Credit Union Magazine - January 2009 - (Page 38)

compared with the peer average of 78%. “The upside is we still have money to loan,” Babin says. “We’ve grown loans at a faster rate than shares, but we’ve seen share balances and checking accounts grow through person-to-person marketing as well.” Consumer lending > $250 million in assets Gains on competitors To hold on to its position as an auto lending leader in a year when auto sales dipped to a five-year low, SAFE Federal Credit Union, Sumter, S.C., with $540 million in assets, streamlined its indirect lending processes. It reduced price tiers to four from six, funded loans more quickly, and offered dealers the opportunity to extend to their customers some of the same direct rates and terms, such as a 60-month rate for a 72-month loan. In a promotion to reward dealers for steering business its way, SAFE Federal offered coupons dealers could redeem the following month to offer customers the credit union’s in-branch rate, says Penny Pratt, vice president of lending. The credit union distributed the coupons based on the average number of deals received from each dealer—as an incentive to send the same number or more the following month. As a result, indirect loan volume rose 283% for $14.7 million more in volume in 2007 over 2006. With a view toward the worsening economy and rising prices at the gas pump and grocery store, SAFE Federal looked for ways to help members reduce monthly expenses. The credit union began promoting credit card transfers from higher-priced accounts—at 6.5% for the life of the loan. It also raised the credit card limit to $25,000 from $15,000 for its lowest-risk members. The promotion grew the credit card portfolio $7.3 million, to $43.2 million from $36 million, a 20% uptick for the year.“We weren’t encouraging additional debt, just asking members to consolidate their current balances with SAFE at a lower rate,” she notes. “Raising the account limit helped us recapture market share among low-risk members.” SAFE Federal also launched a sales culture in 2007— “the right way,” Pratt says, by first training both frontline and back-office employees, and emphasizing that cross-selling must make sense for members. “Our employees were always huge SAFE advocates. They love our products. They just needed training on how to talk to members about them,” Pratt says. “And they appreciate our motto: If we can’t save members money, make them money, or make it more convenient, there’s no reason to offer the product.” uCU LENDING IN 2009: WHAT’S IN STORE Excellent opportunities in business, student, and mortgage lending are what Steve Rick, senior economist for the Credit Union National Association, foresees for credit unions in the new year. Factors playing into that prediction: u Federal Reserve nontraditional policy measures lowering consumer and mortgage interest rates, and therefore increasing loan demand; u Lower bank lending due to capital constraints, higher risk aversion, cash hoarding, and tighter underwriting standards; and u Sufﬁcient credit union capital to increase loan portfolios 61% ($327 billion) and still be one percentage point more than the National Credit Union Administration’s 7% well-capitalized category. But Rick mitigates that with a few cautions: u Consumer loans are souring; u Home equity delinquency rates are rising fast; and u Substantial home price declines in some areas are leading to large defaults and foreclosures. “Managing liquidity and credit risk is imperative in today’s credit crunch,” he adds. Also, expect increased regulatory scrutiny and oversight. Mortgage lending < $250 million in assets ‘Realty’ check Mortgage loan officers at First Alliance Credit Union, Rochester, Minn., with $97 million in assets, saw the first warning signs of the economic downturn in late 2006. Members were having a harder time selling their homes, and appraisals were coming in below tax-assessed values. The credit union began requiring appraisals for all home loans and reviewing home equity loan files with balloon payments pending. It identified 39 loans worth $1.1 million that would come due in 2008 and sought to head off potential problems, occasionally seeking “creative” options for members who had run into credit problems, says CEO Kelly McDonough. Like other credit unions, First Alliance talked with some members who wanted more home than they could afford. “It’s not our approach to help them make decisions that would be bad for them, but many members who came to us would say, ‘The Realtor 38 CREDIT UNION MAGAZINE ÑJANUARY 2009 Ñcuna.org http://www.cuna.org

Table of Contents Feed for the Digital Edition of Credit Union Magazine - January 2009

Credit Union Magazine - January 2009 Contents On My Way Leading Edge Spotlight President's Perspective Game Plan Washington Insider Wright Stuff Executive Suite Reverse Mortgages Come of Age Six Merger Myths Leading-Edge Lenders TwentyFour/Seven Bankruptcy Compliance Tools of the Trade Trendlines Rates & Ratios Council Corner Shoptalk System Scan Marketplace Branching Out Advertiser Index

Credit Union Magazine - January 2009

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