GAINESVILLE, Fla.-Business lending at SunState FCU has grown by $21 million in the past two years to the point where the CU has reached its MBL cap, despite competition from much larger CUs in the region.
That strong performance was just one reason SunState was chosen as a recipient of a Crystal Performance Award from Raddon Financial Group for CUs with assets of less than $500 million. Crystal Awards are based on a scorecard that measures growth, income, efficiency and margin management.
"We've had a strategy to focus on business lending," said SunState CEO Jim Woodward. "We started that about three years ago, and it really caught on in 2010 and then continued into 2011. We are considered a top business lender for our asset size; we're recognized for that. Here in our market, my competition is a $4.4-billion credit union, a $1.4-billion credit union, and a $500-million credit union, and we are outlending them."
SunState serves about 27,000 members with $282 million assets, and Woodward noted that its success in member business lending is not accidental; it has sought to recruit top sales talent. But, more important than that, he said, is the way the credit union has built relationships throughout the local business community.
"We're out in the community, at the Chamber events, at the Rotary, all that stuff," said Woodward.
Just as important are the relationships it has built with local bankers who have been downsizing in an attempt to raise capital. "They would have notes that would come due that they would not renew...and therefore they've referred to us. We've been very selective; some accounts are good for us, some are not, and we've had the luxury to pick and choose."
CUSO Is Added
Now that Sunstate FCU has reached its lending cap, it has introduced a CUSO to focus on servicing those accounts. SunState Financial Solutions, LLC, was launched at the beginning of 2012, but Woodward said it will likely take most of the year before the CUSO is fully functional. He said CUSO reps are reaching out to businesses with loans from the credit union to discuss merchant processing, and it has also contracted with Southeast Corporate, "and they're going to refer other credit unions to us."
While SunState can't do much unless Congress raises the MBL cap-Woodward expressed hope that might happen by the end of 2012-it continues to get referrals and is working on some loan participations, keeping 10% of the loan and selling the other 90%, and earning a small bit of fee income during the process.
Woodward said that because SunState can be picky with its commercial lending it doesn't have to offer teaser rates. Rates on commercial loans are based on the market, but are in the 6% range, based on factors such as Beacon scores, loan-to-value and more. Points paid on the loans can fluctuate from 25 basis points up to 1%.
Woodward said that the commercial real estate market has finally bottomed out, but the same has not yet happened in the consumer real estate market. While north central Florida has not had the same struggles as areas such as Tampa and Miami, "there's still too much on the market that's offered, versus what the demand is for."
SunState continues to make mortgage loans, however, primarily based on refinancing. Additionally, the CU determined recently that almost two-thirds of its membership does some of its banking business elsewhere, so one of its areas of focus in 2012 will be on getting members to bring over existing loans and bundling that business.
"Our biggest challenge is to keep the business we have and try to grow from that," said Woodward. "Because we're not the lowest rate in town, we're not going to get a lot of new business, so the emphasis is to keep that back door closed and maintain what we do have." One way SunState does that is by pre-qualifying members for products and services like credit cards, courtesy pay, lines of credit, investment products and more.
Woodward stressed that credit unions shouldn't be afraid of entering into business lending, but they should also be sure to work with partners and staff that know what they're doing. "Instead of not growing or sitting on deposits you can't use, look into commercial lending," he said. "It's a good product as long as you do it the right way."
