A Strategy To Centralize Lending And Increase Efficiency

University Credit Union in Orono, ME, creates new positions and titles to streamline its lending environment.

 
 

University Credit Union in Orono, ME ($275.2M, Orono, ME), serves the students, employees, and alumni of the state’s university system. The share draft penetration at the credit union notably exceeds those of peer institutions — 70.4% versus 55.0% for credit unions with $250 million to $500 million in assets and 61.0% for Maine credit unions, according to Search & Analyze data on CreditUnions.com. But member participation in parts of the lending arena lags behind peers.

In third quarter 2016, University posted a 16.5% auto penetration and 4.8% first mortgage penetration. For credit unions in its asset band, those numbers were 18.5% and 2.6%, respectively. However, the credit union's strong first mortgage participation translates into a higher average loan balance of $14,145 per member versus $12,730 for similarly sized credit unions.

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Its efficiency ratio — where lower numbers denote a more efficient operation — is also a bit higher than peer credits — 90.2% versus 86.9% for credit unions with $250 million to $500 million in assets. With a strong net interest margin, the credit union wanted to increase its efficiency through growth.

To improve efficiency, the credit union identified an opportunity in its sales and service processes. According to Renee Ouellette, senior vice president of finance for University Credit Union, the credit union was not structured in this way but rather was focused on traditional retail services. So, the Maine credit union shook-up its strategy and org chart.

Renee Ouellette, SVP of Finance, University Credit Union

Renee Ouellette, SVP of Finance, University Credit Union

In this Q&A, Ouellette discusses the credit union’s reorganization in the second half of 2016 and why the management team decided centralizing lending was the key to greater efficiency.

Why did University Credit Union reorganize? What were some of the major changes?

Renee Ouellette: We were looking for ways to become more efficient — that was one of the primary drivers of the reorganization. We decided to transition to a centralized lending model to focus on both the sales and the service aspects of lending, which had not been a strong part of our process compared to the traditional full-member-service retail model we were operating in.

We centralized both our consumer and mortgage lending processes and created a separate arm that focuses exclusively on serving members after the loan closes.

As part of the reorganization, we also stopped indirect lending. We want to focus on not only efficiency but also developing deeper relationships with our members.

Which areas were affected by the reorganization.

CU QUICK FACTS

University Credit Union
Data as of 09.30.16

HQ: Orono, ME
ASSETS: $275.2M
MEMBERS: 27,982
BRANCHES: 9
12-MO SHARE GROWTH: 11.6%
12-MO LOAN GROWTH: 1.9%
ROA: 0.45%

RO: We created a new loan operations department. In the past, we had our originators, collectors, and a few other areas handling various aspects of servicing after a loan closed, but it was no one’s full-time focus, and many of the tasks didn’t fit within the broader areas. In some cases, job titles changed but the positions stayed relatively similar.

The credit union was committed to ensuring we did not have any layoffs. However, becoming more efficient did include having a smaller staff size overall. We used a period of higher turnover to our advantage and ramped up the reorganization efforts. We didn’t want to refill positions that were not going to be in place down the road, so the timeline became more compressed.

How long was the reorganization?  Who was involved in the planning?

RO: We were in the early stages and still discussing some of the changes when we realized we were having a period of higher attrition. The senior management began working hard on the planning efforts in March/April. We communicated the intent of the reorganization to staff in late May/early June. Then we conducted all of the new position interviews and made final selections for the revised org chart by mid-July.

In addition to the senior management team, we had many discussions with our board of directors early on and throughout planning, and the board approved the plan as a whole. We also worked with an outside party to centralize lending.

What positive results can you share — especially in terms of lending?

RO: We now have individuals who are dedicated to finding all opportunities to help our members. For example, if we see a member has a credit card and another vehicle loan elsewhere, we are able to be more proactive, whereas previously we might not have had the opportunity to discuss other products. We want to bring everything under one roof to make it easier and more beneficial for the member as well as bring additional loans for the credit union.

LENDING ACTIVITY
FOR U.S. CREDIT UNIONS | DATA AS OF 09.30.16

© Callahan & Associates | www.creditunions.com

  University Credit Union Credit Unions $250M-$500M In Assets Maine Credit Union All U.S. Credit Unions
Loan/Share Ratio 99.58% 74.75% 82.75% 78.53%
Loans & RE Servicing Portfolio/Shares 105.50% 82.17% 91.43% 85.62%
Indirect Loans/Total Loans 11.96% 19.19% 10.30% 18.65%
Annual Interest Income Per Loan Account $760 $657 $647 $704

Source: Peer-to-Peer Analytics by Callahan & Associates.

The new retail branch process has been successful as well. Members used to come into the branches and sit down with a loan officer to fill out an application for everything from credit cards to mortgage loans. They can still complete their application in a branch office, but they now do this by phone with an individual who is more experienced and specialized in the product the member is seeking.

Some members were unsure about the new process at first, but as they go through it, we’ve gotten rave reviews. It cuts down on wait time, and we give the member the opportunity to call the consumer lending originator at their convenience or we can call them. If they’d like to apply now, we provide them with a nice space where they can get on the phone with an experienced originator and complete the application.

A benefit of the loan originators being centralized in one space is that they have been able to become more specialized.

Another benefit of the loan originators being centralized in one space is that they have been able to become more specialized. This is important with more complex loans. They know which questions to ask and are able to keep track of more because they are doing this on a daily basis instead of being in a branch location where they might only handle one mortgage loan, for example, in a month.

What advice do you have to other credit unions considering a reorganization?

RO: One of our keys to success was moving through the process quickly. The reorganization wasn’t something that lasted for an extended period, which would have increased staff anxiety. Making changes like this is a challenge, but it’s going to be challenging no matter how you do it — fast or slow.

Communication is another critical piece of the puzzle. It’s important to keep as much out there as you can, understanding that you can’t always give the entire story and background to all staff. Despite this reality, we tried to keep everyone abreast of the progress and timing of changes.

Another big success for us was giving everyone the opportunity to apply for any position. We didn’t force everyone to re-apply unless there was a significant impact or change to their position. However, any staff member who was interested in a new opportunity was welcome to apply for any of the new positions. We had several people make moves within the organization because of this open application process.