Larry Edgar-Smith | SVP, Product Evangelism
Those of you who attended CUNA Lending may have heard about GTE Financial Credit Union out of Tampa, Florida, which received the Excellence in Lending Award. I had the opportunity to interview Aaron Bresko, Chief Lending Officer and Executive Vice President of production and resources at GTE, to discuss the institution’s efforts in serving the underserved and member business lending.
Larry: Firstly, thanks again for another fantastic CUNA Lending event. It was wonderful, informative and we appreciate all the time you spent on it. So, I hear you got a special award, can you tell us what the name of the award was and a little more about it?
Aaron: Well we are a low-income credit union with a CDFI designation as of 2012. Back then we were the largest credit union. Usually the CDFI low-income credit unions are the smaller ones, not 200,000+ members and nearly $2 billion in assets. So we applied for the designation.
This is actually the second award we received. The first one we received two years ago was to support consumer lending, specifically helping our members get autos, because that’s what helps people get jobs. If you have a car, versus taking public transportation, not only do your job opportunities open up, but you also have access to promotions and other jobs that you can apply for because you’re not going on a bus. That was our first grant.
The latest one was around small businesses and a small business incubator. We have several partnerships set up with non-profits in development areas in the Tampa area where we will identify folks who are starting up new business who maybe don’t have any experience, and help provide education, loans, deposit products so that they can take their idea to fruition and start a business. The more small businesses, obviously, the more employment and jobs that creates. So that’s where we focus on the jobs in our community. We have 21 branches, 18 are in the low-income areas. A good majority of our folks are low to moderate income, so that’s a huge part of our market and the segment that we serve.
Larry: So why is serving the low-income community such an important part GTE’s message?
Aaron: I think if you look at the root of credit unions as a whole, that’s how we were formed. We began to see the credit union movement take off around 1935 as a consequence of the Great Depression. People didn’t have affordable access to financial products and services. Now, after the Great Recession (2008), credit unions have experienced a resurgence in growth and popularity. For us, as a cooperative, we are here to serve the underserved. We’re in Florida, our market area Tampa, is the second most distressed in the whole country. I believe Orlando is number one, so it’s just a natural fit for us.
Larry: Right, that makes perfect sense. So you’ve had a really busy 2015 doing this, what do you think your institution will be doing in 2016 to advance that cause?
Aaron: We’re not brick and mortar. Our operating model for all of our members is more remote, using our virtual banking solutions. We know folks are going to banks or credit unions less and less and we don’t have a lot of brick and mortar presence in distressed areas. So what we are looking at having what we’re currently calling a community teller, where this person would go to the YMCA on Mondays, Gospel Mission on Tuesdays and have set office hours like many people would associate with a college professor.
The folks in those non-profits would come and they could open up accounts and we’d educate them and give them information and bring the financial services to them. Part of the plan will be the education. Not everyone has a PC or transportation, but most people have a tablet or a smart phone, so bringing the banking services to that phone and giving them that education, reaching out to them and showing them how to be in control by using affordable financial products and services.
We’re currently evaluating how many community tellers should we have, where will they go and how will they operate. Obviously this is not profitable, it’s more of a 5-7 year investment from non-banked to banked to deposit products where you can qualify for lending products, so we’re applying for the grants and we look for subsidies to help support our initiatives in the low-income environment.
Larry: That’s great. It’s the long-play, isn’t it? You’re looking at the possibilities for the future.
Aaron: That’s right – they’re underserved, other than payday lenders. It’s very expensive to be poor in our country, and we’d love to get people out of that payday lending cycle, but sometimes that’s just easy access, and shame on banks and credit unions for not providing the right access to those who need it.
Larry: You mentioned earlier a small business incubator earlier and I also noticed this year at the CUNA Lending Conference there were a number of sessions on focused on member business lending. How do you think the role of credit unions is contributing to that member business lending movement?
Aaron: It’s more than just deciding you want to do it, you have to hire the right expertise. A lot of credit unions when they start a new department, such as a mortgage department, and they’re able to have their employees grow with the credit union and learn a new discipline and run it. You can’t do that with small business, you need to have the expertise in the underwriting, the relationships and that servicing.
Having said that, those that do it well can really make big difference in their community. For instance, our target is not the $1-2 million commercial loan, our average loan amount for small businesses is around $120,000, which are truly the smaller businesses and they don’t have as much access because banks are looking at $500,000 and above. For credit unions, you have to do it right and make sure you have all the right disciplines and checks and balances because it is a high-risk business if you don’t do it right.
Larry: Yeah and GTE has always been good about that, you tend to put together really robust business plans about how you get into new initiatives so I can really see you doing it well as you go forward.
Aaron: Yes! I don’t have background in small business so I hired someone who does. You don’t just pick it up overnight. You can have a general understanding but you need someone who really knows it to run it.
Larry: That’s definitely important.
Your advice is always welcome and I think as you look at folks at other credit unions that are trying to get more involved in their communities and help with serving the underserved even more than they are today, what words of advice would you extend to them?
Aaron: I’d say, number one, go for it. Embrace it. There are a lot of rewards and that service is what credit unions are for.
Having your low-income designation, is a lot easier to qualify for than it used to be. Credit unions used to have to prove that half or their membership were low-income, whereas now NCUA puts out a list and now based on your membership and zip codes of the communities you serve, they basically say, “you qualify for it, you just have to accept it”. Furthermore, there are advantages, such as regulatory, as a low-income credit union you can obtain secondary capital. It’s a benefit to the credit union and it doesn’t cost you anything to have. With a CDFI designation, you can apply for grants to help subsidize and introduce programs.
So my advice would be to embrace that and really modify your products and services, make sure you have products and services for all segments in your membership.
Larry: You mentioned going forward, and I think it’s an important part of it, on the rewards side there are certainly tangible rewards, we talked about the long-play earlier. How about those intangible rewards, what do you see in the face of your members and your employees when you are able to serve the underserved?
Aaron: I don’t see this as a difference necessarily. Credit unions don’t have to do a lot different, it’s basically things we’re already doing, truly focusing on the low-income segment just helps us do more of it and do it better.
Larry: That makes a lot of sense. Well, Aaron thanks so much! This is definitely a great topic to discuss during the holiday season.
Thanks again to Aaron and all of the GTE team for doing such a great job in serving the community! Your award is well deserved and we appreciate you as a shining example in of what credit unions stand for!