Lending The Element Way

A focus on key institutional strengths and the unique priorities of its membership yields unprecedented opportunity for a small West Virginia cooperative.

With nearly a 95% loan-to-share ratio,Element Federal Credit Union ($26.6M, Charleston, WV) certainly knows how to identify loan opportunity among its membership.

As of 4Q 2012, Element has achieved 5.7% total loan growth year-over-year, driven primarily by double-digit increases innew auto as well as significant gains in used auto and unsecured loans, according to Callahan & Associates’ Peer-to-Peer Software. But to reach this point, the institution first had to truly know itself and its membership. Below are Element’sgolden rules for lending, forged over more than a decade of balance sheet success.

Know Your Strengths

Best known for its culture of innovation, Element backs up that deviation from the norm with a lending program grounded in traditional cooperative strategies.

We have always been a very good lending institution, says CEO Linda Bodie. Our goal is 90% loan-to-share, and we’ve been at or above that ratio for a very long time.

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Auto loans and consumer loans including debt consolidation and summer or winter vacation loans have been key drivers of loan penetration for the credit union in the past and will remainso for the foreseeable future, Bodie says. But just offering good loan products at the right rate does little to encourage the long-term relationships that Element strives for.

Sometimes when you do mass advertising, you get members who are chasing the rate or the offer and are not really invested in the credit union,Bodie says. What’s the point in attracting people who are going to leave as soon as their CD matures? Instead, we’d like to remain true to who we are and focus on what defines us best.

Service, financial education, and a top-notch member experience are some of the ways Element differentiates itself.

We have a lot of people who are getting gouged by 24% rates or higher on a car loan, Bodie says. We’ve been able to help those people see that other institutions are not treating them in a manner that is fair in our opinion.People struggle with a lot of things, and finances shouldn’t be one of them.

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One way that Element encourages members to do more with the institution is to create special campaigns that tap into existing loan products in exciting new ways.

Members seem to like giving back to the state and the community, so I think it’s important for us to do the same as well, saysMiranda Nabers, loan officer and member services representative.

For example, this past December, our West Virginia University basketball team had a tournament game in New York, and the football team also had a bowl game out of state. So we offered a loan package for people to get out there and support thoseteams at these games.

Don’t Accept Institutional Silos

Although lending is the primary focus of just a handful of the credit union’s 13 employees, it’s also a long-term institutional priority that is supportedin some way by each and every department.

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Everyone has a primary function, but we are all crossed-trained in several areas, says Samantha Painter, assistant manager for Element. When we hire employees,we’re looking for individuals that have sales experience but are also team-oriented.

In the past, the loan department has offered individual cash bonuses and other incentives such as employee of the month to help fuel loan activity, but today, employeeare also held accountable for specific monthly goals that they are expected to reach.

To encourage continued momentum, these goals aren’t static but gradually increase each time they are met.

The mentality is okay, we hit this goal. Next month let’s up it $100,000 for each of us, says Emily Chandler, lending manager.

Make An Outstanding First Impression

For new members, the credit union offers an orientation in the first 60 days of membership. During that time, one dedicated staff member typically the employee who helped the member open an account walks the person through the entire onboarding process from start to finish.

Although critical to eventual lending success, this step is just as much about creating a personal connection as it is vetting the member for any financial products or services.

We don’t want to overwhelm them in the beginning, Bodie says. We do some follow-ups, but if the member doesn’t want phone calls, we’re not going to call them. If they want to email,we’ll email. If they want to Skype with us, we’ll Skype. We’re building trust by saying, Look, you matter to us. You’re not just a number.’

Presenting a real person with a name and a face, who knows the member well enough to give accurate, targeted information is something that few consumers get at other businesses, and the experience tends to stick with them over time.

We’ve found that the employee who has walked them through their onboarding is forever their point of contact for any future issues or questions they may have,Painter says.

The credit union also has a strategy for recapturing loans from bank customers directly. In this process, called a financial intervention, representatives sit down with a potential member toevaluate any fees the person is incurring at his bank, review the individual’s credit, and then empower him to make the best decision regarding his specific situation.

Tap Into Technology

The credit union’s plethora of virtual resources doesn’t just benefit members. It also makes for more efficient and effective lending processes among Element’s staff.

The way we utilize the iPads in the branch and our webpage with the Go button is an essential part of what I do day-to-day, Nabers says. People call in andask, How do I get a loan form? Where do I find this application? Can I do this?’

Most of the time, answering these questions simply involves guiding the member to the credit union’s website and the Go button. Using that application on a home computer, mobile device,tablet, or in the branch, members can send the credit union a loan payment, apply for a new loan, or do any other activities that ordinarily would require a more hands-on approach fromlending staff.

Some members do need to be walked through these options initially, but once acclimated, most quickly adapt to the self-service option. Today, roughly 48% of the creditunion’s loan applications are received via virtual channels or Go kiosks in the branches.

We are really the forerunners in this area, Nabers says.

Seek Out And Address Potential Delinquency

Strong underwriting helps nip a majority of potential delinquency issues in the bud. Applicants go through a standard background check that includes verification of their workplace,contact information, and personal references.

But just as important as the information on those forms is the interaction between the loan representative and the member. Often, that relationship provides the most leverage and opportunity for a proactive solution should the borrower run into difficulty down the line.

We tell them if something ever happens, please come to us first, Chandler says. Do not let this get to a collection issue. We don’t want it to hurt your >credit so let us help you through whatever is going on.

We understand that life happens to people, Nabers adds. Someone might have gotten sick or you might have lost your job. We do live in coal country in southern West Virginia, and some people have been laid off for a time.

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Generated by Callahan & Associates’ Peer-to-Peer Software.

In those instances, loan officers will contact the members to see if they have questions or need to work with the credit union on a payment schedule.

Element also encourages direct deposits and direct debits in these situations to ensure that members won’t have to worry about missed payments that occurinadvertently because of stress, a busy schedule, or other life distractions.

However, if the member won’t participate in these steps, the two-person collection team sends out delinquency notices and eventually calls the member directly. If there’s still no response after an appropriate period, the credit unionwill move on to the charge-off process and take the steps needed to collect on the debt.

Be A Believer In Second Chances

We can’t always give members the loan they want, but we can look into any issues that have happened in the past and help them work through those, Chandler says. Then in the near future they can go and get that car loan or mortgage that they really want.

Debt consolidation loans are one of the representative’s best tools to give credit-damaged borrowers a second chance at financial success.

During this process, employees go through the member’s credit history to see the interest rates the person is paying and how the credit union might be able to provide a better deal. Members are then able to put several assorted financial commitmentsinto one holistic, manageable picture and settle on an affordable payment schedule.

Sometimes, the credit union will assess specific credit issues in the member’s past to see if it can make the requested loan happen.

I was working with a boat dealer recently. One of his customers couldn’t get approved for a loan, so he called me, Nabers says. I went ahead and processed the application, and the guy had great credit. He just had somestudent loans that he was paying on, but it was enough that nobody else was going to touch him. So I told the dealer, Bring him here.’

In the end, it’s not just the number of loans on the books that matters most to Element, but how they got there and how the credit union helped those borrowers advance towardtheir specific life goals.

Many times people are missing out on life because their finances are off, and I want to correct that so that they can go on those great vacations, or go camping, or spend time with their family, Nabers says. We want to helppeople improve their credit and help them enjoy their life. And once you start doing that, the loans willcome in.

June 5, 2014

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