Loan Growth Best Practices. Kathy Begley VP, Operations & Credit University of Kentucky FCU

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1 Loan Growth Best Practices Kathy Begley VP, Operations & Credit University of Kentucky FCU

2 Thousands Historical Loan Growth Total Loan Trends $400,000 $350,000 $300,000 $250, $200, Month

3 How did we do it? Automated systems integration Marketing Product Innovation Incentive Plan

4 Automated Systems Online web application Member and Non-member integrated with our core Enhanced Loan App (ELA) with Symitar (2007) Series of work flow steps System approval rate 62.1% direct and 37.9% indirect Account Cross Sell (ACS) with Symitar (2012) Within ELA, pre-approval offers for shares and loans based on member profile $1.9 million in new loans since Jan 2012

5 ACS Success ACS Success Since Inception (2012) Bill Pay Direct Dep E-Alerts E-Statements Home Equity Loan New Vehicle Overdraft LOC 127 Pre Appr LOC Used Auto Loan 125 Visa

6 TV and radio Marketing %20More%20Than%20A%20Name%203%20%5BLOCKED%5D%20%28Broadcast%29.mov Bill boards Newspaper Facebook and YouTube

7 Product Innovation 3 rd Party partnerships Mortgage Local mortgage companies Vehicle Indirect dealers Rate Genius Business Loan Participations Cooperative Business Servcies Student Loans Student Choice

8 Incentive Plan Sales Staff Back Office Staff (referrals) Company wide staff (Stakeholders)

9 Cooperative Center FCU Berkeley California Presented by Ms. Chris Perez VP of Lending and Loss Mitigation November 2013

10 Established in 1942 Cooperative Center FCU $104 million in assets 13,000 members CDFI designated credit union Community Development Financial Institution

11 Coop FCU Consumer Lending Strategies Diversify loan portfolio Focus on original purpose how to help our members Got Creative Think out of the box!

12 Coop FCU Lending Strategies Focus on SEG groups Business community - Partnered with cooperative affordable housing projects Indirect loans Floating homes Partnered with financial literacy programs for the underserved Starter Visa secured card programs

13 Coop FCU Lending Strategies Student loans/credit cards Partnered with UC Berkeley Offer internship program for students Commercial business loans Construction projects for affordable housing Organic gardens, energy efficient start ups

14 Coop FCU Lending Strategies The purpose of life is not to be happy. It is to be useful, to be honorable, to be compassionate, to have it make some difference that you have lived and lived well. Ralph Waldo Emerson

15 TRANSFORMING YOUR LENDING CULTURE Change Beliefs Modify Actions Alter behavior Get Results Presented by: Frank DeGraw, Executive Vice President

16 Either you manage your culture or it will manage you Source: Change the Culture-Change the Game, Roger Conners and Tom Smith

17 What is the most compelling reason to work on culture? Culture Results

18 Transforming the Culture Cycle

19 PROVIDING THE RIGHT EXPERIENCES Executive management s philosophy / attitude Policies and procedures Using the DC PRINCIPLES

20 LC 1 ANALYSIS B 1 Beliefs Making higher risk loans will hurt my career I will get my head handed to me if I make a risky loan The credit union will lose money if the loan I make goes bad I don t have the time to close more loans A 1 Actions Don t make higher risk loans Look for ways to deny them Only process low risk loans Don t try to sell anything to higher risk borrowers Avoid making the difficult decision Avoid following up approved applications to close and fund

21 LC 2 ANALYSIS B 2 Beliefs I will be rewarded for making higher risk loans I will approve and close more loans to help the membership and the credit union I will help my career by closing and funding more loans A 2 Actions Look for opportunities to make higher risk loans Look for opportunities to sell to higher risk borrowers Be excited about processing higher risk loans Make the difficult decisions Enthusiastic about closing and funding loans

22 LC 1 ANALYSIS A 1 Actions Don t make higher risk loans Look for ways to deny them Only process low risk loans Don t try to sell anything to higher risk borrowers Avoid making the difficult decision Avoid following up approved applications to close and fund R 1 Results Little to negative loan growth Low approval ratio Low funding ratio Loan officers adverse to risk Making loans only to very low risk borrowers Decrease in interest income

23 LC 2 ANALYSIS A 2 Actions Look for opportunities to make higher risk loans Look for opportunities to sell to higher risk borrowers Be excited about processing higher risk loans Make the difficult decisions Enthusiastic about closing and funding loans R 2 Results Increase in interest income Making more loans Making a broad spectrum of loans (Risk-Based) Higher approval ratio Higher funding ratio

24 Create a CULTURE OF ACCOUNTABILITY

25 STEPS TO ACCOUNTABILITY Source: Change the Culture- Change the Game, Roger Conners and Tom Smith

26 THE RESULT INTEREST INCOME