BIRMINGHAM, Ala.-Alabama TelCo Credit Union here is reporting strong growth for the first six months of 2011, with more than 2,200 new checking accounts totaling $30 million in deposits and nearly $60 million in new loans.
Like most other credit unions, said CEO Linda Cencula, Albama TelCo Credit Union has struggled to build its loan portfolio over the last several years, and the recent increase is more a stabilization than actual growth.
"Loans have pretty much stabilized, which we consider a positive in the environment we're in," she said. "We're putting a lot of new loans on, but the paydown pace has been higher than normal as consumers try to get their financial situations in line with the economy."
Cencula credited the rise in deposits and loans with public dissatisfaction over the big banks, along with the credit union's marketing campaign that seeks to raise awareness of its loan rates ("Borrowing Tactic From Pepsi, ATCU Has 'Challenge,'" July 4, 2011). "Over the years you hear that when the economy is bad you try to cut expenses, and one of the first things to get cut is marketing," she said. "Our philosophy is the opposite; this is when we hammer down and try to keep our name out there."
Cencula said that the credit union has not tracked how many of those new checking accounts are from new members versus existing members who have transferred their checking business from another FI. She said that she had heard many people say at community events that they were mad at their bank and planned to switch to a credit union. Alabama TelCo's average member has three products with the credit union, said Cencula, including the required share account.
The credit union has more than 52,000 members with $556 million in assets. According to its most recent Call Report, Alabama TelCo has about 2,500 real estate loans on its books, totaling about $111 million. Of the nearly $60 million in new loans this year, Cencula said little of that has been real estate, in part because of a concerted effort on the credit union's part to avoid long-term loans in a low-rate environment.
Borrowing, But Not As Much
Driving loan volume has been car loans and credit cards.
"People are borrowing money, but not at the levels they did in previous years," said Cencula. "Where before we did lots of $30,000 and $40,000 car loans, now we do lots of $8,000, $10,000 and maybe $15,000 car loans. So people aren't buying the big ticket type vehicles; they're buying the older, used models that cost less."
While Cencula would like to see fewer deposits coming in and more loans going out, she acknowledged that new checking accounts are helping build business.
"The first thing is to get them in here and get them into a sticky product like a checking account," she said. "For years, credit unions lagged behind on checking accounts because we don't have the brick & mortar facilities equal to the larger banks, and what drives checking is the convenience factor. But with the banks having to charge, that's sort of driving people to credit unions, and maybe they're thinking the value is there, even though the convenience is not as great as we'd like it to be."
As the credit union begins its strategic planning for 2012, Cencula noted the possibility that loan growth won't be able to keep pace with deposits. Still, she said that Alabama TelCo will likely use the first half of 2011 as a guide for 2012, in part because, "I don't really think it will be worse and I don't think it will be better."
No Budget Cuts To Marketing
For credit unions looking to emulate Alabama TelCo's success, Cencula recommended not skimping on marketing.
"Continue to keep your credit union's awareness up," she advised. "We've heard it in so many seminars and written materials that we need to keep credit unions at top of mind because now is our time to capitalize on what is going on in the market around us. The tendency is to pull back when income is down and operating expenses are up, and to pull back from marketing and communications efforts. That's probably not the thing to do. Hammer down with your marketing."
Note To Readers: This issue of Credit Union Journal includes expanded coverage of successful lending efforts, with coverage beginning on page 1 and also appearing on pages 20-25.
