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The Credit Builder Strategy That’s Actually Working · Leaders in Lending

0:04
Speaker 1: Hey everyone, and welcome back to another episode of Leaders
0:06
Speaker 1: in Lending. I'm your host Drew Beggery, joined today by
0:09
Speaker 1: Steve Bug, the CEO at Great Lakes Credit Union, a
0:12
Speaker 1: one and a half billion dollar asset size credit union
0:15
Speaker 1: based just north of Chicago. Steve, welcome to the podcast
0:18
Speaker 1: and thank you for joining me today.
0:19
Speaker 2: Hey Drew, thanks for having me on. Really appreciate it.
0:22
Speaker 2: Glad to join you.
0:23
Speaker 1: Awesome. So let's just dive right in, Steve, As you
0:26
Speaker 1: may already know, I always love to give the listeners
0:29
Speaker 1: a bit of context on the how did you get
0:31
Speaker 1: here type of stories? So can you tell us one
0:34
Speaker 1: what first drew you to financial services and to know
0:38
Speaker 1: what did that journey look like as you progressed into
0:40
Speaker 1: your role today at Great Lakes.
0:41
Speaker 2: Sure? So, financial services for me started many years ago
0:45
Speaker 2: in college where I worked for a regional bank, worked
0:48
Speaker 2: for a finance company for a while as well, left
0:52
Speaker 2: the industry for several years, got into tell communications, and
0:56
Speaker 2: then was fortunate about eighteen years ago to be drawn
0:59
Speaker 2: into a union. And at the time they were looking
1:02
Speaker 2: for somebody with some distribution experience, some sales and marketing
1:05
Speaker 2: that would compliment the executive team I'm like, this sounds
1:08
Speaker 2: pretty cool, right, I'll do it for a couple of years.
1:12
Speaker 2: Eighteen years later, I'm here, And what really drew me
1:15
Speaker 2: to the credit union movement drew was the passion for
1:18
Speaker 2: the interaction with the community, the people helping people, spirit,
1:23
Speaker 2: and just really the capacity to give back and really
1:26
Speaker 2: serve your members and the community in a different way
1:30
Speaker 2: perhaps than a bank. And so that really drew me in.
1:35
Speaker 2: I've always loved to be involved in the community and volunteer,
1:39
Speaker 2: and then really once I got ingrained in the industry,
1:41
Speaker 2: had a great CEO that gave me that ability to
1:44
Speaker 2: learn the industry from an expert inside the industry. We
1:48
Speaker 2: complimented each other's skills really well, and she gave me
1:52
Speaker 2: that opportunity over time to learn the credit union movement,
1:56
Speaker 2: the different functions of the credit union, to lead those areas.
2:01
Speaker 2: And when I left that credit union was their EVP.
2:04
Speaker 2: And it really pitched me really well at Great Lakes,
2:08
Speaker 2: especially from the community involvement, which is what our board
2:11
Speaker 2: was looking for at the time. So I joined Great
2:13
Speaker 2: Lakes Credit Unions seven years ago president and CEO. Much
2:17
Speaker 2: different institution now than we were. Of course, a lot
2:20
Speaker 2: in the world has changed in those short seven years,
2:23
Speaker 2: as we know. But I would say, Drew, one thing
2:27
Speaker 2: that I have always really appreciated. I've had great leaders
2:31
Speaker 2: that have given me that opportunity to excel, learn and develop.
2:36
Speaker 2: But equally important to me was being able to utilize
2:39
Speaker 2: coaches and mentors in my career, which I've really and
2:42
Speaker 2: I still use today to bounce ideas off of. And
2:45
Speaker 2: it just give me a different view through a different
2:48
Speaker 2: lens than perhaps what I'm looking through and that has
2:51
Speaker 2: served me well, not only here at Great Lakes, but
2:55
Speaker 2: really throughout my entire career.
2:57
Speaker 1: Now, that's awesome, and that sounds like a very non
3:01
Speaker 1: linear path to your to your current current role, but
3:04
Speaker 1: I can echo that I that I have the same
3:06
Speaker 1: settiment on the Credit Union mission of people helping people.
3:10
Speaker 1: So that is a that's great. So the main theme
3:14
Speaker 1: of our discussion I would define, as you know, like
3:17
Speaker 1: building credit, building confidence. In some of our prior conversations Steve,
3:21
Speaker 1: leading up to this, you shared how Great Lakes has
3:24
Speaker 1: you know, helped members with thinner credit files start building
3:28
Speaker 1: credit and rebuilding their you know, their financial confidence. I'd
3:31
Speaker 1: love to hear about how you went about doing that
3:34
Speaker 1: and how has it served as a real alternative to
3:37
Speaker 1: to pay day lending.
3:38
Speaker 2: Yes, great question, Drew. Thanks. So if we look back
3:41
Speaker 2: at GLCU, we're a low income designated credit union, a
3:45
Speaker 2: community development credit union, so we really serve those of
3:49
Speaker 2: modest means. Uh So, over fifty one percent of our
3:52
Speaker 2: membership is low income. We serve a very diverse population
3:57
Speaker 2: just because of where we sit in the Chicago suburbs,
4:00
Speaker 2: branches in the city and in suburbia. So when we
4:03
Speaker 2: look at serving those members, especially those that are more
4:07
Speaker 2: challenged from a credit perspective, we need to make sure
4:11
Speaker 2: that we have products and services that are going to
4:13
Speaker 2: benefit them and add that value. And one thing that
4:17
Speaker 2: we realized is we just can't have a standard suite
4:21
Speaker 2: of lending products that we say really fit all demographics
4:26
Speaker 2: because as you and I know, they don't. So we've
4:28
Speaker 2: been very diligent in our efforts to have products and
4:33
Speaker 2: services that are going to help our members improve their lifestyle. Right.
4:38
Speaker 2: Some of it is changing their behavior, some is just
4:41
Speaker 2: giving them an opportunity to get back into what we
4:44
Speaker 2: would consider more traditional banking. So a couple examples that
4:48
Speaker 2: we've utilized at Great Links Credit Union. One is our
4:51
Speaker 2: credit builder loan. We're very proud of this loan. It's
4:56
Speaker 2: simply one thousand dollars. We don't charge an applic pation fee,
5:01
Speaker 2: there's zero percent, and it's set up on a repayment
5:05
Speaker 2: plan and the idea is that we're reporting that back
5:08
Speaker 2: to the credit bureau because they are making payments on it,
5:12
Speaker 2: we hold that thousand dollars, so in essence, there's never
5:15
Speaker 2: any delinquency right or a charge off, and it rebuilds
5:19
Speaker 2: their file and it gives them that ability then to
5:22
Speaker 2: use that in their credit file to look at other
5:25
Speaker 2: opportunities for lending in the future. And so I would
5:30
Speaker 2: say it's been somewhat popular. We have about forty loans
5:35
Speaker 2: on file right now, and those that have utilized it
5:40
Speaker 2: have graduated then into other lending products such as getting
5:44
Speaker 2: a credit card or getting a small personal loan. And
5:49
Speaker 2: so when we look at the members that utilize that,
5:52
Speaker 2: they've understood that they either have no credit file or
5:56
Speaker 2: they need that second chance opportunity. Right. We try to
5:59
Speaker 2: tie in to the best of our ability financial literacy
6:03
Speaker 2: and education as well, because we do need to change
6:05
Speaker 2: that behavior or that pattern that they've fallen into. So
6:09
Speaker 2: those that do take that seriously, will work with our
6:12
Speaker 2: consulors on developing kind of what that needs to look like,
6:16
Speaker 2: how important it is to make those payments timely, and
6:20
Speaker 2: then to utilize that right as that next stepping stone,
6:24
Speaker 2: and that has worked well for those members. We've had
6:27
Speaker 2: that product for a couple of years now and so
6:31
Speaker 2: slowly over time. Right, we want to make sure that
6:33
Speaker 2: we're offering it to the right member that's going to
6:37
Speaker 2: use it in the right way. I think for us,
6:41
Speaker 2: something that we've offered for several years at Great Lakes
6:44
Speaker 2: Credit Union. Another example is our payday lending alternative. We
6:48
Speaker 2: call that fast Cash, and that is a loan that
6:53
Speaker 2: is a twenty nine point nine nine percent with auto
6:56
Speaker 2: pay thirty three point nine nine percent without auto pay.
7:00
Speaker 2: There is a twenty dollars application fee and it's based
7:03
Speaker 2: on that member's behavior with the credit union. So they
7:06
Speaker 2: do have to be an existing member, but it gives
7:09
Speaker 2: them that opportunity to prove to us over a period
7:12
Speaker 2: of three months that they're a member in good standing,
7:16
Speaker 2: and then they do have to be eighteen years or older.
7:20
Speaker 2: They access that through our mobile app, so it becomes
7:23
Speaker 2: available when they hit that criteria. So any member that
7:28
Speaker 2: is eligible can go on the app, they'll see it appear,
7:32
Speaker 2: they can basically apply, and so it's self service, right,
7:38
Speaker 2: they go in, it's offered to them, it's underwritten, it's
7:42
Speaker 2: funded without Credit Union employee interaction or intervention. And so
7:48
Speaker 2: we have a little over one thousand loans on our
7:51
Speaker 2: books for about seven hundred and three thousand. We only
7:54
Speaker 2: have thirty eight loans that are past due, so that
7:58
Speaker 2: delinquency is about three point eight percent, and we've only
8:04
Speaker 2: charged off forty four of those loans for about forty
8:07
Speaker 2: seven thousand. So in the big scheme of things, that's
8:11
Speaker 2: not that large, right because they are smaller loans. But again,
8:15
Speaker 2: a lot of our members will utilize that as a
8:19
Speaker 2: way to bridge paychecks or gaps in income coming in,
8:25
Speaker 2: and so they find that they need to utilize that
8:28
Speaker 2: for emergency spending or in the current economic times that
8:32
Speaker 2: we're dealing with, to put food on the table, help
8:35
Speaker 2: pay rent, and so they look forward to paying that
8:40
Speaker 2: down where they can apply again and use that in
8:43
Speaker 2: those emergency situations. And we've also seen that members then
8:48
Speaker 2: will utilize that right as part of their tool and
8:51
Speaker 2: resource to really kind of manage their day to day budget. Again,
8:58
Speaker 2: we want to provide financial liver see an education a
9:01
Speaker 2: little bit harder on that because it is more of
9:03
Speaker 2: an automated tool. But I will tell you the feedback
9:06
Speaker 2: we get through from members is that they appreciate that
9:10
Speaker 2: they can do it on their own and they don't
9:13
Speaker 2: have to bring forward why it is that they need
9:17
Speaker 2: to use that right. So some members are embarrassed because
9:20
Speaker 2: they do need to bridge that gap. So through self service,
9:24
Speaker 2: it's a great, great opportunity for those members to take
9:28
Speaker 2: advantage of that. One. One new loan that we've just
9:33
Speaker 2: started in a financial desert on the southwest side in
9:38
Speaker 2: Austin through our Leader's Network branch is a member assistance
9:42
Speaker 2: loan and it could be used for an existing member
9:44
Speaker 2: or a new loan. We've just started it a couple
9:46
Speaker 2: weeks ago and it's simply a loan for three hundred dollars.
9:51
Speaker 2: It's at twenty nine point nine nine percent, so monthly
9:56
Speaker 2: payments approximately sixty five dollars a month set up on
10:00
Speaker 2: a five year term. After a couple of weeks we
10:03
Speaker 2: have six loans eighteen hundred dollars. It is underwritten, but
10:08
Speaker 2: it is really underwritten to give them an opportunity to
10:12
Speaker 2: prove themselves before we would look at offering another type
10:16
Speaker 2: of product or service. This came up due to our
10:19
Speaker 2: relationship with the Leader's Network, which is a nonprofit national
10:23
Speaker 2: group that we've worked with to bring that branch to
10:25
Speaker 2: that financial desert and our branch staff. So we're testing
10:30
Speaker 2: it in that community. We'll see how that goes over.
10:34
Speaker 2: We're monitoring that on a weekly basis. If that works,
10:38
Speaker 2: then we'll look out rolling that out in other areas
10:41
Speaker 2: in the community. But again, I think for us, these
10:43
Speaker 2: are just examples Drew of trying to provide some products
10:48
Speaker 2: that are needed in those diverse communities that are economically
10:52
Speaker 2: challenged and for those members that just need that second
10:55
Speaker 2: chance or another opportunity.
10:57
Speaker 1: Yeah, they're getting that second chance. And then at the
10:59
Speaker 1: end of the day, it's it's comfort. Right. So I
11:02
Speaker 1: want to dig a little bit more into the credit
11:05
Speaker 1: builder and the and the fast cash. You know, that's
11:09
Speaker 1: of course building credit, building building confidence. What I want
11:13
Speaker 1: to dig into though, is like you already kind of
11:15
Speaker 1: outline that it can translate into secondary type of loan,
11:19
Speaker 1: credit cards, so so on and so forth, or maybe
11:21
Speaker 1: even some type of of deposit product that you uh
11:24
Speaker 1: that you share internally, right, So can you walk us
11:28
Speaker 1: through what the journey and or transformation for those members
11:32
Speaker 1: is like going from that almost like uncertainty to empowerment
11:36
Speaker 1: type of stage of life.
11:37
Speaker 2: Yes. So for those members that look at that product
11:42
Speaker 2: as a way to help them build their relationship with
11:46
Speaker 2: more of a traditional banking establishment, then they're using that
11:51
Speaker 2: to kind of enter back into what we would consider
11:54
Speaker 2: traditional banking. Right, so it's their first opportunity to either
11:59
Speaker 2: re estate, bablish or establish credit and use that to
12:03
Speaker 2: build kind of that journey. So, for example, on the
12:07
Speaker 2: credit Builder loan, we've had some members because first they're
12:11
Speaker 2: becoming members of the credit union, so they're opening that
12:13
Speaker 2: share account and then we're attaching that loan on the
12:16
Speaker 2: credit union side. So we are one of five credit
12:20
Speaker 2: unions that offer a HUD certified consoling program. It's just
12:24
Speaker 2: not for housing, it's for budgeting assistance, financial literacy. So
12:28
Speaker 2: we've had members that have utilized that Credit Builder loan
12:33
Speaker 2: and through utilizing that, they'll meet with one of our
12:37
Speaker 2: consulors who will say, this is a great way for
12:39
Speaker 2: you to establish credit. Let's get that credit file belt.
12:44
Speaker 2: Then they'll work with our consolers post program to then
12:49
Speaker 2: work on that next step. So for a couple of them,
12:53
Speaker 2: it's been able to build up a savings routine of
12:57
Speaker 2: then starting to save for a down payment for a
13:01
Speaker 2: home or a down payment for an automobile, and then
13:05
Speaker 2: we'll tie in a deposit account. So we also offer
13:10
Speaker 2: a second chance checking. It's a certified bank on product
13:14
Speaker 2: where you can't overdraft or nsf it, so they'll use that.
13:17
Speaker 2: They can still use the debit card, put it in
13:20
Speaker 2: their digital wallet, but again it gives them that ability
13:23
Speaker 2: so they're saving. They've had a loan. Now we're getting
13:27
Speaker 2: them into utilizing a transactional type account right letting them
13:32
Speaker 2: use a debit card or a digital wallet, so that
13:35
Speaker 2: then we can start building some of that spending history
13:38
Speaker 2: along with the lending file. And then we've had those
13:42
Speaker 2: members graduate into more mainstream lending products, applying for a
13:49
Speaker 2: credit card, applying for a small personal loan. We've had
13:53
Speaker 2: examples of where they've applied and gotten approof for an
13:56
Speaker 2: auto loan. We've had a couple examples where they've said
14:00
Speaker 2: over time to put money down on a home while
14:04
Speaker 2: they're working with our consolors. Right, So if you think
14:07
Speaker 2: about it, Drew, we're really trying to change their perception
14:10
Speaker 2: of banking. We're also trying to improve their decision making
14:17
Speaker 2: and change their behavior. Right, So, if they're working with
14:20
Speaker 2: the concertor they're putting these programs in place, those are
14:24
Speaker 2: some success stories. Certainly, we do have those that don't
14:31
Speaker 2: complete paying the loan back, right, So then we're taking
14:33
Speaker 2: that thousand dollars back and paying that down so it
14:36
Speaker 2: does not negatively impact them, which is great. And so
14:42
Speaker 2: I think those that are taking this seriously and know
14:46
Speaker 2: it's a way to better their economic lifestyle, right, we
14:51
Speaker 2: help them through that journey. That timeline can be as
14:56
Speaker 2: great or as small as they want it to be.
15:00
Speaker 2: And that's why our concertors work on that individualized plan
15:03
Speaker 2: to really help them achieve what it is that's important
15:07
Speaker 2: to them. Same thing with our fast Cash loan. Although
15:12
Speaker 2: folks are using that as a payday alternative, they're also
15:18
Speaker 2: being able to utilize that to bridge that gap. Most
15:23
Speaker 2: of those members, since they're already GLCU members, utilize it
15:28
Speaker 2: in addition to their checking account relationship, their savings relationships.
15:33
Speaker 2: Some of them do have loans with us, but it
15:36
Speaker 2: is helping them kind of bridge that gap in tough,
15:40
Speaker 2: tough economic times, and we do see, especially in the
15:44
Speaker 2: current environment, we're in more utilization of that loan just
15:50
Speaker 2: because it's tough, right and things are very expensive.
15:53
Speaker 1: Now that's good. It's like you think about that whole structure.
15:57
Speaker 1: It could be a set in and forget it. But
16:00
Speaker 1: kudos to your team of there's more of a consultative
16:04
Speaker 1: approach on the back end that gives them that holistic
16:07
Speaker 1: view of what their financial freedom could look like if
16:10
Speaker 1: if you follow that path. So in thinking forward, you
16:13
Speaker 1: know the building of credit, the building of confidence it
16:16
Speaker 1: should have, and I believe it does have an impact
16:19
Speaker 1: on increased loan demand across these this cohort of numbers, right,
16:24
Speaker 1: But in today's lending landscape, automation and reduced human interaction,
16:28
Speaker 1: of course, are becoming the norm. I know I've talked
16:31
Speaker 1: about it a lot on this podcast and in prior recordings,
16:34
Speaker 1: but if I'm not mistaken, Great Legs has taken a
16:38
Speaker 1: different approach by eliminating the traditional loan department right in
16:42
Speaker 1: favor of I believe, a centralized lending type of model,
16:45
Speaker 1: but still empowering the branch loan officers to lead those
16:49
Speaker 1: personalized financial wellness types of conversations. So, Steve, can you
16:53
Speaker 1: talk about what kind of inspired that shift, how it's
16:56
Speaker 1: reshaped the lending experience for your members because the traditional
17:00
Speaker 1: format right now is digital, digital, digital, and less people
17:03
Speaker 1: wanting to come into a branch and talk to a
17:06
Speaker 1: representative about their financial wellness.
17:10
Speaker 2: Sure, and I think for us it's important to understand
17:15
Speaker 2: that because we're dealing with members of low to modest means, right,
17:19
Speaker 2: certainly we have mid market and upscale memphers as well
17:23
Speaker 2: to help us fuel and fund what we're doing. Right. However,
17:26
Speaker 2: if you think about the members that we're engaged with
17:29
Speaker 2: our members in the communities we serve where we have
17:32
Speaker 2: brick and mortar, view that as kind of that financial
17:36
Speaker 2: wellness center. So, yes, you got on a great point.
17:39
Speaker 2: We need robust digital offerings, which we offer at Great Lakes.
17:44
Speaker 2: You know, we utilized that example earlier with fash Cash
17:48
Speaker 2: being on our mobile app. Right, we have online account opening,
17:52
Speaker 2: online loan opportunities. But what we find through for a
17:57
Speaker 2: lot of our members, especially our lower income members, they
18:00
Speaker 2: may start digitally, but they want to have that interaction,
18:05
Speaker 2: so we offer that a couple of ways. One certainly,
18:09
Speaker 2: you can contact us through the member contact center. You
18:12
Speaker 2: can use our AI assistant and chat with us right
18:15
Speaker 2: and get a human, or you can come into a branch.
18:20
Speaker 2: We have certified concerts, the FI set program in branch
18:24
Speaker 2: and it is turning into more of a financial wellness center.
18:27
Speaker 2: Transactions continue to go down, but what we're finding is
18:31
Speaker 2: the interactions with our members in branch become more focused
18:36
Speaker 2: on how are we here to serve you?
18:39
Speaker 1: Right?
18:39
Speaker 2: It's not just about a transaction anymore. So what we
18:43
Speaker 2: realized is the challenge when we had all of our
18:46
Speaker 2: lending folks sitting in a centralized department right, branches weren't
18:51
Speaker 2: really engaged. We had a way that you could come
18:54
Speaker 2: into a branch and then virtually be connected. Our members
18:58
Speaker 2: told us they did not like that because if they're
19:00
Speaker 2: coming into the branch, they're coming into it for a
19:02
Speaker 2: specific reason. So when we started looking at, well, how
19:06
Speaker 2: can we enhance that service model, it become apparent to
19:10
Speaker 2: us that we needed to move those loan officers out
19:15
Speaker 2: into the branch and then also upscale some branch staff
19:20
Speaker 2: to be able to interact on the lending side with
19:23
Speaker 2: the members right face to face, so we still use
19:27
Speaker 2: a digital interaction tool to enter information and work with
19:31
Speaker 2: that member. The member can even do that digitally in branch.
19:34
Speaker 2: Most preferred to have us do that, and so yes,
19:38
Speaker 2: there are times when automation will underwrite it. It'll kick
19:41
Speaker 2: back the decision quickly, but if it needs to be reviewed,
19:45
Speaker 2: we do have centralized underwriters, not a lot, but a
19:49
Speaker 2: few that will look at those cases that require more
19:52
Speaker 2: hands on. But the branch staff is able to interact
19:56
Speaker 2: with the member, understand their need, get them in the
19:58
Speaker 2: right product and service, explain the program to them, and
20:02
Speaker 2: then fund it for them once that's approved as well.
20:06
Speaker 2: So our model has been get rid of that centralized model, right,
20:11
Speaker 2: and then put that back in for us back into
20:14
Speaker 2: the branches. We still offer that through our contact center,
20:19
Speaker 2: so you still can reach a person, but it's not
20:22
Speaker 2: in a centralized area, right, It's going to be in
20:25
Speaker 2: one of our branches. And quite honestly, if the members
20:28
Speaker 2: calling in, they don't care if you're in a centralized
20:30
Speaker 2: group or you're sitting in a branch. So from a
20:33
Speaker 2: cost savings perspective, since we have branch staff anyway, because
20:36
Speaker 2: they're there for the members during branch hours, why not
20:40
Speaker 2: utilize them more effectively, so we've upskilled them. And that
20:43
Speaker 2: also means, because we require a different skill set, we
20:47
Speaker 2: pay them a little bit more than just a transactor, right,
20:51
Speaker 2: So it serves the member, it serves us, and then
20:54
Speaker 2: certainly right we overlay our digital platforms on top of that,
20:59
Speaker 2: so we offer kind of the best of both worlds,
21:03
Speaker 2: and that model has really worked well for us for
21:06
Speaker 2: the last several years.
21:08
Speaker 1: That's great. I think with this ever changing idea of
21:13
Speaker 1: more digital, less human interaction, as much as we say
21:16
Speaker 1: we all love it in some facet, we're always trying
21:21
Speaker 1: to obtain it right, Like you go on to a
21:25
Speaker 1: specific website and talk to an AI agent, you just
21:27
Speaker 1: want a quick answer, and it's not out putting it
21:29
Speaker 1: quick enough. You immediately pick up the phone and she's like,
21:31
Speaker 1: I need to talk to an agent. I need to
21:33
Speaker 1: talk to a member service representative or something. So it's
21:36
Speaker 1: a good kind of thought to keep in the back
21:39
Speaker 1: of your mind. Like as we go forward with this
21:41
Speaker 1: digital shift, like us as humans are going to want
21:44
Speaker 1: to continue to engage with other humans.
21:47
Speaker 2: But yeah, and I think that's a great point right
21:49
Speaker 2: to make. So digitalization is very important, But you're get
21:54
Speaker 2: on a great point through it's that human interaction as well.
21:57
Speaker 2: So you need a strong, great digital platform, but you
22:01
Speaker 2: need that ability to your point, right, it's a great point.
22:03
Speaker 2: You still need that human interaction, whether it's through the phone,
22:06
Speaker 2: through a direct chat, or for us even being able
22:10
Speaker 2: to offer it through one of our twenty two locations.
22:12
Speaker 1: So last question, and I kind of want to pivot
22:15
Speaker 1: a bit from the member experience to the broader lending
22:19
Speaker 1: landscape if you want to go there. But you know,
22:22
Speaker 1: currently there's a lot of uncertainty now with of course
22:26
Speaker 1: the administration change, the evolving regulatory signal, wavering, ongoing tariff discussions,
22:33
Speaker 1: and the uncertainty there. So how are you approaching, you know,
22:37
Speaker 1: your lending strategy in light of these unknowns and how
22:40
Speaker 1: do you stay adaptable in the constantly shifting environment?
22:44
Speaker 2: Yeah? Tough right now, Right in the environment that we're
22:47
Speaker 2: all in from a never perspective, but also from an
22:49
Speaker 2: institution perspective. So certainly in the economic times we're in,
22:55
Speaker 2: we do see applications increase, but we're also seeing denials increase,
23:02
Speaker 2: right because of credit files. Right, So what we're trying
23:06
Speaker 2: to do is to ensure that we're able to work
23:09
Speaker 2: with our members the best of their ability. But part
23:12
Speaker 2: of that may be suggesting alternatives versus just denying them outright,
23:17
Speaker 2: to say, well, maybe did you look at purchasing an
23:21
Speaker 2: auto that doesn't cost as much, right? Or can we
23:25
Speaker 2: get a payment that better works for you? So offering
23:27
Speaker 2: alternatives versus just flatly denying alone. But certainly we are
23:32
Speaker 2: seeing denials. But I also think that because we have
23:36
Speaker 2: that human interaction with those members that want that, at times,
23:41
Speaker 2: we're then able to offer some constantly or coaching to them.
23:45
Speaker 2: Maybe it's consolidation of debt. Maybe it's looking at if
23:50
Speaker 2: they have a home, do they have a home equity loan?
23:53
Speaker 2: Is that a better option for them if they're looking
23:55
Speaker 2: at adding on some expense, right. So it's taking the
23:59
Speaker 2: program that we have and educating the member in a
24:03
Speaker 2: way to let them know that there are other options
24:06
Speaker 2: for them. And I think that's one unique thing not
24:08
Speaker 2: only about Great Lakes, but the credit union movement in
24:11
Speaker 2: general is very good about offering those options and that
24:15
Speaker 2: sometimes you know, digital can do that a little bit,
24:18
Speaker 2: but that's where that human interaction plays in. I think,
24:23
Speaker 2: you know, it's tough because we certainly have all seen
24:26
Speaker 2: that delinquencies have increased in a lot of product lines right,
24:30
Speaker 2: charge offs are increasing. Housing in some segments across the
24:34
Speaker 2: country is starting to see some pressure on pricing. I
24:38
Speaker 2: heard this week right some in California are experiencing back
24:43
Speaker 2: what we did in eight nine and ten, where they're
24:45
Speaker 2: giving deeds back, you know, in LUA foreclosures. So I
24:49
Speaker 2: think it's paying attention to all of the economic constraints
24:54
Speaker 2: that are impacting all of us, right and making sure
24:57
Speaker 2: that you balance the need of being able to serve
25:00
Speaker 2: of your member in the community, but doing it in
25:02
Speaker 2: a smart way that certainly does not add additional or
25:07
Speaker 2: unneeded risk to your balance sheet or your concentrations. And
25:11
Speaker 2: so I think it's looking under the hood at what
25:14
Speaker 2: you're offering, making sure you're pricing engines, are taking all
25:18
Speaker 2: these nuances into consideration and evaluating them on a more
25:22
Speaker 2: frequent basis to make sure that you're properly handling the
25:27
Speaker 2: risk side of that equation. I think also putting people
25:32
Speaker 2: in products and services that don't make sense for them
25:36
Speaker 2: is a challenge, and that is a challenge when you
25:39
Speaker 2: don't have that human interaction, are only utilizing kind of
25:42
Speaker 2: a digital model. So it's making sure that the box
25:45
Speaker 2: that you operate in if you're utilizing automated underwriting, right,
25:50
Speaker 2: is taking into consideration those risk factors and making sure
25:54
Speaker 2: that you continually update those and look at those because
25:58
Speaker 2: the risk factors that we use to years ago are
26:01
Speaker 2: not the same respectors that we need to use in
26:03
Speaker 2: that model today, right. And then I think it's just
26:07
Speaker 2: making sure that as we evolve products and services that
26:11
Speaker 2: you're managing those and looking at those metrics on an
26:14
Speaker 2: ongoing basis. Kind of goes back to my point on
26:17
Speaker 2: that three hundred dollars loan, right, don't want to put
26:19
Speaker 2: a lot of those on the books that are all
26:20
Speaker 2: going to be charged off, even though they're small. So
26:23
Speaker 2: it's monitoring that on a daily or weekly basis and
26:26
Speaker 2: making sure the lending teams are really myopically focused on
26:31
Speaker 2: managing those products and services. And then I also think,
26:35
Speaker 2: you know, making sure that you're cognizant into LTVs, Right,
26:42
Speaker 2: what does that look like? Does that really make sense
26:45
Speaker 2: right when you're when you're giving out those loans. So
26:49
Speaker 2: I think the awareness needs to be there, and it's
26:53
Speaker 2: looking at all those economic factors. And then you know,
26:57
Speaker 2: we're also seeing stress and pressure on some of those
27:00
Speaker 2: markets in the last few years that have really had
27:02
Speaker 2: housing values increased significantly starting to come back. So making
27:07
Speaker 2: sure that if you're looking at a refinance of a
27:09
Speaker 2: first or a helock, that you are taking those values
27:13
Speaker 2: into consideration as well, and then really communicating and being
27:18
Speaker 2: transparent with the membership when you're working with them on
27:21
Speaker 2: a lending opportunity. Right. So, I think it just becomes
27:27
Speaker 2: more of tuning into some of the key learnings we
27:31
Speaker 2: picked up in the last economic downturn and then really
27:36
Speaker 2: codifying those and saying, what did we learn, and let's
27:39
Speaker 2: not get back into those same habits, and then how
27:43
Speaker 2: do we get ahead of it versus so being more
27:46
Speaker 2: proactive drough than being react.
27:48
Speaker 1: I'd love to get your thoughts to expand off of that.
27:51
Speaker 1: You brought up a great point, and I would say
27:53
Speaker 1: this is the consensus across the financial services ecosystem, whether
27:56
Speaker 1: it's credit unions and or banks. Delinquencies are on the rise,
28:01
Speaker 1: Denials of loans are on the rise. Most financial institutions
28:07
Speaker 1: their form of income of course comes from lending. But
28:11
Speaker 1: as we have pressures to valuations of homes, valuations of vehicles,
28:15
Speaker 1: also constraining the approval the approval odds of these types
28:18
Speaker 1: of products that you offer to your members. How do
28:21
Speaker 1: you think about this in the short term from an
28:23
Speaker 1: income perspective? Right, Like, if things are down and lendings
28:26
Speaker 1: down and approvals are down, does this impact income statement?
28:30
Speaker 1: How long? How are you kind of measuring your thought
28:32
Speaker 1: process and moving forward with that? Right?
28:34
Speaker 2: So I think that goes back to concentrations, right and
28:37
Speaker 2: modeling out through your ALM what your balance sheet can
28:41
Speaker 2: really take, right. And so perhaps if you're lent out
28:45
Speaker 2: and a lot of that is in mortgages, right, is
28:49
Speaker 2: that a challenge? And then how do you offset that
28:52
Speaker 2: with other type of loans right that are going to
28:55
Speaker 2: help balance that concentration mix. But it is an income challenge, right,
29:01
Speaker 2: So it's what other forms of non traditional income does
29:06
Speaker 2: your credit union focus on? Right? And so how do
29:09
Speaker 2: you maximize in a downward economic trend those other revenue
29:15
Speaker 2: streams that can make up for whatever that gap is
29:19
Speaker 2: going to be? Or you know, like us, we're a
29:22
Speaker 2: shop that is very heavy and have been very heavy
29:24
Speaker 2: on the mortgage side. We have a lot of those
29:27
Speaker 2: fixed mortgages at low rates, right, because we got caught
29:30
Speaker 2: in that bubble of not selling them quick enough, right,
29:33
Speaker 2: So then we had to turn to other lending products
29:35
Speaker 2: and services that was going to bring in more income,
29:40
Speaker 2: So commercial lending, small business lending that brings in some
29:43
Speaker 2: fee income. But also today you're putting those on at
29:46
Speaker 2: a higher rate. Need to do it the smart way, right,
29:49
Speaker 2: But I think it's balancing out. What are some of
29:52
Speaker 2: those other products and services that you can bring in
29:55
Speaker 2: fee income in in the right way? And are you know,
29:59
Speaker 2: onboarding those loans at a higher rate than you have
30:01
Speaker 2: on your books today, and as things pay down, replace
30:04
Speaker 2: those loans with loans at a higher rate. But part
30:09
Speaker 2: of it is a timing as well, right, And so
30:12
Speaker 2: then what other sources of income are you looking at? Right?
30:16
Speaker 2: So can your investment portfolio bring in some additional income?
30:20
Speaker 1: Right?
30:20
Speaker 2: Do you have QSOs that can ratchet up income? Right?
30:24
Speaker 2: So I think it's looking at all those alternative sources
30:27
Speaker 2: if you have those available at your credit union. But
30:30
Speaker 2: I will say, you know what I've seen sometimes during
30:35
Speaker 2: economic downturns old enough to be here in a couple
30:38
Speaker 2: of them, is you don't overreact either, right, because you
30:42
Speaker 2: can go too much one way or the other right,
30:45
Speaker 2: So what's that course of action that's going to keep
30:48
Speaker 2: you in the middle, right, And then having that strategic
30:52
Speaker 2: discussion with your board, with your leadership team to make
30:56
Speaker 2: sure that you're taking all those things into consideration and
30:59
Speaker 2: that you're really managing through more analysis and modeling on
31:05
Speaker 2: decision making. Because you may think, well, all right, I
31:09
Speaker 2: need to add on some more loans at a higher rate.
31:12
Speaker 2: Well that's great, but are you doing it the right way?
31:16
Speaker 2: Is their risk with bringing on those loans? Right? Certainly
31:18
Speaker 2: we all love cecil and balancing out cecil implications as well,
31:24
Speaker 2: but I think you need to do it in a
31:25
Speaker 2: smart way, and I do think you need to look
31:28
Speaker 2: at it with more emphasis placed on analysis and modeling,
31:33
Speaker 2: and then make sure that whatever you decide to do,
31:36
Speaker 2: that your balance sheet can support that, right, and that
31:39
Speaker 2: you have the liquidity and the capital to be able
31:42
Speaker 2: to build that into that balance sheet right analysis as well.
31:46
Speaker 1: Exactly. Well, thank you for that, Steve. I think this
31:50
Speaker 1: is a good transition spot. I always like to close
31:54
Speaker 1: the podcast out with three questions rapid fire, so we'll
31:57
Speaker 1: get started here. What is the latest and great app
32:00
Speaker 1: or technology gadget that you cannot live without.
32:03
Speaker 2: Yeah, So I'm an old technology person, So I would
32:07
Speaker 2: say my iPhone because all my apps that I use
32:09
Speaker 2: are on the iPhone right as they all off for
32:11
Speaker 2: all of us, and so you know they're right there.
32:14
Speaker 2: They're handy. But I would say, you know, top of
32:17
Speaker 2: the list certainly would be our mobile app here at
32:21
Speaker 2: the credit Union, right, because I can check on everything
32:24
Speaker 2: all the time. I can see what my wife is doing, right,
32:27
Speaker 2: what's coming in the account, what's going out of the account.
32:30
Speaker 2: And then certainly because of Chicago, have to use Ways
32:34
Speaker 2: a lot because the traffic is horrendous and there's always
32:38
Speaker 2: something going on, so what's the best way to get there?
32:40
Speaker 2: So Ways is probably my go to app as well.
32:43
Speaker 2: And then fit Bit because I love to just see
32:46
Speaker 2: sleep score, steps per day activity. Right. So I think
32:50
Speaker 2: those would probably be the three top things on my
32:54
Speaker 2: iPhone that I utilize.
32:56
Speaker 1: Yeah, I'm interested to see the transition of that. Like
32:58
Speaker 1: you think about the iPhone, how long it's been out,
33:01
Speaker 1: whether it's Ways or Google Maps or even the I mean,
33:04
Speaker 1: the Bit's probably a decade in market now, Like those
33:07
Speaker 1: are the ones that we can't live without. What does
33:09
Speaker 1: that translate to in another decade or two decades now
33:11
Speaker 1: from a technology perspective, but I would agree with you
33:14
Speaker 1: that the technology that we cannot live without, I think
33:17
Speaker 1: the phone number one takes takes the cake.
33:20
Speaker 2: All right?
33:20
Speaker 1: Next question, if you could switch jobs with anyone for
33:23
Speaker 1: a day, who would it be?
33:24
Speaker 2: In y So probably a little bit unique to me.
33:28
Speaker 2: For those that know me, that probably wouldn't be a surprise.
33:30
Speaker 2: But I would say Clay Robbins, who is the CEO
33:34
Speaker 2: of Lelly Endowment based on Indianapolis. Right, So, being a
33:39
Speaker 2: Hoosier born and raised in the Hoosier State, had the
33:43
Speaker 2: opportunity to work with them at a community foundation, their
33:49
Speaker 2: very phone thropic. Their give back is tremendous, especially in
33:53
Speaker 2: the state of Indiana, in community foundations and the impact
33:57
Speaker 2: that that organization has made in the communities that they
34:02
Speaker 2: serve in Indiana and the impact and seeing the impact
34:06
Speaker 2: of those dollars being utilized. And so I go back
34:08
Speaker 2: and say, that's really interesting because right if you take
34:13
Speaker 2: that model and say, gosh, what could be done even
34:17
Speaker 2: in other states, right by those type of pel and
34:20
Speaker 2: profit organizations. Wouldn't we all be much better off? The
34:24
Speaker 2: members we serve, the communities, we serve and because of
34:29
Speaker 2: living our mission here at GLCU, that organization really resonates
34:34
Speaker 2: with me, especially with having some interaction with them in
34:37
Speaker 2: Indiana and at the credit Union I came from.
34:39
Speaker 1: That's good. We can take offline for another conversation our
34:44
Speaker 1: collegiate fandom. But I did not know that you were
34:46
Speaker 1: a former Hoosier and fan, so we'll pick that up
34:50
Speaker 1: another day. Last question, though, does not need to pertain
34:53
Speaker 1: to lending, but what is one bold prediction for the future?
34:56
Speaker 2: So I would say, so this is like pretty bold
35:00
Speaker 2: going out there, nothing to do with lending, right, But
35:03
Speaker 2: I really think the Chicago Cubs, I don't want to
35:06
Speaker 2: jinx it right, are going to win the World Series
35:08
Speaker 2: this year. Just wait and see it's gonna happen. It's
35:12
Speaker 2: gonna happen.
35:12
Speaker 1: As a Cleveland Guardians now now Guardians fan, I don't
35:16
Speaker 1: have the same mindset of rooting for anything Cubs related
35:21
Speaker 1: since of what happened in twenty sixteen. But we can
35:23
Speaker 1: also take that offline for another.
35:25
Speaker 2: And if I'm telling you that, I'm looking at my background, right,
35:28
Speaker 2: and then you see the Bears in the back, right,
35:31
Speaker 2: I did not say, right any prediction on them, but
35:34
Speaker 2: maybe if I move over and hide there, right, So,
35:37
Speaker 2: I just caught that on the background, Like, yah, that's
35:39
Speaker 2: probably not so great. I should have had something up
35:40
Speaker 2: there on the cups, right.
35:41
Speaker 1: Yeah, but Bears Brown's Noga guards cubs potentially. But Steve,
35:47
Speaker 1: this has been such an insightful conversation. Thank you so
35:50
Speaker 1: much for you know, sharing your experience, your perspectives. As always,
35:54
Speaker 1: to our listeners, thank you for tuning in. If you
35:56
Speaker 1: enjoyed today's episode, be sure to subscribe to share with
36:00
Speaker 1: a colleague, friend, and the industry. Until next time, keep innovating,
36:03
Speaker 1: stay curious, and thanks again for being part of our conversation.