permaculture

[Wesley Roe and Santa Barbara Permaculture Network <lakinroe@silcom.com>]

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.