Low Income South Dakota Credit Union Enjoys Big Mortgage Gains

HURON, S.D. – Dakotaland Federal Credit Union, serving a low income field-of-membership in rural South Dakota, is proving a creative spirit and a willingness to seek out new financing avenues-including federal grants-can go a long way in keeping your credit union healthy. “Look, we were not about to lay over and drop dead when a major employer a few years ago closed its doors and forced big layoffs,” explained Dan Cumbee, president of the $58 million Dakotaland Federal which has two branches, 8,000 members and serves a six county area with an average density of 11 people per square mile. Since the economic trauma of 1996 when a big pork processor shut down, resulting in the layoff of hundreds of employees, Dakotaland has managed to tap into a number of key government programs including the Treasury’s Community Development Financial Institution agency with a whopping $632,000 grant to the CU less than six months ago. “That grant has been particularly helpful to us since we’ve been able to buy new software that allows us to offer mortgages and real estate services which we could not have done,” said Cumbee, noting the CDFI grant was for $550,000 in secondary capital plus $82,000 for technical assistance. The CDFI said it was one of its largest grants to a low income CU. Dakotaland became a low income community chartered CU for Beadle County in May 1998, and in November 2001 it added two low income tracts in Brookings County. Three months later added four more counties: Sanborn, Jerauld, Kingsbury and Hand. Dakotaland has been a member of the Federal Home Loan Bank since 1999 “where we aggressively borrow funds to assist us in matching our in house nonconforming real estate portfolio.” Dakotaland has $16.6 million in real estate loans and services another $10 million. It is an approved seller/service for Fannie Mae and the FHLB. Since receiving the CDFI grant, said Cumbee, the CU has seen its refinancing and mortgage volume grow “so that now we have been doing $3 million to $4 million a month.” A typical loan runs $40,000. Cumbee said Dakotaland retains all the servicing on its loans “so our members will always have direct contact with our staff.” Dakotaland has been offering a refinancing special in which members can borrow up to a 3-year-fixed rate at about 5.72% for $1,000 in total closing costs. The 10 and 15-year terms have been down to 5%. “Our goal is to refinance as much of our area as possible,” he said, noting that the improved cash flow from consolidated debt payments “add much economic stimulus.” “It’s a great deal for our members and it’s a long term benefit to the credit union,” he argued. Dakotaland also makes small business and “micro” business loans and its overall growth through the years has averaged 20% per year. “We’re consistently ranked near the top of our asset category in `return to member.’” The Huron CU offers checking accounts, free Internet access and free bill payer services. It owns seven ATM machines. Cumbee said interest in Dakotaland’s mortgage program has sparked interest of other small CUs in the state and so “we are helping other credit unions on starting up similar programs.” The first pilot effort being worked on is at Mitchell Area Federal Credit Union, he said, The Dakotaland president noted that his CU decided to become more aggressive in the lending area in 1996 when Armour & Co. closed its packing plant. Two years later Dakotaland became a low income community charter. But it was only last year that Dakotaland “heard about the CDFI grants” and decided to make application, he said. Cumbee noted that most of the banks serving the Huron area and the six counties are large out-of-state institutions, and many of their predecessors “have already downsized or consolidated.” The new owners of the small banks “have changed their name and brought in high priced fee structures and non competitive rates on loans and deposits,” he said. “There’s not much money to be made offering financial services in our area and that is where Dakotaland flourishes,” he concluded. -