As financial institutions, many people would suppose that credit unions make lending money a key focus of their business. But sometimes, over time, they lose some of that focus and fail to adapt their lending programs to members' changing economic needs. That is a little of what Brett Jorgenson found in 2007 when Christina Lethlean, the new CEO at the then-$550 million Gesa Credit Union, brought him to the CU to be the new chief lending officer.
“It wasn't that they were necessarily doing too many wrong things,” Jorgenson explained, “it was that they weren’t doing a lot of lending overall.”
Jorgenson found that many of Gesa's members just didn't think of the CU in terms of filling their loan needs, seeing the credit union more as a place where they could save money and as a place for transaction accounts.
The now $1.1 billion Gesa, headquartered in Richland, Wash., serves primarily what is known as the tri-cities area, a region comprising the communities of Richland, Pasco and Kennewick, and a population of roughly 180,000 people. But the CU has a field of membership that covers the entire state, a fact Jorgenson would use to the CU's advantage in auto lending, and Jorgenson sensed that the members were ready for their credit union to become more than just a place where they deposit money.
Jorgenson's first step was to centralize and harmonize the CU's overall lending operation. Before he arrived, the credit union had completely decentralized lending from branch to branch and uses different underwriting criteria.
“It was possible for someone to shop a loan application from branch to branch,” Jorgenson explained. “If they were turned down at one branch, they would go to another until they found one where they could get the loan.”
As might be expected, this led to increased loan delinquency and uncertainty about loan underwriting had suppressed overall loan volume to $1 million per month.
In response, Jorgenson centralized the lending process and standardized loan underwriting so that loan decisions could be made uniformly across the credit union. Once Gesa had taken those steps, Jorgenson began the process of making the credit union a lending powerhouse. Gesa began to offer and advertise competitive auto loan rates, and build and strengthen relationships with auto dealers. He began to implement a service and empowerment culture, an attitude where the CU hired and trained staff with strong loan skills and provided services that were aimed at improving the bottom lines of both members and auto dealers.
This approach helped Jorgenson spread the indirect lending program well beyond the tri-cities area to include auto dealers in the Tacoma and Seattle area, where the CU has no branches. Jorgenson reported that the CU was able to establish relationships with the new auto dealers that let it add new members and, later, expand their experience of Gesa with other products and services, particularly credit cards.
Jorgenson also began to focus on changing the way the credit union's staff addressed lending.
One change was to train the credit union's member service staff in a Creating Member Loyalty Program. Credit union staff learned through the program to start the loan process by asking questions of members about their needs and listening before they offered a given loan product. That approach helped reverse a decline in the CU's consumer loan base and now it’s not unusual for member service staff to book 20 new consumer loans per month.
Gesa also began training staff comprehensively on the full range of the CU’s loan products and services. The CU used a series of workshops to help members better understand new account opening, along with consumer and business lending.
Jorgenson reported the training helped the credit union begin to expand existing loan programs, particularly the CU's housing finance and credit card programs.
Gesa already offered mortgages when Jorgenson arrived, but the program only had one staff member and was more or less moribund. “Members just didn't think of Gesa when it was time to finance a house,” Jorgenson said. “And the CU was off the map with Realtors as well.”
Complicating things as well, Jorgenson arrived at Gesa just as the real estate bubble was bursting nationwide and as the resulting crisis in the housing industry had begun to pick up steam. In some ways this was a boon to the CU as Jorgenson reacted swiftly to the collapse among competing mortgage firms by hiring their experienced staff that had been let go. The influx of seasoned housing finance professionals allowed Gesa to step up both its portfolio loan products as well as qualify for loans offered with government backing through the Federal Housing Administration and Veterans Administration.
Real estate loans now drive the CUs overall loan portfolio, Jorgenson reported, as the CU saw its monthly originations move from $500,000 per month, or about three mortgage loans, to over $10 million. On a yearly basis, the CU booked $110 million in housing finance loans in 2010 and $122 million in 2011, a figure the CU is on track to repeat this year, Jorgenson reported.
The CU's home finance program has also benefited somewhat from the tri-cities area not experiencing as much of the housing bust as other areas experienced. Unemployment has remained relatively low and the average mortgage loan amount has remained a healthy $160,000 with a 2% rise in home prices last year. This stable environment helped the CU roll out a popular mortgage product that allows borrowers to pay off their loans in 10 years and to streamline its mortgage loan process. The streamlined process means that Gesa funds its mortgage loans in an average of 30 days whereas its competitors average about 60, the CU reported.
Jorgenson also significantly grew Gesa's credit card program. When Jorgenson came on board, the CU had been considering selling its credit card portfolio, but Jorgenson kept it and converted it from being a fixed rate card to a variable rate card. Gesa also added a Platinum card program in July 2011 and inaugurated a revolving cycle of card promotions on points and no-fee balance transfers. These have helped boost the card program to 300 new accounts per month compared to 100 in 2010 and overall accounts to 12,000, Jorgenson said.
All of the efforts behind the lending growth have succeeded in tranforming Gesa from an afterthought in the minds of many of its members to being their first choice when needing a loan. Gesa highlighted this change in the last quarter of 2011 with a two-month promotion celebrating its 100,000th member. The promotion offered fee-free home equity loans, credits against closing costs on new home loans, cash back on the Platinum Visa card and a great rate on new auto refinances. The promotion netted the CU $43 million in additional loans, capping the CU's reputation among members as the place to come to finance their lives, Jorgenson said.