Reviving the Spirit of St. Louis
St. Louis Community CU offers a gateway to hope, dignity, and affordable financial services.
St. Louis Community Credit Union stood at a crossroads in 2005. The credit union had abundant capital but faced stagnant growth. The board of directors and senior executives asked themselves: Do we want to be like many area financial institutions and do nothing as more people in our community fall through the cracks? Or do we become a force for change and empowerment?
“We were turning away hundreds of people who wanted access to basic accounts, but they couldn’t get them due to membership eligibility restrictions,” says Paul Woodruff, the credit union’s vice president of community development. “We also started to see an increase in members who were using payday lenders and check cashers, which strips wealth out of our community.
“If there’s no alternative to that, people will continue to use those services, which makes a bad situation even worse. And if members have loan obligations with us and payday lenders are taking their money, that’s a losing proposition for our credit union.”
The board and executive team decided to revise the credit union’s policies and procedures so it could better serve those members. And when new CEO Patrick Adams took over in 2008, he brought an even greater sense of urgency to St. Louis Community’s new direction. Operating with the philosophy that everyone deserves to be treated with financial dignity, the credit union:
Added branches in some of the most economically impoverished neighborhoods, which banks had abandoned. St. Louis has the nation’s third-most underserved African-American population, according to Adams. About 80% of the credit union’s membership is classified as low-income; 70% is African-American.
Obtained a “community development financial institution” (CDFI) designation and “low-income credit union” designation, which allowed it to access more capital and resources, such as those available from the National Federation of Community Development Credit Unions.
Recalibrated its membership criteria and product offerings to better serve the underserved. Members with substandard or incomplete credit histories start off with second-chance checking programs, payday lending alternatives, or credit-building loans before moving on to mainstream products.
Created or strengthened partnerships with nonprofit community centers, workforce development agencies, and health care providers. The credit union also created “microbranches” at three facilities to establish a physical presence in the inner city. During the past two years, St. Louis Community has opened 2,220 new accounts and issued $1.65 million in loans through their full-service microbranches. These microbranches range from 300 to 850 square feet and require only one full-time employee, along with a “float” manager who helps at peak periods.
Developed alternatives designed to compete with payday lenders and title-loan shops, which run rampant throughout Missouri. The credit union has issued $3.8 million through 7,900 Freedom “Payday Loan” Alternative loans since 2007, and $555,000 in consolidation loans through 689 Payday Saver Loans since 2010. The credit union opened one branch directly between two payday lenders in a strip mall in Dellwood, Mo.
Offered free inpidual and group financial education assistance to more than 21,000 consumers since 2008 through community partners and its own facility— the CU Excel Center®. To reinforce its purpose as a learning institution, the CU Excel Center doesn’t contain a credit union branch.
- Entered into a four-year, $800,000 collaboration with a bank to fund brick-and-mortar and educational initiatives. In 2015, the credit union will open the Gateway Branch, which preserves the heritage of the first and only minority-owned and managed financial institution in St. Louis.
As these initiatives caught on, people started to realize they could get a second chance at the credit union when no one else would give them one. The credit union’s guiding philosophy is: “We don’t judge; we help,” says Woodruff.
“We could have gone to the suburbs and battled for deposits and become a ‘me too’ institution, but that’s not us,” says Adams.
What sets the $237 million asset St. Louis Community apart is “a cohesive understanding at the management level that its market is the low-income market—period,” says Pablo DeFilippi, the director of membership for the Federation.
“They know that’s their market, they own it, and they have excelled at developing a business model that makes sense—and makes money,” says DeFilippi. “It’s not just that they’re doing the right thing. They’re doing well by doing good.”
NEXT: A holistic approach
A holistic approach
“A lack of access to financial services by the underserved is really just the tip of the iceberg,” says Woodruff. “To achieve long-term success, the credit union took a holistic view of members’ needs—transportation, child care, affordable housing, health care, clothing, job training, and access to social services.”
The credit union decided to collaborate with nonprofit organizations with expertise in those arenas. It partnered with numerous agencies, including Family Workforce Centers of America (FWCA)—a job training and counseling organization housed in the MET Center in St. Louis—to help educate members who lack basic money management skills.SIDEBAR:
“St. Louis Community can relate to the participants in the class,” says FWCA founder Carolyn Seward. “The credit union understands the issues, and wants a true partnership.”
The credit union teams up with partners to provide free financial education classes through a program led by Jaison McCall, financial literacy and community outreach specialist. McCall says the program emphasizes the power of personal behavior. (“Putting the ‘personal’ in personal finance, ” p. 41.)
“We’re embedded in the community and we want to be visible—that builds trust,” McCall says. “Our business is our members.”
Building microbranches in established and respected community support centers, such as Grace Hill Settlement House and Kingdom House, helps the credit union gain the trust of people who have grown weary of dealing with mainstream financial institutions.
“When members are in our lobbies or on our phones, we use that time to connect them with the resources they need,” Woodruff says. “That builds brand loyalty and meets a greater social need.”
The Annie E. Casey Foundation deposited $100,000 into the credit union’s MET Center microbranch. The credit union’s CDFI designation makes this type of nonmember capital infusion possible. Other grants have helped St. Louis Community:
Launch its Payday Saver Loan program and consolidate existing payday loans for members—a program that has become self-sustaining through risk-based pricing.
Offer energy payments, home improvements, and weatherization projects for low-income home owners.
Contribute to mortgage down payments for 20 families in need.
- Create the SURE Rides Auto Loan program, which offers auto financing to low-income consumers. Access to reliable transportation is a major factor in getting and keeping a job.
And starting this year, St. Louis Community will take part in the Financial Capability Partnership Initiative— a three-year agreement with Kingdom House to further integrate credit union products with social services. This initiative will focus on debt reduction, asset building, and youth financial education. The Federation and the Center for Financial Services Information will provide technical assistance for the program, which is being funded by the Kresge Foundation.
Woodruff believes it’s a smart business decision to serve the underserved, but he would advise credit unions to start small.
“I think the underserved market is a huge opportunity that a lot of credit unions are overlooking,” he says. “Credit unions don’t necessarily need to dig in as deeply as we have. We do some things that other credit unions just aren’t comfortable with, and that’s OK.
“But other credit unions could deploy microbranches or increase their financial education and outreach efforts,” Woodruff adds. “As you gain experience, it gets easier to become a bit bolder.” St. Louis Community strives for operational efficiency, which is clear from its key operating ratios:
A 2.26% net operating-expense-to-average-assets ratio, which compares favorably with larger credit unions.
A 2.02% charge-off rate.
A 13.86% capital ratio.
A 1.69% delinquency rate, which compares favorably with its peers.
- A 7.22% average loan yield.
The credit union’s impressive operating ratios have come about through a lot of hard work. “There are some days I want to rip my hair out,” Woodruff says. “But there’s no way I’d ever quit or leave the credit union movement because I’m in love with what we can do. We have the potential to change lives. That’s hokey, but it’s true. People are really grateful just because you give them a chance.”
ADAM MERTZ is Credit Union Magazine’s senior editor. Contact him at 608-231-4342, or @AdamMertzCUNA.