PITTSFIELD -- The Greylock Federal Credit Union rebounded strongly in 2012 posting a gain of $6.06 million in net income, according to the financial institution's annual report.
In 2011, the county's largest credit union's net income dropped $3.8 million, driven by an historic 2 percent drop in mortgage rates which affected the bottom line.
Although the prime rate is expected to remain at about that same level -- 3.25 percent -- for the time being, several changes in the marketplace, some spurred by the slowly recovering economy, contributed to Greylock's gain in 2012.
According to President and CEO Marilyn L. Sperling, Greylock spent $6 million less on dividends paid to its members in 2012, as a significant number of long-term certificate of deposits, or CDs, matured at a lower rate, placing $142 million in the credit union's coffers.
The interest rate was 5 percent when the CDs were sold, and 1 percent when they matured.
Paying less in dividends to members allowed Greylock to offset a $7 million drop in the amount of interest and fees on loans that it received in 2012, she said.
Although Greylock holds an 84 percent share of the county's auto loan market and a 30 percent share of the mortgage market, the credit union's total amount of loans dropped $69 million to $881 million in 2012.
"That interest expense contributed significantly to our bottom line," Sperling said.
Greylock saved money when it needed to budget $7 million less for loan losses in 2012. Sperling said borrowers are "starting to get back on their feet."
Greylock also made $4 million refinancing fixed-rate loans in 2012, compared to $1 million the year before.
"We actually made some good money in the refinancing of fixed-rate loans," she said.
Greylock's capital-to-asset ratio -- which measures whether a company has sufficient capital to support its assets -- increased by 1 percent in 2012 to 8.21 percent.
"Our cost of funds improved significantly," Sperling said. "Our loan volume continues to be strong, and generates income that generates other income for us. And borrowers are feeling less challenged then they did the previous year."
Despite the low interest rates, Sperling said the bounce back in Greylock's net income did not come as surprise.
"We did expect it because the forecast kept being pushed out," she said. "One thing that we really focused on in 2012 were ways to make us more efficient in terms of the variety of our purchases. We've been encouraging online banking, because paper statements are a cost to us."
She doesn't expect another dip in Greylock's finances in 2013. The credit union currently has $111 million in reserve for potential economic downturns.
"We expect another good year this year," Sperling said. "We needed to work through the challenges with our borrowers. There's still some challenges ahead. Some families are still struggling out there."
On the flip side, Greylock's total assets dropped some $400,000 in 2012 to $1.13 billion. Sperling attributed the decrease to the credit union's decision to sell its credit card partnership with a third-party vendor, an expense that cost Greylock $43 million in 2011.
Greylock also refinanced $136 million of mortgages in 2012. Every member who refinances into a fixed-rate mortgage represents an asset that comes off the credit union's books, Sperling said.
Greylock set a membership record with 70,843 member/owners in 2011, but that number dropped by 589 members in 2012.
Although the reduction was small, it was the first time in four years that Greylock had experienced a membership decline.
Sperling said Greylock performed "data cleanup" in 2012, by removing some long-term memberships that were "essentially dormant."
But of the 2,600 new memberships that Greylock did receive in 2012, around 1,200 were county residents under the age of 25.
"That's the group that we want to get," Sperling said, "the youths and younger working people."
To reach Tony Dobrowolski:
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