FirstLight FCU began in the 1950s serving Biggs Air Force Base outside El Paso, then merged with the credit union serving Fort Bliss and was known for years as either Air Defense Center FCU or Fort Bliss Credit Union. In 1996 it applied for a community charter that allowed it to serve Dona Ana County, N.M., which includes Las Cruces. In 2001, the credit union applied for an underserved charter in El Paso County and took on the name FirstLight in 2005. Today FirstLight serves the Fort Bliss military base, the New Mexico county, and El Paso County, Texas. We sat down with Karl Murphy, CEO to discuss how FirstLight is positioning itself to deal with the adverse circumstances that many credit unions find themselves in today.
How did you handle the write-off?
KM: We wrote all of it off in March. We'll now revisit it on account of the Congressional vote to allow payment over seven and eight years. It was definitely a hit on the balance sheet, but going in we had had a fairly strong capital position, over 8%. The write-offs took us to around 7.25%.
How did you handle the situation with your Board?
KM: We were very open with our Board from the beginning. We told them exactly what was happening and what the possible impacts would be. Naturally, the Board was not happy about the situation at all and one Board member was very anxious, but it was clear to everyone that the situation had nothing to do with actions by anyone at FirstLight FCU. We discussed options with the Board, including asking for TARP money. We decided against asking for TARP money on the theory that if we did, taxation might well follow and that taxation would take as much or more money than any write-down.
What about your staff and members?
KM: We were very open with senior management and staff. We put together talking points for them to answer member questions and we asked for feedback to better understand the reaction of members.
There really was not much tangible concern on the part of members – perhaps a couple of dozen asked questions. Possibly this was because the local media did not play up the story. Some business leaders called to ask questions, but generally the public was not bombarded with stories about troubles in corporate credit unions.
So we never sent communications to the members specifically concerning the write-downs. Instead, we assured them that their credit union was safe and sound. We told them that their deposits were insured to $250,000. We researched who had uninsured shares and told them how they could insure those shares, made direct contact with some of these members– they appreciated it.
How have your services been affected?
KM: Our philosophy has been that an impact on our capital is not going to impact our service to members. Our strategic plan has called for the opening of a new branch to help the Fort Bliss community. We thought about delaying it, but we also knew that 22,000 more soldiers are heading to Fort Bliss in the next couple of years. We thought it best to continue with the branch to have it ready when the soldiers arrive. When the trouble hit, we were also in the process of switching our remote banking vendor. Again, the switch is costly, but we thought it best to keep it on schedule because it moves us forward strategically.
I think we need to recognize that the NCUA write-off is a one-time, short-term event. We need to be prudent financially but not skip the financial pieces critical to the future.