CREDIT UNIONS CASHING IN BANK ALTERNATIVES MAKING INROADS.

Byline: Evan Pondel Staff Writer

Consolidation in the banking industry is a potential boon for credit unions hoping to capitalize on consumers who have become disenchanted with behemoth financial institutions.

Many credit unions are capturing a broader audience these days by offering competitive rates, more financial services and longer hours. Accounting for about 10 percent of the total deposits in the United States, credit unions are now boasting asset bases similar to community banks. A fundamental difference: Credit unions are nonprofit entities and therefore exempt from taxes.

``Many credit unions provide decent interest for checking accounts,'' said John McCune, research director for the banking group at SNL Financial in Charlottesville, Va. ``But we are in somewhat uncharted territory right now with the consolidation in the industry. And a lot of consumers are too lazy to switch to a credit union.''

Wescom Credit Union is becoming a formidable force in Southern California, opening its 26th branch in Calabasas on Monday. The Pasadena-based credit union has approximately $2.5 billion in assets, offering checking and savings accounts, loans and individual retirement accounts.

``We've become an attractive alternative to people that have been through a number of bank mergers,'' said Jane Wood, an executive vice president at the credit union. ``It seems that any time a business is profit-driven it's going to function differently.''

Credit unions originated in Europe as cooperative-owned financial institutions run by members. That sentiment still prevails today among most credit union executives. But from the banking industry's perspective, that semblance of purity is not an accurate description. Charlotte Birch, a spokeswoman for the American Bankers Association, said most credit unions are taking advantage of their tax exemptions.

``There is a new breed of credit union and it's not the small mom and pop, plain vanilla culture,'' Birch said. ``It's becoming harder and harder to differentiate between a community bank and credit union.''

Before garnering mainstream popularity, credit unions had a reputation of serving underprivileged communities. That notion has evolved in the last decade as more credit unions began surfacing throughout the nation. There are approximately 10,000 credit unions with more than $480 billion in assets, serving 79 million people in the United States.

``For that reason, we think it's time policy-makers start asking questions whether large credit unions should be able to retain their tax exemptions,'' Birch said.

Until that happens, many credit unions have aggressive expansion plans. Burbank-based Lockheed Federal Credit Union plans to open 11 branches in the next five years. John Janclaes, a senior vice president at Lockheed, said his career path parallels the trend of more consumers banking with credit unions.

Janclaes started in the banking world, but decided credit unions were more aligned with his philosophies. ``It became a real easy decision for me,'' he said. ``And just because we don't have the big advertising budgets like WAMU (Washington Mutual), we still offer the same services.''

Evan Pondel, [phone]

evan.pondel(at)dailynews.com

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(color) Wescom Credit Union, based in Pasadena, opened its 26th branch Monday inside an Albertsons supermarket in Calabasas.

Evan Yee/Staff Photographer