A Personal Approach To Dealer-Referred Loans

How a hybrid indirect business model helps a Palmetto State credit union earn auto lending referrals and new member face time.

 
 

CU QUICK FACTS

SC Telco FCU
Data as of 12.31.16

HQ: Greenville, SC
ASSETS: $351.6M
MEMBERS: 54,912
BRANCHES: 7
12-MO SHARE GROWTH: 13.3%
12-MO LOAN GROWTH: 11.5%
ROA: 0.96%

SC Telco Federal Credit Union ($351.6M, Greenville, SC) is committed to improving the financial lives of the cooperative’s member-owners. This focus on developing long-term relationships with members is one of the driving factors behind its distinctive approach to indirect lending.

After one branch manager exhibited stand-out success in building relationships with local auto dealers, the credit union decided to centralize its efforts and focus more on loan referral sources.

“In 2014, we created a business relationships department,” says Travis Barbare, vice president of lending for SC Telco. “The goal was simply to develop more relationships within the communities we serve to generate new loan business.”

What started as a one-man show expanded into a team of five staff members in just two years. In the past, individual branch managers had the responsibility of drumming up loans in their respective communities. Now, the business relationships team focuses on developing those relationships. The team works within the markets the credit union serves through its seven-branch network. The team also processes all the applications the credit union receives from approximately 30 referral sources.

Travis Barbare, VP of Lending, SC Telco FCU

“The business relationships manager establishes and maintains relationships with dealers, typically those that sell an average of 30 to 40 used cars per month,” Barbare says. “We vet the dealers and look for those that are in close proximity to a branch so it is easy for new members to come in and sign the closing paperwork while we set up their new membership.”

The process starts at the dealership; however, new members must go into their local branch after the credit union has approved the loan.

“We make an appointment and forward all of the paperwork and background information to the local branch,” Barbare says. “This gives us an opportunity to educate the new member, explain the credit union difference, and review their credit report with them. If we’re going to have 30 to 45 minutes with the member, we want to discuss the types of things that will help improve their financial life.”

Having this face time has proven critical, especially with the credit union’s focus on C/D paper borrowers.

“We’re usually a much better option for these members,” Barbare says. “They get a better rate, and the dealers appreciate we fund on the same day the loan closes.”

Although SC Telco serves numerous SEGs, the credit union’s field of membership includes several underserved areas as well. This one-on-one handling benefits both parties, allowing relationship owners and borrowers to get to know each other and discuss specific ways the credit union can help the member reach their goals.

We work hard for members, and that is our message with dealers, too.

Travis Barbare, VP of Lending, SC Telco FCU

Several new members needing to sign paperwork at once can create capacity issues, but the credit union’s team members work through challenges like this to provide white glove service.

And that personal touch is paying off. In fourth quarter 2016, SC Telco earned 687 net new members per branch, compared with 148 for credit unions with $250 million to $500 million in assets and 224 for credit unions nationally, according to data from Callahan & Associates.

The credit union has also posted strong checking and deposit growth along with triple-digit growth in ancillary services. Year-over-year, the credit union posted a 13.3% growth in shares and a 11.5% growth in loans. This bested the growth posted by asset-based peers and credit unions nationally.

What’s more, Barbare says the average GAP and MRC policies for SC Telco have increased from 30 per month on average to nearly 200 per month.

In 2016, 56% of SC Telco’s auto lending came from its referral sources, according to Barbare, and the credit union’s used auto loan portfolio grew 39.8%.

How Do You Compare?

Check out SC Telco FCU's performance profile. Then build your own peer group and browse performance reports for more insightful comparisons

Search & Analyze

Perhaps surprisingly, SC Telco has achieved this growth without paying any fees to dealers. Unlike traditional indirect lending with incentives or fees, the credit union bases this model solely on relationships and service.

“We work hard for members, and that is our message with dealers, too,” Barbare says. “Dealers know we’ll come up with solutions that make sense for the borrowers and the dealers.”

In terms of advice for other credit unions, the vice president of lending recommends using the best talent for the broader community outreach. Plus, think about all the areas in the credit union, including branch staff and collections, this model would affect.

“Overall, this approach has been successful for us,” Barbare says. "It works well in the communities we serve. We're looking forward to continuing a smart growth strategy that balances volume and service."

 

 

 

May 1, 2017


Comments

 
 
 

No comments have been posted yet. Be the first one.