<p>PORTLAND, Ore – Yet another credit union has sold off its credit card portfolio. The $57 million Buckeye State Credit Union of Akron, Ohio sold its $4 million credit card portfolio to MBNA. MBNA has been very active in the credit union market acquiring portfolios. AssetExchange, Portland, Ore., facilitated the sale. AssetExchange has a network of buyers nationwide where it can shop card portfolios. AssetExchange CEO William Koo said credit union card portfolios have become highly sought after by portfolio buyers. "It's interesting. I'd say even just two years ago credit union credit card portfolios didn't draw a tremendous amount of interest. But issuers really like affinity groups now, like a university or a credit union. Credit union members are a lot more loyal than customers of a big bank," said Koo. "What they are buying is not just the current balance- they're buying the loyalty members have to the credit union." Koo said it's getting harder for issuers to compete on price with many issuers offering the same if not similar teaser and fixed rates. Also, direct mail, which card issuers have depended on for years, is expensive and with consumers receiving hordes of different offers, success is being watered down. "If they get a half percent success rate, they're happy," he said. Mike Baughman, president/CEO for Buckeye, said there were three main reasons for selling: card competition is stiff; it frees up employees who were previously consumed with the VISA operations; and most importantly it frees up the CU to be more aggressive in other lending areas. Baughman said he wants his CU to get deeper into mortgage lending and also in serving the economically-challenged with new lending programs. "At two of our branch locations we have unemployment rates of 6.5 to 7%. We're coming out with a product where we can loan to someone at retail levels who has had credit problems. We want to challenge the check-cashers so our members aren't gouged," said Baughman. He said lending programs for members with weak credit are inherently more risky, and will given more scrutiny by its state regulator. The money from the portfolio sale can help off-set some of that risk, said Baughman. Since the CU sold a $4 million portfolio, it gets that amount back, freeing those dollars up to be put back in loans. But the CU will get more than the face value of its $4 million portfolio with this sale. Credit union card portfolios are selling at a premium these days, and Baughman said, though he didn't want to be too specific, Buckeye's portfolio sold for over a 10% premium. Koo said premiums are ranging from 8 to 20%. Koo noted that the one-time sale price isn't the only income opportunity. "They (the buyer) will often pay "x" percent back to the credit union on something like percent of net sales, interchange income or finance charges." A portfolio where the buyer sees a big upside will fetch more lucrative terms for the CU. For example, if a CU has a portfolio where the average card balance is around $1,000, the buyer will see that portfolio as having lots of potential, given that households carry an average credit card balance of over $6,000. Selling a credit card portfolio is not the right move for all CUs, said Koo, but once they commit to doing it they must present it to multiple buyers to ensure they get top dollar. "The key is if a buyer knows there are four other buyers right behind them, they're not going to low-ball you. We saw one buyer increase their offer by 43% just because we got involved and could present to multiple buyers." [email protected]</p>