GRAND RAPIDS — The largest credit union in West Michigan recently got larger.
The CU Financial Group, a nonprofit enterprise of four area credit unions, saw its total assets jump by an incredible $45 million in the past six months. The reasons for that healthy fiscal growth reflect recent changes in the national economy and the local financial market.
“Since the first of the year, we have seen an increase in our asset base for all four of our credit unions in excess of $45 million in assets,” said Jerri Schmidt, director of marketing for the CU Financial Group (CUFG). “We have seen a tremendous growth since the first of the year.”
Both Wall Street and Monroe Avenue have played distinctive roles in that gain. Local consumers have begun abandoning those boulevards in search of other paths to find value for their money, and that trek has led many of them to CUFG.
“Consumers in the marketplace right now have reached a level that they know what they will pay for service and what they expect from service.
“And I believe that some of them don’t feel they’re getting that kind of service or value from their current financial institution and so they’re looking elsewhere,” said Schmidt. “A lot of them are coming our way.”
Schmidt explained that all the mergers, consolidations and acquisitions of local banks —underlined by the sale of Old Kent to Fifth Third — have sent consumers to CUFG. These consumers, she said, are looking for more than a financial return from their lender.
“People like their community, and I think there was a sense of betrayal on the part of Old Kent that people felt that they do not represent their hometown anymore. So they decided it was time to look for something that did mean something to their hometown,” she said. “We are hearing that from a number of people.”
The recent downturn in the stock market has also contributed to the growth in assets.
Schmidt told the Business Journal that more than a few traders decided to take a break from the nerve-racking downhill ride that had plagued the markets, and have turned their attention, and their money, to safer, more stable options that guarantee an acceptable return.
“They were pulling some of their money out of the stocks that they felt they could take a loss on, and they were putting it in money market accounts or short-term CDs. In other words, they were putting it into liquidity accounts until the market turned around or until they decided where else they were going to go with it,” said Schmidt.
The Grand Rapids Teachers Credit Union, the Health Care Credit Union, the Alliance Credit Union and Saint Mary’s Credit Union make up CUFG.
The Teachers Credit Union is the oldest of the four, having opened its doors in 1933. Alliance and Saint Mary’s started in 1959, Health Care in 1971.
Then each of the three separately created a working relationship with Teachers between 1971 and 1974. But each retained its own board of directors. So far, having four boards for one company hasn’t hurt business.
“No, it hasn’t,” said Schmidt, who added that the total assets of the four average $465 million.
Teachers Credit Union manages the group through the agreements it has with the other three. Each credit union keeps its own set of books. The policies, processes and data management, however, operates under a single system. But now that credit unions are more geographically than employment-based, CUFG may reorganize later this year.
“We taking a look at what does our membership field encompass, and who are we serving right now. We’re assessing that right now,” Schmidt said.
CUFG is also considering creating full-service trust and real estate departments for their members Currently credit unions can hold a member’s trust, but Schmidt said CUFG wants to develop that service further.
As for a real estate section, the Federal Reserve Board is expected to decide this year whether financial holding companies can offer brokerage and property management services. The banking industry supports enactment of this rule, as do credit unions, and, if the Fed approves, CUFG wants to offer these services to its members.
So the bottom line is, there is more growth in CUFG’s future.
“Absolutely,” said Schmidt.
CUFG has 13 branch locations and a network of 34 automatic teller machines.
Plans are to install four more ATMs before the end of this year. The corporate office is at 3809 Lake Eastbrook Boulevard and on the Web at cufg.org.
The recent surge in credit union deposits isn’t any real reason for you to send your banker a sympathy card, as business has been good.
In fact, when compared to credit unions, most bankers can afford to give you a toaster or a set of Ginsu knives in return for your business.
Over the last 15 years, the total assets of the nation’s banks rose at a rate nearly seven times faster than those of the country’s credit unions. The average bank has assets almost 18 times that of the average credit union. The banking industry has had more growth in just the last five years than credit unions have had in their existence. And banks have become three times more profitable in the last decade.
Here is a snapshot comparison of the two types of financial institutions:
- Market Share: From 1985 to 2000, the market share of total assets belonging to banks rose from 64.1 to 78.9 percent — a gain of 14.8 points. Over the same period, the total-assets market share of credit unions went from 3.2 to 5.7 percent — a gain of 2.5 points.
- Market Size: At the end of 2000, the average credit union had total assets of $42 million. In contrast, the average bank had $750 million in total assets — a figure 17.8 times higher than credit unions. Overall, bank assets total $6.2 trillion, or about 14 times the total assets of credit unions, which is $450 billion.
- Assets: From 1996 to 2000, bank assets grew by $1.9 trillion, while credit union assets rose by $134 billion. The banking industry grew by more in that five-year period than credit unions have in their entire history.
- Profits: During the last two years, the annual dollar profits for banks have averaged $71 billion — nearly three times the $25-million margin banks had in 1992.
- Dividends: Over the last eight years, bank dividends have exceeded tax payments by $71 billion.
Source: Credit Union National Association, June 2001