Show Aggression In Tepid Economy

Tom Dorety, president and CEO of Suncoast Schools Credit Union, and Frank Pollack, president and CEO of Pentagon Federal Credit Union, reflect on 2011 accomplishments and 2012 goals.

Two credit union executives say they see an opportunity for loan growth in the year ahead, despite economic predictions that the national economy will be slow to recover.

We think there is huge opportunity in the mortgage market and we’re trying to stage into that, says Frank Pollack, president and CEO of Pentagon Federal Credit Union ($15.1B, Alexandria, VA), which recently purchased a large real estate firm. We are a big mortgage lenderFor us, this is a long-term strategy and we’re looking to the next year.

Pollack joined Tom Dorety, president and CEO of Suncoast Schools Federal Credit Union ($4.9M, Tampa, FL) and Dwight Johnston of Dwight Johnston Economics on Feb.9 for a roundtable discussion with Callahan & Associates on the future of the national economy and its impact on credit unions.

Johnston said he expected 2012’s economic recovery to be weaker than the general consensus among economists as the crisis in Europe affects U.S. markets later in the year, and as oil prices and slow job growth hamper a boom recovery. Clearly for most consumers it doesn’t feel like much of a recovery, especially with their paychecks not going up, Johnston says. We’ll have an OK recovery going, and it could stay thatway, but jobs could be a big road block.

But Dorety says his Florida market, including the Tampa Bay and Fort Myers areas, shows no signs of an economic struggle. On the contrary, Florida, which was hit hard by the foreclosure crisis, has recently begun to reverse its housing market declineand both its tourism sector and health care sector are thriving. The state’s west coast is welcoming job growth and the cost of owning a new home is now on par with the cost to rent, making home buying more attractive. The positive economicenvironment helped Suncoast Schools FCU score a positive ROA of .4% in 2011 after three consecutive years of negative returns.

The most significant thing we accomplished here was changing the mindset of this organization from defensive survival mode to a more strategic planning for the future,Dorety says. We started aggressively going after the mortgage market in the third quarter, and we’ve reaped significant benefit.

Suncoast Schools FCU reported a net income of $21.4 million for 2011, up from -$29.9 million in 2010, -$77.0 million in 2009 and -$76.7 million in 2008, according to Callahan & Associates’ Peer-to-Peer data. Pre-recession, Suncoast Schools reported a net income of $56.5 million in 2006.

Source: Callahan & Associates’ Peer-to-Peer software

The credit union this year is planning to shore up even more checking accounts, which exploded in the wake of Bank Transfer Day,add more credit card accounts, and aggressively target a younger demographic, Dorety says. We are in a remarkable position we’re going to be able to steal business, Dorety says.

Pentagon FCU has also reported a strong 2011 with its highest loan volume ever with 142,000 loans totaling $8.4 billion, up 14.2% from the $7.4 billion in loans granted in 2010. The majorityof the credit union’s loan portfolio is first mortgages, which comprised 52.9% of the total loan volume and which are driven by its 5/5 ARM product.Auto loans comprise 17.2% of the portfolio and >credit cards, 11.3%.

Source: Callahan & Associates’Peer-to-Peer software

All of us have to be a lot more aggressive about growing than we ever have been in the past, Pollack says. We’re not trying to growth the balance sheet aggressively. We’re more focused on loan origination than balance sheet growth.

Chip Filson, former CEO of Callahan & Associates, called 2012 an inflection point for credit unions as they can redesign a uniquely cooperative system not only for members but for the general public. How will we respond to this opportunity?

May 23, 2014

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