Complainers have the facts wrong about credit union-bank purchases
Editor’s note: The following is a letter from Scott Earl, president and CEO of the Mountain West Credit Union Association, in response to an article published in Credit Union Journal and its sister publication, American Banker.
As president and CEO of the Mountain West Credit Union Association representing 117 credit unions, I would like to clear the air about a recent article predicting a slowdown in the number of credit unions purchasing banks.
The article quoted Christopher Williston, president and CEO of the Independent Bankers Association of Texas, regarding Alaska USA Federal Credit Union’s recent deal to buy bank branches in Phoenix. Williston questioned what reason an Alaskan credit union would have for being in Arizona.
I’m hoping to clear up some details regarding the credit union and its growth plan in the Phoenix-metro area. Alaska USA currently has eight operating locations in Arizona. Those locations serve an estimated 61,000 members.
Those members are people who live, work, raise families and enjoy Arizona full time. They are invested in their communities, just like credit unions. Credit unions are community-based financial institutions, not-for-profit and locally owned by their members. These members live, work, shop and own small businesses in those communities.
Alaska USA has always been heavily invested in the communities in which it serves members.
In the article, Williston questioned Alaska USA’s agreement to purchase seven branches and deposits of TCF Bank locations in Arizona. However, not mentioned in the article is that Alaska USA was granted approval several years ago to serve members in an underserved area in Maricopa County, Ariz.
This large “underserved area” falls within the "investment area" as defined in a section of the Community Development Banking and Financial Institutions Act of 1994, and covers 413 contiguous census tracts in that county.
The acquisition being challenged in the article includes branches within or directly adjacent to those underserved areas which Alaska USA currently serves. Furthermore, 100% of the deposits are core deposits, not commercial or private banking (high-net-worth clients). This further supports the mission of serving the underserved.
The proposed sale will bring the total number of Alaska USA FCU branches in Arizona to 15, along with a financial center, an operations center and a data center in Glendale, with more than 350 employees in the state. That is a significant community investment.
So, when banks or banking associations speak up against community investment and member service, one has to wonder: What’s the real issue?
Banks are selling to much larger banks for profit and then act as though they are a victim. Community banks are suffering at the hands of megabanks, not credit unions.
Nationally, the credit union market share is only 7%, up slightly after nearly three decades — from 5.2% in 1992. When comparing that trend with the growth of the largest 100 banking institutions, the numbers are staggering.
In 2017, those big banks had a whopping 75.4% market share, up from 41.1% in 1992. So, frankly community banks are looking in the wrong direction to see what’s impacting their business.
Though credit unions in the state (and elsewhere) are growing, the reality is, they are not draining banks of growth and customers. It’s not even close.
The value of being a member of a credit union far outweighs that of being a customer at a bank because members are an owner, and are treated as such. Consumers get a better deal when they join a credit union, so it makes sense that they would want them in their communities.
And credit unions, by design and mission, are committed to investing into their communities. Therefore, we look forward to helping Alaska USA FCU continue to serve the people of Arizona.