Credit unions gain market share from banks

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Articles - February 2010
Thursday, January 21, 2010

Plenty of Oregon banks are still reeling, but the state’s credit unions are flush with cash.

Credit unions differ from banks in that they are member-owned and not-for-profit, giving them tax advantages over banks. Regulations prevent them from taking big risks, and they have held up much better than banks during the downturn, avoiding taxpayer bailouts and forced closures. Credit union deposits grew by 11.4% in Oregon between June 2008 and June 2009, outpacing 8.1% deposit growth for banks during the same period. Over the past decade, Oregon credit unions have increased membership by 20% while more than doubling their assets, from $7.1 billion to $15.45 billion. Their statewide market share of 39% is at its highest level, according to industry statistics.

OnPoint, Oregon’s largest credit union, gained 11,000 members in 2009 and added 43 jobs. CEO Rob Stuart says OnPoint plans to open four to six branches in 2010, including one in the “distressed market” of Deschutes County. “We’re safe and sound and we’re local,” Stuart says.

But local economies have been far from immune to the downturn. Credit unions such as OnPoint have not lost millions on sprawling subdivisions or condos, but they are big auto lenders, and repos are on the rise. Bill Anderson, CEO of MidOregon Credit Union in Bend, says 2009 was the worst year he’s seen for delinquencies and charge-offs. It was also a record breaker for deposits, which shot up 13.9% in 2009.

“We’ve got plenty of cash,” Anderson says. “We’re not in the position other folks are in.”

Indeed, some credit unions have more cash than they know what to do with. As nonprofits they can’t distribute dividends to investors, and federal regulations cap the amount they are allowed to lend to businesses — at least for now. The Credit Union Association of Oregon (CUAO) is joining a national coalition in lobbying to allow more business lending by credit unions.

“Main Street is screaming for capital, and credit unions have all this cash ready to go,” says CUAO president and CEO Troy Stang. “It just makes sense to put that money to work.”

Stang estimates that updated loan caps would enable credit unions to pump $10 billion into the national economy and create 108,000 jobs, at no cost to taxpayers.

Oregon bankers don’t like the idea. Linda Navarro, president of the Oregon Bankers Association, says her industry has fought similar legislation before and will do so again.

Navarro takes issue with some credit unions, which she says have drifted from their mission of serving underserved populations and are now basically the same as banks but with unfair tax advantages.

“There’s a place for credit unions,” she says. “But they should be held to the structure that they were founded on… Are there really loans out there that community banks can’t make that a credit union should be making?”

BEN JACKLET
 

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Editor's Letter: Power Play

January-Powerbook 2015
Thursday, December 11, 2014

There’s a fascinating article in the December issue of the Harvard Business Review about a profound power shift taking place in business and society. It’s a long read, but the gist revolves around the tension between “old power” and “new power” as a driver of transformation. Here’s an excerpt:

Old power works like a currency. It is held by few. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. It downloads, and it captures.

New power operates differently, like a current. It is made by many. It is open, participatory, and peer-driven. It uploads, and it distributes. Like water or electricity, it’s most forceful when it surges. The goal with new power is not to hoard it but to channel it.

The authors, Henry Timms and Jeremy Heimans, don’t necessarily favor one form of power over another but merely outline how power is transitioning, and how companies can take advantage of these changes to strengthen their positions in the marketplace. 

Our Powerbook issue might be viewed as a case study in the new-power transition. This annual book of lists provides information on leading businesses, nonprofits and universities in the state. Most of the featured companies are entrenched power players now pursuing more flexible and less hierarchical approaches to doing business. Law firms, for example, are adopting new technologies and fee structures to make legal services more accessible and affordable.

This month we also take a look at a controversial new U.S. Securities and Exchange Commission rule requiring public companies to disclose the median pay of workers, as well as the ratio between CEO and median-worker pay. 

Part of the 2010 Dodd-Frank financial reform law, the rule will compel public companies to be more open about employee compensation, with the assumption that greater transparency will improve corporate performance and, perhaps, help address one of the major challenges of our time: income inequality.

New power is not only about strategy and tactics, the Harvard Business Review authors say. “The ultimate questions are ethical. The big question is whether new power can genuinely serve the common good and confront society’s most intractable problems.”

That sounds like a call to arms. Or a New Year’s resolution. Old power or new, the goals are the same: to be a force for positive change in the world. Happy 2015!

— Linda


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