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Credit Unions Making More Loans, Adding Members
YOUNGSTOWN, Ohio -- Not only are credit unions in the Mahoning and Shenango valleys making more loans, predominantly auto financing, their members are building their savings accounts. Credit unions also report their credit quality is improving and that they’re adding new members, as they call their customers.
This reflects the findings of the National Credit Union Administration, the federal agency that regulates almost all of the 6,560 credit unions in the United States. Federal charters are held by 4,029 credit unions and 2,400 of the 2,531 with state charters are federally insured.
In its second-quarter report issued last month, the agency found that credit unions across the United States saw a 9.8% increase in their loans outstanding during the 12 months ended June 30 – double the 4.9% increase the Federal Deposit Insurance Corp. reported for banks.
The Ohio Credit Union League, the trade association for credit unions in the Buckeye State, says its membership saw loan growth of 7.43% during the same 12-months, and asset growth of 2.48% compared to all U.S. credit unions’ 4.45% rate.
As interest rates have started to rise, mortgage origination lending dropped 37.6% the first half of the year among all credit unions, the Ohio Credit Union League reports, but that drop was a less precipitous 18.3% in Ohio, credit unions here originating $930.4 million in residential loans the first six months.
As of June 30, Ohio credit unions had originated $2.5 billion in consumer loans this year, up $181.4 million from fist-half 2013 figures, most of this year’s lending going to the purchase of new and used vehicles.
At the Seven Seventeen Credit Union, Warren, its lending manager, Vice President Darlene S. Cesta, reports it originated $176.5 million in all loans last year and is on track to make more than $200 million in new loans this year.
Michael Kurish, president and CEO of the Associated School Employees Credit Union, Austintown, is encouraged that its members are financing the construction and purchase of houses more than refinancing mortgages, as was the case last year, and taking out larger loans to finance vehicle purchases.
At First Choice Credit Union in Niles, President and CEO Marc Mucroski reports his members are saving more and borrowing more, most of the funds lent used to finance the purchases of vehicles and, to a much lesser degree, student loans.
The strong growth in savings was something of a surprise, Mucroski admits, but says it speaks well of his members repaying or paying down their debts and building their savings accounts.
In New Castle, Pa., the CEO of GNC Credit Union, Dianna Cecchini, says its loan portfolio is $2 million higher this year than it was a year ago. GNC has assets (which consist mostly of loans) of $72 million.
Cecchini also reports satisfaction with the volume of business at its office in Neshannock Township, opened two months ago, where staff have “opened more than 50 new accounts” and relieved some of the volume from the main office in downtown New Castle.
Some of the growth in membership, Cecchini posits, results from “banks outfeeing themselves,” that is, the charges they impose on their customers to use their services, such as using a foreign ATM. “They’ll charge $3, $3.50,” she says. “Ours is only $1.50.” GNC has five ATMs in Lawrence County.
Members of GNC are borrowing “basically to finance cars,” Cecchini continues, “although we have seen an increase in home-equity lending.”
GNC is financing “more used cars than new” and members are borrowing for five- and six- year terms more than three- or four-year terms, she says, even though the longer-term loans carry a higher rate of interest.
Slightly more of vehicles they buy have U.S. nameplates than foreign, “but it’s close.”
First Choice has grown both organically and through acquisition, Mucroski relates. When the Ball Credit Union in Hubbard was merged, First Choice added nearly $1.8 million in assets and took its membership above 4,000.
The bulk of its lending has been to finance vehicles, trucks and SUVs more than cars, an indicator that people have more confidence in the economy, Mucroski observes. Most of the cars and trucks First Choice finances are “American-built,” he says, “mostly Fords and Chevies like the Equinox.”
He remarked on his members who took advantage of buying Fords through Ford Motor Credit Co. Ford Credit had an incentive program that allowed its customers to pay no interest the first three months. “Then they came to us and refinanced,” he reports.
Seven Seventeen’s Cesta says members of her credit union sense the economy is improving, which has led to them buying houses and taking out larger car loans. The credit union lends indirectly through 150 dealers in the region.
Where in 2013, Seven Seventeen booked $49 million in used-car loans and $11.8 million for new cars, that has narrowed. So far this year, the credit union has booked $45 million in used-car loans and $13 million for new cars and trucks.
Most mortgages extended have been for existing houses, “although we have a few construction loans going on,” Cesta says.
Cesta makes it a point to note that veterans who served in Iraq and Afghanistan have not taken advantage of Veterans Administration loans that allow them to buy a house with no down payment.
“It’s widely underutilized,” she states. “The veterans have earned this. We’ve made an effort to get the word out, that they’re eligible and there’s no expiration date.”
Most of the mortgages Seven Seventeen originates are “single-family houses in Trumbull County,” relates real estate lending manager Mark R. Senkowitz, “but we’re increasing in Mahoning County.”
Most borrowers come up with the 20% down payment needed to avoid private mortgage insurance, he says, but “some put down as little as 5%,” the minimum unless a member avails himself of a Federal Housing Administration loan that allows 3.5% or is a veteran.
Most mortgages are fixed-rate loans with 30-year terms that finance between $90,000 and $100,000.
The size of Seven Seventeen, more than $800 million in assets, allows it to support a dedicated commercial lending unit headed by Vice President Brett Carnahan. Loans year-to-date are 12% above the $59 million commercial portfolio at Dec. 31, he reports.
“It’s been a very good season for us,” Carnahan begins. We’re making new loans, some commercial construction loans, some equipment, some specialized equipment, some real estate.
“We’re a partner with MVEDC [Mahoning Valley Economic Development Corp.] where we’ve got a couple of [Small Business Administration] 504 loans in the hopper.”
ASECU, with $145 million in assets and 17,500 members, also engages in indirect auto lending.
Kurish is disappointed when he sees a member drive his new car into the credit union parking lot and learns from the driver he leased the vehicle rather than secure financing through the credit union.
That number has been rising, Kurish says. “It does give us pause and I’m thinking of sitting down again with our directors about offering leasing.”
The last time Kurish and the directors explored leasing, “We looked at it and decided not to,” he says.
Seven Seventeen does not engage in car leasing either.
Indicators the economy is continuing to recover, Kurish says, are the larger sums borrowed to finance vehicle purchases. “The average loan has increased to $12,000, up from $10,500,” he says. “And the bigger vehicles are selling better, SUVs especially.”
The terms members want to repay have increased as well. “They’re more comfortable with a longer term because cars last longer,” he says. “We’ll go out six and seven years” although most car loans are for between three and five years.
Kurish is encouraged by the growth ASECU has enjoyed. “We’ve increased our membership despite the population [in the Mahoning Valley] dropping,” he says. But he won’t allow himself to become complacent.
Kurish cites banks that lack brick-and-mortar branch networks such as Ally Bank, new electronic payment systems that compete with credit unions’ home banking services, and Walmart offering a flat-fee checking account. All pose threats he doesn’t take lightly.
Editor's Note: Today is International Credit Union Day.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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