Filling The Vacuum: Tongass FCU Is Expanding Access Affordable Credit Union Services

By Pablo DeFilippi, National Federation of Community Development Credit Unions

For the Metlakatla Indian Community on Annette Island in Southeast Southern Alaska, Tongass Federal Credit Union is here to stay.

Recognizing the community’s economic distress and abandonment by traditional banks, the credit union challenged geographic constraints to ensure critical financial services to the island’s 1,400 residents – a pioneering effort President and CEO Susan Fisher hopes to build on.

Founded in 1963 by a group of teachers and public employees, Tongass Federal Credit Union was granted a community charter in 2001. Ketchikan, a city of just 14,000 people, serves as the hub of the credit union’s vast assigned geographic area. Alongside Tongass FCU, two national banks, two regional banks, and two credit union branches serve the population of Ketchikan and its outlying islands.

The community of Metlakatla is located on Annette Island Reserve, an island run by tribal sovereign government. The island is the only Indian reservation in Alaska, as its Native Alaskan population elected to retain their land rather than accept a federal settlement as part of the Alaska Native Claims Settlement Act of 1971. Metlakatla’s chief economy is fishing. The community features a fish-packing plant, grocery and convenience stores, a health clinic, post office, gas station and ferry terminal. More than 80 percent of the island’s 1,400 residents are Native Alaskan. One must be a member of the Metlakatla Indian Community or have permission from the tribe to live on Annette Island, and it is only accessible by a 15-minute, weather-dependent floatplane ride to and from Ketchikan, or a twice-daily ferry that runs five days per week.

In 2005, Wells Fargo Bank closed the only bank branch on Metlakatla – a branch occupied by the National Bank of Alaska until its 1999 sale to Wells Fargo – citing the poor economy.

“The bank closure was a huge problem,” Fisher said. “People couldn’t afford to come to Ketchikan to do their banking, and direct deposit wasn’t an option for many residents. The local businesses couldn’t cash big checks. The (tribal government) tried getting currency in Ketchikan and cashing checks in Metlakatla, but the demand was overwhelming. No banks or other credit unions would tackle the situation.”

According to Fisher, the first step was working with the tribe to take over the vacant bank branch, firing up the ATM and building a member base. Through its affiliation with the National Federation of Community Development Credit Unions (the Federation),  Tongass FCU became CDFI certified and as a result gained access to specialized expertise and assistance to access external resources. In 2010, Tongass FCU received a $1.6 million secondary capital investment through the one-time US Treasury’s Community Development Capital Initiative (CDCI) which significantly strengthened the credit union’s capacity to grow and offer lending programs responsive to the needs of the communities its serve.

Looking for more innovative ways to meet the needs of its membership Tongass FCU reached out to the Bureau of Indian Affairs (BIA) to participate in the BIA business loan guarantee program. While open to financial institutions that serve Native populations, Fisher found out that the program specifically excluded credit unions. The Federation persuaded BIA to amend ,  the program’s participation requirement and allow CDFI certified credit unions to take part in it. Tongass FCU began offering Native Alaskans the new financing option last year.

More than seven years after Wells Fargo’s departure, the Metlakatla branch of Tongass Federal Credit Union operates six days per week. The credit union opened a brand-new facility last spring, funded in part by the Community Development Capital Initiative. To date, Tongass FCU has roughly 1,000 accounts in Metlakatla, including businesses, nonprofits, churches, clubs, association, and individuals.

Tongass FCU also worked behind the scenes to ease the shortage of affordable housing on the island. While the land is owned by the tribe, residents obtain decades-long, renewable leases and build homes that can be bequeathed to future generations. The Metlakatla Housing Authority funds public housing projects and builds units on the island.

When the housing authority landed eight Federal Emergency Management Agency (FEMA) mobile homes last year, the credit union financed five of them – saving two families $300 per month towards a down payment on a new home. Applicants had to pay five percent down, have a decent credit score and show they could make the payments. In seven years, they will own the home and can sell it to move into something bigger. For one family, the financing meant their children would have a bedroom instead of sleeping on a relative’s couch.

Tongass FCU also laid the groundwork for the future financing of housing authority units. By financing through the credit union, borrowers are guaranteed a fixed-rate payments and the ability to stay in their unit  – not moved by the housing authority due to a fluctuating income or other variables. “It was cumbersome for (Tongass FCU) to work through all the details, but now we’ve laid the groundwork,” Fisher said. “This approach won’t work for everyone, but there will be many others who will see an advantage to credit union financing.”

In the coming years, Fisher hopes to concentrate on better serving the residents of Prince of Whales Island, the fourth-largest island in the United States with a population of just 5,000, where the credit union currently operates two branches separated by a two-hour drive. While most of the island’s population lives in the town of Craig, Fisher decided to open a branch in far-flung Thorne Bay in 2006 because the town needed the services. “When we started we were all volunteers,” Fisher said. “We had services two days a week in a sporting goods store. We kept the money in a gun safe.”

Tongass FCU opened its Klowoch branch on the western side of the island in 2008 at the request of the local grocery store manager. Before the credit union opened its doors in a rented unit of a nearby mall, residents had to travel eight miles to cash a check. There is no public transportation in Klowoch. Tongass FCU developed enough business in Klowoch to move into a larger mall unit in 2010. “There’s a lot of competition in Ketchikan, but Prince of Whales is experiencing a lot of growth right now, Fisher said. “People assume that everyone has access to things like financial services and public transportation. Tongass remains committed to serving those living in remote, rural Alaska.”

Tongass FCU is a terrific example of a credit union effectively using the “building blocks” for creating sustainable and impactful community development programs: NCUA’s low income designation; the US Treasury’s CDFI certification; and the Federation’s specialized expertise. We can expect to hear much more from Susan Fisher and her team as they continue to bring the tools and resources business and consumers in their field of membership need to improve the local economy and their lives.