Accept more risk
SAFE Federal Credit Union, Sumter, S.C., is reaching out to the newly credit-impaired and is prepared to take on additional risk to meet members’ needs.
“We’ll continue to reach out to members whenever we have a loan promotion,” says Penny Pratt, senior vice president of lending and sales for the $806 million asset credit union.
“We tell them how much money they can save by moving loans to us,” she explains. “Periodically we have special low rates on car loans, and we preapprove members. It’s working extremely well: In only one month, we did $1.5 million in auto loans.”
Savings continue to flow in, and the credit union usually pays members bonus dividends and interest rebates.
“Now we’re giving back to members in the form of low loan rates,” says Pratt. “Last December, we offered 2.99% on consumer loans. We usually use risk-based lending, but for this one-month promotion we approved everyone who qualified at the base rate.”
Auto loans promise to remain strong in 2013.
“There’s pent-up demand, and Hurricane Sandy could be a factor, too,” says Pratt. “Mortgages also continue to do well, and we’re seeing more purchases while refinances taper off slightly.”
Personal loans will struggle a bit more.
“People are still in the mode of paying down debt,” Pratt says.
SAFE Federal’s delinquency and charge-off rates compare well to those of peer credit unions, Pratt notes.
“We’re a military-based, middle-market credit union with a conservative membership. We saw borrowers’ credit ratings remain steady through the recession and they’re starting to improve as the economy strengthens,” says Pratt.
She expects the credit union to have 7% or 8% loan growth in 2013.
“We made around $10 million in 2012 loan income, which was fantastic, and we hope it will be in the same ballpark this year.”
SAFE Federal’s members are very loyal, Pratt says, which enables the credit union to accept added credit risk.
“This gives us the chance to help the newly credit-impaired. I think a lot of credit unions could do the same,” Pratt says.