NETT LAKE, Minn. — Just before NCUA chartered the first new credit union of 2015, Northern Eagle FCU was celebrating its first full year of operation, highlighting some of the challenges de novo charters face.
There were high hopes in the Land of 10,000 Lakes when the NCUA granted a charter to the Bois Forte Band of Chippewa Native Americans in Minnesota in late 2013.
Led by Nikki Pieratos, Northern Eagle Federal Credit Union has two offices on the Bois Forte Reservation — in the Tribal Government Building and the Fortune Bay Resort Casino — and has attracted more than 350 members and so far issued about $250,000 in consumer and vehicle loans to the long underserved community.
Membership is open to 5,000 members of the Bois Forte Band as well as to non-tribal members who are part of the immediate household of a Band member. The credit union is also open to those who work for the local tribal government.
As an institution located in an autonomous part of the U.S., the rules for opening an account at Northern Eagle differ slightly from most other CUs. For example, prospective members can use their tribal identification card as legal ID.
Pieratos, who is Chippewa, estimates that some 80% of the current membership is a Bois Forte Band member — including some members who live as far away as Duluth and Minneapolis.
Upon the opening of Northern Eagle, NCUA board chairman Debbie Matz hailed the development as a step towards easing the entry of an underserved community into the financial mainstream.
"Many Native Americans unfortunately lack access to federally insured financial services providers or only have access to predatory lenders," Matz said. "The chartering of Northern Eagle... addresses a real need. The credit union has the potential to play an important role in improving the lives and financial well-being of Northern Minnesota's Chippewa communities."
Northern Eagle said it has served more than 200 people with "one-on-one budget, debt counseling, and credit-building services" through its Credit Builder program and its financial education counseling and various workshops.
"The credit union continues to grow its membership and expand its ability to promote the wise use of savings and credit and provide members with financial services, including savings accounts and loans," Pieratos said.
Northern Eagle offers a wide variety of financial products and services, including savings accounts; consumer loans, emergency loans, certificates of deposit, personal and niche loans; prepaid debit cards, money orders, cashier's checks, financial education workshops for adults and youth, one-on-one financial counseling.
Before the CU opened, Pieratos indicated, the local reservation community had few viable banking options. "The nearest bank is located at least a half-hour away by car from the reservation," she said.
Challenges
With only about $520,000 in assets, as a tiny institution Northern Eagle faces some serious challenges to further growth, including a very tough regulatory and economic climate.
Unemployment on the reservation stands at about 16%, more than double the figure for the state of Minnesota, though a number of businesses have sprouted up in the area, including the a casino run by the tribe, as well as a new golf course, a radio station, a hotel and a manufacturing firm,
Historically, the local economy has been dominated by mining, timber and tourism.
In addition, the reservation is sparsely populated (with less than 5,000 people) with wide geographic dispersal and poor transportation infrastructure. To address this, Northern Eagle currently has a pilot program focused on providing online banking services. Pieratos said she expects the CU to provide online banking and checking account services during this year.
Bright Spots
The Fortune Bay Resort Casino, which opened in 1986, has more than 550 employees, an annual payroll of approximately $10.2 million. Fortune Bay also buys some $22 million in goods and services each year from local vendors.
Looking at the near future, Pieratos has a target of having 25% of her total FOM — some 1,250 people — joining the credit union.
"That is actually an above-average percentage compared to most new credit unions," she noted. "We think we can meet this target by promoting vehicle loans to our members. There's a high demand for that particular product on the reservation."
Mark Cummins, president and CEO of Minnesota Credit Union Network, which helped with the founding of Northern Eagle, noted that there are actually some advantages to starting a CU from scratch and remaining relatively modest in size.
"When a credit union is locally-owned and managed, the membership is comfortable with it because the institution is well aware of its unique needs and culture," Cummins said. "This builds trust in the community over the long-term, while the credit unions becomes ever more attuned to the market that it was created to serve."
But Northern Eagle will have to more than double its asset size quickly to stay afloat, according to Alabama-based credit union consultant Dennis Dollar.
That's because the CU lacks of any real economy of scale. "[I]t is, frankly, quite challenging to sustain a new credit union with less than $1 million in assets," Dollar noted.
Ben Rogers, research director at Filene Research Institute, said that while $520,000 in assets is enough to provide for basic products and services, a credit union that size has to have enough cushion to keep growing.
"Hypothetically, if Northern Eagle has 10% of assets as capital [$52,000] and one car loan of $20,000 that went bad, that capital cushion would go from healthy to dire overnight," Rogers said. "I see from their website that they're currently just seeking deposits and selling a limited number of products. That's a safe first step."
Dollar holds out hope for credit unions like Northern Eagle, especially "if the support of the Native American community is strong enough for this start-up credit union to responsibly grow over the next couple of years, it could possibly grow into a larger credit union with a great community impact. It is going to depend on how strongly the local Native American community supports it."
Pieratos is optimistic. "We have a unique niche community that we serve that is very receptive to us," she said.
