APPLETON, Wis.-Community First CU here takes relationships seriously-and that means rewarding for them.

"The thing we've come to understand about ourselves and who we are as a credit union is that, first and foremost, we are relationship-driven," explained CEO Cathie Tierney. "That sounds trite, because everybody likes to say it, but when you look at our (Raddon) scorecard, that's where it comes out."

Tierney's reference is to Community First CU being recognized in the most recent round of Raddon Financial Group's Crystal Performance Awards for CUs with $500 million or more in assets. Crystal Awards are based on a scorecard of various factors such as growth, income, efficiency and margin management.

Tierney told Credit Union Journal that the $1.8-billion asset credit union puts significant emphasis on finding ways to incent members to bring more business to the credit union, including discounts of up to one percentage point off of a loan rate.

"You get your best loan rate with us if you've got your checking account and direct deposit with us," she said "That's not earth shattering or anything really new, but we've done it for years and years, and we believe in it and it's manifested itself in our strong loan growth."

The credit union saw 7.37% loan growth in 2012-a strong showing, though short of what it had hoped for.

"Our goal for 2012 in terms of loans was 11%, but we like to shoot for the stars," said Tierney. "We're pretty aggressive. We were happy with 7.37%."

Community First is shooting for 10% loan growth in 2013, and Tierney said that the CU feels the economy has improved enough to make that a realistic goal.


Avoiding Indirect Lending

Community First achieved its loan growth without indirect lending, a strategy Tierney said CFCU dropped more than 10 years ago.

"It was always such an uncomfortable feeling-having to pay for the privilege of having the dealer write the paper to send the loan our way," she said. "You hear many times in this industry how many times those relationships never really turn into a relationship. Credit unions have tried for years to deepen those relationships without a lot of success; we just didn't want to do it anymore."

Rather than pay dealers 1% to write the loan, "we pay (members) 1% of the purchase price up to a maximum of $500," said Tierney. "We've offered that for many, many years, and that cost isn't much more than what my friends are paying the dealers. The benefit to me is that I've got the opportunity to build the relationship and sell the add-on products we offer as well-credit life, disability, gap, warranty-and those are up to 50% less than what someone will pay at the dealerships."

Tierney conceded that members do like the convenience of having the dealer write the loan, but said that Community First does a significant bit of recapture work, including sending out preapprovals to members who have just bought cars at the dealership and offering the 1% discount.


Headed For Higher Rates?

On the deposit side, deposit growth was at 11% in 2012, while overall assets were up 11.8%; it's net worth is a high 19.37%.

While Community First remains near the top of its market for deposit rates, Tierney said that a great deal of time at the annual meeting is devoted to making members "understand the nuts and bolts of how financial institutions make money ... and helping them to understand that when the credit union has excess funds, we don't have anywhere to go with them either. Does it help them understand? Maybe. Does it make a difference? Probably not."

Community First is now reviewing options for rewarding members who have direct deposit, checking or certificates for those relationships in a manner similar to those who are borrowers.

ROA in 2012 was 1.69%, while return on equity was at 15.5%. The credit union's loan-to-share ratio at the end of the year was at 81%, just shy of its 84% goal.

"We're very sensitive to matching deposit and loan growth," said Tierney. "We like to shoot for a 96% to 97% loan-to-share ratio, but in the last number of years we haven't seen that, because loan growth has been a bit more depressed. We want to honor our members by paying the best rates we can on the deposit side, but we don't want to set rates as such to where we're bringing in a lot of deposits if we don't have the wherewithal to loan it out."

Part of what has driven Community First's success in the last three years is a program aimed at saving members money in loan interest, which now stands at nearly $60 million. The goal for 2013 is to save members $43 million, which would bring the three-year total to $100 million.

That program is how the CU advertises most of its loans, and while Tierney said it has become bigger each year in the community, she conceded that it is could come to an end in the very near future.

"Once rates start to rise, I'm not sure what that world is going to look like for all of us in this business," said Tierney. "I worry that we're like the retail establishment that has sales every week, and they train people not to buy anything from them unless they have a sale."

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