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HOPE Federal busy filling gaps left by bank branch closings

MS Bank deserts_rgbMississippi banks have left Bill Bynum and the HOPE Federal Credit Union he runs plenty of opportunity to grow Hope’s branching business.

But he’d rather they wouldn’t.

Bank branch closings at the start of the financial services sector collapse in 2008 through the past few years of recovery greatly increased the challenge of reversing the spread of  “bank deserts” across Mississippi. Though the non-profit HOPE Federal Credit Union has more than tripled its branch locations throughout its multi-state market of Mississippi, Louisiana, Arkansas and Greater Memphis over the past years, the deserts within low-and-moderate income communities have grown along with the pace of branch closing by for-profit banks, according to Bynum, CEO of both HOPE Federal and 20-year-old parent organization Hope Enterprise Corp.

The longtime non-profit financial services executive cites a study by the advocacy organization Corporation for Enterprise Development that puts 69 percent of Mississippi’s zip codes in the bank desert category, meaning they either have no bank locations or only a single one.  Of Mississippi’s 533 zip codes in 2012, 369 had one bank or fewer, Corporation for Enterprise Development reported.

The map explains why 38.7 percent of Mississippi households are either unbanked or underbanked, Bynum noted in an interview the same day Hope Federal Credit Union opened a full-service branch in Central Mississippi’s Terry, a town of about 1,300 left without a bank when Regions Bank closed its branch there in the spring.

Bill_Bynum-hs_4CRegions donated the building to Hope after closing the branch, a gift it has made three times previously after closing branches.

Bynum said he is grateful to Regions and is encouraged by the response Hope has received in all three of the communities.

“They are some of our most used branches,” he said, though he added they were not sufficiently profitable enough to meet the $117 billion Birmingham-based bank’s business model.

He said he expects an equally strong response to the new Terry location, whose opening is part of a five year strategic plan to double the number of places and people served – particularly in bank deserts such as Terry.

“We responded to the support that folks in Terry demonstrated,” Bynum said. When Regions left, “all of a sudden they were left with no banking services.

“Before we opened the doors we had we had over 500 people who said they were ready to join. They are serious about taking control of their financial futures.”

HOPE Federal Credit stepped in two years ago to open temporary locations in Utica and Edwards after BancorpSouth closed the only bank locations in each community as part of branch closings across its multi-state market.

HOPE eventually moved from Utica’s City Hall into a permanent location in the town of fewer than 900 residents but left Edwards after failing to secure a suitable permanent location.

Next up For HOPE Federal, Bynum said, is Greenville. “We’ll be opening in the next several weeks. Our build-out is complete there.”

HOPE Federal has had a limited-services operation there for  the last 20 years but the new branch will offer full services.

HOPE Federal, with $200 million in assets and owned by its 30,000 members, is ready to team up with other bankless communities, said Bynum, who has plenty of potential places to set up shop after continued rounds of branch closings in the for-profit bank sector.

“Since the recession we have more than tripled the number of branches we have throughout the region at a time other banks are closing branches in record numbers,” he said.

Of the thousands of branch closings nationally the past five years, 93 percent of the closings occurred in low-income census tracks, Bynum noted.

The result: Payday lenders and other high-cost financial services providers move in, he added.

In 2010, for the first time in 15 years,more bank branches closed than opened across the United states, the New York Times reported in a February 2011 article. The newspaper reported that its analysis showed that even as banks shut branches in poorer areas, they continued to expand in wealthier ones, despite decades of government regulations requiring financial institutions to meet the credit needs of poor and middle-class neighborhoods.

The Times’ article reported the concerns of the National Community Reinvestment Coalition that a dual financial system is developing in America, one for essentially middle-and high-income consumers, and another one for the people who can least afford it.

In those poorer neighborhoods, “you won’t see bank branches. You’ll see buildings that used to be banks, surrounded by payday lenders and check cashers that cropped up,” John Taylor,  president of the Community Reinvestment Coalition, said in the Times’ article.

Today, about  one-quarter of all Americans are under-banked and must rely on such alternative sources such as payday lenders for financial services, the FDIC reports.

In Mississippi’s distressed communities, HOPE Federal is often the only alternative to predatory lenders. Across all of its locations, 37 percent of its members signed up without previously having a bank account, according to Bynum.

Mississippi, he said, “has a higher percentage of unbanked and underbanked than anywhere in the country.”

As the recession bore down on its member communities, “We were making sure the people had the ability to weather the financial crisis,” Bynum said. “We were able to raise capital to keep the regulators happy and make sure we were able to operate in a prudent manner.”

HOPE operates 24 locations, some of which are in grocery stores or retail kiosks,  in distressed communities. Ninety percent of its home mortgages go to first-time homebuyers, according to Bynum.

The mortgages are 30-year fixed rate with underwriting that weighs a borrower’s credit score but also puts considerable value on rent payment history, utilities payment history and stability of income, Bynum noted.

“Our philosophy is, ‘How do we get to yes?’”

So far so good, he said. “They repay us at rates better than many conventional borrowers do.”



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