How One CU Tries To Help Members While Keeping Examiners Happy

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SWEETWATER, Texas-Sweetwater Regional FCU is doing whatever it can to grant loans to members struggling to pay bills, including holding a guitar as collateral for a $3,000 signature loan.

In this small town of 13,000 suffering from an extremely depressed local economy, it's getting much harder to meet the loan needs of members whose credit scores have taken huge hits, shared CEO Mickey Hayes, who also functions as branch manager of the $7-million credit union.

"We look at it from every angle, and try to be creative if we can-like collateralizing a signature loan. We had a builder in here the other day needing $3,000, and he had E credit. At first when we looked at the loan and we said we didn't know if we could do it. Then we ran the numbers and found we could give him $2,000."

The member told Hayes he had a high-dollar guitar he'd put up as collateral to get the full $3,000. "We were ready to do that," Hayes said. "But then the member decided he could get by with $2,000."

The majority of members who walk into SRFCU's one-branch location today are seeking small loans to pay for groceries, utility bills, and to get caught up on medical bills, explained Loan Officer and Collections Manager Renee Martinez, who assists Hayes in overseeing daily branch operations. "Most are asking for about $500."

Martinez said such small requests make it hard on her and Hayes when they have to say no, a frequent occurrence the last two years. "We are granting about 56% of loan requests now, compared with over 80% before the recession," she said. "And you have all these people who are getting turned down by the banks coming to you and asking for your help."

Hayes said pressure from regulators is making daily branch operation harder. "Last year our regional director sent me a letter asking me to establish a strategic plan to improve the loan mix and decrease the amount of subprime loans. That is hard to do when you have mostly 500 credit scores walking in."

Through June, the credit union's delinquency ratio was 2.20% and charge-offs stood at 1.59%.

It's come down to walking a fine line between keeping the examiner happy and meeting the needs of the membership, Hayes conceded. Yet if the credit union is to bring in higher quality credit, it has to offer more services and extend its reach, Hayes explained. Currently Sweetwater Regional is located in a section of town that receives low pedestrian and automobile traffic, and it cannot afford to move.

Hayes' answer is adding home banking and more convenience services, and extending the product line so the CU can win over higher credit score consumers who now do business with one of three local banks. There are no other credit unions in Sweetwater.

"But is has been hard convincing our board," Hayes acknowledged. "They are older and still believe word of mouth advertising will do the job for a small credit union. But I know that won't work for us. I tell the board we need to market and expand the credit union, or face being merged out."

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