Community Service

Faith in Serving the Underserved

Don't believe the hype that members with spotless credit will bring you prosperity, CEO says.

October 10, 2013
KEYWORDS ccuc , cuna
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Teri Robinson

For those credit unions that have been led to believe the path to prosperity lies in focusing only on members with spotless credit, Teri Robinson has a message for you:

Don’t believe the hype.

In engineering a stunning turnaround of Pacific Northwest Ironworkers Federal Credit Union, the CEO of the $10.6 million asset institution in Portland, Ore., placed her faith in a variety of tools designed to serve underserved consumers and those with marginal credit histories.

She was rewarded mightily.

“The NCUA has us thinking, only lend to A, A+ borrowers. That’s not true,” Robinson told a Community Credit Union & Growth Conference breakout session.

Hit hard by the recession, Pacific Ironworkers Federal fell into the net worth restoration program, bottoming out at 4.8% in January 2010. Examiners focused on four areas, according to Robinson: risky borrowers, higher than peer loan yield, higher than peer income, and higher than peer operating expenses.

Her curiosity piqued, Robinson analyzed her books and made a surprising discovery: Pacific Ironworkers Federal attributed 80% of charge-offs in 2011—and 60% the following year--to members with A+ to B ratings.

“I wasn’t losing it on the riskier members – I was losing it on the members who could chase rates,” she said.

Pacific Ironworkers Federal’s most loyal members constituted that at-risk segment, Robinson said. She decided to earn back their business from predatory lenders, who were charging members an average annual percentage rate (APR) of 29% compared with 16% for the credit union’s average D-rated borrower; some even qualified for a C rating and an 8.75% APR loan.

By mining credit reports, Pacific Ironworkers Federal identified loan conversion candidates. Again, the results might be surprising: Robinson cited a school teacher who makes $70,000 annually as a regular payday loan user.

“I figured, if they’ve been making that payment at 36% for 12 months, why not get that loan over here by me?” Robinson said.

In April 2011, Pacific Ironworkers Federal obtained a Community Development Financial Institution designation, creating regulatory flexibility. An infusion of secondary capital boosted the credit union’s net worth from 6.61% in January 2012 to 8.2% as of August 2013. Pacific Ironworkers Federal’s loan growth increased 35% in 2013, hitting $10.5 million.

This year, Pacific Ironworkers Federal granted 47% of its loans to C-, D-, and E-rated borrowers, had a loan yield of 8% and increased its portfolio by $5.7 million. It boasts a 1% delinquency rate, and a 101% loan-to-share ratio.

The National Federation of Community Development Credit Unions considers a lot of theories, says Blake Myers, a Federation consultant. “But it’s people like her on the ground that prove it can happen. She’s created a fair product that also works out very well for the credit union.”

Find more coverage of the conference here and at News Now.

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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.

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