Empower Federal Credit Union Fattens Loan Portfolio

The New York-based credit union has an “aggressive” incentive program that Brenda Carhart, senior vice president of lending for Empower, says has paid off.


Empower Federal Credit Union ($1.0B, Syracuse, NY) is on pace to snag 14.3% in loan growth for 2011 after it focused on rewarding lending sales behavior, monitoring its results, and regularly improving its lending process, says Brenda Carhart, the credit union’s senior vice president of lending.

Empower FCU is the result of a 2007 merger of two $300 million credit unions — Empire Credit Union and Power Credit Union — that resulted in a $600 million credit union. In the past four years it’s increased its assets to $1.0 billion and its member base from 60,000 members to 104,122 members during that time.  It has more than 20 branches, mainly in central New York, and more than 300 employees.

This year, as Empower pushes toward the 14.3% loan growth, it’s also on track to originate $345 million in loans with 16% of them being C/D/E paper-grade loans, which are more difficult to originate. It had similar significant growth in 2009 and 2010, when it snagged about 10% loan growth both years.

Most of the credit union’s loan growth comes from home equity fixed loans, home equity line of credits, and auto loans, Carhart says. It sold most of its first mortgage loans in 2011, approximately $62 million worth, and is now selling all new mortgage originations. Empower has no indirect lending program; all of its auto lending is direct.

To gauge its success, Empower looks closely at both its approval ratios, which are now about 93%, and its close ratios, also called fund ratios, which have risen from about 65% to 80% this year. It has a .95 loan delinquency.

Carhart attributes Empower’s healthy loan portfolio to three strategies: investing in staff through incentive programs, fine-tuning the structure of where loans fit into the business, and improving the lending process regularly.

How Empower Puts Its People First

Carhart says Empower’s incentive plan, which sets a specific expectation and rewards behavior, is “very aggressive” and includes all lending personnel, from sales people, back office processors, and underwriters to the collections group, the commercial group, and the mortgage group. The credit union offers its management team a quarterly incentive plan with six specific goals: close ratio, consumer loan growth, delinquency, insurance cross sells, mortgage growth, and business loans growth.

“The idea is you want everyone working toward the same goal,” Carhart says. “Loan officers will get paid for setting up the loans and processors get paid to book the loan to keep the loan moving through the pipeline.”

One of Empower’s biggest successes has come from competitor buyouts, where employees mine a credit report for opportunity to cross-sell or consolidate from another financial institution. To date, Empower has done $55 million in buyouts, or 22% of its overall loan business, which called Carhart says is “very important in our loan growth numbers.”

Also, Empower focuses on insurance cross sells and is averaging approximately 45% in sales through its insurance carrier. Loan officers are paid for selling disability, life insurance, gap insurance, and mechanical repair coverage through a $600,000 incentive plan.

Structure Departments For Quality And Speed

Empower has placed its 22 loans officers at each of its branches and has a lending call center staffed with another nine employees. There are two loan officers trained in accepting internet applications and two lenders who travel to the credit union’s SEG groups.

“We do take the time to look at every loan,” Carhart says. “We don’t automate too many loans.”

The credit union’s loan operation support group was the result of its 2007 merger, when the combined organization needed to eliminate some paperwork and the streamline processes. Now, that group has four processors that take the paperwork, prepare it and follow-up with the members so that sales people can focus on securing the next loan. “It allows us to turnaround most of our loans around within 24 hours,” Carhart says of the structure.

Making Lending Processes More Efficient

Empower relies heavily on metrics to track the success of its portfolio, breaking down the portfolio by paper grade, loan type, and paper grade by loan type. That allows executives to see if there is a particular category that’s inefficient or unprofitable or revels whether and where the credit union needs to add staff.

It’s focused on making lending more convenient for its lenders in way like adding iPads in branches so employees can close a loan anywhere in a busy branch. It’s started using Internet signatures and is encouraging more members to participate in that. Now, executives are considering including a live chat function in the lending process.