The Fresno Bee is reporting that the Fresno Economic Opportunities Commission has signed an agreement with the Self-Help Federal Credit Union (Durham, N.C.) to open a branch in south Fresno.
According to the article, the Fresno Economic Opportunities Commission has raised $400,000 of the $600,000 needed to open the branch. The organization is seeking donations for the remaining $200,000.
However Self-Help FCU's financial statements show that the credit union does not need this subsidy from the Fresno Economic Opportunities Commission to open a south Fresno branch.
The credit union has $550 million in assets. For 2013, it reported a profit of $4.4 million and a return on average assets of 0.91 percent. Through the first six months of 2014, Self-Help FCU is reporting a profit of $2.9 million, which translates into a return on average assets of 1.06 percent.
Does it make sense for this poverty-fighting organization to use its scarce resources to provide a branch to a credit union that has the wherewithal to fund its own facility?
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Keith,
ReplyDeleteI am not sure what their strategy is in this instance but you may want to be careful when you critize Self Help. They are one of the most dedicated credit unions I know of when it comes to fighting poverty and living the credit union creed of 'people helping people'. Maybe they are simply making sure that these folks in Fresno are as committed as they are in the endeavor.
I'm not questioning Self-Help's commitment to fighting poverty. But my takeaway from the story, this community organization is struggling with coming up with the money for the branch. All i was pointing out is that Self-Help is generating a decent return on its assets and it can afford the branch.
ReplyDeleteGoogle shows there are at least seven credit unions in this area. And there are banks there too. Self Help probably knows that any movement into a low income market to provide financial services may result in a loss situation. Now, with the support of the commission’s money it will make it less of a risk in setting it up. This group can be served by any financial institution in the area if the financial institution thinks it will result in a profit and not a loss. This brings me to why the NCUA charters new credit unions when current credit unions are having a tough time surviving. Every two days there is a credit union somewhere that either goes out of business or merges. I believe it is for political reasons that the NCUA does this. They feel they can justify this by chartering credit unions in what they call “Underserved Communities”.
ReplyDeleteLet's get a real dialogue going here because this story captures the conundrum and so far, none of you are getting it. Though you are close.
DeleteLet's start the dialogue with with these 2 "apparent" facts.
The quotation on apparent is not that I disagree, but that I haven't specifically looked at the area..I HAVE looked at the national.
Here we go...
The area is OVERBANKED but there are people that are UNDERSERVED. And self help sees an opportunity to serve the underserved BUT doesn't want to foot the entire bill...and risk losing money.
How can the area be OVERBANKED but people be underserved?
And if self help is not for profit then why do they need the subsidy (and I'm not against or for self help's decision, I don't know enough).
Ok.
Who's going to pick it up from here?
The community had to incent someone to serve where banks were unwilling to go. Could have been any FI, but Self-Help stepped in because they were looking where needs are not being met.
DeleteExcellent. We have a dialogue. So, here is my next question...
ReplyDeleteWhy is it that it's only the banks not serving the underserved. If I read the commenters post correctly there are 7 credit unions in the area also.
They must not be serving the underserved at all or sufficient if self help and the community are funding a branch to serve them.
Yes?
No?
Self help are pretty smart guys. Doubt they'd waste their time and resources if there wasn't a VOID to fill by left open by ALL current financials.
Guess there is no reply to why the 7 current credit unions aren't serving the underserved.
ReplyDeleteOne observation in the unproductive "debate" between banks and credit unions....
...both sides ignore the benefits that would accrue from firing all the trade associations and starting a "community financial" trade association.
You have more needs in common than not.
To imply the banks aren't serving the underserved in Fresno without recognizing the 7 credit unions are not as well is more delusion.
Have you stopped thinking?
Agree - some Credit Union's are just as guilty. But, of course they do have FOM constraints.
DeleteLet me make a couple of comments about over banked and underserved. While it sounds as if the two conditions can't exist at the same time, the situation is easy to have when all or most financial institutions (bank and credit union) restrict their service to certain types of people. Often this is done by not opening checking accounts if credit scores are below a certain number. So, everyone is fighting over the 'good' customers and everyone is quilty of underserving the community. Self Help is more aggressive in reaching out to working poor than most.
ReplyDeleteI tend to agree that the real battles in Washington are being orchastrated by Trade Associations for banks and credit unions in order to justify their existance. Without an 'enemy' it's hard to keep the troops in line.
I think there's one piece missing in this dialogue. Whether we accept it or not, there is a segment of society that either don't want to have a banking relationship, are poor financial managers resulting in continuous overdrafts and eventual account closure, or are fraudsters (a growing community by the way) trying to get something for nothing at the expense of hard-working consumers. Frankly, if Self-Help can get a grant to open an office and take business away from check cashers who bleed people dry, then good for them. I don't see why banks can't get these grants as well if they want them. The reality is most of us don't want that type of business.
ReplyDeleteWhile I agree with a good bit of your comments, I believe there is a large segment of the population that works hard, makes low wages and is forced to live paycheck to paycheck. They do overdraw their accounts fairly often (once or twice a month) but they pay the fees. If a credit union or a bank will serve them, a profitable relationship can be developed over time and the consumer will be better off than they would have been using check cashers and payday lenders. However, it takes more effort than most institutions are willing to put forth even though these accounts can be profitable and worth the effort.
ReplyDeleteI'm heartened by the quality of this dialogue.
ReplyDeleteWasn't sure where it would go.
See what happens when we mix in a little logic and facts?
Less of the cu/bank mutual bash fest and more real world considerations.
Leaves one thing dangling just a bit....
....any cu not serving the underserved and offering products and services on basically the same basis as banks...needs and should have all the same treatment as banks including access to capital and taxation.