Nackawic-Millville receives report from man leading efforts to start a credit union to serve their rural community and Riverside Fundy Albert
Nackawic-Millville could have a credit union in place to serve the community’s financial needs this year, but the man leading the effort acknowledges frustration with the process.
Patrick Kemp attended the Aug. 19 Nackawic-Millville council meeting to update councillors about his team’s ongoing efforts to establish the credit union.
He explained that despite a solid business plan in place for a profitable financial institution to serve Nackawic-Millville and Riverside Fundy Albert, they face further steps to gain the required approval of the provincial banking regulator at FCNB (Financial and Consumers Services Commission of New Brunswick).
Kemp explained that the proposed credit union’s five- and 10-year business plans surpassed the regulator’s requirements.
“The only downside is the regulator keeps changing requirements,” he said.
Kemp explained that the survey of potential business and personal clients indicates that the credit union would show a profit well under the regulator’s time requirements.
He said credit unions lose money in their first two years as they build up the money on deposit.
Kemp said a highlight of their business plan was how quickly it could turn a profit. Based on the communities’ demographics, he said their business plan projects breaking even as early as the second year of operation and $1.5 million “to the good” by the fifth year.
While the regulator saw nothing wrong with the research and business plans two UNB MBA students created, it eventually required an accredited accounting firm to “sign off.”
Kemp explained that finding a New Brunswick accounting firm that didn’t already have a competing credit union as a client became a challenge.
He said they eventually found a Moncton accounting firm willing to audit the plan under the agreement their new credit union would not compete within their clients’ jurisdiction.
Kemp explained that the New Brunswick regulators also changed the proposed credit union’s initial investment requirements from the original requirement of 10 founding members investing a minimum of $50,000 each for a total of $500,000.
He explained that the regulators now want an initial investment of $1.5 million to ensure the required funds for a branch lease and two years of guaranteed salary for a qualified manager. He said the higher numbers are achievable.
“It’s all fine,” Kemp said.
He added that the proposed credit union could also meet the regulator’s staff requirements for a qualified branch manager, loans manager, and mortgage manager, noting potential savings by offering part-time employment or dividing time between the Nackawic and Riverside Albert branches.
Kemp added that the regulator also opposed the number of tellers outlined in the plan, noting that financial organizations are reducing these positions.
Kemp argued against reducing teller staff, noting that one reason for establishing a credit union branch is that many seniors are unfamiliar with online banking.
“We argued that’s why seniors are more susceptible to fraud and identity theft,” he said.
Kemp said residents and small business owners in both Nackawic-Millville and Riverside Fundy Albert stepped up to say they would support a credit union.
Nackawic lost its last bank earlier this year when the Scotiabank branch at the Nackawic Mall closed. Riverside Fundy has been without a bank for several years.
The proposed credit union hopes to use the vacant Scotiabank as its Nackawic branch.
Kemp explained that the proposed credit union not only requires New Brunswick regulator approval but also must deliver all policies and procedures required throughout Atlantic Central, which oversees credit unions throughout Atlantic Canada from its Halifax office. While the plan already meets those demands, they will have to re-do the study once they gain provincial approval.
Kemp described the numbers used in their credit union plan as “ultra-conservative,” utilizing only two-thirds of the calculated numbers. Even those numbers showed the credit union could be profitable within two years.
“The whole goal is to make sure there are no surprises,” Kemp said.
Responding to questions from the council, Kemp said the application to establish the credit union will proceed as soon as the accounting firm “signs off’ on their plan.
Noting that banking institutions’ fiscal years run from Nov. 1 to Oct. 31, Kemp said the best-case scenario would see the credit union open its doors in Nackawic by Nov. 1 of this year.
He said Riverside Fundy could face a longer wait.
