How One CU Is Growing Loans By 14%

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GAHANNA, Ohio-KEMBA Financial CU has enjoyed 14% loan growth over the last year by being aggressive with several products, while also taking advantage of every opportunity banks are giving them.

"It's adapting to the market," said CFO Phil Hunt. "The dysfunction of the financial markets presents opportunities if you are looking for them. Banks leave holes all over the place as they are regrouping. If a credit union is willing to go in and fill these gaps, whatever they might be in your market, you will find you can get good loan growth."

KEMBA's philosophy is evidenced by growth in credit cards (50% increase in the last year), indirect auto (up 33%), auto loan recapture (improved 15%), and loan participations (up 28%).

According to Hunt, with consumer spending down, growth really means "stealing loans" from banks as they ignore some of their existing business. To do that, Hunt said the CU has to know its competitors well. "If you know what their strengths are, you know when their strengths are becoming their weaknesses. Listen to what your members say about doing business with the banks, and pay attention to what your front-line staff pick up on. There is no magical intelligence group you need to put together."

That approach made it clear to KEMBA in 2008 that credit cards would be a big opportunity in the next few years. In 2009, it set aggressive targets and revamped its product line. from five offerings to two platinum cards-one fixed rate with rates as low as 12.99%, and one variable with rates as low as 7.99%-and added a cash-back program. "While we had a lot of products, we didn't have a lot of growth," Hunt said. "We reduced the administrative costs to give the most back to members."

Building dealer ties has driven growth in indirect auto lending. KEMBA emphasizes service and fast turnaround. "We have done well here because of the business development approach we put in place," said SVP-Lending Mike Dorsett. "When the banks pulled back the dealers did not like that. They want someone they can count on to always be there and give them great service."

Auto loan recapture has gown by more than one-third due to aggressive outbound calling and in-branch efforts, and loan participations are doing well, totaling $18 million. "Loan participations seem to be almost a dirty word anymore," offered Dorsett. "But we do some church loan participations with Evangelical Christian Credit Union. ECCU serves the churches well, and they do an excellent job of assessing the risks of providing loans to churches."

While only a small part ($4.1-million) of the $400-million total portfolio, KEMBA's indirect retail program is expected to jump-start when the economy comes back, Dorsett said. KEMBA partners with several local businesses to provide loans to their customers. Almost all of the businesses provide services or products to homeowners. "Roofs, basements, garden tractors, etc.," shared Dorsett. "The loan is important. But the arrangement allows us to acquire a member who is a homeowner and is credit worthy. Pick up the loan and then offer the member a home equity line, maybe an auto loan . . ."

As loans have grown, delinquencies (.94%) and charge-offs (.92%) have stabilized. Hunt said the CU tightened underwriting guidelines in 2005 to 2006, laying the groundwork for the success today. "It is very difficult to get loan growth when you are fighting loan quality," concluded Hunt.

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