done differently, Wolfburg said, it would be in communicating.

“Maybe there could have been some more tabletop around that — about just being ready right away to be able to communicate as clearly as possible with our members,” the CEO said. “There was a little bit where it took a little longer to get that message out there than we would have liked.”

The outage slowed VyStar’s growth in Q2 2022, pushing it down from one of the best in the industry to just below that of the average credit union in the country.

Continued growth during the rocky quarter certainly didn’t make things any less stressful for VyStar while its digital banking was down, though. This was especially the case given that VyStar had, the previous year, invested $20 million in the banking technology company providing the new online and mobile banking system, Nymbus Inc. At the time, Nymbus hailed the investment as “the industry’s largest-ever fintech funding round made on behalf of a credit union.”

Asked whether there was any chilling of VyStar’s relationship with Nymbus during the crisis, Wolfburg answered diplomatically: “I think as you work through issues, you’re going to have times when you become more focused with the project at hand, versus [the] overall relationship,” he said.

VyStar is in a “very good place” with Nymbus now, though, he added, and the two entities “continue to work side by side.”

With the new system now up and running and membership growth trending back up toward pre-digital banking outage days — Wolfburg said July’s growth was stronger than May or June’s, with the end of July outperforming the rest of the month — the credit union is now revisiting the outage in a postmortem review, conducted in partnership with some third-party firms.

While VyStar declined to elaborate on how many firms it was hiring nor what types of firms these are, Wolfburg said it could take “several months” for the firms to finish a full analysis of what went wrong.

To Georgia and beyond

Meanwhile, the focus on growth continues, both in Florida and now in Georgia.

VyStar opened a branch in Titusville in April and in Melbourne in early August.

VyStar also has a strategic initiatives team that Wolfburg said continues to evaluate opportunities for bank and credit union acquisitions down the line.

More acquisitions may be on the way, Wolfburg said — with banks still in the mix. While credit union mergers might be easier, they “take a long time,” he said.

“It’s not as much of a transaction as it is a relationship-building experience,” he said.

While Wolfburg declined to name potential targets, the credit union is having conversations. “We continue to have both credit union and bank partners that were in our pipeline before this that continue to be in the pipeline that we have discussions with,” he said.

During Wolfburg’s tenure as CEO, VyStar has grown its membership by about 9% a year, more than double the national credit union growth rate, according to S&P Global Market Intelligence. If that growth rate continues, VyStar can expect to double its membership in just over eight years.

As well as recently expanding its field of membership to include Georgia, a few years ago VyStar also received authorization to serve military members from all branches of service, both active and retired, anywhere in the world.

“So we have the same field of membership approval as like PenFed, or Navy Federal or any of the largest players in the world,” he said.

Asked whether he was looking to unseat the $160 billion, 11.8 million-member Vienna, Virginia-based Navy Federal Credit Union — the nation’s largest credit union — Wolfburg laughed, and said a few things about focusing on VyStar’s steady, organic growth and optimizing its service to its members.

What he didn’t say was “no” — although he acknowledged it wasn’t something he foresaw happening during his career.

“That would be quite the aspiration any time soon,” he said.

For now, though, the focus is on attainable growth, both in Florida and in the newly opened fields of Georgia.

VyStar is already underway with purchasing branch locations in the Peach State, has struck up a relationship with Thomas University in Thomasville and is working with the new ECHL hockey team launching in Savannah.

“Five to seven years down the road,” Wolfburg said, “you’ll see us as a credit union of the Southeast that’s serving Florida, serving Georgia, potentially into some of those border states.”