[00:00:00] Rob Keatts: The country needs credit unions more today than it ever has, and I think we need to be able to stay true to our roots. How do we make sure that we are using data and we’re using technology so that we can serve in, in a manner that is. Prudent the people that need serving in our communities. And that’s the beauty of having 4,000 plus credit unions around the the nation is there’s a credit union in every community.

[00:00:24] 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 Paone connects with industry leaders to discuss the latest trends. And happenings around the lending industry.

[00:00:43] Narrator: Let’s dive in to the latest in lending.

[00:00:47] Vince Passione: Welcome everyone to 22 minutes in lending. I’m your host, Vince Passo. Our guest today is Rob Keatts, executive Vice President and Chief Strategy Officer at Chartway  Credit Union, with over two decades of experience in strategy and [00:01:00] technology within financial services and healthcare.

[00:01:02] Vince Passione: Rob has been instrumental in shaping Chartway strategic direction since joining in 2016, overseeing everything from IT modernization to enterprise wide transformation initiatives. Rob, thank you for joining us on 22 minutes of lending.

[00:01:15] Rob Keatts: My pleasure. Thank you for having me.

[00:01:17] Vince Passione: Awesome. So Rob, let’s just start off size of the credit union field of membership where it has offices.

[00:01:23] Vince Passione: It’d be great to just get a background for our listeners.

[00:01:25] Rob Keatts: Sure. So we are, uh, just over 3 billion in assets.

[00:01:29] Vince Passione: Congrats.

[00:01:29] Rob Keatts: Um, headquartered in, uh, Virginia Beach. We have offices in the Hampton Roads area of Virginia, so Southeastern Virginia, Houston, Texas, and the state of Utah, both north and southern Utah. And obviously Texas and Utah came through acquisitions from years ago.

[00:01:48] Vince Passione: Clearly big concern about just the industry in whole and the survival of smaller credit unions. Mm-hmm. So let’s start there. Sure. Um. How does Chartway help smaller credit unions survive? Is that [00:02:00] part of what you believe is a strategy for Chartway, is to help the smaller credit unions, they’re important to your existence or not?

[00:02:07] Rob Keatts: Yes. And um, so part of it is, is, is part of it is we have talked to other credit unions around merger and acquisition. Um, you know, if they’re not able to survive, let’s partner and do it together. Mm-hmm. Um, we also partner with smaller credit unions that are just. Let’s share ideas. Um, and, and it’s interesting.

[00:02:29] Rob Keatts: It’s not always like we’re the ones with the ideas. It’s, there’s some small credit unions out there with amazing ideas. There’s a hundred million dollar credit union local or near us that we talk to on a regular basis that they’re doing some incredible things and we’re like, can you teach us how to do, uh, some of what you’re doing?

[00:02:45] Rob Keatts: And so I think the credit union industry as a whole, that, um, willingness to collaborate, um. Is is part of what is gonna help smaller credit unions survive longer? Um, because I do think that as an organization or as an [00:03:00] industry, we really do want to make sure that we don’t get down to five credit unions.

[00:03:05] Rob Keatts: Um, that doesn’t help anybody. And so the, the, the more we can keep smaller credit unions healthy, the better. Um, at the same time, we want to make sure that. Mergers need to happen. We want ’em to happen before a credit union gets to the point that the NCUA is taking them over. So, um, it’s kind of a, a yes hand.

[00:03:24] Vince Passione: I was looking at your, some background on the, on the credit union. I was looking at your 5,300 report. Let’s start off with the investments in, in branch. So what’s behind that? I mean, this is a time when most people are talking about being digital first, but you know, as we said in the opening, a $25 million investment in branch infrastructure.

[00:03:43] Vince Passione: So what’s the thinking there?

[00:03:45] Rob Keatts: Yeah, so that’s, um, that’s a multi-year strategy around both opening a few new branches as well as renovating existing ones. Um, and we are, we, we believe digital first. We are definitely putting a lot of money on our digital side, but we don’t think the branches are going away.

[00:03:59] Rob Keatts: [00:04:00] We, um, when COV hit. Everything went digital and since we’ve opened back up, we’re actually at and above, uh, transactions and branches from where we were pre COVID. And so we don’t see it going away. We do see it changing, and that’s part of the investment we’re making. Um, either as we’re building new branches or renovating existing, we really are designing them so that in the future they’re not.

[00:04:23] Rob Keatts: Just for cashing a check, but they really are there for having conversations and doing education of our members on the needs of their, their financial life. And so that’s part of what we’re doing is it really is kind of a restructuring of our branches so that they can support our members needs today as well as what we think it’s gonna be five, 10 years from now.

[00:04:43] Rob Keatts: We truly believe that we need to have physical presence in the communities that we serve. Um. If nothing else, it’s, it’s, it’s a marketing piece where people see our name more often. Sure. It’s Bill boy. Um, but people do like to know that when they have that complex [00:05:00] question, they, they want to be able to come in, sit down and have a face-to-face conversation.

[00:05:04] Rob Keatts: And we wanna make sure that we are close, uh, when they want to have that conversation. ’cause we do think that’s a need for people. And I think it is, um, gen Z and millennial, I think it’s older as well. We, you know, we still see the, the same thing of Sure. People have a complex. Question or there’s fraud on their account or those kind of things where they’re just unsecure.

[00:05:24] Rob Keatts: They want that face-to-face communication.

[00:05:27] Vince Passione: No, makes sense. So branch infrastructure’s expensive between the infrastructure itself, rent and then turning around and having people in the branch, how do you measure return on that? Is it, is it just about the experience or is it looking at product pre penetration?

[00:05:43] Vince Passione: Are you looking at traffic?

[00:05:46] Rob Keatts: Yes, yes. And yes. It’s, um, it really depends, honestly. It really depends on the branch. Um, we have branches that we have, uh, in areas that we specifically look at the branches. It’s gonna bring in deposits. We have branches where we say it’s going to [00:06:00] be a heavy loan branch. We have some branches that are heavy because of education for the community around them.

[00:06:05] Rob Keatts: And so anytime we open or remodel a branch, we really look at. That branch, the expectations of that branch and build on a proforma around what we would want to see coming out of, in order to say it was successful what we did. But, um, it’s, no two branches are alike. And so it’s not like a, a cookie cutter formula.

[00:06:23] Rob Keatts: It really depends on who the members are around the branch and what our expectations is are for that branch.

[00:06:29] Vince Passione: Rob, you touched on deposits and I, I throw in there, right. New members. There’s been a lot of concern around deposit betas. It’s affected the industry, not just credit unions, committee, banks, banks as well.

[00:06:40] Vince Passione: How do you see the branch commitment, uh, contributing to, to getting those deposits? I mean, there’s lots of debate about, uh, deposit franchises, a thing of the past.

[00:06:52] Rob Keatts: Yeah, I mean, I, I, I think we’re at a point in the industry now, um, where. We need [00:07:00] to source deposits wherever we can get them. Um, and so there’s definitely a digital play around deposits.

[00:07:06] Rob Keatts: We do believe there’s a physical play around deposits. We do. We have members that, um, have money to bring into the credit union, but they want that face-to-face. They want that banker experience to come in and have a conversation around where to deposit their money. What should they keep in their accounts?

[00:07:24] Rob Keatts: What should they invest? And so, um, between our, our, our branches, um, and, and our investment organization, I think those two combined, um, really are kind of leading that physical charge. Um, and we do believe there’s, there’s the right place to have a branch where. We can bring and deposits because it is physically in that location.

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[00:08:19] Vince Passione: So we, we talked about this prior to, uh, starting to record about your commitment to Latino communities, and we had Victor Cora on from Copra, uh, on a prior episode, and he had talked about serving Latino communities is essential to credit union survival, but Victor kind of suggests that it’s not really common practice.

[00:08:38] Vince Passione: So what’s, what’s motivating Chartway? How did it become a priority?

[00:08:42] Rob Keatts: Yeah. So, um, yeah, Victor and K Compare are really good friends of ours. Um, we do a lot of work with Victor. We started probably three or four years ago. Um, really seeing and hearing from our team members on the ground out in Utah. Um, the need for more services [00:09:00] in the Hispanic community, the more of our members coming in.

[00:09:02] Rob Keatts: Um, we’re speaking Spanish. And so we really decided to take a look at it. And our, our typical start for everything is data. What is the data telling us? And so we partnered with Victor and Coer actually, uh, to really look at our data, to understand our markets, understand the demographics in our markets.

[00:09:20] Rob Keatts: Um, and sure enough, that’s exactly what we saw in Utah was a significant. Increase growing population of Hispanic members. And then we started looking at other financial institutions and didn’t see anyone that truly was out there in the market, uh, serving all the needs. And so that’s just kind of, you know, how we do things as we look at it.

[00:09:40] Rob Keatts: We say there’s a need in our community, how do we help? And, um, we partnered with Victor, um, worked with, um, inclusive, another organization as well. And um, really started down the journey of getting our Es avanzamos designation to ensure that we were able to truly serve that membership. But [00:10:00] it’s just, we saw it as a need in the community that we could help with.

[00:10:02] Vince Passione: It was interesting when I was chatting with Victor, ’cause you know, you kind of think about, oh, Hispanic community, there must be some, some special products and services, but this is really serving this, a lot of these communities that the multi-generational, um. It’s everything from, you know, wealth management trust it, it, it, this is not CDFI, this is looking at a community of, of, of individuals who’ve been here, done well and are looking for access to financial services, broader financial services.

[00:10:30] Vince Passione: Is that, is that the focus for you?

[00:10:33] Rob Keatts: Absolutely. I mean, we really, we position things differently, but we have not created any new products. The products we have serve our members. Um, it’s just a different set of members. We do, we do a lot of I 10 lending both, um, auto loans as well as mortgages in Utah, but it’s our same product.

[00:10:52] Rob Keatts: We just accept an I 10 number instead of a social security number. We don’t charge huge fees. We don’t charge different interest rates. It’s, [00:11:00] it’s the same products. It’s just a different community, um, that needs access to them. And we’ve said we don’t see. The risk in using I 10 instead of social. And so, mm-hmm.

[00:11:14] Rob Keatts: Um, we’ve been able to, to serve the community well, and we haven’t had to create new products. It’s same financial needs.

[00:11:22] Vince Passione: Okay. Now, Robert, let’s go back to Juntos. That’s an inclusive program.

[00:11:26] Rob Keatts: Yes.

[00:11:27] Vince Passione: What’s required to be in the program?

[00:11:29] Rob Keatts: Um, a lot. Um, so it’s, uh, it, it was, uh, it was quite a few months of work to make sure that.

[00:11:38] Rob Keatts: They wanna make sure that people are truly serving the Hispanic market and not just saying they are. And so it’s making sure that you have, um, team members that are trained and bilingual, making sure you have the right documents that are, um, translated, making sure your products do have certain functionality.

[00:11:55] Rob Keatts: Um, and like I said, ours already did. We didn’t have to change products. [00:12:00] Um, but there is a lot to make sure that everything you’re doing when someone walks into a branch. If that has a Junto Zamo designation, they know they will be served, they will see their language, they’ll be able to speak to someone in their language and have their needs met.

[00:12:14] Rob Keatts: Um, and so it, it’s a pretty extensive, um, list of things that you have to meet. Um, and like I said, I think we were probably, uh, months, um, from start to when we actually were able to get our designation.

[00:12:28] Vince Passione: So it’s not just language, it’s also culture. Right? You, you, absolutely. And, and how much of that is retraining existing branch members versus recruiting folks from within the community?

[00:12:39] Rob Keatts: Um, I. It’s probably 50 50. Um, when we started, a lot of it was retraining existing team members. Um, we have, uh, through the data that we were able to get through co we have two of our branches in Utah where over 50% of our membership. Is Hispanic, walking in the [00:13:00] door. Mm-hmm. Um, and so we really looked at how do we start moving around some of our bilingual team members so that we could get those branches at a hundred percent bilingual.

[00:13:08] Vince Passione: So talk about measurements. So how do you measure, um, success here?

[00:13:15] Rob Keatts: It’s, um. It’s interesting. So we we’re working on that right now. So every year we go through a process with co, where they do a deep dive into our data and let us know how we are doing, um, from both a growth of the Hispanic community as members, as well as the depth.

[00:13:34] Rob Keatts: How many products are they? Um. Truly taking advantage of everything that we have. Um, we do that on an annual basis today. Um, because we don’t keep that data in house on, uh, demographics inside of our data warehouse, um, we are actually having conversations with a couple of other organizations to where we can start doing that on a monthly basis.

[00:13:54] Rob Keatts: Um, because we really are seeing. From an annual standpoint, I mean, [00:14:00] last year we grew almost 30% in the Hispanic market in, in Utah. And so really we want to be able to measure that, um, much more in depthly. We’re a big data-driven organization, and so only being able to get that data once a year is kind of makes us itchy.

[00:14:12] Rob Keatts: And so we’re, we’re having conversations where we can get that on a much more frequent. Basis. But the other side of it really is what we’re being able to do in the community and what the community is telling us. So, and there’s a lot of organizations coming to us to say, can you help us? Because we’ve heard that you’re in here, you’re serving the community well.

[00:14:30] Rob Keatts: And so that’s one of the measures for us, absolutely. Is that we have people coming to us, not the other way around. And that’s truly telling us that we’re doing the right thing. We’ve got the word of mouth in the community that we are there to help.

[00:14:42] Vince Passione: Great. So let’s switch gears. Business banking, you started in 2024, so tell us about the strategy behind it.

[00:14:49] Vince Passione: What do you hope to gain by getting into business banking?

[00:14:52] Rob Keatts: Very similar to kind of how it happened on the Hispanic market. We really started looking at the data. We were getting more and more members [00:15:00] coming in and opening a business account, which is really just a consumer account, but it’s for their, their.

[00:15:06] Rob Keatts: One person business. Um, we saw the need in the community. We heard it from the Hispanic community, that there was a lot of small businesses that weren’t able to get financial services. And so we said, okay, we, we think there’s a a, a play here. There’s a gap that we can fill. Um, and so we started up our process of building out business banking.

[00:15:25] Rob Keatts: Um. We, in the next month or so, we’ll have everything launched, um, for full service, small, um, and medium sized businesses. Um, and we really think that there’s a, a real need for business banking at lower fees, higher rates for returns, um, especially in some of the underserved markets.

[00:15:48] Vince Passione: And, and talk to us a little about the, the technology innovation.

[00:15:51] Vince Passione: What are you doing to support business banking?

[00:15:54] Rob Keatts: So we have, um, we are a Q2 is our, uh, consumer, uh, [00:16:00] digital banking. Um, and they have a business banking platform. So we’re in the process of implementing all of that right now. Um, next month all of that will be live. Um, and so really at its partnering with our already existing partners.

[00:16:13] Rob Keatts: Um, to be able to support the needs, uh, from a technology standpoint. Um, and then we’ve been spent, we spent the last probably eight, nine months building out the products on the backend from checking, savings, lending products to support the needs. I.

[00:16:28] Vince Passione: Okay, so let’s, let’s, let’s talk about FinTech. So you joined the organization as A-A-C-I-O.

[00:16:34] Vince Passione: Now you oversee the strategy. Um, it’s, it’s, it’s not particularly, it’s not a common career path, but I was a CIO once too and, and wound up where I am. So I, I think there are lots of turns you can take in leveraging technology. Yes. What was behind chart way’s decision to do this was this, we’re really committed to technology and needs to be embedded in our strategy.

[00:16:54] Vince Passione: We’re tech first. Talk about that.

[00:16:57] Rob Keatts: I mean, I, I think it’s [00:17:00] probably both ways. I think as an organization we recognize the need for technology. We recognize the need for digital, um, and digital first. I think there’s also a piece of it. That strategy is just something I’ve always been part of. What I’ve done as a CIO has always been around the strategy side, and so I think it was a nice fit for me.

[00:17:20] Rob Keatts: Mm-hmm. Um, but we are, we are an organization that believes that we’ve got to understand. Um, the digital needs of our members because, uh, like we were talking about earlier from a, a millennial, the, the Gen Z and, and on, um. Everyday banking is gonna be on their phone, not at a branch. They, they want a branch.

[00:17:41] Rob Keatts: They’ll come into the branch when they have a complex question, but their, their bank branch is their phone. Mm-hmm. And so we’ve gotta be able to keep up with the, you know, the chases, the capital ones of the world that are putting $500 million into r and d. We’ll never be able to, to reach that. Kind of [00:18:00] investments.

[00:18:00] Rob Keatts: So partnering with fintechs, understanding who’s out there and how we should be integrating with them is how we’re gonna be able to kind of keep up as an industry.

[00:18:08] Vince Passione: Now, when you talk about investments, are you, are you investing directly in fintechs? Are you part of the Circle fund? Are you part of eda?

[00:18:15] Vince Passione: How do you, how do you do that?

[00:18:17] Rob Keatts: We are, so, we actually, we have a qso, um, that we started, uh, to do investments in fintechs. I’m the president of the QSO also. Um, and we do both direct investments into fintechs as well as we are an investor in Circle Fund two as well from a diversification standpoint.

[00:18:37] Vince Passione: And by doing that, tell me, tell me successes and tell me where you’ve had challenges.

[00:18:42] Rob Keatts: Yeah, I mean, the successes, the reason we do it is we start with the, the organizations we invest in are fintechs that either Chartway is using or we want to use. And the difference there really is resource allocation. We can’t spin up everything as quickly as we want. Mm-hmm. Um, but really we look at it from the standpoint [00:19:00] of we want to make sure that the companies that w.

[00:19:04] Rob Keatts: We are investing our energy into that we, that we believe are gonna help our members, that they continue to thrive and grow and be innovative. And for a startup that means capital. And so if we can put some of the capital in, that helps them continue to innovate. Then it’s a win-win for both them as well as us.

[00:19:23] Rob Keatts: Um, and it does give us the ability to have some, uh, some input on direction. So a lot of the fintechs we, we, um, we invest in, they will ask us, Hey, you know, can we talk to your team about X, y, and Z thing? We’re, we’re thinking about where you willing to beta a product for us. Um, and, and so it does give us the ability to kind of help the direction of the, the company we’re using and make sure that they can continue to, um.

[00:19:49] Rob Keatts: Grow and innovate. That’s really our philosophy

[00:19:52] Vince Passione: now, Rob, what about AI and credit decisioning? Lots of conversations about bias. Uh, we have the CEO of of fair play [00:20:00] on, uh, where he talked about his product and, and how it can sort of detect bias. And, you know, his assessment is that most of, of the training data today.

[00:20:10] Vince Passione: That’s being used to train algorithms. It’s got bias in it already. Uh, he went so far as to say we should probably use ethnicity and age, uh, because it’s already, it’s already in the, in the algorithm. So what are your thoughts there?

[00:20:24] Rob Keatts: Um, I, I, I think AI trained machine learning trained models for credit underwriting are a must.

[00:20:32] Rob Keatts: Um, FICO doesn’t cut it anymore from a credit union standpoint in my opinion. Uh, too, we say no too often, um, to the demographic, to the members we’re supposed to be serving, which is the underserved. Um, so for Chartway, our model actually goes live next month and, and we’re looking at, we’re hoping somewhere in the neighborhood of about a 30% lift in yeses.

[00:20:57] Rob Keatts: Um. Through, through, through doing it that [00:21:00] way. And, and is there bias? There’s inherent bias in everything. Um, we train the model, lock it down, test it for bias. Once we are comfortable with it, we then put it in production. And unlike other ai, it doesn’t learn as it goes. That’s the model for a period of time.

[00:21:16] Rob Keatts: And then we will train a new model, lock it down, check it for bias, put it into production. So, um, that’s really how we look at it. How most of the industry looks at it, is you don’t, you don’t let the model learn as it goes. You train it and then that’s what it’s doing. And that way you make sure it doesn’t pick up new biases that you’re not aware of, um, as it moves forward.

[00:21:35] Rob Keatts: Um, and that’s what we’ll be doing, uh, starting next month. Excited about it.

[00:21:40] Vince Passione: Now, delinquencies we’re, you know, we’re certainly talking around the different CEOs at the show. Big concern about the spike, especially in auto, the 2020 and 2021. Mm-hmm. Uh, vintage. Really not good for credit unions. Uh, largest part of your portfolio is, is used and then new auto.

[00:21:57] Vince Passione: Yeah. You can you opine a little bit on your [00:22:00] experience, what’s happened to you, your delinquency rates, and then what do you think the longer term outlook is? I.

[00:22:05] Rob Keatts: Yeah, I mean, yeah, 20 20, 20 21, um, auto, uh, as well as, um, unsecured personal lungs. Just those vintages have been rough. Um, we have actually seen them starting to plateau, um, which we’re really happy about.

[00:22:21] Rob Keatts: So, um, our delinquencies, our delinquencies definitely were up towards the end of last year. They’ve been trending down, um, for the first three months of this year, and we see them continuing to trend down. 23, 24 vintages are doing really well and the 2020 ones are starting to plateau off. So, um, throughout our entire autos cards, pretty much the bulk of our portfolio, we’re not seeing anything increasing.

[00:22:49] Rob Keatts: Right now. Everything is either stable or coming down. Um, what that’ll look like tomorrow. It’s so hard to tell because of everything going on in the economy. [00:23:00]

[00:23:00] Vince Passione: Sure. Well, lastly, given the uncertain times, what do you think are the key things that credit unions should be thinking about as a financial partner or provided with their members that they serve?

[00:23:12] Rob Keatts: Um, I. Really, it’s keeping in, in in mind why we exist. I mean, we really are here to serve the underserved and how do we make sure that we are continuing to do that, um, with all the economic uncertainties. Um, someone who isn’t considered underserved today might be tomorrow depending on what happens, uh, with their futures and their financial futures.

[00:23:35] Rob Keatts: And I really think. The country needs credit unions more today than it ever has. Um, and I think we need to be able to say true to our roots, how do we make sure that we are using data and we’re using technology so that we can serve it in a manner that is prudent the people that need serving in our communities.

[00:23:56] Rob Keatts: And that’s the beauty of having 4,000 plus [00:24:00] credit unions around the the nation is there’s a credit union in every community. And I, I think we all need to make sure that we we’re. No one’s being left behind from a financial standpoint.

[00:24:09] Vince Passione: No, that’s great. Well, Rob, we’re gonna leave it there. Uh, so that wraps up our episode, this episode with 22 minutes in lending.

[00:24:16] Vince Passione: Big thank you to Rob for joining us and sharing your insights. Don’t forget to subscribe so you never miss an episode, and we’ll see you back here at our next 22 minutes in lending. Thanks again, Rob. My pleasure. Thanks for having me.

[00:24:27] Narrator: Thank you for listening to the 22 Minutes in Lending podcast. We hope you enjoyed today’s episode.

[00:24:32] Narrator: 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.