Step Away From Status Quo In New Economy

New tools and procedures designed to meet regulatory challenge can help you survive a new economy.


This is part two in a two-part series on how credit unions can respond to a changing economic and regulatory environment.

The Dodd-Frank Act and the NCUA have imposed financial regulations this year that, together, affect almost every aspect of the nation’s financial industry.

For members, it’s triggered a cutback in spending, a trend which has made the marketplace for their business even more competitive. Credit unions have reacted proactively by turning to new tools and procedures designed to compete aggressively and are growing their portfolios and increasing profitability in all areas — from mortgages to auto loans.

Evan Kass, vice president of consumer lending at Schools Financial Credit Union ($1.3B, Sacramento, CA) concedes that the new regulations were merely an extension of what was already being done.

“Schools Financial CU performs prudent risk management practices,” Kass says. “We routinely pull updated credit information and updated collateral valuations on all our consumer and residential loans in order to determine our level of risk and make any necessary line adjustments and manage our loan loss reserves. We validate our scoring models and underwriting criteria, and routinely report on credit quality to our board of directors.”

The credit unions that are experiencing growth during these difficult times agree that new analytics and procedures are needed to help manage lending strategies and to heighten loan growth, while at the same time reducing delinquency and loss levels.

This improved visibility helps credit unions drive operational efficiencies. They also support growth by helping organizations explore fundamental business questions that frame decisions. In the process they reveal new insights and assist in forecasting future trends.

In an era that the Information Technology (IT) industry calls the new normal, information automation has become more critical than business process automation. Part of the reason for this is new government regulation, but another important reason is simply that data content doubles about every 14 months.

While the growth in data can seem overwhelming — not to mention the effort needed to manage that data – many credit unions are eager to seize the opportunities it presents. If knowledge is power, data is business value. Fortunately, IT companies are making it possible for organizations to take a step-by-step approach in building up their capabilities to tap that bonanza.

Mark Mykleburg, lending manager of Prevail Credit Union ($232.5M, Seattle, WA), strongly recommends automated tools that free up credit union executives to do the all-important work of lending.  He advises spending quality time in researching technology solutions to fit specific needs.

“Analytics are the key in allowing us to capture additional business in the higher risk loans,” Mykleburg says. “Look at it this way — if you were very sick, you’d visit a specialist who’d run tests to determine why you were sick. Without that information, how could you be treated properly? I have been able to minimize my losses and filter my approvals based on the factors provided by the analytics. I have determined characteristics that allow me to automatically approve down to 660 credit scores. I would not be able to do that without the analytics.”

Kass says he agrees on the value of analytics.

“We frequently review applicant characteristics on all of our risk tiers and determine if our underwriting threshold requires any adjustment,” Kass says. “That said, we manage our portfolio risk by controlling the volume of loans in the lower tiers.”

As the economy continues to improve, having these tools and processes in place will then position credit unions for still stronger, more secure growth. Even today, many credit unions are taking a more active approach to growing their portfolios and finding success in those efforts.

Lending Insights provides key analytics and reporting tools that help credit unions make more profitable loans, while meeting regulatory requirements. Lending Insights helps credit unions easily view and understand all aspects of their loan portfolios for timely and strategic decisions.

The first part in this series explored how credit unions can successfully manage risk through an economic enviroment rife with new regulations. See "Adapt To New Rules To Grow Your Portfolio" for advice on those strategies.

This is an excerpt from an article that appears in the Fall/Winter 2011 issue of CU Direct’s Merge magazine.

Credit unions interested in learning more about how Lending Insights can support and enhance their lending program, can contact Mike James at 877-262-3680, ext. 704, or, or visit



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