Lending Perspectives: Five Loan and Leadership Lessons from COVID-19

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Bill Vogeney Photo
Chief Revenue Officer
Ent Credit Union

6 minutes

As you reflect on how your pandemic response has gone so far, plan your next wave of action.

Sitting down at my computer at the end of another long day, I find comfort and stress relief thinking about what our credit union has achieved in the last six weeks. In early to mid-March, our members and our staff quickly transitioned from COVID-19 prevention in the form of washing our hands and not touching our faces to a shelter-in-place order in a matter of 48 hours.

Operationally though, the impacts had only just begun. Staff at risk of being acutely affected by the virus were sent home. Staff that could work from home started transitioning to a different and, in most cases, less productive environment. Requests for help from our members came flooding in. There’s a lot of things I could talk about that we faced and dealt with very quickly during a very short period of time. However, here are five things that I think were my most important lessons learned or validations of what we already knew about our organization.

1. Past results are not a predictor of future success.

A variation of this is most often used when describing the return on an investment, but was certainly applicable to my credit union and, specifically, our plans to assist members. We have a lot of practice either helping our members, or being prepared to help them, over many years. Ent was very much ahead of the curve with loan modification plans before the Great Recession. We developed what we believe were innovative strategies to reduce payments and interest rates through unprecedented member outreach as early as February of 2008. We had a series of natural disasters in Colorado between 2012 and 2017, from fires to catastrophic hail storms, for which we developed emergency loan plans to assist members with short-term funding. We also had developed a government shutdown loan plan as well. In short, we felt we were ready for anything.

In just a few days, we realized all of our plans and processes would be woefully inadequate. Instead of reduced payments and interest rates, members needed no payments. Our automated skip-a-pay process, while able to serve several hundred members a day, was perhaps too restrictive for the magnitude of the pandemic and only 60-70% of member requests were automatically approved by the system. We had to pivot quickly, which we did, yet we went through a week or so that wasn’t up to our high standards—nor those of our members.

2. Experience with adversity can help guide your response to new adversity.

What was extremely helpful was our past adversity and organizational experience with it. Over my career, I’ve seen credit unions (and managers) struggle when faced with their first taste of adversity. I’ve shared a story with my managers from earlier in my career of a high-flying credit union that, in the mid-1990s (great economic times), was faced with what I’d refer to as a loan portfolio explosion that stemmed from some really shoddy loans.

The credit union had previously been fairly conservative with its growth and lending risks and only started to grow at hyper speed for the previous two years. Unfortunately, key senior executives had never faced such a significant problem as that portfolio going south. As a result, the leadership under-reacted at first and then couldn’t recover enough from the wave of defaults to keep the business going. Ultimately, the CEO and the VP/lending both lost their jobs. The credit union recovered only after struggling for the better part of five years.

Experience with adversity teaches you to be calm, but fast-acting. In some regards, once you’ve lived to tell the stories, I think it’s easier to be prepared because your loan portfolio, business model and overall business philosophy benefits from past struggles.

3. Workforce flexibility is more than just working remotely.

More than just cross-training, I’m referring to a member-centric staff that can do, and has done, a variety of jobs. We were able to survive the initial onslaught of member requests for assistance because we have a workforce of long-term employees who have performed several different jobs over the years. It was easy to deploy those folks to where we needed them.

Yet you also need a staff that’s committed to not only helping your members, but their fellow employees. A great story I can tell is that two of our dealer representatives for our indirect program were so committed they agreed to work our email queues and direct members to the department that could help. Neither of them have served in another role for us. They’re both recovering finance managers from the dealer world. Yet they love Ent and they were committed to doing whatever was necessary.

4. Assess your ability and commit to your decisions.

In a crisis, there is no room for second-guessing. You have to assess the challenges, determine your organizational ability and make decisions. The perfect example for us was the development and assessment of our plan to help our business members. We rolled out aggressive deferment plans for small and large business loans. We offered immediate doubling of small business lines of credit up to $50,000. We implemented an emergency larger line of credit up to $100,000 for those existing business members with larger loans that we were very familiar with. What couldn’t we do? The U.S. Small Business Administration’s Payroll Protection Plan loans.

Since we’re not an SBA lender, we were well aware that we suffered from “not knowing what we don’t know.” We heard from members that were expecting to obtain these loans the day the SBA released its guidance. We spent several days after the CARES Act was signed determining what we could about the program. We had to make a decision: Do we try to stand up this program in an insanely short time frame, or do we point our members in the direction of a known third party?

We chose to rely on referring our members to a non-bank SBA lender. If we had tried to implement the program, we would have been woefully late in delivering the loans; I would have contributed to a level of stress for my staff that they didn’t need; and, quite frankly, I think our overall service to members would have suffered along with it. To a certain extent, I felt we were practicing a business version of battleground triage.

5. Above all, expect the worse and you’ll be better prepared for what does happen.

I sometimes take a little heat for being a bit of a pessimist. Okay, so I’ve predicted seven out of the last three recessions; isn’t there a silver lining to my Johnny Raincloud disposition? In this case there is. Over the last six weeks, I’d have to say there are a pair of things that are fairly accurate about the impact of the pandemic on our members and our operations: One, just about everything that could have gone wrong has gone wrong. Two, every time we’ve tried to estimate what might happen, we’ve underestimated the impact.

More than likely, the impacts of COVID-19 will have a greater reach that we thought a month ago. Start the next wave of preparation, consider what segments of the economy may be permanently damaged, and determine how that will impact your credit union.

CUES member Bill Vogeney is the self-professed lending geek and chief revenue officer for $6.2 billion Ent Credit Union, Colorado Springs.

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