Grow Financial Federal Credit Union ($1.9,B, Tampa, FL) was founded in 1955 to serve the military personnel and civilian employees of MacDill Air Force Base in Tampa, FL. The credit union has since expanded its membership to serve employees of more than 1,000 local businesses in certain Florida, Georgia, and South Carolina counties.
Over the past year, the credit union has grown its loans faster than its shares, posting a 6.74% 12-month loan growth as of March 31, 2013, versus a 4.57% for its 12-month share growth. It had 0.61 loan accounts per member in the first quarter versus 0.55 for credit unions with $1 billion or more in assets, 0.50 for all credit unions nationally, and 0.48 for Florida credit unions. Its first mortgage penetration was 2.97% versus 2.39% for its asset-based peer group, 2.08% for all credit unions nationally, and 2.15% for Florida credit unions. Its auto penetration was even more impressive; 27.75% versus 16.66% for credit unions with $1 billion or more in assets, 16.0% for all credit unions nationally, and 14.99% for Florida credit unions.
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Here, Amy Perez, assistant vice president of retail lending at Grow Financial, talks about efficiency and opportunity at the Florida credit union.
What lending area do you focus on these days?
Amy Perez: Auto loans are our primary focus — both direct and indirect. However mortgage lending and commercial lending are key areas for the credit union as well.
Does Grow use a centralized lending model?
AP: Yes, we went live with 100% centralized lending in April 2012. It’s been successful; we’re able to deliver consistent service and we started a pilot last week for centralized funding as well. We’re funding six branches and our call center centrally and within the next few months we plan to have 100% centralized funding.
How does centralized lending help Grow capitalize on new opportunities?
AP: When we made the decision to go to centralized lending, we spent a lot of time brainstorming about what would make this a successful transition. There were strong opinions on both sides regarding whether we should be centralized, it was a big move to take away the decisioning from those who work face-to-face with the members. We wanted to identify how we could bridge that gap and what we could do to capitalize on a portion of the market that was not being served.
Coming out of the recession, members’ credit scores had dropped significantly. However, we viewed a lot of people who were “D” or “E” risk according to their credit scores as more “B” or “C” risk because they were getting back on their feet.
It takes time for credit scores to rebound, and Grow wanted to be the financial institution that was there for our members and helped them as they were coming out of hard times. These loans are high yielding and profitable, and we felt we could gain member loyalty for a lifetime.
We put more experienced underwriters with the C/D/E loans while the newer underwriters focused on A/B paper. This approach made a difference. Today our D/E paper is the highest yielding paper, and we don’t have a lot of losses.
How do you train your underwriters? What tools do they use?
AP: We train them to look at risk and yield. By using both the Beacon score and EDTI [enhanced debt to income], underwriters can analyze how much risk is involved and what the potential yield is for the credit union. This is helpful, especially if the underwriter is on the fence about an application.
What are some of the new opportunities you’ve capitalized on recently?
AP: The credit union moved into South Carolina and Georgia last November. No one had programs like Grow does for first-time buyers, and there are a lot of untapped needs. We hired a vice president for the market who is involved in the local chambers and the community. We also have a dealer services department that consists of four dealer representatives and an AVP. One of the dealer representatives is specific to South Carolina and Georgia. They are the sales arm and sign-up new dealerships for the indirect program — we’ve signed up approximately 100 dealerships and are looking to build a branch in the area — in addition to serving as the middlemen between the dealerships and underwriting.
How does the credit union keep up with collections and fraud?
AP: We work close together as far as consumer loan delinquency or charge-offs. The collections team sends information to the lending department so our trainers can audit the loans and go back out to the underwriters to train on it.
We communicate any patterns or trends we see right away so underwriters know what has contributed to those losses. We also share analytics back and forth between the collections and lending teams. The goal is for each of us to understand what’s going on within both teams and keep communications open.
How do you solicit feedback from new hires?
AP: They go through traditional new hire training, but then we also have an underwriting-specific training program. As part of that secondary piece of training, we schedule times to meet one-on-one with each new underwriter.
Not only do they meet individually with their manager and lending executives, they also meet with our dealer services area. The goal of these one-on-one sessions is to get their feedback and gauge their experience. But this doesn’t stop after the training period. We schedule regular one-on-ones and offer employee incentives for ideas we can use. We create open communication through weekly one-on-ones with direct supervisors and monthly or quarterly meetings with the senior vice president of lending, who asks for feedback on how they can improve their internal and external service. In fact, Grow was just voted the No. 1 place to work in the Tampa Bay area.
Are there specific examples you can share about process improvements you made?
AP: Before we moved to centralized funding, we had a three-step process: review the loan before funding, fund it, and have quality control review it again after funding. We streamlined that process when we changed to centralized funding. The funder now looks at the loan just once before funding and we have removed that second review. Combining QC and funding has allowed us to reduce staff time and build efficiency.