A member lifeline
Changes to the regulatory environment and other issues have made life difficult for many small credit unions. But one $2.5 million asset church-based credit union is thriving nonetheless.
The 422-member Queen of Peace Arlington (Va.) Federal Credit Union is celebrating its 53rd year of existence. While its mission and members have changed some over the years, the benefits it provides members remain the same.
Queen of Peace, which serves a small Catholic parish, opened its doors in 1964 to help its primarily African-American membership obtain credit.
It started in a small corner of what’s known as the Matthew 25 building, with a concrete floor and a room that was freezing in the winter and sweltering in the summer.
The credit union’s sole employee, part-timer Dan Morrissey, serves as CEO, treasurer, compliance officer, and more.
“Change has been a double-edged sword,” he says. “When there’s not as much going on [in Washington] it’s easier for us to get noticed, while expanded fields of membership can make it hard for people to know we’re here. But we’ve also seen asset growth that is unusual for a credit union this size.”
Queen of Peace has long operated with a net income ratio higher than many credit unions 20 times its size. In December 2007, that ratio was 1.57%, compared with 0.42% for credit unions in its peer group (less than $2 million in assets) and 0.64% for credit unions with assets of $10 million to $50 million.
Although the financial crisis hurt credit unions of all sizes, Queen of Peace has managed to keep its net income ratio above industry averages from December 2008 until now.
“A large part of our asset growth has been members bringing in large deposits, which in turn helps us lend more,” Morrissey says. “Our membership is made up of people committed to helping others, and the more they support the credit union, the more of their fellow members we can support.”
John Lynch, a member for three years, says he joined the credit union to save money and to help the institution offer competitive products members need.
“My aunt was the president of a church-based credit union in Wichita, Kan., and she visited us once a year while in town for the CUNA GAC,” Lynch says. “She would ask if I’d joined my church’s credit union. So I did, and it’s been a good decision. I probably don’t make deposits as much as I should, but it’s good to save some money and support this church and the credit union in its mission.”
While Queen of Peace doesn’t have an official mission statement, the phrase, “Not for profit, not for charity, but for service” adorns its monthly newsletter and other communications, and it’s repeated often by board members.
It’s a mantra it puts into action with its member interactions despite occasional resistance from regulators.
NCUA examiners, for example, don’t like to see loans to members with low credit scores.
“But that’s something we push back on,” Morrissey says. “In fact, we just completed a loan to a member with a 475 credit score. If we can’t give these members loans, they’re going to go elsewhere—probably to a place that won’t treat them as well as we do.”
This attitude toward lending has served the credit union well, says Jim Libera, board member.
“The effectiveness of our approach speaks for itself, as we have very low delinquency,” he says. “It’s because we know the people, and that’s an extra element of due diligence that works. It’s a testament to how special the credit union/member relationship is.”
Board Chairman C.C. Jenkins says he’s seen time and again how predatory other lenders can be, and how Queen of Peace takes a much more consumer-friendly approach.
“Predatory lending has hit our members hard, particularly those in the Hispanic community,” Jenkins says. “People often just don’t know how bad their loans are. We had a member come to us recently, with a decent credit score, who was paying 22% interest on a car loan.”
Morrissey says the credit union does its best to look at all the facts and members’ circumstances.
“We deny a few loans outright,” he says. “But there are times we’ll have to work with a lower amount or different terms than the member is seeking.”
He points to a recent example of when a disabled member wanted to get a loan to buy an accessible van, but the only option from other financial institutions was for the member to make a 50% down payment.
“When he came to us, we did our research, looked into those kind of vehicles, and put our heads together to work something out,” Morrissey says. “We ended up financing 90% of the loan.”
Queen of Peace has several ways to boost members’ financial literacy, from a free credit review service to encouraging automatic deposits to increase savings. It also encourages young members to open and maintain savings accounts.
Morrissey credits the commitment and diverse backgrounds of its board members as one of the key ways the credit union continues its work.
Jenkins also serves on the board of $860 million Wright-Patman Congressional Federal Credit Union in Washington, D.C., and Libera had a long career in investment banking.
One board member is the granddaughter of a longtime former director. Others have been Ph.Ds, CPAs, and IT professionals.
“Our diversity as a board has been a real strength throughout the years and has helped us weather the tough times,” Libera says. “It’s something all small credit unions should look to.”
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