Washington State Units Give Banks a Run for the Money

In Washington State, credit unions are giving bankers fits.

The Evergreen State's credit unions held nearly $6 billion in deposits at the end of 1990, about 8% of the state's total, according to the Washington Credit Union League.

Since these member-owned, nonprofit cooperatives do not handle business accounts, their share of consumer deposits was considerably higher.

As commercial bankers frequently complain, regulatory and tax advantages help credit unions pay better rates on deposits and charge less for loans than most banks and thrifts. Bankers also say that credit unions -- at least in Washington -- enjoy a reputation for responsiveness to members' needs that make them tough to beat.

Rates Better than Banks'

"To win those accounts away is extremely difficult," said Gordon Piercy, marketing director at Puget Sound Bancorp, Tacoma. "Their customers are very loyal."

Boeing Employees' Credit Union, the state's largest, illustrates the challenge bankers face.

At $1.4 billion in assets, the Boeing unit is dwarfed by such banking giants as Seattle First National Bank and Washington Mutual Savings Bank.

But on deposits and checking accounts, the credit union strives to pay 125 basis points above the average bank rate, said Gary J. Oakland, the credit union's president and chief executive. Currently, because of low rates industrywide, it is missing its target: It offers 5.75% on its market-rate savings account, compared to a Washington bank average of about 4.75%.

Response to Low Rates

The Boeing credit union offers a 12.9% annual percentage rate on credit card balances. A recent credit card solicitation mailed to 13,000 members, which coincided with the wave of publicity on high credit card interest rates, drew an 11% response in the first two weeks, said Mr. Oakland.

The credit union's membership is limited to families of current and past employees of Boeing Co., the Seattle-based aerospace company.

Nevertheless, the credit union has recruited an astounding 175,000 members, including 82% of Boeing's present employees, Mr. Oakland said. Some 48% of the members identify Boeing Employees' as their primary financial institution, he added.

Good Times for Boeing

Boeing itself has been flush with aircraft orders, a boom that has caused business to surge at the credit union too. In the last seven years, membership has doubled and assets have more than tripled.

The credit union also prides itself on staying close to members. When Boeing employees went on strike a few years back, the credit union extended several million dollars in emergency loans to help strikers pay for food and housing.

And while it offers home equity loans, it discourages members from using the product. Promoting home equity loans "encourages people to mortgage their primary retirement asset," Mr. Oakland warned.

Shortcomings Acknowledged

To be sure, Boeing Employees' has some competitive weaknesses.

"The products we offer are somewhat limited," Mr. Oakland said. The credit union makes no first mortgages, for example.

What's more, it has just one office, a large complex in Tukwila, a suburban town south of Seattle near several Boeing facilities. Members who can't get to the office conveniently must bank by phone, mail, or teller machine.

That sort of narrowness makes Boeing Employees' and other credit unions vulnerable, bank and thrift marketers believe.

"They don't have the range of services and expertise" of a full-service institution, said Deanna Watson Oppenheimer, Washington Mutual's marketing director.

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