WASHINGTON – Credit union membership penetration figures vary widely from state to state, from 81% in the District of Columbia to 10% in Arkansas. Although reasons vary as widely as the numbers, they have one thing in common: they're more often the result of circumstance than strategy. The states with the lowest penetration numbers . Arkansas, New Jersey, Mississippi, Kentucky and Georgia . share similar reasons for paltry participation, including rural areas without credit union representation and a lack of industry. "Our credit unions are located, for the most part, in the cities. We have large pockets of rural areas that don't have any credit union services at all. We have one credit union in the northeast quadrant of the state, and it's one of our larger credit unions, but if you go west, you can go for hundreds of miles without finding another credit union," said Reta Kahley, President/CEO of the Arkansas Credit Union League. In fact, Kahley said, the league frequently receives calls from companies looking for a credit union, but often, there isn't one located nearby. And where there are no credit unions, there are no cooperative ATM or branching networks. Wendell Lyons, president of the Kentucky Credit Union League, faces the same geographical limitations in his state. "Because we've got the vast rural area of Appalachia, and very poor areas that don't have a lot of commerce and industry, with credit unions typically being chartered and organized around the workplace and industry, it explains why there are large geographical areas without credit union representation," Lyons said. Kahley also cited the size of Arkansas credit unions as a significant factor. According to the league leader, two-thirds of credit unions in the Razorback state are fewer than $10 million in assets, and many have single-sponsor field of memberships. Fewer products and services combined with limited membership potential make it difficult to compete in the financial services marketplace, she said. In an effort to bolster credit union membership, the Arkansas league drafted a community charter template last year to assist credit unions that want to expand. One credit union has used the template to expand its charter so far. Industry Effects Charles Elliott, President of the Mississippi Credit Union League, blamed a lack of large employers as the biggest reason his state has only 18% penetration. "We have been a historically occupational-based charter state, and there are not a lot of large employers. When you serve small employee groups, you don't have the penetration numbers you do with the large groups," Elliott said. In fact, there is so little industry in Mississippi, Elliott said most Mississippi counties qualify as underserved areas; as a result, the league encourages credit unions to expand their charters to include such regions. Bob Walls, president of the New Jersey Credit Union League, has only been on the job seven months, so he admits he's not yet aware of all the reasons his state only has 14% penetration, despite a strong industry-based economy and 241 credit unions. The league leader speculated that accessibility might play a role, as many industry-based credit unions are still located at restricted work sites. Walls said New Jersey credit unions face strong competition from the banking industry, particularly in an expensive media market, which includes New York City and Philadelphia. "It's tough to market in this area. Credit unions are pretty much limited to print and other less expensive marketing channels," Walls said. The New Jersey League will put more effort into advocacy campaigns and help credit unions make consumers aware of the credit union difference, he said. On the greener side of the fence, states with high penetration figures often have strong military or government presences, along with successful credit unions that have catered to these groups. The five highest penetration states include the District of Columbia, Virginia, Alaska, Utah and Hawaii, respectively. The methodology to determine penetration artificially bolsters figures in D.C. and Virginia. Credit Union Times obtained data from Callahan & Associates, which gathered membership figures reported to regulators. Regulators base state figures on the number of members claimed by credit unions headquartered in a particular state rather than members living in that state. In D.C., most credit unions serve federal employees, who typically live in outlying Virginia or Maryland suburbs. And in Virginia, industry giant Navy Federal boasts nearly 2.7 million members; however, only about half a million of those live in Virginia. Still, how Navy Fed and other large military and government credit unions have flourished is worth noting, said Lewis Wood, director of publications and public relations for the Virginia Credit Union League. Wood said that military credit unions like Navy Fed and Pentagon do a good job of marketing to members and retaining membership. They also have established significant branching networks, not only on military installations, but in popular military retirement areas like Florida. Utah League of Credit Unions President Scott Simpson also credited strong government-based credit unions for his state's 62% penetration. "Utah has historically had a large number of government employees. We've got some fairly large and successful government credit unions, and Utahans have responded to that," Simpson said. The Utah league chief also credited the state's previously relaxed field of membership rules as benefiting all credit unions in the state. When asked why Alaska boasts a 70% penetration rate, Alaska USA President Bill Eckhardt asked, "how much time do you have?" The Alaska story began when the U.S. Government encouraged people to relocate to Alaska after World War II. Eckhardt said local, family-owned banks did not trust the newly arrived "outsiders", and refused to loan them money. Naturally, new credit unions flourished in such an environment. In the 1970s, the construction of the Trans Alaska oil pipeline brought an influx of workers. Alaska USA and other military credit unions struck black gold when Congress designated the construction to be a defense project, allowing them to extend membership to pipeline workers during a strict field of membership era. "We opened up probably 50,000 accounts for pipeline workers, from about `73 to when oil started flowing in '79," Eckhardt said. Additionally, Congress passed the Alaska Native Claims Settlement Act in 1971, which set up regional native corporations and provided natives with money and land. Federal agencies like the NCUA were encouraged to find ways to make these corporations successful. The agency unsuccessfully attempted to charter credit unions for natives, so the NCUA asked Alaska USA to temporarily include native corporations in its field of membership. In return, Alaska USA trained native staff, members and volunteers to take over spin-off institutions. Alaskan natives never did take to the credit union model, and the NCUA found itself in a bind – the agency was mandated to spin off native-owned credit unions, but the groups didn't want them. Eckhardt and recently-retired California league president David Chatfield, who was a vice president at Alaska USA at the time, convinced Congressman Ted Stevens to add a rider to a bill in 1982 that gave Alaska USA permanent authority to serve native corporations. "It's the only time in the history of credit unions that Congress has specifically addressed a credit union's field of membership," Eckhardt recalled. An existing cooperative mentality prior to Hawaii's statehood played a key role in the current 60% penetration rate, said Hawaii CU League President Dennis Tanimoto. When sugar and pineapple plantations were driving the Hawaiian economy in the 1930s, workers set up their own financial cooperative system called Tanomoshi. Workers put a portion of their modest incomes into a pool, and the person who bid the highest for the money would receive it as a loan. Thanks to Tanomoshi, credit unions were an easy sell for organizers, Tanimoto said. "The interesting thing is that mentality still exists today, even though sugar and pineapple no longer are the primary drivers of our economy," Tanimoto said. He also credited a good relationship between credit unions and banks for the state's success. As an example of bank cooperation, he said, the Bank of Hawaii set up a shared ATM and branching network with credit unions long before the arrival of the Co-op Network or FSCC. To this day, several credit unions still partner with the bank to provide bank customers and credit union members access to more than 400 ATMs and more than 70 branches. Credit unions also deposit excess liquidity into Hawaiian banks, Tanimoto said, which the bankers recognize as a win-win situation. -

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