State’s credit union membership grows to 3 million
The cooperatives perform many of same tasks as banks but instead are owned by their members
More consumers have been opening accounts with credit unions in Wisconsin over the past decade, pushing credit union membership in the state past the 3 million mark for the first time.
The number of credit union members is up more than 40% in Wisconsin since 2007 — growth that has occurred despite a sharp decrease in the actual number of credit unions.
People joining credit unions today often are going to big, strong credit unions that offer technology, investment advice and other services that smaller financial institutions might not be able to provide.
However, industry leaders say some smaller credit unions remain mainstays in their local communities, too.
“I think a great deal of it has to do with credit unions getting their message out,” Brett Thompson, president and chief executive of the Wisconsin Credit Union League, said of the ongoing increase in members. “They’re much better at telling the public, who eventually become members, what they’re capable of doing.”
Credit unions are like banks in many ways, but they are financial cooperatives owned by their members, instead of shareholders.
Wisconsin’s largest credit union, New Berlin-based Landmark, has about 10% of all credit union members in the state.
“Landmark, during the second quarter, hit our own milestone as we crossed the 300,000 membership count,” said Jay Magulski, the credit union’s president and chief executive. “This has been and continues to be a story of us taking excellent care of members and our associates, and then giving back to our communities in a meaningful way. It all works together.”
The growth in membership has come while the total number of individual credit unions has been drastically decreasing, typically with smaller ones merging into financially stronger credit unions that have more to offer their members.
In 2007, Wisconsin had 260 statechartered credit unions. Today, it has 135 state-chartered credit
unions and several that operate under federal charters. The peak period for credit unions in the state was in the early 1960s, when there were nearly 800.
But more people have been joining fewer Wisconsin credit unions.
In 2007, there were nearly 2.1 million members of state-chartered credit unions. By the end of 2016, there were almost 2.8 million members, and this year, membership has topped 3 million, the Wisconsin Credit Union League announced last week.
Credit unions are described by the Wisconsin Department Financial Institutions, which regulates them, as cooperative, nonprofit corporations formed to encourage the prudent use of money by members and to create a source of credit at a fair and reasonable cost.
Historically, credit unions were formed to serve people with a common bond, or what’s technically called a “field of membership,” such as a limited geographic location or employment with certain companies or organizations. Today, however, more credit unions have charters that allow for broader membership than in the past.
The nonprofit, cooperative structure of credit unions makes them exempt from income taxes — a fact that sticks in the craw of community banks that compete against them for consumer and smallbusiness accounts.
Bankers contend credit unions have an unfair competitive advantage because of the tax exemption, which lowers expenses. That can translate into better interest rates and lower fees than a competing bank could offer, they contend.
“To me, the dramatic growth over 10 years in the field of membership of credit unions really begs the question of why are they allowed to continue to have a tax exemption when they are no different from a bank,” said Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association. “They serve and can serve virtually anyone in the state because the field of membership has no substantive meaning anymore, and yet they get a tax break that no other individual in Wisconsin gets — much less other for-profit businesses get.”
The bankers organization has been pushing for an end to the income tax exemption for large credit unions for years, especially as banks have watched the steady growth of credit unions with more than $1 billion in assets — a level bigger than more than 90% of banks based in the state of Wisconsin.
“It’s not rational anymore, and especially today when you’re seeing an overhaul of tax reform and conversations around closing loopholes and making the tax code fair for everyone,” Oswald Poels said.
The Wisconsin Credit Union League’s Thompson doesn’t buy that argument.
“I think the banks are off the mark with comments like that,” he said. “The reality is credit unions are doing better because they’re one of the remaining local community based financial institutions in many places in the state of Wisconsin.”
Thompson said the income tax exemption “only allows credit unions to serve and return more to their members than the banking structure allows them to do, given they have middlemen — shareholders — they need to appease as well.”
Not all states have seen similar growth in credit union membership. Overall in the United States, 50.3% of federally insured credit unions had fewer members at the end of the second quarter of 2017 than a year earlier, according to the National Credit Union Administration. Credit unions with falling membership tended to be small — about 75% of those that lost members had less than $50 million in assets.
But in Wisconsin, it appears more membership growth is coming. The state may even be part of what some think is the beginning of a trend — credit unions buying local community banks and turning bank customers into credit union members. Such takeovers have happened three times in Wisconsin since 2014. In addition, some banks have been selling off some of their branches to credit unions.
Thompson said he thinks as the banks consolidate and larger ones absorb smaller ones, it could open the door for some credit unions in the state to attract more members.
“I think that will lead to opportunities for credit unions to serve more communities in the state of Wisconsin as those larger banks don’t find some of our communities to be lucrative,” he said.