First Steps and Fresh Starts: The Art of Storybook Lending

[00:00 Kristina Kovacevic: … our mission is we show up, we listen to your story and we provide opportunities. And I think that is one of the best cross-selling tools that we have.

[00:12] 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.

[00:35] Vince Passione : Welcome back to 22 Minutes in Lending. I’m your host, Vince Passione, and today we’re diving into the heart of member-focused innovation with a guest, Kristina Kovacevic, AVP of Retail Experience at First Alliance Credit Union. Kristina’s story is one of resilience and transformation. Arriving in the US as a child during the Bosnian War, she discovered her passion for credit unions later in life, making a significant impact in just eight years. She currently leads retail operation at First Alliance, a credit union with a rich history, and focused on helping members start fresh and build strong financial futures. Kristina, I’m really glad you’re here today.

[01:09] Kristina Kovacevic: Thank you for having me.

[01:10] Vince Passione: Awesome. Kristina, why don’t we just start off with, tell us a little about First Alliance, membership, the membership asset size, all that great stuff.

[01:19] Kristina Kovacevic: Yes, First Alliance was established in 1932 in Rochester, Minnesota by a couple of firefighters and teachers that found a need to serve that community, community of teachers. Currently, we have a little over 20,000 members and we have also expanded recently, our footprint to 14 additional counties in southeast Minnesota.

[01:47] Vince Passione: And current field of membership, how broad is the field of membership today? It is all community-based now?

[01:53] Kristina Kovacevic: It is all community based and we continue to expand because we have noticed that some of those smaller communities in southeast Minnesota don’t have the resources to financial education and some other needs that they need as far as just having a financial institution even in their town, so we want to be able to provide those services to them as well.

[02:19] Vince Passione: And asset size, you just shy of $300 million?

[02:22] Kristina Kovacevic: Correct.

[02:24] Vince Passione (02:24):And loan-to-share today, you’re about in the 90s I thought,

[02:29] Kristina Kovacevic (02:29): Yep, in the 90s. And for 2025, our strategic plan is to bump that up a few percentage points and continue to grow as an organization, hence, why we took on those 14 new counties.

[02:41] Vince Passione: Okay, so you’re in Rochester, Minnesota Mayo Clinic employs about 40,000 people there, so am I correct
in assuming that majority of those people are medical practitioners? Do you touch a portion of those in your membership today as you think about that community-based focus?

[02:58] Kristina Kovacevic: Yeah, I would say that we do have a good portion of members that do work for Mayo Clinic. I don’t know if you know this, but Rochester has 38 different financial institutions

[03:13] Vince Passione: I didn’t know that.

[03:13] Kristina Kovacevic: Here, and more are coming and it’s because of Mother Mayo, right? Everyone’s trying to get a piece of that pie and we are always interested in employees at Mayo Clinic, but our biggest focus in our 2025 strategic goal is to focus on our First Start and Fresh Start members.

[03:36] Vince Passione: Tell us a little bit about that. I was looking at the website, trying [inaudible 00:03:41] definition. What is First Start, what is Fresh Start?

[03:43] Kristina Kovacevic: Yeah, as far as First Start and Fresh Start, I just want to start out by saying that I think this is one of the coolest things that I’ve been a part of. First Start members is someone who’s just coming out of high school, they don’t have credit. Maybe they just moved to the US and they don’t have credit, they don’t have a checking account, they don’t have an auto loan, a mortgage. We try to focus on those members to be able to provide them a financial educational background, provide them with workshops that we have.

[04:16] Kristina Kovacevic: We’re in the process of creating First Start and Fresh Start packets, so members know if you’re a First Start member, “Here’s all of the things that we offer you. Here are the things that we can do for you.” And then when we look at our Fresh Start members, those are members that maybe had a hard time in life at some point. Maybe it’s due to death, divorce, bankruptcy, you name it. Those things can drastically change your credit score and your credit worthiness, so to say, so we try to focus on those members because everyone deserves a second chance and we want to be that financial institution that does that for them.

[04:53] Vince Passione: All right, so drill down a little bit. If I’m a Fresh Start member and I made some mistakes in the past and now my credit isn’t as great as it used to be, I’m assuming I walk into the branch, although I do see you have some partners online and you’ve got some content online, but what happens when I come into that branch? Am I making an appointment, who do I go see? What’s the experience like?

[05:13] Kristina Kovacevic: Yeah, I think the best thing to always do is to stop into the branch and speak to someone in person if you can. If not, obviously, we can do multiple things online through email, through phone call, but preferably with the First Start Fresh Start members, we really want them to come in. If you were to walk in, you would sit down with one of my staff members and they would listen to your story.

[05:38]Kristina Kovacevic: They would ask a lot of questions that maybe might be uncomfortable for some people to answer, but that’s where we can gather the story and then that’s when we can provide the possibilities and opportunities for you. We’ll look through that credit report, we’ll ask you questions like, “Hey, can you tell me why your 30, 60, 90 days late on X loan and what happened?” And just that story telling, story lending that we do, we really want to understand what happened and not fault you for having life events happen that are out of your control.

[06:16] Vince Passione: Now, in the intro, we talked about your background, right? Did you experience some of this coming in? Is that why you’re so passionate about it? Or tell us a little bit about the journey.

[06:25] Kristina Kovacevic: Yeah. Actually, I moved here with my mom and dad and sister in 1996, so I’ve been here for a long time. But I think that just looking back at some of the struggles that my parents experienced, not necessarily maybe in the financial industry as not being able to get an auto loan or get that mortgage, but just in the sense of understanding and knowing the products and services and knowing how those products and services work, I tend to lean towards the members that are not from the US.

[07:01] Kristina Kovacevic: And especially when they see my name, my last name, they’re like, “I want to work with her,” because they feel this connection. And I love that because it just builds a trust and then I’m able to share my story, they’re able to share their story, and so then that relationship building happens and the trust happens. And then it’s so much easier for me to recommend them to sit with one of my staff members, knowing that they believe in me and they trusted me. That’s really, really huge for me.

[07:29] Vince Passione: That’s great, that’s a great story. Brian Cray from Navy Federal, that was a big quote in his podcast, it’s about building trust with members.

[07:37] Kristina Kovacevic: Yes.

[07:39] Vince Passione: Let’s go back to success factors then, for both First Start and Fresh Start. Can you give us a sense of scope of it and how you judge your success working with these demographics?

[07:49] Kristina Kovacevic: I think biggest way we judge the success might be kind of unique, but watching their faces turn from distress into, initially feeling stressed out, maybe in distress, not knowing where to go, not knowing what to do, providing those opportunities for them and just seeing a difference when they walk out of the branch. And then it’s the follow-up after that, calling those members and asking them, “Hey, I know we covered a lot of information, do you have any questions for me? Is there anything I can help answer? I know we talked about X, Y and Z.”

[08:25] Kristina Kovacevic: Also looking at our member surveys, that also is a way that we measure that success. And then also lastly, just one thing I’ve noticed about people from different countries, and this is true about the Bosnia community too, you have one person go into the credit union and they have a great experience. They’re telling the entire community about it because they want to share that success with them and that comfortability and that trust and that relationship building. So for me, it’s hearing, “John Doe brought in X, Y and Z because they told me about this, this and this, and I want that.” That’s what makes me tick, that’s what makes me happy.

[09:09] Vince Passione: A big referral. You hear this often in the business and especially in large sort of immigrant communities, that makes an awful lot of sense.

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[09:49] Vince Passione: Let’s talk about the other side of the balance sheet though, on the risk side. You’re dealing with this specific demographic, how do you underwrite and how do you structure these loans? You’re an ITIN lender, right? I know there’s a grant structure as well that helps you go a little bit deeper, but can you give me a sense, what’s average FICO and then how do you deal with risk and how do you deal in your ALM committees when you’re talking about underwriting this kind of risk?

[10:13] Kristina Kovacevic: Yeah, I think biggest thing that we focus on is that storytelling lending that we do. I think also as far as average credit score, I would say it’s probably in, gosh, the 500 to low 600. Obviously, we look at debt-toincome and loan-to-value. We look at all of that, but we want to hear the story, what happened in that timeframe that made you fall behind? And then also, not setting people up for failure. You might think that you need a $30,000 auto loan, when in reality, a $20,000 loan is what you can afford. So really being open and honest with the member, showing them the numbers. And I think biggest thing is just caring about the member.

[11:10] Kristina Kovacevic: You don’t want them to fail, and I think sharing that with them builds that trust and builds that relationship. We’re not trying to set them up for failure. Back in my lending days, I would say, “Hey, I know that you really want this $30,000 loan, but your payments are going to be $550 versus going with a $20,000 loan, your payment is going to be, let’s just say $500, for example. You’re saving yourself $50. Why not take that $50 and put it in your savings accounts?” I think it’s giving them different avenues to look at on how they can save money but still get an auto loan that’s going to get them from point A to point B.

[11:49] Vince Passione: When you think about that kind of risk, and I looked at your 5300, your delinquency rates are pretty low, about 1%. Other credit unions listening to this, is the main message here that it’s about this storytelling lending, that really helping people understand, members understand affordability and ability to pay is driving those delinquencies at that rate?

[12:13] Kristina Kovacevic: Yes and no. It has a lot to do with that, but I think it also has a lot to do with meeting people where they are at, so providing that budget worksheet that they can work on, the follow-up on that budget worksheet. Just really staying active in the member’s life, not just being a, what do they call it? An order taker.

[12:39] Vince Passione: Okay, makes sense.

[12:41] Kristina Kovacevic: Not being an order taker and providing possibilities and opportunities and suggestions to the member. I think sometimes people get so caught up in, “Okay, they want an auto loan, we’re going to get them an auto loan, and that’s how we’re going to move on and that’s how we’re going to get that membership.” It’s more about listening, providing that auto loan, and then looking at the credit report and what else can we do for that member to save them money and to help them be more financially stable going forward?

[13:12] Vince Passione (13:12): Now, I’m going to get this wrong, but 5300 report, 60 employees in all of First Alliance, is that right?

[13:19] Kristina Kovacevic: 68.

[13:20] Vince Passione: 68, okay, wasn’t bad. 68 employees, a lot of hands-on, a lot of skills here.

[13:28] Kristina Kovacevic: Yes.

[13:28] Vince Passione: There’s a cultural piece of it. How do you train the staff and how do you maintain the culture here? Because this is a high touch, high service culture.

[13:38] Kristina Kovacevic: Yes, I love this question. I was hoping you would ask me something along the lines. At my previous financial, we had 521 employees, so pretty big credit union. It would be an act of God to get someone to help you as far as maybe branch help or help on the back end. Here, when I started, everyone is so involved. Everyone cares about the member and the member’s well-being and it might not be your department, but you might have some knowledge that you want to bring in, so culture here is so amazing.

[14:17] Kristina Kovacevic: It’s just so refreshing to be at a credit union that cares about their staff and that cares about their members. And we’ve had a little bit of turnover in the recent months and my CRO, Andrea, helped cover the lobby. That would’ve never happened at my previous financial. And I think the team members seeing that, that does boost morale and they see that anyone is willing to do whatever we need to do to help the member. I think when people walk into our branches, they feel that. I feel that. When I first walked in, I felt that culture, that positivity, that willingness to help, the willingness to find solutions for our members.

[15:04] Vince Passione: Credit union size, 68 people, big aspirations, lots of partnerships. I was looking at the site, we were talking about it prior to the call. Folks like Greenlight, can you talk about those partnerships? And obviously, we talk about FinTech all the time, right?

[15:20] Kristina Kovacevic: Yes.

[15:21] Vince Passione: And so your view of disruption versus, “No, it’s actually enhancing the experience,” and how do you see those partnerships changing the consumer behavior and really helping you in your goals?

[15:34] Kristina Kovacevic: Yeah, I am a huge supporter of FinTech. I think that as times are changing, we as credit unions need to change and find ways to connect with members and again, meet them where they’re at. One thing as far as MeridianLink, which we use for opening accounts and loans, we just adopted Ultrapiece, so we can send text messages to members. Phone calls, a lot of people don’t pick up phone calls [inaudible 00:16:13] and then email, I feel like there’s so many emails that you get sent out that it just kind of gets lost with all the other things that are popping up in there. So being able to provide that text messaging service to our members has been very, very beneficial.

[16:30] Kristina Kovacevic: We look at reports of how many users we have and how many messages are being sent out and how many messages are being received. And on a weekly basis, that number just keeps rising. I think it’s because one, the staff is getting more comfortable. Members obviously coming in are learning about it, so that has been such an amazing tool. Partnerships are very, very important to us. Greenlight, just having the ability to start teaching your children young about financial responsibility. It starts out really small, but those small little steps that you take go a long way. Just a lot of great partnerships that we’ve had that actually, I can honestly say I’m proud to be partners with them and promote them as well.

[17:22] Vince Passione: Yeah, Greenlight has a lot of traction in the credit union system. How long have you been using them? Any metrics you can share when it comes to adoption?

[17:30] Kristina Kovacevic: Greenlight, I can’t really share much about that because I’m so new to the organization, but when I’m sitting in branches and listening to my staff talk to the members, a lot of members are telling them, “My son or my daughter, we’re doing this with them. I’ve told my friends about them or I’ve told their friends’ moms and dads about it.” So the word is spreading, which I think is really great.

[17:59] Vince Passione: Before we talk about trends, any other sort of measurements you can share that are your goals or sort of best practice that you focus on when it comes to cross-sell, upsell? Because a lot of credit unions try this, right? Especially, we talked about on the indirect channel, trying to upsell, cross-sell, but any sort of great revelations that said, “Wow, we did a great job of selling a credit card to this auto loan bar,” any of those?

[18:27] Kristina Kovacevic: Yeah, I think our mission is we show up, we listen to your story and we provide opportunities, and I think that is one of the best cross-selling tools that we have. Meeting members where they’re at, they might think that they just need that auto loan. I can think of a specific example out of my Byron location. We have a staff member who had a couple that was recommended to them. They wanted to refinance their motorcycle loan. Next thing you know, Erica pulls the credit report and she sees that they have some credit card balances out there, and next thing you know, they have their motorcycle loans refinance with us, their auto loans refinance with us, a personal loan, a checking account, a membership. Just being there and listening and not necessarily being an order taker, I think is the best cross-sell tool.
[19:22] Kristina Kovacevic: Not being afraid to say, “Hey, I had a chance to look at your credit report, I think we can do X, Y, and Z for you.” Or also just asking members, “What other accounts do you have at other financial institutions? What do you really like about this financial institution?” “Oh, I have a certificate of deposit at X that’s earning me this.” “Oh, well, did you know that we also have certificates here at First Alliance and these are our rates?” I think it’s being informational, sharing all the information that you have. I tell my staff, “Do you think that you would know all the information that you know right now if you didn’t work at a credit union?” And they’re like, “No.” And I’m like, “Share that knowledge with your members. Help them live a more financially stable life. What are the things that you would want to know when you go into the doctor’s office or you go to purchase a car? What information would you want to know so you can make the right decision? Do that for your members.”

[20:30] Vince Passione: Got it. Last question, retail trends. What do you see coming down the pike and which are your credit union peers being prepared for this year?

[20:41] Kristina Kovacevic: I think what we should focus on and be prepared for this year is tough times. Times are really tough and people are using their credit cards and their personal loans to pay for bills and to pay for groceries, and I think us as credit unions and always partnering with each other, finding different resources that we can use to help those members, Greenlight, GreenPath. Just different channels that we can provide our members, that’s one of the biggest things I see, is just tough times for members.

[21:24] Kristina Kovacevic: I think also just being prepared to be more involved in our members’ lives with creating those budgets for them and not waiting for them to contact us, but for us to contact them. That small little check-in, that thank you card. Maybe you set a calendar reminder when it’s someone’s birthday and just reach out to them and wish them a happy birthday, just so they know that people are there, that we’re available. Yeah, I think that’s the biggest thing, is just tough times and trying to figure out what people are going to do and where they’re going and how can we be there to support them and help them grow in the tough times?

[22:09] Vince Passione: Great. Well, Kristina, a huge thank you for joining us today, so really appreciate hearing your insights

[22:15] Kristina Kovacevic: Thank you for having me.

[22:16] Vince Passione: Great. That’s a wrap for our 22 Minutes of Lending. Don’t forget to subscribe so you can stay tuned for more episodes and we’ll reach you back here at our next 22 Minutes in Lending. Thanks again, Kristina.

[22:27] Kristina Kovacevic: Thank you.

[22:28] 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.