Indirect Lending Has Direct Payoff At SSFCU

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SAN ANTONIO — Indirect lending has its fans and its critics. Count Security Service FCU among the fans.

Mike Chapman, SVP of lending for Security Service, noted Security Service FCU has been the No. 1 indirect lending credit union in the country over the last eight years in dollars and loans. Its indirect lending portfolio is more than $4-billion.

The $6.1 billion credit union was tabbed by CUDATA.com as one of the Top 10 credit union lenders by loan growth in 2010. Chapman said acquisitions of Utah's Beehive CU and Colorado's Norbel CU added only slightly to its numbers. Its overall lending portfolio is $5.5-billion.

"The economy continues to be difficult for a lot of folks, but we were able to expand some of our markets," he said. "We have built up our indirect lending program over 20 years and have great relationships with our dealers. When other lenders pulled out we remained an alternative for the dealers. The captives have aggressively re-entered the market in the last year, but we are still doing well."

Indirect is not the only club in the lending bag for Security Service. It has been growing its commercial lending reach for the last several years with success, and it is doing well in mortgages.

What the acquisition of the two CUs has done for Security Service, Chapman said, is open new markets.

"Having the opportunity to branch out and serve new members has been very important to our success," he said. "We have had some problems with real estate, but nothing compared to the sand states. To us, it is the basics of offering the products our members deserve. If they need some help we help them. We take a lot of pride in service to our military because we originally were a military credit union."

SSFCU reported 2010 net income of $71-million, excluding NCUA assessments. It paid $5.5-million to the NCUSIF and $5.8-million to the corporate stabilization fund, leaving it with net income of $59.5-million. Its net worth ratio was 8.47%, making it "Well Capitalized."

Focus on Credit Quality

In 2009, Security Service began a focus on credit quality that carried over into 2010, Chapman said.

"We obviously made a strong effort to watch out for the safety and soundness of the credit union while looking to help our members. We looked for products that were most beneficial to our membership."

The key to successful lending, he continued, is consistency. Chapman said Security Service has not gotten involved much in subprime lending, either in auto loans or mortgages.

"We have done a lot of analysis over the years to find areas that can be improved. When gas goes up we focus on disposable income. Many people in Texas and Colorado have big trucks, so when gas goes up to $4 a gallon that impacts them."

So far, 2011 lending is "going well," Chapman reported. The auto industry has picked up, although he said the jury is out on what impact the earthquake and tsunami in Japan will have on volumes.

"There are very positive signs which we hope will continue. We are seeing continued consistent growth in commercial lending to small businesses as well as mortgages. It is hard to predict, but I have high hopes that it is going to be a very good year not only for the credit union, but more importantly our members and the economy as awhole."

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