Army Navy FCU grows by being 'lender of choice'

CORPUS CHRISTI, Texas (3/27/09)--Army Navy FCU has built its growth model based on being able to lend money and becoming the "lender of choice" in the area it serves.

The $780 million asset, Corpus Christi-based credit union experienced 11% membership growth in 2008. It usually grows more than 10% each year, Wayne Vann, Army Navy CEO, told News Now.

Army Navy has been a community credit union since 2003 and serves a six-county area with a population of about 400,000. In January 2003, the credit union had about 40,000 members. Today, it has more than 68,000.

The population of Corpus Christi and the surrounding area is nearly 70% Hispanic--not first generation, but an established Hispanic population, Vann said.

"Corpus Christi is one of the weakest credit areas in the nation with an average FICO (financing corporation) score of 578," Vann said. "To serve those people we have decentralized loan approval, versus the usual centralized approval process at most credit unions. We have more than 40 lenders at our 10 branches. We decentralized it, because with a centralized process most of our members wouldn't make the cut.

"All our growth revolves around our ability to lend money," he added. "Our loan to-share percentage is 92% to 97% generally. We try to stay north of 90%."

About 50% of Army Navy's loans consist of C-paper (600 to 639 FICO scores) and D- paper (below 600 FICO scores). The credit union's A-paper consists of FICO scores of 680 and above, and its B-paper is in a FICO score range of 640 to 679.

"We have to build a model that will fit our audience," Vann said. "Our growth philosophy is based on building relationships."

Army Navy uses five rungs to establish a lending ladder with members: capacity, stability, relationship, credit score and collateral.

"We look at a member's capacity to make loan payments; are they stable in terms of having a job; our relationship with the member--consisting of how many deposits and services they have with us--how well we know them; and their FICO score," Vann explained. "So based on the first four rungs, we decide whether to give out a loan. We look at the collateral piece last."

About 55% of all the credit union's loans are automobile loans. Of that, 60% are for used cars and 40% are for new ones. "Because our members have mostly low- to moderate- incomes and marginal credit, they mostly buy used cars," Vann explained.

About 35% of the credit union's loan portfolio is real estate, he added.

Although Army Navy does a lot of print and media advertising, its biggest source of business is referrals. "Once referrals start, then there is some pressure on the referring persons to make their loan payments and maintain good credit," Vann said.

Many Hispanics refer family members and "throw out a wide net" with referrals because often times they cannot obtain loans at other financial institutions, Vann said.

As for the future, "there is plenty of business out there and it all revolves around relationships," Vann said.

"Most of our employees start as tellers and learn their knowledge base internally," he added. "We're service-oriented and listen to our members to see if we can make the service fit somehow in term of their needs.

"We've built this whole [growth] model off of being able to loan money. We're known in this area as the lender of choice. You need a stomach for risk and need to know your audience. Then you train your staff appropriately," he concluded.

courtesy of cuna.org