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Modesto's Valley First seizes growth opportunities

While many financial institutions across the country still are reeling from the recession, Modesto's Valley First Credit Union is growing.

The credit union has expanded from seven to 10 branches and increased its reach into Ceres and Yosemite National Park in the past year. Its latest purchase is the financially troubled Tracy Federal Credit Union, recently shuttered by the federal National Credit Union Administration.

Valley First took over the credit union's two Tracy branches late last month, as well as its $25.4 million in assets and 5,973 members. Valley First promises to provide uninterrupted service during the transition. By the end of the month, the name change should be complete, said Valley First President and Chief Executive Officer Hank Barrett.

"This isn't growth for the sake of growth," Barrett said of the credit union's recent acquisitions. "It's growth for the sake of service. The tree is yielding fruit and we're going to harvest it when it's there. When things start moving (for the general economy) again, it's not going to be there for us anymore."

In its 11-year history, Valley First has grown from $110 million to $360 million in assets and from one branch to 10 branches. As corporations across the country shrunk their staffs in the past year, Valley First increased its staff from 110 to 130 people without any layoffs.

With more than 60,000 members, the institution expects to top $400 million by the end of the year, capping its most prolific period of growth.

Barrett said the credit union, which was not part of the federal bank bailout and has received no Troubled Asset Relief Program funds, has been able to expand while others are contracting thanks to a large reserve, sound lending practice and the nature of credit unions.

"We were in great shape financially going into this thing," Barrett said. "We didn't do stupid stuff."

The bank was sitting on a 13 percent capital reserve before the recession hit, when the legal requirement is 7 percent. It also had not offered many of the specialty mortgage products -- subprime and the like -- that other banks offered and had relatively fewer mortgage write-downs as a result.

Andrew Wagner, finance professor at California State University, Stanislaus, said many credit unions have fared better during the financial crisis because of their structure and mission. Owned by the members instead of shareholders, credit unions are nonprofit organizations and generally have more limited memberships than commercial banks.

Valley First is open to people who live, work, worship or attend school in Stanislaus, Merced, San Joaquin, Tuolumne, Mariposa, Fresno and Madera counties.

"It makes sense that credit unions (like Valley First) are doing better," Wagner said. "Not as much of their money goes toward mortgages. So they weren't hurt as much by the mortgage crisis as commercial banks. In general, they're better positioned now."

Barrett said the moves Valley First has made in the past year and a half weren't on the organization's radar before the recession began. But then opportunity after opportunity presented itself.

Merced-based County Bank closed last year, and Valley First bought one of its branches in Ceres. The branch opened last month, the credit union's first location in the city.

Also last year, the Yosemite Credit Union in the national park was in financial distress and merged into Valley First. It now has a branch and an ATM in Yosemite Valley, providing the only financial services in the park.

Then San Rafael-based Westamerica Bank pulled out of its Oakdale branch. Valley First bought the building and plans to move its Oakdale branch to the larger, more prominent West F Street site in August.

"I've told many people, I've been in credit unions over 30 years and now is definitely the worst economic time I've experienced, but also by far the most fun I've ever had," Barrett said. "When the market was good, these are things we could never have done. These are the things you dream of doing for your membership."

Bee staff writer Marijke Rowland can be reached at mrowland@modbee.com or 578-2284.

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