By Ray Birch CU Today
DORCHESTER, Mass.—As more small credit unions seek to expand via community charters to survive, one CU says a closed field of membership is exactly what’s behind its success, and what will carry it into the future.
The $265-million Boston Firefighters CU sports some impressive statistics: about four services per member in addition to the share account; rock-bottom delinquencies (0.09%); 87 basis points of ROA, and steady net income each year—averaging nearly $2 million annually over the last five years.
It’s a close relationship with its field of membership—Boston firefighters, Boston police and now Boston emergency medical services, Professional Firefighters of Massachusetts, Massachusetts State Police, and Suffolk County Sherriff’s Department—that is bringing members to the credit union who then use it extensively, said it AVP of Operations Cathy Boucher.
“Because we have a closed field of membership, we believe we have a better ability to look at each individual member’s needs,” said Boucher. “Although we have to follow policies, we have the ability to take the time and hear our members’ needs and offer unique solutions. They connect with the personal approach. They know we understand them as people and the challenging work that they do. They open a direct deposit checking account and just continue to take more services from us. It’s a great relationship.”
For example, Boucher said the credit union created a Veteran Mortgage, which comes with no down payment requirement and offers low rates on 30-year terms for first-time homebuyers.
“Since we serve local police and firefighters, many of them have military backgrounds,” Boucher said. “Our Veteran Mortgage is like nothing they can get anywhere else in the market. For many of our veterans we do 100% financing, and we can give them a very good rate because we know the character of veterans. This is just one example of how we have some unique processes that allow us to help our members—processes we would not have if we did not serve a closed field of membership and know our members very well. We think this gives us an advantage over the banks.”
Give Back
What the approach has also given the credit union is member loyalty that allows it to give back to its members. For the sixth year in a row, Boston Firefighters has received a Benefits of Membership Award from CUNA. The award recognizes credit unions that offer exceptional financial value to their members in the form of benefits. Credit unions submit their rates, fees and account yields with their applications, and judges compare these figures to those of competing banks to determine the average savings per member.
This past year BFCU returned an average of $726 per household. Boucher acknowledged that great rates play a big part in the return.
“In our most recent ranking report for rate comparison in our local market, BFCU ranked in the top three for every category of certificate, savings, checking and money markets,” Boucher said. “We were number one in six of the categories.”
The credit union also charges few fees.
“We recently lowered the few fees we do have,” said Boucher. “The only fees we have are related to insufficient funds, and we keep those as low as possible—$25 for an overdraft and no more than $50 a day. We also don’t charge any overdraft fee if the expense is less than $25. And as more local institutions begin adding fees to their checking programs, our checking accounts are totally free.”
This past year the credit union also received the Great Rate award from research firm Datatrac, which compares rates in local markets. Datatrac found that by choosing BFCU, members save 27% on personal loans, auto loans cost 45% less and credit card interest is 34% lower. Looking at market savings rates, Datatrac said that Boston Firefighters members receive 186% more on IRAs, checking accounts earn 178% more, CDs pay 129% above the market average and money market accounts return twice as much.
Boucher said that the credit union looks at its metrics—such as ROA and capital—simply as guidelines for how much it gives back to members. The credit union’s capital stood at 11.76% at the close of 2017.
“We discuss it in the boardroom all the time, and we don’t want to build up capital for the sake of building it up,” she said. “We always look at our products and services and consider what we can give back to members. We review all of the key metrics and have goals each year we want to achieve, but paramount each year is what can we give back to members and where we can give it back to them.”
Closed FOM
It’s a philosophy that has always backed the credit union—made easier with the closed field of membership, Boucher said.
“Our members know we give back to them. They know it’s not lip service. We really deliver on our promise,” she said.
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