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Filene CUs share secrets to lending in recession
MADISON, Wis. (11/7/11)--Twenty-three out of more than 2,200 U.S. credit unions larger than $50 million in assets grew their new- and used-auto loan portfolios by more than 5% each year between 2008 and 2010. Eleven also grew their credit card portfolios by 5%, according to a new Filene Research Institute report. Those who were successful had strengths in common.

"Superior Consumer Lenders during the Great Recession" supported by a grant from CUNA Mutual Group, is Filene's latest examination of credit union lending.

The Great Recession reduced the flow of U.S. consumer lending, and the opportunities that remained required much effort, the report said.

Filene's researchers conducted qualitative interviews with 12 of the 23 credit unions. Each of their stories is published as a case study in the full report. Despite their different regions, some key common strengths emerged:

  • Sales culture--Few credit unions said they felt like they had mastered it, but every successful lender interviewed spent a lot of effort trying to improve the credit union's sales culture.
  • Consistent underwriting--The tumult that started in 2008 pushed scores of lenders to change their underwriting or exit consumer lending altogether. Many successful credit unions held to their standards--or tightened them slightly--and kept lending through the financial crisis.
  • Refinancing-- Dropping interest rates combined with effective data mining and sales processes meant that many of the successful credit unions could capture loan growth even without a new purchase.
  • Market power--A handful of credit unions leveraged strong positions in a local economy or particular product line to make themselves first-choice lenders during the downturn.
  • Symbiotic product lines--Although the report focused mainly on auto and credit card lines, several credit unions attributed their consumer lending success to cross-selling from other, more important products like mortgages or agriculture loans.
  • Direct lending--A strong minority of credit unions interviewed got their loans the traditional way: by relying on existing members, branch traffic and steady cross-selling.
  • Indirect lending--Most credit unions interviewed captured their lending growth primarily from indirect lending. None were indirect "dabblers." Each cultivated strong dealer relationships, invested in technology, and set its own underwriting standards.
Most credit unions interviewed for the report drew strength from two or three of these categories, and focused on doing that particular task well.

The case-study credit unions include:

  • Acadia FCU ($95 million in assets), Fort Kent, Maine;
  • Baton Rouge Telco, ($194 million), Baton Rouge, La.;
  • Columbus Metro FCU, ($203 million), Columbus, Ohio;
  • Daniels-Sheridan FCU, ($54 million), Scobey, Mont.;
  • Education Plus CU, ($71 million), Monroe, Mich.;
  • EECU, ($1.2 billion), Fort Worth, Texas;
  • Fort Worth Community CU, ($723 million) Bedford, Texas;
  • Gesa CU, ($1.1 billion), Richland, Wash.;
  • Hutchinson CU, ($170 million), Hutchinson, Kansas;
  • SAC FCU, ($506 million), Bellevue, Neb.;
  • Scott CU, ($737 million), Collinsville, Ill.; and
  • Security Service FCU, ($6.5 billion), San Antonio, Texas.
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