Credit Unions Thrive by Offering Members Consumer-Oriented Services

Jo Anne Martin grimaced as she surveyed the small, dimly lit room that had housed the Building Trades Federal Credit Union. Then she smiled at the sight of a sign hanging on the glass door. “The credit union has finally moved,” it read.

“There were days, boy, when our members would line up right outside the door,” said Martin, president of the credit union. “But they stuck with us. That’s loyalty.”

The Orange-based credit union will be showing off its new headquarters--in a two-story structure it built--during an open house this afternoon.

And on Saturday, the Orange County Teachers Federal Credit Union, the county’s largest credit union with 50,000 members and nearly $500 million in assets, will dedicate a new $3.5-million, 30,000-square-foot addition to its offices in Santa Ana.

The two events are symbolic of the success the credit union movement has been enjoying in recent years.

Credit unions--banking institutions owned by members whose deposits are considered stock in the organization--are not following the trend of other financial institutions that have leveled off in growth, said David Greenwood, vice-president of government relations and communications of the California Credit Union League.

Growing, Competing

Instead, they are growing--sometimes dramatically--and increasingly are competing with banks and savings and loans by offering their members consumer-oriented products such as free checking, automated teller machines and customized financial products, he said.

Prior to the deregulation of the banking industry in the late 1970s, most credit unions offered only basic services--they accepted deposits and made personal loans at relatively low rates.

Now, many credit unions offer members checking accounts--called “share draft accounts”--automobile and second trust deed loans and even, in the case of the larger institutions, mortgage loans. IRA accounts, discount brokerage services and other financial products also are offered at many credit unions.

And because credit unions are nonprofit, member-owned institutions, these services are almost always offered at a lower cost than a bank or S&L; can offer.

By taking advantage of financial deregulation, the Building Trades Federal Credit Union has grown to 4,500 members since it was founded in 1982, said Martin, a former labor union bookkeeper.

Assets Doubled

And since October, 1984, when the credit union’s board of directors decided it needed more space, its assets have more than doubled to $12 million from $5.7 million while its deposits have jumped from $5.4 million to $11.4 million. Outstanding loans to members have increased from $5 million to $8.5 million, Martin said, and the credit union’s cash reserve has grown to $500,000 from $181,000.

“We have proven that we are going to be around,” Martin said. “This is a secure place to invest savings and we have had exceptional growth.”

The 53-year-old Orange County Teachers Federal Credit Union’s growth in recent years has been even more exceptional.

Since 1983, the credit union has tripled its assets--to $497 million from $149 million. That is more than twice the size of the county’s largest locally owned and headquartered bank.

Deposits have soared to $403 million from $110 million, loans have nearly tripled to $270 million from $100 million, and the credit union has a reserve of about $63 million, up from $36 million four years ago.

The secret of their growth--and of the growth of most of the other two dozen credit unions in Orange County--is that the member-owned institutions can provide more personalized service than banks and most S&Ls;, which are charged primarily with making profits for their shareholders.

Close to Customers

Because credit unions are member-driven, they can offer the products that consumers want without worrying about their profitability, said Larry Cox, director of government relations for the California Credit Union League.

Credit union staff members know the life styles and needs of their members, Martin said. The Building Trades FCU, for example, has “a lot of construction workers, who may have up to 10 employers for the year,” Martin said. “If they apply for a loan through a bank, they may be looked at as being unstable. But we know their reasons for having so many employers, and we work with them so we are not seen as a cold financial institution.”

Rudy Hanley, a former high school math teacher who serves as president of the Orange County Teachers FCU, said the credit union offers a special savings plan for its teacher-members to enable them to budget their nine-month salaries to last through the summer. The program, sort of a hot-weather Christmas Club, enables participants to deposit a portion of their paychecks during the school term into a special “summer certificate” account and then to withdraw summertime “paychecks” from the account during the three-month summer holiday.

The ultimate goal of programs such as these, say Hanley, Martin and other credit union boosters, is for credit unions to become the primary financial institutions for their largely middle-class members, leaving banks and S&Ls; for businesses and the relatively well-to-do.