Puget Sound Business Journal Reports on Washington Credit Union Growth

September 19, 2014

By Brad Broberg

Troy Stang, President & CEO, Northwest Credit Union Association

In the banking world, 100 million isn’t a big number. After all, $100 million will pay a year’s compensation for a handful of big-name CEOs.

But 100 million is plenty big for credit unions. Nationwide membership cracked the 100 million mark in June for the first time, rising 2.9 percent over the past year as credit unions added 1.7 million members, according to the Credit Union National Association (CUNA).

Washington credit unions are riding the crest of this surge. Membership — individuals can be members of more than one credit union — grew by an average of nearly 4 percent a year between June 2009 and June 2014 and now stands at more than three million statewide.

The $1.1 trillion in assets held by the country’s credit unions — a 7 percent share – is dwarfed by the $15 trillion in assets held by commercial banks — a 93 percent share.

In Washington, however, credit unions hold 23 percent of assets compared to 77 percent for commercial banks, according to the Northwest Credit Union Association (NWCUA), the trade association for credit unions in Washington and Oregon.

Cooperative traditions

Washington’s credit unions, which are owned by their members, owe much of their popularity to the longstanding popularity of the co-op model here, said Troy Stang, president of the NWCUA. Examples range from Group Health to REI to rural electric utilities.

“Collectively, in the Northwest, there are a lot of cooperative values,” Stang said. “We think of credit unions first as cooperatives and second … as financial services businesses.”

Credit unions have evolved tremendously since they took root in the U.S. more than 100 years ago. They’ve gone from offering savings accounts and making small loans to providing the same services as most banks – checking accounts, ATMs, mobile banking, home loans, financial planning and more.

Once limited to serving specific groups – typically employees of particular industries and companies – today’s credit unions can now offer membership to anyone.

As nonprofit institutions, credit unions share their profits with their members. Free checking – without minimum balance or deposit requirements – is common. Credit unions also typically offer reduced fees, lower interest rates on loans and higher interest rates on savings.

Commercial banks share profits with stockholders. The trend among banks has been to raise fees and make free checking tougher to obtain by increasing minimum balance and direct-deposit requirements.

“That translates directly into why credit unions are showing growth,” Stang said.

Sizing up

BECU is the state’s largest credit union, with 880,000 members and assets of $12.5 billion. It’s the fourth-largest credit union in the nation and the largest that is not government sponsored.

Founded as the Boeing Employees Credit Union in 1935, Tukwila-based BECU gained nearly 40 percent of its current members during the last five-plus years – a period defined by the “too-big-to-fail” legacy of the financial crisis.

“That’s when we really started to see an uptick in our growth,” said Benson Porter, president and CEO of BECU. “Consumers who are attracted to BECU and other credit unions are looking for a financial partner that is looking out for their best interests.”

A year or so before the financial crisis boiled over, BECU made a fortuitous decision to begin aggressively rebranding the credit union via heavy television and other advertising.

Instead of being the Boeing Employees Credit Union, it became simply BECU to blunt the misperception that it serves only Boeing employees. “We bump into that every day (but) less than 15 percent of our members are active Boeing employees,” Porter said.

Shifting accounts

The rebranding campaign coincided with the collapse of the region’s signature bank, Washington Mutual Inc., and WaMu’s subsequent takeover by JP Morgan Chase, which led many former WaMu customers to look for a new financial home. The same thing happened when Bank of America, which inherited a strong local customer base after purchasing Seafirst Bank, announced it would charge a fee for debit card transactions.

Those two events “really created a tailwind” for credit union membership in this state because of WaMu’s and BOA’s large presence in the market, Porter said. “This region saw a bigger impact than other parts of the country,” he said.

With 45 branches, BECU has many times more locations than most credit unions, but continues to battle the stigma that credit unions are not as convenient as big banks.

To counter their individual shortage of locations, credit unions have formed a nationwide ATM network with 30,000 locations and a shared branch network consisting of 5,000 branches around the country where members of one credit union can bank at another credit union.

BECU recently placed ATMs at 134 Rite-Aid stores. In another convenience-boosting move, customers can now make appointments online for any and all services.

10 percent interest

Verity Credit Union, which originally drew its membership from local employees of the federal government, had been shedding members before turning things around last year with help from a special offer of 10 percent interest on a 10-month deposit of $1,000. Verity, based in Seattle, added 900 members and grew by 3.5 percent to 26,000 members in 2013.

“The problem is at the end of the 10 months … you spend a lot of time trying to retain that growth,” CEO John Zmolek said.

Zmolek’s goal for 2014 is to grow by 5 percent. Verity held a month-long contest for new members with daily drawings for $100 and a grand prize drawing of $10,000. Verity also launched an aggressive refinance program for auto loans and is “working hard at the social media angle” to raise its profile, Zmolek said. That includes its Verity Mom blog written by a chosen Verity customer whose audience – other mothers – is a target demographic for the credit union.

LGBTQ market

A group that wants to start a new credit union is targeting a different demographic – the LGBTQ community. “We feel that there is a capacity and a need and an opportunity for this kind of institution,” said Phillip Endicott, founder and president of Equality Washington.

The group is raising funds and forming a steering committee with its eye on applying for a charter to launch the state’s 105th credit union in the next six months, Endicott said.

The Equality Credit Union would be open to all, but like the impetus behind most credit unions, the inspiration comes from a need for more responsive financial services within as particular community – in this case the LGBTQ community.

“This is a community that is a just emerging from years of discrmination,” Endicott said. “It just makes sense at this time in history.”

The plan is to open the first branch on Seattle’s Capitol Hill but eventually expand to other locations. Equality Washington would like to find a larger credit union to serve as an incubator until the Equality Credit Union can stand on its own.

“We’re actively looking for that partner,” Endicott said.

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