By Ray Birch
SCRANTON, Penn.—For CEO Clarence Baltrusaitis, the story of how one member tried to pull open the door on a long-closed office sums up the challenges his CU used to face.
“This kind of put things into perspective for me,” said Baltrusaitis. “A few years ago, I was in our parking lot and I saw a member pulling on the door of our old loan office that had not been open for more than 10 years. I asked her what she was doing and she said she was coming to the credit union for a loan. So, it had been more than 10 years since this member approached us for a loan.”
Now, members increasingly know which door to knock on—or tap on, or dial up.
That’s due to a series of adjustments to lending policy and the internal culture that have made a big difference for the small credit union’s lending performance.
Baltrusaitis, CEO at the $185-million NET FCU, told CUToday.info that often what limits a small credit union is its own internal policies. Baltrusaitis shared that message in a previous report, and how the credit union eliminated its stale loan policies reworking its loan program with a focus on giving decision-making power to experienced loan officers—as opposed to flipping through pages of rules and getting managers’ OKs.
Since that CUToday.info report, the credit union has made additional subtle changes to its lending culture, finding ways to not only encourage lending and front-line staff to talk to members about loans, but also giving them the tools to have effective conversations.
8% Growth Target
As a result, NET FCU has increased its loan portfolio from $49.8 million at the close of 2014 to more than $72 million last year.
“We wanted 8% growth last year but fell a little short,” said Baltrusaitis. “We have taken our loan-to-share ratio above 40%.”
While that may seem low to some, it’s a big improvement from where the credit union was not too many years ago. When Baltrusaitis arrived at NET FCU in 2013, the credit union was 25% loaned out.
As the story of the member attempting to enter an office closed for a decade illustrates, a big issue facing the small credit union, and many other small shops, is that it was not known for making loans.
With a limited marketing budget, Baltrusaitis set out over the past year to educate members and to change the staff’s lending mindset—moving them away from being order-takers and waiting for members to come into the credit union for a loan to actively offering loans to prospective candidates.
NET FCU upgraded its LOS system to provide loan officers and front-line employees with a person’s account history and outstanding loans—including the rate they are paying—at other lenders.
“We have found great opportunities at the teller line and call center in talking to members who did not have a loan with us,” said Baltrusaitis, who added that NET FCU also began talking
Clarence Baltrusaitis
more about its lending program over Facebook, Instagram and Twitter.
A Little More Risk
The credit union also encouraged its tenured lending team to take more risk.
“That may seem like it’s easy to do, but it was a challenge,” said Baltrusaitis. “Sometimes your experienced loan officers do too good of a job protecting the credit union. We told them that it is OK to accept more risk. Our denial ratio had been at 30% to 35%, which is too high. It should be closer to 20%. You approve four-out-of-five loan requests, that is about right. You are helping the credit union grow, and more important, helping more members get loans.”
What also helped boost lending was simply talking more about the program at monthly meetings, and recognizing top loan performers.
“All this encourages your staff to look for opportunities to help someone with a loan,” said Baltrusaitis.
A culture shift won’t be effective if the credit union’s lending policies are stale, outdated and restrictive, a situation that Baltrusaitis says occurs all too often at a small credit union.
“Small credit unions seem to have long-standing, conservative and limiting lending policies,” said Baltrusaitis. “I think many have lending limits for members set 20 years ago. Well, a $100,000 cap won’t work for a member these days if they want loans for a house and a car.”
As CUToday.info reported, that was the situation Baltrusaitis faced at NET FCU when he took over less than five years ago.
In 2017 the CEO told CUToday.info that NET FCU had a complex, rule-ridden lending program that had not been updated in many years, which has since been dramatically changed. Baltrusaitis said that before he arrived a lot of rules that limited the credit union’s ability to make sound loans crept into the lending process over the years and kept the portfolio from growing at all.
'Instant Loan Statement From Hell'
Baltrusaitis said that small CUs often create an “instant loan statement from hell” when they begin putting in exceptions after exceptions—trying to put all the exceptions into the loan policy. “You want to make it straightforward so that loan officers do not have to keep a copy of the loan policy in their back pockets and refer to it on every loan.
“You also want to be able to default to your experienced loan officers’ judgement,” he continued. “Let them make the calls in the gray areas. Rely on their experience. If a loan officer has been on the job for ten years or more, they have seen the good, bad and ugly over time, and they know how to protect the credit union.”