For the first time as an alliance representing members in Washington and Oregon, the Northwest Credit Union Association met last week in Tacoma, filling the Hotel Murano and exchanging both ideas and mutual support.
Credit unions continue to grow in popularity among depositors – or “members” – in the Northwest. Also, industry data from 2009 show that while the nationwide average market share for credit unions was 8.9 percent, in Washington the number rose to 17 percent and in Oregon, 19.7 percent.
Two primary issues concern credit union leaders: first, a 12.25 percent regulatory limit on the amount of money they can lend to commercial borrowers, which they would like to see increased to some 27 percent; and also the provision of “alternative capital,” now unavailable, that they could use to bolster their assets. These sources of capital could include subordinated debt, the issuance of preferred stock, and being allowed to seek investors beyond their membership base.
On the first day of the conference, The News Tribune spoke with association CEO John Annaloro, President Troy Stang and Board Chairman Bill Anderson.
In a recent interview, the leader of the national association mentioned the “credit union movement.” What makes it a “movement?”
Annaloro: Credit unions are as deeply committed as any bank. They are committed to their members. It’s what you can get back – lower rates on loans, lower fees, higher rates on savings. With the difference in the market basket of savings, and about three million members in Washington, that puts $150 million back into the economy that wouldn’t be there if it wasn’t for credit unions.
You’ve combined the Washington and Oregon associations. How’s the new group working out?
Anderson: This is our inaugural year. People are getting used to the little differences. This whole event it a huge change. We’re bringing together close to 800 people. The vendors are interested in talking to a larger audience. The networking is unbelievable.
Stang: There has never been a better time for credit unions in Washington and Oregon to share resources, and talk about what’s working well, and talk about what’s not working well.
In a changing environment, we need to spend time talking about innovating the next product, the next service.
Some bankers have complained that credit unions have an unfair advantage.
Annaloro: In the ’90s, members of Congress threw in a few roadblocks to credit unions. One of those was a limit on our commercial lending. We need to raise the cap. That’s what’s been agreed to. Also – alternative capital.
How is the climate in the Northwest for credit unions?
Annaloro: Credit unions in Washington and Oregon are doing well. This is one of the strongest environments in the nation. We’re growing market share.
And in deposit growth?
Annaloro: In the first three months of the year, BECU grew by $400 million in deposits above their plan.
After a number of bank failures, we’re now seeing mergers. Is it the same with credit unions?
Stang: There are merger conversations happening in hallways, in this venue. It’s prompted by multiple reasons: succession, leadership changes, regulatory burden, scale. There are more mergers across the region and nationally.
Anderson: My sense is that the volume of mergers is decreasing.
Stang: It’s tough to speculate.
Some people may not know the difference between banks and credit unions. There still might be misperceptions. What would you like people to know about your institutions?
Anderson: It is the smartest choice. They can save money, and get better service.
Annaloro: The only money credit unions can loan is deposits. You have to run a bulletproof deposit program. We have our own niche. We do a fine job, and the market is huge.
Two large community banks – Columbia in Washington and Umpqua in Oregon – seem to take pride in the way they serve their customers.
Anderson: They’re great banks. (But) it wasn’t very long ago that books were written about the service at Washington Mutual.
Stang: The thing that I’d like to get across – fundamentally, we are different.
Anderson: Not only what we do, but why we do it. Customer service is why we exist.
We don’t have shareholders – we have members. We don’t have to be focused on the next quarter’s earnings. Community banks compete against each other. Credit unions compete for members, but not against each other.
C.R. Roberts: 253-597-8535
c.r.roberts@thenewstribune.com
CREDIT UNIONS VS. BANKS
Credit unions and banks compete for deposits as well as respect. Both entities claim to best serve clients, and each serves in its respective niche ñ whether for commercial loans, home loans, family finance or outreach in financial literacy.
The News Tribune last week heard from South Sound leaders in both camps ñ from Brian L. Vance, president and CEO of Olympia's Heritage Financial Corp. and Heritage Bank; and from Phil Jones, president and CEO Lakewood's Harborstone Credit Union.
Brian Vance:
Credit Unions were originally created to offer limited services to a limited group of members.
Today they want to offer a full slate of products to an unlimited group of "members" to "level" the playing field with commercial banks, while not paying taxes. Not paying taxes gives them a huge competitive advantage to offer all of their products at rates that are difficult for banks to compete against.
If they want the ability to offer unlimited products to an unlimited group, then they should do a mutual stock conversion (that more and more credit unions are considering) and pay their fair share of taxes. They can't have both. I am in favor of allowing them to retain their tax free status, but they also need to be bound by their original charter of limited products to a limited group or they can level the product playing field and convert and pay taxes.
As with any nonprofit organization, there are always restrictions. The choice is clear, give up the restrictions, but pay taxes. Otherwise, why wouldn't all businesses elect a nonprofit status?
Phil Jones:
The Federal Credit Union Act was signed in 1934, during the height of the Great Depression because working class people like you and me found great difficulty getting affordable loans from the nation's banks. Banks simply were not interested in providing consumer credit.
Within that 1934 charter, credit unions were required to abide by a not-for-profit, cooperative business structure in order to justify their tax exemption, which in Washington state is limited to only B&O tax. Credit unions pay all other taxes every other business pays, including banks. In addition, the credit union charter has limitations to the types of products and services they can offer to their member-owners that banks do not.
If a bank wants to convert to a credit union, it can. The bank would only have to share its profits with their customers instead of a few wealthy shareholders. But that hasn't happened yet, and I suppose it never will.
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