Lending Growth in the Midwest via Cultural Change
A radical culture change in the workplace and a shift in how collection efforts are carried out have helped two credit unions in the Midwest grow their loan portfolios well above the industry’s national average.
For the $1.5 billion Affinity Plus Federal Credit Union in St. Paul, Minn., the collections department became the “solutions department” a few years ago, said Dave Larson, senior vice president.
Larson was one of the guest speakers on Aug. 1 during the “Loans: The Next Frontier” Web seminar, which was hosted by Credit Union Times and moderated by Editor-in-Chief Sarah Snell Cooke.
- SEE the Aug. 1 webinar.
- READ followup questions and answers from the participants.
- REGISTER for the Oct. 17 webinar on managing through mergers and acquisitions.
- REGISTER for the Dec. 5 webinar on regulation and compliance.
That name change helped Affinity Plus empathize with a member’s circumstances rather than rely on traditional methods of collecting on delinquent loans, Larson said.
“We start with the person, not the credit score. The answer is across the desk, on the phone or an email,” Larson said. “We do use credit for pricing but that’s not where we start. Bad things can happen to good people.”
Affinity Plus currently has $1.4 billion in total loans, with mortgages making up a very aggressive slice of the portfolio pie, Larson noted. Consumer loans take up about 15% while real estate continues to grow, he added. Despite having a $350 billion indirect loan business at one point, the credit union decided to exit the business in 2004 because it struggled to build long-term relationships this way.
Larson said while it was a hard decision to make, it was just as well since the move fit nicely with how Affinity Plus changed its thinking toward helping members who may have fallen on hard financial times. Eighty percent of the credit union’s more than 150,000 members are borrowers and over 99% of them pay their loans on time every month, he said. More than 80% of new members are referred to Affinity Plus by current members.
“Prior to 2004, we dialed for dollars. Performance was based on the number of calls and contests–who would pay and wouldn’t pay their loans,” Larson said. “We didn’t think it brought meaning into banking at Affinity Plus. So, we took a look at collections and said let’s turn this inside out.”
While many were either scaling back or literally shutting down their lending programs between 2007 and 2009–considered the years of the Great Recession–Affinity Plus took a different approach.
“We didn’t stop lending. We benefited from people leaving the banks,” Larson recalled.
In 2002, Kyle Markland, president/CEO of Affinity Plus, moved forward with a plan to change the culture at the credit union that included hiring practices. Earlier this year, Markland was named Credit Union Times 2012 Trailblazer CEO of the Year.
“Quite frankly, if you worked for a bank, that was a deterrent. We looked to industries like health care, and we got rid of a number of system controls,” Larson said. “We opened up our systems to do what’s right for the member. It became a trust-based culture.”
One of the new initiatives was the implementation of MOE, or member, organization and employee. Aligned closely with the cooperative’s mission, the way it works is if a service or product benefits the member, it trumps the organization and employee, he explained.
At the $1.7 billion Community First Credit Union in Appleton, Wis., a sales and service transformation has also helped not only loan growth but across other channels, said Minh McKenzie, vice president of sales and service.
It started with a credit union-wide training program that emphasized member satisfaction, accelerated growth and gaining market share.
Sixty percent of Community First members are borrowers and the credit union’s delinquency rate is 0.73%. Between 2007 and 2012, the credit union increased its access to payment protection plans going from 18% to 48% as of June. GAP protection availability increased from 30% to 52% during the same period.
“Our objective was to modify some of our behaviors and transform the team to provide a ‘well member’ experience,” McKenzie said. “We wanted to make sure we were improving sales without sacrificing service.”
McKenzie, who was hired at the credit union in 2007, came from Wells Fargo. Ironically, the same bank used the same training program that Community First implemented but there was a glaring difference.
“Wells Fargo did not focus on the service piece. It focused on the sales piece,” McKenzie said. “It was product centric, not customer centric.”