Pushing Through Loan Growth Slump

While the lending environment in Hawaii is difficult, some credit unions are bucking the trend with several strategies.


While Hawaii is indeed a state where credit unions are struggling to improve loan growth, credit unions like Aloha Pacific Federal Credit Union ($755.6M, Honolulu, HI) and Pearl Harbor Federal Credit Union ($340.4M, Waipahu, HI) have found ways to improve many sectors of their portfolio.

Hawaii is a saturated market for financial institutions with about 80 credit unions and nine banks vying for a limited amount of business. Many of the Hawaii credit unions also have overlapping field of memberships and are facing competition from several of larger mainland banks and credit unions that have opened there.

Hawaiian credit unions averaged -2.0% loan growth in the second quarter of 2012, placing in them at the bottom of state performances, with only new Jersey and Nevada reporting a lower growth rate. The loan growth average for all credit unions in the U.S. in the second quarter was 3.72%, according to Callahan & Associates’ Peer-to-Peer data. Hawaiian credit unions loan growth rate has been fairly on par with the national average for several years until the second quarter of 2012, when the island state’s growth began to lag behind. The loan growth in Hawaii has trailed ever since.

But several credit unions have kept stronger growth rates. Aloha Pacific Federal Credit Union is bucking sluggish lending environment by reaching outside of the island’s borders and purchasing a branch in Las Vegas to drive mortgage growth. And Pearl Harbor FCU is promoting its 4.75% personal loan rate and its $500 closing cost incentive for home equity lines of credit.

While the credit union did see immediate growth from simply acquiring the branch – its overall loan portfolio grew 11% in the past year – it is banking on the fact that Las Vegas’ housing market rebound will be more significant than Hawaii’s housing market and produce stronger mortgage growth. So far the strategy seems to be working, says CEO Wallace Watanabe.

Aloha Pacific FCU, while working in the subprime market, requires 30% down payment and Watanabe says the credit union has no foreclosures and has decent delinquency rates. The credit union’s total delinquent loans dropped 10.2% in the second quarter compared to a year prior, according to Callahan & Associates’ Peer-to-Peer data. “We’re quite prudent in our lending practices,” Watanabe says.

Aloha is also expanding its solar loan program that it started about two years ago. So far, it has serviced more than $6 million in solar panel loans, with each loan about $15,000. Watanabe says the market for solar panel loans is taking off in both Hawaii and Las Vegas as consumers can still enjoy tax incentives for the technology.

Watanabe attributes the credit union's auto loan growth of 1.36% in the second quarter, to strong, long-term relationship with auto dealers and improving indirect lending. The average Hawaii credit union’s auto loan growth was fell a sharp 14.2% during that same time, compared with U.S. credit unions' gain of 5.5%.

Pearl Harbor FCU’s auto loans have also fared well, which Loan Manager Glen Fukunaga attributes to the fact that the credit union recently implemented a staff incentive, added new radio and direct mail campaigns, offered competitive rates, and partnered with local dealerships. It also changed the interface of its core system, which improved response time and approval rate.

“Our loan strategies are consistently changing,” says Fukunaga. “We try to develop new and different products based on the needs of our members. … We actually try to stay away from what everyone else is doing and look for products and marketing avenues that make us stand out from the rest.”

Like Aloha Pacific FCU, Pearl Harbor has achieved lower delinquency rates – a 10.1% decline to $1.8 million total delinquent loans in the second quarter compared to a year prior, according to the credit union’s two-year report. To better connect with delinquent borrower, the credit union restructured its collections department, emphasized follow-up calls by setting a team goal to work more efficiently. It also now uses its call center for employees to make conduct follow-up calls during their down time, Fukunaga says.

“Our future loan growth strategy and goals will largely depend on what happens in the economy and market place,” Fukunaga says. “As the economy and Hawaii evolves, we will evolve with them. Of course, we would like to grow in all areas and add new products, but this will largely depend on our members, their needs and wants, and what is happening amongst the ever changing financial landscape.”




Oct. 23, 2012


  • This article exemplifies how credit unions have been forced to become more creative with their loan portfolios. Many credit unions have ventured into the business loan arena, because large demand has built up in this area with the void left by banks exiting this market. Credit unions have shown their true nature of being cooperatives and working together to find the best solutions. Many credit unions have banded together and have begun participation loans in this area, which diversifies the risk and promotes the true spirit of cooperation.
    Kevin Finneran