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We expect members to continue borrowing money in a responsible way in the Middle Tennessee region. Our members are not afraid of borrowing money as long as they feel they are getting the best deal with competitive rates and terms. Members in this region are pretty conservative borrowers so we expect that used auto loans will continue to be much stronger than new auto loans. We also expect small balance real estate loans to be a hot item as members are trying to streamline their debt into one payment. We expect fierce competition for loan business as all financial institutions will continue seeking increased loan growth. Members will demand faster turnaround on loans and will expect their financial institution to offer plenty of choices in financial delivery of all banking services.
Car sales are strong. Indirect loan competition is as great as it was before the "captives" exited the business in 2008/2009. Not only is there more local competition but also out of market competition including non-domestic lenders. Rate pricing, credit standards and dealer incentives are all getting much more aggressive in an attempt to buy more market share.
First mortgage demand is much stronger than the last couple because of interest rate levels. While purchase activity has improved, the vast majority of the business is refinance. It is difficult to grow portfolio balances because existing ARM's are getting refinanced into 30 year fixed and the new demand is also for 30 year fixed. All of these loans are being sold into the secondary market. Second mortgage demand has picked up with the recent improvement in home values. Business is probably 50/50 HELOC versus 2nd mortgage.
Everyone is chasing high quality small business loans. Pricing has become very aggressive with the result that deals are being lost to competitors. SBA financing interest is very high. Delinquencies down; charge offs down; ALL levels also down as a result. First mortgage charge-offs are up as a result of the courts making some headway toward clearing the backlog of foreclosure actions. However, still taking 2 to 3 years from beginning to end to get title to a property.
The real estate market has improved with shortage of inventory. The properties finally coming out of the foreclosure process are selling for values in excess of the FAS 114 value. HARP 2 continues to be the major source of Fannie Mae and Freddie Mac business. GTE Financial closed over 1,800 HARP loans in 2012, and new applications continue to come in at a steady pace. Auto lending is key part of product offerings at 2012 saw a dramatic increase in the volume of loans funded.
Bottom line…loan portfolio, balance sheet increase almost 17% net. We sold $500 million in loans to Fannie Mae and Freddie Mac. 2012 was the best year in credit union’s history for new loan production. New members continued to be the focus with a 9.11% increase in net membership. Majority of members attracted through Community Financial Centers, only ten percent of membership came from indirect channel, with the rest beginning their membership on the Internet.
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