Is this an anomaly? Evangelical Christian Credit Union in California (ECCU, $607m) experienced 23.8% asset and 94.3% member growth rate in the past year thanks to a unique positioning strategy.
Though ECCU has performed exceptionally well for the industry, the success is nothing new for the credit union. In the mid 1980s ECCU executives decided to change their strategy by offering a commercial banking platform to faith-based organizations such as churches and schools.
"We take a holistic approach to understanding the total banking needs of the ministries and schools," said Mark Holbrook, president & chief executive officer of ECCU.
Its niche allowed ECCU to abandon the overly saturated consumer marketplace and focus on commercial practices. Currently, ECCU originates approximately $500 million in member business loans annually and has a Return on Average Assets (ROAA) of 1.6%. Over the last decade, its ROAA has ranged between 1.5 to 2% annually as a direct result of its repositioned strategy.
During the mid 1980s, many small ministries were paying outrageous fees for loan and banking services. Through experimentations with various business lines for faith-based organizations such as auto lending and tuition management, ECCU executives realized they could provide assistance to these underserved organizations. They stepped into the member business marketplace and began offering the full gambit of commercial services, including deposits, investments, cash management advice and loans, solely to faith-based organizations.
The faith-based organizations they encountered were all facing similar challenges in finding and obtaining land to build their facilities. To help these organizations, ECCU developed a framework that the lenders could customize based on the specific members' needs.
"We are developing long-term relationships with faith-based organizations by helping them think through their planning and development phases," said Holbrook.
The 15 staff members in the commercial lending department have been instrumental in the success of the lending program because they effectively foster strong relationships with member businesses. They also manage institutional risk by acting conservatively on the underwriting of the loans to faith-based organizations. Holbrook said that about half of these commercial loans are under $1 million; however, ECCU has also funded loans in excess of $40 million.
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