Amid financial unease, credit unions still getting it done
In the post-financial crash economy, good news has been in short supply, but one outlier has been the state's credit union industry. Collectively, the state's 22 credit unions have seen assets grow from $4 billion at the beginning of 2008 to more than $5 billion in 2011.While a 25 percent bump in assets may not seem world-beating when compared to returns during the bubble period of securitized mortgage bonds and credit default swaps, it does reflect a subtle shift in consumer preference."It has to do with the collapse of the financial markets," said Daniel Egan, president of the New Hampshire Credit Union League as well as similar associations in Massachusetts and Rhode Island. "Many people have lost faith with large regional banks and have sought a safe harbor of security and safety that will be around in the future. They want their money with a local option that they believe is looking out for the best interests of consumers."New Hampshire is where the first credit union, St. Mary's Bank, was established in 1908. Based on a Canadian model and set up to provide financial services for immigrant laborers, St. Mary's still operates and is the oldest credit union in the country (the similarly named St. Mary's Credit Union in Massachusetts is the oldest statewide credit union in the country). Credit unions developed first to serve the financial needs of specifics groups of people, such as factory workers, union members or teachers and public employees, but have since expanded membership requirements to cover geographic areas.Overall, according to the National Credit Union Association, as of March 2011, there were 7,792 federally insured credit unions in the country serving more than 90 million members and handling more than $950 billion in assets.Their cooperative, non-for-profit charters set credit unions apart from larger regional or national for-profit banks. Members in effect collectively own the credit union and elect and have a one-member, one-vote voice in selecting the board of directors.While each credit union is required to make a profit to remain financially sustainable, Egan said that profits are returned to the institution to provide better interest rates on loans or accounts or to provide more services for members and for money to be put into the community.Responsiveness is key"Our members own us. We are trusted and we are local but none of that would count if we didn't provide superior services," said Gordon Simmons, the president of Portsmouth-based Service Credit Union, the largest credit union in the state with almost $2 billion in assets.Founded in 1957 at the then-new Pease Air Force Base in Newington, the credit union was originally set up for military service members, their families and Department of Defense civilian employees. Service Credit Union has since expanded its public profile by becoming the main sponsor of the two-day Boston Portsmouth Air Show, which recently drew an estimated 50,000 people.Service Credit Union is also in the midst of a multimillion-dollar construction project to build a new headquarters, down the road from its current location in Portsmouth. Following its June merger with the two-branch Seacoast Credit Union, Simmons said, Service Credit Union now has more than 147,000 members worldwide -- it has 20 branches in New Hampshire, one in Massachusetts and four at military bases in Germany -- and 500 employees. Assets have grown from a little more than $1 billion in 2006 to $1.91 billion by June 2011, while deposits have grown by almost $550 million to $1.33 billion during the same time frame.According to the most recent ranking, Service Credit Union is the 68th largest in the country."We're not the Bank of America or one of those conglomerate banks. We have had sound, conservative lending principles that have kept us relatively healthy despite the difficult economy," said Simmons, who has been with Service Credit Union since 1974. A more conservative lending approach, Simmons said, has kept industry loan delinquencies down to below 2 percent while loan portfolios have grown. (Service Credit Union's loan portfolio has grown from $723 million in 2006 to $1.2 billion in 2011.)The keys, Simmons said, are connected to being continually responsive to the needs of members with strong customer service and listening."We get a lot of feedback from members," he said.Egan said a trend among consumers toward local control and involvement has emerged over the past couple of years."Membership has grown because members are realizing that their credit union is not maximizing profits in order to pay dividends to shareholders, but for their benefit," he said.The small-scale sideConsolidation has also been one of the major changes in the past quarter-century, with the number of credit unions receding due to economic shifts.Egan said the 1970s were the "heyday" of credit union growth in New Hampshire, when around 70 were chartered. "A lot of them were tied to specific industries and manufacturers, such as small lumber companies that went out of business," he said. Merger was and remains the best path to survival, he said.The June merger of Seacoast and Service Credit Union -- the sixth for Service in its history -- is a case in point.Joanne Nadeau, former president and CEO of Seacoast Credit Union, said that Service offered more of the financial products that Seacoast's members sought, had more locations and longer hours of service and, and for a long-term perspective, was financially strong.Seacoast was facing a challenging economic environment as a smaller institution that might make it vulnerable to a reduced return on assets ratio, an important benchmark, while not being able to make the necessary technological investments to keep members satisfied. "We are now able to give our members the convenience and technology they are looking for," Nadeau said.Seacoast had been formed in 1966 to serve the needs of teachers and administrators in the Hampton and Exeter areas. At the time of the merger, Seacoast had 5,300 members and $36 million in assets.The recession and its aftermath did claim institutions across the country, as federal regulators have closed or taken over some 45 credit unions in 15 states since 2009. By comparison, some 365 banks failed from 2009 to 2011.Guardian Angel Credit Union in the North Country, which on its sparse website offers a 6.90 percent loan rate for pellet and wood stoves, represents the small-scale side of the credit union tale."We serve a different market. It's a whole different ball game," said Jerry Dumoulin, CEO at Guardian Angel since 1986.Guardian Angel was established in 1929 and has 4,800 members, $40 million in assets and branches in Berlin and Lancaster. Dumoulin said membership dipped slightly in 2008, but has begun to slowly but steadily rebound. "We serve teachers, mill workers and professionals," he said.Anyone within a 50-mile radius of Berlin (in New Hampshire) and who opens a $50 savings account is eligible to join. Dumoulin said all of the directors are from the region and are uniquely aware of the fragile but hopeful economic environment.Dumoulin is a Berlin native who returned to the area and joined the credit union as loan officer in 1974 after graduating from the University of New Hampshire. "We have to wear a lot of hats," he said about the growing regulatory complexity that faces him and his 21 employees. "I just love the work and the people. We've seen the community grow together over the years. We've had some loan losses, but most of the people are good, hardworking and honest," he said.