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First Commonwealth Federal Credit union doesn't shy away from underserved markets, despite the fact that they take extra time and effort to serve. In fact, the credit union is continuing to seek out new population segments, tailoring its services to meet needs of individual groups within those areas.

"The one-to-one personal touch we've taken in these markets has netted small gains, but given us something on which to build," said Allen Billiard, the credit union's vice president of marketing and public relations. "We've forged new relationships one account at a time."

Steps the $346-million credit union have taken since receiving its underserved designation from the National Credit Union Administration in fall 2001 have broadened its membership scope while promoting credit union services among population segments that need it the most, said Billiard. That's changed the way consumers receive financial services in eastern Pennsylvania, he said.

First Commonwealth's underserved program started when the NCUA put Padua Federal Credit Union, located in the Lehigh Valley community of Easton, into conservatorship some three years ago. First Commonwealth acquired Padua FCU's deposit accounts, then applied to expand its services in the area, Billiard said.

The Classic Description

Easton fit the classic description of an underserved market, said Billiard. A high concentration of elderly and young people, along with a racial mix that included Hispanic, African-American, Portuguese and Italian, dominated the city's "West End" district. A growing influx of Syrian immigrants has further broadened that mix.

The West End supported lots of high-density housing, characterized by row houses and "splits" that had been converted into rental units. The area also was home to a high number of transients, with significant population turnover every two years, said Billiard. More than 25% of the population had a median household income of less than $20,000 per year.

First Commonwealth began by partnering with area social service agencies, most notably the Allentown-based Neighborhood Housing Service of Lehigh Valley, to develop programs to promote home ownership. The agency's rationale-that owner-occupied homes in depressed areas makes for a more cohesive community and safer neighborhood, since residents have a financial stake in the neighborhood's preservation and enhancement-was supported by the credit union, which saw it as a springboard for other financial initiatives, said Billiard.

"We used this as a tool to encourage the establishment of savings accounts, since that seems to be the biggest challenge," Billiard said.

Through the program, started in May, First Commonwealth also found that residents lacked a basic understanding of financial management. By enforcing a basic savings level of $1,600 as the first step in starting a home mortgage process, the credit union was able to begin the process of financial stability through resident education, Billiard said.

The Neighborhood Housing Service also helped residents buy housing by providing 5% to 10% percent of the balance due for downpayment and underwriting low-interest mortgage loans. In some cases, NHS also offered "forgiveness loans," which the borrowers didn't have to repay

First Commonwealth is getting ready to provide more services when Easton's West End gets up to speed, said Billiard.

"We're listening to our branches down there before deciding what's next," Billiard said.

But while Easton's underserved mortgage program begins picking up steam, the credit union is not sitting back to see what else might develop. During the development phase, First Commonwealth also pledged $5,000 in funds to help a Catholic middle school install a computer lab. The donation was enough to spur similar financial and in-kind contributions and now the school is using the lab to produce its own newsletter, said Billiard.

The Classic Description

First Commonwealth also has been working with an area temporary employment agency to start direct-deposit accounts for its contract workers. The goal, said Billiard, is to steer those who live from paycheck to paycheck away from high-cost check-cashing stores and start them on the road to good financial practices. The credit union provides a low-cost checking account, in lieu of strict check-cashing services, and has even posted the $5 membership fee on behalf of new direct depositors, he said.

"We wanted to make sure there were absolutely no barriers to membership," Billiard said.

The biggest challenge with this group, Billiard said, is "education, education, education." The credit union test markets new products within as little as a four- to five-block area through direct mailings to see what will best meet the needs of Easton's underserved residents, he said.

The experience in Easton has helped First Commonwealth expand its commitment to underserved populations and in March the credit union received NCUA's approval to start serving underserved tracts in Pittstown, Penn. The community, home to Pittstown College, presents an entirely different population demographic, said Billiard.

"Because of the university, we find ourselves serving a large group of young people," Billiard said. "We've revamped our youth program to meet their needs."

The new program, due to launch in July, extends account subsidy benefits to the 18- to 23-year-old segment. First Commonwealth also is waving ATM surcharges for transactions made by its members on its own machines and has eliminated other sources of fee income in an attempt not only to serve students' needs, but capture their allegiance.

"Younger members are the future of the credit union and if we subsidize their transaction needs now, when they most need it, they're likely to stay with us as they enter the job market and become more fully functioning members," he said.

A younger member base also means greater use of technology services, such as ATMs and Internet banking, which will reduce the cost of serving this segment, Billiard said.

But First Commonwealth also is working with the Berks County Senior Citizens Council, located in roughly the same area, to find out how better to serve the financial needs of the elderly. Flexibility is the key to serving such groups effectively, said Billiard, and First Commonwealth sees this as both a profitable and appropriate investment of the credit union's resources.

"When you start serving an underserved area, you have to be willing to fine-tune your goals throughout the process," said Billiard. "It's a lot of work because you have to become part of the community before you can serve it."

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