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Reaching new heights.

Reaching New Heights

Richard Feist, general manager of Assiniboine Credit Union of Winnipeg and a director of the Credit Union Central of Manitoba recounts an interesting and somewhat amusing story about the early image of Credit Unions in the province: "Due to the fact that most Credit Unions started out small and were often operated single handedly out of private homes, the term "hip pocket service" has often been applied when discussing those early years.

"When speaking of hip pocket service, we can look to the beginnings of our own Assiniboine Credit Union in 1942," he says. "Our story actually began with a series of lunch hour conversations between the Registrar of Co-operative Associations and two employees of the Winnipeg Electric Company. The employees were interested in forming a Credit Union and this led to some organizational meetings in 1943 at the Gas Distribution office on Fort and Assiniboine. It was attended by 15 persons who paid a total of $100 into the share capital of the newly formed company.

"After necessary expenses were met, $60 was left over with which to make the first loan. Subsequently, a loan of $50 was made to an employee of the Winnipeg Electric Company, leaving $10 in the loans fund. It is said that the then treasurer of the Assiniboine Credit Union would carry these assets in his hip pocket. However, this proved almost disastrous," adds Feist, "for one day the company's assets fell down the toilet. They were quickly retrieved, though and no damage was done."

Suffice it to say, Manitoba's Credit Unions have long since outgrown this "hip pocket" image, and any general manager carrying his branches' assets round with him today would do so only under heavy armored guard.

It seems somewhat trite to say that Credit Unions have come a long way since those rather humble beginnings but one look at the 1988 financial statements issued by the Credit Union Central of Manitoba and there's little doubt that they have firmly established themselves as major players in the province's fiercely competitive financial sector.

Total assets of the Manitoba Credit Union system rose to $2.4 billion last year -just "slightly more" than the $4,900 accumulated during 1937, the very first year of operation for Credit Unions in the province. Those "one-man operations" have given way to 86, multi-staffed, technologically superior Credit Union operations throughout Manitoba serving a combined membership that numbers 311,000 (an increase of 7.2 percent over the past five years).

Deposits now stand at more than $2.4 billion and outstanding loans reached $1.9 billion last year (by the way, in 1937 there was $4,300 in outstanding loans).

In addition, preliminary results indicate that net earnings reached a record $13.8 million in 1988 - a far cry indeed from the $10 in the lip pocket of one Credit Union treasurer 40 years ago.

The actual number of Credit Unions operating in 1988 was 86, down from 99 in 1984. According the Credit Union Central chief executive officer Mal Anderson, this is due to a "trend toward solidifying smaller operations under a larger umbrella to take advantage of the economies of scale. However, the number of actual locations has held steady at about 175 over the years," he adds.

Although they have been part of Canada's financial scene since the turn of the century, Credit Unions are perhaps the most misunderstood of all the financial institutions, past or present. So, just exactly what is a Credit Union, and how does it work? Most simply defined, it is "a co-operative organization providing useful financial services to its members." More specifically, people with a common bond pool their financial resources and make them available to other members whio need loans which are based on mutually approved guidelines and offered at acceptable interest rates.

Credit Unions differ from other major financial institutions in that they are owned, directed and controlled by their customers--customers who are members and shareholders. It is the members who determine policies, elect directors and share in the profits. For these resons, Credit Unions are more sensitive to specific customer needs than other organizations, explains Anderson.

"Because we operate within the communities of our members, credit unions know the needs of those communities better than most and are able to react more quickly and efficiently. We are locally owned and locally operated which makes us much more sensitive to the needs of the marketplace we serve," he says.

Customer service is still paramount, he adds, and it's very much a "one-to-one kind of operation. Decisions are reached at the point of contact," says Anderson, "and we can parlay our local/regional strengths with those on a national level.

While each individual Credit Union operates as a separate entity responsible primarily to its membership alone, Credit Unions, like other financial institutions pool their resources to be used by other Credit Unions across the country.

This concept of local ownership has been an important factor in the growth and development of Credit Unions, both in Winnipeg and in rural Manitoba. "The Prairies traditionally have been a generator of large deposit amounts, and Credit Unions by nature tend to keep this investment money within their own provinces," explains Richard Feist. "Our entire investment base at Assiniboine Credit Union is located right here in Manitoba."

Although this local ownership/local investment scenario is an important component in the Credit Union structure, it is not the only factor contributing to overall growth, states Feist. "Our ability to offer quality products, excellent rates and the best possible service to our members have been the underlying factors in our growth."

Assiniboine is Winnipeg's largest Credit Union with a membership in excess of 34,000. With eight branches in the city, Assiniboine now has assets of just under $255 million, placing it second in the province. Its absorption of the Professional Financial Savings and Credit Union last year resulted in an overall growth of some 28% in 1988. "Normally, our annual growth rate is between 8 and 10 percent," notes Feist, "but even without the acquisition, our growth last year was almost 13 percent."

Bill Halpenny, general manager of Astra Savings and Credit Union, says the Credit Union's percentage of the market is much greater today thanit was five years ago, due largely to this member-oriented structure as opposed to the more traditional customer base.

"People are recognized and ackowledged by name whenever they come into one of our six branches," he says. "The personalized service is very important because we tailor our services and products to suit our membership, not the national trends."

This application makes for quicker and easier service for the member, adds Halpenny, who notes that decisions regarding a member's needs can be made at the local level rather than waiting for word from an eastern-based head office. "There's much less red tape involved when making a decision," he says.

Incorporated in 1958 primarily for Winnipeg-based Air Force personnel, Astra became an open bond Credit Union serving all Manitobans in 1969. It now has approximately 13,000 members with assets totaling $110 million. The first "non-St. James" branch was opened in 1987 at the corner of Gateway and McLeod in East Kilodnan and Astra's Portage west and Ness Avenue branches have both undergone recent expansions.

Herve Vermette, general manager of Cambrian Credit Union agrees with his counterparts that the growthw within the Credit Union system in Manitoba is largely because peole are concerned about local autonomy. "Credit Unions have a natural appeal to those people who want their money to be invested locally rather than internationally," he says.

However, he is quick to add that in light of the fierce competition in the financial services sector quality service and innovative products are important in attracting new business. "Our rates and charges have to be more than competitive and we try to provide the best service possible to our members at the least possible cost.

"Our profits go back to our members," he adds, "which sets us apart from the majority of other financial institutions in the province."

Cambrian grew out of the old Co-Operators Credit Union etablished back in 1957 to accommodate employees of the Red River Co-Op system. Over the years, some 26 other Credit Unions have become part of what is today Cambrian Credit Union. "We now have about 24,000 members and assets totalling $144 million," explains Vermette.

Just three years ago, CAmbrian had 14,000 members and assets of $60 million, but a merger with Heritage Credit Union last July resulted in immediate and significant growth. But, even without the merger with Heritage, Cambrian has enjoyed some 18 percent annual growth over the past four years.

Steinbach Credit Union is the largest Credit Union in the province in terms of assets with $338.5 million on the books at the end of 1988. It also has 23,425 members, an increase of 1,640 from 1987. General manager Dennis Guenther attributes this significant growth and the impressive numbers to quality service, industry leading rates and the ability to make decisions on their own that best suit the membership at large.

"Credit Unions are really like small corporations unto themselves," he says. "While there is a certain degree of competition among each of the branches, we, for example, make our decisions on the basis of what's best for our members, which may differ from a decision made by a Winnipeg-based Credit Union."

Growth at the Steinbach Credit Union has been an ongoing thing, but Guenther points out that the growth has been carefully monitored and planned over the years. "We never want to discourage growth but we must keep a good handle on it," he states. "We must never forget why we are in business in the first place - to provide top quality service and products to the existing membership. This cannot be jeopardized at the expense of sudden growth or development."

Carpathia Credit Union is the largest Ukrainian Credit Union in Western Canada with a membership of 7,865 and assets to the end of 1988 totaling $72.9 million. According to general manager Bill Kalinowsky, assets are up $7.8 million from 1987 while reserves grew by $309,415 to $2.8 million.

"throughout 1988 we maintained more than competitive rates on deposit accounts, while our rates on loans remained lower than industry norms," he says. "Sound management of our margins and matching of assets and liabilities was a high priority last year."

He adds that a specific goal for this year is to find ways to increase the membership: "Without question, the road to building our membership base is a long one, but effective, cost-conscious promotion will help us attract new members."

One important attraction could well be the recently expanded and renovated Main Street branch which features a third-floor loans area and board room facility that is the equal of any major downtown office complex. The main floor consumer area underwent extensive renovations and upgrades last year that saw the introduction of a new computer system and the addition of an Automated Teller Machine.

Harry Peters, general manager of Crosstown Credit Union, the largest Mennonite-based Credit Union in Winnipeg, says there are advantages and disadvantages to local ownership: "The major banks can do things like promotion and advertising in large volumes; something we cannot do. However, each Credit Union has a little different way of doing things and are more flexible in their decision or policy-making techniques than banks.

"We can react more quickly to industry demands or market swings," he adds. "We don't have to wait for days for a final decision."

Like the others, he points to competitive rates and reasonble service charges as key to continued growth: "We keep close watch on our service charges whereas banks might tend to increase them more frequently than we do."

Although Crosstown is a closed bond Credit Union, it still has a solid membership base of about 8,500 and has assets of approximately $70 million. There are three locations in Winnipeg to serve the Mennonite membership.

An area of recent growth for the majority of the province's larger Credit Unions has been commercial loans. While the needs of the memebership-at-large will always remain uppermost in management's mind, the Credit Unions have been flexing their muscles in the lucrative and expanding small business sector. Their size does not permit them to go after corporate giants and multimillion dollar deals, but the Credit Unions of Manitoba have carved out an impressive niche for themselves in the area of small business loans - $100,000 and up, usually to a maximum of about $5 million.

"Generally, we got into the corporate side of things as a result of our members becoming entrepreneurs," notes Richard Feist. "Over the years, our deposit growth has always been greater than our loans growth, so new areas of lending had to be found. Commercial loans were the next step."

While business loans can be extremely lucrative, care and caution are the watchwords wor the Credit Unions when looking at this side of the business.

"If we make a mistake in a commercial loan it will be considerably more costly than a mistake made on a personal loan, so we must be very careful whn reviewing this type of business," notes Dennis Guenther.

Almost to a man, the general managers state that about 15 percent of their business comes from the commercial side, and all agree that it is unlikely that this figure will exceed 20 percent. "The needs of our members come first," says Bill Halpenny. "The demand for personal loans and mortgage money is still high and this must be our first priority."

Members' deposits (and subsequent investment by the Credit Unions) are protected by the Credit Union Stabilization Fund. It is a deposit insurance corporation established under the Credit Unions and Caisses Populaires Act and is required to guarantee and protect the deposit made by members. A five-member board is appointed by the Lieutenant-Governor-In-Council and everyday operations of the Fund are administered by a general manager and support staff.

"The Fund closely monitors and inspects each Credit Union's operation," explains Mal Anderson. "In this way, the Fund ensures that each Credit Union is conducting its business within the stringent legislation that governs the industry."

Each individual Credit Union contributes to the Fund based on the monies that its members have in various savings and deposit accounts. The Fund is maintained through mandatory assessments made quarterly on each Credit Union in the provincce.
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Title Annotation:credit unions in Manitoba
Author:Bain, Don
Publication:Manitoba Business
Date:Apr 1, 1989
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