SAN DIEGO -- In the nearly 10 years it has been offering business services and loans, North Island Credit Union has earned a reputation in the community for being a hands-on innovator taking pride in its ability to make home-grown decisions. With the department's staff having a combined 238 years of business lending experience, being the first credit union in San Diego to become a Small Business Administration Preferred Lender, moving to a state charter, and a system conversion in 2001, North Island has built its business services methodically and through old-fashioned "good word of mouth."
"The first ingredient is the people we have on board," said Jeff Stone, executive vice president of business services at North Island on the credit union's successes. "We didn't try to do everything at once. We did it gradually."
North Island started in 1997 with the objective to grow its core business deposits, Stone said. At the time, the $1.5 billion credit union served mostly defense-based employees. Increasing deposits came as North Island was looking to transition from its old computer and software systems to something more efficient. After a due diligence search, it went with Open Solutions, Inc. because of its open interface and faster product development processes. Many business members were coming to the credit union to process checks so the timing could not have been more perfect, Stone said.
"In the old days, if we wanted to develop a new loan product, it was a four to six month process," said Robert Reck, first vice president/business product administration officer at North Island. "In the [Open Solutions] world, you look at the product, copy it into a test environment, test it for a week or two and then you're up and running in two to three weeks."
The conversion took place in July 2001, a year earlier, North Island changed from a federal to a state charter and also had a more complete line of business products and services in place. Today, the credit union serves nearly 108,000 members through 14 branches around San Diego and surrounding areas. It has $118 million in business deposits with $126 million in loans on the books and $260 million in loans under management.
Stone said the use of Open Solutions' Member Business Processing Solutions has allowed the credit union to model business member loans using the framework of similar consumer loans. Since implementing MBPS, North Island has increased its deposits through member business lending.
"We were fortunate we had something to move to," Stone said. "For other credit unions, they have to take the time to stop and think about the costs."
For instance, North Island has seen a steady increase in tax deposits, Reck pointed out. The conversion has helped to handle such unique deposits. Still, the credit union has partnered with other vendors that have the systems to process other untraditional business services, he added. Those partnerships have helped to service all types of loan amounts and business owners. Stone said business loans range between $500 and $4 million and real estate loans go from $49,000 to $19 million. Everyone from the lawn mower repairman to a defense contractor is served.
"The relationship officers are critical to bringing in new business. The branch managers are very active," Reck said.
In fact, North Island is in the midst of an advertising campaign that invites business owners to consider the financial institution for all their business banking and personal financial needs.
"The biggest objection is they don't think a credit union can do both," Stone said.
To help manage the 12.25% member business lending cap, the credit union participates out loans and offers lines of credit against that limit. Stone said if North Island did not sell loan participations, it would be at 140% of its cap. The credit union has $32 million in unused lines of credit and is in the process of applying for a member participation waiver.
"Normally, we don't want to get that high," Reck said on the 140% threshold. "In 2003, during the booming real estate market, we were getting in the 75 to 80% range."
Looking ahead, North Island is planning to launch Positive Pay for those who are avid check writers. The product aims to protect against check fraud. By early 2008, plans are also in place to possibly debut remote capture, which digitizes checks using special check-reading equipment and transmits the electronic checks to a financial institution for immediate deposit. In 2009, the credit union will prep to offer an "off-balance" sheet sweep account and seek out partnerships with entities like Lehman Brothers to service higher balance accounts.
North Island's biggest competitors on the real estate side come from savings and loans, community banks, life insurance companies and other credit unions. What helps, Stone said, is the local decision making.
"We're home grown, [business owners] are talking to the decision makers here and we're making the loan decisions," Stone said. --email@example.com