163 credit unions, totaling $165B in assets, have submitted their 4Q data to Callahan's First Look program. Key highlights and growth numbers include:
Credit unions continue to fund their communities loan demand with 6.7% 12-month loan growth
As members save more, shares increase 7.3% over 4Q 2007
Delinquency climbs to 1.39%, an increase of 78 basis points from last year
At the end of 2008 Northeast Credit Union ($643M in Portsmouth, NH) posted 29.8% loan growth, 19.6% share growth and 20.5% member growth.. Yet the credit union had to slow their tremendous organic growth in the second half of 2008 by raising loan rates. A conversation with their President and CEO, Peter Kavalauskas, revealed the dedication to the cooperative's success through new initiatives, solid execution, and an excellent market.
Success in Auto Lending
In late 2007 Northeast's senior management team recognized that there was a unique and significant opportunity to expand their indirect lending program. Regional and national banks were beginning to withdraw from the marketplace. The opportunity was simple in concept: investing in a full-time traveling employee to nurture existing dealer relationships and develop new ones. The credit union has had an active indirect lending program since 1999 with CUDL and knew both the risks and rewards. Previous investments helped strengthen their internal operations and they had developed a solid underwriting team. They decided to go ahead and soon found the right person who had experience working with dealers, considerable personal contacts and new ideas. With his focused assistance, their auto portfolio has grown 82.9% to $256M since the fourth quarter of 2007. As other lenders pulled back, the credit union recognized another distinct benefit: the portfolio quality was increasing. With their stellar underwriting team and fewer lenders vying for quality buyers, Kavalauskas estimates that over 90% of their indirect program is 700+ paper. Yet, he notes, "We don't have the asset base to sustain the level of loan growth or the volume this market can generate." Going forward, they are looking to possibly create a CUSO to expand the lending to other area credit unions.
Converting Indirect Members
An ongoing dedicated effort by their employees has converted many indirect members into members who use the credit union to a full extent. After the purchase, all indirect members who live within 10 miles of a branch receive a series of mailings and a phone call from the call center. Now, those indirect members average close to 3.0 services per household, almost at the 3.25 average of other members.
Competing Share Promotions
Growth from the indirect program didn't happen overnight. Kavalauskas credits staff education programs on sales and service to expanding member relationships. Kavalauskas continues, "We also had some phenomenal CD promotions this year. Our local market was really heating up – we saw a lot of 7-month and 13-month promotions with rates around 4.5%. We went to the market with a 5.25% 'Pick Your Own Term’ CD, with 95% of the money placed in 6-month and 12-month certificates and few takers on the 5-year side." As those certificates come up for renewal, the credit union will offer competitive market rates. They've found that the majority of holders will renew at their institution as long as there is a competitive rate. Going into 2009, Northeast is expanding the Sales & Service initiative with the implementation of a new CRM tool.
Kavalauskas also credits their still solid market, saying, "New England hasn't seen the real estate price declines like the rest of the country. We do expect some deterioration throughout 2009, but are able to plan for it."