Economic news released over the past few weeks points to a strengthening national economy. Reports show household borrowing increased 9.9% in November and with the additionof 243,000 jobs in January, the unemployment rate has fallen to a three-year low of 8.3%. Iowa has fared better during the recession than other states. Its 5.7% unemployment beats the national average, and as of June 2011, Iowa credit unions havethe strongest asset growth (10.47%) of any state in the country.
When you look at states across the country, Iowa credit unions are generally doing better in terms of growth, earnings, and delinquency and charge offs, says Janet Lintin, CEO of Des Moines Police Officers Credit Union ($35.2M, Des Moines, IA). That being said, we’re doing a lot of things right.
We have tried to focus on where our members’ heads are with regard to financial services,Lintin says. Our members have responded by deepening their relationship with us.
The credit union’s membership growth is strong (12-month share growth is 9.31%), but it doesn’t wait for members to walk through the door looking for loans or other products. It pays careful attention to members who are buyingcars, and even if it advises them to finance with the dealer so they can take advantage of the rebates which it often does it follows up with a phone call and an offer to refinance at the credit union’s lower rate. As of fourthquarter, slightly more than 15.5% of the credit union’s loan portfolio consists of new autos, compared to 7.56% for Iowa credit unions and 10.08% for all U.S. credit unions.
In 2011, Des Moines Police Officers Credit Union launched its Free in Three credit card consolidation promotion that offered members a three-year loan at 5.49%. In addition to relying on its standard channels of promotion, it used its data processing system to identify and directly contact those members who would benefit. The program helped the credit union grow its unsecured loansegment more than 54%, and the term and rate on the Free in Three loans allowed the credit union to invest its funds for three years at a better rate than it could getthrough its investment vehicles.
The success of Free in Three was so strong, the credit union used that as a model for its Free and Clear mortgage promotion in late 2011.
We found many members had paid down their mortgages but wanted to refinance to take advantage of the lower rate environment, Lintin says. We had room to grow our mortgages,but because we hold them we did not want to introduce interest rate risk by putting long-term assets on the books at low rates.
The answer: A seven-year mortgage with a 3.49% rate, 70% loan-to-value, and $500 closing costs.
We were surprised to suddenly be doing business with some excellent members who wanted a lower rate but did not want to pay the high closing costs, says Lintin, referring to the transaction friction many homeowners face today. We put another $1 million of these loans on the books.
|12-Month First Mortgage Growth|
|Data as of December 31, 2011|
|Source: Callahan & Associates’ FirstLook.|
Free and clear is a win-win solution for the credit union and its members. And in 2012, Des Moines Police Officers Credit Union will continue to focus its attention on creating products thatare customizable to its member’s needs.
We’ve found through recent promotions that solutions sell better than products, Lintin says. I know this is not new thinking, but we sometimes let the product mix dictate the solutions and miss opportunities to help our membersand improve our bottom line.