February 19, 2025 • 38 mins
As economic conditions shift, financial institutions must adapt their lending strategies to balance growth, risk, and liquidity. A “Slow and Grow” approach is emerging as a sustainable way to navigate today’s market while expanding financial services.
This week, host Barry Roach welcomes Michelle Goeppner, Vice President of Consumer Lending & Product Strategy at Vantage West Credit Union, to explore how lending programs are evolving post-COVID. They discuss the role of AI-powered underwriting, flexible loan programs, and the importance of internal alignment in driving loan growth. Plus, they dive into how financial institutions are expanding their reach beyond state borders while enhancing community impact.
Join us as we discuss:
This week, host Barry Roach welcomes Michelle Goeppner, Vice President of Consumer Lending & Product Strategy at Vantage West Credit Union, to explore how lending programs are evolving post-COVID. They discuss the role of AI-powered underwriting, flexible loan programs, and the importance of internal alignment in driving loan growth. Plus, they dive into how financial institutions are expanding their reach beyond state borders while enhancing community impact.
Join us as we discuss:
- How AI-driven lending programs help manage risk, return, and volume
- Strategies for deposit growth, cross-selling, and member onboarding
- The financial wellness programs turning borrowers into savers
- Innovative mortgage solutions tackling housing affordability
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Hi, I'm Barry Roach, host of Leaders in Lending, brought
to you by Upstart. The following is a conversation originally
aired on an America's Credit Union webinar late in twenty
twenty four, titled Capturing Prime Members in twenty twenty five
and Beyond. I chatted with Michelle Gapner, the vice president
of Consumer Lending and proc Strategy at Vantage West, a
three billion asset credit union base in Tucson, Arizona. Michelle
(00:26):
and I discussed balancing loan growth with limited liquidity, growing
prime members, and working to expand those relationships. Thanks for listening,
and I hope you enjoy it.
Speaker 2 (00:35):
All right, everybody, let's get started. Hello and welcome to
America's Credit Union's webinar Capturing Prime Members in twenty twenty
four and beyond. My name is Adam Right, and I'm
a manager of online learning Products at America's Credit Unions.
If you haven't already, feel free to download today's presentation handouts.
You'll find them available under the resource tab and you're
zoom tuomar. As a quick reminder, please keep yourself muted
(00:56):
during today's presentation. If you have questions during the presentation,
please enter it up in the chat. We'll be taking
questions at the end. We are happy to have Michelle
Wepner and Barry Roach sharing their expertise with us today.
Michelle is the VP of Consumer Lending and Product Strategy
Advantage West Credit Union. With over twenty years in financial
services experience, Michelle has accumulated an extensive track record of
(01:17):
taking on the challenge and responsibility for high profile product marketing,
strategy and lending issues. Barry is a senior account manager
at Upstart with over thirty years of experience in the
financial services industry. Arry has proven leadership of large, multifaceted
teams of financial professionals which delivered above market financial results. Previously,
as President and CEO of Water and Power Community Credit
(01:39):
Union in Los Angeles, Berry led the organization to achieve
significant asset growth and improvement and financial strength while improving
all aspects of the digital experience. Without further ado, I
will turn things over to you. Thank you Michelle and
Berry for.
Speaker 1 (01:52):
Joining us today. Thank you, Adam, slide please and next
slide please. Hi Michelle, nice to see you. Please take
it away and then we'll get into the discussion for today.
Speaker 3 (02:08):
Thank you all right, Thank you Berry. Thank you, Adam,
thanks for having me.
Speaker 4 (02:13):
Hello everyone. As Adam said, I'm.
Speaker 3 (02:15):
Michelle Gafner, the vice president of Consumer Lending and Product
Strategy from Vantage West Credit Union. So Vantage West Credit
Union is based in Tucson, Arizona. We have military roots
as we serve the Tucson airmen and their families back
in the fifties, and now we have evolved to a
state chartered credit union known as Vantage West with just
(02:38):
under two hundred thousand members. We're three billion in assets,
and we've got eighteen branch locations across Tucson and the
Phoenix area.
Speaker 1 (02:50):
Great. Thank you, Michelle, and thanks for joining us today.
Just for the audience. Vanjewest has been a valued partner
of Upstart for the past couple of years. Michelle and
I work very closer together. We speak if not, if
not monthly, I mean usually once a week or so.
There's a reason for Michelle and I to get together.
(03:11):
What we're talking about today is really about capturing prime
members in twenty twenty five and beyond, and I think
the experience with Vanage West, they've already captured a whole
bunch of prime members since they came on as Upstart
partners back in later twenty twenty two. So since that happened, Michelle,
let's just talk a little bit about when you started
(03:31):
partnering with US, economic conditions evolved quite a bit. I mean,
we were at that point just coming out of sort
of COVID restrictions and stimulus and this ramp of deposits
and lots of liquidity to sort all of a sudden,
liquidity somewhat seized roughly six months after that, and so
(03:52):
you know, where you maybe had some higher loan growth
projections in later twenty two, that kind of quickly shifted.
So maybe suare a little bit about about how you
were adjusting not just the yepstart program, but you know,
all your loan growth goals from when liquidy kind of
got a little tighter and then as it started to
(04:15):
come back, because we have certainly seen in the past year,
how how deposits have come back a little bit as well.
Speaker 4 (04:20):
Yeah.
Speaker 3 (04:21):
Absolutely, Well, to say it's been an interesting lending environment
the last few years would be an understatement, and it
certainly has been since we started partnering, Barry. I think
in the fall of twenty twenty two. I think we've
had what ten or so rate hikes since then, and
least as you mentioned, yeah, we had some liquidity constraints,
(04:42):
as I'm sure many watching and listening did as well.
We had to intentionally slow down our lending, which is
always a hard message as you know, a lender and
an originator to tell our teams we've got to slow
it down. But thankfully we've been able to turn it
back on. And you know, with the Upstart partnership, we
(05:05):
went with the slow and grow strategy. So we started
in our market, Arizona, with you know, originating a few
million a month and then testing it out, you know,
to see how it worked, how did it work for us,
how did it work for our members, what was the feedback,
And then we steadily, you know, started ramping up volume,
(05:26):
you know, both because one getting our feet wet with
the program, but two, as you mentioned, the changing environment.
And then from there we started to expand markets. And
I think one of the things I love so much
about this program are the levers that we can control,
and you know, being a control freak, I want to
be able to do that.
Speaker 4 (05:47):
So whether it's adjusting our net return or.
Speaker 3 (05:50):
Our expected loss rate, our volume, our max loan size,
that's The great thing about this program is the customizable
of flexibility.
Speaker 1 (05:59):
Great and so the partnership that you have internally, because
I know you and the lending group you always have
those aggressive goals, right, I mean, you're you're always trying
to put more money on the street. You're trying to
find ways of not just this isn't just a financial
thing with show You're not just trying to sort of
grow the balance sheet. You're actually trying to help those
(06:20):
members that you have with their next purchase need or
wherever the case may be. But talk a little bit
about that partnership, like, like how that's sort of the
catalyst for you to be able to realize and recognize
these great loan growth goals you have. You also need
to have the support of the risk side of the
business and the finance side of the business. So maybe
(06:42):
talk a little bit about about how and you and
the rest of the lending folks have been able to
sort of make sure everyone's served riding on the same
tracks as the train.
Speaker 4 (06:54):
Yeah.
Speaker 3 (06:54):
I think one of the things we learned through this
partnership specifically was the importance of bringing on your key
partners across the credit union early and often.
Speaker 4 (07:04):
To get comfortable with it. You know, I think everyone involved.
Speaker 3 (07:08):
In community lending would love it if there were endless
volume potential within their geographic footprint, but unfortunately that's not
the reality.
Speaker 4 (07:19):
And so we took the approach.
Speaker 3 (07:21):
Of expanding beyond Arizona so that we have the funds
to do more within our community. And I think that
was a big challenge for some folks internally to adjust to.
You know, we're a local credit union, why would we
be partnering with this fintech? Why would we be going
to other markets? But it was really helping to tell
(07:42):
the story that we could better serve our community if
we have those dollars to do so. And so sometimes
you have to go outside to get those dollars.
Speaker 1 (07:51):
So growth beyond the traditional branch footprint or feel amageably
you have as a catalyst to be able to make
those investment at the revenue, to make the investments to
get a better value proposition for those that are sort
of inside. So there's many ways of doing it right,
but I think you guys have kind of figured out
a really good formula for it. So I know you've
(08:13):
got other fintech partnerships, not just Upstart you know, for
several as well. And I do know that there's a
bit of an evolution with you and your world. I mean,
you were traditionally you're a lender, right and have been
a lender for a lot of your career, and now
it's like, okay, Michelle, you're doing such a great job
with lending. We usually look after deposits now, which is
(08:34):
you know, really almost flipping the hat a little bit.
But I would think a similar sort of an approach
or or a similar sort of guide guidance in terms
of how you would try and find those new positive
opportunities to help you with those those lending opportunities. So
maybe tell the audience a little bit about that evolution
within Vantaged West and kind of how you've seen sort
(08:54):
of similarities I guess in your approach as you're looking
at getting deposits as well.
Speaker 3 (09:00):
Yeah, well, you know, we're broadly speaking, fintech is a
critical part of our growth strategy Advantage West. So while
you all were one of our first partners, we've since
added other partners for auto refinancing, loan decisioning, improving our
digital experience, and so you know, now with deposits, we're
(09:26):
we're really focusing on how we grow that we have
advantage West. What's called our rally cry, and it's where
everyone focuses on one strategic priority across the Credit Union. Yes,
everyone has a day job and other things they're responsible for,
but the rally cry is the one thing that we
get everyone to rally around and really focus on.
Speaker 4 (09:48):
And that right now for the next six to nine
months is deposits.
Speaker 3 (09:53):
So we're looking at a whole bunch of things between
a refresh of our deposit products to a new digital
account opening solution, digital engagement tools.
Speaker 4 (10:05):
So that is a.
Speaker 3 (10:07):
Huge focus for us, and of course, as you know,
that allows us on the other side of the house
to keep originating.
Speaker 1 (10:15):
Absolutely. Yeah, So I love the idea of a rally cry.
I can't say that the creditings that that that I ran,
we kind of had. We didn't call it a rally cry,
but we tried to do a similar sort of thing,
like what is what is the one topic or the
one focus on our business that we can all rally around.
And and maybe that's a in an indirect way, start
(10:37):
answering the last question about how do you get everyone
on the same page. The finance folks, the risk folks,
and so on and so forth. Right, So just the
it's maybe it's a little too early, sort I share
some successes with that, Michelle, But you know you've talked
about sort of some product development and redevelopment and so on.
(10:57):
You know, what, what are the projections for this? And
and I know this is not just a six to
nine month thing, because I'm assuming that you're building something
that you think we'll have some sustainability going forward into
twenty six and beyond from there.
Speaker 3 (11:11):
Yeah, well, we're pretty early in this rally cry. This
is our second one since we've gone to this strategy.
So our first one was around reducing operational expense, and
at first it was a little confusing to people, but
then it just became this idea of when I have
to make a trade off of where to invest my
time or my resources, you'll.
Speaker 4 (11:33):
Lean into the rally cry.
Speaker 3 (11:34):
And so that rally cry was so successful we were
able to get our op X down substantially that we said, okay,
let's try it again.
Speaker 4 (11:41):
What's the next big focus? And so now it's deposit.
Speaker 3 (11:44):
So don't have any early I guess metrics or anything
to share just yet. But you know, come back in
a few months, and I'm sure we will, but I
will say that it's done a great job of unifying
everyone across the Credit Union and focusing on one specific
thing perfect.
Speaker 2 (12:01):
Yeah.
Speaker 1 (12:02):
So, and it's unfair maybe to ask for sort of
those metrics now with this new rale cry. But I'm
glad you brought up with the operating expanse because it's
something that we all say we keep an eye on.
But you'd be surprised when you start to look under
the couch cushions and see all those revenue leakage opportunity
or or or other expanses that just you know, sort
(12:24):
of have always been persisting within the Credit Union. Yeah,
but quick opportunities, right, so that's kind of a fueling
I guess some of the other investment and growth opportunities
that you're trying to do. Absolutely all right, let's talk
a little bit then. You know about one of the
key aspects of the partnership that you've had with Upstart.
(12:46):
It's not just finding new borers, but you've also got
a bunch of brand new members, right, so starting in
Arizona within your traditional field and membership now sort of
expanding beyond, So thousands of new members have also sort
of come in to the crediting. Can you describe a
little bit maybe around how you've been treating those new
(13:06):
member opportunities, like what's been sort of working to leverage
to get that next product service or is there a
way that you've been sort of segmenting these new members
coming in that's been particularly successful for you and the team.
Speaker 3 (13:23):
Yeah, so we've added I think over seven thousand not
new members so the Credit Union as a result of
this program, folks that we likely wouldn't have reached otherwise.
And the performance has been excellent, over ninety seven percent
er in repayment, and we've definitely seen a shift in
the profile since we've added the Prime program. But yeah,
(13:45):
we have three target segments at Vantage WES. One is
what we call our Prosperous Arizonans, so there are fifty
five plus super prime borrowers. And it's interesting as I
was thinking about our segments and the programs that upstart offers,
there's an absolute alignment. So the Prime program serves those
(14:09):
prosperous Arizonas. And then we have our middle market, which
is forty five to fifty four AB credit. So you know,
prime borrower and those folks align nicely with the traditional program.
And then lastly we have our aspiring so younger borrower,
maybe new to credit range of folks in the credit spectrum.
(14:33):
And as a CDFI designated credit union, we're always looking
for ways to extend credit to the low and moderate
income borrower. And as you know, we've been in talks
about the LMI Load to Moderate Income program and so
that would help us attract those borrowers and be able
to lend deeper and invest in that group.
Speaker 1 (14:56):
Yeah, I mean, it's take advantage of those programs that
are available for you with cdf I. The reason for
cdf I is is very altruistic. One is to try
and and sort of lift up those folks that are
in low and moderate income areas, either through education or
through UH financial literacy or just simply meeting their product
(15:17):
and service need where they are and hopefully sort of
get them into a more prosperous surve financial situation. So
there's that aspect of it, but also, I mean financially,
there's some great benefits and some great grants that can
kind of come with that. CDFI programs evolved a little
bit here. It used to be I think a little
(15:38):
easier back when when I looked at you know, six
seven years ago at my credit union to be able
to to qualify. It's a little more difficult now. But
are you finding that that with sort of organically within Arizona,
that that you've had some successes with sort of breaking
in through those those low moderate income areas we have.
Speaker 3 (16:00):
Yeah, and that's you know, the bread and butter too
of who we serve, and so that of course will
continue to be a focus. And you know, you mentioned
the difficulty with with CDFI, and of course we're finding
that too. But we've since launched a very successful program
on financial wellness. So it's a very robust program that
(16:26):
a lot of our branch folks have been trained on
to educate members. So you know, it's our goal to
turn borrowers into savers, savers into investors. And so that's
kind of you know, the stepping stone of that program.
Speaker 1 (16:41):
Right and and really fits in with your segmentation strategy
because you're likely looking to sort of migrate some of
these members through different segments right as they become more
prosperous and so on, and you know, today's load and
model at income and maybe that younger demographic they're tomorrow's homeowners.
You know, I live in southern California. It's really hard
(17:03):
to break in as a first time home buyer in
Southern California. It might be a little easier in Tucson
and in some of the lower moderate income areas across
the country. But maybe talk a little bit about your
approach that way for first time home buyers, given that
you know, the price, the entry prices has gone up
from when we're five years ago where we were looking
(17:24):
at you know, three and four percent thirty year mortgages
and now that price is a little higher right now.
So house Fans West are started managing through through all
of that right now.
Speaker 3 (17:36):
Yeah, so my pre in the mortgage group, they've done
an excellent job of addressing that.
Speaker 4 (17:41):
We know, affordability is a huge problem. So there's they're
offering some first time buyer programs.
Speaker 3 (17:47):
They also have launched a forty year mortgage, so they're Yeah,
so they're really trying to address this problem that we
know as nationwide it but it is a pretty big
problem in the Tucson air Yeah, so that team has
been working feverishly to create new products and services for
our members to be able to address it because we
(18:08):
were hearing it a lot from challeng.
Speaker 1 (18:10):
I love that you've created a non QM product right
that is definitely needed there and is specifically addressing those
that cohort that that's trying to address. So kudos to
the Vantage West team for thinking sort of outside the
box on that and for having the support again across
the organization and your board directors to be able to
(18:32):
sort of take on those sorts of things. That's great, Michelle.
Any other sort of early results on expanding relationships with
it's been pretty early on the Prime program. So ups
are just introduced in July, and just for the audience,
it's basically Upstart wants to make sure that we are
(18:54):
providing loan solutions for all Americans, not just for those
who the traditional credit scoring system may have loss in
some way throughout their financial history, but really trying to
attract Prime members with really good products at a really
good price that's that's attractive to them and advanced. It
(19:14):
has been a partner on this Prime program now for
three or four months. I mean it's really changed through
the borrower and member profile for you in some respects.
How is that feeling with your segmentation strategy then.
Speaker 3 (19:27):
Yeah, well, as I was saying, it fits with you know,
all there's offerings. Each program that upstart has fits with
each of those segments nicely. And so you know, we
started with the traditional program, of course, and the performance
was excellent, and we want to lend deeper where we can,
(19:49):
and as I mentioned, part of our strategy is to
be able to lean into certain borrowers so that we
can go deeper elsewhere and the prime programs us to
do that. But yeah, we have seen a shift in
the mix since launching that. So of course higher scores right,
lower expected loss rate. So it'll be interesting to see
(20:12):
how how those two programs play together, and then if
we also introduce the LMI program.
Speaker 4 (20:19):
But yeah, we've been it's early, but of course we've
been with how it's performed so far.
Speaker 1 (20:24):
And are you thinking maybe a different sort of marketing
treatment to depending on where the border is coming from,
So start of looking within Arizona and maybe maybe outside
of Arizona, LM I might have its own sort of approach.
These prime borders may have a different approach than those
that may be in sort of a lower risk here
or higher risk here. I guess this case, maybe you know,
(20:45):
maybe talk a little bit with your marketing team because
you've got to work pretty closely with them on making
sure that that those opportunities are kind of met with
I think a relevant product or service outreach to them.
Speaker 4 (20:58):
Yeah.
Speaker 3 (20:59):
Absolutely, and you know that's one of the things.
Speaker 4 (21:03):
Admittedly that we were so focused on.
Speaker 3 (21:06):
Growing and optimizing the program that we've not been as
intentional with the cross selling and the onboarding, but it
is a huge focus for us in twenty twenty five.
And actually we're probably about a month away from launching
an offer specifically to those that come in through the
(21:27):
Upstart Journey, a very rich checking offer because now they're
part of our fold.
Speaker 4 (21:32):
We want to you know, welcome them.
Speaker 3 (21:34):
Into the member base and you know, hopefully they give
us a try for other products and services. But yeah,
I think, you know, with the different programs and our
slow and grow strategy, we're going to continue to look
to expand other markets. You know, we we were very
(21:54):
strategic about how we did that. We did states kind
of bordering Arizona, as you know, we were very very
careful around that and We'll continue to expand, but again
monitoring and making sure that we're serving our targets. I've
been reinvesting it back into the Tucson community.
Speaker 1 (22:15):
Right, And the checking relationship is still the anchor product, Michelle. Right,
with all the evolution we've had in financial services, banks
and credit unions, free checking fifteen twenty years ago that
was kind of the big thing. It is still the
anchor product that I think most most financial consumers signify as, Hey,
(22:36):
my main financial institution is where my checking account is.
And maybe it's less relevant now that that checking account
was opened at a branch a mile from my house.
Because with an advantage West, you've got a pretty rich
digital platform, right, Like I can be in southern California
and I can totally engage with your folks and pretty
(22:58):
much get anything I need in the digital or even
over the phone. So it's with checking, it's not just
with those new Upstart borders within Arizona. You're also kind
of looking outside of the stafe borders as well.
Speaker 4 (23:14):
Right, absolutely, Yeah.
Speaker 1 (23:16):
Yeah, that's good. One thing with Upstart. So for the audience,
So I worked at a credit union that was also
an Upstar partner. We had expander field of membership to
new county and southern California counties are pretty big, there's
a big population in them, and so the one that
(23:36):
we expanded to had about two million people in it.
And we actually use upstart to as one of our
first outreaches into that county so that we're able to
find a brand new Borowers brand and became brand new
members in that county. So really with sort of zero
marketing spend for that particular project, we had successful in
bringing in hundreds of new more borders and new members
(23:58):
in that county pretty quick. And then the marketing team
we're like, this is great, we can ab test different
ways of different approaches for them. We didn't have as
I think as as precise a segmentation program as you have,
which is probably a good enabler to make that as
successful as possible. But yeah, I think cross sell is uh,
(24:21):
those cross sell opportunities are so important and that catalyst
for growth for you going forward.
Speaker 4 (24:27):
Yeah.
Speaker 3 (24:27):
Well, and you know, we see the feedback we get
through you know, satisfaction surveys and folks saying this was
such an easy experience, it was such a great loan
experience that it's it's a great opportunity to serve up
something else right when they've had that positive experience.
Speaker 1 (24:45):
Absolutely good. So looking to have Michelle like, what what
excites you about the next phase of the partnership, because
you know you've got this this sort of core borrowers
and new memories. We've got the prime Now you know,
any other sorts of products or or services or solutions
that you're focused on here as we roll into twenty five.
Speaker 3 (25:06):
Yeah, So we just started having kickoff conversations with you
all around your helock offering, which is a great way
for us to capture borrowers who perhaps bought a home
during the housing boom and you know they're locked in
at those low rates and want to tap into that equity.
We've seen some great growth in our own helock portfolio,
(25:28):
but again capturing those that we wouldn't have access to.
Speaker 4 (25:33):
So we're excited to begin conversations around that.
Speaker 3 (25:37):
We just launched the recognized Customer program with you all,
so if there is advantage west member that's coming into
the Upstart platform, they'll now be routed to us, which
is great. I participated in your AI certification program.
Speaker 1 (25:54):
Good, yes, Yeah, which wasn't an easy. I mean, let's
be honest, right, that was not an easy pro.
Speaker 4 (25:59):
Did the long verd and the short version?
Speaker 1 (26:01):
Yeah, but they were from you like that was university level, right,
And still it really was.
Speaker 4 (26:06):
It was taking me back to stats class, but it was.
Speaker 3 (26:09):
It was great, and I truly recommend it to anyone
not only thinking of partnering with upstart, but anyone just
looking to get a better understanding of artificial intelligence and
machine learning and the differences and the compliance environment involved.
So we've actually started to make that part of people's
development plans. Every year, folks that manage WESS have to
(26:32):
create a development plan, and because we are partnering so
much with fintech, we have suggested some folks take it.
Speaker 1 (26:39):
That's great, that's good. Yeah, you know, you talk helock.
I read something not too long ago that ninety percent
of all first mortages in the United States have a
rate of five percent or less right now. So people
are kind of stuck in their houses because of rate,
but they hate their kitchen or they hate their bathroom.
And you know, that's that's where I think the heal
(27:00):
product kind of makes a lot of sense. Not just
upstarts heelock products certainly, but you know, any helock product
I think should be really at the forefront as creditings
are looking at twenty twenty five, because these are also
really really good members for other products and services that
you may be able to offer. So so it's good
that you have that going on. Well, Michelle, I want
(27:22):
to thank you so much for talking into our audience today. Ali,
could you pull up the science please. Thank you so.
Vange West is really one of upstarts longest tenured and
one of our most valued lending partners. But in addition
to Vantage West, we partner with many other creditings across
the country, helping them deliver high performing and profitable personal
loans while also helping with membership growth in their desire
(27:43):
geographic market. We have over one hundred lending partners across
the country of all assets, sizes and various geographic reach
like many of those that are pictured on the previous slide. Now,
Michelle and I talked a little bit about how Vanage
West has gained. Not only are these high quality performing loans,
but very high quality new members. There's a visual of
kind of what that new member profile looks like and
some of their characteristics, including what we're seeing in early
(28:06):
stages in average creditsco over around seven fifty six. So
many of our credit unis have had success cross selling
to these particular members in these into additional products and services.
And it's pretty exciting for us to see this as
this is a program that ups are just launched with
a few of our trusted lending partners here in July
and you three months later, it's it's really really blown
(28:28):
up and become one of our primary value propositions that
we have to our new lending partners and our existing
ones of these new prime borers that are coming through.
So if you're entering a new market, upstart can find
those borders in that designate geographic area. And these new
members generally represent a pretty attractive demographic for building new
member relationships. And finally, if you've got any other questions
(28:51):
about what we talked about today or anything we missed,
please feel free to reach out to Michelle right directly.
You can see our contact information there. Michelle and a
few others from the Vanaged West team will be attending
the ACU Lending Conference in Nashville in just a few
short days. Members of the f Start team will also
be there we really look forward to. It's actually one
of our favorite events of the year because we see
(29:11):
a lot of a lot of our lending partners. We
also see a lot of prospective lending partners, and there's
a lot of questions and a lot of curiosity around, well,
how exactly does AI work in lending? Like what's what's sir?
Your your secret, sauce your solution with us, and so
it gives us an opportunity to really talk to lending
professionals across the country about about all the things that
(29:31):
we're doing here at upstart. But we would love to
meet you in person. If you're coming, please stop by
our booth when you're there. And I want to thank
everyone who joined us today and thank you to Michelle,
and I'll turn it back over to our moderator.
Speaker 2 (29:46):
All right, folks, Well, if you had any questions and
that was your chance, please don't be shy. I see
we had a couple here in the chat. The first
one we have someone interested in your AI certification program.
Is that a free program?
Speaker 1 (29:58):
Verry, it is. It is a great price. It is free,
so you can go to upstart dot com. And while
I'm talking, maybe my friend Ally can can help with
the exact link for that, but yeah, it is a
free course. We actually introduced two different programs here in
twenty twenty four, almost AI Certification that Michelle was talking about,
(30:19):
which is less about Upstart and more about artificial intelligence
as a topic, and it really is sort of college
university level but a good understanding of what AI is.
There's a lot of I think misunderstanding about AI, and
people think that there's some sort of doomsday scenarios and
so on around AI. This isn't it at all. This
is really just taking for ups models. For example, we
(30:41):
use over seventy billion data points to come up with
our model projections and forecasts as we go through the
underwriting process, as we validate the identity of borders that
are coming through Upstart. So it's we're using it because
there's just so much only so much capacity that humans
(31:03):
have for it, and we know that through machine learning
we can get to answers faster and be more precise
with it. So that's why we really, I mean, artificial
intelligence is really in our DNA, it's in our bones.
It's how we got started and really how we believe
that that we're going to be just supporting all of
our financial partners as we go forward with Upstart, and
(31:24):
I'm just looking at what the course is upstart dot
Com slash ai hyphen certification. There is also an Upstart
Program certification. It's really more for those lending partners that
we've just brought on. It's a good overview of what
Upstart is and sort of how we connect our business
(31:45):
if you are to partner with us, it's that one's
a little more consumable. It's about an hour or so,
but would highly encourage anyone who's who's interested to check
that out as well.
Speaker 2 (31:58):
Yeah, thank you for sharing that. I think it sounds
like incredibly useful certification for lending professionals and I would
encourage you all to check it out. Another question I
got here from a member, how do you distribute the
loanberd between loan types, whether that's auto, mortgage or personal ones.
Speaker 3 (32:17):
Yeah, so we have goals right for the organization set
as part of our plan for the beginning of the year.
So that's, you know, from a lending perspective, how we
distinguish what we're.
Speaker 4 (32:31):
Going to focus on for the entire year and.
Speaker 3 (32:34):
Then specifically the Upstart programs now that we have a
couple of them, it comes down to what's happening across
the credit union. Do we need to bump up the return?
Are we looking for more volume? I would be remiss
if I didn't talk about our capital markets team. So
(32:55):
we have a small but mighty team that's focused on
loan participations. So it's making sure that I'm poisoning my
portfolio for them to take it to the secondary market.
So those are all things that come into how we
distribute and how we look at where we're going to
book volume.
Speaker 1 (33:12):
That's a good point about participation loans. So two years ago, no,
I'll go back three years ago. There was such an
imbalance between buyers and sellers. There were hardly any loan
pools at all, and we were all crying for them,
and we're all outbidding each other, which we're just diminishing
the margins so much it almost was not worthwhile, although
it did boost up that side of the balance sheet.
(33:33):
And then it shifted, you know, almost overnight into there
were way more buyers and sellers. Where's that now, pardon me,
way more sellers than buyers, I should say, is where
it shifted. Where do you see that now, Michelle, Yeah, I.
Speaker 3 (33:50):
Mean, I think the team is finding that there's a
bit more of that balance, so they're not struggling as
much to find buyers. And then you know, this plast year,
we've actually had a really good year of selling participations.
So I think that's what they're planning on seeing again
in twenty twenty five. We have some lofty goals on
(34:13):
that part of the house as well, so hopefully that continues.
Speaker 1 (34:17):
That's good. I mean, so think about an environment where
we have rate reductions. It never really never really happened
in twenty four. Hopefully it happens in twenty five. I
don't know, the FED drop fifty basis points and then
the tenure went up forty basis points, so that kind
of didn't make a lot of sense. But let's assume
for a second that we do see some rate reductions
from the FED in twenty five. I mean, that would
(34:39):
tell me that any paper that you put on in
twenty four or twenty three is be a little higher
yielding and probably a little more attentive for those for
those credites that are looking for to build their loan portfolios.
So yeah, yeah, good, all right, thank you. Any other questions.
Speaker 2 (34:54):
Then one more question here from the members. Is there
an attention to my great numbers between the segments that
you should that your credit union?
Speaker 4 (35:01):
Michelle, Yeah, we do. Obviously.
Speaker 3 (35:07):
You know, there's varying degrees of the credit spectrum, so
it's you know, trying to move folks up through the
credit spectrum and trying to move those folks who are
borrowers to savers and savers to investors.
Speaker 4 (35:19):
So we try to be truly intentional about.
Speaker 3 (35:24):
Not only where we're booking, but then the journey of
the member once they come into our fold and the
types of things that we serve them up, whether that's
financial wellness or if it's you know, a high yield
money market account, right, so depending on where they are
today and then trying to you know, evolve and help
(35:45):
serve them.
Speaker 2 (35:46):
We had one more question come in, how does your
charge off DQ ratio has been affected in comparison prior
to and after a partner upstart?
Speaker 3 (35:57):
Yeah, so I think like most folks, we're seeing delinquencies
in charge.
Speaker 4 (36:03):
Offs rise not only on our.
Speaker 3 (36:09):
Regular portfolio a little bit on the upstart, but we're
within our tolerance.
Speaker 4 (36:14):
So we set and annualize.
Speaker 3 (36:17):
Expected loss ratio with our upstart partners, and then we're
constantly monitoring that so if we have to make adjustments,
we will, and we do and see a little bit
of increase in charge offs in some of our earlier vintages,
(36:38):
but again that's like post COVID era where you know,
again some of that money dried up, and you know,
it's exactly what we saw on our own portfolio too.
Speaker 1 (36:50):
Yeah, and I'll say thank you Michelle from upstarts perspective.
Our lending partners get to choose sort of the risk
tolerance that that they're willing to accept, so they can
land super deep, they can land super prime, UH, somewhere
in between, and we do really have a cross the
spectrum UH lenders. Some are looking for volume in are
and are comfortable with maybe higher yields and also higher losses.
(37:15):
Some are more comfortable with, hey, I really want to
limit my losses, but I'm okay accepting the lower return
UH for for that sort of more more high quality paper.
And again we can accommodate across that entire spectrum, even
a blend of it as well. Some are are trying
to say, hey, with like super prime, we know that
the loss rates really low on that anyhow, But we
(37:36):
also acknowledge the returns low because we're trying to get
the best possible a PR offer out for those super
prime borers. By the same token, you can land a
little deeper and on a blended basis. Now you've got
a return that's uh, that's more attractive to the finance
folks especially as well. So and the loss rate and
the loss rate exactly.
Speaker 2 (37:59):
Well, it looks like that was our last question. So
that's going to conclude our weibe and offer today. Thank
you Michelle, thank you Verry, and thank you to our
audience for joining us. Really appreciate it. If you could
please take a moment to fill out the evaluation on
your screen. Your feedback will help us to improve the
delivery of our programs and is very much appreciated as well. Again,
thank you for joining us, and have a great day.
Speaker 1 (38:19):
Thank you Michelle, thank you Adam.
Hi, I'm Barry Roach, host of Leaders in Lending, brought
to you by Upstart. The following is a conversation originally
aired on an America's Credit Union webinar late in twenty
twenty four, titled Capturing Prime Members in twenty twenty five
and Beyond. I chatted with Michelle Gapner, the vice president
of Consumer Lending and proc Strategy at Vantage West, a
three billion asset credit union base in Tucson, Arizona. Michelle
(00:26):
and I discussed balancing loan growth with limited liquidity, growing
prime members, and working to expand those relationships. Thanks for listening,
and I hope you enjoy it.
Speaker 2 (00:35):
All right, everybody, let's get started. Hello and welcome to
America's Credit Union's webinar Capturing Prime Members in twenty twenty
four and beyond. My name is Adam Right, and I'm
a manager of online learning Products at America's Credit Unions.
If you haven't already, feel free to download today's presentation handouts.
You'll find them available under the resource tab and you're
zoom tuomar. As a quick reminder, please keep yourself muted
(00:56):
during today's presentation. If you have questions during the presentation,
please enter it up in the chat. We'll be taking
questions at the end. We are happy to have Michelle
Wepner and Barry Roach sharing their expertise with us today.
Michelle is the VP of Consumer Lending and Product Strategy
Advantage West Credit Union. With over twenty years in financial
services experience, Michelle has accumulated an extensive track record of
(01:17):
taking on the challenge and responsibility for high profile product marketing,
strategy and lending issues. Barry is a senior account manager
at Upstart with over thirty years of experience in the
financial services industry. Arry has proven leadership of large, multifaceted
teams of financial professionals which delivered above market financial results. Previously,
as President and CEO of Water and Power Community Credit
(01:39):
Union in Los Angeles, Berry led the organization to achieve
significant asset growth and improvement and financial strength while improving
all aspects of the digital experience. Without further ado, I
will turn things over to you. Thank you Michelle and
Berry for.
Speaker 1 (01:52):
Joining us today. Thank you, Adam, slide please and next
slide please. Hi Michelle, nice to see you. Please take
it away and then we'll get into the discussion for today.
Speaker 3 (02:08):
Thank you all right, Thank you Berry. Thank you, Adam,
thanks for having me.
Speaker 4 (02:13):
Hello everyone. As Adam said, I'm.
Speaker 3 (02:15):
Michelle Gafner, the vice president of Consumer Lending and Product
Strategy from Vantage West Credit Union. So Vantage West Credit
Union is based in Tucson, Arizona. We have military roots
as we serve the Tucson airmen and their families back
in the fifties, and now we have evolved to a
state chartered credit union known as Vantage West with just
(02:38):
under two hundred thousand members. We're three billion in assets,
and we've got eighteen branch locations across Tucson and the
Phoenix area.
Speaker 1 (02:50):
Great. Thank you, Michelle, and thanks for joining us today.
Just for the audience. Vanjewest has been a valued partner
of Upstart for the past couple of years. Michelle and
I work very closer together. We speak if not, if
not monthly, I mean usually once a week or so.
There's a reason for Michelle and I to get together.
(03:11):
What we're talking about today is really about capturing prime
members in twenty twenty five and beyond, and I think
the experience with Vanage West, they've already captured a whole
bunch of prime members since they came on as Upstart
partners back in later twenty twenty two. So since that happened, Michelle,
let's just talk a little bit about when you started
(03:31):
partnering with US, economic conditions evolved quite a bit. I mean,
we were at that point just coming out of sort
of COVID restrictions and stimulus and this ramp of deposits
and lots of liquidity to sort all of a sudden,
liquidity somewhat seized roughly six months after that, and so
(03:52):
you know, where you maybe had some higher loan growth
projections in later twenty two, that kind of quickly shifted.
So maybe suare a little bit about about how you
were adjusting not just the yepstart program, but you know,
all your loan growth goals from when liquidy kind of
got a little tighter and then as it started to
(04:15):
come back, because we have certainly seen in the past year,
how how deposits have come back a little bit as well.
Speaker 4 (04:20):
Yeah.
Speaker 3 (04:21):
Absolutely, Well, to say it's been an interesting lending environment
the last few years would be an understatement, and it
certainly has been since we started partnering, Barry. I think
in the fall of twenty twenty two. I think we've
had what ten or so rate hikes since then, and
least as you mentioned, yeah, we had some liquidity constraints,
(04:42):
as I'm sure many watching and listening did as well.
We had to intentionally slow down our lending, which is
always a hard message as you know, a lender and
an originator to tell our teams we've got to slow
it down. But thankfully we've been able to turn it
back on. And you know, with the Upstart partnership, we
(05:05):
went with the slow and grow strategy. So we started
in our market, Arizona, with you know, originating a few
million a month and then testing it out, you know,
to see how it worked, how did it work for us,
how did it work for our members, what was the feedback,
And then we steadily, you know, started ramping up volume,
(05:26):
you know, both because one getting our feet wet with
the program, but two, as you mentioned, the changing environment.
And then from there we started to expand markets. And
I think one of the things I love so much
about this program are the levers that we can control,
and you know, being a control freak, I want to
be able to do that.
Speaker 4 (05:47):
So whether it's adjusting our net return or.
Speaker 3 (05:50):
Our expected loss rate, our volume, our max loan size,
that's The great thing about this program is the customizable
of flexibility.
Speaker 1 (05:59):
Great and so the partnership that you have internally, because
I know you and the lending group you always have
those aggressive goals, right, I mean, you're you're always trying
to put more money on the street. You're trying to
find ways of not just this isn't just a financial
thing with show You're not just trying to sort of
grow the balance sheet. You're actually trying to help those
(06:20):
members that you have with their next purchase need or
wherever the case may be. But talk a little bit
about that partnership, like, like how that's sort of the
catalyst for you to be able to realize and recognize
these great loan growth goals you have. You also need
to have the support of the risk side of the
business and the finance side of the business. So maybe
(06:42):
talk a little bit about about how and you and
the rest of the lending folks have been able to
sort of make sure everyone's served riding on the same
tracks as the train.
Speaker 4 (06:54):
Yeah.
Speaker 3 (06:54):
I think one of the things we learned through this
partnership specifically was the importance of bringing on your key
partners across the credit union early and often.
Speaker 4 (07:04):
To get comfortable with it. You know, I think everyone involved.
Speaker 3 (07:08):
In community lending would love it if there were endless
volume potential within their geographic footprint, but unfortunately that's not
the reality.
Speaker 4 (07:19):
And so we took the approach.
Speaker 3 (07:21):
Of expanding beyond Arizona so that we have the funds
to do more within our community. And I think that
was a big challenge for some folks internally to adjust to.
You know, we're a local credit union, why would we
be partnering with this fintech? Why would we be going
to other markets? But it was really helping to tell
(07:42):
the story that we could better serve our community if
we have those dollars to do so. And so sometimes
you have to go outside to get those dollars.
Speaker 1 (07:51):
So growth beyond the traditional branch footprint or feel amageably
you have as a catalyst to be able to make
those investment at the revenue, to make the investments to
get a better value proposition for those that are sort
of inside. So there's many ways of doing it right,
but I think you guys have kind of figured out
a really good formula for it. So I know you've
(08:13):
got other fintech partnerships, not just Upstart you know, for
several as well. And I do know that there's a
bit of an evolution with you and your world. I mean,
you were traditionally you're a lender, right and have been
a lender for a lot of your career, and now
it's like, okay, Michelle, you're doing such a great job
with lending. We usually look after deposits now, which is
(08:34):
you know, really almost flipping the hat a little bit.
But I would think a similar sort of an approach
or or a similar sort of guide guidance in terms
of how you would try and find those new positive
opportunities to help you with those those lending opportunities. So
maybe tell the audience a little bit about that evolution
within Vantaged West and kind of how you've seen sort
(08:54):
of similarities I guess in your approach as you're looking
at getting deposits as well.
Speaker 3 (09:00):
Yeah, well, you know, we're broadly speaking, fintech is a
critical part of our growth strategy Advantage West. So while
you all were one of our first partners, we've since
added other partners for auto refinancing, loan decisioning, improving our
digital experience, and so you know, now with deposits, we're
(09:26):
we're really focusing on how we grow that we have
advantage West. What's called our rally cry, and it's where
everyone focuses on one strategic priority across the Credit Union. Yes,
everyone has a day job and other things they're responsible for,
but the rally cry is the one thing that we
get everyone to rally around and really focus on.
Speaker 4 (09:48):
And that right now for the next six to nine
months is deposits.
Speaker 3 (09:53):
So we're looking at a whole bunch of things between
a refresh of our deposit products to a new digital
account opening solution, digital engagement tools.
Speaker 4 (10:05):
So that is a.
Speaker 3 (10:07):
Huge focus for us, and of course, as you know,
that allows us on the other side of the house
to keep originating.
Speaker 1 (10:15):
Absolutely. Yeah, So I love the idea of a rally cry.
I can't say that the creditings that that that I ran,
we kind of had. We didn't call it a rally cry,
but we tried to do a similar sort of thing,
like what is what is the one topic or the
one focus on our business that we can all rally around.
And and maybe that's a in an indirect way, start
(10:37):
answering the last question about how do you get everyone
on the same page. The finance folks, the risk folks,
and so on and so forth. Right, So just the
it's maybe it's a little too early, sort I share
some successes with that, Michelle, But you know you've talked
about sort of some product development and redevelopment and so on.
(10:57):
You know, what, what are the projections for this? And
and I know this is not just a six to
nine month thing, because I'm assuming that you're building something
that you think we'll have some sustainability going forward into
twenty six and beyond from there.
Speaker 3 (11:11):
Yeah, well, we're pretty early in this rally cry. This
is our second one since we've gone to this strategy.
So our first one was around reducing operational expense, and
at first it was a little confusing to people, but
then it just became this idea of when I have
to make a trade off of where to invest my
time or my resources, you'll.
Speaker 4 (11:33):
Lean into the rally cry.
Speaker 3 (11:34):
And so that rally cry was so successful we were
able to get our op X down substantially that we said, okay,
let's try it again.
Speaker 4 (11:41):
What's the next big focus? And so now it's deposit.
Speaker 3 (11:44):
So don't have any early I guess metrics or anything
to share just yet. But you know, come back in
a few months, and I'm sure we will, but I
will say that it's done a great job of unifying
everyone across the Credit Union and focusing on one specific
thing perfect.
Speaker 2 (12:01):
Yeah.
Speaker 1 (12:02):
So, and it's unfair maybe to ask for sort of
those metrics now with this new rale cry. But I'm
glad you brought up with the operating expanse because it's
something that we all say we keep an eye on.
But you'd be surprised when you start to look under
the couch cushions and see all those revenue leakage opportunity
or or or other expanses that just you know, sort
(12:24):
of have always been persisting within the Credit Union. Yeah,
but quick opportunities, right, so that's kind of a fueling
I guess some of the other investment and growth opportunities
that you're trying to do. Absolutely all right, let's talk
a little bit then. You know about one of the
key aspects of the partnership that you've had with Upstart.
(12:46):
It's not just finding new borers, but you've also got
a bunch of brand new members, right, so starting in
Arizona within your traditional field and membership now sort of
expanding beyond, So thousands of new members have also sort
of come in to the crediting. Can you describe a
little bit maybe around how you've been treating those new
(13:06):
member opportunities, like what's been sort of working to leverage
to get that next product service or is there a
way that you've been sort of segmenting these new members
coming in that's been particularly successful for you and the team.
Speaker 3 (13:23):
Yeah, so we've added I think over seven thousand not
new members so the Credit Union as a result of
this program, folks that we likely wouldn't have reached otherwise.
And the performance has been excellent, over ninety seven percent
er in repayment, and we've definitely seen a shift in
the profile since we've added the Prime program. But yeah,
(13:45):
we have three target segments at Vantage WES. One is
what we call our Prosperous Arizonans, so there are fifty
five plus super prime borrowers. And it's interesting as I
was thinking about our segments and the programs that upstart offers,
there's an absolute alignment. So the Prime program serves those
(14:09):
prosperous Arizonas. And then we have our middle market, which
is forty five to fifty four AB credit. So you know,
prime borrower and those folks align nicely with the traditional program.
And then lastly we have our aspiring so younger borrower,
maybe new to credit range of folks in the credit spectrum.
(14:33):
And as a CDFI designated credit union, we're always looking
for ways to extend credit to the low and moderate
income borrower. And as you know, we've been in talks
about the LMI Load to Moderate Income program and so
that would help us attract those borrowers and be able
to lend deeper and invest in that group.
Speaker 1 (14:56):
Yeah, I mean, it's take advantage of those programs that
are available for you with cdf I. The reason for
cdf I is is very altruistic. One is to try
and and sort of lift up those folks that are
in low and moderate income areas, either through education or
through UH financial literacy or just simply meeting their product
(15:17):
and service need where they are and hopefully sort of
get them into a more prosperous surve financial situation. So
there's that aspect of it, but also, I mean financially,
there's some great benefits and some great grants that can
kind of come with that. CDFI programs evolved a little
bit here. It used to be I think a little
(15:38):
easier back when when I looked at you know, six
seven years ago at my credit union to be able
to to qualify. It's a little more difficult now. But
are you finding that that with sort of organically within Arizona,
that that you've had some successes with sort of breaking
in through those those low moderate income areas we have.
Speaker 3 (16:00):
Yeah, and that's you know, the bread and butter too
of who we serve, and so that of course will
continue to be a focus. And you know, you mentioned
the difficulty with with CDFI, and of course we're finding
that too. But we've since launched a very successful program
on financial wellness. So it's a very robust program that
(16:26):
a lot of our branch folks have been trained on
to educate members. So you know, it's our goal to
turn borrowers into savers, savers into investors. And so that's
kind of you know, the stepping stone of that program.
Speaker 1 (16:41):
Right and and really fits in with your segmentation strategy
because you're likely looking to sort of migrate some of
these members through different segments right as they become more
prosperous and so on, and you know, today's load and
model at income and maybe that younger demographic they're tomorrow's homeowners.
You know, I live in southern California. It's really hard
(17:03):
to break in as a first time home buyer in
Southern California. It might be a little easier in Tucson
and in some of the lower moderate income areas across
the country. But maybe talk a little bit about your
approach that way for first time home buyers, given that
you know, the price, the entry prices has gone up
from when we're five years ago where we were looking
(17:24):
at you know, three and four percent thirty year mortgages
and now that price is a little higher right now.
So house Fans West are started managing through through all
of that right now.
Speaker 3 (17:36):
Yeah, so my pre in the mortgage group, they've done
an excellent job of addressing that.
Speaker 4 (17:41):
We know, affordability is a huge problem. So there's they're
offering some first time buyer programs.
Speaker 3 (17:47):
They also have launched a forty year mortgage, so they're Yeah,
so they're really trying to address this problem that we
know as nationwide it but it is a pretty big
problem in the Tucson air Yeah, so that team has
been working feverishly to create new products and services for
our members to be able to address it because we
(18:08):
were hearing it a lot from challeng.
Speaker 1 (18:10):
I love that you've created a non QM product right
that is definitely needed there and is specifically addressing those
that cohort that that's trying to address. So kudos to
the Vantage West team for thinking sort of outside the
box on that and for having the support again across
the organization and your board directors to be able to
(18:32):
sort of take on those sorts of things. That's great, Michelle.
Any other sort of early results on expanding relationships with
it's been pretty early on the Prime program. So ups
are just introduced in July, and just for the audience,
it's basically Upstart wants to make sure that we are
(18:54):
providing loan solutions for all Americans, not just for those
who the traditional credit scoring system may have loss in
some way throughout their financial history, but really trying to
attract Prime members with really good products at a really
good price that's that's attractive to them and advanced. It
(19:14):
has been a partner on this Prime program now for
three or four months. I mean it's really changed through
the borrower and member profile for you in some respects.
How is that feeling with your segmentation strategy then.
Speaker 3 (19:27):
Yeah, well, as I was saying, it fits with you know,
all there's offerings. Each program that upstart has fits with
each of those segments nicely. And so you know, we
started with the traditional program, of course, and the performance
was excellent, and we want to lend deeper where we can,
(19:49):
and as I mentioned, part of our strategy is to
be able to lean into certain borrowers so that we
can go deeper elsewhere and the prime programs us to
do that. But yeah, we have seen a shift in
the mix since launching that. So of course higher scores right,
lower expected loss rate. So it'll be interesting to see
(20:12):
how how those two programs play together, and then if
we also introduce the LMI program.
Speaker 4 (20:19):
But yeah, we've been it's early, but of course we've
been with how it's performed so far.
Speaker 1 (20:24):
And are you thinking maybe a different sort of marketing
treatment to depending on where the border is coming from,
So start of looking within Arizona and maybe maybe outside
of Arizona, LM I might have its own sort of approach.
These prime borders may have a different approach than those
that may be in sort of a lower risk here
or higher risk here. I guess this case, maybe you know,
(20:45):
maybe talk a little bit with your marketing team because
you've got to work pretty closely with them on making
sure that that those opportunities are kind of met with
I think a relevant product or service outreach to them.
Speaker 4 (20:58):
Yeah.
Speaker 3 (20:59):
Absolutely, and you know that's one of the things.
Speaker 4 (21:03):
Admittedly that we were so focused on.
Speaker 3 (21:06):
Growing and optimizing the program that we've not been as
intentional with the cross selling and the onboarding, but it
is a huge focus for us in twenty twenty five.
And actually we're probably about a month away from launching
an offer specifically to those that come in through the
(21:27):
Upstart Journey, a very rich checking offer because now they're
part of our fold.
Speaker 4 (21:32):
We want to you know, welcome them.
Speaker 3 (21:34):
Into the member base and you know, hopefully they give
us a try for other products and services. But yeah,
I think, you know, with the different programs and our
slow and grow strategy, we're going to continue to look
to expand other markets. You know, we we were very
(21:54):
strategic about how we did that. We did states kind
of bordering Arizona, as you know, we were very very
careful around that and We'll continue to expand, but again
monitoring and making sure that we're serving our targets. I've
been reinvesting it back into the Tucson community.
Speaker 1 (22:15):
Right, And the checking relationship is still the anchor product, Michelle. Right,
with all the evolution we've had in financial services, banks
and credit unions, free checking fifteen twenty years ago that
was kind of the big thing. It is still the
anchor product that I think most most financial consumers signify as, Hey,
(22:36):
my main financial institution is where my checking account is.
And maybe it's less relevant now that that checking account
was opened at a branch a mile from my house.
Because with an advantage West, you've got a pretty rich
digital platform, right, Like I can be in southern California
and I can totally engage with your folks and pretty
(22:58):
much get anything I need in the digital or even
over the phone. So it's with checking, it's not just
with those new Upstart borders within Arizona. You're also kind
of looking outside of the stafe borders as well.
Speaker 4 (23:14):
Right, absolutely, Yeah.
Speaker 1 (23:16):
Yeah, that's good. One thing with Upstart. So for the audience,
So I worked at a credit union that was also
an Upstar partner. We had expander field of membership to
new county and southern California counties are pretty big, there's
a big population in them, and so the one that
(23:36):
we expanded to had about two million people in it.
And we actually use upstart to as one of our
first outreaches into that county so that we're able to
find a brand new Borowers brand and became brand new
members in that county. So really with sort of zero
marketing spend for that particular project, we had successful in
bringing in hundreds of new more borders and new members
(23:58):
in that county pretty quick. And then the marketing team
we're like, this is great, we can ab test different
ways of different approaches for them. We didn't have as
I think as as precise a segmentation program as you have,
which is probably a good enabler to make that as
successful as possible. But yeah, I think cross sell is uh,
(24:21):
those cross sell opportunities are so important and that catalyst
for growth for you going forward.
Speaker 4 (24:27):
Yeah.
Speaker 3 (24:27):
Well, and you know, we see the feedback we get
through you know, satisfaction surveys and folks saying this was
such an easy experience, it was such a great loan
experience that it's it's a great opportunity to serve up
something else right when they've had that positive experience.
Speaker 1 (24:45):
Absolutely good. So looking to have Michelle like, what what
excites you about the next phase of the partnership, because
you know you've got this this sort of core borrowers
and new memories. We've got the prime Now you know,
any other sorts of products or or services or solutions
that you're focused on here as we roll into twenty five.
Speaker 3 (25:06):
Yeah, So we just started having kickoff conversations with you
all around your helock offering, which is a great way
for us to capture borrowers who perhaps bought a home
during the housing boom and you know they're locked in
at those low rates and want to tap into that equity.
We've seen some great growth in our own helock portfolio,
(25:28):
but again capturing those that we wouldn't have access to.
Speaker 4 (25:33):
So we're excited to begin conversations around that.
Speaker 3 (25:37):
We just launched the recognized Customer program with you all,
so if there is advantage west member that's coming into
the Upstart platform, they'll now be routed to us, which
is great. I participated in your AI certification program.
Speaker 1 (25:54):
Good, yes, Yeah, which wasn't an easy. I mean, let's
be honest, right, that was not an easy pro.
Speaker 4 (25:59):
Did the long verd and the short version?
Speaker 1 (26:01):
Yeah, but they were from you like that was university level, right,
And still it really was.
Speaker 4 (26:06):
It was taking me back to stats class, but it was.
Speaker 3 (26:09):
It was great, and I truly recommend it to anyone
not only thinking of partnering with upstart, but anyone just
looking to get a better understanding of artificial intelligence and
machine learning and the differences and the compliance environment involved.
So we've actually started to make that part of people's
development plans. Every year, folks that manage WESS have to
(26:32):
create a development plan, and because we are partnering so
much with fintech, we have suggested some folks take it.
Speaker 1 (26:39):
That's great, that's good. Yeah, you know, you talk helock.
I read something not too long ago that ninety percent
of all first mortages in the United States have a
rate of five percent or less right now. So people
are kind of stuck in their houses because of rate,
but they hate their kitchen or they hate their bathroom.
And you know, that's that's where I think the heal
(27:00):
product kind of makes a lot of sense. Not just
upstarts heelock products certainly, but you know, any helock product
I think should be really at the forefront as creditings
are looking at twenty twenty five, because these are also
really really good members for other products and services that
you may be able to offer. So so it's good
that you have that going on. Well, Michelle, I want
(27:22):
to thank you so much for talking into our audience today. Ali,
could you pull up the science please. Thank you so.
Vange West is really one of upstarts longest tenured and
one of our most valued lending partners. But in addition
to Vantage West, we partner with many other creditings across
the country, helping them deliver high performing and profitable personal
loans while also helping with membership growth in their desire
(27:43):
geographic market. We have over one hundred lending partners across
the country of all assets, sizes and various geographic reach
like many of those that are pictured on the previous slide. Now,
Michelle and I talked a little bit about how Vanage
West has gained. Not only are these high quality performing loans,
but very high quality new members. There's a visual of
kind of what that new member profile looks like and
some of their characteristics, including what we're seeing in early
(28:06):
stages in average creditsco over around seven fifty six. So
many of our credit unis have had success cross selling
to these particular members in these into additional products and services.
And it's pretty exciting for us to see this as
this is a program that ups are just launched with
a few of our trusted lending partners here in July
and you three months later, it's it's really really blown
(28:28):
up and become one of our primary value propositions that
we have to our new lending partners and our existing
ones of these new prime borers that are coming through.
So if you're entering a new market, upstart can find
those borders in that designate geographic area. And these new
members generally represent a pretty attractive demographic for building new
member relationships. And finally, if you've got any other questions
(28:51):
about what we talked about today or anything we missed,
please feel free to reach out to Michelle right directly.
You can see our contact information there. Michelle and a
few others from the Vanaged West team will be attending
the ACU Lending Conference in Nashville in just a few
short days. Members of the f Start team will also
be there we really look forward to. It's actually one
of our favorite events of the year because we see
(29:11):
a lot of a lot of our lending partners. We
also see a lot of prospective lending partners, and there's
a lot of questions and a lot of curiosity around, well,
how exactly does AI work in lending? Like what's what's sir?
Your your secret, sauce your solution with us, and so
it gives us an opportunity to really talk to lending
professionals across the country about about all the things that
(29:31):
we're doing here at upstart. But we would love to
meet you in person. If you're coming, please stop by
our booth when you're there. And I want to thank
everyone who joined us today and thank you to Michelle,
and I'll turn it back over to our moderator.
Speaker 2 (29:46):
All right, folks, Well, if you had any questions and
that was your chance, please don't be shy. I see
we had a couple here in the chat. The first
one we have someone interested in your AI certification program.
Is that a free program?
Speaker 1 (29:58):
Verry, it is. It is a great price. It is free,
so you can go to upstart dot com. And while
I'm talking, maybe my friend Ally can can help with
the exact link for that, but yeah, it is a
free course. We actually introduced two different programs here in
twenty twenty four, almost AI Certification that Michelle was talking about,
(30:19):
which is less about Upstart and more about artificial intelligence
as a topic, and it really is sort of college
university level but a good understanding of what AI is.
There's a lot of I think misunderstanding about AI, and
people think that there's some sort of doomsday scenarios and
so on around AI. This isn't it at all. This
is really just taking for ups models. For example, we
(30:41):
use over seventy billion data points to come up with
our model projections and forecasts as we go through the
underwriting process, as we validate the identity of borders that
are coming through Upstart. So it's we're using it because
there's just so much only so much capacity that humans
(31:03):
have for it, and we know that through machine learning
we can get to answers faster and be more precise
with it. So that's why we really, I mean, artificial
intelligence is really in our DNA, it's in our bones.
It's how we got started and really how we believe
that that we're going to be just supporting all of
our financial partners as we go forward with Upstart, and
(31:24):
I'm just looking at what the course is upstart dot
Com slash ai hyphen certification. There is also an Upstart
Program certification. It's really more for those lending partners that
we've just brought on. It's a good overview of what
Upstart is and sort of how we connect our business
(31:45):
if you are to partner with us, it's that one's
a little more consumable. It's about an hour or so,
but would highly encourage anyone who's who's interested to check
that out as well.
Speaker 2 (31:58):
Yeah, thank you for sharing that. I think it sounds
like incredibly useful certification for lending professionals and I would
encourage you all to check it out. Another question I
got here from a member, how do you distribute the
loanberd between loan types, whether that's auto, mortgage or personal ones.
Speaker 3 (32:17):
Yeah, so we have goals right for the organization set
as part of our plan for the beginning of the year.
So that's, you know, from a lending perspective, how we
distinguish what we're.
Speaker 4 (32:31):
Going to focus on for the entire year and.
Speaker 3 (32:34):
Then specifically the Upstart programs now that we have a
couple of them, it comes down to what's happening across
the credit union. Do we need to bump up the return?
Are we looking for more volume? I would be remiss
if I didn't talk about our capital markets team. So
(32:55):
we have a small but mighty team that's focused on
loan participations. So it's making sure that I'm poisoning my
portfolio for them to take it to the secondary market.
So those are all things that come into how we
distribute and how we look at where we're going to
book volume.
Speaker 1 (33:12):
That's a good point about participation loans. So two years ago, no,
I'll go back three years ago. There was such an
imbalance between buyers and sellers. There were hardly any loan
pools at all, and we were all crying for them,
and we're all outbidding each other, which we're just diminishing
the margins so much it almost was not worthwhile, although
it did boost up that side of the balance sheet.
(33:33):
And then it shifted, you know, almost overnight into there
were way more buyers and sellers. Where's that now, pardon me,
way more sellers than buyers, I should say, is where
it shifted. Where do you see that now, Michelle, Yeah, I.
Speaker 3 (33:50):
Mean, I think the team is finding that there's a
bit more of that balance, so they're not struggling as
much to find buyers. And then you know, this plast year,
we've actually had a really good year of selling participations.
So I think that's what they're planning on seeing again
in twenty twenty five. We have some lofty goals on
(34:13):
that part of the house as well, so hopefully that continues.
Speaker 1 (34:17):
That's good. I mean, so think about an environment where
we have rate reductions. It never really never really happened
in twenty four. Hopefully it happens in twenty five. I
don't know, the FED drop fifty basis points and then
the tenure went up forty basis points, so that kind
of didn't make a lot of sense. But let's assume
for a second that we do see some rate reductions
from the FED in twenty five. I mean, that would
(34:39):
tell me that any paper that you put on in
twenty four or twenty three is be a little higher
yielding and probably a little more attentive for those for
those credites that are looking for to build their loan portfolios.
So yeah, yeah, good, all right, thank you. Any other questions.
Speaker 2 (34:54):
Then one more question here from the members. Is there
an attention to my great numbers between the segments that
you should that your credit union?
Speaker 4 (35:01):
Michelle, Yeah, we do. Obviously.
Speaker 3 (35:07):
You know, there's varying degrees of the credit spectrum, so
it's you know, trying to move folks up through the
credit spectrum and trying to move those folks who are
borrowers to savers and savers to investors.
Speaker 4 (35:19):
So we try to be truly intentional about.
Speaker 3 (35:24):
Not only where we're booking, but then the journey of
the member once they come into our fold and the
types of things that we serve them up, whether that's
financial wellness or if it's you know, a high yield
money market account, right, so depending on where they are
today and then trying to you know, evolve and help
(35:45):
serve them.
Speaker 2 (35:46):
We had one more question come in, how does your
charge off DQ ratio has been affected in comparison prior
to and after a partner upstart?
Speaker 3 (35:57):
Yeah, so I think like most folks, we're seeing delinquencies
in charge.
Speaker 4 (36:03):
Offs rise not only on our.
Speaker 3 (36:09):
Regular portfolio a little bit on the upstart, but we're
within our tolerance.
Speaker 4 (36:14):
So we set and annualize.
Speaker 3 (36:17):
Expected loss ratio with our upstart partners, and then we're
constantly monitoring that so if we have to make adjustments,
we will, and we do and see a little bit
of increase in charge offs in some of our earlier vintages,
(36:38):
but again that's like post COVID era where you know,
again some of that money dried up, and you know,
it's exactly what we saw on our own portfolio too.
Speaker 1 (36:50):
Yeah, and I'll say thank you Michelle from upstarts perspective.
Our lending partners get to choose sort of the risk
tolerance that that they're willing to accept, so they can
land super deep, they can land super prime, UH, somewhere
in between, and we do really have a cross the
spectrum UH lenders. Some are looking for volume in are
and are comfortable with maybe higher yields and also higher losses.
(37:15):
Some are more comfortable with, hey, I really want to
limit my losses, but I'm okay accepting the lower return
UH for for that sort of more more high quality paper.
And again we can accommodate across that entire spectrum, even
a blend of it as well. Some are are trying
to say, hey, with like super prime, we know that
the loss rates really low on that anyhow, But we
(37:36):
also acknowledge the returns low because we're trying to get
the best possible a PR offer out for those super
prime borers. By the same token, you can land a
little deeper and on a blended basis. Now you've got
a return that's uh, that's more attractive to the finance
folks especially as well. So and the loss rate and
the loss rate exactly.
Speaker 2 (37:59):
Well, it looks like that was our last question. So
that's going to conclude our weibe and offer today. Thank
you Michelle, thank you Verry, and thank you to our
audience for joining us. Really appreciate it. If you could
please take a moment to fill out the evaluation on
your screen. Your feedback will help us to improve the
delivery of our programs and is very much appreciated as well. Again,
thank you for joining us, and have a great day.
Speaker 1 (38:19):
Thank you Michelle, thank you Adam.
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