By Ray Birch
HUNTSVILLE, Ala.—One credit union didn’t really believe tractor loans were much of a business line—then it got a “billion-dollar” wakeup call.
Redstone FCU has now answered that call by forming a unique partnership with Rural King, which has been described as America’s fastest-growing privately owned farm and home store. The collaboration allows Rural King customers to become Redstone members when they apply for equipment loans and credit cards through Redstone. In addition, the collaboration also includes a shared branching relationship.
The arrangement, which began in the second quarter of 2019, may eventually lead to huge annual loan volume for the $5.1-billion credit union, according to CEO Joe Newberry.
“I expect this partnership with Rural King to bring Redstone close to a billion dollars annually in loans when it’s all over with,” he said.
The loans will be more than for just tractors, as Rural King stores sell a wide range of farming equipment, including ATVs.
“It's a huge, huge store, like a Walmart and Tractor Supply on steroids,” said Newberry. “They have great prices compared to anybody else in many rural areas. They are also the fourth-largest battery supplier in the country. They are a very good deal and a great resource for people who live in rural areas that normally don’t have a lot of choices on where to shop.”
Membership Booster
Joe Newberry
Newberry said the arrangement will not only increase business for the Redstone Credit Union, it will also boost membership.
Rural King customers who obtain a complimentary membership to the Association of the United States Army (AUSA) Redstone Huntsville Chapter become eligible for Redstone membership, regardless of where they live. Newberry said the SEG-based CU added AUSA to its field of membership with the thinking that Rural King customers would be “proud” to join the association. AUSA is a private, non-profit organization that acts primarily as an advocacy group for the United States Army.
“I've never been really concerned about increasing our field of membership, but what I've always been concerned about is adding value to our members, wherever they may be,” Newberry said. “If we can do that then we've got a business proposition I think will carry us far into the future. This arrangement with Rural King helps us produce more net income to allow us to give more back to our members.”
Newberry said Redstone’s CPA firm, which works with many CUs across the country, said they haven't seen a similar partnership.
More Than 100 Stores
Rural King has more than 100 stores in 13 states. The collaboration includes shared branching, which was introduced as part of this effort, Newberry said, to give new Redstone members outside of Huntsville greater access to the credit union.
Newberry admitted he didn’t initially think a partnership with a rural, farming equipment store would provide such a benefit to the credit union and its membership. He said he initially told Rural King’s lawyer, who presented the deal to Redstone, that the credit union has done very little with tractor loans and farm equipment loans, saying he could only remember Redstone ever doing three tractor loans.
“He told me Rural King was looking to partner with a credit union in a big way, but I said I was not interested,” recalled Newberry. “But Rural King got back to us and said they didn’t think we could handle all the business they would bring us.”
The Conversation Grows
So Newberry met with Rural King “and we had a good conversation,” said Newberry, who added he learned a lot about the store and its culture in that first meeting. “The conversation started out about tractor loans, and then it turned toward many other things, like lawnmowers and an affinity card. Members can get 5% cash back at Rural King locations and 1.5% back everywhere else.”
Rural King, whose closest store to a Redstone location is approximately 40 miles away, has begun building a store in Huntsville, where the credit union is headquartered. Newberry said if things go as planned, the credit union will explore adding branches in some Rural King store areas.
The agreement has also led to Redstone improving its processes—internal and member-facing—to handle the additional volume, Newberry said.
“We have sort of stepped outside the box with this. For example, we had to figure out how to open up a credit card in less than eight minutes. We had to figure out if all these members would be able to transact their business with shared branching. It is a huge project we put 70 people on,” explained Newberry.
It’s gone very well so far, added Newberry.
Expansion Plans
“Since we start doing the equipment loans in May of 2019, we have approved and funded about 25,000 credit cards so far,” said Newberry, who believes that number will hit 100,000 by the close of 2020. Newberry said Redstone’s rates are lower than what consumers can get elsewhere for farming equipment and supplies: tractors, 36 months at 5.99%; ATVs, 36 months at 5.99% to 7.67%, and lawnmowers, 24 months at 7.99% – 12.58%.
Rural America needs a store like Rural King, said Newberry, who repeated the relationship represents big business for the 464,000-member Redstone.
“Yes, this could lead to more expansion for Redstone if it continues to go well,” said Newberry, who explained that if the CU does add locations near more Rural King stores it will likely first do so with smaller, limited-service offices. “You just take baby steps at first, and if this starts generating income for the members we can look at doing more with those offices.”