Peace In The Valley

A northwestern cooperative steps outside the sandbox to ensure members' financial lives are as serene as their physical surroundings.

SITUATED IN THE northern swath of Oregon’s Willamette Valley basin, the Salem region has been home to many groups of people. Its natural beauty, abundance of flora and fauna, and economic opportunity have called to Native American tribes, earlyexplorers, Methodist missionaries, fur traders, settlers, and farmers throughout history. Today, more than 150,000 residents call the city home.

According to the Oregon State Archives, the name Salem is a variation of the Hebrew word for peace. The Kalapuya people, who thrived in the area before the early 1800s, referred to the region as Chemeketa, which means meeting or restingplace.

Although ecological peace is still clearly abundant in Salem, financial security and the peace of mind that comes with it can be more difficult to come by. Perhaps that’s why Maps Credit Union’s ($460M, Salem, OR) ongoing efforts to help itsmembers live up to the region’s namesake have been so well-received in this community for nearly 80 years.

As the state capital, Salem’s largest employment sector revolves around the government, followed by trade, transportation, and utility. However, primarily due to the presence of the world class Salem Hospital and the hundreds of schools, universities,and colleges within a 70 mile radius, health care and education make up two additional pillars of the region’s economy.

Maps draws its own historic roots from the education profession. In 1935, just one year after the Federal Credit Union Act passed,17 teachers and professors from the public school system and Willamette University established what was then known as Salem Public School Teachers Credit Union.

We were founded by several of the great teachers from the middle 20th century in Salem, says Mark Zook, who joined the credit union in 1992 as a market researcher and became CEO in 2009. Our schools in this region are often namedafter these individuals.

The credit union adopted the name MAPS when it converted to a community charter in 2008. However, its name still pays homage to its educational roots i.e., Marion and Polk Schools=MAPS.

The conversion ushered in a period of expansion, and today Maps has 175 full-time and 20 part-time employees. It has 14 locations, including three student-run high school branches and two college campus branches. In its headquarters, the credit unionhouses facilities for business partner interactions and CUSO operations, which lease both space and employees from the credit union.

It offers members an extensive online, mobile, and ATM network fueled by a new core system from Open Solutions. These services contributed to the credit union’s roughly 5% membership growth in 2012. The median age of members who joined Maps lastyear was 21, says Jill Nowacki, the credit union’s spokesperson and vice president of development.

According to Callahan & Associates’ Peer-to-Peer analytics, the credit union’s share draft penetration rate one of the best indicators that the cooperative is a member’s primary financial institution is roughly 68%. Theaverage for credit unions with $250-500 million in assets is 53%.

Although the credit union welcomes such success, its nine-person executive team and seven-person board stillmust address the problems that coincide with rapid growth. For example, four years ago the credit union faced concerns about low reserves.

I was sitting at lunch with my dad, who worked in the medical profession and is not a businessman, and I was telling him about our concerns, Zook says. His comment was, Too bad you don’t have something to sell,’and I thought, I do have something to sell, our administration center.’

As a result of that conversation, Maps forged new regulatory and accounting ground. It sold its headquarters to its membership and now leases the space back from them. In addition to it being a pioneering strategy, the lease payments provide an approximate6.5% return to Maps members, according to Zook.

Creative problem solving extends to the loan portfolio as well. According to Callahan & Associates’ Peer-to- Peer analytics, in first quarter 2013, the credit union achieved doubledigit or nearly double-digit growth in a majority of areas, includingthose where many peers are struggling. It has a substantial commercial portfolio with low delinquency and has increased HELOCs by $8 million annually.

But where Maps truly excels is in seeing new business opportunity where others don’t. It identifies and collaborates with key partners to a degree unprecedented among much of the industry, and is pushing the boundaries of what a credit union canand should be.

For example, a full 79% of Maps members qualify as low-income individuals. That figure has increased dramatically since 2009 and led the credit union to obtain a low-income designation in order to better serve its entire community. The credit union alsoestablished a nonprofit group, Maps Community Foundation. The foundation works closely with local organizations such as the public school system, the Doernbecher Children’s Hospital, the Mid Valley Literacy Center, the Teen Parent Program, andMarion County Parole and Probation to identify opportunities for fundraising, multi-lingual educational classes, and job training among marginalized or fringe residents, Nowacki says.

The credit union sponsored 63 classes in 2012, and these collaborative partnerships are critical in helping it identify needs for specific products or services among current and potential members.

We now offer a credit building loan, primarily for people who are either new Americans or young people who don’t have access to credit, Nowacki says. It’s a three-step program and our first group of participants is gettingready to graduate into a line of credit. We’re seeing success stories of people going from credit scores of zero to 675 or better.

To ensure it is serving its members to the best of its ability, Maps’ leadership constantly surveys the horizon for additional industries and business models it can apply to grow Maps’ own expertise, scalability, and sustainability throughan operational, financial, or multi-owned business subsidiary. It is an operator or investor in 14 different credit union service organizations (CUSOs) and has committed roughly $2.8 million to these businesses, which range from mobile app development,to consumer reporting, to disaster recovery, to insurance and advisory services. According to Zook, these companies many of which required only a few thousand dollars in initial investments now contribute 20% to 30% of the credit union’sincome each year.

The following profile outlines how Maps engages members, small businesses, and commercial clientele and uses the CUSO model in diverse ways to enhance the cooperative brand and drive revenue.

March 10, 2014

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