CARSON CITY, Nev. — After having its member business lending program sidelined by regulators in 2010, Greater Nevada CU is making a comeback, having increased its business lending portfolio by 115% over the past 18 months.
The key steps to that success: developing expertise through both hiring and training of staff, delving into its member data to determine the need and crafting a full set of business services — not just loans — to fill that need.
GNCU had to halt its MBL program in 2010 for regulatory reasons after its capital ratio, along with many other CUs in Nevada in the aftermath of the financial crisis, fell below 6%.
The $489 million CU initially began doing business in lending in 2003, according to Dean Altus, the CU's chief operating officer, who oversees all its lending operations. In the years leading up to 2010, the CU booked about $2 million to $3 million per year in business loans.
Laying The Foundation
After one year on the sidelines, GNCU once again was eligible to do business lending, Altus said.
"But we had disassembled the production side of the department, and it took a while to get going again," he said.
Asked what changes GNCU made to restart the program, Altus said that one of the biggest was hiring Jeremy Gilpin as vice president of businesses services.
"Jeremy has an extensive background on the production side of business services," Altus said. "His niche is loan production, and he has formed relationships with SBA and the Nevada State Development Corp. They have been referring quite a few loans to us," Altus said.
In the seven months through July 31, GNCU had booked $8 million in business loans, helping 54 members.
The average loan is about $170,000, Altus said.
"Those loans are too small for most banks, but there is a need," he said. "We have been able to step in and fill that niche.
Last year, GNCU did slightly more than $6 million in MBLs.
Halfway To Its Goal
Altus said that its goal for this year is $15 million, noting that it is more than halfway there.
One of the first things it did to get to that goal was hiring Gilpin in May 2013. He formerly was a credit administrator for Baker Boyer National Bank, in Walla Walla, Wash. Baker Boyer is the oldest community bank in the state of Washington, known for its wealth management, and Gilpin was responsible for credit approval and risk-based pricing.
"I was a credit union employee all along but did not know it," he said.
One of the first steps that GNCU took after he was hired was to research the CU's demographics to determine what types of lending members needed, Gilpin said in an interview.
The second step was to hire a staff.
"There were a lot of community bankers out there who, as with me, were credit union employees but did not know it. We were able to pick up several experienced community bankers, one person from Wells Fargo, plus we repurposed some people here at Greater Nevada," Gilpin said.
GNCU offers a full suite of products, including merchant services, MasterCard and Visa services, and remote deposit capture, he said.
Other Services In The Hopper
In November, GNCU will add cash management services, after it completes a core conversion.
"We offer everything a commercial bank would offer. That distinguishes us, and then we add our relationship-based credit union philosophy," Gilpin said.
Construction loans, one of the CU's newest products, is taking off just as rapidly, fueled by local businesses that want to expand. A recent example is L.A. Bakery, which, thanks to a construction loan from Greater Nevada, was able to expand its business to provide better dine-in and take-out options, while increasing its wholesale distribution.
"A lot of the businesses we lend to are owner-occupied. Since we specialize in guaranteed lending, that was a natural fit to do [Small Business Administration] loans," Gilpin said.
"We also became a qualified lender for the USDA, and made ourselves available for its business and industry program. That means agricultural loans and rural development," Gilpin said.
For example, GNCU has a member whose business manufactures clutches and pistons for race cars. It was able to procure a loan guaranteed by the U.S. Department of Agriculture because the owner lives in a rural community.
GNCU also did a loan for an optometrist in remote Ely, Nev., who needed to expand his facility. That loan likewise was guaranteed by the USDA because he was the only optometrist for miles.
"There have been four business and industry loans done in Nevada this year, and we have done three of them," Gilpin said. "The USDA calls us when they see an applicant in our service area."
The availability of government backing gives GNCU options, Gilpin said.
When a loan application is received, the credit union knows if it doesn't qualify for traditional financing, he said, adding that a federal guarantee is a "tool in our toolbox."
"It opens so many more opportunities," Gilpin said.
Referrals From Banks
GNCU also gets referrals from the Nevada State Development Corp. because it doesn't have a minimum loan requirement, as many banks do.
Similarly, Gilpin said that GNCU gets referrals from the Farm Service Agency because there are many agricultural lenders who don't make small loans.
"For USDA loans the applicant has to be an owner-operator. A lot of our construction lending comes from this, because we can take them to one of these programs after construction is complete," Gilpin said.
"We do not do loans for development of strip centers or other speculative lending," he said. "We only do owner-occupied."
Gilpin was quick to give credit for GNCU's member business lending program to others at the CU.
"I am in the branches on a daily basis," Gilpin said. "If an employee knows of a member who has certain types of businesses, we get the referral."
GNCU holds monthly training sessions for employees in its branches, which Gilpin said gives staff members the freedom and confidence to make referrals.
MBL is just one part of the loan picture for GNCU, which has branches in several cities across Northern Nevada.
According to Altus, lending is going "very well" this year, as auto loans and other consumer loans already were more than $50 million at the end of last month.
The CU's credit union service organization handles mortgages, and it has funded $50 million in seven months.
"Most of our mortgages are sold to Fannie Mae, but production-wise it is doing very well," Altus said.
"There is some good demand out there. We have put more of an emphasis on lending the last couple years, and the economy is improving," Altus said.
GNCU is keeping a close watch on what happens with efforts to raise the 12.25% of assets cap on MBLs. The CU would have to get to $60 million in business loans to hit that ceiling. It currently holds about $23 million in MBLs.
