Lending Officer of the Year: Leonard Growing Loans to Support Local Businesses
Kenny Leonard is a 33-year-old millennial who joined a credit union as a teenager.
Although he strayed from the movement for more than 10 years, when he worked in commercial loan departments at four different banks, he never lost his affinity for credit unions.
“I didn't have as much angst, if you will, as some bankers do toward credit unions,” Leonard, the winner of CU Times’ 2016 Trailblazer Award for Lending Officer of the Year, said. “I had been a member of a credit union since I was in high school and always thought that they served their purpose very well. So when I saw the job listing for this opportunity at ECCU, I thought it’d be a great chance for me to get into more of an executive level position and utilize the skills that I’d learned from the banking world to help ECCU go to the next level by creating the commercial department.”
Established in 1935 by nine educators who pooled their money in a classroom at the old Kalamazoo Central High School, ECCU manages $430 million in assets, operates seven branches throughout southwestern Michigan and serves more than 37,000 members.
Since joining ECCU in March 2014 as vice president of commercial loan services, Leonard led the growth of the credit union's member business loan portfolio from 36 loans worth $3.4 million and one employee to 104 loans worth $22 million and four employees by the end of 2015. What's more, not one of the credit union's MBL loans is in delinquency.
While the credit union's MBL growth was built on Leonard's development plans and vision, he was quick to point out that the success couldn't have been accomplished without the support of ECCU's board of directors and the executive team, as well as the daily, hard work of his MBL team: Bobbi Van Bruggen, commercial loan coordinator, Holly Parmley, commercial credit analyst and Ryan Reffitt, director of commercial loan services.
Leonard acknowledged, however, that a growing local economy in western Michigan, where small business owners are optimistic and confident about the future, certainly helped fuel the credit union's business loan growth.
ECCU itself is optimistic and confident about the future, even with more competitors entering the commercial loan market, Leonard said.
“It's great for us because I think with competition it means you have to have a great staff that knows how to sell the benefits of a commercial loan and the system to process loans in a timely manner,” he said. “A lot of other financial institutions are just trying to do it based on price, rather than the relationship. We really want to be a trusted advisor with our businesses that we lend to. We want them to call us when they need something for their business or when they need advice. We want to be that value add.”
To deliver that message, the credit union's marketing department developed and posted articles on its site on how ECCU's commercial loan staff helped local entrepreneurs grow their businesses – not just with capital, but with ideas, advice and other solutions.
Leonard, who reports directly to ECCU President/CEO Julie A. Blitchok, was recruited by the credit union because of his extensive commercial lending experience, particularly in the SBA arena. After working for Kellogg as a retail sales rep, he landed his first commercial lending job at Northpointe Bank and moved on to LaSalle Bank as a commercial credit associate.
In 2007, he was hired as an SBA Commercial Loan Officer for the Michigan Certified Development Corp. and then became a vice president for United Bank & Trust as a marketing manager pitching SBA 504 and SBA 7(a) loans. In 2012, he was named vice president of business development for Celtic Bank, the nation's sixth largest SBA lender.
On day one as ECCU's vice president of commercial loan services, he walked into a one-person MBL department that was extremely busy managing the portfolio and had very little time to sell new loans. At the time, a CUSO took care of back-office operations such as underwriting and closing documentation.
“When I first got there, I spent the first six months just evaluating the current policies and procedures and getting a feel for how things were being done, taking a look at the portfolio and identifying what the risk platform was,” he explained. “From there I hired a credit analyst so that I could bring the underwriting in-house and manage that a lot more to my liking as far as managing risk. Then I also sought a commercial banking lender who had a lot of experience in the marketplace and his own book of business that he could begin to work to bring over to grow our portfolio.”
The credit union manages a variety of loans in commercial real estate, investment properties, acquisitions and construction. ECCU is also involved in the financing of a new $2.5 million bed and breakfast business on the shores of Lake Michigan, and is carving a niche providing MBL loans to the region's fast-growing microbrewery and distillery industry.
Thanks to his background in SBA lending, Leonard also began building up that portion of the portfolio from one loan to eight loans on the credit union's books.
The cooperative is committed to developing its SBA portfolio because it provides additional options for members. For example, the SBA typically requires lower down payments and longer amortization, and allows for start-up loans based on sales projections, which most financial institutions are reluctant to do.
“From a financial institutions perspective, term loans that have an SBA guarantee can be sold into the secondary market, so you don't have to reserve capital against the guarantees,” he noted. “You can sell that guarantee into the secondary market for a nice premium so that helps with liquidity and capital ratios, and it doesn't affect the member.”
What's more, in order for a credit union to succeed in SBA lending, it's important to do it frequently.
“You have to do SBA lending very frequently to fully understand how to do it and stay on top of all the regulations,” he said. “The more you do it, the easier it gets for members. I’ve seen lots of organizations that do get into trouble by just dabbling in SBA loans. After closing an SBA loan with a 75% or 90% guarantee, they think they can just put it in their portfolio and manage it like any other normal commercial loan. But you can get yourself into trouble because there are requirements you have to do throughout the life of the loan in order to maintain that guarantee.”
So how did ECCU manage to achieve zero delinquencies in its MBL portfolio?
“I’d like to say that we have a sophisticated underwriting process that we go through,” Leonard said. “In all honesty, the 36 loans that were on the books when I got here were very well managed.”
To maintain a low delinquency rate, Leonard plans to keep leveraging the flexibilities of SBA programs to offer working capital so entrepreneurs are not cash-strapped and don't have to start playing games with their payables, which significantly impacts their ability to operate their business.
Leonard said ECCU also focuses on making sure borrowers have some significant cash flow, whether that's through a line of credit or working capital that the credit union provides.
“Nine times out of 10, that's what will take a business down, the lack of cash flow,” he said. “So we really work closely with our borrowers to make sure that that's not going to be an issue.”
In addition to continuing to grow the MBL portfolio, Leonard plans to eventually add new product and service offerings, such as tax-deferred, simplified employee pensions for small business owners.