Expansion route for credit unions
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No Comments [ Add Comment ]By Jeff DeMoss
Standard-Examiner staff
jdemoss@standard.net
G
oldenwest Credit Union is one local financial institution that has had a lot to celebrate lately.
The Ogden-based credit union's assets have nearly doubled in four years, and it recently beat out more than 800 others for a prestigious national award.
Since switching to federal charters in recent years to avoid more restrictive state rules, local credit unions have seen assets and profits skyrocket through expanded services and larger service areas.
"We've been able to rise above some others and reach a lot of new people without sacrificing our commitment to our existing members," said Shelley Clarke, Goldenwest's president and chief executive.
Earlier this summer, Clarke traveled to Hawaii to accept the National Association of Federal Credit Unions' 2007 Credit Union of the Year award.
The total number of federally insured credit unions in the U.S. fell from 8,695 at the end of 2005 to 8,362 at the end of 2006, according to the National Credit Union Administration, which regulates the institutions. In Utah, the total number fell from 116 to 112.
The decline is mainly because of consolidation through acquisitions, according to the NCUA.
Assets and membership, however, have grown steadily in recent years. From 2005 to 2006, total assets of federally insured credit unions grew 4.6 percent to $710 billion, while membership rose 1.2 percent to 85.8 million people.
In the same period, federally insured credit unions in Utah saw their total assets grow 14.6 percent to $11.7 billion, while net income jumped 48.5 percent to $143 million. The NCUA does not provide membership figures by state, but most in Utah say they have seen steady increases in membership.
NCUA spokesman Nicholas Owens said Utah has the highest per-capita credit union membership among all states, and Scott Simpson, president of the Utah League of Credit Unions, said Weber County has the highest participation rate in the state.
"There's always been a really strong presence there, and it keeps getting stronger," Simpson said. "Some of the nation's biggest and healthiest credit unions are based right in the Ogden area."
In spring 2003, the three largest Utah-based credit unions -- America First, Mountain America and Goldenwest -- switched from a state charter to a federal charter after the Utah Legislature put restrictions on their ability to expand into new areas.
Those three, along with several others that have since followed suit, have been able to expand beyond their traditional boundaries and grow their assets much more rapidly.
All three say that while their decision to make the change has certainly been a factor in recent growth, Utah's strong economy and rapid population growth already had them set on a steady growth curve.
Three months after America First Credit Union switched its charter, it announced plans to open six new branches statewide over the next six months.
Since the change, America First's assets have grown from $2.6 billion to $4.1 billion. It now has 74 branches, up from 50 at the time of the switch. Its employee base has grown from about 1,100 to nearly 1,600.
In the same time, its membership has increased from 330,000 to 438,000. America First is the nation's 13th largest credit union in terms of assets, and the eighth-largest for membership, according to the NCUA.
John Lund, executive vice president for America First, said it's hard to say whether the credit union would have seen similar growth had it stayed with its state charter.
"We were having good growth before the switch," Lund said. "We were very happy with our state charter for many years, but in the late '90s the state Legislature started looking at imposing severe limitations on us."
Goldenwest, which had about $300 million at the time it converted, now has more than $565 million in assets.
Switching to a federal charter allowed Goldenwest to accept members outside of Weber and Davis counties. The credit union, which now has additional offices in Morgan, Salt Lake and Utah counties, has opened eight new branches since the switch and now has a total of 17 locations.
"The federal charter actually allowed us to grow our infrastructure," Clarke said.
Under federal charters, credit unions still have field of membership restrictions that limit where, and to whom, they can offer membership, but the federal rules are less restrictive, and sometimes not clearly defined.
"It's an ongoing process," Owens of the NCUA said. "It takes time to come up with guidelines that can be applied universally and fairly."
While they still view the tax-exempt status of larger credit unions as unfair, local banks have been able to expand their reach as well. Major Utah-based institutions like Zions Bancorporaton have seen record-high profits in recent years, as have many smaller banks.
Banks don't face the same growth restrictions as credit unions, but unlike credit unions, banks are required to pay state income taxes.
Centennial Bank, which was started in Ogden 10 years ago, has been growing at a brisk pace, marketing director Roger Dickson said.
From the end of 2003 through the end of 2006, Centennial's assets more than doubled from $89 million to $197 million. The bank opened branches in South Jordan and Orem last year and opened a Layton branch this year.
As the Wasatch Front market has become more cluttered in the financial services sector, most major banks and credit unions in Utah have turned to emerging markets like St. George for expansion.
"There is an incredible amount of banking competition in Northern Utah," Dickson said. "There are huge national banks, large regional banks and solid community banks. There is also a tremendous credit union presence here."
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