If you ask Jon Gramenz, a former banker with more than 20 years of commercial lending experience, what still boggles his mind about credit unions, his answer comes swiftly.
“They share everything,” he remarked.
Gramenz made that discovery shortly after being hired at the $216 million Clackamas Federal Credit Union in Milwaukie, Ore., in May 2010 to revamp the cooperative’s stalled business lending program. While he considers himself a commercial lending veteran, he had never retooled or launched a program. A credit union in a different area stepped in to offer assistance with the pricing structure.
“There’s a definite difference with banks,” said Gramenz, Clackamas’ business services officer. “But I think it’s because we’re all working for members and that carries over.”
Hiring Gramenz was one piece of the strategy to bring Clackamas’ business lending program back to life, said Kimo Rosa, lending services manager. When area banks were laying off seasoned business loan officers in 2009 and 2010, the credit union used that opportunity to its advantage by bringing Gramenz aboard.
“With Jon’s expertise we were able to improve our existing loan policies, risk ratings and lending model,” Rosa said.
For one, Gramenz helped overhaul applications processing and review. He also restructured policies and pricing. Loan fees were implemented, but they remained lower than what banks were charging, Rosa said. Gramenz was also able to bring over a number of relationships he established from his years in commercial banking. In fact, he said some of his banking colleagues were helpful when it came to establishing the credit union’s pricing model.
As a result, Clackamas went from a $2 million business loan portfolio when Gramenz was hired, to nearly $10 million. Between 30% and 40% of that growth came through local commercial real estate transactions.
Even though Clackamas has been offering business loans since approximately 2007, Rosa said returns were nearly nonexistent.
“It was a soft rollout and we realized that it takes some time to build this type of department,” Rosa acknowledged. “We worked hard to put a basic structure in place but it just sort of limped along.”
In addition to hiring Gramenz, the credit union’s community charter helped to provide a wider map to get to know more local borrowers and their businesses, Rosa said. Applications have come in for small operating lines of credit to fleet vehicles to large commercial loans. A centralized business loan committee reviewing the credit files provides more clout since the decision makers are local.
“Being local and knowing the area and prospects gives us an advantage over other financial institutions that make lending decisions from headquarters outside the area. We can assess trends and opportunities more quickly and with more insight,” Rosa said.
With a handful of small community banks and three big banks competing in the small business space, having that awareness has taken the program further down the road. Gramenz said even though there are four credit unions in the area that are doing very well in business lending, all of them, including Clackamas, work together.
Because Clackamas has been well capitalized, the credit union was able to open branches in smaller counties, Rosa said. Its presence in those communities has helped to land larger commercial building transactions with Gramenz’ underwriting ensuring the deals were sound. Those borrowers began to spread the word about their experience with the credit union, which has led to increased exposure.
Clackamas built on those acquaintances by advertising business lines of credit with low application fees, Rosa said. Networking and internal connections have also yielded positive results. The credit union is talking to local title companies about its offerings. Gramenz and Clackamas’ mortgage loan originator can work together to create the best possible loan packet for an individual or corporation. Connecting construction and permanent lending has turned out to be a win-win for the credit union.
“This has been an organization-wide focus. We have every department assisting. Front line staff are looking for opportunities to refer business,” Rosa said. “Marketing is increasing brand awareness, and senior managers are diligently reviewing credit files. It has been a group effort.”
While the sour economy has been a curse for many, it has opened up even more opportunities for Clackamas as small businesses continue to seek out alternatives after being turned down by banks. Rosa said nearly 80% of new business owners coming to the credit union have complained about their longtime former banks’ deteriorated relationships due to frozen lines of credit and increased fees.
“I hear these stories every day,” Gramenz said. “A lot of businesses don’t realize credit unions do business lending. That has been the biggest obstacle. They’re surprised to hear that we can offer things that a bank can.”
The hiring of business development officers, which is a relatively new part of the program, has helped educate the small business community about Clackamas, Rosa said.
Both Rosa and Gramenz are optimistic about what the future holds.
“We have a lot of survivors–businesses that have been around for three or four years,” Gramenz said. “If they’ve been around for that long, I’m sure that they’ll continue to survive.”