It was a significant occurrence in Mississippi last year when the state’s largest bank, BancorpSouth, announced it was closing 23 branches. The Tupelo-based bank’s closings spanned Alabama, Arkansas, Mississippi, Missouri, Tennessee, and Texas. Many of the closings occurred in rural areas, areas that were not supporting sufficient sustained growth, areas in which BancorpSouth was the sole provider of financial services.
Utica is one Mississippi community that relied on BancorpSouth as the financial services provider. The bank’s departure would have meant the largely older, blue collar residents would have to travel 17 miles or further, without access to public transportation. Their need for a local “banking” institution piqued the interest of Hope Federal Credit Union.
Hope In A Desperate Region
“Given our mission of providing financial services in underserved places, Utica’s branch closing got our attention,” says William Bynum, CEO of Hope Federal Credit Union ($140.3M, Jackson, MS), the sixth-largest credit union in Mississippi and the 19-largest financial institution in Hinds County. “We’re seeing a lot of ‘bank deserts’ emerge in towns throughout the region. We wanted to learn more about what the situation was in Utica and in other areas that were losing financial services.”
Utica is generally an underbanked area. It is located in Hinds County, which has 109 total branches as of June 2011. But that number can be misleading. At least 95 of those branches are located in Jackson, which is more than 40 miles away. After evaluating data on the local banking environment, Hope formed a local committee to gauge the population’s interest in welcoming a credit union.
“Based on the community buy-in, we felt we could make it work,” Bynum says. “Residents wanted a depository that could provide financial services. There was a high level of concern about payday lenders filling the void. The residents knew how important it was both to the local economy and the future of their town to have a financial institution responsive to local needs.”
Last summer, in advance of BancorpSouth’s August closing, Hope set up a temporary station in Utica’s city hall to help residents open and transfer accounts. It then leased a modular branch to gain a more substantial presence and demonstrate its commitment to serving Utica’s residents.
“We emphasized this would be a community-owned financial institution, that our success was going to hinge on how much they supported it,” Bynum says. And Utica has shown its support.
Since last fall, 466 Utica-area members have joined Hope, depositing approximately $1.03 million. The credit union has booked 27 loans totaling slightly less than $173,000, according to Bynum.
In Spring 2012, Hope purchased the old BancorpSouth branch – after negotiating a “reasonable purchase price” – and is upgrading the branch with features such as an ATM and night drop box for businesses. The ribbon cutting for the branch’s grand opening is set for May 25.
“Utica is probably going to be one of our best locations because of the local ownership,” Bynum says. “Residents were upset the bank abandoned them, and they were appreciative the credit union stepped in.”
A Growing Trend
According to the Corporation for Enterprise Development, Mississippi is the most unbanked state in the union, with 16.4% of the population unbanked and 25.2% underbanked.
“We’ve had record numbers of banks closing,” Bynum says. “We’ve been approached by several communities … but our ability to respond to that trend is limited.”
Further North, NorthCountry Federal Credit Union ($350.2M, Burlington, VT) is an oasis of sorts for its own bank deserts. This spring, the credit union stepped into Alburgh, VT, when the community’s only financial institution, People's United Bank, left town. Alburgh’s Find a Bank committee reached out to NorthCountry, and after much consideration the credit union decided to proceed with a branch opening.
“We felt, as a community, they were going to be underserved,” says NorthCountry President John Benoit.
Alburgh’s population ebbs and flows with the seasons, from roughly 2,000 to 6,000 people, Benoit says. The lakeside community is located in Grand Isle County, a county with only one financial institution since People’s United closed its doors. That bank is located more than 12 miles from Alburgh. Alburgh is located approximately 50 miles from NorthCountry’s headquarters in Chittenden County, where it is the third-largest credit union and ninth-largest financial institution. The credit union has moved into underbanked areas before. It has even grown a branch in one small community from slightly less than $1 million to $17 million in three years. But Alburgh required different considerations.
“In this case, we looked at what we have done in the past, going into a small community and opening a branch,” Benoit says. “For the others, there was some competition. Here there is no competition.”
People’s United Bank closed on Friday, March 30. On Monday, April 2, NorthCountry was open for business via a rented mobile unit. On April 20, the credit union purchased the old bank branch and after minor renovations will celebrate its grand re-opening on May 5.
“Our philosophy is: Every community deserves an FI,” Benoit says. “We know branching is important. The only way this worked was by purchasing an existing branch at a reasonable price with no competition. That building was the only one appropriate for bank services. The bank left a lot of the equipment, which allowed us to get it up-and-running at minimum cost.”
According to Benoit, the credit union has made the other branches profitable and sees no reason why it can’t run a successful branch in Alburgh.
Both Bynum and Benoit admit there are risks as well as rewards to entering a bankless community. First and foremost, there are immediate costs associated with opening a branch in a market with no established membership base. And building awareness takes time and energy.
But for these two CEOs, the credit unions’ actions are nothing more than fulfilling their cooperative obligation.
“We respond to a lack of financial services,” Bynum says. “Being responsive to the needs of local residents has always served us well.
“We look forward to the opportunity to be an integral part of the growth of the community,” Benoit says. “We saw this as an opportunity to bring something to the town and we’ll make it work.”