NORWICH, Conn.-CorePlus FCU here has opened two branches specifically for making loans as a way to test the waters for expansion to areas where the CU does not currently have a presence.

"Like a lot of credit unions, we need loans," said CEO Warren Scholl. "We have more deposits than loans and are looking for ways to reach out to the communities we serve. ... Why not start with a loan office?"

Known as "Loan Zone" branches, CorePlus opened the first Loan Zone "to create an environment where people could come in and get a small loan-a signature loan, a consumer loan, an auto loan-without feeling the intimidation of walking into a big financial institution. I think there's a general reputation out there that credit is not available. We may have the name credit union, but a large number of younger people don't know the difference between a credit union and a bank. What we're trying to do is put the credit back in credit union and emphasize that portion of our model and our business plan."

The 21,000-member, $201-million credit union has placed Loan Zone branches in Norwich and Putnam, and they are both two-person shops.

"It introduces the credit union into the marketplace in a non-intimidating standpoint without running into a lot of competition. We're not taking deposits, we're not competing with banks; we're just trying to emphasize what a credit union is, and it's working very well for us."

The Putnam Loan Zone opened in April and has since booked 175 loans totaling about $3 million. The Norwich Loan Zone opened in July and has booked about $600,000. "The numbers are there for the small loans," said Scholl. "Ninety percent of the people walking into these offices had not done business with us before, so they're new members. In addition to the loan business, we're also getting credit card business from them, which is good too, because our rates are considerably lower than a lot of the national banks."

The branches are positioned to draw foot traffic and walk-ins, such as near the office of one of the CU's former SEGs and near a shopping center. "There's an auto repair shop nearby, a tire store and so forth, so people are over there getting new tires and getting hit with a bill and they say 'How will I pay for this?'" said Scholl. "They walk to the Loan Zone and walk out with the money."

Scholl said that members usually understand when they come in to perform non-loan transactions and are told that Loan Zone branches are only for loans. He said it was too early to say much about the demographics that are utilizing these facilities, but noted that the plan is to give the project two years, during which he expects the loan portfolio to rise to about $10 million.

 

Advice On Strategy

"If we turn around and reach a $10-million portfolio of small loans in just a couple of years and that translates to X number of members, that proves this area is appropriate to a full-service branch and we'll transfer those members to a full-service facility of one kind or another," said Scholl.

For credit unions considering a similar expansion strategy, Scholl emphasized "It's not an end-all to solving their deposit-to-loan ratio problems and it's not a flash in the pan. If you make the commitment, you really have to try to work at the community for a couple of years; you've got to commit and go from there. Call me in two years and I'll tell you how successful it was; right now, I'm confident that it will be."

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