ARLINGTON, Va. – Depending on how deeply you count and what you use as sources, at least 80 credit unions sold their credit card portfolios in 2003, double the number that sold in 2002. But under the spur of those sales, the credit union card industry has begun to step up to the plate with greater services, training and research to help credit unions better manage and retain what credit union card advocates assert remains a highly valuable asset. As a result, the conversation around card portfolio sales has begun to change. Where 12 to 18 months ago the discussion centered on the controversy of whether or not to sell the portfolios, the new conversation seeks to answer the question how a credit union might best manage its credit card accounts, and in that conversation portfolio sales are but one of the options credit unions might consider. "I think it's definitely true that many more credit unions recognize that they have to manage their card portfolios and can't just ignore them," said Glen Lee, a senior vice president with TNB Card Services, a subsidiary of the credit union owned Town North Bank, headquartered in Dallas. Lee reported that his firm had purchased 18 card portfolios last year and started another 10 in agent relationships. But he reported TNB had seen a strong rise in interest among its 400 client credit unions in getting the firm's help in analytical and card management services. TNB offers a range from so-called full service account management to out and out agent relationships, Lee said, and the firm is seeing more credit unions looking for help somewhere along that spectrum. The portfolio sale as a management option message came across in a breakfast information session at CUNA's GAC offered by Asset Exchange, a leading broker of credit union card portfolios that is headquartered in Portland, Oregon. Although the firm acknowledges that it has an interest in credit unions selling portfolios, it has also maintained that selling a portfolio is not always the best option for a credit union. Asset Exchange panel participants included two executives from credit unions that had sold their card portfolios to Atlanta-based InfiCorp and an executive from a credit union that had not. It also included a representative from MasterCard Advisors, a new branch of the card association which is dedicated to helping card issuers, for a fee, improve their card account management and get better results from their portfolio. The participants were not told who had bought the portfolios during the event to avoid the appearance that any one purchaser's program was being endorsed, and the stories of all three of the executives highlighted why these card management situations cannot be treated in a standardized way. The $132 million Midwest United Credit Union, headquartered in Blue Springs, Missouri, had found itself with a portfolio whose quality had begun to deteriorate. There had been rising delinquencies and some charge offs due to bankruptcy, along with cardholders opting for other card issuer's cards. After an analysis of what it would take to make the portfolio profitable, CEO Pat Yokley explained that the board had decided that the resources that would be needed could be better deployed in other products that were more central to the credit union's services. "We considered that our money and time could be better spent elsewhere," Yokley told the meeting and had opted to partner with the portfolio buyer. Midwest's experience pointed to a calculation many credit unions may have to make in regard to their card programs in the months and years ahead. Essentially, even if a card program is growing and healthy, the likelihood is that it may continue to play a decreasing role in a credit union's overall loan portfolio because it will not have grown as fast as other loan categories. Secured lending in real estate and autos in September 2003 stood at 84% of total credit union loan portfolios, according to NCUA data, but credit card loans stood at only 6%. When a card portfolio makes up only a small part of a credit union's overall loan portfolio, it may be difficult to justify spending a great deal of marketing or other resources on it. The $604 million Financial Partners Credit Union, headquartered in Downey, California, had a somewhat similar situation with some differences as well. While the portfolio was still performing, the credit union was facing a new, primarily Hispanic field of membership as well as taking on more student members. Orlandus Waters, senior vice president of business development for the credit union explained that the credit union felt it lacked the resources to meet the new marketing challenge on its own, but it definitely wanted to keep offering cards to the new potential members. So the credit union had negotiated a partnership deal that allowed it to still have a role in the marketing of the cards and helped it continue offering the new members what the credit union believed was a key financial service. "Their first card marketing budget of $800,000," Waters noted, "was as much as my entire marketing budget for all my products." Since then the credit union has put its marketing resources into other product and service lines, Waters reported, that have also helped it reach out to the potential new members. But David Osborn, CEO with the $659 million Anheuser-Busch Employees Credit Union reported that his credit union started a Platinum card program that was so successful none of the potential buyers could offer the credit union what the portfolio was really worth. The CU kept it and has seen its new accounts grow, balances surge, and income jump from $1.3 million to $2 million per year. But Osborn stressed that it would not be enough just to keep the card in a corner of the credit union's newsletter, it needed to be managed. The credit union had laid out $35,000 in card marketing, as well as started relationship pricing and had taken other steps to make sure the card program was integrated into the credit union's operations. The executives agreed that a credit card program could be a key element of their CUs' portfolio of services and products, but whether it was sold or not, it could not continue to be managed passively. -

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