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New LICUs seek to grow and engage.

Executives incorporating their low-income designation into their business plans said it has brought both greater opportunities and deeper community involvement.

More than 2,000 credit unions have now been designated as low income after the NCUA proactively identified them and offered a simplified application process.

In order to qualify as a low income credit union, at least 50% plus one of a federally chartered credit union's members had to have incomes of not more than 80% of the median household income for their area. State-chartered credit unions face different criteria depending upon their state, but many of them have also been recognized as low income.

But while many of the credit unions understood the legal and financial opportunities the low-income designation presented, (LICUs enjoy additional latitude with regulatory and capital issues, for example) they didn't always expect the opportunity it brought to both broaden and deepen relationships.

"I tend to think about this in terms of evolution, not revolution," said Pablo DeFilippi, membership director for the National Federation of Community Development Credit Unions.

"There used to be a large perceived gap between CDCUs and other, so-called mainstream credit unions," he continued, "but I don't think that exists as much anymore. All credit unions are starting to recognize they have low-income people among their members, and they need to reach out to them, but they are doing so slowly and in a measured way."

For example, DeFilippi said, many credit unions seeking to integrate a designation into their operations will often begin by surveying the community development and low-income services they already offer.

He noted many credit unions already offer a financial education or financial counseling class or program, or they cash checks or refinance very high interest rate loans, or make other efforts. They might have done this for years, DeFilippi said, but just not recognized the work for what it was.

The federation offers an Emerging Market Review that can help a credit union conduct such surveys. During an EMR, a small team from the federation visits a credit union to identify what it al ready does and the opportunities that exist to do more.

"We called it the Emerging Market Review because there is a growing awareness that serving low-income members is not just something a credit union does for charitable reasons," DeFilippi stressed. "Credit unions are discovering that serving low-income members is an opportunity to grow, to increase their loan portfolios, broaden their membership and earn more fee income. It's not optional, it's essential."

Suncoast Schools, the nation's largest low-income credit union, has been going through the process of integrating its new designation into its operations, according to Julie Renderos, CFO at the $5.7 billion credit union in Tampa, Fla.

Renderos put Suncoast's application for a low-income designation into the context of its 2013 shift from a federal to a state charter as well as building on the recognition that the communities it serves had also begun to change.

"We started out as a federally chartered credit union serving primarily teachers," Renderoos observed, "but then came to understand that the federal charter didn't work as well it had for us, that many of our communities had really shifted."

Renderos credited the Great Recession and the credit union's location in one of the hardest-hit states.

"You know, here we were in one of the 'sand states,'" she said, "and we had so many members who needed our help just to stay in their homes. We started a loan modification program on our own before anything else was announced."

Suncoast did other things to help see its members through the crisis, and as the crisis ended Renderos said Suncoast was left acutely aware it needed to keep serving lower-income members.

"It was clear our communities have low-income people in them and that we need make sure our products and services meet their needs and can help them onto their next steps," Renderos said, adding that Suncoast was in the process of applying for CDFI recognition.

For the $1.1 billion CoVantage Credit Union in Antigo, Wis., integrating working with low-income members into operations has been a matter of becoming aware of communities that need the credit union's help.

Paul Grinde, community development officer for the credit union, said some of the awareness CoVantage needed dated back to when the credit union was founded in 1952, but that the institution had continued working to hone and refine it.

Grinde said working with low-income members has often been a matter of building of awareness of members' needs, such as accepting taxpayer identification numbers as well as Social Security numbers for some its procedures and applications.

Likewise, when CoVantage became aware that increasing numbers of Hmong had moved into the community to join relatives who had been settled there after the Vietnam War, the credit union hired some Hmong as staffers in branches near their neighborhoods.

Jamie Chase, founder of CU Strategic Planning, a consultancy specializing in helping credit unions earn CDFI recognition, explained credit unions had begun to realize that working with low-income members opened up a path to growth.

For example, if the credit union's loan growth is negative or the yield on loans is below peers, the new low-income designation can provide insight into a potential opportunity to create products and policies to increase loans to those members.

"Credit unions leveraging awareness of their service to a low-income field of membership have the highest yield on loans, loan growth, loan-to-share ratios and ROA in the nation," Chase wrote. "As a result, the low income-designated credit union can increase assets and grow the credit union without a catastrophic drop in net worth.

"Most of these credit unions haven't realized that they served low income people," Chase wrote in an email exchange with CU Times. "The label is loaded. It conjures an image of a lazy or unemployed individual, or even a homeless person. In reality, 80% of the median family income nationally is $51,520. These are hardworking people: School teachers, city workers, college adjunct faculty and every single enlisted man and woman in America. These are America's heroes," she wrote.

The Rundown

* Integrating a low-income designation into daily operations creates opportunity.

* Integration is a matter of building awareness of lower-income member needs.

* The national ceiling for low-income is 80% of median family income or $51,000.

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Title Annotation:STRATEGY
Author:Morrison, David
Publication:Credit Union Times
Date:Jun 11, 2014
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