Gateway Metro Credit Union of St. Louis, Mo., was becoming a victim of its own success. Gateway's highly successful indirect auto lending program had resulted in 54.5 percent total share growth from 2000 to 2003. But that 18 percent annualized growth was creating a strain on the balance sheet.
We knew that the indirect lending business was doing a great deal for the credit union, said David Barton, president and chief executive officer of Gateway. However, liquidity was becoming an important issue if Gateway Metro was going to stay in the indirect lending business.
So, Gateway Metro turned to Missouri Corporate Credit Union's CARPool program for a solution. Offered through Charlie Mac, a credit union service organization, CARPooL allows credit unions to sell all or a portion of their portfolio of loans for new or used autos while continuing to service them.
Credit unions are quickly learning that the sale of indirect loans can help them maintain and even strengthen their relationships with auto dealers. In the St. Louis area, Gateway Metro had made all the right moves in establishing its indirect lending program. It had even waited several years before launching its program, while doing its homework and learning from the successes and mistakes of other credit unions.
The program was an immediate success. Even despite strong growth in member deposits, its loan-to-share ratio zoomed from 76 percent to 90 percent in a three-year time frame.
In deciding to move some of its loan portfolio off its balance sheet, Gateway Metro became the first credit union to take advantage of the CARPooL program through Missouri Corporate.
The fact that Charlie Mac is a credit union service organization was a huge factor for our board of directors to approve this transaction Barton said. The fact that Charlie Mac is a part of the organized credit union movement allowed the board to be more comfortable with the process.
Postal Credit Union of St. Paul, Minn., can also attest to the benefits of indirect lending. Like Gateway Metro, Postal had long known of the advantages of keeping a funding source available to dealers while maintaining a one-stop-shop for consumers. As a result, Postal turned to Minnesota Corporate Credit Union for help in its indirect lending program.
In our market, you need to have both a direct and an indirect program if you want to grow your auto-loan portfolio, said Dennis Bauer, executive vice president of Postal Credit Union. If you do not have an indirect relationship, your chances of capturing auto loans go down dramatically. Knowing we have CARPooL as a solution gives us a lot of flexibility in pricing and helps us remain competitively priced.
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