While it has become common to decry small credit union mergers, one Arizona CEO said mergers helped her institution better serve more members.
Robin Romano serves as CEO of the 7,100 member, $33 million MariSol Federal Credit Union, as well as on the board of the National Federation of Community Development Credit Unions.
Founded in Phoenix in 1954, MariSol has grown both organically and through mergers to its current size, Romano described, adding communities and cultures along the way.
The merger growth began when MariSol, then called the Maricopa County Employees FCU, merged with Sun Catholic Credit Union in 2002, a move which felt largely natural, Romano said.
“They had a field of membership that had a lot of people of Hispanic origin in it already and we had a predominantly Hispanic membership,” Romano said, “so merging the two was not too difficult.”
Romano said MariSol had taken care to try to maintain Sun Catholic's culture and to make sure the new members felt included in their new credit union. That meant growing the board of directors from seven to nine members.
The next merger came in 2006 when a small credit union associated the chapter of a local social welfare group, the Order of Oddfellows, merged with MariSol. In 2009, the Chicanos Por La Causa Credit Union merged in as well.
The mergers meant that MariSol grew in members and assets and was able to expand its ability to serve its members, Romano explained.
NCUA numbers back her up.
MariSol closed last year with a net worth ratio of 8.96%, according to credit union's call report, and a return on average assets of 0.34%. This net worth ratio is about four basis points below other credit unions of similar size, according to the agency's ratio analysis for the third quarter, the most recent report that includes peer data. But MariSol's ROI is about 0.1% over the peer group during that same period.
Further, NCUA's data shows that MariSol pulls in higher average loan yield compared to peers: 6.89% for MariSol versus 6.12% for peers in September 2013.
One of those loans that has worked well for MariSol is what the credit union has called its Quick Loan program. Launched in 2007 as a way for its members to avoid the high interest rates of payday loans, Quick Loans come with additional features. While the loans require direct deposit and for the borrowers to have had a job for at least six months, the loans are paid back in three months, rather than one pay period, and carry a savings component.
Members will take out the loan for $500, but repay $570 with the $70 going into a savings account which usually sees them continue in their savings habits, Romano said.
“The thing is, that savings component is one of the most well liked parts of those loans,” she said. “That $70 is a big deal for them to attain at the end of the loan period.”
Another program is the Pay Yourself Mortgage, a housing finance program that provides mortgage loans to low income members. One major difference in the program is that while it requires a down payment of between 3% and 5%, it does not carry any mortgage insurance.
Instead, MariSol charges a premium of 75 basis points of the loan which the borrower pays into a savings account and cannot withdraw for five years. After five years, borrowers can take out up to 50% to help make some substantive repair and remodeling to the property. After 1- years, borrowers are able to access the full amount.
“It means we accept some of the risk the mortgage might default,” Romano said, “but we solidly underwrite the loans, and when compared to the 1.25% that mortgage insurance often costs, ours is a really pretty good deal.”
Romano noted that the credit union works with a lower income housing organization that helps lower income members raise the down payment needed and that, should the loan default, the MariSol has access to the savings account to help defray any losses the credit union might face.
The program's performance last year appeared to justify Romano's confidence as well. According to MariSol's call report, the credit union finished out 2013 with 28 mortgage loans on its books worth roughly $2.6 million, but had none of the loans post as delinquent or charged off.
MariSol does carry one foreclosed property on its books worth just over $18,000.