By Ray Birch
PITTSFIELD, Mass.—One credit union says that its low-income designation has not only helped its own bottom line, but that of its community, as well.
John Bissell, CEO of Greylock FCU, told CUToday.info that the thinking that serving the community does not also mean serving the credit union is flawed. In 2017, Greylock markedly increased its focus on the underserved in its markets and enjoyed one of its best years ever.
The $1.1-billlion credit union posted its largest net income ($6.7 million) in its history, pushed capital to a new high (10.5%), and at the same time saw delinquencies fall to their lowest level (1.08%) in more than 10 years.
“It is accurate to say that last year was our top earnings year for total net income, and was also the year in which we significantly expanded our community development lending and outreach,” said Bissell. “Our net income was the highest it’s ever been. It was gratifying to see that.”
Middle Market
The credit union serves a rural area in Western Massachusetts near the border with New York, and a large percentage of the membership is low income. But there is also a sizeable percentage of members who are middle to upper income.
“Greylock has a very large share of the middle market in our region, and it is certainly true that we are not sacrificing any financial strength by focusing on the underserved,” Bissell said. “In fact, we believe that is contributing to our financial strength, by more assertively growing our community development capabilities.”
Greylock qualified as a Community Development Financial Institution in 2014. Since that time, said Bissell, its image and awareness within the community have been further raised. The credit union has not only introduced more products to serve the underserved, such as loan programs that take into account more than just the FICO so the CU can extend more members credit, but also strong financial counseling and financial literacy programs.
“When we demonstrate to the community that we are truly here for everyone, that has driven a lot more business volume of all kinds our way,” Bissell said. “There is a lot of loyalty to Berkshire County, and people have been here a long time. They like it when they see local businesses caring and investing in the community. So more members, of all levels of household income, come to Greylock. They bring over their loans, they tell their friends about us. We are building tremendous momentum.”
Bissell said that when the credit union supported its community efforts with marketing, telling the community about what it is doing, it served to boost business further.
More Momentum
“We really began to feel lot more momentum then,” he said.
A major element of its community outreach efforts is financial literacy. The credit union believes the best way to reach the community, both for impact and for reaching numbers of people, is to work through local employers to deliver educational programs on-site.
“We partner with non-profits and employers in the county,” explained Jodi Rathbun Briggs, SVP and chief lending officer. “We maximize our impact in the community by going through employers. When we do good things in the community, people recognize what we are doing and why we are here and want to do business with us.”
When it comes to lending, Briggs said Greylock firmly believes that a member with a bad credit score is not always a bad loan risk.
“If someone comes to us with a bad credit score we work with them to improve their score,” said Briggs. “We get them into a loan program that works for them.”
The New Road Loan is one of the programs added as the credit union began focusing on the low-income community. This product targets subprime borrowers and puts them not only in a loan that offers better rates than those typically available through a subprime lender, but also encourages the member to make on-time payments.
If a borrower makes 12 consecutive on-time, monthly payments, Greylock will reduce the borrower’s rate by one percentage point.
“It’s possible that someone with subprime credit over the course of two to three years could reduce their rate to enjoy a payment that is very, very affordable for them,” said Briggs.
$11,000 Average Loan Size
Last year Greylock made 137 New Road Loans for $1.6 million in balances, with the average loan size being $11,000.
The credit union applied for a Community Development Financial Institution Fund grant last year and was approved for $686,000. The funding is expected soon and Briggs said the Greylock will put that money to work in many ways, including more New Road Loans.
“Knowing we had the grant, recently we increased our focus on New Road Loans,” Briggs said. “We closed twice as many New Road Loans in March as we did in January and February.”
What is helping Greylock close more of these loans this year is a policy change. The CU looks closely at the borrowers’ history of repaying their car loans at any institution with which they have had a vehicle loan.
“If they have been current on those loans, that tells us they will pay their car loan,” said Briggs. “Even if the borrower may have issues paying other bills, we will make the car loan.”
Bissell further outlined how receiving the CDFI grant will allow the credit union to do even more within Berkshire County:
- It plans to extend an additional $750,000 in Safety Net, short-term emergency loans to low-credit-score borrowers
- It will make an additional $2 million in small business loans
- It will make an additional $8 million in New Road Loans
Risk-Based Lending
Bissell emphasized that all the work Greylock is doing to serve the underserved is backed by a strong risk management program. He said the credit union takes a careful, risk-based approach to all of its lending.
“We have strong portfolio analytics and track the results of our lending programs,” said Bissell. “That is one reason we can confidently keep increasing our efforts to serve low-income members and grow that business—we know we are carefully managing the risk.”
In addition to Greylock lowering its delinquencies to record levels, it has reduced its overall consumer loan delinquencies to .11%.
“Serving the underserved is a strategic focus for us,” said Bissell. “We are growing this capability and I think we are just in the first or second inning of what is possible for Greylock.”