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This One Strategy Took Lending From Good to Great · Leaders in Lending

0:04
Speaker 1: Hello, and welcome to Leaders in Lending, brought to you
0:06
Speaker 1: by Upstart. I'm your host, Barry Roach, and I'm happy
0:09
Speaker 1: to be joined today by Adam Brice, the chief lending
0:11
Speaker 1: officer at EFCU Financial in Baton Rouge, Louisiana.
0:14
Speaker 2: Now.
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Speaker 1: Adam's first visit to the podcast was in late twenty
0:17
Speaker 1: twenty two, and he talked about advances and enterwriting technologies
0:20
Speaker 1: and how that fits with a common sense approach to lending.
0:24
Speaker 1: In today's episode, Adam's sharing his views on today's auto
0:27
Speaker 1: lending environment and how credit unions can adapt to capture
0:31
Speaker 1: market share. Adam also talks about how credit unions play
0:34
Speaker 1: a big part in supporting their community and shares how
0:37
Speaker 1: EFCU Financial has teamed up with local universities to help
0:40
Speaker 1: students improve their financial literacy. Thank you for listening. Let's
0:44
Speaker 1: get started.
0:45
Speaker 2: I'm doing good, Barry.
0:46
Speaker 3: I'm happy to be on the podcast and I'm looking
0:48
Speaker 3: forward to going through some different questions with you.
0:50
Speaker 1: How are you today, I'm good. Thanks, thanks for joining us. So, Adam,
0:54
Speaker 1: you were on the pod in December of twenty twenty two.
0:58
Speaker 1: What's changed between now and then? Probably a lot of
1:00
Speaker 1: things on the lending side, I mean you would talk
1:03
Speaker 1: back then around some shifts and indirect auto lending, and
1:07
Speaker 1: if you think about at that time period, we were
1:10
Speaker 1: still kind of coming out of the pandemic and some
1:13
Speaker 1: of the supply chain issues that had been happening back then,
1:16
Speaker 1: and that was certainly impacting auto lending and credit unis
1:19
Speaker 1: and other financial services. What shifts have you seen really
1:23
Speaker 1: in in indirect auto lending since that time period, you know,
1:27
Speaker 1: going back two and a half years or so.
1:29
Speaker 3: There has been a couple of shifts. And you know,
1:31
Speaker 3: I'd made a prediction kind of during and after COVID
1:33
Speaker 3: that I thought the days of full car lots and
1:38
Speaker 3: you know, plenty of inventory and the lots, I thought
1:39
Speaker 3: those days are done because you saw the way that
1:43
Speaker 3: dealerships were handling business during the COVID times. You could
1:46
Speaker 3: do some dealerships only had five, six, seven, eight, nine,
1:49
Speaker 3: nine units in a lot and they were having record profits,
1:52
Speaker 3: record months. And when you have a bunch of inventory
1:56
Speaker 3: sitting on the lot, I mean, as you know, that's
1:57
Speaker 3: just interest running and that's just a lot of expenses
2:00
Speaker 3: there that's just sitting on the lot. You know, not
2:02
Speaker 3: nothing's really happening to those expenses. But now, you know,
2:07
Speaker 3: as we fast forward to twenty twenty five and I
2:09
Speaker 3: kind of look around our area, dealerships are full backup
2:12
Speaker 3: of inventory. There's plenty of inventory just about every dealership
2:16
Speaker 3: that I see. So that shift that I thought we
2:19
Speaker 3: were going to see of you know, units and inventory
2:22
Speaker 3: being a little bit less, you know, it's it's it's
2:24
Speaker 3: kind of not happened, and it's come back to seeing
2:27
Speaker 3: full lots, full inventory. And then you know, you're seeing
2:30
Speaker 3: some captives kind of move away from from indirect lending.
2:33
Speaker 3: You've seen some kind of re enter the market. And
2:36
Speaker 3: I think especially here in our area in Louisiana, insurance
2:40
Speaker 3: is always going to be a big factor because we
2:42
Speaker 3: are in a natural disaster prone area like Batono's Louisiana
2:45
Speaker 3: and Southern Louisiana in general, insurance is always going to be,
2:48
Speaker 3: you know, a big issue, and that it's been a
2:50
Speaker 3: big issue for some of our members, you know, being
2:52
Speaker 3: able to obtain insurance, whether it be auto or home,
2:55
Speaker 3: you know, just because of some of the natural disasters
2:57
Speaker 3: that we've seen in this area over the past eight
2:59
Speaker 3: to ten years.
3:00
Speaker 1: Right right, So, really, I guess to summarize a lot
3:03
Speaker 1: of the supply chain issues have seemed to have abated,
3:07
Speaker 1: where we're back to seeing some some lots that are
3:10
Speaker 1: full again. What else do you attribute that to, though,
3:14
Speaker 1: because I mean, let's face it, cars are lasting a
3:16
Speaker 1: lot longer now than they were maybe when you and
3:19
Speaker 1: I started driving, right, you know, the the average life
3:24
Speaker 1: of a of a car or a carburetor for example,
3:27
Speaker 1: didn't seem to last all that long, and nowadays are
3:29
Speaker 1: just manufactured in such a way that that they just
3:34
Speaker 1: last a little longer. I mean, are you seeing that
3:37
Speaker 1: on the used car side, that that's having an impact
3:40
Speaker 1: on sort of valuations for in your underrating processes, or
3:46
Speaker 1: changes in maybe some of the consumer behaviors around that.
3:50
Speaker 3: I think we're saying some change in the consumer behavior.
3:53
Speaker 3: I think people are holding on to their vehicles a
3:54
Speaker 3: little bit longer. You know, valuations have certainly increased, especially
3:59
Speaker 3: especially during COVID and moving on through the years now
4:01
Speaker 3: in twenty twenty five, but you kind of see, you
4:05
Speaker 3: kind of can look around and people are holding onto
4:07
Speaker 3: their vehicles a little longer, even you know, our portfolio
4:09
Speaker 3: in general, you know, we see people kind of holding on,
4:12
Speaker 3: holding on to vehicles just a little bit longer than
4:13
Speaker 3: they typically have, and it's you know, it's resulted in
4:17
Speaker 3: you know, people using their vehicles a little bit more.
4:19
Speaker 3: They're they're running them a little bit harder, and then
4:22
Speaker 3: when you get to the time where they do get
4:24
Speaker 3: the trade typically you know, they've put a little bit
4:27
Speaker 3: more miles on the vehicles that we've seen, and we've
4:29
Speaker 3: seen you know, negative equity climbing a little bit. And
4:31
Speaker 3: I think there's that's a that's kind of a two
4:33
Speaker 3: pronged answer there, because I think with some of the
4:36
Speaker 3: valuations that we've seen, you know, during COVID and kind
4:39
Speaker 3: of after COVID, UH, the valuations are extremely high, and
4:42
Speaker 3: I think you've seen some of that level out over
4:44
Speaker 3: the past couple of years now. So when people were
4:47
Speaker 3: puying you know, two and three years ago, and now
4:49
Speaker 3: they're coming to that you know, thirty six thirty eight
4:51
Speaker 3: months on frame where we're seeing the standard you know,
4:53
Speaker 3: member come in to trade a vehicle in. They're their
4:56
Speaker 3: their equities a little bit, a little bit more negative
4:58
Speaker 3: than they're maybe accustomed to because of the valuations at
5:01
Speaker 3: that time that we were seeing a few years back.
5:04
Speaker 1: Sure, yeah, I remember in twenty one and twenty two.
5:07
Speaker 1: I was working at credit unions of the time and
5:09
Speaker 1: we're looking at valuations that were coming in because used
5:12
Speaker 1: car values is shot through the roof and thinking, well,
5:14
Speaker 1: that's great, what's the residual value going to be if
5:16
Speaker 1: I have to collect on this thing in two or
5:18
Speaker 1: three years? And from talking to collections professionals across our industry,
5:22
Speaker 1: they're kind of seeing that happening right now, that, as
5:25
Speaker 1: you said, a lot of negative equity, and if someone
5:28
Speaker 1: does have some sort of financial misfortune that makes them
5:32
Speaker 1: not able to make those payments anymore, not a lot
5:34
Speaker 1: of value left after repoll. Have you experienced something similar
5:39
Speaker 1: to that down in your region?
5:41
Speaker 3: Yeah, we have, And I think that's something else to
5:44
Speaker 3: be talked about is the longer terms now here, especially
5:48
Speaker 3: in the Baton Rouge area, and eighty four more term
5:50
Speaker 3: is barely standard. That represents probably over half of our
5:54
Speaker 3: half of our monthly indirect business is in the eighty
5:57
Speaker 3: four month terms. So with the higher value, the higher terms,
6:02
Speaker 3: that neck of equity is kind of getting pushed a
6:04
Speaker 3: little bit further and further. And when people do come
6:07
Speaker 3: into trade, not only are they a little more upside
6:10
Speaker 3: down because the evaluation may be a little bit higher
6:12
Speaker 3: when they purchased in twenty one, twenty twenty two, but
6:15
Speaker 3: then maybe they signed on for an eighty four month term,
6:17
Speaker 3: So really you're into the forty eight to sixty month
6:20
Speaker 3: area of that term of the loan. You've not paid
6:23
Speaker 3: as much principle as you may have originally paid, you know,
6:26
Speaker 3: in prior loans, because let's be honest, seventy two month
6:29
Speaker 3: was kind of that standard, that standard loan term now
6:32
Speaker 3: and then now the eighty four month term is just
6:35
Speaker 3: so so much standard, especially for us and in our area.
6:39
Speaker 3: It certainly that's what drives a lot of volume in
6:41
Speaker 3: our market, and a lot of them I think can
6:43
Speaker 3: be you know, it can be attributed to a vehicle
6:45
Speaker 3: prices have gotten a lot more higher and a lot
6:48
Speaker 3: more expensive. People are still trying to keep up with
6:52
Speaker 3: the joneses, you know, and trying to They're shopping more
6:55
Speaker 3: payment conscious where versus maybe what's more practical for them,
7:00
Speaker 3: and so well, we can get a lower payment if
7:02
Speaker 3: we stretch out the term to say eighty four months,
7:04
Speaker 3: and that's what we're seeing a little bit of now,
7:06
Speaker 3: and I think people were ultimately starting to pay the
7:08
Speaker 3: price for it, you know, as they're come and do,
7:12
Speaker 3: whether they're training the vehicle in or if they're struggling
7:14
Speaker 3: making their payments. And what happens is the negative equity
7:17
Speaker 3: is so high that when a vehicle does get turned
7:19
Speaker 3: in for a repo, or it gets you know, there's
7:22
Speaker 3: a wreck or something in an accident, the DA gets totaled,
7:24
Speaker 3: the value is just not there. I can share my
7:27
Speaker 3: own personal story. My wife and I bought a vehicle
7:30
Speaker 3: in October of twenty twenty one, right when the vehicle
7:35
Speaker 3: value craze is really kind of getting getting a little wild.
7:38
Speaker 3: The clean trade on that vehicle was forty three thousand.
7:42
Speaker 3: In January the following year, which is about four months later,
7:46
Speaker 3: I pulled the value in her vehicle and the vehicle
7:48
Speaker 3: had jumped up in value to fifty one thousand dollars.
7:51
Speaker 3: I have never in my life, and I've been in
7:53
Speaker 3: lending now over fifteen years, I've never in my life
7:56
Speaker 3: seeing a car appreciate in value the way like that.
8:01
Speaker 2: That did.
8:01
Speaker 3: Much less cars genuinely appreciating period, but for it to
8:05
Speaker 3: appreciate almost you know, twenty five percent was just astronomical
8:09
Speaker 3: in my opinion. And that's just a one sample it's
8:11
Speaker 3: a one off deal of one vehicle. It was like
8:14
Speaker 3: that for thousands of thousands of vehicles and thousands of
8:16
Speaker 3: thousands of members who are feeling that effect. And now
8:19
Speaker 3: you know, a year and a half later after that,
8:21
Speaker 3: the value had significantly dropped. And I think that's what
8:23
Speaker 3: you're seeing now with the negative equity and the people
8:27
Speaker 3: trying to trade in with longer terms.
8:28
Speaker 1: Now sure, I mean, think of this this low rate
8:32
Speaker 1: environment atom that we enjoyed in the auto landing space,
8:34
Speaker 1: I should say we as lenders. It was tough for us,
8:36
Speaker 1: but as purchasers, as borrowers, it was great. There were
8:40
Speaker 1: two ninety nine auto loans pretty much available for you
8:43
Speaker 1: know what, like a six or seven year period like that, right,
8:46
Speaker 1: So that was you talk about when values were up
8:50
Speaker 1: at the end of twenty one into twenty two. That
8:52
Speaker 1: was kind of the end of that era if you
8:54
Speaker 1: think about it, because inflation started and then interest rates
8:56
Speaker 1: started to pop up. So those two ninety nine auto
8:59
Speaker 1: loan deals now are six ninety nine And can I
9:03
Speaker 1: afford Can I afford that fifty thousand dollars car in
9:08
Speaker 1: a seventy two month term? Probably not anymore. That's why
9:10
Speaker 1: it's it starts out to eighty four and then you
9:12
Speaker 1: have the add on products. Right, So there's some sort
9:14
Speaker 1: of a if there's gap or some sort of a
9:17
Speaker 1: other sort of mechanical breakdown assurance or something like that.
9:21
Speaker 1: So has that has that meant that EFCU has had
9:25
Speaker 1: to sort of change aspects of your underwriting policies or
9:30
Speaker 1: the way that you're looking at the asset or are
9:32
Speaker 1: you sort of weighing the asset versus the borer quality
9:37
Speaker 1: any differently now than you would have been, say, two
9:39
Speaker 1: three years ago.
9:41
Speaker 2: I'll be honest with you.
9:42
Speaker 3: We we weigh it kind of the same as we
9:44
Speaker 3: did two or three years ago. It's just kind of
9:46
Speaker 3: a natural progression that you know, collateral and inventory has
9:50
Speaker 3: taken and we've kind of just naturally kind of gone
9:53
Speaker 3: with it. One of the things that I preached our
9:56
Speaker 3: underwriting teams is consistency. You know, what we approved to
10:00
Speaker 3: day is what we will approve tomorrow and what we
10:02
Speaker 3: will approve next week. And in order for us to
10:05
Speaker 3: be and for us to stay consistent and to be
10:07
Speaker 3: so successful that we are in indirect lending, it helps
10:09
Speaker 3: the dealers understand that they know, hey, EFCU is gonna
10:13
Speaker 3: buy this deal, you know, next week or today or tomorrow.
10:17
Speaker 3: And that's helped really a lot with our progression indirect lending,
10:21
Speaker 3: our protection and consumer lending is just staying consistent across
10:24
Speaker 3: the board, and you know, always, you know doing you
10:27
Speaker 3: know what's right, what's the best interest to the member,
10:30
Speaker 3: and what's just in the best interest.
10:31
Speaker 2: In the credit union.
10:31
Speaker 3: If if the loan makes sense, I can promise you
10:34
Speaker 3: we're going to do it regardless one way or another.
10:36
Speaker 2: If it makes sense, we will do the loan.
10:38
Speaker 3: And we've seen that kind of consistency play out, you know,
10:42
Speaker 3: from time and time and again with our portfolio. Our
10:45
Speaker 3: loan portfolio has been outstanding. We have some of the
10:47
Speaker 3: lowest delinquency in the state of Louisiana. Our charge off
10:50
Speaker 3: numbers are some of the lowest charge off numbers in
10:52
Speaker 3: the state Louisiana. And I really preach that to the
10:54
Speaker 3: consistency and to the underwriting soundness and reviews that we
10:59
Speaker 3: consistently do day and day out.
11:01
Speaker 1: Right now, you use a common sense approach with that, Adam.
11:03
Speaker 1: I remember from your last pod you talked about that
11:05
Speaker 1: that certainly you've got your underrating policy, your general lending
11:08
Speaker 1: policy specific policies for auto loans, and then you use
11:11
Speaker 1: technology for the underrating process, so you're not just relying
11:15
Speaker 1: on on just sort of a credit score or you know,
11:20
Speaker 1: there's multiple aspects of the credits. The border was credit
11:25
Speaker 1: worthiness that you're looking at. So has that had to
11:28
Speaker 1: change any at all in these past few years or
11:31
Speaker 1: is common sense still very much a critical component of
11:35
Speaker 1: your underating process as you're looking at each board where
11:38
Speaker 1: that comes through your system.
11:40
Speaker 3: Common sense lending is still the number one priority here
11:42
Speaker 3: at Ecuminans. We're doing loans at the end of the day,
11:46
Speaker 3: and I tell my underwriters this, if you can answer
11:49
Speaker 3: this question, and that question is will this loan be
11:52
Speaker 3: repaid as agreed? And if you can answer that question
11:55
Speaker 3: and you can answer yes to it, then we should
11:57
Speaker 3: be doing that loan because at the end of the day,
11:59
Speaker 3: you know we're roll us what the loan is for.
12:01
Speaker 3: If if you know that the loan is going to
12:03
Speaker 3: be repaid back and you can say yes to that question,
12:06
Speaker 3: then you should be doing that loan. You should be
12:08
Speaker 3: figuring out a way how to do that loan, whether
12:11
Speaker 3: you know, making an exception to a policy or a procedure.
12:14
Speaker 3: You know because at the end of the day, you know,
12:16
Speaker 3: it's all about you know, the bar's repayment ability, and
12:19
Speaker 3: if they have the ability to repay and you can
12:21
Speaker 3: answer yes to say they're going to repay this loan,
12:24
Speaker 3: then you should be able to do the loan. And
12:25
Speaker 3: that's kind of the typical practice that we take here
12:28
Speaker 3: at the Credit UNIITYFC Financial and that's how we've kind
12:30
Speaker 3: of always kind of worked in that way for the
12:32
Speaker 3: past ten to twelve years.
12:34
Speaker 2: And you know, I will.
12:35
Speaker 3: Say that it seems like a very good approach for us,
12:38
Speaker 3: but you know, to say that is always going to
12:41
Speaker 3: be the same way, no, because we're going to be
12:44
Speaker 3: looking at some type of AI uh, you know software
12:47
Speaker 3: here in the future. You know, we may be looking
12:49
Speaker 3: at zest or Synaptics or maybe some other type of
12:52
Speaker 3: AI vendor to kind of you know, move forward with
12:54
Speaker 3: our you know, with our lending uh and move into
12:57
Speaker 3: some more automation, some efficiencies driving automatic decisions right right.
13:01
Speaker 1: And which is I think a smart way of doing it.
13:03
Speaker 1: You can still retain that common sense judgment which is necessary,
13:07
Speaker 1: but the ability to have consistency with common sense lending.
13:11
Speaker 1: You and I both know, like we people are going
13:14
Speaker 1: to have a different perspectives as they may look at
13:17
Speaker 1: at a loan application. You may look at differently than
13:20
Speaker 1: I would than someone else would, And I think that's
13:22
Speaker 1: where maybe AI comes in to assist with putting some
13:26
Speaker 1: guardrails around what that underwriting criteria would be. And I
13:29
Speaker 1: know that IFCU is also looking at at other ways
13:32
Speaker 1: to sort of gain more consistency around that lending decision.
13:36
Speaker 1: So maybe you can start of share with our audience
13:38
Speaker 1: a little bit about how you've you've changed how you're
13:41
Speaker 1: looking at lending in branches and now I have more
13:45
Speaker 1: of a centralized aspect of that. So maybe maybe take
13:48
Speaker 1: us through that a little if you could.
13:50
Speaker 3: Yeah, absolutely So last year, in the middle of the year,
13:54
Speaker 3: we decided that we wanted to create a loan contact
13:57
Speaker 3: center and basically some of the things that we seeing
14:00
Speaker 3: the branches where you know, we had you know, forty
14:02
Speaker 3: five to fifty different loan officers in the branches.
14:05
Speaker 2: Some of them wanted to do loans, someone would rather
14:07
Speaker 2: just be be a teller and a worker box.
14:09
Speaker 3: Some of them have be a headteller and other ones
14:11
Speaker 3: wanted to work different duties and we kind of recognized
14:14
Speaker 3: this and we could see it in our lending numbers.
14:16
Speaker 3: We could see it in our debt protection numbers and
14:19
Speaker 3: our ancillary product numbers. With the gap and warranty, you
14:22
Speaker 3: can kind of see certain people who would really, you know,
14:24
Speaker 3: really relish in that fact that they got to, you know,
14:26
Speaker 3: cross selling loans and really succeed in some of those things.
14:29
Speaker 3: But then we had others who were a little bit inconsistent.
14:33
Speaker 3: You know, their volume wasn't wasn't being driven as high
14:35
Speaker 3: by you know, motivation. They would rather do, you know,
14:37
Speaker 3: some different things. So what we decided to do as
14:40
Speaker 3: a credit union was create a loan contact Center. So
14:43
Speaker 3: what we did was we put out, you know, some
14:45
Speaker 3: job descriptions for you know, we wanted to bring in
14:48
Speaker 3: five to seven of the best loan officers that we
14:50
Speaker 3: had in the branches, centralized them here at our operations
14:53
Speaker 3: center where they would just focus.
14:55
Speaker 2: On loans and branch loans all day every day.
14:58
Speaker 3: We've created a kiosk kind of a kiosk center in
15:01
Speaker 3: each branch where we have a computer station there where
15:04
Speaker 3: a member can do they can do live live in
15:07
Speaker 3: video with the with the one of the Loan Contacts
15:10
Speaker 3: Center REPS here at Operations Center They can also do
15:12
Speaker 3: a remote video from a cell phone. So if they're
15:14
Speaker 3: at their house and they want to have a video
15:16
Speaker 3: conference with one of our loan contacts and reps, they
15:19
Speaker 3: can easily log on and have a video chat from
15:21
Speaker 3: their house with one of our contacts iner reps. And
15:24
Speaker 3: basically what this is doing is we're filtering all of
15:26
Speaker 3: our consumer lending origination into six different people and six representatives,
15:31
Speaker 3: six of our loan experts. So instead of training forty
15:34
Speaker 3: to fifty different people, we're training you know, six to
15:36
Speaker 3: eight people and it's just loans all day, every day.
15:39
Speaker 3: That's all they do. We're training, they get training the
15:41
Speaker 3: heavy train on ancillary products, debt protection, you know, cross selling,
15:47
Speaker 3: you know, identifying opportunities on credit reports, you know, to
15:49
Speaker 3: make cross sells. And this has been, you know, one
15:52
Speaker 3: of the things that we were really targeting because we
15:54
Speaker 3: really wanted to see our consumer lending numbers really get
15:57
Speaker 3: a good boost.
15:58
Speaker 2: We wanted to see some of.
15:59
Speaker 3: Our net interesting margin get a boost, and we were
16:02
Speaker 3: struggling with some of those things like debt protection, answer products,
16:05
Speaker 3: and this was kind of our answer to that was
16:07
Speaker 3: to be able to filter in, you know, all of
16:09
Speaker 3: our consumer loans from the branches into six different people
16:13
Speaker 3: who are working loans all day every day. They're not
16:14
Speaker 3: working on a box, they're not opening up an IRA
16:17
Speaker 3: in the branch. They're not dealing with fraud issues from
16:19
Speaker 3: different members coming in, you know, having issues like that.
16:22
Speaker 3: It's all loans, all day, every day, and you know,
16:25
Speaker 3: when it really gets together and it really starts hitting
16:28
Speaker 3: on all cylinders, we really believe that we'll have one
16:30
Speaker 3: of the top options for consumer lending in the state
16:33
Speaker 3: of Louisiana.
16:34
Speaker 1: Heat in all cylinders, I get that right, the little
16:36
Speaker 1: pun there so all gas and no brakes to use
16:39
Speaker 1: another pun, right. Really, this is a dedicated sales force
16:42
Speaker 1: that all they have to do is go out and.
16:46
Speaker 2: With these new.
16:47
Speaker 1: Borders not just create that new loan solution for them,
16:51
Speaker 1: but also look at those ancillary products. So I would
16:54
Speaker 1: imagine you've seen some cross sell opportunities or some cross
16:57
Speaker 1: sell successes that have come from that approach as well.
17:00
Speaker 3: Absolutely, I mean, our our debt production numbers have steadily
17:03
Speaker 3: started climbing. You're seeing our antilayer products, you know, start
17:07
Speaker 3: to climb with gaps and warranties, which means our net
17:10
Speaker 3: interest margin, our non interest income is starting to take
17:13
Speaker 3: a boost, and that's exactly where we want to be
17:15
Speaker 3: and we want to see and we want to continue
17:16
Speaker 3: to get those number numbers better. And as that contact
17:19
Speaker 3: center develops and grows and matures and seasons, you know,
17:22
Speaker 3: as as people get stronger and stronger up loans, we expect,
17:25
Speaker 3: you know, those numbers just continue to continue to escalate
17:28
Speaker 3: and get higher and improve, you know, all those things
17:30
Speaker 3: that you know we're talking about, whether it be net
17:32
Speaker 3: interesting come or non interesting income, and our net interest
17:35
Speaker 3: margin continue to improve and grow.
17:37
Speaker 1: Yeah, I mean improve net interest margin. Music to ears
17:40
Speaker 1: for every CFO out there, it's so hard right now,
17:43
Speaker 1: especially when we had we've had what three rate cuts
17:47
Speaker 1: since September of twenty twenty four that have not taken
17:50
Speaker 1: hold in the interest rate market at all. We're still
17:53
Speaker 1: seeing the tenure, for example, in around the four forties
17:56
Speaker 1: at the time of this recording, and it just there's
18:00
Speaker 1: so much uncertainty out there as to where the interest
18:02
Speaker 1: rate environment will be going. Has that had an impact
18:07
Speaker 1: on for you FCU in terms of your planning for
18:09
Speaker 1: twenty twenty five? There has been marching compression because of
18:13
Speaker 1: the cost for the credit union to get a dollar
18:16
Speaker 1: to come in, and then you know there's pressures to
18:19
Speaker 1: decrease interest rates so you can be competitive in your marketplace.
18:22
Speaker 1: So with that marching compression, are there has that shifted
18:26
Speaker 1: or has that changed in any way your growth of
18:29
Speaker 1: your growth prospects for twenty twenty five.
18:32
Speaker 3: Yeah, I mean we've always been a heavy certificate of
18:34
Speaker 3: deposit shop where a lot of that's how a lot
18:37
Speaker 3: of a lot of our deposits were coming in. And
18:39
Speaker 3: we've made a shift, you know, to try to move
18:41
Speaker 3: away from that to try to get some non maturity
18:43
Speaker 3: deposits in the door. We've made some changes to our
18:45
Speaker 3: money market product. We've made a couple of changes to
18:48
Speaker 3: some of our checking account products to try to bring
18:50
Speaker 3: in some of that non maturity money to come in.
18:52
Speaker 3: So you know, we're not you know, we're sitting on
18:54
Speaker 3: fixed costs, you know for CDs. You know where our
18:56
Speaker 3: average certificate rate probably in twenty twenty five, I want
19:00
Speaker 3: to say, was around four and a half percent, and
19:02
Speaker 3: then when you have rates you know kind of in
19:04
Speaker 3: the sixes, six and a half seven percent area, you
19:07
Speaker 3: know that that margin is not very it's not very big.
19:10
Speaker 3: That's a very thin margin, especially when you talk about
19:13
Speaker 3: factor and cost labor, you know, software delinquency charge offs.
19:17
Speaker 3: I mean, that's a very razor thin margin that we've seen.
19:20
Speaker 3: So we've shifted our focus, you know, from being you know,
19:23
Speaker 3: a heavy CD shop to more of a you know,
19:26
Speaker 3: try to bring in more non maturity deposits to be
19:29
Speaker 3: able to you know, be able to lend that money
19:31
Speaker 3: out at some higher rates and you know, have some
19:33
Speaker 3: lower rates coming in for that no non maturity money.
19:35
Speaker 3: And we've seen, you know, we've seen some improvements there
19:38
Speaker 3: on our end. We've we've been able to lower some
19:40
Speaker 3: of our non maturity or've increased our non maturity numbers
19:44
Speaker 3: and lowered some of our CD numbers to be able
19:46
Speaker 3: to continue to lend. So there's margins will continue to
19:48
Speaker 3: kind of grow and expand.
19:49
Speaker 1: Yeah, that's smart until we see rates start to lower.
19:54
Speaker 1: Bor room rates at least for financial institutions. You know,
19:58
Speaker 1: you're you're going to have to think fast to be
20:01
Speaker 1: able to keep that liquidy wheel turning as as things
20:04
Speaker 1: go on. I'm gonna shift gears a little bit. There's
20:07
Speaker 1: another fun shift gears. Let's talk a little bit about
20:10
Speaker 1: I know we FCU is prolific in your communities, in
20:14
Speaker 1: supporting your local academic institutions, specifically Louisiana State University, Southern University,
20:20
Speaker 1: both in your inergy pardon me, both in your geographic footprint.
20:25
Speaker 1: And I know you've been doing some things around financial
20:27
Speaker 1: literacy education and some other partnerships. So maybe share with
20:31
Speaker 1: the audience a little bit about the genesis of that,
20:33
Speaker 1: why that started with financial literacy with students, and kind
20:37
Speaker 1: of where you've taken it, where you think it may
20:40
Speaker 1: go from here. Yeah.
20:42
Speaker 3: Absolutely, So we had a CEO change a couple of
20:44
Speaker 3: years ago. We brought in a new CEOT out of
20:47
Speaker 3: Michigan and he actually was with the University of Michigan
20:50
Speaker 3: Credit Union. His name is Tom Kashlikiz. He was a
20:52
Speaker 3: former CFO over at the University of Michigan Credit Union. Naturally,
20:56
Speaker 3: he had that relationship you know, already pre established at
20:58
Speaker 3: the University of Michigan, at the University of Michigan itself,
21:02
Speaker 3: So that was one of his goals coming in here,
21:05
Speaker 3: was to be able to establish some relationships with some
21:07
Speaker 3: of the local universities around here. In that timeframe. Uh,
21:11
Speaker 3: since he's come in, we've signed sponsorship agreements with Louisiana
21:14
Speaker 3: State University and Southern University multiple year agreements where we've
21:18
Speaker 3: become you know, some of the flagship sponsors for credit
21:20
Speaker 3: unions for those universities. With that comes you know, a
21:24
Speaker 3: lot of perks. We've been able to go in.
21:26
Speaker 2: To both universities LSU and Southern.
21:29
Speaker 1: UH.
21:29
Speaker 3: We've been doing some financial literacy. UH. I've done some
21:32
Speaker 3: car buying seminars with both Southern student athletes and LSU
21:36
Speaker 3: student athletes. You know, people who you don't really you know,
21:39
Speaker 3: handle some of those day to day things. They've never
21:42
Speaker 3: really gone out and you bought a vehicle. So we've
21:43
Speaker 3: done you know, kind of mock uh mock car buying
21:46
Speaker 3: scenarios and seminars with with both universities that really provide
21:50
Speaker 3: a lot of great results and a lot of great
21:52
Speaker 3: feedback from both universities and just them just getting general understanding,
21:56
Speaker 3: general training about you know, some real worldlife things like
21:59
Speaker 3: going out and buying a vehicle has been you know,
22:01
Speaker 3: tremendous help to some of these kids and some of
22:03
Speaker 3: these students in these communities. And it's you know, it's
22:06
Speaker 3: not information and it's not education that they typically get,
22:09
Speaker 3: you know, in the classroom or you know, out in
22:12
Speaker 3: their out in their day to day life because typically
22:13
Speaker 3: you know, these are generally sports sports athletics athletes who
22:17
Speaker 3: are usually concentrate on their sports and you know, they're
22:19
Speaker 3: not having a whole lot of time to be able
22:21
Speaker 3: to go out and do some of these things. So
22:22
Speaker 3: for us to be able to go in there, you
22:24
Speaker 3: know and provide some of these financial literacy events, you know,
22:27
Speaker 3: such as car buying, uh, you know credit you know,
22:30
Speaker 3: credit worthiness and kind of understand like a credit one
22:32
Speaker 3: oh one, uh, you know, type of class that we've
22:34
Speaker 3: been able to go in as Southern and l s
22:36
Speaker 3: U and kind of teach and kind of get the
22:39
Speaker 3: get a basic understanding, get a graphs, you know, for
22:41
Speaker 3: these students to really understand, you know, what some of.
22:43
Speaker 2: These things mean. What some of these things do.
22:46
Speaker 3: You know, when it is a great time to go
22:47
Speaker 3: buy a vehicle, you know, what should we be doing
22:50
Speaker 3: before we go buy a vehicle? You know, going getting
22:52
Speaker 3: pre approved, you know, understanding what you know, what your
22:55
Speaker 3: interest rate, you're going to you potentially qualify for. You know,
22:58
Speaker 3: what is the value of the vehicle that you may
23:00
Speaker 3: be trained in things like that that we're just kind
23:02
Speaker 3: of you know, showing these student athletes just basic little
23:05
Speaker 3: things that you know will go a long way and
23:07
Speaker 3: save them so much money, you know when they go
23:09
Speaker 3: out and do go buy that first vehicle?
23:11
Speaker 1: Yeah, I mean you're teaching them life skills really and
23:13
Speaker 1: it's beyond just the vehicle, and it's also how you're
23:16
Speaker 1: going to pay for that vehicle. Have you considered insurance?
23:19
Speaker 1: Have you considered if there's a breakdown, how are you
23:22
Speaker 1: going to pay for all those things? So, you know,
23:25
Speaker 1: I've had more than twenty years in credit unions and
23:29
Speaker 1: it still floors me that there's there's nothing in high
23:33
Speaker 1: schools or middle schools teaching financial literacy. It seems to
23:37
Speaker 1: fall on the community based financial institutions and a grassroots
23:42
Speaker 1: level to go out and actually educate these kids on
23:45
Speaker 1: the realities of their financial life that you know, you're
23:49
Speaker 1: preparing them for things that those that aren't going through
23:52
Speaker 1: any sort of program like this just just may not
23:55
Speaker 1: have any any sort of understanding of or even know
23:57
Speaker 1: where to go to ask for these sorts of questions.
23:59
Speaker 1: So kudos to to the FCU and yourself for that.
24:03
Speaker 1: I know that you also with these universities, the f
24:07
Speaker 1: c U is embarking in uh an IL name, image
24:10
Speaker 1: and likeness promotions, So not necessarily straight down the lending path,
24:14
Speaker 1: but certainly I think it's something that's helping to build
24:17
Speaker 1: your brand in in your marketplace and maybe some some
24:20
Speaker 1: brand awareness for potential car buyers, potential auto loan borders.
24:25
Speaker 1: So maybe talk a little bit about how an i
24:29
Speaker 1: L started as an idea with the FCU and kind
24:31
Speaker 1: of where it's where it's going from there.
24:33
Speaker 2: Yeah.
24:33
Speaker 3: Absolutely, I mean it started with our price price Tyler grodeye,
24:37
Speaker 3: you know, and at that point, and I AL was
24:39
Speaker 3: so very new, you know, not a lot of people
24:42
Speaker 3: had a lot of understanding of the I L and
24:44
Speaker 3: you know what the ramifications were going to be, you know,
24:46
Speaker 3: contract obligations, you know, how to write up a contract
24:50
Speaker 3: for a player at that point, you know, and when
24:52
Speaker 3: Tom came in, you know, Tom had already had some
24:54
Speaker 3: experience of this with the University of Michigan Credit Union,
24:57
Speaker 3: so you know, he's come in, We've got the sponsorship
24:59
Speaker 3: of agreements lined up with these universities, and then hey,
25:02
Speaker 3: now it's time that we know we help some out
25:04
Speaker 3: of the student athletes out. We were able to do
25:07
Speaker 3: several sponsorship in I l agreements with two LSU baseball players,
25:11
Speaker 3: Danny Dickinson and Chase Shores. I happen to be the
25:16
Speaker 3: beneficiary of being able to select those players. I'm not
25:19
Speaker 3: sure if you see behind me, there's a there's a
25:22
Speaker 3: nice there's a bat above there, and there's a a
25:25
Speaker 3: platform at night platform, but they pick a frank picture
25:28
Speaker 3: of l s U in National Championship, say number seven.
25:31
Speaker 3: I happen to be a huge l Shue baseball fan,
25:33
Speaker 3: so it kind of was a natural fit for me
25:35
Speaker 3: to be able to kind of identify some some players
25:37
Speaker 3: of the LSU's team and you know, be able to
25:40
Speaker 3: reach out to them. And you know how that started
25:42
Speaker 3: was being able to go into some of these universities
25:45
Speaker 3: and start doing some of these financial literacy events.
25:48
Speaker 2: We started by doing a.
25:49
Speaker 3: Financial literacy at LSU and that's how I met Danny
25:52
Speaker 3: Dickinson and him and I quickly established a relationship. And
25:55
Speaker 3: then later on down the line, you know, we were
25:57
Speaker 3: able to offer him an n IL deal where you know,
26:00
Speaker 3: he came in along with Chase Shores. They came in,
26:03
Speaker 3: We took some pictures, we put up put them up
26:05
Speaker 3: on some billboards. You know, talking about some of our
26:07
Speaker 3: great products and services. So and now they're you know,
26:10
Speaker 3: they are recognizable faces around.
26:12
Speaker 2: The LSU community.
26:13
Speaker 3: And it's just been the same thing for Southern you know,
26:15
Speaker 3: we've gone in we've done a few sponsorship agreement in
26:18
Speaker 3: IL agreements with some of their players, you know, getting
26:20
Speaker 3: them kind of more involved, and just getting the universities involved.
26:23
Speaker 3: And it was all literally through the financial literacy events
26:26
Speaker 3: that we started doing with some of these student athletes
26:28
Speaker 3: at these universities, and that's how these relationships developed. LSU
26:32
Speaker 3: specifically has actually a mock in IL not in mocking
26:36
Speaker 3: an in IL app where you can request, you know,
26:40
Speaker 3: a certain player, you can and they have the contract
26:43
Speaker 3: already drawn up where the player will put his information,
26:46
Speaker 3: the credit union or institution will put in their information.
26:49
Speaker 3: It'll be a signed agreement, it'll have some kind of
26:51
Speaker 3: detail information or what's required other player d DNT information,
26:54
Speaker 3: what's required out of that institution. And we've been able
26:57
Speaker 3: to sign a few agreements that way and be able
26:59
Speaker 3: to really kind of pushed an eye out button into
27:03
Speaker 3: our favor and really kind of getting our name more
27:05
Speaker 3: out there as associated with these players and these student
27:07
Speaker 3: athletes and it's been a really good, really big success
27:10
Speaker 3: for us. We've seen a lot of success from you know,
27:13
Speaker 3: both the Credit Union standpoint and the players standpoint. As
27:16
Speaker 3: you know, they're succeeding in the field, the Credit uniit
27:18
Speaker 3: is succeeding in the community absolutely.
27:20
Speaker 1: I mean when when true and when the Credit Union
27:22
Speaker 1: gets a greater brand awareness, uh from representation by these
27:26
Speaker 1: players and then they got a few dollars in their pocket,
27:29
Speaker 1: which not that long ago. Amateur athletes, n CUAA athletes,
27:35
Speaker 1: we're getting paid a big fat zero for the performance
27:38
Speaker 1: on the field. And so now they're actually gained a
27:41
Speaker 1: little bit for the skill that that that they're and
27:43
Speaker 1: and the work that they put in for amateur athletics.
27:46
Speaker 1: So that's that's great for you, f CEU. All Right,
27:49
Speaker 1: So we usually end the pod with bold predictions, but
27:52
Speaker 1: I'm gonna have a little bit of a twist here today, Adam,
27:54
Speaker 1: because you're a veteran of the pod. I mean, you
27:56
Speaker 1: can handle these sort of these these sort of curve balls,
27:59
Speaker 1: right baseball pun there. So I'm going to do bold
28:02
Speaker 1: predictions with word associations. So I'll give you a word
28:05
Speaker 1: and you give me a bold prediction on it okay,
28:07
Speaker 1: and and yeah you know these are free or your
28:10
Speaker 1: money back okay. So on all these predictions, so we
28:13
Speaker 1: won't hold you too hard to it so bold prediction
28:16
Speaker 1: word association. Interest rates.
28:21
Speaker 2: Bold prediction.
28:22
Speaker 3: For the year, they probably stay the same, maybe even
28:26
Speaker 3: into halfway a twenty twenty six. I think interest rates
28:28
Speaker 3: are going to kind of hover around the same, regardless
28:31
Speaker 3: if the FEDS aside to drop the rate or not.
28:33
Speaker 3: I think I think INTR rates are going to kind
28:34
Speaker 3: of hold steady.
28:35
Speaker 1: Got you use vehicle prices?
28:40
Speaker 3: Use vehicle prices I think will start coming down a
28:43
Speaker 3: little bit, as they have already that we've seen this
28:45
Speaker 3: year with the influx of inventory. Rates are still high.
28:50
Speaker 3: Inventories are very plentiful. At that point, when you have
28:52
Speaker 3: high inventory, you have load demand. What happens prices start
28:55
Speaker 3: going down. I think that's exactly what you're going to
28:57
Speaker 3: start seeing, as you've started seeing over the past, you know,
28:59
Speaker 3: sover months or so.
29:01
Speaker 1: Got you tariffs.
29:04
Speaker 2: Mixed results.
29:06
Speaker 3: I'm not sure what to think about the tariffs, and
29:08
Speaker 3: I don't think anyone else has an ID.
29:09
Speaker 1: I don't either. I don't even think the auto company
29:13
Speaker 1: executives know what what's gonna happen with you.
29:15
Speaker 3: Yeah, I'll just say neutral because I'm not really sure.
29:18
Speaker 2: That's just a mixed bag.
29:19
Speaker 1: They're altogether Yeah, uncertainty. So here I'm breaking into this,
29:23
Speaker 1: but a little bit of uncertainty. And perhaps that's why
29:25
Speaker 1: you're seeing more cars than the losses. People are maybe
29:30
Speaker 1: not quite ready to make that jump, thinking, hey, things
29:33
Speaker 1: might get a little bit harder economically here. Maybe I'm
29:37
Speaker 1: okay with my car. It's not perfect, but it still runs,
29:40
Speaker 1: and uh, and maybe I'm not ready to take on
29:42
Speaker 1: a new payment or a higher payment.
29:44
Speaker 2: Yeah. Maybe. So it's just it's just so, it's just
29:47
Speaker 2: a big mix bag there.
29:49
Speaker 3: No one, I don't think no one really has a
29:50
Speaker 3: good idea of what's really going to come out of.
29:52
Speaker 2: That right on.
29:53
Speaker 1: Okay, three more self driving vehicles.
29:57
Speaker 3: Will become a bigger thing as we progress in time.
30:00
Speaker 3: I think it's a small thing right now. But you've
30:03
Speaker 3: already seen like some you know, trucking manufacturing companies who
30:07
Speaker 3: have some of these self driving eighteen wheelers that are
30:10
Speaker 3: already doing you know, drives across the country right now.
30:13
Speaker 3: And I think that's only going to progress, especially in
30:16
Speaker 3: like the transportation industry, when it comes to eighteen wards,
30:19
Speaker 3: I think that's only going to continue to progress.
30:22
Speaker 1: AI Artificial intelligence here to.
30:26
Speaker 3: Stay, and it's only going to continue to be a
30:28
Speaker 3: bigger factor in everything that we do in our lives,
30:32
Speaker 3: whether that be underwriting, lending, financial institutions, grocery stores. I mean,
30:37
Speaker 3: I went through a Taco bell a couple of weeks
30:39
Speaker 3: ago with my little boy, and I was I was
30:41
Speaker 3: doing an order taker with an AI assistant. It wasn't
30:44
Speaker 3: a live person, it was AI.
30:46
Speaker 1: Right, and Brito's delivered to your door just like that exactly.
30:50
Speaker 1: LSU Tiger Baseball will be in.
30:53
Speaker 3: Omaha this year. We'll be competing for a national championship.
30:57
Speaker 3: This is open as a as a baseball field as
31:00
Speaker 3: I've seen in quite some time. I think there's probably
31:02
Speaker 3: seven to eight teams that can win a national championship
31:04
Speaker 3: this year, but I expect LSU to be an Omaha.
31:07
Speaker 1: So my crack researcher told me though that that LSU
31:09
Speaker 1: Baseball is some ranked number one in the country right now.
31:12
Speaker 1: So well, Adam, thank you once again for coming on
31:15
Speaker 1: the pod. We really appreciate you coming on and sharing
31:17
Speaker 1: your views on auto lending and things down the road.
31:21
Speaker 1: For the economy and and and lending in general, and
31:25
Speaker 1: appreciate your time, and we'll certainly have you back sometime
31:27
Speaker 1: in the future.
31:29
Speaker 3: Absolutely, Barry, thank you so much for having having me,
31:31
Speaker 3: and I really appreciate doing this with you, and I
31:33
Speaker 3: look forward to being able to doing this with you
31:34
Speaker 3: again in the future.
31:36
Speaker 2: Thank you, thank you,