Operating its indirect lending program for several years as part of a CUSO with 16 other credit unions throughout Maryland, northern Virginia and parts of Pennsylvania, executives from State Employees Credit Union of Maryland (SECU) knew it wasn’t reaching its full potential.
“We were a little displeased with the way we were set up there because even with 17 members, SECU was responsible for about 60-65% of the business for the entire CUSO,” said James “Toby” Smith, the credit union’s vice president of lending. “The problem with that was an overwhelming majority of the members had to agree to make decisions. Some credit unions were doing a dozen loans each month while we were doing a couple hundred, so changes to the programs we wanted to offer or our rate sheets were subject to a very slow approval process.”
SECU is headquartered in Linthicum, MD. The credit union serves 240,000 members throughout Maryland and surrounding areas with 22 branches and $3.4 billion in assets. SECU’s indirect lending portfolio is approximately $360 million, and it has a total lending portfolio of $3 billion.
The cost savings associated with being part of a CUSO, Smith added, were being offset by opportunities SECU was missing due to an inability to be nimble and respond to market changes. SECU knew where the opportunity was in the indirect space and had room in the balance sheet for expansion. “At that time, our strategy was to pursue and achieve significant growth in all categories,” Smith said. “We saw a huge amount of potential in indirect lending, so we decided to leave the CUSO and try it on our own.”
After reviewing and analyzing several different options, SECU chose to partner with CRIF Select. It chose the SelectComplete solution, which includes dealer management, loan package processing and fulfillment services, and program consulting as well as state-of-the-industry technology for indirect lending. While the previous CUSO did offer dealer representation, SECU’s new program with CRIF Select features two CRIF Select dealership representatives and an account manager to service the market.
“We were also allowed to interview Select’s prospective dealer reps who would be brought aboard to represent our local markets,” Smith said. “It felt very good, as a true partner, to see that our opinion was valued every step of the way. That went a long way to prove CRIF really cares about what’s important to its clients.”
CRIF Select’s processing and funding staff in Atlanta, GA, would allow SECU to handle increased volumes without putting strain on the credit union’s existing internal staff or creating a need for more overhead, Smith explained. CRIF Select’s consulting expertise would also give SECU the benefit of borrowing from experience of similar clients that had faced common challenges that could arise.
Within the first year of partnering with CRIF Select, SECU’s indirect lending footprint more than doubled. Application volume jumped from 955 to 2,088 applications each month. Funding amounts increased from $101.5 million to $238.8 million.
In fact, SECU’s partnership with CRIF Select was almost too successful within the first year. “We basically outkicked our coverage, to borrow a football metaphor, because CRIF Select was so good at what it does,” Smith said. “Our loans-to-share ratio shot up from 88% to 101%, and as a result, we were facing a situation where our cost of funds would have negated any further growth.”
That’s where Select’s consulting expertise proved to be a valuable asset. CRIF Select advised SECU, which was disproportionately leveraged in the A and B credit tiers, to change the structure of its dealer flats and interest rates for the lower-rated tiers as a way to encourage more-profitable deals without sacrificing any of the program’s growth.
“It really helped us transition from just exponential growth to smart growth,” Smith said. “CRIF Select’s expertise played a tremendous role in that process.”
But perhaps the most important aspect where CRIF Select helped SECU with these changes was in the messaging to get out in front of the coming changes without damaging relationships with any of its most powerful dealerships. “I can’t place a dollar figure on the value of the CRIF partnership to manage the messaging and keep those dealers happy despite the fact we were lowering flats and raising rates,” Smith said “Each move had to be strategic so we didn’t overwhelm our dealers and not simply a knee-jerk reaction to both our balance sheet and a shifting market.”
Moving forward, Smith says SECU is excited to see where its partnership with CRIF Select can help the credit union refine its focus and identify more advanced growth opportunities. “As far as we’re concerned, the sky’s the limit,” he said.
CRIF Select offers the tools and expertise to help any credit union build and maintain a superior indirect lending program. For a complete guide on how to build or strengthen each portion of your program including dealer management, technology, underwriting, processing and funding, and consulting and reporting, please click the button below to request a copy of our Universal Roadmap for Indirect Lending Success.