PLYMOUTH, Mich.-After weathering a rough patch when the recession hit Michigan, Community Financial Members FCU has rebounded and last year saw loan growth of better than 5% and checking account growth of nearly 8%.
Those numbers are part of why CFCU 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 measured on a scorecard of growth, income, efficiency and margin management.
CEO Bill Lawton noted that like so many other credit unions, Community Financial is putting nearly all of its current efforts into boosting loans. During the worst of the recession, the $477-million, 49,000-member credit union slashed deposit rates and allowed certificates to mature and move elsewhere, while at the same time working to ensure that it didn't change its loan underwriting standards. And while some of the communities it serves have pulled through, others-particularly further north in the state-are still struggling.
Changing the Phone Message
"We were out there when everybody else was pulling back from lending," he recalled. "A lot of the big banks were pulling back the lending they were doing in Michigan, and we were out there with the message of 'We've got millions to lend.' We changed our phone message to 'Community Financial: We've Got Millions To Lend.' That was the gist of it-to let people know that even though they were reading everywhere that you couldn't borrow money from anybody, we wanted to make sure people knew they still had a source to borrow from."
The credit union worked to solidify its relationships with local car dealers and "our indirect program went crazy," said Lawton. On top of that, CFCU focused on consolidation loans for members who were deleveraging debt, including offering signature loans for members with long-term relationships at the credit union or in instances where members "had an old credit report where we could see that they were reducing the amount of debt over time."
In one instance, Lawton recalled, Community Financial helped a member with nearly $25,000 worth of credit card debt at an average of 25% APR refinance that debt at a 10% APR.
The credit union also has an $18-million workout portfolio for mortgages. These days those loans are earning 5%, but also have a 10% delinquency rate. Lawton is unfazed. "Those folks are still challenged, but that portfolio is doing wonderfully compared to industry standards," said Lawton.
Upside Down & Here To Stay
Home prices in Michigan are still low and the unemployment rate in the Great Lakes state is still at 9%. "We're going to be dealing with upside down mortgages for a long time, but our thought is that we've seen the decline and that things are going to stabilize or get better," said Lawton, adding that the CU employs risk-based pricing on most products. "I'm a lot more comfortable doing a high-LTV mortgage now than I was in 2005 and 2006 after we'd seen prices go up and up and up."
He said Community Financial is now seeing "a huge number of refinances and an increased number of new home buyers." As of its December 2011 Call Report, CFCU had 4,263 mortgages and real estate loans totaling $281.5 million.
Income and efficiencies are core components of Raddon's criteria for Crystal Award winners, but Lawton noted that cost control is not a major focus at Community Financial right now.
"I think there's a lot more opportunity on increasing your top line than on focusing on your bottom line," he said. "When things were really lousy and we were losing money ... I was stressing to my team that we need to continue to make investments. Any investment we don't make that would make us money or serve our members better, if we would make it in good times, we need to make it in bad times, because that's what's going to turn the bad times back into good."
Among the expense-reduction steps it has taken has been to decrease to 5% its 401(k) matching contribution.
"But the major focus was not on coming out of it through lowering expenses, but coming out of it through increasing the amount of revenue we had. And, to tell the truth, we were so darn busy making loans we knew were profitable that we didn't even have time to think about not doing that."
