Neighbors FCU attracted new members in the first wave of PPP and strengthened internal processes to handle the new business.
The Louisiana cooperative is now deepening its engagement with those members via competitive business services delivered with a credit union touch.
The Paycheck Protection Program brought with it a couple aha moments for Neighbors Federal Credit Union ($1.1B, Baton Rouge, LA) and the small-business people who came to the cooperative for help.
For the businesspeople, it was the realization that a member-owned cooperative like Neighbors could help them access the PPP pipeline. For Neighbors, it was the realization the cooperative could help its new members beyond the payroll.
According to Anthony Pitalo, vice president of commercial deposits at the Pelican State institution, Neighbors closed 435 loans for approximately $16 million and added 203 new members with commercial accounts during the first round of PPP lending last spring. By year’s end, the cooperative had attracted 490 new business members. With referrals helping things along, the credit union reached 1,000 new accounts as 2021 dawned.
Pitalo, who spent eight years in commercial lending before taking over commercial deposits seven years ago, says Neighbors’ initial all-out effort was geared toward helping hurting small businesses in the community. But then there was an aha’ moment.
Anthony Pitalo, Vice President of Commercial Deposits, Neighbors FCU
It’s all about scale, the VP says. Businesses that bank with larger financial institutions had to compete with a larger client base. This caused processing delays and frustration. Some of those businesses reached out to us, and a multitude of referrals followed.
Below, Pitalo explains how Neighbors took advantage of its opportunity to help in a crisis by building business relationships that it hopes will last through good times and bad.
What opportunities did the Payroll Protection Program provide? How did you leverage them?
Anthony Pitalo: Increasing commercial deposits was already part of our strategic plan. When the pandemic started, our focus shifted and it was all about getting cash to small businesses in our community no matter if they were a member or not.
Quite frankly, it was an opportunity to have discussions with existing members that we haven’t spoken with in a while and also to have new conversations with businesspeople that have never been with a credit union.
What challenges did the PPP program present? How did you meet them?
AP: Acting as a conduit for the government, the challenges with adopting and implementing new guidelines and procedures seemed to change daily. Plus, these were still loans, so we had to vet each application to make sure the proper individuals were able to acquire these loans. With such an undertaking, we had to consider staffing and efficiency.
We had recently launched a new online account opening for commercial accounts and found that was a great tool to start the process for the PPP loans. The software is a simple workflow that requires applicants to enter the required information to open a commercial account.
Once we validated the information, we coordinated with our commercial lenders on the PPP application. This reduced the vetting time by allowing our lenders to focus on underwriting the PPP loans.
That online efficiency helped us attract non-members who could go through the same process. And then, of course, they became members.
Did businesses have to be members in advance to get a PPP loan? During the initial crush, small-business people around the country reported being turned away from banks where they weren’t customers.
AP: No, there was no membership requirement. They became members, of course, when they established a share account to accept the loan funds. This was the most efficient way to access their cash. They could visit a branch for a cashier’s check or perform a wire transfer to get funds to their primary institution.
This was one of the silver linings we gained members by assisting the community.
CU QUICK FACTS
Data as of 12.31.20
HQ: Baton Rouge, LA
12-MO SHARE GROWTH: 13.41%
12-MO LOAN GROWTH: 10.35%
How sticky will these relationships be compared to the relationships you had before?
AP: That remains to be seen. I think we’ll have a better picture once there’s some normalcy. You’ve got to remember, a lot of businesses are still trying to survive. A business we helped back in April might be closed within 12 months.
But, our products are comparable to any other financial institution, so the goodwill we’ve built through the Payroll Protection Program combined with our products and services should give us a good chance to grow that relationship.
What business services do you offer and to how many members?
AP: We currently have roughly 2,700 business members. On the deposit side, along with our traditional checking account, savings accounts, and certificates, we put a lot of work into treasury cash management services including ACH origination, merchant services, office scanner remote deposit, ACH positive pay and block filters, and sweep accounts.
Revisiting the PPP process, what kind of businesses received funds in the first round? Has the second round differed from the first?
AP: We’ve helped K-12 schools, daycares, numerous service and retail businesses, nonprofit organizations, storage facilities, surgical centers, insurance companies, auto collision companies, engineering firms, different kinds of contractors you name it.
After the first round, we still wanted a more efficient process for our members. For example, if our department would have employees quarantining for 14 days due to COVID-19 exposure, there’s a risk that a member’s application could be delayed. Therefore, this second round, we partnered with a servicer to handle the origination and forgiveness phase. Members access the portal through a co-branded site.
Right now, a lot of them are using our checking and savings accounts and our upgraded digital services within online banking. Some have opened new loans and credit cards. Our deposits grew about $19 million for the year 2020.
5 Lessons From PPP
Anthony Pitalo, vice president of commercial deposits at Neighbors, offers lessons his cooperative learned from its PPP experience.
Take the opportunity to do more. But take on only what you can handle.
Perfection is not the expectation. In times of mass need people will be understanding if service levels decrease because everybody’s affected.
Don’t stay quiet. Communicate consistently, even with the smallest updates.
Show empathy. Business members want to know the voice on the other end of the line understands they are trying to keep their businesses alive, manage employees, keep food on the table, and more.
Finish strong. Nothing is more gratifying than seeing the process through to the end!
How are you soliciting that business?
AP: Our marketing team has done a wonderful job creating campaigns for different services and products specifically targeted at those members. My team and I are calling and doing site or virtual visits. We’re keeping in constant contact as best as possible.
Most importantly, though, is that when we do visit with them they feel the same quality of service that all of our existing members have been feeling from day one.
Will this new influx of business relationships change your product lineup, strategies, etc.? If so, how?
AP: You always have to be evolving to get where you want to go. If there’s a service that one company might need and it’s a service that benefits the majority of our business members, we will absolutely look into it.
This interview was edited and condensed.