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Credit union's unusual problem: A few too many deposits
Vashon’s thriving credit union has had to put a halt to new business accounts — but for a most unusual reason: The small credit union is a little too flush with cash.
Since Puget Sound Cooperative Credit Union (PSCCU) opened a Vashon branch a little more than a year ago, hundreds of Islanders, many of them frustrated with corporate-owned banks and their escalating fees, have flocked to the financial institution. It now has about 2,000 members on Vashon and $20 million in deposits, a rate of growth that has astonished its founders and even garnered national media attention.
The Los Angeles Times recently wrote a lengthy and glowing piece on the credit union, noting that Vashon’s branch — and the story behind it — has made the Island “a darling” of the Occupy movement. The story was picked up by the Seattle Times, the Bellingham Herald and other papers.
The press attention brought even more interest to the credit union, said Patte Wagner, manager of the Vashon branch. Recently, they’ve been getting calls from residents of California, wondering if they, too, could move their money to the Vashon branch. (They can’t. Only Washington residents can open an account at a state-licensed credit union.)
But even before the LA Times story hit the news stands, the credit union had been faced with a problem: They’ve had too few loans to counter the expense of all those deposits.
Credit unions don’t make money on deposits, said Kevin Ellisen, PSCCU’s chief executive officer. They only make money when they loan the funds from those deposits to other members — in the form of credit cards, car loans, mortgages and other forms of debt. And while the deposits have been coming in at a rapid clip, Vashon credit union members have not been quite so quick to borrow money or move their existing debts — mortgages and credit cards, for instance — to the branch.
Ellisen said the media attention has been “thrilling” and the support on Vashon gratifying. “But it’s a situation where our expectations have been exceeded. We’re now trying to manage our growth,” he said.
PSCCU was chartered in the 1930s and has four branches. It has never suspended business accounts before, Ellisen said.
“I don’t want to give people the impression that we’re suffering,” he added. “But too much of a good thing is indeed too much of a good thing. … Give us another year before we can take on more (business) deposits.”
If suspending business accounts — which includes accounts held by associations, clubs and nonprofits — doesn’t rectify the deposit-to-loan balance, Ellisen said, he’ll consider writing letters to those members who have $500,000 or more in their savings accounts and asking them to lower those deposits “so that we’re able to receive the deposits of more members.”
The handful of Islanders who helped bring PSCCU to the Island say they, too, are thrilled by the media attention and the way it’s highlighted the power of a credit union. Bill Moyer, executive director of The Backbone Campaign and now a board member of PSCCU, said the story of how Vashon brought a credit union to its community is both inspiring and meaningful because it can be replicated elsewhere.
“It’s a model for other people, for other communities,” he said.
He’s not worried about Vashon’s credit union. “It’s sustainable. It’s just uncommonly fast growth,” he said.
At the same time, he added, those who support the credit union on Vashon need to take the next step. “People need to know that moving your debt is as important as moving your money,” he said.
Rex Stratton, a lawyer who also played a lead role in bringing PSCCU to the Island, said he’s also enjoyed the publicity the Vashon branch has received. But he also is glad the credit union is striving to manage its growth.
“You have to be very careful about what your mix is. … It’s a very interesting dance,” he said.
As for Wagner, the media attention has been fun and a little overwhelming. The LA Times’ reporter highlighted her role; “luring” Wagner from her previous job as the manager of Vashon’s Chase branch to become the manager of the credit union, the reporter said, was considered a “stroke of genius” by the Vashon organizers.
After the story hit the wires, Wagner said, she got congratulatory calls and emails from friends at Washington Mutual (which owned the branch before Chase took it over), saying things like “go, girl,” or, “I knew you’d take some action.”
A buttoned-down banker, she laughed at the role she’s found herself in as the manager of a small credit union on Vashon Island. “Holy cow. We’re the darling of the Occupied movement,” she said.