Community Reinvestment In The New Year

Too many credit unions support worthwhile causes that have nothing to do with their core mission.

 
Alix Patterson

By Alix Patterson

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For credit unions, community support isn't simply a “nice” thing to do. Rather, credit unions must support their communities if they want to effectively develop and serve their membership.

This year represents an opportunity for credit unions to consider what’s worked in the past and what the future might hold in their own community reinvestment efforts.

What Is A Community?

Using geography is a convenient way to define who or what comprises a community, but credit unions are better served considering two documents at the heart of their institution: the charter and the mission statement.

The charter identifies a credit union’s field of membership, whereas the mission statement more clearly defines a target market. And although community charters tend to limit a potential field of membership by geography, many other charters encompass associational affiliations that stretch fields of membership across states.

Once a credit union identifies its membership, it should leverage community reinvestment efforts to benefit this group — donating time, money, and resources with the institution’s mission in mind and not simply as a way to make people happy. Too many credit unions support worthwhile causes that have nothing to do with their core mission.

Too many credit unions support worthwhile causes that have nothing to do with their core mission.

How Credit Unions Support Their Communities

Some credit union community reinvestment is intentional, such as vetted partnerships with local non-profits or incubators; other reinvestment is less deliberate.

During the Great Recession, it’s estimated that approximately 7 million Americans lost their homes to foreclosure. And although the loss of a home is a significant financial and emotional blow to the affected homeowner, foreclosures impact entire neighborhoods as well.

According to 2012 data from RealtyTrac, neighboring home values drop an average of 1% for every 7% the foreclosed home value drops, with an average decline in property value for the foreclosed home anywhere from 22%-28%. This means a neighboring home with an initial property value of $250,000 could decline nearly $10,000.

Enter credit unions.

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More so than banks, credit unions modified mortgage terms for troubled homeowners. These modifications enabled borrowers to stay in their homes and are an example of how — in the course of doing business —the credit union industry supports communities.

Of course, credit unions also make active investments in their economies.

Down South, ANECA Federal Credit Union ($91.7M, Shreveport, LA) invested $500,000 in a local startup competition that encourages entrepreneurialism and returns money to the Shreveport economy.

Then there’s Coastal Federal Credit Union’s ($2.8B, Raleigh, NC) partnership with a local business incubator that connects the North Carolina credit union with 220 companies and 900 employees. And Family Trust Federal Credit Union ($442.7M, Rock Hill, SC) moved its entire headquarters in support of a movement that is turning Rock Hill into a vibrant economic and cultural center.

Finally, Vancity Credit Union of Vancouver, Canada, shows how to make community support a strategic priority through its triple bottom line business approach that focuses on people, the planet, and profits.

Every year the institution publicly publishes its business plan, and its tagline, Make Good Money, promises sustainable banking. What does that mean? For Vancity, there are no trade-offs between short-term benefits — product, service, advice, price — and long-term ones — social, environmental, and economic sustainability.

Vancity is working to transform how banking is done to help its communities thrive financially, socially, and environmentally. In 2015, it returned $19.5 million to its members and communities. Watch the video.

Authentic Community Reinvestment

Reinvestment for reinvestment’s sake is not the name of the game. As credit unions look to attract the next generation of member, showing authenticity is critical because that’s a value that resonates with today’s young generations.

“I personally refer to millennials as the next ‘Great Generation’ because the degree of generosity that we’re seeing from them is quite impressive,” Jean Case, chief executive of the Case Foundation, told the Washington Post in a June 2016 article. “They’re turning their idealism into action in a very real way.”

The article cites data from the latest Millennial Impact Report, which surveyed more than 2,500 millennial employees and managers. The report found that 84% of respondents made a charitable donation in the past year, whereas 70% spent at least one hour volunteering for a cause they cared about, and more than one-third volunteered 11 hours or more. In addition, 32% used paid time off to volunteer, and 16% took unpaid time off to volunteer.

Authenticity is a concept more often associated with a company’s presence on social media, though credit unions should more broadly apply it to all interactions between company and customer — or credit union and member.

Even the best marketing teams can’t manufacture authenticity, but they don’t have to. If a credit union focuses on its cooperative mission and supports community reinvestment efforts, the authenticity is real. As a financial cooperative owned and operated by members, doing good is in the credit union’s job description.

Even the best marketing teams can’t manufacture authenticity.

Internal Community Reinvestment

Credit unions don’t need to donate to charities or partner with high-tech incubators to reinvest in their communities — in fact, doing so might not fit into some credit unions’ missions.

That’s fine. In some cases community reinvestment requires internal product development and funding.

For example, payday loan alternative products fill an important need for some credit unions members, yet these products are typically unprofitable for the institution. But what if they could be?

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Credit unions can invest their own money or use grants to fund or expand unprofitable programs or those with tight margins. Not because they offer stacks of income to an institution, but because they do good.

For example, Freedom First Credit Union’s ($453.0M, Roanoke, VA) Borrow and Save program, designed to meet the financial needs of its membership, provides fast cash with affordable interest payments and contributes to a borrower’s future financial wellness.

Dupaco Community Credit Union ($1.5B, Dubuque, IA) offers an individual development account and broader network of support to help those in need build a solid financial foundation.

And St. Mary’s Bank ($965.5M, Manchester, NH) offers low-income first-time homebuyers a reprieve from mounting down payment and closing costs through FHLB of Boston’s Equity Builder Program.

To reinvest in their communities, credit unions don’t have to give to external sources. They can develop product lines that in themselves lift up the community and offer real, measureable community investment.

 
 

Jan. 23, 2017


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