Credit unions granted underserved areas are clearly adding members from those areas

<p>WASHINGTON – Contrary to skepticism among credit union critics, there are indications that federal credit unions have recruited significant numbers of new members from underserved areas that they have added to their fields of membership under a streamlined NCUA procedure. According to NCUA data, the nine credit unions that took on underserved areas in November 2000, the earliest month for which there is easily accessible information, have added an average of just over 3,900 members to their rolls as of December 2001. Interviews with the credit unions indicated the new members came mostly from those underserved areas. NCUA streamlined the procedures by which credit unions could add underserved areas as of January 2000 and gradually credit unions have been adding more. As of December 2001, the agency granted credit unions permission to add 16.1 million residents of underserved communities to their fields of membership. Credit union critics have more or less scoffed at the agency’s claims, noting that “potential members are not the same as members,” but credit unions persisted in adding the areas and it seems clear that they are working to serve them too. A $1.2 billion credit union in 2000, Randolph-Brooks FCU was perhaps the best suited in terms of assets to add the underserved area of South San Antonio, Texas, and its advantage showed. Almost 15,000 new members joined the institution in 2001, according to NCUA. RBFCU records indicate that 4,000 of those members came about from the Randolph-Brooks’ work in the underserved area, according to Tracy Hennigan Marketing Director for Randolph-Brooks and Anna Postelle, Vice President of Business Development for the CU. “We anticipated adding the underserved area and so began planning and working with that community even before November of 2000,” said Hennigan. Randolph-Brooks had history in the area because it maintained its branch on the Randolph Air Force Base, where the credit union started. The credit union also opened another branch, Mission South, in the area as well, once the underserved area addition was finalized. But the biggest commitment the credit union made was introducing Randolph Brooks to the community house-by-house, business-by-business and community institution-by-community institution. Randolph Brooks began a “South San Antonio Task Force” that asked employees from all levels of the credit union to volunteer for six weeks to work spreading the news of Randolph Brooks in the new area. “It was a major time commitment,” Postelle said, because the credit union in effect asked not only for the employees to volunteer but also for their fellow employees and supervisors to take up the slack when they were gone. Through the work of its South San Antonio Task Force Randolph-Brooks met the community in homes, businesses, churches and neighborhood events throughout their area, getting warmly welcomed wherever they went. “It was really quite an education for us,” Postelle said. “South San Antonio is very Hispanic and very Catholic and the church is a strong institution in that community so a lot of the time we worked through the church. At church festivals there we would be talking about the credit union and adding on members. We were very eagerly received.” The credit union also initiated products that would help meet the needs of the area. Helping Hands, a program Postelle declined to say was aimed at payday lenders, offered credit union members loans of between $300 and $500 for short periods of time. Second Chance, an auto loan program, works with borrowers who may not have the best credit and “are sincerely trying to rebuild their credit records,” Postelle said. When asked whether Randolph-Brooks would take on another underserved area, Postelle said, “I think everyone at Randolph Brooks understands that this really brings home that credit unions are about people helping people.” All that work seems to have paid off too. According to NCUA, Randolph Brooks had a return on assets of 1.34% in December of 2001, a delinquent loan ratio of .19% and loan growth of 15.33%, almost a full nine points over its peer average. The members from the underserved area contributed to this growth as well. According to Hennigan, the members from the underserved area have opened 3,935 accounts, deposited $7.5 million, and took out 1,167 loans worth $3.9 million. North Florida Federal Credit Union, in White Springs, Florida, called itself White Springs Federal Credit Union when the NCUA granted the $11 million institution permission to add the underserved counties of Suwanee and Columbia Counties, an area that CEO Delbert Morgan describes as a “a whole lot of land without a lot of people.” “It’s kind of unheard of for a $14 million credit union to have three branches,” Morgan said, “but when you have 30 minutes drive time between each branch you have to do something to serve your members.” Although NCUA recognizes an increase of only 92 members in 2001, Morgan says that credit union picks up 190 new members a month now, almost all from the new area. The pace increased substantially beginning in the fall of 2001, Morgan said, after the credit union put in the new branch in Lake City and the economy picked up a bit. In January 2001 the area’s largest single employer, a phosphate mine, laid off about 400 employees and that threw the region into an economic tailspin, Morgan said, right at the time the credit union was trying to expand. Although Morgan said North Florida would have added the area again if it had the chance, he worried about other credit unions also considering adding underserved areas. “It will not be like working with their single sponsor or even multiple groups,” Morgan said. “It is a different world.” Working with underserved areas requires more patience, more ability to work with people, more face-to-face time with members, more financial education and more willingness to live with some uncertainty, Morgan said. “Working with, for example, state or city employees is easy, they mostly have secure jobs that are mostly not going anywhere,” Morgan said. “Working as a community credit union, in an underserved area means you are open to whatever happens economically in the community – good or bad.” Steven Grooms, CEO of the $84 million 1st Liberty FCU, based in Great Falls, Montana, said that the credit union would add another underserved area “in a heartbeat” even though the credit union actually lost members in 2001. Grooms says that the credit union’s growth in the underserved area is “on target” with projections despite the lost members. Grand Rapids Air Force Base is part of the credit union’s field of membership and Grooms said that credit union membership is often a casualty when service members leave the base, though the credit union is working on convincing them to keep their membership. NCUA granted 1st Liberty a five-county underserved area, holding over 100,000 people, all of whom are of modest income. Grooms said the credit union hasn’t developed any special products for the underserved areas because the areas closely resemble 1st Liberty’s current field of membership. “Our membership is substantially made up of modest income already,” Grooms said. Grooms said he expects that the credit union’s efforts to work in the newer communities will get a boost when the credit union opens a branch between the towns of Cut Bank and Great Falls. He also said 1st Liberty has had good results using a credit scoring system that has allowed it to offer more loans than it had previously. NCUA reported 1st Liberty’s loan growth to be 17.79%, over 11% higher than its peer average. Cliff Rosenthal, executive director with the National Federation of Community Development Credit Unions (NFCDCU) praised the addition of new members from underserved areas but called the 3,900 average underserved members added statistic, when examined from another angle, “meaningless.” Rosenthal said an analyst would need other data to really measure credit union activities in a new community, data about the number of new members that were retained, for example, versus the number of members who might have joined, found that credit union didn’t meet their needs, and left. Nonetheless, Nick Owens, spokesman for NCUA Chairman Dennis Dollar, generally praised the additions, noting that they demonstrated the agency had not streamlined the process by which credit unions can add underserved areas in vain. David Berenbaum, senior vice president with the National Community Reinvestment Task Force praised the credit unions for adding the underserved areas and reaching out. “Making sure as many as possible had access to credit union services is what CAP [the CAP regulation], was all about.”</p>