Some CU Lenders Thrived During Recession

‘No no’s’ is good news for Hutchinson CU members.

July 05, 2012
KEYWORDS auto , credit , lending , loan , unions
/ PRINT / ShareShare / Text Size +

How did some credit unions manage to grow their loan portfolios during the Great Recession while others floundered?

By sticking to the basics and taking advantage of indirect lending, according to three credit unions that experienced average loan growth of 12% over the past four years.

“Eat your vegetables,” advises Garth Strand, CEO of $179 million asset Hutchinson (Kan.) Credit Union. “It’s not flashy, but you have to continuously focus on the basics—being competitive, speedy, accurate, polite, confidential, and following through—to even be in the game.”

The credit union also has a “no no’s” policy: Financial services representatives are can approve loans, but any loan denials must come from the central underwriting department.

“We don’t say no until we have done everything we can do to say yes,” Strand says.

Although other credit unions have found success with indirect lending, Hutchinson Credit Union doesn’t rely on it heavily—only 7% of its consumer loan volume comes from indirect channels. That’s largely because the credit union hasn’t found the right “philosophical match” with an auto dealer that’s good for all involved parties, Strand says.

In contrast, Scott Credit Union in Collinsville, Ill., has seen huge growth in indirect lending since 2007. “There are no silver bullets with indirect lending,” says Steve Stryker, chief operating officer for the $794 million asset institution. “We have engineered our program for the long haul by focusing on dealer communication and response times.”

As a result, its dealer network has expanded from 70 to more than 200 in the last five years. During that time, the credit union:

  • Added an electronic conduit to improve dealer communication;
  • Implemented an instant decision matrix and a centralized underwriting department to speed response times;
  • Streamlined its Internet loan application; and
  • Added a representative to manage the dealer relationship.

On the direct lending side, Scott Credit Union expanded its incentive program for frontline staff. This program is driven by noninterest income generated on direct consumer loans.

As a result, noninterest income grew from $30,000 in 2007 to $500,000 in 2011.

EECU in Fort Worth, Texas, has also found success in the indirect lending, namely by moving from a third party to an in-house program, says Joe Rossa, senior vice president of the $1.3 billion asset credit union.

“The key to indirect lending is hiring the right people and developing a relationship with dealers you can trust,” Rossa says. EECU’s auto loan portfolio grew from $275 million in 2007 to $640 million in 2011.

Another key component to EECU’s auto lending success has been its “We Are One” philosophy. To avoid competing with its preferred auto dealers, the credit union issues preapproval certificates to members with the same rates and terms whether members close the loan at the dealer or the credit union.

“We want our members back, so we allow them to finance their cars in a way that’s most convenient for them,” Rossa said. The branch still gets credit toward its goals and incentives for the application and preapproval so employees aren’t selling against the dealer.

Strand, Stryker, and Rossa addressed the America’s Credit Union Conference in San Diego, which next year will be held in New York City (June 30 to July 3).

Post a comment to this story


What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive