Second Federal Credit Union opened its doors in Chicago Sept. 21, assuming the footprint of a 130-year old failed thrift.
When the Great Recession carried away the Second Federal Savings and Loan in 2010, community leaders recognized the potential financial catastrophe for Chicago’s low income and underserved consumers on the city’s Southwest side.
“Even though it was a saving and loan, Second Federal had really acted like a community development credit union, like a CDCU,” said Randy Chambers, chief financial officer at the 40,000 member, $586 million Self-Help Credit Union. Second Federal will operate as a subsidiary of the Durham, N.C.-headquartered Self-Help.
Second Federal had a history of serving immigrant groups, often changing its staff and culture to meet the needs of the latest group, Chambers said. In each case, the thrift had provided newly arrived populations with financial services and loans, including mortgages.
Currently, immigrants in the area are primarily from Latin America; as a result, Chambers said, many Second Federal employees speak Spanish.
Ironically, it was exposure to immigrant populations that resulted in the thrift’s collapse, Chambers said.
“In other parts of the country, the Great Recession took unemployment up to 10%,” Chambers said. “But at this community, it was already at 10% and the Great Recession took it to 20%.”
When the thrift failed, Chambers said Self-Help partnered with a community organization to buy the thrift’s portfolio of more than 1,100 home loans worth roughly $141 million. While the purchase protected homeowners from the impacts of potential foreclosures, it was only a partial victory for the credit union, he said. Self-Help had been in negotiations with the FDIC to also acquire the failed thrift’s deposit accounts, but that deal initially fell through and the deposits were sold to another institution.
Despite the setback, Chambers said Self-Help kept working with both the FDIC and the deposit-purchasing bank. When it became clear the new customers weren’t a good fit for the bank, Self-Help made another offer that was accepted.
The newly acquired depositors qualified for membership by joining an association that was the primary local sponsor for Self-Help, Resurrection Project.
“Keeping Second Federal in the community as a viable, ongoing financial institution is a crucial part of helping our residents weather the recession and keep moving forward,” said Resurrection CEO Raul Raymundo at the Sept. 21 grand opening.
Even though the credit union picked up the mortgage loans at a discount, nearly 20% were delinquent and many needed modification, Chambers said. The deposits acquisition further challenged net worth. Fortunately, the John D. and Catherine T. MacArthur Foundation provided $15 million of secondary capital, he said.
NCUA Board Member Michael Fryzel, Illinois Gov. Pat Quinn and Illinois Attorney General Lisa Madigan also took part in the reopening ceremony.