St. Mary’s Bank ($747.9M, Manchester, N.H.) is the oldest credit union in the U.S., but it’s not stuck in the past – it’s relishing its future. The credit union created an aggressively-priced mortgage product alternative. It’s been holding its indirect lending partners more accountable. And it fine-tuned its loan department to increase efficiency.
Because of these changes, St. Mary’s loan portfolio has grown substantially over the past few years to $530 million, 85% of which is in real estate and consumer lending. In just the past year, the loan portfolio grew at more than four times the rate of the credit union's peer group. It topped 11% growth through March 2012, compared to 2.73% for credit unions with assets between $500 million and $1 billion.
The improving economic environment has helped the cooperative, but St. Mary’s Bank also benefitted from its hybrid Easy Way Equity Loan Mortgage Alternative. The product works on the consumer side of the portfolio and has been able to compete in the fixed-rate arena.
The Easy Way Equity Loan Mortgage Alternative rolled out in September 2011 and St. Mary’s has since serviced about 100 loans. That’s brought in $9.5 million in new, 3.74% APR loans, with an average loan balance of $95,000. The credit union expects to surpass $10 million by the end of August.
“It’s the easiest product you could think of,” says Elizabeth Stodolski, director of marketing at St. Mary’s Bank.
When marketing ELMA – the internal nickname for the new product – the credit union looks at the borrower’s age, income, and home-ownership status. Because the product has no closing costs, it works well for members in their mid-30s or older who own a home that they can refinance. The credit union is also looking for a member with an income around $40,000 or an A+ or A-tiered lender definition, says Steve Macek, director of consumer lending at St. Mary’s Bank.
The cooperative’s email marketing has been its most successful. St. Mary’s Bank uses its data to identify members and craft messages based on their needs.
St. Mary’s lending success is also the result of a restructured loan department. With the influx in loan volume, the credit union hired eight new employees – two loan officers to bring its total to eight, and six more employees to process the requests. These employees will be able to focus solely on loans in a mortgage center that will be opening in September, says Stodolski. The first mortgage center will be located in Nashua, N.H. The credit union already has one branch in Nashua, N.H., but wants to have a strong presence and develop more loan business in the second-largest city in the state.
The credit union redefined goals and set expectations for how long each position would support one loan with the loan operations group. Employee roles changed to a more focused job description, dividing the work into specific roles of loan opener, loan processor, underwriter, loan closer, and post loan closer.
The loan opener assigns the loan to a processor, underwriter, and title company. They order the appraisal, flood certificate, and title so the information is received as soon as possible. The file is given for preliminary review to an underwriter, who gives a conditional approval pending verification of all information.
The file then moves to the loan processor who looks at the underwriter’s conditions and works directly with the member. Once all conditions are met, the loan file will flow back to the underwriter for final approval. The file then moves to the loan closer. This position sets the closing date, seeks final documents, including insurance binder and verbal verification of employment, and prepares the closing documents.
After the loan closing, the file returns to the department for review by the post loan closer, who verifies all documents have the required signatures. All of this is done with the expectation that the loan will close within 30 calendar days, giving the credit union about 20 business days to process the file.
Along with rearranging the department positions, St. Mary’s Bank also restructured employee compensation, providing incentives, including group rewards, meals, and other prizes valued between $100 and $200.
The credit union concentrates on its indirect lending program as well. Over the past year, its auto loan portfolio increased 16.9%. Used auto has jumped 27.9%, which puts St. Mary’s Bank in the top 10% for indirect credit union lenders. And these gains have been tough for the cooperative financial institution.
“Call it Yankee frugality, but people here hold onto their cars for a long time,” says Macek. The average age of a car in New Hampshire is nine years. “We’re asking every dealer we service for one additional loan per month.”
While the request doesn’t seem like much, with 150 active dealers and an average loan size of $17,000 to $18,000, the amounts add up.
“We’re holding our dealer partners more accountable,” says Macek. “We’re challenging them to only send us loans we’ll approve.”
The credit union has also hired an employee to visit its dealer partners and ask them what loans didn’t come to the credit union and why. Most loans aren’t turned down at St. Mary’s Bank though. It prices indirect rates the same as direct rates to eliminate competition and confusion.
Within the indirect department, the marketing continues to be both internal and external. Approximately every month, the credit union works on themed sales campaigns with goals, competitions, and celebrations.
Between mid-June and July, employees competed in the campaign "Refi 101", working to capture loans from other financial institutions. St. Mary’s Bank offered to deposit $101 in members’ accounts if they brought in a loan from another institution.
The financial services industry is constantly changing. Credit unions continue to look to new players, but St. Mary’s Bank has shown it has no qualms with change and wants to persevere as a leader. Mirroring some of its strategies in restructuring and accountability can lead to more productive and happy loan department.
Author Bailey Reutzel and multimedia producer Melissa Forsyth hit the road in August for a weeklong Cooperative Trek. They traveled from Washington, DC, to Portland, ME, stopping along the way at 11 credit unions and learning first-hand about successful strategies to share with our readers. Follow the 2012 Cooperative Trek on CreditUnions.com as we release stories from the road throughout the fall of 2012.