Holy Trinity Baptist Church Federal Credit Union has about $24,000 in assets, making it one of the smallest credit unions in the U.S. But it has survived and thrived over the past 50-plus years with low overhead and a small but loyal membership.
Transcript:
Chana Schoenberger (00:01):
The country's attention has been taken up for the last few months with a banking crisis. The numbers batted around are quite large, as hundreds of millions of dollars change hands between depositors banks and the federal government. Today we're traveling to the other end of the financial spectrum where the numbers aren't nearly that huge. Here's American Banker Technology Reporter, Miriam Cross.
Miriam Cross (00:24)
Last November, I heard former National Credit Union Administration chairman Rodney Hood say something at a fintech conference that grabbed my attention right away.
Rodney Hood (00:34):
The thing that I would like all of you to leave here with is, credit unions have continued to grow amid the pandemic. We now have credit unions that present 132.6 million members throughout the United States. We have a little under 5,000 credit unions that are, again, around the country. Our largest credit union is about $130 billion with offices in 25 different countries. One of our smallest credit unions is about a $200,000 credit union that's in the basement of a church that's only open on Sundays. So there is a full panoply of diversity within our credit union system…
Miriam Cross (01:10):
$200,000 in assets, the basement of a church, only open on Sundays. To put that in perspective, the smallest bank in America has $3 million in assets. I was fascinated. How can a financial institution be that small? Where is this church? Who is using this credit union? I did some searching, and landed on Holy Trinity Baptist Church Federal Credit Union in Philadelphia as the likely candidate. At least, I thought so. Because Holy Trinity doesn't have $200,000 in assets. It's way smaller. From American Banker, I'm Miriam Cross, and this is Bankshot, a podcast about banks, finance and the world we live in.
(01:57)
The question of which credit union is the tiniest in America is a moving target, but Holy Trinity Baptist has consistently been right at the bottom. In the first quarter of 2023, it had about $24,000 in assets. This is par for the course. At the end of 2022, it had $23,200. Some credit unions have technically been smaller in recent quarters. For example, in the third quarter of 2022, People's Trust Community in Arkansas reported just $1 in assets, but it was only chartered that September. In the fourth quarter of 2022, Varick Memorial in New York reported just $12,000 in assets — but in the previous quarter, it had about $155,000 in assets. In contrast, the largest credit union in America, Navy Federal in Virginia, has $166 billion in assets. Suffice it to say, Holy Trinity Baptist Church Federal Credit Union has been very tiny for a very long time. I was intrigued. How does this credit union survive? Why do its members choose to bank there? It took several phone calls, initially spread across several Sunday mornings, to nail down plans to visit — because that and Tuesday are the only days the credit union is open — but in March, I took the train to Philadelphia to find out more.
Train Conductor (03:13):
Ladies and gentleman, next stop, Philadelphia. Please grab all of your belongings.
Miriam Cross (03:18):
It is a beautiful day in Philadelphia on the last Sunday in March. I'm in the social hall in the basement of Holy Trinity Baptist church, a few blocks south of Rittenhouse Square, with several members of the board of the credit union, including Delores Peters, the treasurer, also known as Dee, and Terrence Green, president of the board. They have gathered after church services to talk to me about the credit union. If the audio sounds echo-y, it's because we're in a cavernous room.
Dee Peters (03:44):
I'm Dee Peters, treasurer and manager of the Holy Trinity Baptist Church, Federal Credit Union
Miriam Cross (03:52):
Dee has been treasurer of the credit union since 1994. The credit union started in 1965, and was chartered in 1966, which was one of the few pieces of information I could find online about it. It has 85 to 90 members, all of whom are either members of the church or actively involved in the church.
Dee Peters (04:09):
As the years have gone on, we have lost members because of death. But we gain members now. And we're small, but we're faith based. And the seniors, they like coming to the credit union as well as young people, is because we issue out loans on faith base, we don't do credit checks and all that. We believe in you, you are a member of the church, God has sent you to us. So that's how we work with our loans. And we have a delinquency of zero.
Miriam Cross (04:49):
So how did people find out about the credit union? Is it just because they're members? Like, again, very little online presence, there's no website?
Dee Peters (04:56):
No. No.
Miriam Cross (04:58):
And is that a hindrance at all?
Dee Peters (05:00):
No. No, no,
Terrence Green (05:01):
No. Once you're a member of the church, you can come in and open an account.
Miriam Cross (05:06):
That's Terrence Green, the president of the credit union,
Terrence Green (05:09):
And I'm Terrence Green, the president of the board for Holy Trinity Baptist Church Federal Credit Union.
Miriam Cross (05:16):
Well, I was going to ask, how do you exist with $23,000?
Terrence Green (05:22):
We don't have to pay rent or pay a lease or anything like that. That's true. So everything that our assets are just what we have on the books, there's nothing outside of that. So that's one way you survive. You don't have to, we don't pay. We're not paying anybody bills. We're not paying anybody's salaries or anything like that. Everything. This is all voluntary, all volunteers. Oh
Dee Peters (05:44):
Yeah. Nobody gets paid.
Terrence Green (05:47):
So that is the main way you stay afloat because you're not really paying too much out. Everything is coming in.
Miriam Cross (05:59):
Terrence has a day job, in the accounting department at Eagle One Federal Credit Union in Philadelphia. Some members of the board have their own day jobs, but most are retired. Dee spent 40 years at the Federal Reserve Bank of Philadelphia, most recently in the accounts payable department. So is this your retirement gig?
Terrence Green (06:18):
Gives her something to do.
Miriam Cross (06:20):
According to the NCUA, a "small" credit union is defined as having less than $100 million in assets. This ceiling was set by the NCUA board in 2015. In the fourth quarter of 2022, there were 2,981 such credit unions, which is 62% of all federally insured credit unions. The average assets of this group were about $30 million. The Small Credit Union Initiative at the Credit Union National Association, or CUNA, gears its services toward credit unions with less than $120 million in assets. Here is Tom Sakash to tell us more.
Tom Sakash (06:53):
My name is Tom Sakash and I'm the manager of Small Credit Union Initiatives at Credit Union National Association.
Miriam Cross (07:01):
And do you have a sense of how many credit unions fall under your definition of small credit union in the country? Out of the whole subset of credit unions, how many are small?
Tom Sakash (07:11):
Yeah, so under a hundred million in assets, I think there are about 3,000 small credit unions. Under five million in assets, I think there are about 800 credit unions. I like to share that number because you know, it's a reminder that there are still so many really really small credit unions out there. You know, still thriving, still working to serve their members even at that size. So yeah, you know bulk of credit unions in our industry are small today.
Miriam Cross (07:43):
What are the unique characteristics you see of small credit unions besides their size?
Tom Sakash (07:49):
Yeah, I mean, I think that a lot of the smaller credit unions that are still in operation today, they often have the original field of membership. So, you know, many credit unions were started with a single SEG or single employer group and some of the small credit unions that still operate today, still only serve those members. They haven't changed their fields of membership. They still serve that exclusive community. There are many small credit unions that have changed their fields and membership and now serve a community or a set of communities or a set of counties and you know, those are credit unions that are trying to change and evolve a little bit and serve a broader market. I think the way that they operate, their service model, they still really like to be in front of the member, you know, a lot of financial services. The industry is going a lot more technology forward a lot more, efficient, streamlined, you know, frictionless service, you know, with a very digital forward approach whereas a lot of smaller credit unions, they still find their value proposition to be that really high touch service. They really just understand their members, know their members personal lives, know their stories and you know that that really does resonate with members who like using, you know, some of these small credit unions because they feel part of, you know, the family, they really feel that their membership is unique to them.
Miriam Cross (09:23):
Holy Trinity Baptist has two products: a savings account and a small-dollar loan for amounts under $1,000. If members want to deposit money, they bring cash or a check to Dee Peters on a Sunday or Tuesday, when the credit union is open, or they can drop it off in the credit union's mailbox. If they want to withdraw money, Holy Trinity writes them a check, through its account at American Heritage Credit Union, another credit union in Philadelphia. Which may sound inconvenient for those of us who are used to opening accounts and withdrawing money online, but according to Terrence, that is part of the credit union's appeal.
Terrence Green (09:56):
That's all we do a savings, we don't have a checking account or anything like that. And the real point of it is, you want to put your money somewhere, where you don't have that immediate access to it. So you're actually really using it as a savings account. For a lot of savings account, you go online, you can make a transfer to your checking account. Well, if you want to access your money here, you have to come to us and say, I want to take 100 bucks out of my savings. And then we write you a check and then give you the check for $100 and you take that check somewhere to cash it.
Miriam Cross (10:32):
The loans are also dispensed by check. As Dee mentioned earlier, the credit union issues loans based on faith and does not check credit scores. People will fill out a paper application, including proof of income. Dee will turn the application over to the loan committee, they have a meeting to review the application, and decide whether or not to extend the loan.
Terrence Green (10:51):
Since we don't run a credit report, or a credit check to give loans, we're basically going on the understanding that you're a member of this church, and you're borrowing from the church credit union, and we have the faith that you're going to pay us back. We won't, if you didn't pay us back, we wouldn't report it on credit. You know, that doesn't hurt your credit scores. It's just some other means of if you get into a bind, you have a way to borrow money without having to go through all the rigmarole of loan applications and credit scores and credit checks
Miriam Cross (11:33):
It turns out these practices are pretty common among faith-based credit unions.
Monica Copeland (11:38):
There's a cost to pulling credit and some credit unions make a decision too about like whether or not we're going to pull a credit report or report to a credit reporting agency, you know, will that negatively affect you, that kind of thing? And also cost to the institutions of having that service and being part of that whole system. So there is probably more of what you call character lending, in terms of the ability to pay back and just credit unions in general this is key part of their ethos and it's called, they have this phrase called people helping people in the credit union movement,
Miriam Cross (12:13):
That's Monica Copeland.
Monica Copeland (12:15):
Monica Copeland. My title is MDI Network Director and MDI stands for Minority Depository Institutions and I work at Inclusiv.
Miriam Cross (12:23):
Inclusiv is a national network of credit unions and a community development financial institution intermediary. She's done a lot of work with small credit unions and MDIs, including faith-based ones. How would you define a faith-based credit union?
Monica Copeland (12:38):
So I would define a faith-based credit union as a credit union that's started by a faith institution. So the denominations can vary, but we're talking about often like Baptist churches might start a credit union. Lutheran, Catholic churches, parishes the church often from a Christian perspective, these are often, that's the faith lens that they're coming from. There are other institutions that do faith lending. There's a Hebrew Free Loan Society and things like that. But usually when we're talking about faith-based in the credit union space, there are Christian institutions formed at churches who then choose to take on forming a credit union for their church members.
Miriam Cross (13:23):
As with Holy Trinity, Monica finds that faith-based credit unions have streamlined their operations. They tend to have a basic savings account and do lending, especially for small amounts.
Monica Copeland (13:33):
That is one of their sweet spots and specialties, particularly when they're trying to combat things like payday lending in their community. Sometimes when the credit unions hear about that, they're like Okay let's give you the money to pay off that payday loan. So you have a loan with us that's like better terms, better interest rate, fairer just in general non-predatory and so they do specialize in those small amounts and people do come back. When I first started I was surprised to see some of these smaller credit unions don't necessarily even have the checking product, you know? Because the cost of having the checking product and so many other institutions can offer that. You could bank with your credit union as your primary but many people these days have multiple, they have a bank account and a credit union account, they're using things for different purposes
Miriam Cross (14:18):
So how do the examiners typically look at this kind of lending?
Monica Copeland (14:23):
So they might view it as quote unquote, more risky, they view this population that way. We in the community development field disagree. We have had many cases where we've been able to prove the default rate is comparable to larger institutions, you know, like this whole type of like character sometimes, they are performing just as well or even better than some other institutions. So, this idea that they're inherently risky, just because of like, who they are, where they live, that you ordinarily would not loan to them. It's not proven through the lending
Miriam Cross (15:06):
That's certainly true with Holy Trinity Baptist. Dee tells me they have rarely had a delinquency. The interest rate on the loan is 12%, and members have six months, a year, or two years to pay it back. When I asked the NCUA about what kind of support it offers these institutions, Martha Ninichuk, director of credit union resources and expansion, said that the NCUA examination program for small credit unions recognizes the challenges unique to small credit unions, such as limited staff, limited segregation of duties and internal controls, and a possible lack of financial resources to secure necessary equipment, education, and training. She said credit unions rely on guidance provided by the examiner during and outside of the official examination process.
Dee Peters (15:48):
NCUA with the examiners, they sometimes had a problem with me, giving them our loan committee giving them that information. They kept saying you need to do credit checks. What, we don't have no delinquency. So you know, I mean, and we have very small amount of a loan. You can't go to the bank and get the loan. Like we have a member that had a pipe bust in the house, and she only needed $700. We were able to give it to her because we only go to $1000
Terrence Green (16:28):
When we get our examinations from the NCUA, they are always remembered that we don't have any delinquencies on our books. So they tell us just to go ahead and do it the way that you're doing it.
Miriam Cross (16:43):
So what have the reactions been when they came
Dee Peters (16:45):
Oh, excellent. You know, as soon as they come in Dee we know you're a small credit union, it's not going to take us long to do you. I would be sitting there ready? So here you go. And everything is good.
Terrence Green (16:58):
I did have a relationship with a lot of the examiners because I work for the accounting department at my credit union. So I got to know a lot of them. And some of them were coming here. And I'm talking to them at work, like, how's everything going? He's like, Oh, you're good. You're good, especially since you got updated on the computer.
Dee Peters (17:21):
Good.
Miriam Cross (17:23):
So is there any sort of technology that you use here?
Dee Peters (17:27):
We have a computer,
Terrence Green (17:29):
We use Excel spreadsheets and all that too.
Miriam Cross (17:33):
Do you have a core system?
Dee Peters (17:35):
No, no. We
Terrence Green (17:38):
Told
Dee Peters (17:38):
You we were faith based.
Terrence Green (17:39):
Our core system is American Heritage Credit Union.
Miriam Cross (17:44):
Holy Trinity Baptist does indeed have a computer. I saw it while I took a tour of the church in the credit union, which is one office next to the fellowship hall. The wooden desk in the office has been there since 1965. There is a leather band ledger, which has information on all members of the credit union and two filing cabinets, one of which has information about its members and the other of which has blank applications and loan receipt books. This kind of blew my mind because my mom literally has more filing cabinets in the basement for just our family member. Information is also stored online, but Dee keeps the physical ledger around because some members prefer to view their accounts that way. Some small and faith-based credit unions have banded together to acquire technology that they don't have the resources to get on their own. The Faith-Based Credit Union Alliance in Chicago is one example. This nonprofit is made up of a group of small credit unions, predominantly faith-based, who share resources and ideas, and even negotiate contracts together for joint ventures. They're located in states around the U.S. and the majority of these credit unions have been around for decades. Here are Drs. Joronda Crawford and Hiram Crawford. Both are heavily involved with the Faith-Based Credit Union Alliance.
Dr. Joronda Crawford (18:53):
I'm Dr. Joronda Crawford and I'm the president of the Faith-Based Credit Union Alliance. Additionally, I am a board member for the Israel Methcomm Federal Credit Union.
Dr. Hiram Crawford (19:04):
I'm Dr. Hiram Crawford, I'm a supervisory committee chair for the Israel Methcomm Federal Credit Union. And also vice chair of the Faith-Based Credit Union, Alliance.
Miriam Cross (19:16):
What sort of contracts have you done with the Faith-Based Credit Union Alliance?
Dr. Joronda Crawford (19:20):
We have a core processor contract. We have a loanliner contract and we have credit bureau contracts. Some of us were on different core processors. We had a few credit unions who were not on a core processor at all. They were actually doing spreadsheets. And when the pandemic hit, we realized that, you know, we had no way of reaching our members because we were used to them coming to the church and doing whatever needed to happen. So actually one of our core processes had the idea. Well, maybe we could do a joint contract with all of you and they weren't able to do it. But we say, Hey, let's check out some of the other core processors and see if they would be able to do it. So we were able to get that contract and of course, most of us could not afford the expensive loanliner forms, we couldn't afford the credit bureau checking, so we were able to get all of that for our credit unions.
Miriam Cross (20:22):
Holy Trinity Baptist was closed between March 2020 and September 2022 because of the pandemic. They held church services on Zoom. If people wanted to deposit money, they would mail a check to the church, and Dee would pick it up. She said nobody was withdrawing. People like having a cushion. Even though the members of the Faith-Based Credit Union Alliance have a contract with TransUnion, faith-based lending is still important for them.
Dr. Hiram Crawford (20:47):
I can always remember that the faith-based credit unions are helping those that are involved in their church. So it doesn't matter what the situation is because we know the member and that helps tremendously so we can help them out.
Dr. Joronda Crawford (21:04):
This is new. This is brand new that we have a contract with the credit score so we always had to deal with history with the person. And you know, and then I think that basically because they are so happy that you trusted them. They tend to pay you back.
Miriam Cross (21:22):
What were your delinquency rates before you had a contract with the credit bureaus?
Dr. Joronda Crawford (21:26):
The delinquency rates were very low and they still are yes they're very low and that's based on a relationship. Just like you have to have a relationship with the Lord Jesus Christ. We have a relationship with our members and that makes all the difference in the world.
Dr. Hiram Crawford (21:45):
And we have many good stories where Grandma was able to bring in little grandson. And he made his payments. He may have missed a few months but that's that many instances. And so it's helped our young people immensely because you know, that Grandma just happened to be one of the on the loan committee and say, Wait a minute. Little Johnny, you'll be in here next week to pay his loan and sure enough. There comes Johnny, he pays his loans.
Miriam Cross (22:17):
That's so interesting. So how have the examiners responded to this type of lending.
Dr. Joronda Crawford (22:24):
The reality is, is that our credit unions do have low delinquencies. So the examiners are just really looking at the bottom line, you know, they don't, I guess they do care whether you got a credit score or not but, but the main thing is, the person paying back the loan, you know, the trouble comes, when they don't pay back the loan.
Miriam Cross (22:44):
But are you moving more into credit score based lending?
Dr. Joronda Crawford (22:48):
Well, I mean we we're still using the relationship because I mean that is even better than a credit score because a person can have a good credit score and then not pay you back and you know, because many of our credit unions can't afford to report, they know well, hey, they're not gonna in, they're not even go know that I didn't pay this loan back. So the relationship is much stronger than a credit score as far as I'm concerned.
Miriam Cross (23:15):
Monique Gaillard is a member of Holy Trinity Baptist Church Federal Credit Union. She uses both the savings account and small dollar loan. She works full-time as a business development specialist at a technology nonprofit, but she is also doing her PhD on the side and has found the small dollar loan to be helpful during her studies.
Monique Gaillard (23:33):
The loan has been incredibly important just for handling some needs that I need around my educational endeavors. Whether it be school books or last minute tuition costs, whatever the case may be, that long has been very beneficial to that.
Miriam Cross (23:48):
I asked her if the lack of digital banking access has ever been a problem, but she said no,
Monique Gaillard (23:53):
I do use it as a place to hold my finances for when I need them. And I plan out when it is that I need them so that I can get that, get the money out in the appropriate amount of time. So, I wouldn't say that, you know not having access to an actual online banking system or something like that would be a downfall for me. Honestly, I hadn't even thought about it, I just know hey, I have to pay my tuition for school or you know, I'm going on this trip or whatever the case may be. I know what money I have put in here and I know that it's there and I can plan out whatever I need to withdraw it
Miriam Cross (24:29):
And so why did you decide to join the credit union?
Monique Gaillard (24:33):
Because I felt like it was important to continue to…. I mean, they've had the credit union for years and if I could be a contributing partner to help them stay alive and thriving, thenI wanted to do that. I feel like it was critically important for African Americans to have a safe space to come and handle whatever type of financial dealings that they might need especially if it is something like a small loan or something like that. I think that, you know, oftentimes we might not have the access to certain things or have to go through large bank bureaucracy to get what we need.
Miriam Cross (25:08):
One more topic on my mind was what is the future of these small and faith-based credit unions? Is there more demand? Is there less demand? Are they growing? Are they shrinking?
Monica Copeland (25:18):
Yeah, so I would say the story of faith-based again, mirrors, the story of the national credit unions, you know, on the decline in terms of sheer numbers. But when you look at asset size and number of members that's either growing or holding steady. So, the credit union field is not shrinking if you look at the people, like people are not fleeing credit unions. They're just contracting in the number of institutions that exist for some of these things that we talked about like technology scale upgrades, You know, things like that. It's like some of the faith-based credit unions were created anywhere from the 30s, 50, 60s, and some of them, their founders are passing away and they have an older membership and older staff. So some of them do start to say, Hey, I'm getting tired, I want to who's gonna take on this mantle, who's gonna continue this work? Because again, something we didn't talk about is the volunteer nature of these faith-based credit unions? A lot of them don't have paid staff which is like incredible. To know that and to know that maybe this person might help sometime job or they might be a full retiree but they're doing the work of running this institutions
Miriam Cross (26:26):
According to Dee, Holy Trinity doesn't have trouble finding volunteers to take over when someone is ready to move on. In fact, she's training two others to learn what she does as she eases out of her role.
Dee Peters (26:37):
So our credit union is, we've been really doing good, thriving. We know that we are the smallest, but we are not concerned because we have God on our side. That's why we still exist.
Chana Schoenberger (26:55):
This episode of Bank Shot was written and produced by Miriam Cross. Our executive producer is Chana Schoenberger, and our sound engineer is Kellie Malone. Special thanks this week to the board of Holy Trinity Baptist Church Federal Credit Union, especially Dee Peters and Terrence Green, Monica Copeland, Tom Sakash, Monique Gaillard, Joronda and Hiram Crawford, the National Credit Union Administration, and the Financial Technology Association. If you like the show, please like and subscribe or visit americanbanker.com/subscribe to get some of the best news and analysis out there from American Banker. I'm Chana Schoenberger and thanks for listening.