January 2009 - Feature
Credit Unions on the Move
By Gregory Arroyo
GA: Would it be accurate to say that credit unions view today’s crisis as an opportunity to gain market share?
TB: I think so. Looking at the numbers, credit unions represented 14.7 percent of all auto loans in the first quarter. By October we were at 21.6 percent. A six-point market increase over seven to eight months is significant.
The increase in market share has not come without challenges, however. As a California-based company, we’re seeing first hand the effects of the economic crisis. But we’re starting see some positive steps taken by credit unions in the state. Nevada and Arizona are also very challenging states. Where we’ve picked up momentum is in Texas and the Northwest. We’ve also signed some big credit unions in the Northeast.
GA: How can they be so active?
TB: Credit unions are definitely performing much better than other financial institutions right now, but there are some credit unions that are doing extremely well and some that are more challenged. It’s partially due to the geographic regions they’re in, especially if they are in an area hit hard by the subprime mortgage debacle.
Remember, credit unions haven’t typically been active in subprime lending or leasing, which is why they remain active today. Some credit unions did have members who took out subprime loans with other institutions. When those customers default on those loans, many times they default on their credit union loans too.
GA: Will liquidity be a problem for credit unions going forward?
TB: Well, four out of our top five lenders are 100 percent lent out. They’re borrowing money to lend, so I think there’s definitely a challenge with how much more volume they can pick up. However, the industry as a whole has approximately $100 billion in liquidity.