EL SEGUNDO, Calif. — Nate Smith has no fear that ContinentalCredit Union's consumer loan portfolio will suffer as members feelthe pinch of an economic downturn.

“We're doing really well,” said Smith, chief lending officer,acknowledging that, “every credit union has its seasonal cycles, ofcourse.”

Continental revamped it's lending philosophy last spring, andsince then things have taken off. “We used to have a much moreconservative approach. We had a tiered philosophy of A paper, at a740 credit score and the joke became A or no. We shed tears over itbut it wasn't what we wanted to do going forward. This is a creditunion, after all.”

Smith decentralized lending decisions to Continental's branchesinstead of keeping them at headquarters in El Segundo, whichloosened things up a bit. “We found that the demand was still thereand we've been kickin' it ever since,” he said.

Signature, auto loans RV loans and ATV loans (at 5.7% for 10years) have risen, and the CU's new Platinum credit card has been aroaring success as well. “So many of our members have told us, 'youalways said no in the past,'” and that really showed us we we're onthe wrong track. I mean, we had members of 25-years standing whodidn't have a loan with us. That's hard to understand; in fact,it's amazing. But our turnaround has been equally amazing, and ourmembers have responded. Today, everything we do is about memberservice. It's all our management considers whenever we think of anew product or service. It's like we've been reborn.”

The CU started what Smith called a “viral marketing” campaign tomake up for lost time and lending opportunities, offering a $150bonus for every loan a member brought in. Business developmentmanagers were hired to visit airlines and as a result, membershiphas already increased 1,000 so far this year. “Now we look for away to say yes to lower income members, too, as out tiered lendinggoes from A to E.”

“How's this: our loan-to-share ratio is 63% (That is justslightly less than twice what it was in March 07). Our loans bygeneral type are consumer at 55%, real estate at 28% andparticipations at 17%. I am allowing the participation loans to paydown while trying to increase consumer and real estate loansratios. About 40% of our consumer loans are vehicles/recreational,new or used,” Smith said. “We're adding a few million every monthand continue to be in the black.”

Continental released its platinum card at an introductory rateof 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 at13.99%. All the CU's old Visa Classic cardholders got an automaticconversion to the new card, which was sent out in early Novemberand by month's end 350 applications had been processed and another450 were waiting at the post office.

“It appears to be steamrolling along, and I'm very happy withthe initial success. We'll probably do another balance transferoffer following the holidays, this time at 1.9% until the balanceis paid off or maybe for a year. We're still working on that, butwe have some time.”

Smith noted that the last drop in the federal funds rate mightsignal another boost in lending, and he hoped the Federal Reservewould again lower it at the December meeting. “I think that if theydo, then HELOCs will start popping again, so we'll do a promotionin the spring.”

To accommodate it's members who live in Arizona, Continentalwill also promote boat loans. “From now on, we plan to beaggressive in our rates and give the fastest service we can tomembers who want to borrow to make their dreams come true,” Smithsaid.

And the delinquency? “Oh, our delinquency is low. It's only0.25%. I attribute that to our prior very conservative approach.But that wasn't really working for members. This new approachdefinitely is, and they are telling us how much they like it.”