Deposits, Small Loans & Millennials: Onsite at CUBG

SAVANNAH, Ga. – Just as CU Business Group’s 2018 National Business Conference kicked off Monday afternoon, CEO Larry Middleman took some time to share his thoughts on the business lending landscape for credit unions and how CUBG is addressing current business service challenges.

CUBG is a Portland, Ore.-based CUSO that assists approximately 575 credit unions in 47 states with their commercial lending and business services programs. It hosts two versions of its national conference every year – one on each coast of the country – to accommodate credit unions in different regions. The west coast version took place last month in Portland.

Read on for a portion of Middleman’s conversation with CU Times, which focused on three key challenge areas being discussed at the conference: Deposit programs, small loan requests and commercial lending to millennials.

CU Times: At last year’s CUBG conference, you described how credit unions were beginning to make bigger business loan deals. Have you seen that trend continue?

Middleman: Many credit unions are in their 10th year or more of commercial lending and business services. Commercial lending is where there’s a ton of expertise in our industry, there are some heavy hitters from banking that have built some solid programs and have been in the industry for years now, and they are a major player in their marketplace. They are right in there with some of the largest banks, bidding on big deals – big deals being $10 million, even $20 million – and credit unions have the expertise to originate those deals, and now have the infrastructure, systems and processes to participate those. And they can do so pretty effectively, whether it be through CUBG or their own network. So it just keeps advancing at a pretty rapid pace on large, commercial real estate deals, which is great to see. Ten years ago, we were just getting started in all that.

I separate commercial lending from business services because the deposit side – credit unions’ relationship with depository services – is becoming highly important. That’s because there’s a high loan to share ratio, which means that you can use more business deposits in order to keep your loan portfolio growing. The systems, expertise and infrastructure on the business deposit side is not advancing at the same rate that the lending side is. It’s going at a slower pace, so that makes it harder to attract a sophisticated business because you can’t serve all their needs.

CU Times: How do the topics at this year’s CUBG conference differ from last year’s, and what challenges do they address that may have cropped up or intensified for credit unions in the past year?

Middleman: We’re always very conscious of recruiting really good speakers on the deposit side. Most conferences that are put on by a CUSO or entity like us really focus on lending. And a lot of ours is in the lending area, but we have an early bird session right now, for example, that spends three hours in-depth on how to build a better deposit program. I just was just talking to one of the attendees, and he said, “You know, what I really like about this is you guys have deposit sessions here too.”

One of the challenges of the industry right now is how to handle small loan requests. Those are very small in dollars and not very profitable just as a transaction on their own. I’m talking about loans less than $100,000 for a business pickup, small piece of equipment, or couple of credit cards for a small business. With the underwriting and processing of those small loans, it’s hard to get them to be efficient. So another one of our sessions is on how to set up an efficient process for small loans. We have a ton of expertise in that, we have some case studies in the room there, and CUBG has developed a program we call Fast Track, which is designed to process one of those under $100,000, non-real estate commercial loan requests. [With Fast Track,] we can basically have a credit decision back to the credit union on the same day. So we’re addressing that – the big-dollar deals are pretty well-covered in a lot of credit unions, but with the small stuff, there’s still a struggle in how to efficiently do that.

Another thing that our conference is specifically addressing is very forward-thinking. Commercial lending tends to be very paper-oriented – there’s lots of data, we have to crunch numbers, and we kind of do it in the old school way. Millennials, who are the business owners of today and definitely tomorrow, aren’t really used to that. [Millennials will wonder,] how do I apply for a commercial loan on my phone? So we have a speaker who has done a ton of research on commercial lending for millennials. It’s hard to see a millennial coming in with all their tax returns, sitting down, and having the credit union say, “I’ll get back to you next week if we need anything else, and we’ll get this loan closed in 30 to 60 days.” That just doesn’t fit the millennial.

Read the full interview with Larry Middleman in the Oct. 17, 2018 print issue of CU Times.