NuUnion Credit Union traces its roots to State Employees CU and Ottawa County School Employees CU, both established in Michigan in the 1950s. The two credit unions combined in 2004, took the NuUnion name in 2006 and a community charter about the same time. NuUnion serves 28 counties in
central Michigan. It has14 branches, over 88,000 members and over $813 million in assets. The NuUnion region has been suffering economic troubles in recent years, the state having lost 450,000 manufacturing jobs; unemployment is currently 9.3%, the highest in the nation. Population around Lansing is stagnant or shrinking. Home values have declined 25-30% from their highs.
You’ve been looking at challenges not just for months but for years.
SW: In recent discussions with our staff, they have acknowledged the past years have been tough. But they also recognize that they are now skilled in managing difficult challenges. At the moment, we feel good that we have been doing this for a while. We feel prepared and at times, encouraged. We’re more or less pleased we are not just beginning at cost cutting or dealing with loan losses. This is not our first rodeo.
Your loan losses have been increasing?
SW: Like many others in our market, our loan losses have increased, which tells us times are tough. We made good loans to good people. And today many of those folks are going through unforeseen circumstances. We’re mostly seeing job losses or medical emergencies. We are not detecting sloppy underwriting, and we did not engage in high-risk loan products.
We benchmarked our loan losses back a couple of years. If we had now what we were having then, our ROA would be 0.4. As it is, we’ll likely be a bit under breakeven.
What have you been doing as an institution to keep your financials in order?
SW: We have been fairly conservative through all this trouble, so we are in better shape than many of our competitors. We are well capitalized, and we have lines of credit we have not drawn on. We are still making loans. In fact, owing to the situation that some of our competitors are drifting away – regional banks, Big Three finance corporations and so on – we see some real opportunities, notably in mortgages, student lending and business lending. We’ll focus on these. As we see it, the pie is not getting larger here, but with others dropping out, we end up with a larger slice of the pie.
Our auto loans are increasing. I think that’s because we do a sort of reversal compared to our competition. We have an inverted pricing model on our auto loans. We price our best rate at the 60-month term for new and used vehicles and higher rates for shorter terms. Our competitors typically price their best rates at the 48-month term and have higher rates on the longer terms. These loans are popular; volume is high and we’ve built some loyal customers from them. We are also seeing some good loans come in from our indirect lender programs, probably because other sources of credit for people have been drying up.
Our feeling is that this is not a time to be backing down. We are keeping the loan window open.
SW: We’re dealing with this head-on. Over the last 12 months, we’ve lowered our expense-to-asset ratio from 4.39 to 3.88. We’ve moved our calculation for the allowance of loan loss from a 36-month rolling average to a 12-month rolling average. We’ve written off some loans that perhaps we needn’t have, but no one can say how long this trouble is going to last and we want to deal with problems as they come up, not try to shuffle them around.
Any new programs?
SW: As part of our philosophy not to back away from our members, we have loosened our media budget up a bit. Plus, our branch and marketing teams have looked to ways of doing more with what we have. Accordingly, for the last year they have organized about 300 small events in which we take our message out to the public through community events – setting up tables and tents in our branch parking lots, area businesses, local activities, schools or universities, handing out lemonade and popcorn along with literature, and sharing that we are there for our members, still making loans and taking deposits, and doing for our people what we have always done.
Recently we started something we call SoSmart, a dividend-paying checking account. If a member agrees to accept an electronic statement, one ACH through the account by means of direct deposit or bill paying, and performs fifteen debit card transactions in a month, that member receives 4.5% APR on the account balance and also ATM refunds of $25 per cycle. Even if the member falls short of the above in a particular month, the member gets 0.5% on the account. This program has been very popular and brought in new money.
In May 2008, we partnered with a handful of other leading credit unions from across the country to create a new student loan product that offers students and their families a way to fill the gap that federal aid may leave behind. The student loan product is priced competitively and can be used to cover tuition, fees, books, room and board, and other related expenses. Again, we are getting into the market when others are getting out. We see this as a competitive advantage and we are helping our members send their kids to college. Under the current student loan lending environment, our members might not have been able to send their children to college without this program.
We are also looking to lean manufacturing as a model for cost cutting. The idea is not to settle for tweaking a flawed process but to examine products and services from a member’s perspective. If something is not adding value then it is defined as waste, and we should find a way to eliminate it.
Other than these programs are you doing anything specifically for members, especially members in distress?
SW: We are doing what we have always done, only more of it. We are working with members and adjusting loans on a case-by-case basis. We have restructured several loans for our members. In some cases, we are able to rewrite loans from other institutions and lower their monthly payments. We want to help them stay in their homes and keep their automobiles but there are some members we cannot help.
Realizing that times are tough for our members, we want to help them during these difficult times. That’s why this past September we began offering Financial Check-Ups that provide our members with a free, one-on-one consultation. We take them through a step-by-step understanding of their personal goals and follow-up with a thorough analysis. All our employees are trained to help members in every way they can and to refer them to specialists if they have to. The people at our CUSOs are likewise trained.
Do you have any advice to credit unions that are only now just facing the kinds of challenges you have had for more than a year?
SW: Yes. Take a conservative approach. Face the harsh realities head on. Don’t hide your head in the sand and hope the trouble will go away, because it probably won’t. Some things, of course, are beyond your control, but do everything within your control.
Above all, keep serving your members; keep the loan window open. Offer them stability; keep being there for them.