HOQUIAM, Wash. — Five years ago Newrizons FCU was facing collapse — suffering steep drops in membership, loans, and assets. It was a situation so severe that NCUA issued the tiny institution a prompt corrective action warning.
The then$6.8 million-asset credit union's board of directors and management team realized something drastic had to be done to save the institution located in remote, rural Grays Harbor County on the Pacific Coast.
The board immediately began community outreach programs to feel out what the residents of this poverty-stricken corner of Washington State most needed and what services the credit union could offer them.
They also sought to attract new members by moving away from the credit union's initial core group — the former (and aging) employees of a local machinery manufacturer named Lambs-Grays Harbor Co., which went bankrupt in 2000.
The decline of Lambs-Grays Harbor paralleled the near-collapse of local industry which might have spelled doom for the whole county — and, strangely, it all had to do with a bird.
"Lambs-Grays Harbor Co. was highly dependent upon the local timber and logging industries and prospered under that relationship for many decades," CEO Ynette Gibbs told Credit Union Journal.
However, by the 1970s, environmentalists and other activists raised fears about the future of the local Northern Spotted Owl, which was listed as a potentially endangered species by the U.S. Department of the Interior. Over the next few decades, environmentalists battled with the logging-timber industry (and local workers) over the habitat for this gradually disappearing bird, which needs abundant forestlands to survive.
By 1990, the spotted owl was officially listed as an endangered species and provided with expanded forestlands to roam in — while fewer timberlands were allowed for logging activities. That ignited a chain of events that eventually shut down many logging and timber operations in the region in order to protect the endangered owl.
"About 10 years later, Lambs-Grays Harbor Co. went bankrupt, throwing 500 people out of work," Gibbs explained. "This resulted in the disappearance of hundreds of stable, high-paying jobs and the collapse of the foundation of the local economy. As a result, many of the young people in the area left, leaving behind a large and aging unemployed population of residents. In tandem, the credit union entered a period of stagnation."
But around that same time, the CU made two important changes: First, it changed its name to Newrizons (from Lambs-Grays Harbor Co. FCU); and, more significantly, it switched from an employer group charter to a community charter. And in 2004, the credit union received a Community Development Financial Institution (CDFI) certified low-income designation.
"By switching to a community charter, the credit union greatly expanded its field of membership to encompass virtually anyone who lived in the surrounding area," Gibbs said. "The new charter and the low-income designation also gave us access to various government grants which was a crucial step in the credit union's rebound."
Indeed, in 2010, the CU received nearly $200,000 in CDFI grant monies to develop partnerships and outreach in the community to deploy more loans. Even the short-term impact of the award was significant, taking the credit union's net worth ratio from 6.76% in 2009 to 9.67% the next year.
But in early 2010, the unemployment rate in the county reached an astounding 16.2%, a 17-year high, while Newrizons had shrunk to about 1,100 members and was on its last legs.
Gibbs, who had been on the job for less than one year at that point, went to work with the original CEO, Terry Fultz to turn the credit union's fortunes around by applying some of the skills and expertise she had acquired from a multi-decade career in high-tech and finance.
"We began to offer financial products that were desperately needed by the local community — for example, auto loans for people with bad credit." Newrizons' subprime auto lending program — designed for people with a credit score below 600 — has been an unqualified success, Gibbs said.
This and other programs have brought in hundreds of new members in recent years. Under the auto loan program, in cooperation with local car dealers who pay a fee to the credit union, members pay lower annual interest rates (18% vs. an average of almost 30% from alternative lenders) on their loans.
The CU also offered a suite of other products, including personal loans, credit cards, mortgage loans, home improvement loans, debt-consolidation loans, auto loans (both direct and indirect), boat loans, RV loans, and even loans on residential rental property.
Newrizons started offering services such as free financial and credit counseling, including specialized, intense one-on-one sessions with certified financial counselors. The CU helps overstretched members with such issues as collections and past due management services, negotiated settlements with creditors and options to personal bankruptcy.
"We had to develop more of a community mindset in order to stay afloat," Gibbs said. "The outreach efforts brought in a diverse group of members, by age, by ethnicity and by profession, from across the county."
Indeed, between 2010 and 2014, the credit union's loans outstanding jumped from just below $6 million to nearly $10 million, while assets have nearly doubled to more than $12 million. Membership grew by 47% over the same time.
Newrizons has also enlisted the help of local partners — including community groups, businesses, and educational institutions — to either provide services to the credit union or supply matching funds to help run some of its programs.
It also received nearly $500,000 in CDFI grant funding in 2013 for the purpose of high-risk lending. Some $300,000 was allocated to capital and $195,000 to loan loss reserves, according to the CU.
This year, the CU reports having 1,676 members and nine full-time employees.
But while Newrizons rebounded, the surrounding area remains scarred by poverty and high unemployment, despite new job opportunities offered by a newly-built prison and three Native American-run casinos.
"Part of the reason for that has to do with seasonal issues," Gibbs noted. "The biggest industries here remain timber, logging, commercial fisheries and tourism. But these are not year-round activities and, hence, high unemployment is structurally built into the local economy. You have many people here whose incomes tend to fluctuate wildly during the course of a year."
Indeed, with an average unemployment rate of about 10.8%, Grays Harbor County has one of the highest jobless figures in the state. Between 2009 and 2013, some 19% of county residents lived below the poverty line, according to the U.S. Census, compared with 13.4% for the state. Meanwhile, the county's median household income ($42,405) falls far below the average for the state ($59,478).
Grays Harbor county remains overwhelmingly white (88% of the population as of 2013, according to the census), but it also has a significant Native American population and a burgeoning Hispanic community that has about tripled in size over the past decade to nearly 10% of the whole.
"Part of our outreach involved the Hispanic and Native American communities—two groups who have been traditionally ignored and underbanked," Gibbs noted, adding that with generational poverty a pervasive issue in the area, some 71% of local students qualify for free or reduced-priced lunches in the public schools.
Newrizons has spearheaded efforts to attract Native Americans in the area. "We have assisted them with credit counseling, financial education and auto loans, which are highly sought after in contrast to alternative lenders who charge very high interest rates," she said. "We have also established programs to help Native Americans set up savings accounts and file income taxes."
A special focus has also been made to work with the local Hispanic community, including undocumented immigrants who have joined the credit union by acquiring taxpayer IDs. Newrizons' income tax assistance program, for instance, has particularly attracted Hispanic members. Since 2011, the CU has more than tripled the number of people it has helped file income taxes.
To address some of the economic deprivation issues suffered by the local Hispanic community, Newrizons instituted a bilingual student internship program that selects promising Hispanic students from local schools. "They are paid minimum wage and taught such things as computer skills, check-cashing and how to work as a teller," Gibbs said.
