his peers are overlooking a profitable market: the poor. For the last six years, the Tampa credit union has focused on reaching people underserved by other financial institutions. Although $105 million-asset Florida Central is starting to see its delinquencies rise a bit faster than its peers, the institution enjoys a high return on assets and is looking for new ways to reach into poor communities, Mr. Gallagly said. "This is good, sound business," he said. Over the last two years the credit union has refined its risk-based lending program, which evaluates borrowers by credit history, debt-to- income ratios and other key measures of creditworthiness. Instead of rejecting members who don't meet the credit union's underwriting standards, Florida Central now makes some of them loans at a higher rate. For example, Florida Central's Gold credit card rate is 11.9%, its standard rate is 13.5%, and the subprime rate is 16.5%. On car loans, Florida Central charges riskier borrowers an additional 200 basis points and requires a higher down payment, Mr. Gallagly said. Members with solid credit histories can apply for 100% financing. "We are willing to take a slightly higher delinquency to accommodate people we heretofore have rejected," he said. Mr. Gallagly estimates that 40% of Florida Central's 47,000 members come from families with low to moderate income. The credit union's membership consists of 500 employee groups, including several food packing houses. "We serve a lot of people who aren't making a hell of a lot more than minimum wage," Mr. Gallagly said. The credit union's delinquency rate has risen over the years, but its June 30 delinquency ratio of 0.63% is still better than 57% of its peer group, according to Callahan & Associates, a Washington-based consulting firm. The credit union's 0.18% chargeoff rate is higher than about two- thirds of its peers. Maintaining such a portfolio is expensive as well. Three quarters of all credit unions have better ratios of operating income to expenses than Florida Central's 49.7%, Callahan says. On the other hand, its return on assets, 1.94%, is higher than 91% of credit unions churn out, according to Callahan. Mr. Gallagly said the credit union's low-income focus has "had a positive impact on our bottom line even though our expenses have risen." The credit union recently added 80,000 people in blighted east Tampa to its membership base. As part of a renewal project, the credit union plans to open a branch in the area soon. A community group called the Tampa- Hillsborough Action Plan bought the building and, along with the credit union and the city, is putting up money for renovations. Ultimately, the east Tampa office might break off from the parent. "If at a later date the community has a keen desire to have their own credit union, they could apply for their own charter and spin off and they would hire Florida Central to do the management," Mr. Gallagly said. The credit union has several programs targeted at lower-income borrowers. For example, it participates in a city-sponsored home lending program for people with bad credit. The city guarantees the loans for five years, and the credit union charges market or slightly above-market rates. Florida Central has made 53 of the loans in its two years of involvement. One of the staff at the east Tampa branch will specialize in such lending.

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