Lessons From a Short-Lived Credit Union Dream

Mark Koller lived his dream of opening and operating a credit union to serve people of modest means in the heartland state of Nebraska.

But his dream lasted for only two years, closing shop for the last time as Community HOPE Federal Credit Union in Lincoln on Monday, Sept. 30, when it merged into the $992 million Cobalt Credit Union. Though the credit union is the largest by assets in Nebraska, where it operates 26 branches, Cobalt has a state charter in Iowa, where it operates four branches.

In a recent interview with CU Times, the founding CEO of Community HOPE reflected on the valuable lessons learned from his executive experience, which Koller said he doesn’t view as a failure.

“I think the local paper tried to paint it that way, but I’ll be honest with you, this wasn’t a failure,” he said. “It was just one of those issues where it made more sense to align ourselves with a bigger partner, Cobalt CU. They’ve got a wide array of services and products that are going to really enhance our member relationships. Cobalt has a common mission that we have, and that is to serve the unserved and the underserved as well. It’s a great match.”

But before the merger was proposed earlier this year, Koller believed Community HOPE would eventually be able to operate as an independent credit union to serve people of modest means. He found out some years ago from the Human Services Federation in Lincoln, which is home to about 125 social services agencies, that there was – and still is – a huge need to reduce the effects of payday lenders on poor residents and the community. In Lincoln, there are just as many payday lenders, about 20, as there are Starbucks (six) and McDonald’s (14).

What’s more, Koller determined there are about 65,000 low- to moderate-income residents who live, work, worship or attend school in the downtown Lincoln area and would be eligible for membership. Membership was also open to people who participate in associations or programs to alleviate poverty in downtown Lincoln.

After Koller, a former commercial banker and bank examiner, identified this marketplace niche, he spent the next five years of his life systematically working through the NCUA’s arduous chartering process. He finally secured the charter in June 2017 and opened up the branch a few months later.

Although Community HOPE had a marketing plan on paper, there were challenges in executing that plan due to limited resources and making unintentional communications missteps.

“We had the word low-income too often associated with our name and people would say, ‘Well, you’re low-income, we can’t necessarily bank with you.’ People thought they had to be low-income to apply for a car loan with us, and of course, that wasn’t true,” Koller reflected. “And I think that was part of my lesson. Because, like I said, I’ve never been a marketing guy, so I didn’t realize the effect that words were going to have. Words make images and images matter. I think that was probably my biggest overlook.”

While Community HOPE spent a lot of time trying to attract potential members of modest means, Koller realized in hindsight that he should have stepped up efforts to attract people with middle-level incomes. Interestingly enough, however, he speculated that the strong economy may have created headwinds.

“I think that’s part of the economy right now, in that people are pretty satisfied with where they are now with their banks, and trying to convince them to move is almost impossible,” he said. “We talked a lot about low income people, but we also needed the regular income people, and they just didn’t draw in as quickly as the low income people did.”

The main challenge for Koller was that he could not afford to hire a full-time marketing manager, so many of the marketing duties fell on him, on top of all of his other duties in running the branch and other work responsibilities. That meant he didn’t have enough time to focus on marketing initiatives that were so crucial for a de novo credit union.

He met with social service case managers who help people of modest means, and some of them joined the credit union. He also had degrees of success in attracting new members and selling new loans via email and social media marketing efforts.

“We had a Facebook page and web page and we did some [marketing], but we could have been more proactive, I think,” Koller said.

One marketing flop included sending out 15,000 direct marketing mailers, which yielded only two responses. Even though Koller had doubts the direct mailer would work, he really didn’t know whether it would at that time and wanted to try it to find out.

As a senior project, a marketing class from the University of Nebraska developed some interesting marketing ideas for Community HOPE.

“One idea I really liked was the ‘find the wallet hunt’ that would put 35 bucks and coupons in a wallet somewhere in downtown Lincoln, and we would give out hints as to where it might be,” Koller said. “So, it was kind of like an egg hunt. They came up with some really good ideas, but the timing just didn’t quite meet up. If I’d had those ideas a year and a half earlier, it would have been very helpful, but then again, I also needed a marketing person.”

Despite the lack of resources, the credit union managed to slowly but surely grow membership, loans and assets.

At the end of its first year in 2017, the credit union served 33 members and managed more than $8,000 in total loans and $367,494 in assets. By the end of 2018, Community HOPE grew its membership to 190, and had $171,267 in total loans and $377,419 in assets. And by the end of the second quarter of this year, membership increased to 218 while total loans jumped to $185,608 and assets totaled $304,098, according to NCUA financial performance reports.

Koller, who retired, plans to enjoy some leisurely travel with his wife and perhaps do a little consulting work on the side.

In 2017, three de novo credit unions received their charters, the most charters the NCUA has granted since at least 2012, according the independent federal agency’s website.

Community HOPE was the first de novo credit union to receive its charter in June. Three months later, the NCUA granted a federal charter and share insurance fund coverage to Clean Energy Federal Credit Union in Boulder, Colo., and in December, a third de novo credit union, Civic Federal Credit Union, was also granted its charter and share insurance fund coverage from the NCUA.

So far, the $8.4 million Clean Energy and the $19.3 million Civic are well-capitalized and showing loan growth trends, according to their NCUA Call Reports.

Clean Energy is focused on serving more than 4,000 members of the American Solar Energy Society and other consumers who want loans to install residential solar energy panels, high efficiency energy home improvements, and electric or hybrid vehicles.

While Civic specializes in providing and servicing loans for dozens of volunteer fire departments for new fire trucks, equipment, ambulances and buildings, the credit union plans to expand its business loan offerings outside of this realm. Additionally, the credit union offers an array of personal loan products and services.