EL SEGUNDO, Calif. -- Nate Smith has no fear that Continental Credit Union's consumer loan portfolio will suffer as members feel the pinch of an economic downturn.
"We're doing really well," said Smith, chief lending officer, acknowledging that, "every credit union has its seasonal cycles, of course."
Continental revamped it's lending philosophy last spring, and since then things have taken off. "We used to have a much more conservative approach. We had a tiered philosophy of A paper, at a 740 credit score and the joke became A or no. We shed tears over it but it wasn't what we wanted to do going forward. This is a credit union, after all."
Smith decentralized lending decisions to Continental's branches instead of keeping them at headquarters in El Segundo, which loosened things up a bit. "We found that the demand was still there and we've been kickin' it ever since," he said.
Signature, auto loans RV loans and ATV loans (at 5.7% for 10 years) have risen, and the CU's new Platinum credit card has been a roaring success as well. "So many of our members have told us, 'you always said no in the past,'" and that really showed us we we're on the wrong track. I mean, we had members of 25-years standing who didn't have a loan with us. That's hard to understand; in fact, it's amazing. But our turnaround has been equally amazing, and our members have responded. Today, everything we do is about member service. It's all our management considers whenever we think of a new product or service. It's like we've been reborn."
The CU started what Smith called a "viral marketing" campaign to make up for lost time and lending opportunities, offering a $150 bonus for every loan a member brought in. Business development managers were hired to visit airlines and as a result, membership has already increased 1,000 so far this year. "Now we look for a way to say yes to lower income members, too, as out tiered lending goes from A to E."
"How's this: our loan-to-share ratio is 63% (That is just slightly less than twice what it was in March 07). Our loans by general type are consumer at 55%, real estate at 28% and participations at 17%. I am allowing the participation loans to pay down while trying to increase consumer and real estate loans ratios. About 40% of our consumer loans are vehicles/recreational, new or used," Smith said. "We're adding a few million every month and continue to be in the black."
Continental released its platinum card at an introductory rate of 4.99% for transfers through May 2008, Smith said. The A limit is $50,000 at 8.99%, B is $40,000 at 10.99% and C is $30,000 at 13.99%. All the CU's old Visa Classic cardholders got an automatic conversion to the new card, which was sent out in early November and by month's end 350 applications had been processed and another 450 were waiting at the post office.
"It appears to be steamrolling along, and I'm very happy with the initial success. We'll probably do another balance transfer offer following the holidays, this time at 1.9% until the balance is paid off or maybe for a year. We're still working on that, but we have some time."
Smith noted that the last drop in the federal funds rate might signal another boost in lending, and he hoped the Federal Reserve would again lower it at the December meeting. "I think that if they do, then HELOCs will start popping again, so we'll do a promotion in the spring."
To accommodate it's members who live in Arizona, Continental will also promote boat loans. "From now on, we plan to be aggressive in our rates and give the fastest service we can to members who want to borrow to make their dreams come true," Smith said.
And the delinquency? "Oh, our delinquency is low. It's only 0.25%. I attribute that to our prior very conservative approach. But that wasn't really working for members. This new approach definitely is, and they are telling us how much they like it."