Friday, July 16, 2010
Permaculture Credit Union finds niche in
discounts for going green
www.pcuonline.org
New Mexico Business Weekly - by Rachel Sams NMBW
Associate Editor
Randy Siner | NMBW
http://albuquerque.bizjournals.com/albuquerque/stories/2010/07/19/smallb1.html
For Donald Sarich, president and CEO of Permaculture Credit Union in
Santa
Fe, money is like water.
"Water can be very erosive ,if it comes in
quickly, it can erode the
soil away", he said. "Money can be the
same way."
Channeling resources back into the local community can improve an
economy1s
health, Sarich said.
That's what Permaculture Credit Union has been
working to do for 10 years.
The common bond among its members is a belief in
the tenets of permaculture,
which holds that systems should be designed in a way that harmonizes
with
the natural world.
With about $5.1 million in assets at the end of the second quarter,
PCU is
tiny. It has three employees and an office on the second floor of the
State
Employees Credit Union. But PCU1s assets grew by 38 percent last year,
and
it1s getting close to its goal of achieving profitability solely from
its
operations.
PCU primarily offers savings accounts and loans.
Its niche is
sustainability discounts on loan rates. A first
mortgage that includes
green improvements to a house would earn a .25
percent discount off the
credit union's base rate, while a loan to buy a
bike would get a 3 percent
discount.
Margaret Wolverton got a loan for slightly more than $300,000 from PCU
to
purchase her mostly off-the-grid home on about 28 acres near
Cerrillos, with
passive solar heating and well water. The credit union gave her a rate
about
2 points lower than she thinks a traditional bank would have offered Ð
if
one had been willing to lend to her.
"I'm amazed that something like this
exists," Wolverton said of PCU.
The credit union's field of membership is
national. About 44 percent of its
members live in New Mexico, 23 percent in
California, 6 percent in Arizona,
3 percent in Colorado and the other 24 percent elsewhere.
PCU doesn't do much advertising. Its marketing
primarily happens by sending
representatives to places where fans of
sustainable living gather, like the
New Mexico Solar Energy Association conference.
The little credit union thinks now is an opportune time to expand
its
services, with interest in sustainability and the
slow mone movement on
the rise. So PCU is making a big fundraising push
this year, targeting both
members and the public with messages in its newsletter and on its
website.
The credit union hopes to raise about $175,000, including $25,000 for
a
solar power system.
All credit unions are nonprofits that are owned by their members. But
most
credit unions were created by associations or employer groups that
helped
with their funding. PCU never had that, so it has relied on donations
Ð from
$25 gifts to six-figure grants Ð for part of its income. The credit
union
typically applies for grants from organizations interested in
environmental
stewardship.
Excluding donations, PCU had a $4,758 loss from operations in 2009.
That was
just over half the size of its operating loss in 2008, and less than a
third
of the size of its loss in 2007.
Regulatory rules limit how much lending an institution can do, based
on how
much capital it has on hand. For every dollar donated to PCU, Sarich
said,
it can leverage $15 worth of new assets. So if it had another $155,000
in
donations, it could add $1 million in assets.
Raking in donations in a recession won't be easy,
but PCU has tackled plenty
of challenges. The credit union's unusual focus
initially threw financial
regulators for a loop. Organizers filed five
applications for a credit union
charter before they finally received approval.
As of June 30, 2.27 percent of PCU's loans were
past due. The national
average for credit unions in the first quarter,
the latest period for which
data is available, was 1.76 percent. Sarich said
he is reaching out to
members who are falling behind on loans.
The credit union has recorded $23,037 in loan losses on the $15.8
million in
loans it has made, Sarich said Ð a rate of 0.15 percent.
Because of its loan growth, PCU is setting aside more money to
cover
potential loan losses, he said. PC's allowance
for loan losses was about
0.29 percent of its assets as of June, and the
credit union is working to
increase that to 1 percent.
PCU has sold some of its mortgage loans to institutions like
Guadalupe
Credit Union in Santa Fe and San Francisco-based RSF Social Finance.
The
effort allows PCU to do more lending, because as a small
institution,
regulators limit the amount of loans it can hold
on its books.
"They're good loans and well-collateralized"
said Winona Nava, president
and CEO of Guadalupe Credit Union, who served on
PC'1s board in its early
years. "We felt they were a good
investment."
RSF Social Finance bought about $1 million worth
of loans from PCU.
"The folks at PCU know most of their members, and they know all
of their
borrowers," said Ted Levinson, senior
lending manager at RSF, which provides
capital to social enterprises dealing with food
and agriculture, education
and the arts and ecological stewardship.
"That"s very rare to find nowadays,
when a [financial institution] knows where its
money is coming from and
where it's going to, and it leads to much better
credit decisions."
Vital Stats:
* Company: Permaculture Credit Union
* President and CEO: Donald Sarich
* Address: P.O. Box 29300, Santa Fe 87592-9300
* Phone: (866) 954-3479
* Website: www.pcuonline.org
* Employees: three
* Net income: $75,418 in 2009 (loss from operations, $4,758)
Strategies:
1. Market yourself by going to where your customers are. Permaculture
Credit
Union sends representatives to places like the New Mexico Solar
Energy
Association conference and the Bioneers conference in California.
2. Be persistent. PCU1s unusual focus initially threw regulators for a
loop.
But by working with regulators, even after several rejections of its
charter
application, PCU was able to get off the ground.
3. Target like-minded organizations when seeking grants. PCU looks
for
groups interested in the
environment.