SLEEPY EYE, Minn.-Focusing on the long-term for both the credit union as a whole and the relationship with each individual member has helped Southpoint Federal Credit Union earn the number-two spot on Callahan & Associates' Return of the Member overall rankings.
Having a presence in a town of just over 3,500 residents for the last 72 years and claiming one-sixth of the population in its charter area as members certainly allows for Southpoint FCU's strategy to work itself out.
"Over the years we've had the luxury of having a substantial capital base that we've been able to utilize so we can forego short-term profits and invest in long-term relationships," said CEO Dick Nesvold.
The credit union has a 15.58% capital ratio.
The $190-million Southpoint was able to build market share despite the fact it did not offer a single checking account product until the dawn of the new millennium-instead acting as a depository and a lender. Though mostly a CD-based credit union, Southpoint now offers checking accounts with "all the bells and whistles," as well as basic savings accounts with 1.5% yield, IRAs and HSAs.
While its deposit rates are not above market, members have been attracted to them over the last 10 years as the credit union offers discounts on loans for individuals with checking accounts and direct deposit. In the short time it has offered checking accounts, Southpoint has achieved more than 50% penetration, greatly enhancing its revenue stream. SFCU reported just over $1 million in net income for the third quarter of 2008.
On the lending side, the 10,000 member Southpoint FCU offers straightforward products such as its 5.45% 36-month auto loan along with 15- and 30-year fixed mortgages, which provide the bulk of its business.
"Our forte in the last several years has been in the mortgage lending area. We've got limited market values here so we offer products that are pretty simple," Nesvold said. "We're in an agriculture-based community and that's been very good. For the last five years, while there has been a substantial price appreciation elsewhere, the value of our houses has been at trickle up. So the correction that has taken place is also similar."
With the average price for a home around $100,000 and an aversion to the secondary market as well as a fairly strong agricultural sector, Southpoint has never had to worry much about defaults and exposure to toxic assets, despite having about $103 million worth of loans in its real estate portfolio.
Because of its location, Southpoint does not compete with the big banks but does have to contend with a number of community banks that also have not been damaged by the real estate crisis. Nesvold said that his credit union relies on its history in the region and its personal approach to each member to compete in the marketplace.
"We've prided ourselves in the value we provide to our members for many, many years," he noted. "We take very seriously the level of service were providing to them as well as providing marketable products that have the first priority being the benefit to the member."
