Member loans don’t simply walk in the door now as in boom times. As a result, credit unions have retooled to help staff recognize and act on lending opportunities that also benefit members.
Goldenwest Federal Credit Union, Ogden, Utah, aims to grow its loan portfolio by 5% this year. “It’s a big challenge considering all the debt consolidation and loan repayments among our membership,” says Kerry Wahlen, president/CEO of the $806 million asset credit union. “But I expect us to succeed.”
With mortgage rates at 40-year lows, he’s seeing numerous refinances. “Members consolidating debt at 30-year rates of 3.25% are able to consolidate a lot of consumer debt, which makes growing our loan portfolio more difficult,” Wahlen says.
While there hasn’t been a dramatic change, local real estate values have stabilized. Plus, low interest rates allow members to pay down loans more quickly. This has helped Goldenwest Federal grow its home equity lines of credit.
“With interest rates so low, the principal contributions in first mortgage payments are so great that people are building equity in their homes,” Wahlen says.
The credit union embraced an aggressive sales culture eight years ago, and Wahlen credits that change with helping to attract loans during tough economic times. “We recognized that to be successful in the future we had to have a dynamic, sales-oriented business in all areas of the credit union. Loans were a major focus.”
Goldenwest Federal’s loan-to-share ratio hit a low point about two years ago, but has increased to about 66% now—and it’s Wahlen’s goal to grow it further.
“We slowed deposit growth to try to increase this ratio,” he explains. “We looked to recalibrate our mix of deposits and reduced the number of [share certificates] with members who don’t have other relationships with us. We still have competitive [share certificate] rates, but we’re not marketing them publicly.”
To transform to a sales culture, the credit union hired a sales manager and did extensive staff training. “Now, from the CEO down, all staff look for opportunities to cross-sell products,” Wahlen says. “We engage our employees with contests and incentives to cross-sell consumer loans.”
Goldenwest Federal decentralized its lending process as well. “We gave staff decision-making authority. Each of our 20 branches has the independence to make loan decisions for the most part,” Wahlen explains. “We have guidelines and approval standards, but loan staffers actively participate in the decision process.”
He considers his credit union’s loan pricing to be “moderately innovative.” And Goldenwest Federal has a full spectrum of marketing campaigns in both traditional and online media.
“But our great member service is our best selling point,” Wahlen says.
He believes credit unions need to be both creative and persistent in making loans. “Today’s market is so competitive and difficult that you have to get after it in every possible way.”
NEXT: Extreme lending
UW Credit Union, Madison, Wis., has a five-year business plan calling for annual loan growth of more than 5%.
“Achieving this goal has been challenging, but we’ve been able to accomplish it,” says Paul Kundert, president/CEO of the $1.5 billion asset credit union. “Consumers continue to deleverage so it takes significant origination activity to keep pace with the loan pay-downs.”
Growth is primarily from consumer loans rather than real estate loans. “And while we’ve booked well over $1 billion in first mortgages in the last 24 months, we’ve chosen to sell those loans to minimize our interest-rate risk,” Kundert says.
UW Credit Union has met its loan growth goals despite being unable to participate in the Stafford student loan program for the past two years.
“At the end of last year we had about $296 million in Stafford loans, or 29% of our loan portfolio,” Kundert says. “In its heyday, this program produced more than $120 million every year in loan activity.”
Two years ago the credit union implemented a program called “Extreme Lending.” This initiative involved re-training all front-line staff to turn member interactions into loan opportunities.
“They discuss potential ways to save members money by refinancing loans held elsewhere,” Kundert explains. “We’ve conducted more than 20,000 credit consultations in the past 18 months or so.”
The credit union also created an outbound calling team to reach out to members directly and ask for their loan business. These member lending consultants work leads generated from numerous sources, such as recaptured auto loans.
“Working with our primary credit bureau partner—TransUnion—we identify members who have financed auto loans elsewhere,” says Kundert. “If our rate beats theirs, we contact the member and recapture the loan.”
He has seen dramatic increases in loan originations. Through August 2012, year-over-year origination increases include:
And while low interest rates have spurred borrowing, Kundert attributes much of the credit union’s success to its “Extreme Lending” approach.
Giving members free access to their credit scores also helps, he says. “We believe if members are more educated on what goes into their credit scores it will help them access credit—and they’ll position themselves to be creditworthy members as well.”
Kundert says consistency and reliability are extremely important variables to successful lending. “We’re focused on delivering financial services in a trustworthy manner. Members appreciate our unbiased, straightforward advice and know we act in their best interests. In fact, we provide a fair deal for consumers at all levels of financial capacity.
“We assess our performance by reviewing loan approval statistics,” he continues. “And our loans don’t contain surprise provisions in the fine print.”
Another important consideration is giving members multiple access points to loans—by phone, in person, online, and via mobile devices.
“We deliver nearly 70% of our loans outside the branch network via our lending center,” says Kundert. “In most cases, members get an answer to their loan requests before they hang up the phone or log off the website. And members who visit our branches get answers before they leave.”
Kundert expects UW Credit Union to close the year with more than $725 million in first mortgage originations. “This would be a record for us, exceeding even 2009 levels by over $100 million.”
“We manage our portfolio very closely against pre-defined targets, and I believe we’ll see much more of the same in 2013 and beyond,” he says. “With no end in sight to low interest rates, consumers should continue to seek out credit.
“We’re fortunate to be doing business in a fairly stable economic environment in Wisconsin,” Kundert continues, “and I don’t see that changing much in the near term.”