A Well-Rounded Loan Portfolio

Rescue loans, allowance for loan and lease losses, strategies for non-indirect auto loan growth, and more this week on CreditUnions.com.

 
 

Credit unions are posting tremendous loan growth. In aggregate, the credit union industry's loan portfolio expanded 10.7% between June 30, 2014, and June 30, 2015, with real estate and consumer lending splitting that performance.
 
So this week, CreditUnions.com is taking a look at lending strategies credit unions are using to develop well-rounded loan portfolios, from rescue loans to strategies for non-indirect auto loan growth and more.

Indirect lending and participation loans have been key drivers of growth for many credit unions in recent years. According to Peer-to-Peer analysis from Callahan & Associates, indirect loans as a percentage of total credit union auto lending grew to 49.07% as of the end of 2014.

Credit unions that did not engage in indirect lending and participation loans increased their loan portfolios by 7.41% last year compared with 10.82% growth for the industry as a whole.

In Strategies To Make A Direct Impact On Auto Loan Growth by writer Ted Goldwyn, three credit unions without indirect lending take the road less traveled to increase loans and relationships.

For nearly a decade, Mountain America Credit Union ($4.6B, West Jordan, UT) has taken an approach to loan recapture that helps employees and borrowers alike understand the long-term impact of refinancing a high-priced loan at a lower rate or a shorter term.

Referred to internally as “rescue loans,” both the balances and the resulting savings from these efforts grow every year, says Nathan Anderson, the credit union’s executive vice president and chief operating officer. Year-to-date in 2015 alone, Mountain America has saved its members more than $35 million in interest. 

To learn more about this product read An Answer To The S.O.S From Member Wallets by Callahan writer and editor Aaron Pugh.

Westerra Credit Union ($1.3B, Denver, CO) revised its process for taking qualitative and environmental (Q&E) factors into consideration for its Allowance for Loan and Lease Losses (ALLL) approximately one year ago. Today, the credit union breaks down its analysis according to each of the eight risk areas identified in NCUA’s Notice of Final Interpretive Ruling and Policy Statement (IRPS) 02-3.

“We have found that breaking down ALLL by risk area according to the guidance NCUA has provided is helpful,” says Jennifer Meyers, Westerra Credit Union’s CFO. “We take each of these specific areas and risk weight them based on how we assess those items would impact the actual loss potential in our portfolio.” 

Read more about the credit union's risk criteria and how a solid allowance methodology and consistent application provides peace of mind in Qualitative And Environmental Factors In The ALLL by Sharon Simpson.

Employees of the state of Washington joined together in 1957 to form WSECU ($2.3B, Olympia, WA), and for 58 years the credit union has been “proud to support our dedicated public employees,” says the institution’s website. In 2003, WSECU passed the $1 billion in assets mark and 10 years later expanded its field of membership to include anyone in the state.

Today, WSECU has $2.3 billion in assets and more than 225,000 members. It also has a robust mortgage sales and loan participation line of business that helps it carry a 94.1% loan-to-share ratio — versus 80.0% for credit unions with more than $1 billion in assets and 78.9% for Washington credit unions — and 101.3% ratio for loans and real estate servicing portfolio versus shares — versus 87.4% for asset-based peers and 88.2% for state credit unions — as of midyear 2015, according to Search & Analyze data available on CreditUnions.com.

In Selling Loans Keeps Production Engine Running Smoothly with Randy Gunderson, CFO for WSECU, he discusses why and how the credit union began participating consumer and commercial loans in addition to its long-standing practice of selling mortgages to Fannie Mae. 

As credit unions look for ways to diversify loan portfolios, a growing number of organizations are launching or revitalizing student lending programs.

Careful underwriting, default insurance, and other best practices are helping  Northern Credit Union ($218.3M, Watertown, NY), Elements Financial Credit Union ($1.13B, Indianapolis, IN), and Affinity Plus Federal Credit Union ($1.72B, St. Paul, MN) beat national loan default rates and introduce bundled products that create lifetime relationships with college grads. Read more in How To Make Student Lending A Low-Risk, Low-Hassle Investment by writer E.C. Harrison.

Happy Reading.

 
 

Aug. 24, 2015


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