FirstLook: The Key to 14% Lending Growth

Affinity FCU demonstrates that sticking by their membership, in good times and bad, can lead to phenomenal growth—even when the competition comes roaring back.


The Number One priority for most credit unions today is growing loans. With interest rates on investments near 0% and non-interest income under legislative threat, the best way to grow revenue is adding loans.

For all credit unions, loans on the balance sheet at March 31, 2010 have increased only .9%, much slower than the 7.6% annual growth in shares.  The $1.9 billion Affinity Federal Credit Union, Basking Ridge, NJ, shows the opposite trend in first quarter numbers.   Loans are up 14% from a year ago, shares 8% and the loan-to-share ratio has increased over 10%.   The net interest margin is up 80 basis points from one year earlier.   How was this "contrarian" outcome achieved?

Bob Birkhahn, Affinity’s EVP and Membership Relationship Officer, says the growth owes most to dealing with people face-to-face and letting them know the credit union will stick by them in bad times as well as good. Birkhahn says Affinity looks for character and if a person seems really determined to stay in a home, the credit union does all it can to achieve that goal. Of $105 million’s worth of modifications for more than five hundred people it has not had a single re-default. 

Birkhahn also reports its year-over-year credit card applications grew 65%, mainly because its credit card is plain vanilla and people have been responding well to that. He reports that the credit union has been concentrating on quality used cars, and also getting high marks from consumers. And he says Affinity has been picking up good commercial customers that banks have terminated not because of their character or potential but largely because the banks have made sweeping reduction decisions about their portfolios. Birkhahn said, “We hold to our principles of sticking with people long term, and they are really seeing the value in that.”

The complete story of Afinity’s efforts will be highlighted in the May’s Callahan Report.  In addition there is a side by side comparison of how the credit union system’s lending results in 2009 compare with those of the $2.2 trillion Bank of America.