OVERLAND PARK, Kan.-Credit unions are investing heavily in their lending infrastructure to book more loans before interest rates rise and to manage risk, according to one analyst.

"We see credit unions investing on both the tactical and strategic levels," said Tony Ferris, managing partner for Rochdale Group. "On the tactical level there is a move toward better lending practices. Credit unions are doing multi-dimensional analysis of their portfolios and doing a targeted focus to find members who might be primed for a refi."

In addition, he said he is also seeing credit unions increasing their pursuit of the mortgage and, as economic conditions improve, going "deeper down the lending scale" beyond A paper. Moreover, when loans leave, Ferris said more credit unions are pushing hard to bring those loans back. "They want loans that are making a decent return in a flat-rate environment-before rates go back up," he assessed.

Enhanced Delivery Channels, Marketing

While credit unions are putting in place the pieces to support their lending efforts, on the strategic level Ferris said CUs are also much more focused on marketing and sales than he has ever seen.

"They are enhancing delivery channels, looking at how to reach members more efficiently. This is seen especially in online banking."

Because CUs are pushing hard to bring in more loans, they are spending money on their risk infrastructure, Ferris noted. This includes enterprise risk management, concentration risk and ALM methodology.

"They are building infrastructure and support processes to make sure they can go after people with lower credit," he observed. "They are getting good results from risk management and lending investments. The industry is more aware of the bottom line than it was in the past. There are haves and have nots out there, and some of the have nots are hoping the old days will come back. But many credit unions realize life as we know it has changed and they are looking for ways to support the bottom line, not just ride it out. Because of this, I see a lot more merger activity over the next three years."

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