ISHPEMING, Mich. — Aggressive interest rates and solid business connections enabled Ishpeming Community FCU to grow its loan portfolio by 15% last year and earn second place in the borrowing category on Callahan's Return of the Member rankings.
The $93-million institution scored big gains in auto lending, but surprisingly it was new car loans that experienced the highest year over year rate of growth, soaring 38%, $2.8 million, between December 2007 and December 2008.
"We have a very good relationship with a network of indirect dealers," said CEO George Isola. "Last summer we opened a branch office in a new city so we wanted to kick that branch off with a very aggressive interest rate on new and used cars. It really gave our auto lending a boost."
Used car loans also experienced a solid gain over the year, jumping by $3.6 million - a 28% spike. The lower rate not only increased loan volume over the summer, but also made dealership employees more comfortable doing business with Ishpeming Community FCU and that improved relationship ended up paying huge dividends
"What we wanted to do was run an aggressive rate for vehicle loans for 60 days when we opened that new office," Isola explained, noting that when the credit union ratcheted up the rate in September, a curious thing happened. "It did not slow down the volume; the month we raised the rate was the busiest car loan month ever. We absolutely did not expect it."
But this small town in the upper peninsula of Michigan experienced it's own mini-boom and bust in 2008, cut deeply into loan demand by the end of the year.
"We have two iron mines in our membership area and right up until October they were hiring as many people as they could because every ton they could produce they could sell," Isola said.
Once full-fledged panic hit the financial industry last fall, credit seized up, worldwide shipping ground to a standstill and corporations everywhere put their plans on hold. Despite its distance from Wall Street, the impact was almost immediate on Ishpeming as more than 300 workers, a full third of the mine's workforce, was laid off shortly thereafter.
"Overnight there was a glut of steel in the world which effected all of the mills and mines," Isola recalled. "That's when the recession hit us and our loan demand has plummeted since then, not surprisingly. There is a whole number of businesses that support the mines, so it just ripples through every business in the community right down to the car dealers."
With its annual 250 inches of snowfall, winter and early spring tend to be extremely slow months on the lending side in the Upper Peninsula town and so the credit union sits in a "wait and see" mode. Isola will not know until June if the credit union will have to make a move to reach its modest goal of 5% loan growth this year. But he is sure that Ispheming Community's low operating expenses, low loan rate, high deposit rate approach will give the CU the advantage in the market.
"We try to be the Wal-Mart of credit unions; the low cost provider," he said. "The experts say that you shouldn't advertise your rate - but if you have the lowest, then you should."
