Credit Unions stand strong: Lending activity takes business as usual approach

TRAVERSE CITY – You didn't read much about credit unions during the financial meltdown. That's because they weren't making much news. But now, the more conservative siblings to banking institutions are making headlines – for the money they stand ready to lend.

"If there is a silver lining in the current crisis it may well be that more consumers and small businesses have looked to credit unions," said Gary Moody, CEO of Credit Union ONE, which is headquartered in Ferndale, MI and has a Traverse City branch.

Credit Union ONE has 117,000 members and roughly $760 million in assets currently. It did not make subprime loans or hold investments in collateralized mortgage obligations, Moody said, but "we are not immune from what is happening in the marketplace."

He offers a more statewide perspective, as Credit Union One has 18 other branches in Metro-Detroit and Grand Rapids.

"The poor Michigan economy is impacting the credit union far more than anything on Wall Street, but we have taken prudent and appropriate measures to protect the credit union's assets and its members," he added.

Where it has seen significant growth, however, is in auto loans. The credit union is benefitting both from captive finance companies that have gotten out of auto lending and leasing and other companies and banks terminating their in-dealership finance relationships, Moody said.

Through October of this year, the Traverse City branch reported 19 new auto loans totaling $395,337 and 151 used auto loans worth nearly $1.7 million.

"We have been able to keep our rates relatively low and offer multiple-loan discounts for members which has resulted in strong growth in this area," said Moody.

Similarly, auto lending is one area where TBA Credit Union has seen considerable growth this year. Personal loans (of which auto is a part) had grown by eight percent through the 3rd quarter, according to President/CEO Karen Browne. Yet its entire loan portfolio had only grown by 3.8 percent.

"A big part of that is the indirect lending we do with a variety of dealerships and we have one very good vendor in town," said Browne. And, like Moody, she's seeing the effects of changes in auto leasing programs by car manufacturers.

TBA Credit Union has four branches in Traverse City and approximately 11,000 members. Its total assets at the end of the third quarter valued $119.5 million.

"Our deposits per member is higher than any credit union in the area," Browne said. She added that the credit union was fortunate to not have gotten into subprime lending and to have made wise investments.

Members Credit Union has between $7 and $8 million in new loans on the books compared to last year, said Dan Witkowski, president and CEO of Members for the last 12 years.

"We're growing, but certainly not at the same rate we were," Witkowski said.

Members Credit Union has seven branches in northern Michigan, over 47,000 members and total assets of approximately $170.2 million, according to its National Credit Union Association (NCUA) financial report through June 30. Annual asset growth had been increasing by seven or eight percent. This year Witkowski expects the increase to be about half that "because people have cut back."

Credit cards and car loans are "holding their own," Witkowski said, while mortgages are up three to four percent. As a member/owner institution, as all credit unions are, there is no interest in putting anyone in a bad deal, he said, adding that he was shocked at the extent of the subprime mortgage fallout.

All three credit unions we spoke to have seen a rise in foreclosures and other delinquencies.

"Our collections department is finding what's leading to delinquencies is divorce, often because of financial problems," Browne said. "And our bankruptcy filings are up, but still below peers in delinquencies and charge offs."

Witkowski and Browne said their branches fielded calls from members seeking reassurance during the height of economic uncertainty this fall but neither saw a surge in new membership.

"It's business as usual" for the most part, Witkowski said. He did say, however, that customers working for the automotive and construction industries are warranting a second look.

"We haven't made any policy changes, just attentive to the income and what the person has to pay back," Witkowski added.

For commercial loans, Credit Union ONE partners with a third party credit union service organization that works with commercial borrowers and both TBA and Members do very limited commercial lending.

"There is no doubt that the interest in credit unions has increased," said Moody. "With the turmoil on Wall Street and what seems to be a daily dose of bank failures around the country, I believe most average consumers are looking for safety."

"Where a lot of banks are struggling, we're strong," added Browne. BN