In August, the Hawaii Credit Union League was an active member of Hawaii's Partnership Against Fraud, a coalition designed to protect the state's citizens, particularly senior citizens, from falling victim to financial scams.
Standing shoulder to shoulder with the league in the Better Business Bureau-led initiative was the Hawaii Bankers Association.
Granted, living in paradise can create strange bedfellows, but the joint initiative was simply one more example of how the Aloha State's credit unions and banks stand together to face a common goal.
The two trade associations and the member institutions they represent have worked cooperatively at both an operational and representational level for as long as anyone can remember. It's a symbiotic relationship some industry leaders say could be a model for credit union and bank relationships in other states.
"The relationship with the banks started before my time and I've been here 25 years," Karl Yoneshige, president/CEO of $1.4 billion Hawaii USA Federal Credit Union in Honolulu, said. "Credit unions had a need for services back then and the banks were willing to see what they could do. It was a business opportunity for them."
Hawaii USA, like many of the islands' 70 credit unions, tapped into local bank resources long ago. The credit union originally used the $14.5 billion Honolulu-based Bank of Hawaii, the state's second-largest bank, for check processing services, but brought that process in house 20 years ago.
The credit union also had a formal relationship that allowed members to conduct their business at the bank's network of 74 branches. The free service was underwritten by Hawaii USA. The emergence of a credit union-shared branch network and the rise in more sophisticated transactional technology has since minimized that need for many credit unions.
Hawaii USA still taps into Bank of Hawaii's ATM network, which is scattered across the state's six major islands, as well as Guam, Saipan, Palau and American Samoa. Access to the 480 machines gives Bank of Hawaii a lock on the market that's hard to beat, Yoneshige said.
"Every year, I do my due diligence, but Bank of Hawaii has the largest number of ATMs in the islands," said Yoneshige, who is currently negotiating a new contract with the bank and declined to disclose how much the credit union spends on the ATM service.
Since Hawaii's banks compete to provide credit unions with services, going with another bank for ATM access might be cheaper, Yoneshige said. However, it also would reduce the number of choices members have for free ATM access, he noted. "That makes it kind of tough to change."
Given the relative success the two industries have amassed, neither is ready to make a major change in the nature of their relationship. If anything, joint efforts, especially in the face of financial services legislation, have strengthened that alliance, according to Edward Y.W. Pei, executive director of the Hawaii Bankers Association.
"We live in paradise and we have to be peaceful," he said. "We have learned to coexist and we have a lot of credit unions that are responsible citizens within the community."
Banks, credit unions and their trade associations worked together three years ago in response to proposed changes to the Hawaii's mortgage foreclosure rule. The modifications would have caused increased compliance issues for mortgage providers in both industries. It was a concern that united the two trade groups, according to Stefanie Sakamoto, legislative officer with the Hawaii Credit Union League.
"That's when our relationship started blossoming and we really began working together as a team," Sakamoto said. "With the financial crisis in 2008 and the number of foreclosures rising nationwide, the Hawaii legislature had lots of concerns about how financial institutions were dealing with the issue. We presented a united front and we were successful."
It helped that, with a population of 1.4 million people, Hawaii is a small state and everyone knows each other, Sakamoto said. An atmosphere of mutual understanding and acceptance has emerged as both a preference and a necessity, she added.
"Both the banks and credit unions serve different people," Sakamoto said.
"Bankers recognize that credit unions serve a unique purpose, and credit unions know that bankers do so as well. It's something that both sides recognize and respect."
The reverence may also be a function of a balance of power. According to the Hawaii Bankers Association and using FDIC data, Hawaii's 11 banks held $47.6 billion in assets as of Dec. 30, 2013.
By comparison, Hawaii's credit unions hold just $9 billion, according to Dennis Tanimoto, president of the Hawaii Credit Union League. But the state's 70 financial cooperatives serve 811,000 members, giving credit unions a penetration rate of some 60% and a deeper reach among consumers at the local level.
"In Hawaii, credit unions and banks have a cordial relationship," Tanimoto said. "Credit unions contract for the services they need from banks and are very liquid, which works well for the banks, too."
For Carol Higa, SVP of Bank of Hawaii's Commercial Deposit Services, which is the department that handles credit union business for the bank, the relationship is profitable in many different ways. The bank provides services for roughly 80% of the state's 70 credit unions, ranging from share draft processing and ATM access to investment services and debit card sponsorships. Higa declined to disclose annual earnings from services sold to credit unions.
But there's more to the relationship than monetary income, Higa said. What's more, the benefit is something that may be unique to Hawaii.
"This is a relationship that goes back to the late 1970s," Higa said. "We're an island community and relatively close-knit. We feel it's beneficial for everyone to work together."
Higa is not sure whether a similar approach would work in other communities, states or even at the national level.
"Call it the Aloha Spirit," Higa said. "It works for us because of our culture, but it may not work elsewhere."
Andrew Rosen, president/CEO of $1.3 million Hawaii State Federal Credit Union in Honolulu, shared similar feelings. His financial industry career, which included six years spent at Bank of Hawaii and additional years at the state's Central Pacific Bank and several mainland banks, gave him greater insight into bank and credit union cooperation.
"It's a small community here and we're forced to work together," Rosen said. "Having worked for several banks on the mainland and in Hawaii, I believe we have a better relationship here than there is on the mainland."
Credit union taxation, the issue that drives the deepest wedge between the two industries, is acknowledged among Hawaii's financial executives. But thus far, it hasn't created any major concerns or even much discussion.
"Credit union taxation? Not an issue," Sakamoto said. "The banks are aware of it and they don't actively lobby against us."
"Taxation has not surfaced as a key issue in Hawaii," Pei said. "We're letting ABA and CUNA battle it out at their level. We don't disagree with ABA's posture and we have no objections to increased competition, but only on a level playing field."
Whatever happens regarding taxation will not affect how the two Hawaii trade groups operate, Pei added.
"Certainly we'll continue to work together on legislative issues while we continue to compete against each other," Pei said. "There are certain capabilities we want to preserve, but if there are opportunities to work together we certainly will."
"We meet periodically and talk about issues. We're friends and colleagues," Sakamoto added.
Whether or not the symbiotic relationship between Hawaii's credit unions and banks can be replicated elsewhere remains to be seen. But it's something that Rosen and other credit union leaders said may be worth a try.
"I'd like to see if there are lessons we can learn from our relationship with banks in Hawaii and see if it's applicable on the mainland," Rosen said. "Ours has been a very supportive relationship and, with the exception of taxation, credit unions are in alignment with banks on 99.9% of the issues."
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