Preliminary data for fourth quarter 2009 performance is flowing into Callahan & Associates’ FirstLook program, and State Employees’ Credit Union ($19.6B, Raleigh, NC) is posting its third best year in the 72-year-old credit union’s history.
“We’ve had years where our loan growth has been at a higher percentage,” says Phil Greer, senior vice president of loan administration at SECU. “But based on volume of loans originated, we had plenty to do.”In 2009, the credit union posted slightly more than $2.1B in mortgage loans. One aspect that makes SECU’s performance stand out is that the majority of its loan portfolio is composed of the two-year adjustable rate mortgage program SECU developed nearly 17 years ago. This year, SECU’s two-year ARM accounted for nearly 86% – or $1.8B – of its portfolio; compare this to 14.54%, which is the percent of adjustable rate mortgages greater than one year that represents its peer group’s average.
Not only did SECU post these numbers “in a very competitive, fixed-rate environment,” but it also performed well with a product given plenty of bad press just two years ago. The credit union simply showed its members the bottom line to illustrate the benefits and opportunities inherent in its product.
“Comparing our two-year ARM to interest-only adjustable rates or payment option ARMs or most other ARMs was a relatively simple task.” Greer says. “Our loan is clearly more advantageous than the types of products that were being deployed at other institutions.”
“We also had in excess of a 10-year history with a product that had been successful with members,” Greer continues. “We had comparison tools in place well before all of this [bad press for adjustable rate mortgages] hit. The two-year ARM we developed because we wanted a niche – a unique product – so we weren’t butting heads with the powers that be in the mortgage business.”
SECU chooses to offer a reduced product line that speaks to the true needs and concerns of its members. With its two-year ARM, it has developed a tool that allows the credit union to address its competition, provide a good product to its members, and post positive numbers year after year. The credit union no longer offers 25- or 30-year fixed rate mortgages. Instead, it concentrates on extolling the virtues of its adjustable rate options as well as its 15- and 20-year fixed rate programs.
Greer says SECU is better off having a reduced product line, as it is less confusing for SECU staff as well as SECU members.
“Do one or two things and do them well,” Greer says. “You can’t be all things to all people.”
And SECU is doing well. Of the $2.1B in mortgage loans it originated in 2009, $675M was in purchase loans and $830.8M was in refinancing other lenders’ loans. Of the total dollars originated in 2009, more than 69% was new money. For SECU, it’s just a way of doing business and spreading the credit union difference.
Data on 4Q 2009 credit union performance is available in FirstLook.