UNIVERSAL CITY, Texas-With multiple loan categories growing more than 10%, 2012 was another solid year at Randolph-Brooks FCU.
Chris O'Connor, president at the 416,000-member, $5.3-billion credit union, told Credit Union Journal that real estate lending at the CU grew by 18% in 2012, while credit cards grew by 20%. Auto lending has generally been in the 10% range, though last year it was just over 9%.
As part of that success, RBFCU was also included in the most recent round-up of Crystal Performance Award winners from Raddon Financial Group for CUs with assets of $500 million or more. Crystal Awards are based on a scorecard of various factors such as growth, income, efficiency and margin management.
Looking at the year ahead, O'Connor said that RBFCU plans to keep the focus squarely on lending.
"Car lending is always a challenge, because we are a direct loan shop," he said. "It's tougher to put out big numbers there, but we've been able to consistently grow that at close to 10% per year."
Randolph-Brooks FCU markets itself to members via billboards, its website and other outlets, and O'Connor said that while checking penetration is currently near 80%, "one of the hooks we've found as far as getting people to open an account with us is that they'll do it in order to get a good vehicle loan."
The credit union has an average of 3.2 products per member.
RBFCU's auto lending also tends to focus more on lower credit score tiers as a way to stay competitive. O'Connor said he expects that dealer pricing won't change much during 2013 and may not ever go back to the way it used to be, so there is an emphasis on stealing loans from other institutions and refinancing those deals at a lower rate.
Non-Interest Income Grows
Randolph-Brooks did more than $650 million in real estate loans in 2012, and O'Connor said the CU tends to focus on shorter term loans, including portfolioing most loans of 15 years or less.
Non-interest income is also expected to drive growth at the credit union this year, as it accounted for about 37% of the credit union's income in 2012. "In the past it's been down closer to 30%, but it's moving up," said O'Connor. "I expect that it will get up closer to 40-45%."
He noted that Wells Fargo's non-interest income levels tend to run near 50%.
"We've got a good concentration of non-interest income when compared to a lot of institutions," he said, pointing out that the credit union has started a number of different companies, including separate outlets for mortgages, title, property and casualty insurance, wealth management, realty and more. "These are diversifying our income streams, so we're making more from a variety of companies than we have in the past."
O'Connor pointed out that non-interest income will be especially important in 2013, as he expects the CU's net interest margin to be even smaller. "Even though we'll push for loans, we're not hanging all of our hopes on that."
Randolph-Brooks FCU continues to pay low-market rates in hope of discouraging unwanted deposits, but those funds continue to flow into the credit union. While the CU has tried to invest those funds, O'Connor noted that QE3 "has ruined the yields you get on a lot of investments, mortgage-backed securities, bonds and so forth, and it's tanked the market."
A Class Act
Much of Randolph-Brook's membership is working class and middle class, and O'Connor said the credit union generally does not target upper class members, in part because that market tends to bring in higher deposits. "We're looking for borrowers and people in their 20s and 30s looking for their first home, a car and an economical checking account," he said. "People who need the core services we offer."
Despite Randolph-Brooks's successes in recent years, O'Connor was quick to point out that there's no template for success, and he was hesitant to offer much advice to other institutions.
"There are many ways to run a good credit union," he said. We know what works for us; I don't necessarily know what works for somebody else."
