Credit Union improves profitability and mitigates losses while enhancing overall portfolio performance with Lending Insights.

THE CHALLENGE:

Monitor loan performance over time to measure delinquency and loss ratios.
Schools Financial Credit Unions’ loan portfolio was experiencing rapidly rising delinquency and loss. The credit union needed to be able to identify from which areas of their portfolio they were coming from and why they were occurring. However, the tools they were using were inadequate in revealing the issues. Additionally, Schools Financial CU knew that continued loan growth was important, but found it difficult to determine which portfolio segments presented the best opportunities.

The credit union was also challenged with being able to run comprehensive reports that were useful to management and satisfying examiners. At the time, Schools Financial CU was using manual spreadsheets and databases to conduct its reporting. Reporting for just the indirect auto loan portfolio took staff 20 to 40 hours per month to complete and still lacked the detail needed.

Ultimately, Schools Financial CU needed more powerful reporting and analysis with less effort and time spent manipulating data. It needed to be able to closely monitor and analyze its loan portfolio, while running more detailed reports. The credit union could not afford hiring additional staff. In fact, Schools Financial CU wanted to free up more of its existing staff’s time so they could focus on implementing policies and practices that would help minimize risk and drive more loans. The management team from the credit union knew there had to be a way around this, which led to its search for a solution.
 

THE SOLUTION:

Lending Insights’ Lending Performance Management System (LPMS).

Schools Financial CU needed a solution that would provide portfolio management and analytics to raise the level of its business intelligence. The credit union needed a system that would enable it to run comprehensive and comprehendible reports to meet regulatory requirements, as well as identify opportunities to minimize risk and make more profitable loans.

During its search for a solution, the credit union discovered there were a few business intelligence solutions available. Most of these solutions were very expensive and required additional programming and set up at the credit union level. Schools Financial CU did not have the development resources or budget for outside consulting. It required a system that was user-friendly and would come delivered ready to use. Lending Insights was the only system available that could meet all of Schools Financial CU’s requirements and was designed specifically for credit unions. Schools Financial CU chose Lending Insights as its solution to help meet its three key objectives.

Minimize Risk of Loss. With the Lending Insights system, Schools Financial CU would have a powerful set of tools to manage its loan portfolio risk. The key metrics, scorecards and detailed reporting within the Lending Performance Management System would significantly reduce the amount of staff time spent manipulating data and preparing reports. The fully automated reports highlight areas of concern by loan and product type. For example, the dealer management reports would allow Schools Financial CU to determine loss and delinquency performance by dealer and further drill into the dealer loan profiles by collateral type, member type, credit tier and a variety of other dimensions. “It was important for us to have a system in place that would allow us to accurately pinpoint loss and delinquency trends over time to monitor the impact of our overall loan portfolio. We knew the tools in the Lending Insights system would allow us to do that.” stated Tim Marriott, EVP at Schools Financial Credit Union.

Meet Regulatory Requirements. One of the features that differentiate Lending Insights from other systems is its static pool analysis, which enables losses and repayments speeds to be analyzed over specific time periods with just a few simple clicks. With Lending Insights, Schools Financial CU would be able to instantly generate static pool analysis and other reports to provide the documentation that regulators are requiring.

Increase Loan Opportunities. Schools Financial CU was also eager to find a way to make more profitable loans while reducing risk. Lending Insights provides a variety of analytics and reports to help accomplish this. The detailed reporting and research tools in the system would help the credit union pinpoint loan growth opportunities. The market intelligence and CUDL benchmark reports would allow the credit union to assess its originations and performance against credit union peers. By providing powerful and intuitive analysis, the Lending Insights system would help Schools Financial CU manage credit risk while identifying opportunities to expand its loan portfolio.

THE RESULTS:

An improvement in profitability and portfolio performance. Impress auditors with loan monitoring and managing tools.

Since implementing the Lending Insight system, Schools Financial CU has been able to minimize risk of loss, meet regulatory requirements and identify opportunities for loan growth. In addition, they have been able to free up more of their staff’s time, which has allowed them to focus more on managing risk and growing their business. Information that once took many hours to prepare is now available instantly through flexible and customizable reports.

The information Lending Insights provides allows Schools Financial CU to take a much deeper look into their loan portfolio. Schools Financial CU can now review their loan loss trends over time, which has helped to minimize their overall risk of loss. During the first few years of using the tools in the Lending Insights system, the credit union was able to reduce their indirect auto loan losses from around $8 million a year to approximately $1 million a year. For many years running, Schools Financial CU has been able to maintain a good market share while running lower loss and delinquency ratios then their geographic peer credit unions.

The credit union has also found the Lending Insights management scorecards to be very beneficial. The scorecards show the credit union performance levels and trends for a wide variety of origination, balance and performance metrics. “The traffic light scheme in the system makes it easy to monitor whether our performance is matching the goals we have set. Green means we’re within the bounds of our goals. If the indicator is yellow or red, we may need to spend time diving into why we’re seeing that particular trend or anomaly,” said Tim.

Auditors were also impressed with the tools Schools Financial CU has available through Lending Insights. Lending Insights has helped Schools Financial CU be exam-ready and instantly able to respond to data and report requests from examiners.

Schools Financial CU has been able to acquire additional loans by recognizing opportunities uncovered through the dynamic reports in the Lending Insights system. “We’ve got a good window into what’s going on with our lending programs at a very granular level. It has helped us identify certain high performing dealer profiles and member segments to target for more loans,” stated Tim.

Lending Insights is a part of CU Directs’ family of credit union-building brands. To find out more contact your local sales rep at (877) 744-2835 or log onto www.CUDirect.com.

This case study is for informational purposes only. ©2011 CU Direct Corporation. All rights reserved.