Lending Pros Share Pandemic-Fueled Lending Lessons

A new story each day this week as five credit unions share how they handled sudden change and soaring needs by adapting people, processes, and products.

 
 

Top-Level Takeaways

  • Ability to respond in a crisis was among the positives gained from the pandemic lending rush.
  • The PPP program was a particularly powerful way to serve the entire community when non-members found they could come to the local cooperative.

Credit unions have been learning a lot about their capacity to lend during the coronavirus pandemic, and we’re not talking about just liquidity.

As members were thrown out of work or saw their income otherwise plummet, their financial cooperatives responded with low-interest loans, forgiving terms, and flexibility in getting the deals done even while members and staff alike were often stuck at home.

That commitment extended to beyond just existing members, as many credit unions stepped up to help non-members apply for job-saving Paycheck Protection Program loans that were dispensed by the hundreds of billions across the country.

This week, cooperatives from Oregon, Nevada, Kansas, Indiana, and Ohio share what they’ve learned about themselves and lending as a critical member service along the way.

Refine your credit union's response to COVID-19 using the Ideas In Action: Pandemic Response page, a hub for all of our articles, webinars, and policies concerning the COVID-19 outbreak.

Trailhead FCU

Abby Stage, Vice President of Lending, Trailhead FCU

Abby Stage joined Trailhead FCU ($125.7M, Portland, OR) in 2008 and has been vice president of lending since January.

What has been your credit union’s biggest lending opportunity or challenge during the pandemic and how have you addressed it?

Abby Stage: In early April, we deployed a 0% emergency loan to assist those members who were negatively impacted by COVID-19, which gave us an opportunity to support our members’ financial needs when it mattered most. We worked in conjunction with Consolidated Credit Union, Point West Credit Union, the Northwest Credit Union Foundation, and Meyer Memorial Trust to provide the loans.

In total, we funded over $100,000 to 43 members in less than three weeks. We recognized the need for immediate access to funds while people waited for unemployment claims and stimulus checks during this taxing and unprecedented time.

What do you see as the biggest positive outcome out of your lending experience so far during this crisis, and how do you think you can build on that particular experience?

AS: The biggest positive outcome that has come out of this experience is recognizing our ability to be quick and adaptive when it comes to addressing members’ needs.

As we come out of this crisis and establish a new normal, it’s imperative that our members’ varying needs and access to services remain top priorities, while being flexible with the evolving challenges of our current environment.

In total, we funded over $100,000 to 43 members in less than three weeks. We recognized the need for immediate access to funds while people waited for unemployment claims and stimulus checks during this taxing and unprecedented time.

Abby Stage, Vice President of Lending, Trailhead FCU

Whether that’s new loan products or innovative access points for members, we want to stay relevant in the ever-changing world and will look for every opportunity to make it easy and rewarding for members to do business with us.

BONUS QUESTION: How much lending have you done in the past couple months, and how does that compare to a normal couple of months?

AS: Trailhead’s lending numbers have remained steady during the last couple months, in large part due to lower home equity rates and a strong refinance market.

Our monthly production has exceeded our loan projection for March and April by 20% and we are on track to close out May with strong numbers.

Our Member Services team has been creative, meticulous, and resourceful – helping to identify lending solutions for our members that are beneficial to their financial wellbeing.

Mazuma Credit Union

Dan Engelhard, Chief Lending Officer, Mazuma Credit Union

Dan Engelhard has been with Mazuma Credit Union ($727.8M, Overland Park, KS) for 19 years and its chief lending officer since 2012.

What has been your credit union’s biggest lending opportunity or challenge during the pandemic and how have you addressed it?

Dan Engelhard: Two big challenges. First is deploying to and continuing operations in a remote work environment. We are 100% remotely deployed now in all lending operations and were able to get there very quickly with very minimal operational impact.

Second is helping members with their lending needs, both new loan needs and assistance on existing loans. We’ve had had record production levels in the mortgage area while maintaining service levels. We ramped up our PPP program in short order and have originated over $2,000,000 for local businesses in the Kansas City area.

The biggest positive is proving our ability to work successfully in remote environments. Additionally, there are lots of new opportunities to engage new business relationships from the PPP program.

Dan Engelhard, Chief Lending Officer, Mazuma Credit Union

We’re also seeing a nice positive trend in auto lending, especially in the indirect channel. For our recovery area (collections) we’ve implemented a streamlined skip-a-pay program and helped over 10% of our loan portfolio with payment assistance. We’ve actually seen delinquency drop significantly during the pandemic time frame.

What do you see as the biggest positive outcome out of your lending experience so far during this crisis, and how do you think you can build on that particular experience?

DE: The biggest positive is proving our ability to work successfully in remote environments. Additionally, there are lots of new opportunities to engage new business relationships from the PPP program.

BONUS QUESTION: How much lending have you done in the past couple months, and how does that compare to a normal couple of months?

DE: Mortgage lending is at record levels, two to three times higher than normal production months. Small Business Banking levels are strong (including PPP loans) and is at 10.6% growth YTD. Retail (non-mortgage) production dropped the most but is trending way up over the last several weeks. We’re down about 30% YTD on retail production, primarily due to reduced auto lending.

Notre Dame FCU

Tom Gryp joined Notre Dame FCU ($670.8, Notre Dame, IN) as its president and CEO in September 2010.

What has been your credit union’s biggest lending opportunity or challenge during the pandemic and how have you addressed it?

Tom Gryp, President and CEO, Notre Dame FCU

Tom Gryp: The greatest opportunity has been our ability to move quickly to provide Paycheck Protection Program (PPP) loans to so many small businesses who were being ignored by their incumbent financial institutions.

Being made to feel abandoned by their financial institution created a great deal of fear and anxiety for these businesses. For many small businesses, the PPP loan was the only lifeline they had to keep their doors open and staff employed during the early stages of the coronavirus pandemic.

We mobilized very quickly to create a portal on our website, inviting all businesses to register with us for a PPP loan. Knowing that PPP funds were limited yet critical to saving jobs, we aggressively solicited PPP loans from both existing and prospective members. For those businesses that were not members, there was an extra step to get the necessary board and NCUA approvals before we could open accounts.

Fortunately, we were able to make this happen in a timely manner. With speed and efficiency, our employees across all departments collaborated across internal “silos” to make a difference to these businesses. As a result of this approach, we were able to fund over 970 loans totaling more than $177 million in PPP loans, and in the process, made hundreds of new friends.

What do you see as the biggest positive outcome out of your lending experience so far during this crisis, and how do you think you can build on that particular experience?

TG: Notre Dame FCU is focused on supporting those who need help the most. Through our PPP lending efforts, we were able to help businesses save around 20,000 jobs!

Forcing a small business to move its banking relationship as a prerequisite to getting a PPP loan was, in our opinion, nothing short of extortion. … In not asking, something magical happened. … Many told us to follow up after the crisis because they wanted to move their accounts to us.

Tom Gryp, President and CEO, Notre Dame FCU

Unlike other financial institutions, when making a PPP loan to a non-member business, we were very deliberate in NOT requiring – or even asking – the business to move its primary banking to us. We believed that in the middle of a crisis, the very last thing a small business had time for was to go through the process of moving its banking relationship.

Forcing a small business to move its banking relationship as a prerequisite to getting a PPP loan was, in our opinion, nothing short of extortion. The business would probably comply, but the business owner would always remember it was done under duress.

In not asking, something magical happened. These businesses appreciated that we were focusing on their needs and not ours. Many told us to follow up after the crisis because they wanted to move their accounts to us. We are absolutely convinced that, in the end, we will have grown many more new business relationships than if we had forced the issue during the PPP process.

BONUS QUESTION: How much lending have you done in the past couple months, and how does that compare to a normal couple of months?

TG: Outside of the PPP loans, our traditional business has skyrocketed. Since we have never bought indirect paper, we have become quite adept at mining our database and purchasing very specific external call lists to identify timely opportunities.

We proactively contacted those folks with not only offers that would save them money, but also to help them evaluate their entire financial situation to uncover additional savings opportunities.

With interest rates at such low levels, nearly everyone had some form of debt that could be refinanced. This situation, coupled with our already-effective outbound calling process, made setting monthly sales records not that surprising, even during the current crisis.

Commodore Perry FCU

Mike Barr has been with Commodore Perry FCU ($49.0M, Oak Harbor, OH) since 2003 and at the helm since 2008.

Mike Barr, President and CEO, Commodore Perry FCU

What has been your credit union’s biggest lending opportunity or challenge during the pandemic and how have you addressed it?

Mike Barr: One of the economic consequences of the pandemic has been the significant reduction in interest rates. This has spurred a lot of interest in refinancing activity, both in terms of mortgage and consumer loans. As a result, we’ve been advertising auto loan refinancing with no payments for 90 days. This has given us an additional opportunity to increase lending activity during a time when, like most credit unions, we’ve seen deposits increase significantly. We need to be creative about finding ways to lend monies, as the returns on investments have also dropped significantly.

What do you see as the biggest positive outcome out of your lending experience so far during this crisis, and how do you think you can build on that particular experience?

MB: For our members, the combination of lower interest refinancing with delayed payments creates both a short-term benefit of increased cash flow during the economic stall, as well as the longer-term benefit of interest savings.

We’ve been advertising auto loan refinancing with no payments for 90 days. This has given us an additional opportunity to increase lending activity during a time when, like most credit unions, we’ve seen deposits increase significantly. We need to be creative about finding ways to lend monies, as the returns on investments have also dropped significantly.

Mike Barr, President and CEO, Commodore Perry FCU

BONUS QUESTION: How much lending have you done in the past couple months, and how does that compare to a normal couple of months?

MB: Overall consumer lending has been a challenge in 2020. However, we are seeing positive trends toward returning closer to normal. For example, in January 2020, we originated approximately 46% of the volume we originated in January 2019. February, 51%, and March 60%. However, by April, we originated 65% of the volume we originated in the same month in 2019. We certainly are hopeful and working to ensure this trend continues as we come out of the pandemic.

Clark County Credit Union

Josh Haldeman has been with Clark County Credit Union ($891.7M, Las Vegas, NV) for nearly six years, the past two as its chief lending officer.

What has been your credit union’s biggest lending opportunity or challenge during the pandemic and how have you addressed it?

Josh Haldeman, Chief Lending Officer, Clark County Credit Union

Josh Haldeman: While we continue to see a fair amount of consumer lending come through the credit union, our biggest lending opportunity has been in our commercial loan portfolio. There are still strong businesses in Southern Nevada seeking opportunities to acquire capital in order to propel them to the next level. We have put strong efforts into growing that portfolio while still being cautious that the turnaround may not be as rapid as we hope.

We also have a very strong SEG in the medical field, city and county employees including first responders, and a large group of retirees from those fields. By still offering loans and maintaining branch operations during these times, many people have turned to us as their primary financial institution. 

What do you see as the biggest positive outcome out of your lending experience so far during this crisis, and how do you think you can build on that particular experience?

JH: In response to our members’ varying financial situations, we created a “HELP Loan” for individuals that have been laid off or furloughed. They receive a low interest rate loan of up to two times their monthly wages (not to exceed $10,000), based on pre-COVID income levels. 

This option is available to existing members that are in good standing with some verification of income. This has been a huge help to those that are waiting for unemployment benefits to kick in or those who are gig workers. It helps our membership know that we are here for them in their times of need and we feel it will build brand loyalty and create lifelong CCCU members. 

BONUS QUESTION: How much lending have you done in the past couple months, and how does that compare to a normal couple of months?

JH: Depending on the portfolio, lending has had its ups and downs. The consumer portfolio took a hit in March, however it picked up a little in April and so far in May we are looking to be near pre-quarantine levels. Still less than where we’d like to be, but we are definitely moving in the right direction. 

There are still strong businesses in Southern Nevada seeking opportunities to acquire capital in order to propel them to the next level. We have put strong efforts into growing that portfolio while still being cautious that the turnaround may not be as rapid as we hope.

Josh Haldeman, Chief Lending Officer, Clark County Credit Union

The mortgage portfolio has been steady, however some of our investors have put in conditions that make selling to them more risky. We have also had strong demand within HELOCs while still maintaining a conservative underwriting approach. 

The commercial portfolio has seen a good increase in loans. We were small players in the PPP loans, which has helped fuel growth. In addition, our pipeline remains strong and we’ve been able to book some large real estate deals with low LTV in both owner-occupied and investor areas. 

Want more credit union strategies? Sign up for the CreditUnions.com free newsletter.