California Credit Union has had a busy year.

The non-profit financial institution, which serves workers in the field of education, moved a branch from Cahuenga to North Hollywood and opened a branch in Woodland Hills.

Next year promises to be even busier, with branches expected to open in Covina, Carson and Santa Clarita.

Think the explosion of branches is just a commercial bank phenomenon? Think again

The Glendale-based credut union recently decided upon a growth strategy that heavily relies upon building two to three branches per year and it's not unique.

"We have been trying to add convenience with new locations, the improvement of electronic delivery service and competitive rates," said Ron McDaniel, chief executive of California Credit Union. "Those key factors are driving growth."

Even as competitive pressures and changes in government regulations are driving consolidation among credit unions, the number of branches is growing.

Three years ago there were 1,462 credit union branches in California. This September that number reached 1,809, a nearly 24 percent jump. That growth mirrors increases in assets, deposits and membership by credit unions serving Southern California.

Historically, credit unions have had restricted membership, available only to those people closely tied together, whether it be workplace or house of worship. But in the past two decades, membership restrictions have been loosened, and credit unions have been taking advantage of the opportunity to open more branches and offer a wider variety of services.

In 1982, credit unions were allowed to start serving workers with a common bond instead of just a specific company. Thus, a credit union affiliated with one defense contractor could serve employees of others. Then in 1998, a federal law allowed credit unions to serve people in geographic areas. Membership also was opened to families of credit union members.

Suddenly, that meant opening branches suddenly became a logical way to expand.

"What used to be local and community specific has dramatically increased. The potential customer base for credit unions is approaching that of banks," said Raphael Bostic, a professor of real estate and banking finance at the USC Lusk Center for Real Estate Development.

Unfair advantage

Consider California Credit Union with its 78,000 members. In the past year alone, it has seen growth in deposits of 14.7 percent and in assets of nearly 14 percent. McDaniel said his organization already had broad membership criteria, but some competitors with more restricted memberships have taken even greater advantage of the changes.

"They allow for much more diversity in types of membership, or who is eligible," he said. "It has helped the industry."

The Credit Union National Association, a trade group in Washington, D.C., projects that growth will slow next year as consumers and businesses retrench amid the housing bust and credit crunch.

Still, credit unions have already experienced criticism from the commercial banking industry, which claims the non-profit financial organizations have an unfair advantage because they are exempt from federal income taxes and many from state taxes. As a result, they are often able to provide higher interest on savings accounts and lower interest on loans than commercial banks.

Manhattan Beach-based Kinecta Credit Union, the largest credit union in Los Angeles County by assets, serves a wide variety of employers across the county. This year, it allowed employees of 54 additional "employer groups" to become members, helping it raise its membership by 9,000 to about 200,000.

At the same time, it added six branches and acquired a company called Navicert Financial Inc., which owns 55 Nix Check Cashing stores, mostly in underserved communities. The locations will include check cashing and credit union services.

"Mainstream financial services have become very competitive and we don't want to compete with a Wells Fargo or a Bank of America," said Simone Lagomarsino, chief executive of Kinecta. "The Nix acquisition was really consistent with what credit unions were created for. Instead of competing head to head with mainstream financial institutions, this will serve a group of individuals that aren't focused on."

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