Local Credit Unions are Enjoying their Bottom Line

Membership and deposits are up, and that trend is likely to continue as long as the economy stays strong, according to the industry’s local trade association.

Things are definitely looking up for the California and Nevada Credit Union Leagues.

The Ontario-based non-profit, which represents 23 credit unions in Riverside and San Bernardino counties, loaned out $1.7 billion during the third quarter of 2016 and saw its total deposits reach $2.7 billon during that time, according to the organization’s data.

Its auto loans reached a record $521 million, with a 33 percent year-over-year increase in new automobile loans and a 21 percent increase in loans for used automobiles.

The league, which got started in the early 1930s as the California Credit Union League – it did not merge with the Nevada Credit Union League until 1996 – also saw its first mortgage originations rise 45 percent during the third quarter.

Perhaps best of all, the league’s membership rose to 341,000, a 13 percent increase compared with the third quarter of 2015 and the highest membership the organization has enjoyed since 2002.

There’s a relatively simple explanation for why California-Nevada, and other credit unions, are adding members, are loaning more money, increasing their deposits and adding more members, said Dwight Johnston, California- Nevada’s chief economist.

“I’d have to say it’s the economy,” said Johnston, who joined California-Nevada in 2012. “Credit unions usually do better when the economy is doing well, and lately the economy has been doing pretty well, especially in California.”

The wave that U.S. credit unions are riding probably began in 2011 with Bank Transfer Day, consumer-drive Facebook campaign that urged people to leave their banks after some of them proposed fees for debit card use.

Most banks never implemented those fees, but the campaign had an impact nevertheless. Credit unions across the country reported a surge in popularity, with membership nationwide reaching 100 million in August 2014, according to the Credit Union National Association in Washington, D.C.

Since then, credit union membership has gone up about two percent every year, the association reported.

Another reason credit unions became more popular is they became easier to join: rather than tying membership to a specific industry or employer, a lot of credit unions based their membership on where a person lived.

Credit unions are not-for-profits that are owned by their members. They offer some advantages over traditional banks, including lower fees and, in some instances free checking. They provide most of the services that regular banks do, including savings and checking accounts, credit cards and access to ATM’s and personal loans.

Credit unions are restricted in several areas.

Unlike banks, they’re not allowed to make loans outside of their membership, issue stock or provide trust services. They’re also not permitted to trade in U.S. government securities or underwrite general obligation state and municipal bonds.

Credit unions tend to be more cautious in their lending practices than banks, a practice that appears to have paid off for them in the wake of the recession, Johnston said.

“We’re more conservative, so when things do go wrong we don’t suffer quite as much,” said Johnston, won runs his own economics consulting firm. “I think the recession showed people the advantages of credit unions. Most credit unions never would have made the loans that caused the housing crisis in the first place.”

Like most credit union trade associations, California-Nevada’s primary job is to lobby on behalf of the industry at the local, state and federal level. It also helps educate its members by providing them with information on a variety of topics, including regulatory compliance, accounting and finance and how to use social media.

“We try to provide as much information as we can to our members, and we make sure they have voice before the government,” said Larry Palochik, senior vice president with California-Nevada. “Our main job is get them as much legislative support as we can.”

Because they’re smaller than most banks, credit unions are usually closer to the communities they serve and more in tune with what services people need, Palochik said.

“We’re not profit driven,” Palochik said. “We only answer to our members, not to shareholders, and I think that helps us.”