Year-Old Tenn. Credit Union Finds Success Despite Great Recession
The now $3 million Mid East Tennessee Community Credit Union turned one-year-old this past March and organizers report the new CU is thriving despite the down economy.
The three largest employers in the mostly rural, sparsely populated Meigs County, where the CU is based, got together to charter and found the credit union in 2007. But it took until March 23, 2009 to actually open the doors, in the teeth of one of the worst economic recessions the country had ever seen.
Meigs County had never gotten all that prosperous. so it didn't have too far to drop when the economy declined, Jim Pitt, chairman of the CU's board and CEO of one of the firms, Polyform Plastics, explained.
Still, it was a bad year economically, and Pitt said the CU organizers had been reminded many times that it was a bad year to start a credit union. But it had taken them so long to organize the effort that it made actually being open seem easier by comparison.
Polyform Inc., Pitt's company, makes plastic parts and has about 100 employees. Another employer, Shaw Industries, is a noted carpet fiber manufacturer with roughly 550 employees and the third, Storm Copper Components, manufacturers copper components and has about 150 employees, Pitt said.
But the credit union's charter from the state of Tennessee is to serve anyone who lives, works, attends school, worships, volunteers or does business in Meigs County and that covers more people than the employees of the three companies, Pitt said. As of the end of the first-quarter the credit union had 600 members.
"Mostly, I am proudest of our loans for the first year," Pitt said, explaining that the employers had wanted to set up the credit union particularly to help their employees meet their needs for short-term small loans, which were leading them into payday lenders and other types of consumer borrowing.
"Most of our loans the first year were in used cars," Pitt said ($192,000 worth, according to the credit union's NCUA records for 2009). "We had a few new cars, but we didn't do as many of those because of the depreciation and the higher sticker prices."
But it wasn't just auto loans in the first year, Pitt explained. It was also the small value, short-term signature loans that members were getting from payday lenders as well as loans for farm equipment and some types of small boats and other recreational vehicles.
"We have a pretty good sized lake here, and the boats have been part of that," he said. The farm equipment had gone to some of the members who both have jobs as well as plant some of their land in the rural county. The NCUA reported that the credit union made $42,000 worth of unsecured loans in 2009.
Some of the loans have been bridge loans for farm operations, loans that the members have used to finance land improvements or planting and then repay later in the year when the harvest comes in, Pitt explained.
Pitt credited direct deposit and payroll deduction for helping the CU make its loans and enable them to be repaid in a timely way. The credit union's delinquency ratio in 2009 was 1.69%, well below its peers, and Pitt chuckled when he recalled how the credit union handles delinquencies when it comes to automobiles.
"We move fast to go to get them and park them in a lot next to the credit union," Pitt said. "After about a week, they come in and redeem them, and we let them have them again."
The credit union has two full-time employees and one half-time employee. Pitt said the CU will stick to savings and loans for now to help keep expenses low while it grows. Services like ATMs or other programs all cost money, he pointed out, while acknowledging that the credit union benefits from the county's small size.
"We are in Decatur, the county seat, so at no point is anyone, anywhere in the county, more than 15 miles away," he said, adding that the CU's hours of Monday through Friday 10:00 a.m. to 5:00 p.m. helps, too.
Mid East Tennessee Community last year made more than $5,500 for the year and achieved a return on assets of 0.48%, according to NCUA records, and it has only grown since there, moving the credit union up from a net worth ratio of 0.28% at the end of last year to just above 1% at the end of the first-quarter 2010.
That put the credit union into the category of minimally capitalized for a new credit union, which the NCUA classifies as one in its first 10 years of having been chartered with no more than $10 million in assets.
Pitt praised the NCUA for the help he said the regulator had provided and for its examiners who had been very good about explaining things guiding the CU, even though that close work had made the CU used to changing plans.
"We've had to keep revising our business plan," Pitt said, "but that's just part of it."