Credit unions enjoy opportunity and expansion

YAKIMA, Wash. -- In the 1950s, Catholic Credit Union was nothing more than a few card tables set up in front of St. Paul Cathedral and St. Joseph's Catholic Church.

Today, Catholic Credit Union, or CCU, is opening multimillion-dollar branches and building a new location in one of the Valley's largest big-box stores.

And it's not alone. HAPO Community Credit Union opened its second Yakima-area location in Terrace Heights earlier this year and has plans for a third early next year.

And across the street from HAPO's newest branch in Terrace Heights is a branch of Yakima Valley Credit Union, which opened last year, along with a new branch in Toppenish.

Once mom-and-pop ventures designed to provide financial services to an employee or religious group, Yakima Valley credit unions have seen rapid growth in membership and deposit levels as they have expanded their presence and have picked up the pieces from the struggles of the larger bank industry.

In Yakima, however, community banks, which avoided subprime lending, have also fared better than the larger national banks. Many note that credit unions have gotten a lot more competitive in the past decade and have been better able to meet the needs of the community.

"We need everybody around," said Mike Broadhead, president of Central Valley Bank. "The capital need to fund this market is so high. Not one of us can do it all."

And more competition is good news for the customer, said Mike Gilmore, president and CEO of Yakima Federal Savings and Loan Association.

"They have more places to shop and more options," he said. "It makes everybody else be on their toes."

Savings deposits for Washington state credit unions reached $24.85 billion during the first quarter of this year, an 111 percent increase from a decade ago when deposits were at $11.77 billion, according to a report from the Washington State Credit Union League.

Despite efforts by the banking industry to emphasize the safety of deposits, people still have the perception that credit unions provide additional security.

"They have been uneasy with all the news of bank failures," said Steve Anderson, chief operations officer for HAPO Community Credit Union.

People are also saving more during the recession -- the national savings rate was at 6.9 percent as of May, compared with zero in April 2008, according to the Bureau of Economic Analysis -- providing another source of growth for credit unions, said Mike Zoller, associate economist for Moody's Economy.com.

"There's definitely a market for smaller local and regional banks," he said. "Credit unions can fill in that gap."

Jeff Kelley, a 46-year-old Yakima resident, shifted his funds from a larger bank to HAPO Community Credit Union about a year and a half ago.

"They're friendlier," he said. "And they usually know your name."

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For decades, if a credit union wanted to extend its membership base, it would have to file extensive paperwork with state regulators. This was done to ensure that credit unions did not grow too rapidly.

But regulators found that even as credit unions extended membership, rapid growth didn't always happen.

In 2002, revised regulations shifted the decision of extending a credit union's membership base from state regulators to a credit union's board of directors, making it easier for credit unions to grow their customer base.

Over the past few years, credit unions have worked aggressively to open branches to reach these new customers.

Catholic Credit Union now can offer membership to residents of Yakima, Adams, Benton, Chelan, Douglas, Franklin, Grant, Kittitas and Klickitat counties being served in branches in Yakima and Ellensburg.

Now it's expanding its West Valley presence by opening a branch in the new Wal-Mart Supercenter and farther down the Valley with a branch in Zillah.

"We look at growth areas. We look at areas where our membership has to drive to (the Yakima branch), said CEO Paul Regimbal. "We have a lot of members in the Lower Valley."

Yakima Valley Credit Union has also opened new branches, most recently ones in Terrace Heights and Toppenish.

"People keep coming into the door whether we advertise or not," said Mina Worthington, CEO of Yakima Valley Credit Union.

Consumer demand has taken HAPO Community Credit Union from its home base in the Tri-Cities into the Yakima market.

Since its formation in 1953 providing services for nonexempt employees at Hanford, HAPO has been serving Yakima residents. They were either workers commuting to Hanford or people who took advantage of HAPO's automobile lending program.

It built its first branch in Yakima in 2005. Earlier this year, it opened a new branch in Terrace Heights and is in the process of building one in West Yakima on North 40th Avenue.

The new branches proved to be more convenient for David Long, 49, who was at HAPO's Terrace Heights branch this week to open a savings account for his 5-year-old granddaughter.

Long has accounts at both banks and credit unions, but he chose HAPO for its branch locations.

"(The Terrace Heights branch) is right across the street from where I work," he said. "And there's a branch by my house."

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Not only are credit unions reaching customers geographically, they're also widening their product offerings.

When credit unions were first created, they weren't allowed to offer checking accounts. Now credit unions can lend money for home mortgages and pay interest on certificates of deposit. Some have ventured into commercial lending, though regulations limit such loans to about 12 percent of its overall portfolio.

Offering more financial products increases its competitive profile, said Gilmore of Yakima Federal.

Yakima Federal has had to adjust mortgage interest rates to stay competitive, he said.

"It's like having another bank in town," he said. "They're just called credit unions."

With credit unions expanding into much larger institutions, the discussion about whether credit unions should begin paying taxes has continued.

But Worthington points out that the competitive advantage is not whether credit unions pay taxes or not but rather a cooperative structure -- customers serve as part owners, becoming the beneficiaries when a credit union profits.

And Regimbal notes that not all credit unions perform all the functions of a bank. His institution, for example, does not offer business accounts or have commercial loans.

And despite the growth, credit unions still remain a small player in the financial system -- all the credit unions nationwide only make up about 5 percent of all consumer deposits.

"Credit unions aren't going to dominate the global economy," Anderson, of HAPO, said. "We were built to meet a need in a particular group and community, and that's expanded. (But) we're a long ways from controlling the national economy."

* Mai Hoang can be reached at 509-577-7685 or mhoang@yakimaherald.com.