The National Credit Union Administration released data this month showing national credit union deposits have surpassed $1 trillion, a positive sign that credit unions are gaining popularity as an alternative to big-name commercial banks and in line with reports of steady membership increases from regional credit unions.
“Year-end data show the credit union system remains sound and focused on providing affordable financial services,” said Debbie Matz, NCUA board chairman. “Rising deposits indicate consumer confidence in the system, and credit unions are turning those deposits into loans that allow members to buy homes, cars and other goods.”
According to the NCUA, total assets in federally insured credit unions rose to $1.2 trillion at the end of the fourth quarter of 2015, an increase of $82.2 billion, or 7.3 percent, from the end of 2014. As overall deposits rose, growth in share drafts was especially strong, increasing by 14.5 percent for the year.
According to Matz, loans also grew by 15.8 percent in 2015 ”” decreasing credit unions”™ exposure to long-term investments.
Behind these key growth indicators has been membership growth, said Kris VanBeek, president and CEO of US Alliance Federal Credit Union in Rye, the largest credit union in Westchester County with more than $1.1 billion in assets.
“For us there has been record credit union membership growth,” VanBeek said. “There is brand recognition generically of the credit union industry being a conservative and safe place to have a deposit.”
US Alliance gained 16,000 members in 2015, a 16 percent increase bringing the company to a total of 91,000 members currently.
VanBeek added that the credit union reputation has been bolstered by their ability to develop a partnership with either a company or certain market and cater to it through loan or deposit products that best match needs.
More than services, it is about whose bottom-line the institution is watching out for, said David F. Lucas, CEO of Stamford Federal Credit Union in Connecticut.
“We are really here to help our members,” he said. “I was a banker for over 25 years ”” in the publicly owned banks, which most of them are ”” the most important thing in the financials was earnings per share. Whereas the most important thing to us is that we give back as much as we possibly can to the members. Our members actually own the credit union, we don”™t have shareholders and we are a not-for-profit.”
Nationally the NCUA reports membership in federally insured credit unions grew to 102.7 million at the end of 2015, an increase of 3.5 million from the end of the fourth quarter of 2014.
However, the association reports consolidation within the industry has steadily continued for more than two decades with the number of federally insured credit unions falling to 6,021 at the end of the fourth quarter, 252 fewer than at the end of 2014 and a decline of 4 percent.
In the past four years US Alliance has acquired seven credit unions, among the most recent were PepsiCo Employee Federal Credit Union in White Plains, a 3,567 member credit union with $35.6 million in assets, and Bethex Federal Credit Union of the Bronx with $12.9 million in assets and 5,600 members.
“The bigger credit unions are doing just fine,” said Lucas. “They are growing at a faster rate than the smaller credit unions, but the smaller credit unions are finding it more difficult to grow.”
With assets totaling $56.3 million Stamford FCU is closer to the smaller end of the credit union spectrum compared with Us Alliance, but has still experienced membership growth over the last five years,.
Since December 2010 Stamford FCU membership has grown modestly from 4,551 to 5,091 at the end of 2015.
VanBeek agreed times have been tough for small credit unions.
“If you look at a credit union fixed on a certain niche I think they can do really well,” he said. “The problem is companies are moving operations, they are moving facilities, they are outsourcing certain job functions and any credit union can get disrupted by that, but a small credit union is particularly vulnerable.”
With innovations like peer-to-peer lending slowly creeping into the more traditional roles of banking services, competition is coming from all directions “from startups to the Walmarts of the world,” VanBeek said, with conditions likely to become tougher for small credit unions,.
“It is going to be a constant headwind ,” he said.
He expects credit unions may soon need two to three billion in assets just to have a seat at the industry table.
Lucas, however, is not so sure the winds of change will arrive so quickly.
“Back when I got in this business in 1977 they were talking about branches becoming obsolete,” he said. “Up until 2012 branches continued to grow every year. E-lending has taken off in a pretty big way, but there is still segment of the market that wants to do their business locally and in person.”
