TNB Builds Credit Union's Credit Card Portfolio Since Purchasing it in 2003

DALLAS ? Making the decision to outsource its credit card program was easy for Lapeer County Community Credit Union, and in the two years since it sold the card portfolio to TNB Card Services, it has never regretted the decision.

Lapeer was one of the early programs purchased by TNB, which has now bought more than 60 card portfolios from credit unions. TNB announced today updated information about the Lapeer program’s performance since the southeastern Michigan credit union partnered with TNB Card Services in July 2003.

“When we closely analyzed the card program, we saw that credit cards were the lowest-yielding earning asset in our loan portfolio,” said Troy Garvin, CEO of Lapeer County Community Credit Union. “We have a pretty strong lending portfolio, so we knew we could take the premium and re-lend it. We decided to sell, because we just didn?t have the money to invest in the program ourselves.”

Lapeer selected TNB as the card portfolio buyer out of four companies courting the 21,000-member credit union. With nearly identical bids on the table, Lapeer selected TNB in part because it was felt TNB would take the best care of Lapeer members, and in part because TNB is owned and directed by credit unions.

Since the July 2003 transaction, Garvin said, it has been clear that the sale was the right decision for Lapeer.

“This move achieved exactly what it was designed to do,” he said. “We loaned all the money out within three months for home equity loans and other loans. Our loan to share ratio before this was around 70 percent, and now it is at 90 percent.”

TNB has built the portfolio in size and strength since acquiring it. In addition to offering low-rate rebate programs, Platinum cards, cash-back and bonus offers, and a wide range of credit card options, TNB actively markets to Lapeer members and gives them round-the-clock customer service.

“They’re doing the things we couldn’t do,” Garvin said. “We couldn’t compete with what’s out there, and couldn’t afford to put $50,000 a year or more into the program to try to build it. With what we could offer at the time, we were just getting the people who couldn?t get a card anywhere else.”

Since TNB took over the portfolio and implemented risk-based pricing, activity has shown marked improvement in low-risk accounts. Aggregate balances on those accounts have increased by 18 percent. Overall, 80 percent of all transactions come from the low-risk accounts. While maintaining balances on the purchased accounts, TNB has increased their overall yield. Finally, TNB has been able to improve the overall risk of the portfolio, boosting the average weighted FICO score to 692

“Lapeer is a great example of what a well run card program can do, whether it’s a credit union promoting its own cards or TNB managing the program for them,” said Glen Lee, first senior vice president of TNB Card Services. “The strategy is always the same. We put customer service as our first priority and build a credit union’s card program steadily and effectively, in number of cardholders, outstanding balances, and lowered overall risk.”