In many scenarios, rapid-fire growth on the balance sheet can be a good thing. But in hyper-competitive markets like Sayre, PA, it’s the long game that really counts. That’s why the past two years of activity at Guthrie Federal Credit Union ($62.2M, Sayre, PA) under new CEO John Savelli have been so significant.

First profiled by Callahan & Associates in the 2010 Anatomy of A Big Thinker series, Guthrie had essentially quadrupled its asset size in less than a decade. This growth was a good thing overall, affording Guthrie the scalability and efficiency that comes with being a larger institution. But it also created some immediate dilemmas on the balance sheet and, in some cases, shifted attention and resources away from other areas of development.

Under the guidance of Savelli, who took the helm in December 2011, Guthrie has been able to accomplish a number of notable improvements, including stabilizing its asset growth, augmenting several important areas of the loan portfolio, and bolstering member relationships through its digital and physical channels.

Addressing The Achilles Heel

Savelli is no stranger to the financial services business. His past experience includes five years working as a loan review officer for a bank and seven years as the senior vice president, chief financial officer of GHS Federal Credit Union ($134.6M), both of which are located in Binghamton, NY.

When he took the helm at Guthrie, Savelli immediately realized the organization had a wealth of potential but also noted areas of weakness he needed to proactively address.

When you look at the numbers on the call report, you get a 50,000 foot look from above but you really don’t know what’s going on until you get on the ground level, he says.

The most severe of these issues was an outstanding concentration risk stemming from a single member who had a large amount in CDs deposited with the credit union. These were set to mature in late 2012, yet the member’s intentions for the funds after that point were unclear.

We set up some one-on-one conversations with that individual and explained how these funds were impacting our balance sheet, Savelli says. We eventually convinced them to move some of that money and come back down to NCUA insured limits on the funds they continued to hold with us.

To reduce any future reliance on singular, high-net-worth members, Guthrie added longer term four- and five-year CDs to its roster and bumped the minimum opening balance from $500 to $1,000. So far, this new savings vehicle has attracted nearly $3 million in additional deposits.

In late 2012, the credit union also joined the Federal Home Loan Bank of Pittsburgh and secured a $10 million line of credit to use for any further enhancements or investments.

Lastly, the credit union replaced its chief financial officer role with a CPA-certified controller and brought the majority of its ALMactivity in-house, which allowed it to better identify risks and nuances that outsiders might have overlooked. Viewed holistically, these changes have had a real effect on the credit union’s safety and soundness.

In 2011, our capital was 7.47% and declining due to rapid asset growth, Savelli says. Right now it’s at 9.48% and growing due to continued profitability controlled asset growth. We’re very happy with that, as are our regulators.

Playing To Its Strengths

As of midyear 2013, annual loan growth at Guthrie was 3.07%, according to Callahan’s Peer-to-Peer analytics. More notable, though, is the growth within its portfolio.

Areas of traditional strength have grown modestly in the past year. For example, the other real estate loans like HELOCs that historically made up approximately 50% of Guthrie’s loan portfolio have increased by 4.9% annually.

However, the credit union has also grown smaller areas of the portfolio such as fixed first mortgages, unsecured credit cards, and new auto by 52%, 31%, and 21% respectively. In terms of overall balances, first mortgages are up more than $1 million over last year, credit cards are up roughly half a million, and new autos are up by approximately $750,000.

Savelli has changed many things at Guthrie, but lending is one area where he embraced its existing strategies. For example, Guthrie has continued its relationship with a third party that handles mortgage underwriting, closing, and servicing. It has also grown this relationship to secure more hands-on training for branch staff, which has helped Guthrie build its in-house expertise.

We saw an influx of mortgage activity as rates started to rise and have also been able to snap up some business from HELOC lenders who exited the market, Savelli says.

A physical redesign of Guthrie’s card products has also had a demonstrated effect on the portfolio.

Our debit card used to look like a restaurant gift card, Savelli says. We changed that design to a blue background and use a yellow background for our credit card, as those are our two primary brand colors.

Guthrie stayed away from the 0% introductory rate that many institutions have offered in the past few years. Instead, it stands behind its streamlined rewards system of one point for every $2 spent with a debit or credit card. And although it can’t afford some of the more extravagant rewards such as airline miles, Guthrie does allow members to combine their points within a household.

Our members appreciate transparency and they know what’s a gimmick and what’s not, Savelli says. By offering a good, low rate and rewarding them with points, we’ve been able to grow that product.

The credit union is set to roll out instant issuance cards for all its debit and credit products this month. Guthrie projects that convenience and accessibility will increase activation rates by 10% to 13% and ramp up transactions by anywhere from 20% to 40%.

Although Guthrie remains active with its main SEG group the roughly 5,000-employee-strong Guthrie Healthcare System it is also expanding the scope and scale of its outreach efforts, which has helped fuel new loan activity.

In the past three months alone, Guthrie has signed up eight new SEG groups, including the staff of a local newspaper The Morning Times and employees at Valley Energy, a local natural gas company. Year-over-year, membership is up 1.39% at the credit union.

We need these new members so we can keep growing and have someone to loan to, Savelli says. These are not huge organizations; some have just 30 employees or so, but they have shown an interest in our brand and the products and services we have.

Growing Into An Electronic Footprint

With rapid growth comes the need for the technological infrastructure to support that activity. But by 2010, Guthrie’s servers as well as many other IT resources had been pushed to their limits.

It had gotten to the point where we couldn’t take advantage of new software that was out there, Savelli says. So we had to upgrade a lot of our systems.

Some of the immediate benefits of this investment included an accounts payable module and second set of servers in the credit union’s Troy, PA, location, which created data redundancy and helped mitigate disaster recovery concerns.

There have also been some big changes to the credit union’s member-facing channels. The credit union overhauled its website in Summer 2013.It had planned to release a new home banking platform and a set of mobile- and tablet-optimized apps at the same time; however, given the impeding release of Apple’s new iOS 7 operating system upgrade, Guthrie held off on releasing these resources for about one month until it could test everything for compatibility with this system.

Now, we have a nice app that works seamlessly with this new upgrade, and we hope to add mobile bill pay by the end of the year to further enhance these offerings, Savelli says.

One of the most significant changes with the new home banking platform is a rebranded name that is easier for users to remember.

Our old name for home banking was Flex Net, but members didn’t really know what that stood for and would even sometimes refer to it as Netflix, he says. So we asked our employees to submit some name ideas and we ended up rebranding it as Guthrie FCU Online.

The addition of e-alerts and an ability to change their addresses online also added value for Guthrie members.

We were getting 10 to 12 address changes per day when we first added that capability, Savelli says. When our members were presented with an easier way to let us know where there were, they jumped on it.

The credit union also plans to roll out RDC by December of this year.

Although the number of members signed up for home banking is still in line with the 80% level identified in 2010, the percent of the membership frequently using this channel is up to 40% and Guthrie expects these new offerings to push usage rates even higher in the months ahead.

Then And Now

Read the 4Q 2010 Anatomy Of A Big Thinker feature to learn more about Guthrie Federal Credit Union.