COLUMBUS, Ohio — An effective lending program is a primary trait of thriving small and mid-sized credit unions, and the economic recession is an opportunity for CUs to improve portfolios, according to former Filene Research Institute Executive Director Robert Hoel.
During a breakout session at the Ohio Credit Union System's annual meeting Hoel shared findings from a Filene study of 3,390 small and mid-sized CUs to determine what makes the best of this group successful.
With lending at the top of the list, Hoel urged attendees to move now and not wait for the economy to stabilize.
"We are in a recession and this is an opportunity," said Hoel, who told Credit Union Journal that many credit unions are not capitalizing on the chance to capture what could be a great deal of business. "Some credit unions are moving smartly on refinancing. But this recession won't last forever and credit unions need to move."
With consumer loan and mortgage rates down, Hoel says members now are "loaded with overpriced loans," pointing to Filene statistics that show members have a much higher percentage of loans at competing financials than at the CU.
Being a highly effective lender, or "star," as Hoel referred to them, doesn't mean closing the largest number of loans in your area or having that "magic loan product," Hoel insisted. "The stars are those who have the right lending attitude — they are doing what they need to do to meet members' borrowing needs."
Reliance on low loan rates isn't the answer either, Hoel added. The "great lenders" focus on speed, convenience, and service, as well. "It might mean waiving fees for some members," he said. "Work with them to earn their business."
In addition to being excellent lenders and not relying on rate, Hoel pointed to seven other traits the stars possess, including persuading members to use CU services more extensively. With the recession, deposits will come, Hoel reminded, telling those in attendance to welcome the money. "Find out who are your largest depositors and invite them to the credit union. Talk to them and learn more about them, and ask for more of their business."
On deposits, it's OK to pay higher rates, another successful trait, but concentrate on elastic accounts such as mutual funds or CDs, Hoel said. And investing in capital growth is important, but make sure you are delivering member value, Hoel said. Instead of building excessive capital, the stars invest in their membership with product and service offerings. "In short, they deliver member value while maintaining adequate net worth levels."
Thriving CUs are also good at:
- Generating fee income.
- Maintaining high average savings balances to reduce expense ratios.
- Managing expenses aggressively.
- Emphasizing high payoff loan, savings, and transactions products.
In closing, Hoel gave an example of one star credit union that achieved "extraordinary success" through innovation. The CU created a "Premier Account Package" for every new member. Instead of a share account, new members get a product bundle consisting of a share account, checking account, debit card, and a line of credit tied to a credit card."The game changed from trying to sell products to getting members to use them."
(c) 2008
