PORTLAND, Maine — Local financial institutions grew last year as the backlash to big banks continued, according to finance experts.
As a result, Maine’s 61 credit unions reached several milestones in 2012, breaking records for membership and assets.
But credit unions — which are nonprofit, cooperatively owned financial institutions — weren’t the only locally managed financial institutions to report growth for the year, as locally owned or managed banks grew as well.
Total statewide membership at Maine’s credit unions was 625,500 as of Dec. 31, 2012, a 1.4 percent increase from the year before and the highest year-end total ever recorded, according to John Murphy, president of the Portland-based Maine Credit Union League.
Membership at Maine credit unions has been increasing ever since the beginning of the Great Recession, according to Murphy. Since 2006, total membership in Maine credit unions has increased 5 percent.
“Clearly, when the recession started, we saw a migration of people wanting to put their funds in a locally owned institution,” Murphy said. “The credit union model is not only local, but owned by the people who use the services.”
Some of that growth is surely “backlash” from the role large banks played in the financial crisis, according to Pankaj Agrrawal, associate professor of finance at the University of Maine.
“The big banks are still paying for it,” Agrrawal said. “One person’s misery is another person’s mirth. Credit unions, in a way, are the unlikely beneficiaries of the financial meltdown that happened at the national and global scale with very large-cap banks.”
Those new members have driven increases in assets, deposits and loans at the state’s credit unions, and smaller, locally managed banks.
Combined assets at Maine’s credit unions were $5.88 billion at the end of 2012, an increase of $275 million, or 4.9 percent, from the end of 2011, and an increase of $1.7 billion, or 43 percent, from their assets in 2006, according to data from the Maine Credit Union League.
Deposits are also on the rise. At the end of 2012, Maine’s credit unions reported $5.04 billion in deposits, an increase of roughly $300 million, or 5.4 percent, from 2011, and an increase of $1.6 billion, or 48 percent, from 2006, according to the league’s data.
The loan portfolios of Maine credit unions hit a record $3.88 billion at the end of 2012, an increase of $227 million, or 6.2 percent, over year-end 2011 figures, and a roughly $820 million, or 24 percent, growth from 2006, the league reported.
Nationally, the country’s nearly 7,000 credit unions reported $1.03 trillion in total assets at year-end, a 6.2 percent increase over 2011, according to the Credit Union National Association. Savings balances and loans at credit unions nationally increased 6.1 percent and 4.8 percent, respectively, the association said.
Credit unions aren’t the only financial institutions experiencing growth in Maine, though.
Maine-based banks also saw their assets and loan portfolios grow in 2012, according to Chris Pinkham, president of the Maine Bankers Association.
Total assets at Maine’s 27 locally owned banks grew 6.22 percent to $19.4 billion as of the end of 2012 compared to the year before, Pinkham said. Because of fluctuations in the number of banks due to mergers and acquisitions, Pinkham can’t say whether the year-end asset figure represented a record.
Loan portfolios at Maine-based banks grew 4.22 percent to nearly $13.9 billion. Breaking down that number further, Pinkham said residential real estate loans are up 4.03 percent to $6.2 billion; commercial real estate loans are up 6.47 percent to $4.5 billion; and commercial and industrial loans are up 6.47 percent to $4.5 billion.
Comparing banks and credit unions is not simple as the two sectors are not equal in terms of size. Credit unions are still relatively small compared to banks. For example, the state’s largest credit union, Maine State Credit Union in Augusta, has $345 million in assets. That would make it only the 16th largest bank in the state. For comparison, Bangor Savings Bank, the largest Maine-based bank, has more than $2 billion in assets.
Pinkham, whose organization also counts large banks such as TD Bank, Bank of America, and KeyBank as members, is less convinced that a buy-local movement in banking explains the growth.
“I’m sure there’s a perception by some financial institutions that they are gaining because of certain market occurrences, but in reality I think consumers — who have a tremendous number of choices in Maine … they select their financial institution because of price and service,” Pinkham said.
UMaine’s Agrrawal agrees that price and service play a part in where people choose to do their banking, but he also points to social movements like “Bank Transfer Day” — a grassroots effort in 2011 that encouraged people to close their accounts at for-profit banks and open accounts at credit unions — as a sign that more is at play in peoples’ decisions.
Steve Clark, CEO of Bangor Federal Credit Union, believes “anti-big bank sentiment” had something to do with the roughly 1.4 percent increase in membership, which now stands at roughly 15,000 members, that his organization has experienced. Bangor Federal Credit Union also increased its assets (5.7 percent increase to $121 million in 2012) and deposits (5.7 percent increase to $111 million) in 2012. However, it lagged in terms of loan growth, Clark said.
The credit union’s loan portfolio actually saw a 2.8 percent dip from year-end 2011 to year-end 2012, from $90 million to $87 million, Clark said. The reasons for the decrease, he said, were the credit union’s “pretty conservative” standards when it comes to adding long-term, fixed-rate mortgages, as well as a slight reduction in its auto loans.
But Clark said the dip wasn’t alarming. In fact, the credit union’s loan portfolio already experience a “positive tick” in the first four months of 2013, jumping back up to $90 million, he said.
Clark is optimistic of the future.
“I think there’s a level of confidence we’ve seen so far [in 2013] that hasn’t been evident in the past couple years,” Clark said. “I think [people] are feeling good about having reduced some debt and seeing a rebound in their 401k plans. I think people are very cognizant of the low interest-rate environment and they’re slowly coming out and taking advantage of that and borrowing now where they haven’t been.
“I anticipate if these trends continue we will certainly exceed the 5.7 percent growth number we achieved last year,” Clark said. “We are very optimistic that the positive loan growth will continue.”