As more big banks say “no” to the growing number of small business owners who need loans, credit unions continue to say “yes.”
Recently, the League of Southeastern Credit Unions (LSCU) reported that credit unions in Alabama and Florida experienced their best financial year on record in many years, including significant member business loan (MBL) growth.
For the first three quarters in 2012, the credit unions in LSCU’s footprint collectively added 165,000 new members this year. Both states have a record number of members – 4.7 million in Florida and 1.83 million in Alabama.
Both asset growth and net-worth ratios have also been remarkable with credit unions jointly adding $3 billion in assets during the first three quarters alone. The net-worth ratio for Alabama credit unions stands at 11% and Florida credit unions are marking a 10% net-worth ratio for the first time in four years. LSCU notes that a financial institution is considered well capitalized with a net worth ratio of seven percent.
Among the growth numbers is also a noteworthy climb in the area of member business loans (MBLs).
Florida has grown its MBLs 7.9% during three quarters of 2012, while Alabama has grown its MBLs 7.6%. LSCU reports that growth numbers also represents a 5% plus increase in MBL growth over 2011.
“Overall you can see that 2012 is on pace to be the best year that credit unions in Alabama and Florida have had since the financial crisis hit in 2007,” Patrick La Pine, League of Southeastern Credit Unions President/CEO said in a press release. “A number of factors are contributing to it, including an improving economy, a greater awareness of the benefits of being a credit union member, the LSCU Cooperative Image Campaign, and the great marketing being done by individual credit unions.”
Steve Swofford, CEO of Alabama Credit Union ($550 million Tuscaloosa, AL) says that his credit union has experienced a highly productive year in the area of member business loans. “We’ve had significant member business loan growth in 2012 and a very good year from a lending standpoint in general. With regard to member business loan growth, some of it has to do with the fact that clearly some of the banks have backed off from small business lending.”
Although Alabama Credit Union has offered MBLs for at least eight years, Swofford says that the credit union has been beefing up its portfolio over the past two to three years. “We recently hired a seasoned business lending professional from a local bank who came to us with lots of contacts.”
Swofford adds that overall loan growth to date through September was at 10% and asset growth at 17%. Kelley Jones Marketing Coordinator explains that strong member service is driving more business to the credit union. “While Bank Transfer Day helped to generate many new memberships, we’ve been aggressively pursuing member growth through our marketing strategy for the past three years.”
She says that a strategic onboarding program has helped to transform many new members into new credit union borrowers as well.
Considerable growth is also occurring at Pen Air Federal Credit Union ($1.2 billion, Pensacola FL). Patricia M. Veal, VP/Marketing reports that assets have grown 7%, loans are at 8% and net new membership growth is at 6%. “We are doing very well in our peer group for financial institutions.”
Veal explains that despite a tight economy, the average consumer has realized that life must go on, but in a smarter way. “Repairs to homes must still happen to protect equity, children need an education, medical needs still happen, cars eventually have to be replaced, etc, but the consumer spending habit is becoming wiser, and consumers are comparing their options.”
“This is great for the credit union movement, which advocated savings,” Veal continues. “I believe the last statistic I saw showed that credit unions save the average consumer $400 a year. Consumers are becoming more aware of the advantages of credit unions as a good value and safe choice.”
While Veal reports that Pen Air is near its MBL cap, Alabama Credit Union still has room to grow. “We would love to see the regulatory cap changed because there is so much more potential out there in good member business loans,” Veal says.
Swofford states that he is at 3% or 4% of the cap and is looking forward to a fruitful year. “We will continue to focus on growing loans and our business lending program in 2013. Our strategy is to deepen relationships and overall penetration through word of mouth and referrals.”By Gina Ragusa