Follow The Shooting Star

Solid pricing and a time-tested strategy helped Star One Credit Union generate loan growth in 2010.


The recession proved a difficult environment for credit union loan portfolios. Members were uncertain about jobs and hesitant to make large purchases that required financing. But there’s a saying about a will and a way.

According to fourth quarter data, Star One Credit Union ($5.4B, Sunnyvale, CA) grew the volume of loans originated in 2010 47% over 2009 levels.

Star One Annual Loan Originations 4Q10


The credit union’s success during the fourth quarter is a backlog of what happened during the third quarter, says Kevin Collins, senior vice president of loan services at Star One. In addition to the fourth quarter activity, the sheer volume the credit union originated in July through September took time to hit the books.

Star One is a portfolio lender and has not sold any mortgages to the secondary market this year. As such, the loan volume enhances its balance sheet. Total loans grew 14.0% over 2009 levels.

As the recession intensified, jittery local brokers and banks withdrew from the market. In the vacuum, Star One shined.

“We were doing the same thing we’ve always done,” Collins says.

The “same thing’” is a basic but effective strategy. Convenience is a big factor. Star One partners with Prime Alliance to offer an online application system that makes it easy for members to submit information. According to Collins, almost 100% of the credit union’s loan applications come through the online channel, which allows the credit union to keep pricing low and staffing at a minimum.

Star One also offers a modification program. Rather than refinancing a loan, the credit union ensures a member is in good standing on a loan and then charges a fee to cut a half-percent from their rate. The initiative keeps members from shopping around. 

Star One’s programs mesh well with its member base, whose tech-savvy and strong credit scores make then attractive borrowers.

Last year was a good year for Star One, and 2011 looks promising, too. Its staff recognizes the lending environment will be less-than-ideal (specifically for auto and VISA balances), but the growing asset class student loans represent is encouraging.

Collins emphasizes the importance of strong marketing campaigns in informing members about mortgage options. He also underscores the valuable business opportunity in making members feel safe.

Star One is an example of the safe haven credit unions offered members during a difficult economic time. The attitudes, practices, and products cultivated during the economic downturn will serve the credit union and its members well as the economy rolls back to life.




Feb. 14, 2011


  • A comment from Star One: Dave Osborn makes a good point about interest rate risk. Some credit unions sell fixed rate real estate loans to keep rate risk off their books. At Star One, 7 years ago we decided to use long-term borrowing to offset interest rate risk. We are very concerned if “rates climb several percentage points and then tell us what happens to their margins and NEV”. For the numbers: our fixed rate real estate is 29% of assets and our borrowing is 17% of assets. We track a “fixed rate RE less borrowed funds to assets” ratio (29% less 17%= 12%). Our equity ratio is 10.6%. We frequently test our interest rate risk with spreadsheets and simulations and feel that our borrowing has offset the risk. We will know if borrowing is as good or better or worse than selling fixed rate loans after a prolonged period of rising rates. The borrowing does “bloat” the balance sheet. Our ratios all have a denominator that is 17% larger than if we sold loans; so we tend to track regular and adjusted ratios for most key ratios.
    Rick Heldebrant
  • Some homes sell or refinance within 5 years. Many homes do not. My home loan is at a very low rate and we will not sell or refinance in the forseeable future. I suspect many folks are in similar circumstances.
  • As with any loan program as time goes on and rates change so will the program change it will balance it's self out with a steady income and average the rates. Also homes refinance or sell within a 5 year span. Good for Star One in having the guts to continue to operate as usual and servicing their members, so they didn't have to look to other means to continue to get financing.
    Savannah G Jarrell
  • Holding on to fixed rate 30 year mortgage loans may help them look good now, but wait until rates climb several percentage points and then tell us what happens to their margins and NEV.
    Dave Osborn