LAS VEGAS — Rick Schmidt, CEO of WestStar CU, shared several of the strategies his CU has pursued over the last several months to turn things around.
Credit Union Journal: What categories of loans has WestStar increased?
Schmidt: Our portfolio is still declining overall, based on the limited loan demand in Nevada. Since the beginning of 2010, we have increased our loan originations by roughly 500%. We still need to at least double our originations to start seeing real growth in our portfolio.
Auto loans, mostly used cars, and credit cards are the two products in which we have seen the most increase in volume. We launched a Gold Rewards program in late 2010 and have a Platinum Rewards program coming out in April. We re-launched an indirect lending program via CUDL in January and expect to see increased auto loan volumes We are also starting to see increased volumes in purchase-money first mortgage business. That won't always show in our portfolio growth as we do not hold the bulk of the production.
CUJ: Has WestStar's lending focus changed? Has pricing changed?
Schmidt: There is a much greater focus on member service and efficiency. We revamped the entire consumer lending process and rebuilt the complete risk-based pricing model. The emphasis was on creating tools for our loan officers to turn all loan applications around within minutes or at most hours-presuming the members have the appropriate documentation in hand when they apply.
We are also building a cross-sell module into our lending platform to identify additional sales opportunities at the point of contact with the member. Our pricing has gotten somewhat more aggressive as we try to rebuild awareness and usage amongst our members.
CUJ: Are you doing relationship pricing?
Schmidt: We have revamped our relationship program, which we call "Royal Advantage," to reward loyal members with better loan pricing. Depending on the relationship the member has with WestStar, we are offering a pricing discount on new loans with us. This program will be further improved in 2011 to build a stronger relationship with our most loyal and active members.
CUJ: What expenses have been eliminated or reduced?
Schmidt: Prior to my arrival, the credit union had a RIF that eliminated a number of positions. We have added a few positions back in the last year, but are running at significantly lower staffing levels than two years ago.
The 401(k) match was eliminated. Travel and conferences have been scaled back significantly, but fortunately there are many credit union conferences here in Las Vegas. Our promotional and advertising budgets have been scaled back and we are doing much more targeted marketing tied to specific programs or SEG groups.
Our recent job fair here in Las Vegas is a good example of being able to get our name out there without incurring large expenses. We have a second job fair scheduled in Reno for the end of March. We have more than 20 companies participating in the Reno job fair-all of whom are hiring!
Our staff understands we need to be frugal with our members' money, so we examine any and all expenses before we commit. Anything we spend has to tie directly back to serving our members.
CUJ: What is your expense ratio?
Schmidt: At the end of 2009, our efficiency ratio was 84.3%. At the end of 2010, the efficiency ratio has declined to 75% (these are before the NCUSIF premium and the Temporary Corporate CU Stabilization Fund assessment).
CUJ: In collections, can you give specifics as to how you increased your numbers?
Schmidt: The first thing we had to do was get the right people onboard. We added several experienced collectors to ensure we had sufficient staff to cover the portfolio.
As you can imagine, here in Nevada, with the economy the way it is, we have to be very aggressive in contacting our members early in the payment cycle. We restructured the collections area to focus our staff on specific delinquent queues/products rather than having everyone call all delinquent accounts. This has helped our team become much more familiar with our membership and with the differing needs by loan product.
We also reinvigorated our loan modification program. It had fallen dormant in recent times. In order to help our members stay in their homes and making payments, it was critical to have this tool available to assist our membership.
I am happy to report that as of the end of February, our delinquency has declined by 500%-from over 6% in early 2010 to 1.23% at the end of February. This is testament to our collections team and to the resiliency of our members as they work to recover from this economic crisis.
