April 27, 2009
COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION
FIRST CHOICE CREDIT UNION
Cert # 67772
55 MARSTON STREET
LAWRENCE, MA 01841
DIVISION OF BANKS
ONE SOUTH STATION
BOSTON, MA 02110
NOTE: This evaluation is not, nor should it be construed as, an assessment of the financial
condition of this institution. The rating assigned to this institution does not
represent an analysis, conclusion or opinion of the Division of Banks concerning the
safety and soundness of this financial institution.
The Community Reinvestment Act (“CRA”) requires the Division of Banks (or the “Division”) to
use its authority when examining financial institutions subject to its supervision, to assess the
institution's record of meeting the needs of its entire assessment area, including low- and
moderate-income individuals, consistent with safe and sound operation of the institution. Upon
conclusion of such examination, the Division must prepare a written evaluation of the institution's
record of meeting the credit needs of its assessment area.
This document is an evaluation of the CRA performance of First Choice Credit Union (or
the “Credit Union”) prepared by the Division, the institution's supervisory agency, as of April 27,
2009. The Division evaluates performance in the assessment area(s), as they are defined by the
institution, rather than individual branches. The Division rates the CRA performance of an
institution consistent with the provisions set forth in 209 CMR 46.00.
INSTITUTION'S CRA RATING: This institution is rated "High Satisfactory"
The assessment of First Choice Credit Union’s record takes into account its financial capacity and
size, legal impediments and local economic conditions and demographics, including the
competitive environment in which it operates.
The Credit Union has defined its membership as its assessment area, as opposed to a
geographic area, an evaluation of credit extended within defined geographic areas was not
conducted; as such an analysis would not be meaningful. Therefore, this evaluation was based
upon an analysis of the Credit Union’s performance in providing loans to its membership;
providing loans to individuals of various incomes, including low to moderate-income members;
and the Credit Union’s fair lending performance.
The Credit Union's average net loan-to-share ratio for the period was calculated at 70.8%, and
exceeds the standards for satisfactory performance at this time. An analysis of the Credit Union's
lending activity by borrower income revealed that the Credit Union’s distribution of loans to
borrowers of different income levels is reasonable and is representative of the membership. The
Credit Union's fair lending performance is also considered to meet the standards of satisfactory
performance. Per management’s request, investments and services were reviewed, and
contributed to the Credit Union’s overall rating.
Description of Institution
First Choice Credit Union was established in April of 2000, as the result of a merger between
Elgasco Credit Union, which was formed as a corporation in 1940, and the Lowell Electric Light
Employees Credit Union that was formed in 1941. Membership in the Credit Union is open to
employees or retirees of Bay State Gas, Northern Utilities, Nisource, National Grid, Energy USA
as well as employees of gas oil, propane, electric or communication companies that work for or
live in Essex County, and any family member or person who maintains his or her principal
residence in the same household with a member.
First Choice Credit Union’s sole office is located at 55 Marston Street, Lawrence,
Massachusetts. Office hours are from 8:00 AM through 4:00 PM Monday through Friday.
The Credit Union offers limited first and second mortgage loans and home improvement loans,
as well as consumer loan products including: personal secured, personal unsecured, new and
used vehicle loans, recreational vehicle loans and promotional loans, such as vacation, budget
and Christmas loans. The Credit Union also provides a variety of savings products. While the
Credit Union does not maintain its own Automated Teller Machines (“ATM”), it is a member of
the NYCE Corporation Selective Surcharging Program, called SUM. SUM is a surcharge-free
alliance of over 2500 Massachusetts ATMs. The SUM Program is designed to provide
consumers with surcharge-free banking alternatives throughout a broad geographic area of the
According to the Credit Union’s December 31, 2008 National Credit Union Administration (NCUA)
Call Report of Condition, the Credit Union’s assets total $6,442,583. Total loans as of this date
stood at $3,536,788 or 54.9 percent of total assets. The Credit Union’s primary loan base is
comprised of new and used vehicle loans, which represent approximately 61.4 percent of the
Credit Union’s loan portfolio. The next largest segment is other real estate secured loans. The
following table depicts the Credit Union’s loan portfolio composition.
Loan Portfolio Distribution as of December 31, 2008
Loan Type Dollar Amount Percentage of
($) Total Loans (%
New Vehicle Loans 1,354,806 38.3
Used Vehicle Loans 818,341 23.1
Other Real Estate Loans/Lines of Credit 637,607 18.0
Unsecured Loans/ Lines of Credit 621,586 17.6
First Mortgage Loans/ Lines of Credit 59,739 1.7
All Other Loans/ Lines of Credit 44,709 1.3
Less: Allowance for Loan and Lease Losses (36,723) ---
Total: 3,500,065 100.0
Source: NCUA CALL Report of Condition
Other than its small asset size and limited resources, there appear to be no significant financial or
legal impediments which would limit the Credit Union’s ability to help meet the credit needs of its
The Division last examined the Credit Union for compliance with the CRA on April 14, 2003. That
examination resulted in a CRA rating of “High Satisfactory.”
PERFORMANCE CONTEXT (CONTINUED)
Description of Assessment Area
According to CRA regulations, an institution shall delineate one or more assessment areas by
which the institution will serve to meet the credit needs of its assessment area and by which the
Division will evaluate the institution’s CRA performance. On May 16, 1997, the state CRA
regulation 209 CMR 46.00 became effective. The regulation permits credit unions whose
membership by-laws provisions are not based upon residence to designate membership as the
institution’s assessment area. In accordance with the regulation, for the purpose of this evaluation,
First Choice Credit Union’s membership delineates its assessment area.
First Choice Credit Union was established to meet the credit needs of employees of Bay State
Gas Company, Northern Utilities or National Grid USA. Other eligibility includes: persons, living
or working in Essex County, who are also employees of "gas, oil and propane companies",
"electric companies" and "communications companies", entities that may result from merges
and/or acquisitions involving such entities, or subsidiaries or successors of such entities. The
Credit Union currently has 1,086 members.
LOAN TO SHARE ANALYSIS
This performance criterion determines what percentage of the Credit Union’s deposit (share)
base is reinvested in the form of loans and evaluates its appropriateness. An analysis of the
Credit Union’s net loan-to-share (LTS) ratio was performed using NCUA quarterly call report
data for the period of March 31, 2007 through December 31, 2008. The average net LTS for the
period reviewed was calculated at 70.8 percent.
The following graph illustrates the loan-to-share trends.
FIRST CHOICE CREDIT UNION
QUARTERLY NET LOAN-TO-SHARE RATIOS
March 31, 2007 - Deecmber 31, 2008
80 74.8 75.0 72.4
70 67.4 66.8
65 60.5 63.5
7-Mar Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08
As illustrated above, the Credit Union’s net loan-to-share ratios fluctuated during the time frame,
ultimately decreasing from 88.5 percent as of March 31, 2007 to 66.8 percent as of December
31, 2008. The ratios reflect an overall decrease in net loans of approximately 15.1 percent,
from $4.1 million as of March 31, 2007 to $3.5 million as of December 31, 2008. During the
same time period shares increased from $4.6 million to $5.2 million or by approximately 12.3
percent. The decrease in lending can be mostly attributed to the current economic environment
and members’ hesitance to borrow and borrowing at reduced dollar volumes. Shares increased
due to certain new memberships in the Credit Union.
The Credit Union’s net loan-to-share ratio as of December 31, 2008, was compared to three
comparable industrial credit unions of similar asset size; the institutions were evaluated in forming
conclusions about the appropriateness of the Credit Union’s loan-to-share ratio.
LOAN TO SHARE ANALYSIS (CONTINUED)
The following table provides net loans-to-share ratios; the ratios shown are calculated from NCUA
Call report figures as of December 31, 2008.
COMPARATIVE LOAN TO DEPOSIT RATIOS
Name Asset Size LTS
Danvers Municipal Credit Union $6,297,060 99.4%
First Choice Credit Union $6,442,583 66.8%
Middlesex-Essex Postal Employees Credit Union $5,558,682 60.2%
Billerica Municipal Employees Credit Union $10,970,133 44.8%
As indicated, the Credit Union’s loan-to-share ratio is above two of the three to similarly situated
institutions. Based on the Credit Union’s capacity to lend, its asset size, its limited resources and
lending strategy, the average net loan-to-share ratio is considered more than reasonable and
exceeds the standards for satisfactory performance.
DISTRIBUTION OF CREDIT AMONG DIFFERENT INCOME LEVELS
A sample of the Credit Union’s lending was analyzed in order to determine the distribution of
credit based upon the income level of the borrowers. The borrower income analysis was based
on the median family incomes for the Peabody, MA (MD-37764), the 2007 and 2008 median
family incomes were both estimated to be $77,200.
The four income categories that define the income level of borrowers include low, moderate, middle
and upper-income. The analysis of borrower income level was identified as the ratio of borrower
income to the Median Family Income for the Metropolitan Statistical Area (“MSA”) or MD.
As defined by the U.S. Department of Housing and Urban Development (HUD) low-income is
defined as income level or area that earns less than 50 percent of the MSA’s median family
income. Moderate-income is defined as income level or area that earns 50 percent to less than
80 percent of the MSA’s median family income. Middle-income is defined as income level or
area that earns 80 percent to less than 120 percent of the MSA’s median family income, while
Upper-income is defined as income level that is equal to or greater than 120 percent of the
MSA’s median family income.
The Credit Union originated 310 loans in 2007, totaling $1,617,214.00. In 2008, the Credit
Union originated 306 loans totaling $1,595,645.00. A sample of 30 loans, 15 from 2007 and 15
from 2008, totaling $400,799.00 was reviewed in order to conduct the following analysis. The
analysis included home improvement loans, new and used vehicle loans and secured and
unsecured personal loans.
During the two year time period under review, the Credit Union made 1 loan, or 3.3 percent of
loans sampled, to a low-income member; 8 loans, or 26.7 percent, to moderate-income
members; 12 loans, or 40.0 percent, to middle-income members; and 9 loans, or 30.0 percent,
to upper income members. Although the sample reviewed indicated Credit Union granted no
loans to low-income members in 2008, and only 1 in 2007, the sample indicates an increase in
the Credit Union’s lending to low- and moderate-income members combined between the two
years. In 2007, 26.7 percent of loans were granted to low- and moderate-income members and
in 2008, 33.3 percent of loans were granted to low- and moderate-income members.
DISTRIBUTION OF CREDIT AMONG DIFFERENT INCOME LEVELS (CONTINUED)
The Credit Union’s lending distribution is representative of all categories of income levels of its
membership. It should be noted that the majority of the consumer loans were granted to single
applicants. Therefore, the percentage of originations occurring in low- and moderate-income
levels would be higher than that of residential mortgage originations, where the income is
usually the result of joint combined incomes and where the comparison is made to the standard
of median family income. Because there were no HMDA reportable loans or home equity loans
originated, no further analysis could be performed.
Based upon the analysis of borrower income, the Credit Union demonstrates a satisfactory level of
performance in providing loans to borrowers of different incomes.
REVIEW OF COMPLAINTS AND FAIR LENDING POLICIES AND PRACTICES
A review of the Credit Union’s public comment file indicated that the Credit Union received no
complaints pertaining to its CRA performance since the previous examination; however
management has procedures in place if such complaints should occur.
The Credit Union has a written Fair Lending Policy which addresses the Credit Union’s efforts to
eliminate discrimination in all aspects of lending including, staff training, marketing and
underwriting. In addition, all loans are approved or denied by management as well as the Credit
Committee to determine fairness and consistency.
Based upon the review of the Credit Union’s performance relative to fair lending policies and
practices, the institution meets the standards for satisfactory performance.
Optional Evaluation of Investments and Services
In addition to the performance criteria, and per management’s request, First Choice Credit
Union’s qualified services and investments were also reviewed.
The CRA regulation defines a community development service as having community
development as its primary purpose and is related to the provision of financial services. The
Credit Union has shown substantial activity in assisting its membership who currently have
delinquent or are trying to reestablish good credit. There were several instances where the
Credit Union entered into “work-out” agreements with members for delinquent debt or where
members were trying to re-establish credit after bankruptcies.
A qualified investment, for the purposes of this CRA evaluation, is a lawful investment, deposit,
membership share, or grant that has community development as its primary purpose. The
Credit Union has a CRA Committee which allocates its charitable contributions. The Credit Union
has made a moderate amount of donations including: regular contributions to The Sun Santa
Fund, which was established to provide a Christmas toy and a holiday meal for families in need
in the Greater Lowell community. In addition the Credit Union has made contributions to HAWK
(Help for Abused Woman and their Children) which were used to purchase supermarket gift
cards, allowing those in need to purchase necessary items. The Credit Union has also made
donations to Toys for Tots and the Merrimac Valley Food Bank. Given the size of the Credit
Union, these efforts are commendable and supported the overall rating.
PERFORMANCE EVALUATION DISCLOSURE GUIDE
Massachusetts General Laws Chapter 167, Section 14, as amended, and the Uniform
Interagency Community Reinvestment Act (CRA) Guidelines for Disclosure of Written
Evaluations require all financial institutions to take the following actions within 30 business
days of receipt of the CRA evaluation of their institution:
1) Make its most current CRA performance evaluation available to the public;
2) At a minimum, place the evaluation in the institution's CRA public file located at the
head office and at a designated office in each assessment area;
3) Add the following language to the institution's required CRA public notice that is
posted in each depository facility:
"You may obtain the public section of our most recent CRA Performance Evaluation,
which was prepared by the Massachusetts Division of Banks, at 55 Marston Street,
Lawrence, Massachusetts 01841.
[Please Note: If the institution has more than one assessment area, each office
(other than off-premises electronic deposit facilities) in that assessment area shall
also include the address of the designated office for that assessment area.]
4) Provide a copy of its current evaluation to the public, upon request. In connection
with this, the institution is authorized to charge a fee which does not exceed the cost
of reproduction and mailing (if applicable).
The format and content of the institution's evaluation, as prepared by its supervisory
agency, may not be altered or abridged in any manner. The institution is encouraged to
include its response to the evaluation in its CRA public file.