Grow By Adding Undeserved Areas

Branching into an undeserved area is a conservative approach that would allow Blue Lakes to serve its current SEGs with the strong relationship it has built over decades.


Brandy Logan, Marketing Director at the Greater Texas Federal Credit Union responds to the 1Q 2012 CUSP Theoretical Case Study: Exploring A Different Charter.

KAREN, I BELIEVE BLUE LAKES SHOULD add underserved areas. Doing so would not necessarily require a change of charter, only an amendment to its bylaws. But it would allow Blue Lakes to remain competitive, to grow by means of expanding into new communities, and to serve new groups of people now outside its membership base. Doing so also has the virtue of allowing existing membership to take advantage of new branches and possibly new products and service offerings.

This approach is a rather conservative one for expanding membership and in this respect is suitable to your board, which tends to the conservative side in looking to move the credit union forward. Quite important in my opinion is that Blue Lakes would still be able to serve its current SEGs with the same strong relationship it has built over decades.

I believe such an approach would improve Blue Lakes’ balance sheet in several ways. Blue Lakes could increase the usage of its share products. This in turn would allow it to grow overall shares, which it could then use to make more stable investments, thus making up for some of the losses it incurred in the corporate trouble. Increased shares would also allow Blue Lakes to increase its number of loans and thus its interest income.

Once Blue Lakes has improved its balance sheet it can enhance existing products or add new ones. In doing this, the credit union would work toward giving consumers more of what they are demanding, something Blue Lakes might not have been doing enough of recently. This in turn should help to increase wallet share in the homes Blue Lakes already serves and convert those teachers and government workers that currently do not use Blue Lakes as their primary financial institution.


As noted, Karen, the approach of reaching out to underserved areas has the distinct advantage of allowing Blue Lakes to retain the strong relationship it has built over decades with teachers and government workers. Owing to Blue Lakes’ long history of serving teachers and government workers, loosening those ties could be a significant shock — both to the common bond groups and to the credit union that has pledged for so long to work solely for their benefit — that leads to membership decline among these groups. Some consideration has to be paid to the physical branches as well: Changing the charter in such a way as to sever formal ties with these SEGs would likely lead to closing branches in government offices or school buildings that serve certain SEG members. The loss of that convenience could drive those members to other institutions. Conversely, if those branches remain and if public access is possible, those branches can serve new members from the underserved areas.

In our own experience at Greater TEXAS FCU, we define an underserved area as a portion of a county — usually using geographic boundaries such as streets and rivers as well as U. S. Census data. Potential members are persons who live, work, worship, attend school in, or do business in a geographic area and other legal entities located in the geographic area.


A virtue of applying for more than one undeserved area is that much of the information on one application can be used in follow-up ones. 


Karen, be aware that the process of applying for underserved areas, although not difficult, can be lengthy. But help is available. NCUA can provide data and advice as well as names of credit unions that have taken the same sort of strategy. These credit unions are likely to offer lessons learned from their experience.

First, you must research the potential area. As you start, you should conduct research on Blue Lakes’ membership. Find out where they live. Blue Lakes might be able to serve more of them in an underserved area it would pick up, which would help it attract new members while better serving existing members.

Then, you will need to send NCUA a letter stating Blue Lakes is interested in applying for an underserved area. At this time, you’ll need to ask for a financial institutions test. NCUA will reply with a letter stating what sort of information it will require, including demographics. Someone dedicated to the task could complete an application in a couple of weeks. I’ve applied for five and all have been approved. Note, staff and offices can ask for different information or request that applicants complete the paperwork in a different way. My own credit union has won approval to serve 12 underserved areas. I have completed two in one year and could have done more. A virtue of applying for more than one underserved area is that much of the information on one application can be used in follow-up ones.

A lot of the information you collect will come from the Community Development Financial Institutions Fund (CDFI) website. From my own experience, it is easier to get an underserved area in an urban area than a rural one owing to population density and income levels. And note that even if there is a bank on every corner, if credit unions are generally unavailable, the area is underserved — NCUA can provide this information.

Some good places to look for underserved areas are growing, outer lying communities. These tend to be filling with people who have lower household incomes and cannot afford housing closer to downtown. Such places might be near smaller Minnesota cities. I expect that owing to income and penetration, Blue Lakes could not find much in the way of underserved areas in the Twin Cities.

Karen, take note, within two years of the approved proposal, Blue Lakes will have to have a physical branch presence in any underserved areas it picks up. So plan your branch strategy accordingly.

Having an underserved area is a lot like having a community charter. Consequently, you must think about marketing. We advertise in community newspapers; it’s low cost but effective. Another low-cost approach is using web-based marketing efforts that display banners on web pages viewed by persons in designated zip codes. We also do some radio spots as well as sponsorships of non-profit efforts. We advertise on Texas A&M football broadcasts that reach a number of underserved areas, and we do some television advertising that also reaches several underserved areas. Think about how you’ll reach your new potential members.