FORT WORTH, Texas-Fort Worth Community CU's decision to take its indirect auto lending program in-house-and to hire a finance person away from a local dealer-has helped fuel 25% loan growth year over year.
The $777-million credit union closed 2011 with a $505 million loan portfolio, up from $404 million one year earlier, and up significantly from $358 million.
"Our indirect auto lending has been improving over the last three years," SVP-lending Kyle Koke told Credit Union Journal. "We actually were in another program for 10 years, but once we brought it in-house it has taken off. We have our own underwriter and a marketing person that contacts dealerships on a daily basis. We now have improved control, the underwriting is better and we have better relationships with the dealers, so it is a win-win situation with everybody."
According to Koke, the vast majority of FWCCU's loan growth has been in indirect auto lending, driven by increased car sales over the past 18 months.
Like others, Fort Worth Community has a lot of competition for auto loans, he continued, including the captives, banks and other credit unions.
Loan Officers Have Flexibility
"Real estate lending is tough, so everybody is fighting for these car loans," he reported.
"We give our loan officers the ability to make decisions. Rate sheets are just a starting point. Our loan officers can negotiate and can match a competitor's rate to get the business. We make decisions based on good business, but their hands are not tied. We tell the dealerships if our rate is 2.5% and they are getting 2.35%, don't think we are out of the deal, just give us a call."
Another contributing factor to Fort Worth Community's success: it hired an ex-finance director from a dealership to handle marketing for the indirect program. Koke said this person "knows how the dealerships think, and knows the lingo," and therefore is able to tell the dealers the CU is ready to do "whatever it takes."
"The dealers want a quick answer and they want their money the next day. So if you break it down to that degree, that is what they are looking for," he said.
In 2011 Fort Worth Community had more than $4.5 million in net income prior to assessments. It paid nearly $1.6 million to the Corporate Stabilization Fund, leaving it with $2.9 million in net income. Its net worth ratio as of Dec. 31 was 9.15% ("well capitalized").
In the first quarter of 2012 it had $694,173 in net income. Its net worth ratio was 9.01% ("well capitalized"). Its 5300 Report listed 42,000 loans for $531.2 million.
'Good At One Thing'
Koke said FWCCU does not do a lot of real estate lending because interest rates are so low. It does "some" home equity loans, but not much in first mortgages.
"We are trying to get good at one thing and that is paying off well for us," he said. "We don't do business lending. We will keep going after the car business, plus some signature loans and credit cards. Promotions are great every now and then, but we plan to just keep working with the dealerships and building our indirect auto lending business."
Delinquencies are at 0.25% for the whole portfolio, with delinquencies on indirect loans at just 0.1%, Koke said. The credit union mostly looks for A and B paper, but is willing to "stretch a little bit for C every now and then" if it knows the member.
"We are having success and hope it stays that way. We are looking forward to the future."