Financial institutions emphasize service
Bear market boosts banks, credit unions

by Christopher Key

 

If there’s anything good to be said about the current woes of the stock market, it will probably be said by banks and credit unions. Investors who lose confidence in Wall Street are flocking to the financial institutions where their money is at considerably less risk. Of course, the current low interest rates on loans are reflected by low interest rates on deposits.

US Bancorp is the eighth largest bank holding company in the nation and boasts $174 billion in assets. It grew to its present size by acquiring small independent banks like West One and Northwest Community Bank. Gary Pickering is manager of the downtown Bellingham branch.

“Big banks have a bad reputation,” Pickering said. “The trick is to maintain a high level of service through the transition.”

US Bank acknowledges the differences in communities.

“We have a community bank model for this area,” Pickering said, “that is quite different from the metro model. I didn’t have much authority as a branch manager before. Now it’s like I’m running an independent business.”

Some larger banks have taken a lot of heat for excessive fees.

“US Bank is moving away from fees on checking accounts,” said Pickering, “and we offer rebates for using your debit card.”

With 16 retail branches in Whatcom County, US Bank employs 65-70 people.

“If we want to stand out in the crowd,” said Pickering, “we have to differentiate our products and services. The biggest reason banks lose business is poor customer service. I have to help people find reasons to switch.”

The economy is a definite factor in the banking business.

“We had to fight to retain deposits when the stock market was up,” Pickering said, “but now those dollars are returning.”

The heat of competition in the Whatcom County market is intense.

“From my point of view,” Pickering said, “there are too many players in the marketplace. It’s a real challenge. However, there’s no question that it’s good for the customers.”

Pickering doesn’t feel that he’s competing with credit unions.

“We can service the medium sized and larger businesses that credit unions can’t,” said Pickering, “and we’re a couple steps ahead of them in technology. There are quite a few customers that maintain checking accounts at credit unions but come here for other banking needs.”

There haven’t been any revolutions in the way banks conduct business, but there has been a revolution in the technology that helps them do it.

“It’s hard for the smaller banks and credit unions to keep up,” Pickering said. “US Bank had 690,000 people using Internet banking in 2000. In September of 2002, that had grown to 1.1 million.”

Banner Bank is what is known as a mini-regional. It operated as Whatcom State Bank until a recent name change. Banner has $2.2 billion in assets and has experienced rapid growth through acquisition. Among the banks consolidated under Banner’s banner were First Savings, Inland Empire, Town, Whatcom, Seaport, and Business Bank of Oregon. The holding company is First Washington Bankcorp of Walla Walla, which was the first chartered thrift in the state.

Banner now has 41 branches and six lending centers in three states. Senior vice president Cliff Frydenberg thinks Banner is just the right size.

“Our assets give us more flexibility in lending,” Frydenberg said, “but we’ve never become impersonal. Most loans are delegated to the local branches, rather than being centralized.”

He agrees that the competition in Whatcom County is stiff.

“There are 65 bank branches in Whatcom County,” Frydenberg said, “averaging about $23.5 million in deposits. In King County the branch average is about $60 million. There is a bank branch for every 2500 people in this county. That’s good for consumers.”

Despite the competition, banks here seem to be doing well.

“The ones with an experienced and stable staff do better,” said Frydenberg. “The majority of our lending officers have 25 years or more of experience. Loan officer turnover is a big problem for some. That’s why Washington Mutual pulled out of Lynden, their first retreat. Our loan officers are very specialized in fields like commercial real estate or agriculture.”

Banner’s formula seems to be successful.

“Assets in the Whatcom Division have grown from $100 million to $193 million in just the last four years,” Frydenberg said. “We’re more responsive because of our size and specialization. We have a retail manager that does nothing but focus on the business and consumer product. The lending staff handles nothing but loans.”

According to Frydenberg, Banner offers the best of both worlds.

“We offer all the benefits of a large bank,” Frydenburg said, “but we’re based in the community. You can get fast decisions on loans because our employees are empowered to make decisions. We put a lot of emphasis on training and supporting our communities. We’re all in this together.”

Industrial Credit Union (ICU) can trace its history back to 1941 and the Puget Pulp Credit Union. Puget Pulp became part of Georgia Pacific. ICU served the pulp side of the operation while GaPac served the tissue side. In the mid 1970s, the credit union broadened its charter to include all industrial operations in Whatcom County and by the mid 1990s, it was a full blown community institution. ICU’s current charter includes anyone who “…lives, works, or worships in the state of Washington.”

“We’re really clear on staying in Whatcom County until we can fully meet the needs here,” said CEO Terri McKee. “ICU is not going to grow just for the sake of growing.”

McKee’s background includes both finance companies and commercial banks.

“I watched the banking industry change from consumer oriented to sales oriented,” McKee said. “Banks are responsible to stockholders, credit unions are responsible to their customers. I’d rather put my efforts into paying more on savings accounts. Our board is heavily weighted in favor of consumer advocates.”

That means maintaining a very personal touch.

“Our members like to hear real people answering our phones,” McKee said. “There’s no big recording to wait through. It’s up to me to figure out how to pay for that.”

Part of McKee’s philosophy includes being accessible to customers.

“I’ve been here for 20 years,” said McKee, “and have grown up with some of our customers. They honk and wave at me when they pull into the parking lot.”

ICU now employs 55 people in four branches.

“We’re opening a branch in the new Fred Meyer,” said McKee. “That will be the first credit union branch in a retail environment. It will include a drive-up ATM.”

ICU features shared branching, which allows customers to go to any other participating credit union and enjoy a face-to-face transaction. McKee doesn’t feel the same competitive pressures as the commercial bankers.

“Commercial banks do a good job of attracting businesses with special needs,” McKee said. “We’re consumer oriented. Customers need both. We can all live together.”

Assets and deposits have increased by 15 percent in the last year, an indication of just how much money is being pulled out of the stock market.

“We’re doing a lot of education around consumer lending,” McKee said. “We try to help people see that zero percent financing offers by automakers are often deceptive. Sometimes, taking the rebate can be a better deal. We want to help our customers make good, sound financial decisions rather than just doing what’s convenient. Teaching financial literacy is important. Too many people keep trading cars and getting deeper in debt. No longer is there a moral stigma attached to bankruptcy and people are using it as a financial management tool.”

One thing McKee emphasizes: don’t be afraid to ask for help.

“When I became CEO here, I called all the other credit union CEOs for help,” McKee said. “I asked them how they would face some of the challenges I faced. Check before you reinvent the wheel.”

The first credit union in Whatcom County was the Whatcom Educational Credit Union (WECU), which was founded in 1936. It now has well over 32,000 members, at least one in 25 percent of the households in the county. That shouldn’t come as much of a surprise, since education is the county’s biggest employer. WECU can draw from Western Washington University, Whatcom Community College, Bellingham Technical College, and all the school districts, both public and parochial. A seven percent increase in membership propelled WECU to more than a 20 percent increase in deposits last year along with an asset growth just short of 20 percent.

According to marketing director Joan Martin, it’s because the members like the feeling.

“Our members get a feeling of exclusivity here that is pretty rare,” Martin said.

The biggest challenge for WECU right now is loans.

“It’s hard because of all the competition out there,” Martin said. “Not just banks, but automakers, as well. That’s where our member loyalty helps. We haven’t had to go head to head with the zero percent interest deals and we aren’t looking for an adversarial relationship. Sometimes it’s hard to balance that with serving our members.”

WECU has 140 employees in five locations and they tend to stay put.

“I’ve worked here for 20 years,” said Martin. “Employees here are treated fairly and with respect. There are opportunities for advancement. Our CEO cares about the employees being happy and the board shares those values. The attitude comes from the top. We spend lots of orientation time with new employees.”

Martin compares WECU members to a cult.

“They expect clean, welcoming facilities,” Martin said. “The staff is respectful and polite. We provide the best, safest financial environment.”

In addition to three offices in Bellingham, WECU has branches in Lynden and Ferndale, along with 12 no surcharge ATMs.

“WECU feels a big social responsibility to the community,” Martin said. “Our employees help build Habitat for Humanity homes, maintain trails, participate in the Human Race and the Jingle Bell Run. We also have a well equipped educational center just across Holly Street from the main office that is available to nonprofit organizations.”

The plethora of financial institutions in Whatcom County means it’s a buyers market. Consumers have more choices in Whatcom County that just about anywhere else in the state. Even the bankers will tell you to take advantage of that situation and shop around.