A Strategy To Serve C And D Paper Borrowers

Cornhusker credit union Trius FCU offers ways to reach good borrowers in hard times while still mitigating risk.

In April 2015, Trius Federal Credit Union ($67.3M, Kearney, NE) then called Kearney Federal Credit Union agreed to merge Kearney Eaton Employees Federal Credit Union, an $18 million institution and the only other credit union in town.

We were in competition all the time, and members would flip back and forth based on who had the better rates, says Amy Schade, the credit union’s vice president of lending. Because we had so many joint members, it made sense for us to grow stronger together.

As a result of the merger, the credit union posted immediate spikes in key financial ratios, such as loan, share, and member growth.

Click the tabs below to view graphs.

1. Loan Growth

2. Share Growth

3. Member Growth

How did lending at Kearney FCU compare to Kearney Eaton Employees before the merger?

Amy Schade: Our lending style was different from Kearney Eaton. We offered a more diverse suite of loans credit cards, consolidation loans, unsecured loans more than $2,000, and more. Kearney Eaton’s lending guidelines were boxy and strict, whereas we offer members outside-of-the-box ideas. Kearney Eaton just didn’t lend to the riskier paper as much as we do.

How does the credit union’s loan portfolio breakdown in terms of credit tier?

AS: For our most recent numbers from June 2016, E was 3.56%, D was 6.94%, C was 13.12%, B was 16.05%, A was 18.32%, and AAA was 24.42%. The remaining 17% is made up of non-risk based products such as some HELOCs, mortgages, and loans inherited from Kearney Eaton Employees in the merger.


Data as of 09.30.16

HQ: Kearney, NE
ASSETS: $67.3M
MEMBERS: 10,439
ROA: 0.45%

Several times a year, Lending Solutions Consulting Incorporated goes on-site to Trius FCU for lender training on interviewing, relationship building, and loan packaging skills. Find your next partner in the Callahan & Associates online Buyer’s Guide.

How does the credit union reach C/D paper borrowers?

AS: We try to build relationships. Members come in and we speak with them for 30 minutes to an hour to get to know them. We ask them how they’ve arrived in the situation they’re in and try to put loans together based on the information we’ve collected.

Word traveled fast that we were giving people a financial opportunity.

Amy Schade, Vice President of Lending, Trius FCU

How do you mitigate risk?

AS: We have an approval matrix for loan officers based on how advanced they are in their interviewing skills and how long they’ve been with the credit union, among others variables. A number of loan officers are not able to approve C/D paper loans on their own. Instead, they underwrite the loan and place them in a loan approval queue with a written statement explaining why the loan should be approved. Then, a higher-level lender will ask questions and approve or deny the loan. The approval queue isn’t just for C/D/E paper, but that’s much of what we see come through.

We also conduct random loan audits. Each month we monitor the yields and delinquencies in the portfolios of our loan officers. If we see an employee’s portfolio has spiked in delinquency relative to the norm, they we’ll audit 10 random loans from the past month to see if something is going on.

For the C/D paper on the mortgage side, we run a credit score enhancement program. Our mortgage loan originators sit down with these members, dissect their application and financial picture, and say, This is where you are today. If you want to buy a house in six months this is where you need to be.

We’ve also built a relationship with a local, small, used car dealer. It probably has 30 cars on the lot with prices running from $10,000 – $30,000 each. He’s sent us a lot of business.

How Do You Compare?

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How did you build this relationship?

AS: I oversee collections and was getting tired of sending vehicles to auction or sending them to a used car lot. A few years ago, I reached out and asked if Tim and Lanny’s Auto Center was interested in consigning some of my repossessions.

We hit it off on, and at the beginning of 2015 we started an in-dealership office on Saturday mornings that we staff with two Trius loan officers. The dealership refers them to us and we do the financing there. It’s like indirect but not really because we get to touch and feel the loan before we make the decision.

What is it about Trius’ field of membership that makes you comfortable approving loans in this credit tier?

AS: We have a lot of manufacturing in our area. We have the Eaton Corporation, which was the main field of membership for the credit union we merged. We also have Tyson meats and a few other meat packing plants. We know they’re all paid weekly and are blue-collar hard workers.

We have the mindset that bad things happen to good people. Kearney is a small town of approximately 35,000, and word travelled fast that we were giving people a financial opportunity and weren’t of one of those Buy Here Pay Here-type places.

February 1, 2017

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