In September 2009, Ent Federal Credit Union in Colorado Springs entered the lending equivalent of the Bermuda Triangle: Members were paying down debt at unprecedented rates, few took out new loans, and automakers’ finance companies re-emerged with offers of below-market financing.
As a result, loan growth hit “rock bottom,” says Bill Vogeney, senior vice president/chief lending officer for the $3 billion asset credit union and vice chair of the CUNA Lending Council. “We were losing loan balances to the tune of 1% per month,” he says. “What we thought was a blip on the screen was a dramatic change in pricing and peoples’ borrowing behavior.”
• Take advantage of the few opportunities today’s economy offers, including low rates and refinancing opportunities.
• Implementing a sales and service culture can help CUs cross-sell products and services, and increase market share among members.
• Board focus: If your CU’s loan portfolio is shrinking, you’re not alone. Nationally, CU loans outstanding declined in 2010 for the first time in 30 years.
At its low point in February 2010, Ent Federal entered crisis mode, holding brainstorming sessions to figure out how to rebuild its shrinking loan portfolio, Vogeney says. “We told staff, ‘we need to pull out of this and make some loans. Consumers aren’t borrowing, so let’s come up with ideas that match the economic times and the fact that people are paying down debt, refinancing, and saving as much money as they can.’ That’s what we tried to capitalize on.”
Ent Federal’s lending challenges reflect those of the credit union movement as a whole. The Credit Union National Association (CUNA) reports credit union loans outstanding declined 1.2% in 2010—the first time that has happened since 1980.
Credit unions’ share of the consumer credit market was unchanged during 2010, indicating the total market is shrinking, notes Bill Hampel, CUNA’s senior vice president of research and policy analysis/chief economist. And total credit union savings have increased only 3.3% through August, suggesting that member households are devoting excess funds to paying off loans.
Most of Ent Federal’s loan decline came from the consumer side—home equity loans, including lines of credit, and direct and indirect used-auto loans. So the credit union focused on its lone bright spot: first mortgages.
Next: ‘Mortgage Freedom’