Paving the Road to Lending Success: Guest Column
On May 1, 2010, Augusta Metro Federal Credit Union opened an indirect lending department and loan growth has been soaring ever since.
Sounds like a very simple statement, doesn’t it? But the process of getting to that point was actually something that management struggled with for several years.
You see, I have been at this credit union since July of 1984 and for more than 20 years of that time, it had been our jobs as loan officers and loan processors to tell the members that “the dealers are ripping you off.”
We would actually tell members to take buyers orders back to the dealership and try and get a better deal on the car they wanted to purchase. I cannot tell you how many times I have had a conversation with a salesperson concerning add-ons and what the actual retail price of the car was. We had new automobile cost guides that we could look up this important information and sometimes it worked and sometimes it didn’t.
We tried to tell our members what their trade-ins were worth. We claimed to know more than the people that actually sold vehicles. The truth of the matter is that is not how you achieve successful loan growth. For many years, our loan growth was basically just turnover growth. We maintained our loan portfolio and grew by small amounts each year.
I have always been taught that if you want more income, you have to make more loans. After all, lending is the lifeblood of credit unions. We did all of the traditional things to bring in more loans. Promotional rates, vacation giveaways, gas cards, cash bonuses to members, great marketing campaigns. We did it all. Growth still seemed to be pretty stagnant even though loan balances would jump for short periods of time and then settle back at very near the starting point.
During our strategic planning session in 2009, we came to the conclusion that we needed to explore the idea of indirect lending. As many credit union CEOs do, I reached out to my peers who were successful in this area. I spoke with three to five different CEOs who had successful indirect lending programs. Some were using CUSOs and some had developed their own in-house programs. There seemed to be pros and cons with each approach.
We chose to move in the direction of creating our own in-house program as we had many car dealerships in our field of membership when we were still a SEG-based credit union and felt as though we had established relationships that we could build upon.
Establishing our own program did not come without help from a consultant who has been successful with indirect lending programs. One of the first things we learned was that people love to do business with people they know, they like and they trust. The relationship with the finance and insurance folks at the dealership is key to the success of such a program. Of course, there are many competitive issues to address such as rates and terms, allowing for the sale of back-end products and quick approval process.
Hiring the right folks to run your indirect lending department is perhaps one of the most important things you can do. It was suggested that we needed a manager and a loan processor. We turned to one of our existing loan officers who was a branch manager at the time. She had some prior experience with automobile dealerships and most of all, she has a wonderful disposition about her that people respect and love.
We also turned to our human resources department where there is a loan officer who worked directly with me on processing employee loans. I had the utmost confidence in her ability to analyze someone’s financial picture and make recommendations back to me for approval or denial. We believe that having exceptional employees that were already loan officers has contributed to the success of our indirect lending department. Both of them can process loans from start to finish including the approval process. They are a fantastic team and have proven their ability over and over.
One of the greatest added benefits that come with indirect lending is new members you most likely would never see if you weren't available in the dealerships. Augusta Metro has been steadily gaining 40 to 50 new members each month. The challenge now is converting these members into members who can take advantage of all of the services available to them.
Augusta Metro ranked 40th nationally in loan growth in the 12 months ending June 30, 2011, according to Callahan & Associates. Our loan growth was 23.81%, while the average credit union industry loan growth was negative 0.47%. While many banks have lowered the money available to lend to the average consumer, Augusta Metro has increased lending in the Central Savannah River Area.
Lending success is looking towards the future and making the best strategic decisions to grow your loan portfolio. Never say never and be open minded to new opportunities.
Sherry Saxon is president/CEO of Augusta Metro Federal Credit Union.
Contact 706-854-6140 or firstname.lastname@example.org