One Credit Union Discovers that Portfolio Evaluation Doesn't Always Mean Sale
ARLINGTON, Va. - The current market for credit union credit card portfolios is so competitive and premiums for those portfolios rumored to be so high that many institutions presume that if they have their portfolio evaluated for marketability they will almost surely sell it. Well, not necessarily. Sometimes an evaluation of a portfolio and an examination of what it might be worth on the local market can lead a credit union to decide to keep it, as the $646 million United Services of America Credit Union, headquartered in San Diego, California, recently discovered. "We had just begun to note that the portfolio wasn't performing as robustly as it had been," explained CEO Mary Cunningham. "The truth is that we had been ignoring the portfolio for a while and we had reached a place where we needed to decide what to do about it." As the credit union began to investigate what it might do about the portfolio, Cunningham quickly realized that no examination would be complete without an inquiry into what the portfolio might be worth on the open market. "They had been circling us like buzzards for months," Cunningham said, without naming the card firms who had been contacting the credit union. "We didn't really understand why just then, but as it went on we began to better comprehend why our portfolio was so attractive." Indeed, while USA FCU had been too busy pursuing other lines of business to pay attention to its credit card portfolio, the assets had grown to a very good size. According to NCUA, the credit union's card portfolio consisted of over $37 million in receivables in December 2004 spread over almost 14,000 card accounts in four programs offering both VISA and MasterCard. Further, with 62,000 members the credit union's cards had penetrated roughly 23% into its membership, leaving plenty of room for a card issuing bank to market cards in an agent program to the remaining thousands of members. "We really had no idea," Cunningham said, "but we set about to learn what it was worth and what our challenges were." As a first step, USA Federal contacted three card portfolio brokerage firms to help them better understand the program's worth as well as its strengths and weaknesses. The credit union chose Asset Exchange, the Portland, Oregon firm which bills itself as an independent broker of credit union card portfolios and with whom USA FCU was eventually so satisfied that it agreed to let the brokerage publicize its situation in a case study.