As banks continue to consolidate and grow as national corporations, credit unions likewise continue to provide financial connections to local communities.
Clark County Credit Union President and CEO Matt Kershaw said the philosophy of “people helping people” has propelled state-charted credit unions to be the largest group of locally-owned financial institutions in Nevada.
“Credit unions are healthy and thriving with strong balance sheets,” Kershaw said. “We are owned by our members – the businesses and individuals who we help get the loans they need to buy their dream homes, get the cars they need to get to work and school, plus we even have second-chance programs that help people get on their feet.”
Many of Nevada’s credit unions have long-standing histories, including Clark County Credit Union, which was founded in 1951. Las Vegas-based One Nevada Credit Union was founded a year earlier, while Carson City’s Greater Nevada Credit Union was founded in 1949.
Clark County Credit Union’s members historically have been government workers, first responders and employees of the medical field – but has grown to include many of Clark County’s other professions like construction and casino workers. Greater Nevada Credit Union serves the northern portion of Nevada.
As credit unions are generally made up of the local communities they’re based in, the credit unions do tend to keep an eye on mega-banks, who now control nearly 60 percent of deposits in the U.S., Kershaw said. While there could be animosity between the banks and credit unions, Kershaw said locally-owned community banks play a crucial part in loan participation.
“We know it’s important to provide reliable relationships with our members,” he said. “That’s why we offer great interest rates on deposits, unique loan programs and give our profits back to our members in the form of a bonus dividend each year.”
Overall, the credit union industry is getting healthier, One Nevada Credit Union CEO Paul Parrish said, with healthy growth, loan quality and building capital. He did say the industry is experiencing consolidation as smaller entities are challenged by the pace of technological change and compliance complexity.
One Nevada, however, is among those chugging forward with ease. Parrish also doesn’t see the positive performance slowing down in the near term. He called his credit union’s membership a “snapshot” of Nevada.
“We’re hitting on all cylinders in terms of financial performance and are aggressively pursuing strategies to increase the value of being a member to our credit union,” Parrish said. “We learned a lot of lessons while we worked our way through the Great Recession, and we’re in much better shape now than we were heading into that economic nightmare ten or so years ago.”
The recent economic success since the nation began recovering from the Great Recession has been beneficial to most credit unions, said Wally Murray, president and CEO of Greater Nevada Credit Union.
“We’re doing very well by and large. Very healthy, very sound,” Murray said. “Certainly credit unions are benefitting from the economic up-turn of the last several years and have done a great job of focusing on improving lives of the consumers and businesses we serve.”
While credit unions have largely focused on individual consumers in the past, they are increasingly focused on the business community.
Kershaw said credit unions are an excellent option for small- and medium-sized businesses, but that Clark County Credit Union is also happy to call several large-scale companies members. The same benefits individuals receive are extended to commercial products, Kershaw said, including eligibility for the annual business dividend each January on business loans and deposit accounts. The 2019 dividends equaled $3.5 million.
“Our commercial lending team helps many of our members get the needed funds to expand and grow their businesses, adding additional locations, new equipment and updated technology,” he said.
Greater Nevada Credit Union has its own commercial lending subsidiary, Greater Commercial Lending. The subsidiary has been named National Lender of the Year by the U.S. Department of Agriculture three of the last four years.
“After coming out of the recession and seeing huge capital needs for small businesses, we entered that market more assertively and have done well,” Murray said.
He said the influx of technology companies in northern Nevada, such as Apple, Switch, Tesla and Google have helped add additional individual members. It’s also helping add additional supplemental businesses to the area, which are potential members as well.
Not all credit unions are focused on expanding its member base to include businesses.
“There’s not a one-size fits all approach for credit unions,” Murray said. “All credit unions have different emphasis based on their field of membership, the areas they serve and the groups they serve.
Parrish said the main focus for One Nevada remains individual members, which are attracted to the credit union’s auto loans, mortgage loans and credit cards. That being said, Parrish said One Nevada has made “quite a few” commercial real estate loans ranging between $1 to $5 million.
“Those are usually the hooks that bring them in,” he said. “When they discover what we’re all about, they’ll eventually move their transaction accounts over. More recently though, we’ve been getting more attention for our remote and mobile delivery channels. The majority of our new accounts are now coming in via those channels.”
Preparing for Change
Local credit union executives aren’t shying away from the potential of another downturn striking soon, even if Parrish is fairly bullish on the current outlook.
“The key, though, is to be preparing for the next downturn while maintaining traction and taking advantage of the existing environment,” Parrish said. “We think we’re accomplishing that through solid credit quality, keeping an eye on expenses, building capital and maintaining decent liquidity.
“Assuming we can keep pace in these key areas, the coming years should bring continued success in terms of financial performance and providing great value for our members.”
Parrish said the same aspects that should help credit unions weather the next downturn better than the last are the same as the banks, explaining the recovery has been a “great environment for all financial institutions.”
Murray said aside from a few minor operations in the Las Vegas area, Greater Nevada has been able to focus on the economic expansion of northern Nevada, led in large part by the technology sector and the supporting industries that have moved in with the population growth.
According to Murray, the best the industry can do is a two to three year outlook, and within that range, or near future, a downturn of some type is anticipated. No matter what, like Parrish, Murray said one of the positives of a credit union is the community of members and how the entire organization is there for its members, “through thick and thin.”
“It won’t be of the magnitude of the Great Recession,” he said. “The economic fundamentals are more sound this time around, not only nationally, but certainly in Nevada. The diversification in the last decade on the technology side has helped and we believe added some additional stability to the Nevada economy.
“While we’re able to plan and react when there is a downturn, it’s going to be certainly more manageable. We don’t have any other reason to exist but to serve our members, whether times are good or bad, that’s our approach.”
New Regulations Coming?
Overall, Murray said the regulatory climate has cooled significantly in the decade since the Great Recession.
“It’s improved the last several years. Coming out of the recession, it was understandably hot and heavy,” he said. “That regulatory pressure has abated slightly and there’s not currently a big movement for new regulations coming down the pipeline.”
Politics and nationwide economic events can alter the regulations, of course, he said, but for now, it seems to be steady.
Parrish was in agreement with Murray, as he pointed to the Trump administration’s preference to keep the financial sector free. Because of the lack of potential new regulations and even the rolling back of previous rules, credit unions and banks have been able to focus attention elsewhere.
“The current administration has favored ‘lightening up’ a bit as it relates to additional layers of regulatory burden for all businesses, including those in the financial industry,” he said. “As a result, we’ve been able to concentrate on much more productive endeavors.”
There is an area that appears to be of a strong focus where the credit union industry would enjoy some additional assistance. Kershaw said credit unions have combined in recent years in an effort of consumer advocacy, coming together to ask the U.S. Congress to help protect consumer payment information.
At the heart of the movement is the consistency of data breaches.
“Hackers, both domestic and international have increased their activity by breaching the personal financial information of American consumers on a daily basis,” Kershaw said. “The time has come to stop the breaches. Credit unions believe those that do not properly store, and secure consumer information must have the liability when a breach occurs. Far too often, the consumer is unaware that their big box mart or gas station allowed an intruder into their payment processing system.”
Beyond lobbying Congress, Kershaw said Clark County Credit Union has put significant resources behind security efforts to protect member data, but also is doing more currently to educate the members in how to avoid and detect scammers. He said the credit union is doing what it can to prevent both individual hacks and wide-scale data breaches – although the latter is often out of their control.
“It is often a phishing campaign or a fraudster who gets a member to provide account information,” he said. “Data breaches with major retailers are the area of biggest expense as we typically have to reissue credit or debit cards to protect our members’ payment information. We do our part to identify scams for our members so they can avoid being targeted individually.”
Other credit union executives are equally committed to the efforts of preventing and educating about cyber theft and fraud. Murray said Greater Nevada Credit Union is investing heavily in security measures as the threats change on a daily basis. He said the credit union has largely stayed away from major issues, but has been hit by large-scale merchant breaches.
Parrish said chip-cards have helped curb some of the debit and credit card fraud over the past few years, but account take-over incidents are on the rise.
“We’ve managed to stay a step ahead of the crooks out there,” he said. “But it’s a continuous battle that, to me, resembles an amoeba that’s constantly changing its form. We’ve got some great pros on staff with the latest tools to protect our members’ accounts and related personal data.”