Highest Percentage of Credit Unions Adopting Underserved Areas Between $250-$500 Million

ALEXANDRIA, Va.-The banking industry has called into question whether credit unions, particularly large ones, continue to serve their mission, but new data from NCUA seems to say otherwise. Information disclosed by NCUA Dec. 6 showed that 62 of 146 federal credit unions between $250 million and $500 million in assets, or 42.47%, have adopted a total of 182 underserved areas with more than 23 million potential members. Next highest were the credit unions with more than $1 billion in assets at 38.89% adopting underserved areas. Twenty-one of these 54 federal credit unions have adopted 80 underserved areas, or an average of about four each. Next are the credit unions between $500 million and $1 billion with 37.84% adopting underserved areas. Study the charts shown here from NCUA for further details. “What this shows is that the larger you are, the more likely you are to have underserved areas,” NAFCU Chief Economist Tun Wai said. “In reality, it shows the commitment of those with the ability to serve underserved areas.” CUNA Vice President of Communications and Media Outreach Pat Keefe was not surprised by the data. “NCUA reports that millions more underserved people are now eligible for membership.Over time, as more persons avail themselves of credit union membership, we expect the number of those served by underserved areas to grow,” he commented. However, American Bankers Association Senior Economist Keith Leggett said this information does not directly address the complaints raised by his organization. “Our accusation has been that there is not any documentation that they are truly serving the underserved. Washington, D.C. is designated as an underserved community, but are the services targeted to the poor section of the city or to the more affluent section? NCUA has no way of knowing what the credit union is doing because they don’t measure it.” According to Wai, that is not exactly true. He pointed out that the credit union must submit a business plan when it adopts an area, which admittedly may have to be tweaked as circumstances change, but he feels NCUA monitors “the effort and commitment of these institutions.” Keefe indicated 2003 Home Mortgage Disclosure Act data, which showed credit unions making a larger proportion of their loans to low- and moderate-income (LMI) borrowers (24.2%) than banks (23.2%). Credit unions were far more likely to approve a LMI borrowers’ application (75% for credit unions and 47% for banks). Additionally, the growth of loans to LMI and minority borrowers at credit unions far exceeded banks in the two-year period ending in 2003. “However, as the Ways and Means Committee hearing illustrated,” Keefe said, “there is more that can be done to be sure policymakers understand and recognize that credit unions are, indeed, successfully reaching out to underserved areas. CUNA believes addressing this issue should be done in a measured way that best suits the needs of credit unions and their members.” In aggregate, 668 of 5,440 federal credit unions (12.28%) had adopted underserved areas as of Dec. 6, according to NCUA figures. -