JACKSONVILLE, Fla. -
“It was a good move,” said John Hirabayashi, CEO of Community First CU, which until then was the second largest auto dealer in northeast Florida and earned $100 million in annual loan volume through 12 auto dealerships. “It was diverting resources from our relationships with our members. The loyalty wasn’t there. There were mixed messages about who we served. That loyalty is more important. We looked at indirect auto lending and saw that only 6% to 8% of these members ended up using other credit union products and services.”
For indirect loans, losses are generally higher, Hirabayashi said, but loan delinquencies weren’t a factor for the 103,000-member Community First CU dropping the indirect lending program. In March, he told the Credit Union Journal that the CU’s total auto portfolio was $216 million, and of that, delinquencies were only about $2 million.
The CU compensated for the income loss from indirect lending by becoming more active with its credit card promoting.
“We started to get more active in marketing,” Hirabayashi said. “Credit cards are up pretty significantly. They’re up about 16%.”
“Another big area that picked up most was real estate,” Hirabayashi continued. Real estate loans for the CU are up about 19%.
“We’re actually just about breaking even for loans this year,” he said.
As of right now, Hirabayashi doesn’t see Community First CU driving back into indirect auto lending.
“But I would be hesitant to say it’s a permanent change, because that means never,” he said. “But the basic model would have to change.”
Hirabayashi said that when new employees of the credit union learn of the change it made, they are impressed that the $1.2-billion CU gave up a significant source of loan volume as a way to be more loyal to its members.
“What has been good from our standpoint is it has allowed us to build better relationships with our members,” he said.
