MADISON, Wis.-Used car loans and a strong credit card portfolio are driving continued lending growth for $1.9-billion Summit Credit Union.
Chief Lending Officer Dan Milbrandt said Summit CU is not resting on its laurels after winning an award just a year earlier for its lending from Credit Union Direct Lending, which was given in 2011 for "excellence in lending practices and overall success." It won by increasing its funded auto loans by 54% from June 2010 to June 2011, with 42% of the funded loans going to existing members.
In 2012, Milbrandt told Credit Union Journal, Summit is seeing "great growth" in used car lending.
"We are seeing almost no new car loans, because we cannot compete with the manufacturers offering 0%; especially 0% without a big rebate option," he said. "For used cars we talk regularly with the many dealerships we partner with through the CUDL network. The dealers appreciate the consistency we offer. We are not the flavor-of-the-month."
To target used car loans, one effective Summit CU strategy has been to provide members with preapprovals for a member up to a given dollar amount. Members receive a letter notifying them of the preapproval, along with a list of approved dealers that will honor the letter.
Working With Dealers
"By working with the dealers and with our CUDL rep, we don't fight with the dealers for the loans and they don't fight with us," he said. "It has become a partnership with the dealers and we have done very well in the Madison area. We are expanding into the Milwaukee area, which will be our next big challenge."
Summit has also seen growth in credit card outstandings, in part due to a strong balance transfer promotion during the first quarter for a special, one-year rate. It also offers members the option of a card tied to a term loan rather than a revolving line. Milbrandt said this allows members to keep their credit card with Summit, and the arrangement is easier on the credit report.
"It helps members get a better handle on their finances, and we keep the revolving limit at a reasonable level-maybe $5,000 instead of $15,000. Our worst charge-offs have been in credit cards that are 15 or 20 years old," he added.
Other secured loans for motorcycles, jet skis, snowmobiles, boats and assorted recreational vehicles have been surprisingly recession-proof, Milbrandt said.
"We find people who can afford those keep paying for them. We have not had to default very many of those over the past two or three years."
No Equity In Homes
There is no equity in the homes in Summit's service area, even in the reasonably stable state capital, Madison, Milbrandt reported, so real estate lending has been a "challenge." He said its mortgage business is "off the wall."
"One thing that frightens me is short-term rates supposedly will be held low until 2014, but I am concerned they could turn on a dime," he said. "So we are making sure not to carry too many long-term loans on our portfolio. We sell our 30-year fixed mortgages directly to Fannie Mae."
Summit is not capped out on commercial lending-yet-but Milbrandt said he is worried that it does not have much more capacity. Summit merged with Great Wisconsin CU in 2008, which he said increased its asset base and "gave us some room, but not an infinite amount of room."
He said it is pursuing "measured growth" in commercial lending, in part by attempting to book more Small Business Administration loans.
Current lending promotions at Summit include a backyard makeover. Members who take out a mortgage or home equity loan are entered in a drawing for a $5,000 backyard spending spree.
Summit has introduced a membership rewards program known as "Oodles." Milbrandt said if members have checking, debit card and loan relationships with the CU they receive an Oodles card that offers benefits from local merchants, in addition to other perks. In May, for example, Oodles members have access to three special offers, including a $50 gift card with an auto or boat loan.
The Year In Numbers, So Far
In its March 2012 Call Report, Summit listed nearly $6.4 million in net income for the first quarter, after paying $601,476 to the Corporate Stabilization Fund. Its net worth ratio was 8.95% ("well capitalized"). It listed 97,136 loans for $1.1 billion.
"Overall we are doing well on lending, but it is challenging," Milbrandt assessed. "We know we can't just sit back and let the business come in, we have to keep being creative. We are budgeting for 12% loan growth this year; last year we were just under 10%. Our philosophy is we are here to loan. I was taught credit unions were not founded because people couldn't find a place to deposit money. We teach our staff to look for opportunities to move other loans over to us, which saves the members money. But you have to ask."
