HUNTINGTON, Ind. – As a state-chartered credit union with a robust agricultural lending program, Community Link Federal Credit Union knew it was just a matter of time before new legislation would pull the reins back on its core loan program.

Last year Indiana bill HB 1179 updated the Indiana Credit Union Act to say total loans and extensions of credit at state-chartered credit unions cannot exceed 15% of the unimpaired capital and surplus of the credit union. For Community Link, that would have meant a $1.1 million reduction in borrowing limit to any one member. Previously state-chartered credit unions could loan up to 10% of assets to one borrower.

Because of this significant change, the $14 million credit union took several forward-thinking steps to ensure that it could still be a viable lending source for its members, many of which are farmers. After nearly 75 years as a state-chartered credit union, it changed its name from Community Credit Union and converted to a federal charter effective July 1. If it had continued on as a state credit union, the aggregate borrowing limit would have dramatically dropped from $1.4 million to $200,000, said Jim Countryman, president/CEO. A federal charter allows for a higher business lending cap, he added.

“We still have a lot of members who finance farm grounds, combines and need operating lines of credit,” Countryman said. “$200,000 is not going to go very far in supporting farmers. We knew we would find ourselves turning a lot of loan business away. That was the final straw for us.”

Countryman said the new legislation might hurt smaller state-chartered credit unions in Indiana because the lending ratio used to be 10% of assets, but now it’s 15% of capital. The state’s Department of Financial Institutions has “started tightening the strings on credit unions,” he opined, leaving many to wonder if converting to FCUs might be considered more.

Meanwhile, Community Link’s business portfolio includes an abundance of real estate loans. In fact, its $2.3 million worth of business loans are all secured by real estate. Most banks and credit unions in the area won’t consider approving financing “fair ground” or acres of vacant, tillable ground for future properties, Countryman said. Community Link, on the other hand, welcomes these types of applications.

“We started out as a farm bureau. That’s we do. We serve the agricultural community,” he said.

Community Link does other types of business loans and currently has an 80% loan-to-share ratio, a deliberate measure because the credit union “believes in getting the loans out to members.” But another issue of struggle has been term business loans, Countryman pointed out. Many of the agricultural loans are tied to the farmer’s primary residences.

“If your primary residence is on 200 acres, [Indiana DFI] wants to call it a business loan,” Countryman said. “NCUA seems much more receptive to work with us more [on clarification] than other regulatory agencies.”

That willingness from NCUA may ease one of Countryman’s “biggest complaints,” which is “oversimplification with [state] regulatory people coming in and painting with a big, broad brush without doing enough analysis.” For instance, a farmer may put down 75% on a tractor. Rather than have the state come in and say the credit union can only do a certain type of loan, Countryman said more analysis could be used to determine on a case-by-case basis what’s being brought to the table by the applicant.

As to the suggestion that Community Link sell off some of its loan participations rather than convert to federal, Countryman said that would be giving away “a good share of [our] income.”

“We’re in a highly competitive marketplace. It’s not that easy to attract business,” he said.

Competitive, indeed. Besides Wells Fargo, National City, and some “very strong” S&Ls, there are four other credit unions including the $1.5 billion Teachers Credit Union and at least two other credit unions that have recently received approval to expand into Community Link’s area, all competing for the same dollars. Edward Jones, the investment giant, is also a major player in the area, Countryman said. Geographically, Community Link’s FOM is moderately populated. The city of Huntington has 17,000 residents and the county has 38,000 residents, said Paul Whiting, Community Link vice president of lending. The credit union also serves more than 20 select employee groups.

Competition aside, Community Link had been planning its conversion strategy over the past year and sought out expertise from the Indiana Credit Union League in presenting its case to the credit union’s board on making the changes, Countryman said. Under a federal charter, it expects to save $3,000 annually in regulator examination fees when it was previously paying $6,000 to the state. Indiana’s sale taxes and loan origination taxes are now a thing of the past. Any equipment and all utility bills carried a 6% sales tax, “easily in the thousands of dollars” the credit union paid each year, Whiting said.

Overall, Countryman said there’s excitement in the air about the new charter. Next year will mark Community Link’s 75th anniversary and it plans to kick off a series of events marking that milestone.

“This will be our way of thanking the people who’ve kept us in business for so long,” Countryman said. “It will be a lot easier for us to market ourselves now. It will be much easier for the staff to communicate who can join now.”