Tulip CU Blossoms After Near-Death Experience

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OLYMPIA, Wash.-The chairman of tiny Tulip Co-op Credit Union here admits the CU "broke" during the recession, but he is also now reporting that repairs are fully under way.

The $1.9-million CU, which serves 1,018 members, posted a net loss of $76,098 in 2008, followed by a net loss of $99,232 in 2009-enough red ink to nearly drown the tiny CU, according to Tulip's Eric Bowman.

"We are very small. We have only one employee," he said. "We are only seven years old and were the first credit union to be chartered in the state of Washington in 17 years. When the assessments came from NCUA, our credit union was already down due to the economy. When the economy deteriorated our loan demand plummeted precipitously. We saw months of no consumer loan demand at all."

Tulip is located inside the Olympia Food Co-op. It serves members of the co-op and low-income residents of Thurston County. Bowman said the CU has done a better job of diversifying its membership in the last year. "We are getting a better blend of the low-income community," he explained. "Eighty-seven percent of our loans by count are to low-income people, roughly 70% by volume, which means we are doing what we set out to do-we help build people's credit."

Tulip received assistance to recover from the brink. During 2010, it took in two sources of secondary capital: a $100,000 uninsured investment from Tukwila, Wash.-based BECU, and $75,000 investment from the U.S. Treasury's Community Development Capital Initiative. Bowman said the $100,000 from BECU is "deeply subordinated debt" that counts toward Tulip's net worth.

"Our net worth was down below 2%, but now it is up over 10%," he said. "When we were struggling we were in close contact with our state regulator on a net worth restoration plan."

Loan Participation Played Key Role

Rejuvenated by the influx of capital, Tulip, which stands for Thurston Union of Low Income People, was able to purchase two loan participations totaling $1 million, which Bowman said served as a "revenue generator" that boosted the CU's earnings "dramatically."

Other changes included "fleshing out" the board so it was more professional, adding an attorney and a stock broker to its ranks.

"In some ways the financial crisis was rejuvenating, because we were able to realize where we were deficient internally. We renegotiated some vendor contracts that were cost prohibitive. The credit union broke-we were losing $7,000 to $8,000 per month-but we put it back together again."

More Good News

Tulip's net loss for 2010, excluding assessments, was just $7,092. It paid $2,577 to the NCUSIF and $2,748 to the corporate stabilization fund. The CU has experienced four straight months of loan growth, which Bowman said is very encouraging.

Bowman said Johna LaRue, Tulip's operations manager, is the "rock" of the CU. "We could not have done this without her," he said. LaRue, however, deflected the praise, saying it is all part of the job at a low-income CU. "I have been here a long time and I truly believe in the mission of Tulip. There's me as the manager and one staff person," she noted.

LaRue said Tulip emphasized collections, which helped it avoid potential losses, but the biggest spark was being able to purchase a loan participation. "The participation loan was a very big undertaking," she recalled. "We later discovered that many other financial institutions did not go down that path because it is so much work... But it was definitely worth it."

The first two months of 2011 have seen a steady increase in loan volume, La Rue reported, adding, "We are really excited about that because we are really pushing our loans."

Tulip offers personal loans, including some payday lending alternatives to help people get off the payday lending cycle, as well as auto loans up to $25,000-a limit the CU aims to raise. Tulip is also exploring a partnership with another CU on manufactured housing loans.

Both Bowman and LaRue praised Tukwila, Wash.-based BECU, for its assistance, which went well beyond making a non-member deposit. "We did a rebranding, and BECU funded a marketing campaign for us," said LaRue.

"We feel really good about the future and things are moving well," Bowman said. "If there is a double-dip shockwave that takes us out, at least I'll feel like we did everything we could. We are not looking behind us, we can only look forward."

Added LaRue: "We are just so excited about continuing our presence here in Thurston County. People walk in here every day saying they wish they had heard about us three years ago, that they never would have gotten a payday loan."

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