BECU Posts 19% Share Growth and Rising Membership in 3rd Quarter

Defying the stall in industry growth rates, BECU is growing shares at five times the national average according to First Look data. What is driving their success?

 
 

BECU, the fourth largest credit union in the country with $6.8 billion in assets, recorded 19% annual share growth through the 3rd quarter. The Seattle-based credit union attracted $958 million in new shares. Although most of the growth was in share certificates, regular shares and money market shares also posted significant increases.

Double-Digit Growth
Share certificates jumped 67% to $1.7 billion while money market shares jumped 56% to $1.4 billion. “These numbers reflect the realization of an initiative we started in ’04 that focused on returning more value to our members. Steps we took two years back freed up resources that allowed us to enhance the spread over the competition,” said Brad Canfield, CFO of BECU.

By focusing on cost cutting and eliminating inefficiencies, BECU was able to offer deposit rates up to 80 bps above Washington state averages and therefore attracted significant deposits.

Loan growth also continued to fortify the balance sheet. Total loans grew 22% to $5.6 billion, with real estate loans growing 16% to $3.0 billion and auto loans growing 33% to $1.8 billion.

According to Canfield, indirect auto lending generating around $100 million a month in originations, coupled with unwavering focus on the home equity market, drove BECU’s loan portfolio growth. Enhancing efficiencies has been a focus in lending as well, as the credit union has simplified in-house processes to drive down costs and offer competitive prices. For example, BECU shortened the approval time for HELOCs by removing multiple redundant forms and significantly reducing paperwork.

BECU’s total assets grew 17% to $6.8 billion while membership jumped 10% from a year ago.

Net Income Grows Despite Higher Costs of Funds
The solid balance sheet growth is matched by equally good growth on the income statement. Total income for the nine months ending September 2006 grew 26% to $323 million versus the same period last year, thanks mainly to 30% growth in loan income.

While expenses grew a modest 4%, dividends jumped 74%, pushing the average cost of funds from 2.2% to 3.1%. Net income grew 6% over the previous September.

Key Financials

 

30-Sep-05

30-Sep-06

12 month growth

Members

422,590

464,889

10.0%

Assets

$5.8 B

$6.8 B

16.7%

Shares

$5.0 B

$6.0 B

19.0%

Loans

$4.6 B

$5.6 B

22.3%

 

 

 

 

Loan Income

$181.2 M

$236.0 M

30.2%

Fee Income

$51.5 M

$55.9 M

8.4%

Total Income

$256.6 M

$323.4 M

26.0%

Direct Expenses

$109.9 M

$114.1 M

3.9%

 

 

 

 

Loans/Assets

78.6%

82.4%

 

Ave Cost of Funds

2.20%

3.10%

 

Operating Expenses/Income

42.80%

35.30%

 

Dividends/Income

30.40%

41.90%

 

ROA

1.40%

1.30%

 

source: Peer-to-Peer

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Nov. 6, 2006


Comments

 
 
 
  • Show us a $100 million CU with these numbers and we can be impressed. This is not rocket science to a monolith like BECU to grow. High deposit rates and low loan rates = growth. Try being a small to medium in this market.
    Anonymous
     
     
     
  • Nice to see the conventional wisdom on share growth shattered like that! We hear a lot these days that consumers are increasingly price-insensitive, that convenience and service are more important to them. This shows that the ability to price at a compellling advantage to competitors (as opposed to 5-10 basis points) can change behavior and preferences. But this also shows the importance of long-range preparations in the form of efficiencies. Terrific to see such profitable growth. Kudos to BECU.
    Anonymous
     
     
     
  • Don't approve. This is a test comment.
    Kunal