The U.S. macroeconomic climate has been strong throughout 2019. The economy has expanded for 22 consecutive quarters, the stock market has trended up for most of the year, the Dow Jones Industrial Average surpassed 28,000 for the first time ever in November, and unemployment is at a five-decade low.
Closer to home, credit unions kicked off the year with sluggish lending; however, the movement has rebounded in the second half of the year. In the third quarter alone, credit unions booked $52.9 billion in first mortgage originations. That’s up 39.7% from the same time one year ago.
Current strong loan growth and low delinquency make for a robust balance sheet. Moving forward, credit union strategies, monetary policy, and consumer confidence all will influence credit union lending in 2020. In the past year, CreditUnions.com has spotlighted interesting ways credit unions are strengthening relationships via loan products that meet members’ needs and build communities. Here are five.
Alternative Payday Programs
NorthCountry Federal Credit Union ($646.3M, Burlington, VT) began offering employer-sponsored small-dollar loans (ESSDLs) a dozen years ago as a way to help borrowers and their bosses alike.
Today, the Vermont cooperative has more than 40 private and public employers enrolled in its ESSDL program — what NorthCountry calls income advance loans — and encourages cooperatives everywhere to consider doing the same.
The idea is simple but powerful. Employers enroll in the program and then offer the loans as a benefit of employment, sometimes with loan reserves bolstered by company contributions. Learn more about income advance programs from NorthCountry, Manatee Community FCU ($33.0M, Bradenton, FL) and Day Air Credit Union ($413.0M, Kettering, OH) in “A Small But Mighty Response To Payday Lenders.”
All About Auto
Prices at the car dealership are on the rise, with the average monthly payment for a new car topping $500 and nearly reaching $400 for a used one, according to Experian. But when a borrower gets a bunk deal on an auto loan, they don’t have to stay in it. In fact, members at Pen Air Federal Credit Union ($1.5B, Pensacola, FL) have saved more than $4.4 million in three years through the credit union’s auto finance program that knocks off up to 2% from loans brought in from another lender.
The inspiration for the strategy arose from the realization that Pen Air saw a lot of A paper coming in from indirect lending. Borrowers in the lower tiers, however, were underrepresented and could benefit a great deal on a good rate.
Don’t start 2020 until you’ve caught up on the best success stories from 2019. Check out CreditUnions.com for our favorite pieces from the past 12 months.
“We decided to reach out to members in that B and C paper group,” says Pam Hatt, Pen Air’s vice president of marketing. “Any time you can save people money, reduce their stress, and enhance their lives, it’s good for everybody. It’s good for business and it’s the right thing to do as a credit union.”
Learn about the program’s terms, marketing, and more in “Pen Air Recaptures Its Way To Auto Loan Growth.”
Technology is transforming lending across credit unions, banks, and brokerages. Amazon has set the bar for intuitive, guided experiences, and members expect nothing less from a mortgage application.
Digital lending platforms are allowing lenders to evolve their experience in lockstep with consumer expectations and adopt new processes, tools, and technology that drive top-line growth. As a technology partner to more than 170 U.S. lenders, Blend has seen firsthand how financial institutions are deploying robust tech at scale and reaping promising results from the start. There is plenty credit unions can learn.
Learn more about digital lending platforms and the motivations behind investing in one in “What Credit Unions Can Learn About Digital Transformation From Top Banks,” sponsored by Blend.
Make The Most Of Microloans
In 2017, Lake Trust Credit Union ($1.9B, Brighton, MI) became the first credit union to be named Michigan lender of the year by the Small Business Administration. The cooperative has a healthy MBL portfolio and also offers business services such as checking, treasury services, credit cards, and commercial real estate lending.
Despite the array of services, leaders at the credit union knew Lake Trust could do more to serve area small business owners. So, in 2019, it moved into microlending, providing small loans and guidance to entrepreneurs who might otherwise risk their personal credit or simply stay on the sidelines.
Using a CDFI grant to bolster reserves, Lake Trust has loaned approximately $1 million across some 50 loans to a variety of businesses — including landscapers, photographers, plumbers, movers, pharmacists, and more — and supported local economic development in the process.
Read more in “Lake Trust Builds Big Dreams With Microloans.”
Product lineup and philosophical alignment alike make Vermont State Employees Credit Union ($819.5M, Montpelier, VT) a poster child for credit union environmentalisms. VSECU has a lineup of loans, savings products, and vendor and association partnerships organized under the VGreen label. The credit union offsets its own electricity use with an array of solar panels, and it’s a member of an international coalition of financial institutions committed to combating climate change.
“Our commitment to these principles of sustainability is an integral piece of our mission as a member-owned financial cooperative,” says CEO Rob Miller.
It’s also good business. Learn how in “VSECU Is All-In On Energy-Savings Lending.”
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