Together with the credit union industry’s outdated tax exemption and its continued campaign to whittle down field of membership requirements, multimillion-dollar stadium naming rights agreements have become a central component of how these special purpose financial institutions market themselves to new segments of consumers. This trifecta has created a powerful feedback loop in which credit unions exploit their tax advantage to win bids, then leverage those platforms to amplify their message to “eligible” members – now 99% of Americans – whose deposits ultimately fuel growth.
And it’s working.
Although credit unions were first awarded a tax exemption to serve people of modest means, since 2012, credit unions have grown from $1 trillion in assets and nearly 94 million members to $2.2 trillion in assets and more than 136 million members as of the first quarter of 2023.
Last month, three Division I universities signed lucrative contracts with three multibillion-dollar credit unions, exemplifying how these not-for-profit financial cooperatives have strayed from their mission to achieve explosive growth:
- Texas Dow Employees Credit Union (TDECU) extended its partnership with the University of Houston (UH) through 2034 for $20 million. In 2014, TDECU and UH made headlines when the then-$2.3 billion credit union committed $15 million over 10 years to affix its name to the University’s football stadium, a record at the time for a Football Bowl Subdivision school.
Since their initial deal, TDECU has more than doubled its assets to $4.7 billion and increased its membership by 96.5%.
Of note, its potential membership – that is, individuals eligible to join the credit union – jumped 335.8% or 14.6 million during that period.
- P1FCU – formerly the Potlatch No.1 Federal Credit Union – landed a $5 million, 10-year deal with the University of Idaho to rename its football stadium.
The $2.1 billion credit union counts growth as one of its key priorities, boasting on its website “we’re always looking to get bigger.” Indeed, it merged with another Idaho credit union in 2021 expanding its field of membership into the Boise area.
P1FCU reported net income of $15 million in 2021 and although it asserts those monies enable it to “increase products and services available to our members,” they also allow the credit union to turbocharge its expansion efforts through partnerships.
These sponsorships complement strategic growth initiatives by credit unions. Idaho Central Credit Union, which donated $10 million to the U of I in 2018 for basketball arena naming rights, saw its assets grow from $3.5 billion in 2017 to $10 billion in 2023 while membership has increased 89%.
- $2.3 billion Allegacy Federal Credit Union secured football stadium naming rights in a deal with Wake Forest University. Though financial terms were not disclosed, a press release announcing the agreement described it as “the largest corporate partnership in Wake Forest University history.”
The return on investment for Allegacy is clear with 250,000 fans and 45,000 students attending games each season, and perhaps even more enticing, the 20 million television viewers Wake Forest games attract.
While stadium naming rights agreements typically support universities within the same geographic area where the sponsoring credit unions operate, their connection to marketing and expansion initiatives raises serious questions, namely:
- If credit unions were created to provide basic consumer financial services to specific low- and moderate-income communities within clearly-defined, local areas, why are they working to broaden their visibility to regional – and in some instances, national – audiences?
- How do credit unions finance these partnerships? Are they charitable donations or marketing expenses?
- Do credit union members approve these arrangements?
- Are they an efficient use of taxpayer resources?
As modern credit unions continue to evolve and engage in activities that do not align with their mission, Congress should conduct oversight on their $3.1 billion tax exemption.