Balancing Tech and Tradition: Serving Local Communities Digitally

[00:00] Elizabeth Adcock: We’re trying to be really aware of how we might want to introduce something that is interacting and emulating a person, that it is in a way that our members will feel as natural and don’t feel as though it’s deceptive or that we’re trying to trick somebody into interacting with the robot instead of an actual person.

[00:23] Narrator: Welcome to 22 Minutes in Lending, your go-to podcast for insights on all things lending. From lending practices, regulatory updates, how to enhance lending efforts and more. In each episode, Vince Passione connects with industry leaders to discuss the latest trends and happenings around the lending industry. Let’s dive in to the latest in lending.

[00:45] Vince Passione: Welcome everyone to 22 Minutes in Lending. I’m your host, Vince Passione, and today we have the pleasure of welcoming not one, but two leaders from MAC Federal Credit Union to our podcast, Elizabeth Adcock, the Chief Information Officer, and Darcie Morgan, the Vice President of Business Services.

[01:01] Vince Passione: Elizabeth brings over 25 years of experience in web and app development and business and IT infrastructure. She has a very strong focus on strategic innovation in the financial services sector. Since joining MAC FCU in 2021, she’s been instrumental in implementing cutting-edge technology solutions to enhance the member experience.

[01:19] Vince Passione: Darcie, also a key member of the MAC team since 2021, oversees business development and has played a vital role in growing membership and assets. Her efforts have significantly contributed to the credit union’s digital transformation and improved member engagement.

[01:33] Vince Passione: Today, they lead at MAC FCU, which has seen remarkable growth in recent years, expanding its assets from 116 million to 200 million and increasing its membership from 15,000 to 20,000. Elizabeth, Darcie, thank you both for being here today.

[01:48] Darcie Morgan: Thank you.

[01:49] Elizabeth Adcock: Thank you.

[01:50] Vince Passione: So listen, why don’t we just start with a little bit about MAC FCU. So based in Fairbanks, Alaska, tell us what’s unique about the credit union or unique about the members and their requirements.

[02:01] Darcie Morgan: Sure. So MAC Federal Credit Union was started in Fairbanks over 72 years ago, and so we have strong roots in the Fairbanks community and we’re focused on military engagements in Fairbanks. We have large military presence up in Fairbanks, Alaska. About three years ago, we actually expanded down into the Matanuska-Susitna borough to about double our location where we can serve members. MAC has really focused on second chance lending. We helped those with bumped and bruised credit, and that’s really what we’re known for, which is a welcome addition to the Matanuska-Susitna area as well, because there’s a strong need there.

[02:46] Vince Passione: That’s great. So let’s stick on the growth. We talked about growth. It was pretty impressive. Past five years, 25% increase in membership and 70% increase in assets. So Darcie, what were the strategies that you deploy to drive that growth?

[03:01] Darcie Morgan: A lot of it had to do with our move into the Mat-Su area. It was really strategic, our field of membership expansion, because Alaska, as a whole, is losing some population across the state, but one of the areas that’s actually experiencing solid growth is the Mat-Su area of Alaska. And so by us expanding down here and offering our services here has really helped to strengthen our credit union in numbers and assets. At the same time, we placed a major focus on diversification. We really specialized in consumer lending, but in the last five years decided to pour a lot into our real estate lending, our mortgage services as well as start our new business services program. So diversification is a big key is to our expansion.

[03:55] Vince Passione: So on the real estate side, residential? It’s all residential?

[03:59] Darcie Morgan: Yes.

[03:59] Vince Passione: Great. And housing, what’s housing like there? And is it something unique in when you’re thinking about… Because cost of living is fairly high there, right, in Fairbanks?

[04:10] Darcie Morgan: Yes. Cost of living is very high. Cost of housing is very high. But what we find is that our cost of rent is also extremely high. So our housing market is in a spot where it still makes sense to purchase a home here because even with the rising rate environment, you can still come out with a better mortgage payment than you could obtaining the same style of house by renting.

[04:37] Vince Passione: How do you deal with the mortgage situation and affordability? Are there any unique mortgage products on the residential side for the members?

[04:47] Darcie Morgan: Yeah. So because we do the second chance lending, we made sure that when we found mortgage companies that we wanted to partner with that we found mortgages that were specific to first time homebuyer, low-income type of programs. We have a VA specialist on staff. And so we’re focusing on trying to match our mortgage lending products to the consumers that we serve on a regular basis. But what we’ve found over the last year is it’s still pretty steady because we have somewhat of a transient population that want to purchase homes. And so we’ve had steady mortgage lending, not high but steady. What we have found is that our real estate in-house portfolio, that it’s mostly home equity line of credit, we see that portfolio has grown substantially over the last couple of years. And we think it’s because we have a lot of homeowners who are in those 2% and 3% interest rates that just decide to hold onto their homes and pour into them to make them their perfect dream home by utilizing the equity in those homes. And so we’ve seen huge portfolio growth on the home equity lending.

[05:51] Vince Passione: Yeah. There’s that wonderful saying, “People hate their homes, but they love their mortgage.”

[05:56] Darcie Morgan: Yes.

[05:56] Vince Passione: Therefore, lots of home improvement, right?

[05:58] Darcie Morgan: Absolutely. Absolutely.

[06:01] Vince Passione: So Elizabeth, I was reading the MAC 2024 annual report getting ready for this podcast, and I saw the President’s report and they highlighted this member-friendly digital platform was rolled out last year. Can you talk a little bit about that and the impact that it had, Elizabeth, on the membership?

[06:17] Elizabeth Adcock: Yes, absolutely. So we rolled out a single platform to service both the online and the mobile space, where previously we had two different platforms and it meant doubling everything every time we needed to make an update. So we rolled out the one unified platform, which allows us to do quicker, more regular updates. There’s an update roughly every four weeks. There’ll be a new app version out there. One of the challenges that we do have here are the harsh weather conditions in Fairbanks. As you can assume, the snow and the ice and the negative 60 degrees can be a challenge. People don’t necessarily want to come into the branch, but where we are actually located now in the Mat-Su Valley, high winds are a problem.

[07:01] Elizabeth Adcock: So there have been times when we haven’t been able to open our branches on time. We might be on a delayed opening much like the schools are, but because we have this 24x7x365 digital offering just allows us to more efficiently allow our members to do their banking whenever, however they want and not just necessarily when our doors are open for the traditional in-branch experience. We are about 20,700 members as at the end of November and 15,500 of them are enrolled in our digital platform. So either using mobile or online, and not even all of our members are eligible to use that platform. We don’t allow it for members who are under 18 without parents’ written permission. So there’s been a huge adoption of the mobile platform over the last 18 months. And on a given month, well over 10,000 are active. So they’ve actually logged in in the last 30 days into that platform.

[08:02] Vince Passione: To support all this growth, did you have to make changes to the tech stack? Did you have to make changes to hosting? Did any of the growth impact the infrastructure?

[08:16] Elizabeth Adcock: 100%. We actually implemented the online account origination system, right as Darcie and I were joining is when we started implementing that platform. So it went live a year before the new digital banking platform to facilitate being able to onboard members in that digital space. Because prior to that, even if you wanted to get onto the previous digital or mobile banking platform, you had to do that in person. There wasn’t a way to apply to become a member, to open a loan or anything without physically coming into our doors. So we’ve done a replacement or migration of a significant portion of the tech stack to facilitate that.

[08:59] Vince Passione: Makes sense. We took a look at InfoTech Live and you had this presentation on taking a foundational approach to AI. Can you kind of explain what that means? And then specifically, how did the implementation affect MAC FCU?

[09:14] Elizabeth Adcock: Sure. To me, the foundational approach is being aware, knowing our users are using it, our staff, our members, they are using it. So knowing how they’re using it, trying to put some guardrails in place so that they understand what it is, what the dangers are, and just being honest with everyone that AI means something different to everyone. We’ve all been using AI for years, whether we know it or not. We’ve got AI built into our cell phones, we’ve got virtual chat agents that we’re engaging with online. We’ll ask a question, it’ll respond, and then it’ll say, do we want to transfer to a live agent? So it’s just knowing it’s here, it’s only going to become more prevalent and not being afraid of it. I think that’s one thing that a lot in financial services are dealing with is the fear of, what is AI, if we’re only thinking ChatGPT or GenAI? And who is on the other side that I’m engaging with and what are they doing with their data?

[10:21] Elizabeth Adcock: So what we’ve done here at MAC is, two years ago, I put in a emerging technology agreement… And calling it agreement rather than a policy because then I don’t have to take it to the board every time I want to change it. But it’s putting that agreement out there for all staff to review which details? What is GenAI? How am I allowed to use it? What can I do? What can’t I do? And then having everybody in the organization sign that and then I countersign it as the information security officer and I just have that on file. And then I periodically will work with the firewall team to just pull a report and see who’s using it? How often are they using it? Am I seeing employees that shouldn’t really have a business justification for using ChatGPT, for example, every single day? And then just conversations as to, “Hey, what are you doing with it? Can you walk me through what the scenario is so I can determine is there a different way to facilitate whatever it is that they’re trying to do?”

[11:24] Elizabeth Adcock: In most cases, they’re using it to write a more professional business email or they might be writing a paper kind of a thing. They’re just putting some basic detail in and getting it to rewrite it and just making sure that we’re not putting member data out there, we’re not putting any confidential proprietary information out there. Because anything that you put into one of these GenAI platforms like ChatGPT becomes part of that learning language model for whoever owns that particular service. And then we have a new policy that is actually going to our board in the next couple of months that is specifically around AI, all kinds of AI. But it’s kind of putting that foundation in place because we’re not doing much from a user perspective with it yet. We do have some auto-decisioning when it comes to account opening, but not direct interaction with our members in our digital channel today. We are evaluating it to see how we can take advantage of it.

[12:26] Elizabeth Adcock: One thing that is unique about Alaska Credit Union members is they really want to talk to someone in Alaska, and in some cases someone in their specific city or borough. We do have members who will call our call center and they want to talk to someone in Fairbanks, not someone in the Mat-Su which is where the call center is actually located. So we’re trying to be really aware of how we might want to introduce something that is interacting and emulating a person that it is in a way that our members will feel as natural and don’t feel as though it’s deceptive or that we’re trying to trick somebody into interacting with the robot instead of an actual person.

[13:12] Jim Merrill: This is Jim Merrill, President and CEO of Inspire Federal Credit Union. For the last 13 years, we’ve partnered with LendKey to elevate our lending services and strengthen our commitment to providing the best financial solutions for our members. The team at LendKey is not only knowledgeable and responsive, but also genuinely committed to our success. They have empowered us to better serve our members and have been a true partner, not just another vendor.

[13:42] Vince Passione: Now Darcie, how does that affect when we’re rolling out new technologies, whether it’s AI, how do you gauge member satisfaction, potential risks with members? Is there a process that you use as you’re facing off against some of your small business customers or the consumers?

[13:59] Darcie Morgan: Yeah. So we’ve actually found out that the adoption rate of doing things electronically is much higher on the business and real estate side. We probably take about 95% of our applications digitally in some form. So we still have the original few who like to come in and sit down and meet with somebody, but most of our stuff is done electronically. We, on the business platform, have a spreading tool that extracts all the data that we need from tax returns. Occasionally, we find some discrepancies, so we make sure we double check all the work that’s done, but it’s created some high efficiencies in that space. Auto-decisioning, we’ve played around with a little bit. We still, I think, are a little bit leery of it, and so while we do some auto-decisioning, we always go back and double-check to make sure that we are in agreement with the auto-decisioning that’s coming through. So our adaptation to it is slow but steady.

[15:03] Elizabeth Adcock: And I would actually add onto that just a little bit. When we are rolling out new technologies or features in the digital banking space, Darcie’s business members are usually the first ones who want to sign up and do any beta testing for me.

[15:16] Vince Passione: That’s great.

[15:17] Elizabeth Adcock: They like to jump in there and put me through the paces for adoption of new tools.

[15:23] Vince Passione: Good test bed. Very good test bed.

[15:25] Elizabeth Adcock: Exactly.

[15:26] Vince Passione: Now Darcie, you mentioned second-chance lending. I was looking at your 5300 report and it’s about 75 million, I think I have it, right, is used auto? Do I have that correct?

[15:36] Darcie Morgan: Yes.

[15:38] Vince Passione: Is that an area where you’re doing second-chance lending or is it mostly just personal and secure or signature loans?

[15:44] Darcie Morgan: It’s primarily auto. We have a really nice ghost credit program. Most of our consumer lenders are certified financial counselors, and so they can help people repair credit and get on the right path to obtaining better interest rates along the line, but also be able to offer them auto loans and things where they’re being turned away elsewhere.

[16:07] Vince Passione: So I’m curious from an underwriting perspective, I mean, what’s the average FICO with someone like that when they come in and you’re doing a second-chance look at these loans?

[16:17] Darcie Morgan: So it kind of depends. On the consumer side, I’m not as involved in the consumer side as I am on the business and real estate. The consumer side, we’re typically in the mid-600s. On the business side, we see higher because we’re doing more small business startup loans and things like that, so a lot of our guarantors are in the mid-700s. And then mortgage, we can do some in-house portfolio stuff we do with home equity and things like that. Well, we’ll go as low as the low-600s, but most of those scores we see because they do own homes that they’re in the higher-600s to 700 ratio. And then on the mortgage side of the house, we’re in government lending, so we’re in those boxes, not as second-chance there.

[17:00] Vince Passione: Now, in that same annual report, there was a discussion in the President’s letter about… And it’s happened to all credit unions. 2020, we saw that stimulus come in, we saw FICO scores get inflated, and then I think the quote was, “And then the chickens came home to roost.” All that money was spent and now across the industry, credit unions and banking, we’re seeing the consumer struggle. What’s going on at MAC right now? What are you seeing in the way of delinquencies? And then what unique techniques are you using either on the business side or the technology side to help these consumers as they go through this kind of difficult patch?

[17:38] Darcie Morgan: So because we’re set up to do the second-chance lending, we have some built-in programs like Skip Pays where if they’re experiencing financial hardships and things that, a lot of times around Christmas, we’ll do an automatic, “Would you like to skip your loan payment for the holidays?” kind of thing to help people manage these flows because cost of living has gone up substantially in Alaska. On the business side of the house, we see more utilization of working capital lines of credit to help kind of float through more expenses for the small businesses that we serve. On the deposit side of the house, which is turning out to be a really nice feature for us, we do a lot of community involvement. We do a lot with nonprofits. And in turn, we actually have a lot of nonprofits that bank with us and carry pretty substantial deposits, which has really been helpful for us.

[18:35] Vince Passione: Yeah, gathering deposits has become the major focus since-

[18:38] Darcie Morgan: Absolutely.

[18:40] Vince Passione: So good place to… Last question then, as we think ahead into 2025. So you’ve had great growth, and of course, I’m sure everyone wants to know what’s the next act? So why don’t we start, Darcie, on your side, as you think about 2025, what are the big goals and initiatives for MAC in 2025?

[19:00]Darcie Morgan: Right now, our focus is on increasing efficiencies. We’ve ripped and replaced a number of our major softwares that we use on a regular basis, and so we’re looking to grow internally over 2025 and improve the processes for both our membership as well as our employees. And we’re really big focused on our internal membership growth. So products per member is really going to be our focus, making sure we don’t just have single loan accounts that they’re offering or they’re banking with us fully and utilizing all of the services that we offer. In the business side, we’re looking to increase online banking functionality. We’re looking to add merchant services and streamline some ACH processing. So just make ease of use better across the board and increase our internal growth is definitely our strategy for 2025.

[19:55] Elizabeth Adcock: It really is, for us, some of the initiatives being more efficient. How do we make our staff more efficient? Getting as close to a single pane of glass as possible where they don’t have to log into 47 different systems every day when they log in to service members. We have a new business banking platform that we’re going to start rolling out in Q1, which will facilitate a lot of the business features that Darcie has already mentioned. And then it really is just taking more advantage of what we have. As we mentioned, we implemented the new account and loan origination system about two and a half years ago, and we’ve barely scratched the surface of what it can do. We are currently in the middle of implementing a new enterprise content management system that natively integrates with more of these platforms.

[20:44] Elizabeth Adcock: And so that’s getting us much closer to one system to do everything or as many things as possible to service a member from the time they walk in until they leave. If it’s doing basic banking transactions, opening a loan, opening a new account, getting a cashier’s check, whatever that ends up being, and just to save time to make our staff more efficient so we can service the members quickly and free up the lines or time for those high touch, high value services that we offer that’s not just, “I’m coming in to deposit a check or to get my balance or to move funds from one side to other.” We can do those in a digital space. You don’t even have to come in. But to sit down with Darcie and really drill into, “What do I need as a small business owner?” It takes time, and how can we allow for more of that time and take some of the mundane things off of their plate so that they can get the basics out of the way and really do that.

[21:44] Vince Passione: Well, listen, great success so far. Lots of luck in 2025.

[21:47] Elizabeth Adcock: Thank you.

[21:49] Vince Passione: Thank you both for joining me today. And thank you to our listeners for tuning in and don’t forget to subscribe so you can enjoy future episodes and I’ll see you back here at our next 22 Minutes in Lending. Thanks again, Elizabeth. Thank you, Darcie.

[22:01] Elizabeth Adcock: Thank you.

[22:01] Darcie Morgan: Absolutely. Thank you.

[22:03] Narrator: Thank you for listening to the 22 Minutes in Lending podcast. We hope you enjoyed today’s episode. You’ll find links to any resources mentioned in the show notes. If you’re enjoying our show, be sure to subscribe and leave us a five-star review.