Oregon’s Credit Unions:
Growing, Consolidating, and Often
Indistinguishable from Commercial Banks
January 2013
About the Author:
Marvin Umholtz is President & CEO of Umholtz Strategic Planning & Consulting Services based in Olympia, Washington south of Seattle. He is a 37-year credit union industry veteran who has held many leadership positions with credit union organizations and financial services industry vendors during those years. A former association executive and lobbyist, he candidly shares his credit union industry knowledge and analysis with public policymakers, financial industry executives, and vendor companies. Umholtz also writes and distributes CU Strategic Hot Topics, a “clients and colleagues” newsletter that analyzes the actions of the National Credit Union Administration (NCUA), the Congress, the Consumer Financial Protection Bureau (CFPB), the Federal Reserve, the corporate credit union crisis, the mortgage finance mess, the sagging economy, uncertainties in financial markets, divisive partisan politics, and the growing conflict about the future role of credit unions in the financial services industry.About This Report
: This report provides a data-driven overview about credit unions head-quartered in Oregon with an additional focus on the largest Oregon-based credit unions. The data clearly demonstrates that large multi-branch, full-service Oregon credit unions have grown to be mainstream federally-insured financial institutions that are indistinguishable from community banks either by the products they provide or whom they serve. Despite their tax-subsidized operations and separate regulatory treatment, bank-like credit unions are a significant competitive force in the Oregon financial services marketplace. The report also assists policymakers to consider whether bank-like credit unions continue to meet a public purpose deserving of marketplace-distorting tax and regulatory treatment.The Report’s Key Findings
Oregon Credit Union Data Q3 2012 Oregon Credit Union Growth Trends 1970-2012
Oregon Credit Union Charter Types and Key Ratios
Oregon Credit Union Services and Products Oregon Credit Union Loan Portfolio
Distribution
Oregon Credit Union Savings Accounts Distribution
Credit Union Membership and Capital Ownership
Large Oregon Credit Unions: Assets, Members, Branches, Key Ratios, Business Loans, Government Deposits
Oregon Credit Union Open Membership Eligibility
Oregon Credit Union Income Tax Exemption and Estimated Taxes
Credit Unions’ Public Purpose and the Community Reinvestment Act
Selected Oregon Credit Union CEO Compensation
Evolution of Oregon Credit Unions to Continue
About the Contents:
As of September 30, 2012 there were 73 credit unions with their headquarters based in Oregon holding combined assets of over $15 billion and reporting over 1.4 million members (customers) and 291 branches.
The ten Oregon credit unions above $500 million in assets represent 68.92% of the total combined as-sets and 64.32% of the total members (customers).
The Oregon credit union industry is now dominated by significantly fewer and dramatically larger institu-tions than in the past.
The 73 Oregon credit unions include 55 federally chartered that are supervised by the National Credit Union Administration (NCUA) and 18 state chartered that are supervised by the Oregon Department of Consumer and Business Services (DCBS).
Oregon-based credit unions are for the most part financially healthy according to several key safety and soundness ratios. The exception is $247 million Har-bor, Oregon-based Chetco Federal Credit Union that was conserved by the NCUA on September 23, 2011 and, eventually, shut down and its assets disbursed to two credit unions in December 2012.
The customer services and products offered by Oregon credit unions are very similar to those that are offered by community banks. The larger the credit union the more likely it is to offer many bank-like products.
The September 30, 2012 snapshot of Oregon’s credit unions consolidated loan portfolio confirms that credit unions are significant real estate-backed lenders (49.92%) with used and new auto lending (35.6%) as the second largest category.
The distribution of customer savings account types is also similar to what one might expect at a com-munity bank – checking, basic savings, certificates, Money Markets, and IRA/KEOGH, among others.
Coquille, Oregon-based $762 million First Com-munity Credit Union has 30 branch offices – the most of Oregon’s credit unions. Portland, Oregon-based $3.2 billion OnPoint Community Credit Union is sec-ond with 22 branches.
Palo Alto, California-based $5.6 billion First Tech-nology Federal Credit Union, which has branches in eight states and Puerto Rico, has a ten branch pres-ence in Oregon.
The Chetco Federal Credit Union was heavily in-volved in business lending and much of that portfolio apparently became delinquent, driving up the overall ratio to 23.81%. The Chetco Federal Credit Union’s negative 7.31 net worth ratio was also dramatic evi-dence of something gone very wrong.
The low-income designation by NCUA or the Or-egon DCBS provides additional bank-like authori-ties to Oregon credit unions including: (1) the po-tential expansion of business lending, (2) authority for supplemental capital, (3) non-member depos-it-taking authority, and (4) eligibility for NCUA’s community development revolving loan program. According to NCUA, there are 25 low-income des-ignated Oregon credit unions representing $3.7 billion in combined assets.
As credit unions grew in Oregon and other states, their advocates found ways to expand member-ship eligibility criteria to fuel that growth. Most credit unions in Oregon were originally organized to serve one employee group or a single rural
com-The Report’s Key Findings:
munity that shared a “common bond,” but there remain few single-group bonds among today’s credit unions. Federal and state credit union regu-lators officially approved these designated “fields of membership” (FOM) for each credit union and have authorized expansions to these FOMs. Crit-ics have observed that like banks open to all cus-tomers, such “open” FOMs allow anyone to join a credit union.
In Oregon the “community-based FOM” is among the most popular with both state and feder-ally chartered credit unions. Most are “live, work, or worship” in multi-county geographical designa-tions ranging from one county to almost all of the counties in Oregon.
By definition, when one of two competitors avoids a significant cost of doing business such as the in-come tax, it has a competitive advantage. In a direct competition between a tax-exempt credit union and a tax-paying community bank for lending market share, the credit union would be advantaged.
Based upon just three quarters of a year’s worth of net income, Oregon’s largest ten credit unions would have an estimated combined 2012 YTD income tax obligation of over $28 million. For all 73 Oregon credit unions it would be $34.5 million. So, 13% of Oregon’s credit unions enjoy 82% of the value of the overall tax benefit.
Despite the low-income designation held by many credit unions, the industry’s commitment to serving the underserved is unverified while each bank’s CRA
activities are well documented. Credit union critics that include consumer activist and economic justice groups in addition to community bankers are de-manding that credit unions prove their adherence to a public purpose.
As the 2010 IRS 990 filings on selected large Or-egon credit unions revealed, the CEO from the larg-est was compensated at $1.8 million and another received an “Other Reportable” amount of over $4 million in addition to base salary.
The ten largest multi-branch Oregon credit unions represent most of the asset growth, membership (customer) growth, and net income generation in the state. They will absorb many of the smaller credit unions, continue to dominate the industry, and garner significant market share. These full-service, multi-branch large credit unions will grow even more bank-like.
The evolutionary dilemma for Oregon’s credit unions resides in the public policy implications and potential costs from abandoning the more traditional approach and the now-outdated “little guy with the umbrella” image.
Community bankers and other credit union com-petitors are certain to assertively weigh in concerning the potential future evolution of Oregon’s bank-like credit unions. The vast majority of credit union indus-try analysts predict that there will be no going back to the past for the largest credit unions.
Oregon Credit Union Data Q3 2012
As of September 30, 2012 there were 73 credit unions with their headquarters based in Oregon holding com-bined assets of over $15 billion and reporting over 1.4 million members (customers) and 291 branches. They range in asset size from less than $1 million to over $3.2 billion. The ten Oregon credit unions above $500 mil-lion in assets represent 68.92% of the total combined assets and 64.32% of the total members (customers). Oregon’s credit unions are part of an industry in the United States that includes 6,888 total federally insured credit unions with combined assets in excess of $1 trillion. Oregon’s credit unions represent 1.06% of all U.S. credit unions, 1.54% of all credit union assets, and 1.51% of all credit union members (customers). Nationally, the nation’s largest 403 credit unions represent over 65% of the total assets.
Asset Category # CUs % CUs $ Assets % Assets # Members % Members
>$500 Million 10 13.70% $10,720,476,532 68.92% 912,346 64.32% $100-$500 Million 17 23.29% $3,252,281,072 20.91% 319,274 22.51% $50-$100 Million 11 15.07% $849,816,269 5.46% 95,472 6.73% $10-$50 Million 22 30.14% $675,263,673 4.34% 75,311 5.31% $2-$10 Million 11 15.07% $55,640,578 0.36% 15,702 1.11% <$2 Million 2 2.73% $528,433 0.01% 341 0.02% Total 73 100.00% $15,554,006,557 100.00% 1,418,446 100.00%
Asset Category # CUs % CUs $ Assets % Assets # Members % Members
>$500 Million 403 5.85% $663,014,894,379 65.46% 52,828,489 56.27% $100-$500 Million 1,029 14.94% $228,711,224,600 22.58% 24,106,484 25.68% $50-$100 Million 784 11.8% $55,997,595,141 5.53% 6,876,986 7.32% $10-$50 Million 2,270 32.96% $55,595,652,980 5.49% 7,957,368 8.48% $2-$10 Million 1,601 23.24% $8,876,958,180 0.88% 1,836,009 1.96% <$2 Million 801 11.63% $718,262,507 0.06% 277,303 0.29% Total 6,888 100.00% $1,012,914,587,787 100.00% 93,882,639 100.00%
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for all federally insured credit unions
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for all federally insured credit unions
Oregon Credit Union Industry: Overview
United States Credit Union Industry: Overview
Year #CUs #Members $ Savings $ Loans $ Reserves $ Assets 1970 265 237,829 $169,165,268 $159,630,555 $14,099,979 $192,962,290 1980 230 675,649 $851,268,343 $735,585,939 $41,860,838 $952,176,786 1990 153 855,696 $2,637,295,829 $1,990,861,475 $213,476,089 $2,870,342,530 2000 115 1,250,644 $6,587,715,274 $5,455,676,709 $732,791,110 $7,345,371,155 2010 81 1,518,209 $14,268,512,799 $11,059,169,521 $1,443,825,361 $14,577,093,993 2012 Q3 73 1,418,446 $13,801,050,035 $9,893,151,835 $1,410,161,781 $15,554,006,557
Oregon Credit Union Industry Growth Trends 1970-2012
Oregon Credit Unions Historical Data: Assets, Loans, Savings (Deposits)
18,000,000,000 16,000,000,000 14,000,000,000 12,000,000,000 10,000,000,000 8,000,000,000 6,000,000,000 4,000,000,000 2,000,000,000 0 1970 1980 1990 2000 2010 2012
Oregon Credit Union Growth Trends 1970-2012
Oregon’s credit unions have grown dramatically in size in recent years. Back in 1970 when the number of indi-vidual Oregon-based credit unions peaked at 265, the combined total assets were less than $200 million. As-sets have grown by a factor of over eighty times that amount in 2012. The Oregon credit union industry is now dominated by significantly fewer and dramatically larger institutions than in the past.
The source of the chart’s historical information is the Credit Union National Association (CUNA). In January 2011 Oregon’s then-multi-billion dollar asset credit union, state chartered First Technology Credit Union, merged with multi-billion-dollar California-based Addison Avenue Federal Credit Union to become First Technology Federal Credit Union. The headquarters was moved to California and all of the data attributed to the merged credit union is now counted in that state. First Technology Federal Credit Union continues to operate ten branches in Oregon, however, the members, savings, loans, reserves, and assets associated with those branches are no longer counted in Oregon’s post-2010 totals. The 2012 totals are as of September 30, 2012 and do not repre-sent an entire year as do the other historic totals.
CU Charter Type # CUs % CUs $ Assets % Assets # Members % Member
State CU 18 24.66% $10,589,822,073 68.08% 899,206 63.39%
Federal CU 55 75.34% $4,964,184,484 31.92% 519,240 36.61%
Total 73 100.00% $15,554,006,557 100.00% 1,418,446 100.00%
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for all federally insured credit unions
Oregon Credit Union Industry: Charter Type
Asset Category # CUs
>$500 Million 10 9.17 74.86 0.84 0.68 1.08 1.18 $100-$500 Million 17 7.98 67.05 4.32 0.92 0.43 0.55 $50-$100 Million 11 8.30 62.66 1.21 0.80 0.57 0.66 $10-$50 Million 22 9.76 57.19 0.91 0.50 0.27 0.36 $2-$10 Million 11 10.93 61.03 1.37 0.84 -0.48 -0.36 <$2 Million 2 21.18 32.32 5.01 2.61 -2.18 -2.18 Total 73 8.91 71.68 1.56 0.73 0.87 0.98
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for all federally insured credit unions
Oregon Credit Union Industry: Key Ratios
Net Worth/ Total Assets Total Loans/ Total Shares (Deposits) Delinquent Loans/ Total Loans Net Charge-Offs/Average Loans Return on Average Assets (ROAA) ROAA Before NCUSIF Stabilization Inc/Exp
Oregon Credit Union Charter Types and Key Ratios
The 73 Oregon credit unions include 55 federally chartered that are supervised by the National Credit Union Administration (NCUA) and 18 state chartered that are supervised by the Oregon Department of Consumer and Business Services (DCBS). The 18 Oregon state chartered credit unions represent over $10 billion in assets or over 68% of the state’s total. The deposits in all Oregon credit unions are federally insured by the National Credit Union Share Insurance Fund (NCUSIF) administered by the NCUA.
Bank and thrift depositors and credit union depositors receive essentially the same deposit insurance cover-age. The greatest differences between the two deposit insurance programs occur in the size and scope of their operations, in their approach to funding, and in the potential costs to the insured institutions. There are many similarities between the two, as well as some important differences. From the depositor’s point of view, the two deposit insurance plans are strikingly similar. Both funds are administered by independent federal govern-ment agencies and both are backed by the full faith and credit of the United States governgovern-ment. The coverage amount and the types of covered accounts are also almost 100% comparable. Additionally, the institutions that hold the insured accounts pay for their respective deposit insurance funds, not the taxpayers.
Oregon Credit Union Selected Service & Product Offerings
Source: National Credit Union Administration (NCUA)
Business Loans 38
Credit Builder 16
Debt Cancellation/Suspension 12
Indirect Business Loans 1
Indirect Consumer Loans 35
Indirect Mortgage Loans 2
Interest Only/Payment Option 1st Mortgage 18
Micro Business Loans 11
Micro Consumer Loans 13
Overdraft Lines of Credit 40
Overdraft Protection 33
Participation Loans 35
Pay Day Loans 14
Real Estate Loans 59
Refund Anticipation Loans 1
Risk Based Loans 51
Share (Deposit) Secured Credit Cards 35
Short-Term, Small Amount Loans 9
ATM/Debit Card Program 66
Business Share (Deposit) Accounts 43
Check Cashing 43
First Time Homebuyers Program 15
Health Savings Accounts 13
Individual Development Accounts 8
In-School Branches 6
Insurance/Investment Sales 32
International Remittances 14
Wire Transfers 54
Customer Service and/or Product Offered # of Oregon CUs Offering
Oregon-based credit unions are for the most part financially healthy according to several key safety and sound-ness ratios. The exception is $247 million Harbor, Oregon-based Chetco Federal Credit Union that was con-served by the NCUA on September 23, 2011. On December 28, 2012 the NCUA closed Chetco FCU and split its good assets and deposits between Oregon’s Rogue FCU and California’s Coast Central CU. The net worth ratio for that 17 credit union peer group is lower and the delinquency ratio is higher because of Chetco Federal Credit Union. Collectively smaller credit unions are reporting very poor return on average assets (ROAA), a key measurement of earnings. Most Oregon credit unions are also experiencing lower than normal loan demand that also contributes to reduced earnings.
Oregon Credit Union Services and Products
The customer services and products offered by Oregon credit unions are very similar to those that are offered by community banks. The NCUA tracks certain offerings by individual institution and by the state as a whole. Most credit unions advertise their complete list of services and product offerings on their individual websites. The larger the credit union the more likely it is to offer many bank-like products.
Although some credit union members might be aware that they are “member-owners” of the credit union’s equity, most of them are totally unaware. The only time an owner-member of a credit union can withdraw their proportional equity is when the credit union liquidates, so it is of little marketable value to them most of the time. However, in public and policymaking situations credit union advocates have amplified the ownership issue despite the fact that few customers even know they are “owners.” Credit unions are structured without capital stock and have no access to capital markets. Capital (net worth) is built through regular contributions from retained earnings to reserves and other capital accounts.
In August 2011 the Filene Research Institute (FRI) released a no-nonsense study by former FRI executive direc-tor Bob Hoel entitled, “Power and Governance: Who Really Owns Credit Unions?” Among many other findings and observations Hoel wrote, “It is also popular for credit union CEOs, board members, trade associations, and regulators to proudly proclaim that credit union members own their credit union. Again, rhetoric fails to tell the complete story. Determining who controls capital is a key step in identifying the organization’s authentic owner. Credit union CEOs and boards, like their corporate counterparts, play key roles in capital decision making. In addition, government regulators exert extraordinary influence on capital levels and capital deployment. Mem-bers have almost no control over capital in most credit unions today. Regulators tend to act as though they own a credit union’s capital…The extraordinary power of credit union regulators raises the distinct possibility that they are the true owners of the credit union. As noted previously, if the regulator or any other party controls the credit union’s capital, it is, for all practical purposes, the credit union’s owner.”
Hoel also wrote, “Given the power of boards, CEOs, and regulators over capital, it is not possible to view mem-bers as the credit union’s owners in the classic sense. Member ownership rights are modest; some might even argue that they are trivial. Members cannot sell or otherwise transfer their theoretical share of ownership to oth-ers. They cannot withdraw their share of the credit union’s capital when they move or when they terminate their membership. Their heirs do not have an equity claim upon their death. The only times that credit union mem-bers receive capital distributions are when the credit union is liquidated or when regulators conclude that the credit union is grossly overcapitalized and permit the credit union to make a special capital distribution. In most non-credit-union cooperatives, member owners have far greater power to transfer and redeem their ownership shares…Four actors – CEOs, boards, regulators, and members – all have some power to control and deploy capital. One conclusion from this multipower arrangement is that the four are joint owners. An alternative view is that the true ownership is so vague and convoluted that no one owns the credit union. The credit union, in essence, owns itself, and it is a self perpetuating entity.”
As owners, credit union members can participate in electing its board of directors, but few actually do. Credit union annual membership meetings are often held at inconvenient times, located at unsuitable venues, and are attended by barely enough members to constitute a legal quorum – often as few as fifteen members regardless of the institution’s size. Often only board members and staff attend these functions and it is a rare occurrence when more than one percent of a credit union’s eligible members actually participate in an onsite meeting. Industry critics point out that most credit union director elections involve an uncontested slate of mostly incum-bent board candidates developed by a nominating committee composed of board insiders. Oregon’s largest credit union, OnPoint Community Credit Union, was the Portland Teachers Credit Union only seven years ago. Yet, today, there are no Portland public school teachers on the board.
Because credit unions have no stock and are not publicly traded, they are also exempt from all but two require-ments imposed by the federal Sarbanes-Oxley Act’s corporate governance standards. The two provisions deal with document destruction and whistleblower protections.
CU Name (Location) Rank $ Assets # Members # Branches OnPoint Community CU Portland www.onpointcu.com 1 $3,219,533,452 245,928 22 Oregon Community CU Eugene www.oregoncommunitycu.org 2 $1,088,423,841 103,988 10 SELCO Community CU Eugene www.selco.org 3 $1,020,213,073 87,764 14
Advantis Credit Union
Portland www.advantiscu.org 4 $1,012,081,791 48,937 5
Unitus Community CU
Portland www.unitusccu.coM 5 $933,909,722 79,721 8
O.S.U. Federal Credit Union
Corvallis www.osufederal.com 6 $786,987,875 72,971 12
First Community CU
Coquille https://myfirstccu.org 7 $762,763,054 71,910 30
Northwest Community CU
Eugene www.nwcu.com 8 $757,813,347 80,208 19
Rogue Federal Credit Union
Medford www.roguefcu.org 9 $583,036,939 55,843 9
Rivermark Community CU
Beaverton www.rivermarkcu.org 10 $555,713,438 65,076 7
Marion and Polk Schools CU
Salem www.mapscu.com 11 $453,635,471 43,881 9
Oregonians Federal CU
Milwaukie www.ofcu.com 12 $301,422,326 24,118 8
Chetco Federal Credit Union
Harbor www.chetcofcu.org 13 $247,921,898 24,926 6
Clackamas Com. Fed. CU
Oregon City www.clackamasfcu.org 14 $241,783,958 28,481 7
NW Priority Credit Union
Portland www.nwprioritycu.org 15 $233,307,003 16,923 7
Central Willamette Com. CU
Albany www.centralwcu.org 16 $218,871,141 23,892 5
Consolidated Federal CU
Portland www.consolidatedfcu.com 17 $174,665,307 11,458 2
St. Helens Community FCU
St. Helens www.shcu.org 18 $165,805,923 15,301 3
Mid Oregon Federal CU
Bend www.midoregon.com 19 $165,381,339 21,888 5
Cascade Community FCU
Roseburg www.cascadecu.org 20 $152,016,191 12,854 3
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for All Federally Insured Credit Unions
Large Oregon Credit Unions: Comparative
Large Oregon Credit Unions:
Assets, Members, Branches, Key Ratios, Business Loans, Government Deposits
Coquille, Oregon-based $762 million First Community Credit Union has 30 branch offices – the most of Oregon’s credit unions. Portland, Oregon-based $3.2 billion OnPoint Community Credit Union is second with 22 branches.
CU Name
OnPoint Community CU 9.88 67.31 1.01 0.69 0.94 1.06
Oregon Community CU 8.35 90.57 0.27 0.53 1.21 1.26
SELCO Community CU 8.86 82.63 0.78 0.72 2.08 2.20
Advantis Credit Union 8.99 86.04 0.25 0.47 1.31 1.38
Unitus Community CU 9.02 65.87 0.53 0.56 0.56 0.67
O.S.U. Federal Credit Union 10.24 62.29 1.00 0.49 1.29 1.41
First Community CU 8.75 56.70 2.30 0.53 0.90 1.02
Northwest Community CU 9.60 96.93 0.77 0.65 0.93 1.00
Rogue Federal Credit Union 7.87 76.26 0.81 1.20 0.83 0.95
Rivermark Community CU 7.85 78.61 1.62 1.32 0.70 0.82
Marion and Polk Schools CU 6.44 63.57 0.33 0.35 0.82 0.94
Oregonians Federal CU 11.07 39.48 0.57 0.61 0.65 0.65
Chetco Federal CU -7.31 97.73 23.81 2.27 -0.27 -0.14
Clackamas Com. Fed. CU 9.08 63.38 0.69 1.40 -0.45 -0.33
NW Priority Credit Union 11.37 39.21 1.00 0.43 0.13 0.24
Central Willamette Com. CU 7.69 67.97 0.68 0.69 0.73 0.84
Consolidated Federal CU 13.40 73.00 0.65 0.31 0.47 0.57
St. Helens Community FCU 9.66 96.83 1.14 0.45 1.51 1.62
Mid Oregon Federal CU 8.36 70.56 1.11 1.35 0.45 0.57
Cascade Community FCU 13.06 59.83 0.04 0.03 0.54 0.65
Source: National Credit Union Administration As of September 30, 2012 for All Federally Insured Credit Unions
Large Oregon Credit Unions: Key Ratios
Net Worth/ Total Assets Total Loans/ Total Shares (Deposits) Delinquent Loans/ Total Loans Net Charge-Offs/Average Loans Return on Average Assets (ROAA) ROAA Before NCUSIF Stabilization Inc/Exp
This list includes Oregon-based credit unions and does not include branches of credit unions with a mar-ketplace presence in Oregon, but that are based in another state. For example, Palo Alto, California-based $5.6 billion First Technology Federal Credit Union, which has branches in eight states and Puerto Rico, has a ten branch presence in Oregon. Formerly headquartered in Beaverton, Oregon then $2.2 billion asset First Technology Credit Union merged in 2011 with Addison Avenue Federal Credit Union. The consolidated insti-tution kept the First Technology name, retained the federal charter of the California-based credit union, and designated California as its headquarters state.
The September 30, 2012 key safety and soundness ratios for NCUA-conserved Chetco Federal Credit Union indicate that credit union’s poor financial condition. The Chetco Federal Credit Union was heavily involved in business lending and much of that portfolio is apparently delinquent driving up the overall ratio to 23.81%. The Chetco Federal Credit Union’s negative 7.31 net worth ratio also is a dramatic suggestion of something gone very wrong. The credit union also had a low-income designation, meaning that at least 50% plus one
CU Name (Location) Rank $ Assets OnPoint Community CU Portland www.onpointcu.com 1 $3,219,533,452 $24,041,238 0.75% Oregon Community CU Eugene www.oregoncommunitycu.org 2 $1,088,423,841 $11,880,037 1.09% SELCO Community CU Eugene www.selco.org 3 $1,020,213,073 $105,931,266 10.38%*
Advantis Credit Union
Portland www.advantiscu.org 4 $1,012,081,791 $85,167,060 8.42%
Unitus Community CU
Portland www.unitusccu.com 5 $933,909,722 $35,473,168 3.80%
O.S.U. Federal Credit Union
Corvallis www.osufederal.com 6 $786,987,875 $59,063,530 7.51%*
First Community CU
Coquille https://myfirstccu.org 7 $762,763,054 $48,663,261 6.38%
Northwest Community CU
Eugene www.nwcu.com 8 $757,813,347 $73,715,361 9.73%*
Rogue Federal Credit Union
Medford www.roguefcu.org 9 $583,036,939 $32,566,317 5.59%*
Rivermark Community CU
Beaverton www.rivermarkcu.org 10 $555,713,438 $14,531,749 2.61%
Marion and Polk Schools CU
Salem www.mapscu.com 11 $453,635,471 $42,408,920 9.35%
Oregonians Federal CU
Milwaukie www.ofcu.com 12 $301,422,326 $4,020,007 1.33%
Chetco Federal Credit Union
Harbor www.chetcofcu.org 13 $247,921,898 $148,232,649 59.79%*
Clackamas Com. Fed. CU
Oregon City www.clackamasfcu.org 14 $241,783,958 $11,134,765 4.61%
NW Priority Credit Union
Portland www.nwprioritycu.org 15 $233,307,003 $0.00 0.00%
Central Willamette Com. CU
Albany www.centralwcu.org 16 $218,871,141 $19,865,345 9.08%
Consolidated Federal CU
Portland www.consolidatedfcu.com 17 $174,665,307 $23,621,021 13.52% St. Helens Community FCU
St. Helens www.shcu.org 18 $165,805,923 $56,547,412 34.10%
Mid Oregon Federal CU
Bend www.midoregon.com 19 $165,381,339 $15,508,277 9.38%
Cascade Community FCU
Roseburg www.cascadecu.org 20 $152,016,191 $1,638,299 1.08%*
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for All Federally Insured Credit Unions Asterisk * indicates low-income designation with exemption from 12.25% of assets business lending cap.
Large Oregon Credit Unions: Business Loans
$ Total Business Loans Less Unfunded Commit-ments (LUC) % Total Business Loans LUC/Total Assets
of its members had incomes below 80% of the local median income. The low-income designation by NCUA or the Oregon DCBS provides additional bank-like authorities to Oregon credit unions including: (1) the po-tential expansion of business lending, (2) authority for supplemental capital, (3) non-member deposit-taking authority, and (4) eligibility for NCUA’s community development revolving loan program. According to NCUA, there are 25 low-income designated Oregon credit unions representing $3.7 billion in combined assets.
CU Name (Location) Rank $ Assets OnPoint Community CU Portland www.onpointcu.com 1 $3,219,533,452 $0.00 $0.00 Oregon Community CU Eugene www.oregoncommunitycu.org 2 $1,088,423,841 $0.00 $0.00 SELCO Community CU Eugene www.selco.org 3 $1,020,213,073 $0.00 $0.00
Advantis Credit Union
Portland www.advantiscu.org 4 $1,012,081,791 $504,973 $0.00
Unitus Community CU
Portland www.unitusccu.com 5 $933,909,722 $979,217 $0.00
O.S.U. Federal Credit Union
Corvallis www.osufederal.com 6 $786,987,875 $0.00 $0.00
First Community CU
Coquille https://myfirstccu.org 7 $762,763,054 $553,445 $0.00
Northwest Community CU
Eugene www.nwcu.com 8 $757,813,347 $0.00 $0.00
Rogue Federal Credit Union
Medford www.roguefcu.org 9 $583,036,939 $0.00 $0.00
Rivermark Community CU
Beaverton www.rivermarkcu.org 10 $555,713,438 $0.00 $0.00
Marion and Polk Schools CU
Salem www.mapscu.com 11 $453,635,471 $0.00 $0.00
Oregonians Federal CU
Milwaukie www.ofcu.com 12 $301,422,326 $0.00 $0.00
Chetco Federal Credit Union
Harbor www.chetcofcu.org 13 $247,921,898 $0.00 $0.00
Clackamas Com. Fed. CU
Oregon City www.clackamasfcu.org 14 $241,783,958 $0.00 $1,093,984
NW Priority Credit Union
Portland www.nwprioritycu.org 15 $233,307,003 $0.00 $0.00
Central Willamette Com. CU
Albany www.centralwcu.org 16 $218,871,141 $0.00 $0.00
Consolidated Federal CU
Portland www.consolidatedfcu.com 17 $174,665,307 $0.00 $0.00
St. Helens Community FCU
St. Helens www.shcu.org 18 $165,805,923 $0.00 $0.00
Mid Oregon Federal CU
Bend www.midoregon.com 19 $165,381,339 $0.00 $0.00
Cascade Community FCU
Roseburg www.cascadecu.org 20 $152,016,191 $0.00 $0.00
Source: National Credit Union Administration (NCUA) As of September 30, 2012 for All Federally Insured Credit Unions
Large Oregon Credit Unions: Gov’t Deposits
$ Accts Held by Member Government Depositors $ Accts Held by Non-Member Government Depositors
Oregon Credit Union Open Membership Eligibility
As credit unions grew in Oregon and other states, their advocates found ways to expand membership eligibility criteria to fuel that growth. It is also common practice by regulators to include a merging credit union’s Field Of Membership (FOM) in the continuing credit union’s FOM. Most credit unions also have a “once a member, always a member” policy even if the member would no longer be eligible to join. Critics have observed that like banks open to all customers, such “open” FOMs allow anyone to join a credit union. An example might be the OSU Federal Credit Union, which offers membership to anybody who is related to someone who is eligible to be a member, even if that relative is not a member. Or Northwest Community Credit Union, which offers membership to anyone who is related to somebody who lives or works within 15 Oregon counties, regardless of the prospective member’s residence.
OnPoint Community Credit Union $3,219 246 -Live or work in any one of 13 OR counties -Live, work, worship, or go to school in Clark or Skamania counties in WA
-Related to a current OnPoint CU member Oregon Community Credit Union $1,088 104 -Live or work in any one of 10 OR counties
-Call OC CU for additional ways to join SELCO Community Credit Union $1,020 88 -Live or work in any one of 26 OR counties
-Related to a current member of the credit union -All businesses located in any qualifying county Advantis Credit Union $1,012 49 -Live or work in any one of 24 OR counties
-Live, work, worship, or attend school in WA -Have immediate family member who is eligible for membership regardless of where one lives or works Unitus Community Credit Union $934 80 -Live or work in any one of 15 OR counties or
Clark County WA
-Have immediate family member who lives or works in any one of the 16 counties
OSU Federal Credit Union $787 73 -Live, work, attend school, worship, or regularly conduct business in any one of 5 OR counties -Related to a current OSU FCU member or some one eligible to join
-Business or other legal entity located in any one of the 5 OR counties
First Community Credit Union $762 72 -Live or work in any one of 22 counties mostly in OR Northwest Community Credit Union $758 80 -Live or work in any one of 15 OR counties
-Related to anyone who lives or works in those 15 OR counties
Rogue Federal Credit Union $583 56 -Live, work, worship, attend school in any one of three counties
-Related to a current Rogue FCU member -Related by descent, adoption, marriage, or domestic partnership to a person who meets any of the above criteria
Rivermark Community Credit Union $556 65 -Live or work in any one of 11 OR counties -Family members or domestic partners of anyone residing Live or work in any one of 11 OR counties
10 Largest Oregon Credit Unions: Membership Eligibility
CU Name $ Assets
in Millions
# Members in Thousands
Membership Eligibility
(as described on the CU’s website)
$5.6 Billion California-based Technology Federal Credit Union has 10 Oregon Branches
CU Name $ Assets
in Millions # Members in Thousands Membership Eligibility(as described on the CU’s website)
Technology Federal Credit Union $5,630 356 -Work for one of over 875 high tech or telecom sponsor companies, the State of Oregon, or in Lane County OR
-Live in Lane County OR
-Related to a current First Tech FCU member regardless of where one lives
-A member of the Financial Fitness Association
Most credit unions in Oregon were originally organized to serve one employee group or a single rural com-munity that shared a “common bond,” but there remain few single-group bonds among today’s credit unions. Federal and state credit union regulators officially approved these designated “fields of membership” (FOM) for each credit union and have authorized expansions to these FOMs. Neither the regulators nor the credit unions are required to make public their legally-defined FOMs, but most credit unions now share this infor-mation on their websites in their “join us” or “membership” links. The inforinfor-mation in the chart is taken from each credit union’s website.
In Oregon the “community-based FOM” is among the most popular with both state and federally chartered credit unions. Most are “live, work, or worship” in multi-county geographical designations ranging from one county to almost all of the counties in Oregon. Nearly all allow relatives of existing members to join. Many credit unions also provide for “back door” membership eligibility through membership in an interest group or asso-ciation. First Technology Federal Credit Union’s “Financial Fitness Association” is an illustration of that form of eligibility. From the consumer’s point of view, every Oregon resident has a large number of credit unions with which he or she can choose to do business.
Credit Union Income Tax Exemption and Estimated Taxes
By definition, when one of two competitors avoids a significant cost of doing business such as the income tax, it has a competitive advantage. In a direct competition between a tax-exempt credit union and a tax-paying com-munity bank for lending market share, the credit union would be advantaged. Whether that advantage turns into reduced costs or other benefits for consumers remains problematic. It greatly depends upon the circumstance at each particular financial institution. Federally chartered credit unions have been exempt from all federal, state, and local taxes since 1937. Credit unions usually pay real estate taxes, payroll taxes, and some other property taxes. Federal credit unions are treated as an instrumentality of the United States. Individual state legislatures can choose to impose a state income tax on state chartered credit unions, but not on federal chartered credit unions. The credit union industry’s embedded focus on preserving the income tax exemption blinds it to potential evolutionary alternatives. In a broader sense, some industry analysts view the credit union tax exemption as a burden on the credit union business model in the United States. Credit unions in other developed countries like Australia and Canada pay income taxes and have received support from their legislators and regulators to evolve their governance structures, capital-access mechanisms, and products and services portfolios. Large credit unions that have outgrown their charter have the legal alternative of converting to a mutual savings bank charter. The ownership by depositors at a mutual savings bank is almost indistinguishable from credit union consumer-member ownership. A mutual savings bank is simply another type of cooperative financial institution that just happens to have a different business license and slightly different powers. Unlike credit unions, mutual savings banks pay income taxes and comply with the Community Reinvestment Act (CRA). As a mutual savings bank credit unions would be placed on equal footing with banks with respect to taxes and with regulatory oversight by traditional banking agencies and the Federal Deposit Insurance Corporation (FDIC). Some critics of aggressively expanding credit unions advocate that those institutions should be mandated to convert to the tax-paying mutual savings bank charter.
In the long run the tax exemption keeps the credit union business model from evolving and may eventually restrain it. However, many credit union officials would not agree with this assessment. The tax exemption appears so embedded in the self-definition of a U.S.-based credit union that the industry’s trade associations would not cut a deal that involved giving it away for fear of the internal uproar it would cause. Preserving and protecting the credit union tax exemption is at the top of the list of priorities for just about every credit union industry trade association – and has been at the top of that list for decades.
CU Name $ Assets
OnPoint Community Credit Union $3,219,533,452 $22,116,377 $7,740,732
Oregon Community Credit Union $1,088,423,841 $9,644,759 $3,375,666
SELCO Community Credit Union $1,020,213,073 $15,126,093 $5,294,133
Advantis Credit Union $1,012,081,791 $9,186,456 $3,215,260
Unitus Community Credit Union $933,909,722 $3,744,762 $1,310,667
OSU Federal Credit Union $786,987,875 $7,359,690 $2,575,892
First Community Credit Union $762,763,054 $4,971,007 $1,739,852
Northwest Community Credit Union $757,813,347 $5,056,998 $1,769,949
Rogue Federal Credit Union $583,036,939 $3,513,415 $1,229,695
Rivermark Community Credit Union $555,713,438 $2,872,471 $1,005,365
10 OR CU Total $10,720,476,532 $83,779,617 $28,251,846
CU Name $ Assets
73 Oregon CUs Consolidated $15,554,006,557 $98,789,967 $34,576,488
CU Name $ Assets
Technology Federal Credit Union $5,630,290,031 $43,571,895 $15,250,163
10 Largest Oregon Credit Unions Net Income & Estimated Tax
73 Oregon Credit Unions Consolidated
$5.6 Billion California-based Technology Federal Credit Union has 10 Oregon Branches YTD Net Income (Loss) YTD Net Income (Loss) YTD Net Income (Loss) 35% Estimated Income Tax YTD
35% Estimated Income Tax YTD
35% Estimated Income Tax YTD
Year-to-Date Net Income (Loss) data for each credit union is from 2012 Third Quarter NCUA Financial Perfor-mance Reports and represents approximately three-quarters of the net income likely for a full year. Similarly the 35% Estimated Income Tax Year-to-Date is calculated on that Third Quarter FPR data and represents approximately three-quarters of what a full year’s tax might be. The 35% estimated income tax is routinely used by industry analysts to illustrate a credit union’s likely income tax costs. Any actual tax paid by credit unions would be based upon the actual federal and state taxes that might statutorily apply as well as any legal tax avoidance strategies that each credit union might implement. Oregon chartered credit unions are currently exempt from income taxes under the Internal Revenue Code 26 USC §501(c)(14) and federal char-tered credit unions are exempt under 26 USC §501(c)(1). Additionally the Federal Credit Union Act 12 USC §1768 further exempts federal credit unions from federal, state, and local income taxes.
Credit union advocates contend that the federal tax exemption is based upon the not-for-profit, cooperative structure of credit unions, not by the size of the credit union, those it serves, or the products and services that are offered. They also cite that credit unions’ boards of directors are generally unpaid volunteers elected by the membership, and credit unions are restricted in who they may serve. They also claim that credit unions continue to serve consumers of modest means and the underserved. Banking groups and some policymak-ers have raised significant questions concerning the appropriateness of continuing this subsidy since credit unions have become the equivalent of a tax exempt bank.
18 | January 2013 Oregon’s Credit Unions
Based upon just three quarters of a year’s worth of net income, Oregon’s largest ten credit unions would have an estimated combined 2010 YTD income tax obligation of over $28 million. For all 73 Oregon credit unions it would be $34.5 million.
According to a recent statement attributed to the President of the American Bankers Association (ABA), “Credit unions’ tax exemption currently costs the U.S. Treasury $2 billion annually. By contrast, their com-petitors – the 6,000-plus community banks that are the lifeblood of towns across the country – contribute $4 billion annually in taxes that support our nation and those communities. Congress should not even consider legislation that would expand the country’s deficit, dole out more benefits to tax-avoiding credit unions and harm community bankers who shoulder their fair share.”
Credit Unions’ Public Purpose, and
the Community Reinvestment Act
From a regulatory point of view a credit union and a community bank have become almost indistinguishable in recent years. A number of factors are all converging into an environment where all federally insured financial in-stitutions will ultimately follow the same regulatory rules and operational expectations. These factors include:
• the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandates, • the Consumer Financial Protection Bureau’s (CFPB) aggressive rulemaking, supervision,
and enforcement actions designed to control the consumer financial services marketplace, • the federal regulatory agencies’ coordinated risk-mitigation actions,
• the exponentially competitive financial services marketplace,
• the protracted underperformance of the economy and subsequent margin compression, and • the increased complexity of the credit union industry
However, differences still remain. When Congress enacted the Community Reinvestment Act (CRA) in 1977, credit unions were excluded although all other federally insured depositories were required to comply with the law’s provisions. Credit union lobbyists successfully advocated that they were not part of the problem that the CRA was designed to address. In something of a Catch 22 since credit unions are not required to comply with CRA, there exist no verifiable data that demonstrate that credit unions comply in spirit with CRA. Despite the low-income designation held by 25 Oregon credit unions, the industry’s commitment to serving the underserved is unverified while each bank’s CRA activities are well documented. Credit union critics that include consumer activist and economic justice groups in addition to community bankers are demanding that credit unions prove their adherence to a public purpose.
Critics like the ABA continue to link credit union’s public purpose with the tax exemption and restrictions on bank-like behaviors. On May 16, 2012 the ABA advised a Congressional Committee scrutinizing tax exemp-tions that, “Many of today’s credit unions are a far cry from the small, traditional credit unions that served distinct groups of ‘people of small means’ which Congress sought to assist when it provided tax subsidies to credit unions in the 1930s. There are now 183 credit unions that have more than $1 billion in assets each; these credit unions hold 48.6 percent of all credit union assets but represent only 2.5 percent of the total number of credit unions. These 183 large credit unions are larger than 91 percent of all banks, and nearly indistinguishable from taxpaying community banks. Indeed, these credit unions compete for the same loans as their community bank counterparts, but credit unions pay no taxes. Credit unions were not intended to be simply tax-exempt banks. As Congress examines the affordability of tax expenditures in the face of rising debt levels, it should target the credit union tax expenditure. The need for the credit union tax exemption has all but disappeared.” In addition to arguing for the elimination of the credit union tax exemption the ABA recommended that credit unions should be required to demonstrate service to people of modest means and that federal credit unions should be required to fill out annual Internal Revenue Service Form 990s that disclose compensa-tion of senior officials.
Pressing the case for “modest means” the ABA statement said, “Moreover, credit unions’ own surveys (CUNA Member Survey, 2002) suggest that their image of serving moderate and lower income people is no longer valid. The typical credit union member has higher than average income, more years of education and is more likely to own a home than non-credit union members. Thus, the credit union tax expenditure is sub-sidizing financial services to individuals who do not need it and who otherwise have access to basic banking services. Basic transparency would surely shine light on this discrepancy. More concrete demonstration of serving people of modest means is needed. This was what the GAO recommended in two studies, one in 2003 and the other in 2006, suggesting that NCUA develop more tangible indicators to determine whether credit unions have provided greater access to services in underserved areas or fulfilled their tax-exempt mis-sion. The recommendations have not yet been fully implemented…With the privilege of federal income tax exemption and a mandated mission of serving persons of modest means or those with moderate and lower incomes, credit unions must be more transparent with those definitions and their application. The current amorphous definition leaves credit union members, taxpayers and tax policy decision-makers without clear and fundamental information to understand how credit unions meet their congressionally-defined mission.”
Selected Oregon Credit Union CEO Compensation
The ABA’s and other critics’ calls for more transparency from credit unions is directly linked to the issue of CEO compensation. As credit unions have grown in size, so have the dollar amounts and marketplace competitiveness of CEO compensation packages. Critics contend such high compensation precludes credit unions from needing the tax exemption to subsidize the “excessive” salaries considering the not-for-profit organizational structure. Credit union’s public posture is often of a not-for-profit looking out for its members. Its compensation packages, however, frequently belie that image.
The “excessive” credit union compensation issue, and lack of public disclosure of that information through IRS Form 990s, has been around for many years. As the 2010 IRS 990 filings on selected large Oregon credit unions revealed, the CEO of OnPoint Community Credit Union was compensated at $1.8 million and the CEO of First Community Credit Union received an “Other Reportable” amount of over $4 million in addition to base salary. The disclosure form did not detail the nature of that $4 million in other reportable compensation.
Even other executives and board members received generous compensation packages. According to the 2010 Form 990 filed by OnPoint Credit Union, the Senior Vice President of Retail Delivery earned over $1 mil-lion, the Senior Vice President of Marketing and Member Services earned over $850,000, the head of Human Resources earned over $800,000, the Chief Risk Officer earned over $750,000, and the Chief Financial Of-ficer earned over $600,000. Two other Vice Presidents were awarded packages worth over $500,000 each. OnPoint offered other generous perquisites such as first class airfare, luxury company cars, paid spouse travel, and health and social club dues. The first-class travel, including companion fares, also extended to each member of the OnPoint Board of Directors.
Most credit union member-owners never see any information concerning compensation, benefits, or perqui-sites provided to the CEO, other highly-compensated executives, and the board of directors. Paradoxically, even if a credit union customer does not own stock in a publicly-traded for-profit company, that company’s executive officers’ and board members’ compensation are readily available on the “Investor Relations” page on the company website and on the Securities and Exchange Commission’s (SEC) EDGAR website, along with volumes of strategic business information outlined in numerous SEC disclosure filings.
CU CEO Base Bonus Other Retirement Nontaxable Total & Incentive Reportable and Deferred Benefits
Robert Stuart
OnPoint CU $527,081 $500,900 $124,152 $652,860 $6,222 $1,811,215
Robert Newcomb
SELCO CCU $470,690 $81,149 $18,375 $11,656 $581,870
Ron Barrick Advantis CU $466,796 $94,420 $11,163 $45,900 $14,439 $632,718
Dal King First Com. CU $295,822 $4,003,155 $8,250 $4,307,227
D Amanda Jones
Oregon Com. CU $238,683 $19,162 $36,500 $9,956 $304,301
Scott Burgess
Rivermark CCU $259,007 $259,007
Selected Oregon Credit Union CEO Compensation As Reported on IRS Form 990 for 2010
Only state chartered credit unions are required to file Internal Revenue Service (IRS) Form 990 Return of Organization Exempt From Income Tax. Federal credit unions under the supervision of the National Credit Union Administration (NCUA) are considered “federal instrumentalities” and are exempt under a different section of the IRS Code than state chartered credit unions. Although these IRS Form 990s did not include the detail about some of the larger reported amounts, articles appearing in credit union industry publications have noted that Supplemental Executive Retirement Plans (SERPs) are increasingly a component of a chief executive officers’ total compensation. Although there are many former bankers in credit union senior man-agement, some of the compensation amounts credit union executives receive would make many community bankers jealous..
Evolution of Oregon Credit Unions to Continue
As the Oregon credit union industry historic growth trends data clearly foretells, credit unions in the state will inevitably grow larger and fewer in number. Continued earnings and margin pressures on the smallest credit unions under $10 million in assets will force them to merge or liquidate. Credit unions in the size range of $10 to $100 million face a problematic future that challenges the traditional credit union business model that relies on retained earnings for net worth growth. Many of them will choose voluntarily to merge as well. $100 million in assets and greater appears to represent the minimum level of longer-term sustainability and some analysts would set that minimum size at a significantly higher level. The ten largest multi-branch Oregon credit unions represent most of the asset growth and net income generation in the state. They will absorb many of the smaller credit unions, continue to dominate the industry, and garner significant market share. These full-service, multi-branch large credit unions will grow even more bank-like in the eyes of the general public and policymakers.
There is nothing inherently wrong with a financial institution that is indistinguishable from a commercial bank. Most commercial banks are well respected by their customers and by the communities that they serve. Near-ly any business would aspire to that position. The evolutionary dilemma for Oregon’s credit unions resides in the public policy implications and potential costs from abandoning the more traditional approach and the now-outdated “little guy with the umbrella” image. An additional uncertainty is whether the increasingly open-membership multi-county credit union presence ultimately succeeds in the Oregon marketplace by provid-ing scope and scale. How quickly the crushprovid-ing regulatory burden and myopic economy drive smaller credit unions and other providers out of the financial services business will also catalyze significant change.
commercial bankers and other credit union competitors are certain to assertively weigh in concerning the potential future evolution of Oregon’s bank-like credit unions. Bankers contend that over the years Oregon’s credit unions have aggressively pursued advantages in both the marketplace and legislative bodies to im-prove their competitive position with banks. Today, other than business organization and corporate compli-ance, it is often hard to differentiate between the activity of credit unions and the activity of banks. Bankers assert that credit unions are designed to remain in the consumer space serving individuals of modest means and are not designed to be large scale commercial lenders under their current tax status. They also say that credit unions are not acting like tax exempt organizations, but instead are acting like banks. The pressures to radically alter public policy are certain to escalate.
External factors are also blurring the distinctions between the larger credit unions and commercial banks. The Dodd-Frank Act and especially the CFPB establish a financial product/service-focused rulemaking and regulatory supervision approach. That consumer-experience emphasis largely replaces the historic silo-like organizational structure supervision that credit unions have experienced during most of their evolution. The CFPB focuses on the consumer-friendliness of the products and the fairness of the broader marketplace, not what type of business charter or governance structure the financial service provider might claim. That rep-resents a significant and potentially disrupting change to the traditional credit union business model based upon a unique charter. The vast majority of credit union industry analysts predict that there will be no going back to the past, especially for the largest credit unions.
