MADISON, Wis.-Overall lending is down for credit unions as an industry, but some CUs are seeing strong loan growth.
A new study from the Filene Research Institute has been released that offers insights into why some CUs were able to build their loan portfolios from 2008-10. (Credit Union Journal also
The study, "Superior Consumer Lenders During the Great Recession," is authored by Filene Research Director Ben Rogers, and looks at small group of credit unions that have seen loans grow by more than 5% each year during those three years.
"Even though each credit union was able to keep growing loans throughout the downturn, none had stumbled upon a wholly new product or program," noted Rogers. The analysis found a number of common practices among the successful lenders, including:
* Sales culture. "Few felt like they had mastered it, but every successful lender we interviewed spent a lot of effort trying to improve its sales culture," Rogers said.
* Consistent underwriting. The report found that the "tumult that started in 2008 pushed scores of lenders to change their underwriting or exit consumer lending altogether. Many of the successful credit unions held to their standards (or tightened slightly) and kept lending through the storm."
* Refinancing. Declining interest rates combined with effective data mining and sales processes meant that many of the successful credit unions could capture loan growth even without a new purchase, the study found.
* Market power. A handful of the credit unions in the study were shown to have been able to leverage strong positions in a local economy or particular product line to make themselves first-choice lenders even during the downturn.
* Symbiotic product lines. While the report was focused mainly on auto and credit card lines, several credit unions attributed their consumer lending success to cross-selling from other, more important products like mortgages or agriculture loans.
* Direct lending. A strong minority of credit unions told Filene they got their loans the old-fashioned way: by relying on existing members, branch traffic, and steady cross-selling.
* Indirect lending. The majority of the credit unions highlighted in the study captured their lending growth primarily from indirect lending. "None of these was an indirect dabbler. Each cultivated strong dealer relationships, invested in technology, and set its own underwriting standards," the report offered.
Rogers noted the credit unions highlighted in the report grew their loan portfolios by strongly following two to three of the categories outlined above.
