How Attentive Listening Makes For Stronger Lending

First Source Federal Credit Union scores rapid loan growth by considering a borrower’s personal background as well as their financial history.

First Source Federal Credit Union ($415.6M, New Hartford, NY) is increasing its lending portfolio at twice the rate of the average credit union its size, and its membership is growing at an even better clip.

The lending volume has prompted its managers to decentralize lending decisioning and underwriting, while its staff continues to pump out $1.53 million a year in annual loan origination per employee, 50% more than the average of the 339 U.S. credit unions with $250 million to $500 million in assets that’s with a delinquency rate half of its asset-based peers.


First Source FCU
Data as of 09.30.15

HQ: New Hartford, NY
ASSETS: $415.6M
MEMBERS: 39,517
12-MO LOAN GROWTH: 20.6%
ROA: 0.93%

How does the credit union do this? It opens its ears before it closes its coffers.

After meeting with consultants and taking a hard look at operations, First Source’s managers have re-focused their philosophy and approach so they can lend to members they might not have lent to in the past, says Amy Fierro, the credit union’s assistant vice president of lending.

We still check credit scores, but we price on them, we don’t approve on them, Fierro says. We look at the whole picture now. Their work history, how they got to where they are today, the bumps in the road they’ve hit, and how we can help overcome them.

Adds Amy DeMetri, vice president of member services, We deep dive into their stories and together build a stronger loan.

First Source is a leader in a lot of major metrics in the Search Analyze database at How do you compare? Find out here.

A Local Institution For Local Members

Amy DeMetri, VP Member Services, First Source Federal Credit Union

Originally a local teachers’ credit union, First Source prides itself on not judging, on being a place where residents can be comfortable sharing the lowdown on their situation.

We have people come in who are too embarrassed to talk to their own bank, even if they’re been customers there for years, Fierro says. We have people who have been through layoffs, demotions, sicknesses, divorces, you name it. We’re giving a lot of people second chances when other institutions wouldn’t even look at them.

For example, the credit union has helped an out-of-work couple with the husband laid off and suffering from cancer.

They were afraid to go to their own institution because they had some blips in their credit score, DeMetri says. We don’t define them by their credit report. We helped them sell and buy a house. He’s healthy now, and they’re both working again.

The credit union also works with businesses. For example, after three generations and more than 100 years, a local clothing store had no natural successor and faced closure. The credit union made a loan to keep the ship afloat when a local human services director with no retail experience stepped up and ensured the vendors and employees would stay aboard.

They haven’t missed a payment, DeMetri says.

We’re giving a lot of people second chances when other institutions wouldn’t even look at them.

Amy Fierro, Assistant Vice President of Lending, First Source Federal Credit Union

Credit union employees balance credulity with credit scores to manage the risk the credit union takes on when it steps outside of standard measures of creditworthiness.

Check out how these forward-leaning credit unions took advantage of a growing economy and responded to regulatory challenges to keep loans growing.

You can tell a lot by reading the credit history and listening to the person’s story, says Fierro, a 23-year employee at First Source. And we’re a small town. Everyone knows everyone, so you develop a gut feeling about things you’re hearing.

Annualized YTD Loan Originations per Member

For all U.S. credit unions | Data as of 09.30.15

First Source FCU originated $4,797 per member in annualized year-to-date loan growth in the third quarter of 2015. That’s 43rd out of the 339 credit unions in the $250 million to $500 million category in the Callahan database.

Source: Peer-to-Peer Analytics by Callahan Associates.

Working Within The Systems

First Source still does auto-decisioning on A-rated paper but has made major changes in how it tiers its pricing to accommodate for the higher risk of other loans.

We might charge a lot more than we would for a C- or D-rated loan, but the rates are still much better with us than if they went to a buy here-pay here or payday lender, Fierro says.

Word-of-mouth works wonders for First Source, but the credit union also markets with billboards, radio and television ads, direct mail, websites, and social media as well as through community and business development partnerships.

The system works.


For all U.S. credit unions | Data as of 09.30.15

First Source FCU posted 20.55% in loan growth in the third quarter, more than twice the 9.50% posted by the average credit union in its asset class, and placing it in the top 10% at 28th out of 339.

Source: Peer-to-Peer Analytics by Callahan Associates.

A holiday lending promotion a reverse Christmas Club, according to DeMetri brought in more than 500 loans worth more than $500,000.

Holidays aside, the overall increased volume has put more demand on the credit union’s lending staff. That’s why First Source has started to decentralize its systems.

It has given more authority to front-line staff it has identified as strong lenders and will grant approximately 10 more people on the branch level some level of underwriting duties.

Meanwhile, the credit union’s communications staff is continuing to send companywide newsletters outlining success stories and stressing the credit union’s lending philosophy. And member-facing managers are making sure their own staff is ready.


For all U.S. credit unions | Data as of 09.30.15

First Source FCU grew membership by 7.46% in the third quarter, nearly three times that of the average credit union of its size. That also placed the New York credit union in the top 15% in that group.

Source: Peer-to-Peer Analytics by Callahan Associates.

Training, training, and more training, and practice, practice, and more practice, is what it takes to work with members this way, DeMetri says. We do role playing with all kinds of scenarios, and we look at real loans afterward to see what went right or wrong and learn from that.

It’s not an easy strategy, but it is one to which the credit union is committed. And as for a parting piece of advice, DeMetri offers this: Don’t open the floodgates until you’re ready. Don’t overestimate your ability to respond.

January 25, 2016

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