There is plenty of good news about the health of credit unions. By almost all indicators, credit unions are thriving in the 21st century. In the past three years, assets and net worth have increased; delinquency has decreased; and loan-to-share ratios have held steady. However, there is also reason for concern about the future of credit unions. Throughout a period which has seen an extraordinary influx of deposits, there have been few new members. Despite record increases in potential membership, actual membership growth has declined in each of the past three years to less than 2% today. Although the credit union system is very safe and sound today, as a regulator, I am concerned that the slow growth of new members poses a threat to the future safety and soundness of credit unions. The reality is, existing members are aging and will not be with us forever. To remain safe and sound in the future, credit unions will need to generate growth from new members. Some credit unions are beginning to do this by pursuing a visionary strategy for the future: reaching new markets. Finding The New Markets Across America, there are 25,000 areas underserved by insured financial institutions. These areas are home to nearly 100 million people who rely on predatory lenders to meet their financial needs. At the same time, these predatory lenders are draining $200 billion a year out of their communities. Potential members in these areas are as diverse as America itself. In particular, more and more immigrants are moving in from Latin America and Asia. And these groups account for current and projected population growth across the nation. Amazingly, in little more than a decade, America's non-white population has exploded by 60%. One out of every three Americans now identify themselves with a race other than Caucasian. Latinos and Asians together are growing four times faster than the rest of the population. Yet both Latinos and Asians are under-represented in most credit union memberships – and the gap is growing wider. This has significant implications for credit unions. Reaching these new members will require different approaches than in the past because America is projected to grow even more diverse. By the year 2020: * Latinos and Asians are each projected to grow more than 75%; * African-Americans are projected to grow nearly 30%. * Meanwhile, the Caucasian population is projected to grow less than 10%. In little more than a decade, there will be no ethnic majority in America. The best strategy to grow membership in the future is to reach out to people of all ethnic backgrounds today. Some credit unions are already employing this visionary strategy with tremendous success. Many of their success stories are available to all credit unions through NCUA's Partnering and Leadership Successes (PALS) initiative. The PALS Best Practices Web site features success stories and contact information from credit unions reaching new markets. Log on to www.ncua.gov, click PALS, then click "Best Practices." I launched PALS during my first year on the NCUA Board to help credit unions develop new strategies for membership growth and share their best practices across America. It is encouraging today to see that whether in urban or rural areas, more PALS participants are putting programs in place to reach new markets and embrace all of the different cultures in their communities. While each market is different, PALS participants have shared several common approaches to welcome cultures and languages unfamiliar to most credit unions: * Recruit bilingual staff from different countries who can relate to immigrants' experiences. * Educate all employees about the different cultures and disabuse them of negative stereotypes. For example, employees should be aware that Latinos have $600 billion in purchasing power, and they are very brand-loyal. * Develop relationships with organizations that residents already trust – such as community centers, charities, and churches. Once residents see your staff and volunteers contributing time and money, and working with community leaders they trust, they will feel more comfortable doing business with your credit union. * Remove any unnecessary barriers to opening new accounts. Accept legal foreign government identification, such as the Mexican government's Matricula Consular cards, as valid ID for new members. Establish non-interest-bearing accounts for new members who do not yet have Social Security numbers. And allow anyone in your field of membership to cash checks and make international wire transfers. * Present a welcoming environment in your lobby so members can bring their families to your branches. Provide extra seating, activities for children, and art work that reflects diverse cultures. * Provide clear financial education in new members' native languages as well as English. Hire a translator who understands financial terms to ensure that materials don't carry misleading meanings in a new language. (For example, two English phrases translated literally into Spanish would mean, "We sell old tires" and "We have all your money!") * Offer a wide range of services to meet the needs of all people living in underserved areas. Provide small loans to cover short-term emergencies, and risk-based loans that allow everyone to access credit at a price based on their own credit history. Help new members put down roots in their communities by providing business loans and affordable mortgages. Reaching new markets is hard work. But credit union leaders have found it is very rewarding. Inside these credit unions, new members are coming in to have friendly conversations with credit union employees who speak their languages. Bilingual employees are developing personal relationships with new members. And English-speaking employees are gaining new experiences, learning key words and phrases from co-workers and members who speak different languages. Reaching new markets is truly enriching these credit unions' cultures. It is also strengthening their safety and soundness. Credit unions that are reaching new markets are diversifying their memberships as well as their assets, effectively spreading their risks and reinforcing their financial base. In addition, they are making a case to preserve their tax exemption. By serving people from all ethnic groups and all income classes in our society – and saving those in underserved areas from paying predatory lenders triple-digit interest rates – these credit unions are demonstrating their "societal good." This is important to lawmakers who are questioning whether credit unions deserve to keep their tax exemption. From my perspective as a regulator, preserving the tax exemption is critical to protecting safety and soundness. If credit unions are taxed, the taxes would cut into retained earnings. Even credit unions that are healthy today could face Prompt Corrective Action under taxation. They would not have the net worth to offer needed new services or to branch into underserved areas. As a result, credit unions would be unable to serve the very people who need them most. But if more credit unions reach into these new markets today, they will position themselves to grow even stronger in the future.