Becoming A Top 100 Lender

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As noted in part one of this series (CU Journal, March 28), TruStar FCU in International Falls, Minn. is a Top 100 CU in two categories: capital and lending. In part one we examined the CU's strategies for creating a better bottom line. In this part, CEO Dale Johnson shares advice on how to be a better lender.

To become a Top 100 CU in lending, Johnson had these ideas:

1) Offer them more than what they came in to receive.

2) Asks for referrals, you would be surprised.

3) Use CUNA Mutual's Loan Liner Plus program.

4) Don't make the member fill out an application when they call.

5) Make it simple, fast and easy for the member to get a loan.

6) Price right with risk-based pricing.

7) Know what your costs are, use cost analysis software. It pays off.

"One thing that we do really well, is that we are not afraid to offer them a solution," said Johnson. "Rather than give the member a $1,500 vacation loan, we may offer him a $45,000 home equity loan. Look at their entire financial position, and see if you can offer them a solution that makes their life better or more organized. We are looking to provide banking solutions with our loans." TruStar's goal is to look at their total financial health. "We have spent a tremendous amount of time on training of loan officers to always look for opportunities," explained Johnson. "We want the member to leave with more than what they came in to receive. TruStar is always looking to package the loans. It is just as easy to do two loans as it is to do one loan. TruStar wants to be seen as a trusted advisor, rather than just a source for loans."

Ask For Referrals

Johnson said that at the credit union, "We teach our loan officers to ask this question: 'Can you recommend anyone else who can talk to us?' You will be surprised at the number of the referrals and you may have changed a small loan into a number of loans by the referrals the credit union receives."

Members don't have to sign a document again and the member has a lifelong agreement. "We do a lot of loans by phone and the members love that relationship. We can finance your car and put the money in their checking account right away. Once you sign, your word is good enough for us. It is a great way to build trust," Johnson said. "We have the coverage through CUNA Mutual's Intentional Non-filing of Non-title Collateral. It is a coverage you can buy through CUNA Mutual. In Minnesota the filing fee with the state is $45. We save the member that money because we don't file. We charge a much smaller $15 handling fee that covers the cost of the insurance. It is another win-win we aim for with the member."

Risk Based Pricing

Approximately 60% of TruStar's members are "A" and "A-plus" paper and this leads to lower delinquencies and a lower charge-off ratio. However, the pricing is very important, forcing the credit union to take a hard look at the pricing side and the asset has to match the liability. TruStar has a higher gross income than its peers, which Johnson attributes to his pricing strategy.

"For the ALM e use matching pools, and we can be more aggressive on our pricing of deposits. Pricing is the key to success in a risk- based lending program," said Johnson. "We did a cost of funds analysis for the organization, we know what it costs us to do teller transactions. It cost us $44 per year to mail statements and $21 a year to send e-statements, so we try to shift members to e-statements. But we also don't give away relationship-pricing incentives unless we know what the costs are. With the cost-analysis software we can make better decisions, and be more aggressive in our pricing. You can't make good decisions unless you know your cost."

For example, Johnson pointed out that some incentives can cost more than they are worth. "TruStar used to offer a member an incentive to have direct deposit on a $50,000 home equity loan. The credit union would give the member one-quarter of one percentage point. But once we did the analysis of what it cost, we realized that it cost, more to give the incentive than it cost to take the payment over the counter." The added information allowed them to make a better pricing decision. "We were losing money to give the member the incentive," said Johnson. "So we decided to stop shooting ourselves in the foot."

This article originally appeared at, and was authored by consultant Rory Rowland. For more information, visit the website or call 816-478-3249.

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