[00:00:00] Kara Van Wert: I think the main thing that we have learned is just because a person has this credit score today doesn’t mean that that is the end all be all as to where they’re at. It gives you more of a historical pattern.

[00:00:15] Narrator: Welcome to 22 minutes in lending your go to podcast for insights on all things lending, from lending practices, regulatory updates, how to enhance lending efforts and more in each episode, Vince Passione on connects with industry leaders to discuss the latest trends and happenings around the lending industry. Let’s dive in to the latest in lending.

[00:00:41] Vince Passione: Welcome to 22 minutes in lending. I’m your host, Vince Passione, and today I’m excited to introduce Kara Van Wert, the Chief Lending Officer of Veridian Credit Union. I’ve been fortunate to have had the chance to work with Kara for close to 10 years, both in her role at Viridian, and also in her role as board member and now chair of member student lending. CUSO during her tenure of Veridian, Karen has driven innovation and impressive growth, whether she’s leading major changes or focusing on member needs. Kara brings energy, vision and expertise to every challenge. Kara, I appreciate you joining me today.

[00:01:12] Kara Van Wert: Yeah. Thank you for the invitation.

[00:01:15] Vince Passione: Welcome. Last time I visited, we were talking about your average age your member, what can you share that with listeners? What is the average age member of reading?

[00:01:25] Kara Van Wert: Oh, Vince. I need to look that up. Yeah.

[00:01:28] Vince Passione: I think when we met with it, it’s Renee, right? Yes, yes, Renee, I thought that you were skewing like 47 years old. Yeah, that, yeah, which was very surprising to me, and and I was just curious, do we know the cause? Is it just where you’re located? Is it the demographic, the cities you’re in, the towns you’re in? Because that is, that is, I mean, the average, average age of credit, you remember, I believe, is now 55 to 57 but it is significantly lower than than your peer group.

[00:02:07] Kara Van Wert: Yeah, it is lower than our peer group. And I think that is attributed to a the products that we offer, and how we’ve how we focus on products that are going to that are appealing to all ages of our membership, as well as the digital offering, which is if to attract the younger generation today, it that is where they’re looking. Is digitally we have also, as we’ve focused on where our next is, looking for those populations of younger generations. So when you look at Iowa, you don’t think of Iowa as as a state with a with a younger population, but when you know their character, yeah, but when you look at Des Moines, and you look at the western side of Iowa and get into Omaha there, you know, when you look at the larger communities there, there is a younger population there that is really looking for that that financial to partner with and grow with throughout you know, all their lending and deposit needs.

[00:03:30] Vince Passione: Now, let’s step back for a minute, because I didn’t get a chance to maybe just reflect on your career. So this is called 22 minutes of lending. You’ve been you’ve been at Veridian for about 20 years. 3434 oh my goodness, 34 okay, I was trying to be careful in all the lending space. So, yeah, you’ve seen quite a bit, you know. And by the way, right? I’m celebrating 43 years in my career. But, but anyway, tell us a little bit about lessons learned. Right? You know, I was watching CNN this morning, and I was watching squawk and his concerns about lending and regional banks right now. And it was interesting. The one comment was made by one of the bank CEOs was, look, we’re being in lending is our business, where we are here to take risk now, obviously, you know, credit unions are a nonprofit. You’re here to serve your members, but you still right. You manage risk. The real question is, what, what kind of keeps you up at night. We’ve had other guests here, and you know, clearly in the credit industry, the 2021 slash 22 vintage of auto loans was, was a tough vintage. Lots of reasons, right? Coming out of covid, right? You know, car prices were inflated. We had individuals whose FICO scores might have been inflated thanks to stimulus. There are lots of things that happened in Creighton, share grew, right? And that’s always we see share grow in a very short period of time. That always become. Is questionable and tricky, but what portfolio is keeping you up at night right now at Veridian?

[00:05:06] Kara Van Wert: Yeah, I don’t know that there’s a specific portfolio that’s keeping me up. And when you I would say it’s more, how do we keep up and and how do we keep up with technology and the competition that that continues to come into the arena, because it’s coming from all different sources. When, when I when you speak to delinquency, I think what keeps me up is, how do we continue to meet our members where they’re at and help them. They don’t, they don’t take on they don’t take loans out, expecting not to pay them. But how do we help them protect themselves against possible downturns, against possible layoffs, and continue to be there for all of their financial needs.

[00:06:06] Vince Passione: Now, you touched on something. You said there’s lots of lots of competition coming from different places. How much of that are fintechs? How much of that are the banks that are in the areas they’re in because you are expanding a new trading area? So in some ways, your competition, right? Yes, we are. I have Nick Olson on, you know, not too long ago, right in Minnesota, top line in Minnesota, right? So I’m sure he’s, he’s, he’s paying into your branch expansion. But, but where do where’s the competition? Where’s the biggest competition? And how much is fintechs? How much is banks? Why would you just maybe even other credit games?

[00:06:39] Kara Van Wert: Yeah, you know, and I look at fintechs specifically and how our maybe mindset has changed from over time, because FinTech used to be a competitor of ours, which they are, and at the same time, they can help us grow so it’s you can look at it as strictly competition, or you can look at it as how can we partner with fintechs and be able to offer what their area of specialty is that maybe we don’t have and grow In an area that is missing on our balance sheet. But you also yes, we, you know, we have competition among the banks, and we have competition even among retail areas. You look at the Walmarts and the things like and the other retail areas that get into some of the financial offerings, and so it’s it’s not just looking at your normal competition, but even what else is out there that is entering the financial markets.

[00:08:03] Jim Merrill: Jim. This is Jim Merrill, President and CEO of Inspire Federal Credit. For the last 13 years, we’ve partnered with lenkey to elevate our lending services and strengthen our commitment to providing the best financial solutions for our members. The team at lenkey is not only knowledgeable and responsive, but also genuinely committed to our success, they have empowered us to better serve our members, and have been a true partner, not just another vendor.

[00:08:33] Vince Passione: I can’t get off any podcast without talking about AI so so question is, I mean, how’s it affecting Veridian? Is there? Are there any projects that you look at and say, These are the ones you’re most excited about? I mean, it is early. It is about data, and you imagine the data correctly, but as as a lender, as a consumer lender, specifically. And what are the areas that you look and say, these are some initiatives of Veridian that I believe are best practices and I’m most excited about,

[00:09:03] Kara Van Wert: I’m Yeah, so AI in lending and in the Credit Union as a whole, has is, is another priority of viridians, because we know that AI can help simplify, make processes more efficient. There’s, there are so many opportunities, and you have to be aware. And also, you know, just do your and be very diligent about how you use AI. You know, we use AI today in decisioning on, on the lending side, it not only gives us a point in time, like, like, a credit score gives you a point in time, a behavior score, but it gives you more. It goes beyond that and and gives more over time, just more and and behavioral. What do I want? Behavioral scores as well. So you know, we’ve used decisioning models a lot in for years in the past.

[00:10:13] Vince Passione: Carol, do you use someone Disrupt? Do you someone like a zest today? Are you a zest?

[00:10:18] Kara Van Wert: Yeah, we are a zest user

[00:10:20] Vince Passione: and what? What have you? How long ago did you start? We were you think you’re an early adopter? I thought it was. You started early, didn’t you?

[00:10:27] Kara Van Wert: Well, we’re two years into it. Yes, yes.

[00:10:31] Vince Passione: And any surprises, positive or negative? I mean, obviously, you know, from a regulatory perspective, there were lots of concerns about the infamous Black Box. But what did you learn the experience in two years?

[00:10:44] Kara Van Wert: Well, I think the main thing that we have learned is just because a person has this credit score today doesn’t mean that that is where they’re that that is the end all be all as to where they’re at. It gives you more of a historical pattern, I would say, and behavioral score, so that we might have a credit score today, but their credit score two months ago might have been 60 points lower. And so it has. It has that historical build into it. And so I think what we have learned is we not only need to take the score that we have, but also incorporate into our decisioning and incorporate into our underwriting model, where our zest score comes in and using that as well so that we get a full picture of their history.

[00:11:48] Vince Passione: Now we have the CEO Kareem from from from Fair play. Fair play’s business change a little bit, but the original business model was to come in and really assess bias. Is there bias? And there’s been a lot of discussion about training data, and, gee, that training data has some bias in it, so it basically will roll that bias forward. Concerns on bias when you when you implemented zest, any any governance around it, to make sure that, you know, we’re watching bias in the model based on training data.

[00:12:26] Kara Van Wert: I would say that when it comes to bias, it was one of the reasons why we actually started to do our due diligence with zest, and it was to mitigate the human unconscious bias that we all have. And so we really worked with zest to develop a program where all of all of that is removed because it’s done, you know, mechanically or through, through the machine decisioning versus a human decisioning. And no matter how hard you try there, there is bias and it, you know, it actually, you know, when we talk to our examiners, they were very pleased with, you know, our usage of zest and our usage of AI to remove that bias that can be part of your decisioning model,

[00:13:24] Vince Passione: any best practice that you’d like to share with listeners when you engage in it that you think really helped you. Was it the conversation with did you go to the regulators first and talk about it? Was that a best practice before you implemented it?

[00:13:38] Kara Van Wert: Actually some one of our best practices was to talk to other credit unions and to really learn from other credit unions. Vince actually, it was at one of our advisory council meetings when we were in Florida that there was, yeah, we had a lot of conversation around zest, around using AI and decisioning models and reaching, I actually had a conversation with her after that, because we were just in the beginning stages of it. And, you know, getting comfortable and credit unions are so have have a are so helpful to each other. I mean, we we cross. We aren’t what we aren’t hesitant to cross that line and and have conversations with each other about what’s working, what’s not. What did you learn? So we really used some of that, some of those conversations, some of those best practices and learnings that other credit unions before us had had experienced.

[00:14:44] Vince Passione: No, I think that might have even been pre covid when we was, yeah, and that was an Annie Sebastian from Navy was was running education lending at the time for Navy, and I remember asking. And we took a, we took a live poll of there were probably 15 to 20 credit unions, and I’d say 75% of them raised their hand and said they were using AI. And I remember those that crosstalk, so you’re right, good. Best practice certainly served you well. Now let’s, let’s check on the balance sheet just a little bit. And I always want to be careful here with our data. But we took a look last night, and it looks like you, you grew your loans by about 12% so, you know, try to pack that that’s about going from about six and a half billion to close to 7.7 point 2 billion. Is that a lot for you? It seems like a lot. Is that a lot?

[00:15:40] Kara Van Wert: You know, we we pride ourselves in loan growth, and it is something that we have really focused on, because it’s a way that we can return back to our members in low loan rates, you know, which help spur deposit rates. And we have had a focus in the last, I’d say, year and a half to two years, where we’ve seen our most growth is in the mortgage and home equity areas, and we’ve tried to, you know, have a focus on on our mortgage offerings. We know that Loan Mortgage rates are high right now, but what can we do on our balance sheet to help our members mitigate some of those high rates and offer an adjusted, adjustable rate mortgage an arm and have it a little bit lower than maybe what they Can what you can get on a 30 year fixed, knowing that in five years, in seven years, in 10 years, they could reprice and offering that at a lower rate, and having it on our balance sheet. Because it is important that, you know, we have those offerings to our members and so that they can achieve the the their dream and of home ownership, because it there is a barrier right now between rates and home prices, but we also have those members that are enjoying those 3% 4% mortgage rates that they that they received back during the pandemic and that so now, what is it? You you date your you date your mortgage. No, I’m going to say it wrong.

[00:17:32] Vince Passione: You love your mortgage, but you hate your home.

[00:17:35] Kara Van Wert: Yes, you Yes, yes, yeah. And so we’re offering home equity rates that and home equity specials out there that, like right now we have six months at 1.99 and then after that, you get to, you know, enjoy our other low rates. But, you know, just offering that too to those members who they love their home mortgage rate, but they they want to enhance their existing home where normally they would have moved. So just looking at looking at it from both sides and across the all of our membership and what they need right now.

[00:18:19] Vince Passione: Now, it’s an interesting time, right? We were looking at some data, and I think the average age of a home in the US is about 43 years old, so housing stock is old. And to your point, you know, when you think about what is, what’s transpired, right? You have folks in these homes that they normally would have turned around and upgraded, but they can’t. Not, can’t, they won’t, because they do their mortgage rate, and getting it, getting a HELOC, probably makes more sense. We touched on auto looking at the balance sheet, right, double digit growth, about 11% mostly unused auto. What’s going on there? Right? Because we’re seeing right auto prices are the highest rate ever, partially by tariffs, but but also just this seems to be this sort of languishing covid thing that just hasn’t really resolved itself. Margins are thin, term is lengthening, but you’re getting volume. So is this refi? What’s going on the auto side? Yeah.

[00:19:16] Kara Van Wert: So we do have a very strong indirect lending program. It’s, it’s about a third of our loan assets, so we keep in line with a lot of dealerships, and that that is a an area of growth for us and we but we also, on the direct side, do a lot of recaptures with our members and looking at, you know, partnering with our credit bureau to look at what, where are our members financed today, what are their approximate rates? And we have decreased rates in the last. Year and a half. So how can we help them get into a rate that’s more affordable, a payment that fits their budget better and and you’re right, the cost of cars are at an all time high. I saw the average over 50,000 on a new auto for the first time ever. So you know, we’re looking for options on to help them soften up their budget a little bit.

[00:20:27] Vince Passione:  Nick Cara, are you doing much leasing now?

[00:20:31] Kara Van Wert: We are. We have not done any leasing. We did it years ago, but have not explored that, that option at that at this point, you know, the captives are so strong in that area there, you almost have to look at it as that’s an area of that where that’s their expertise, that’s that’s their their ball game, and, you Know, used our, our, our portfolio in the auto areas, about 90% used. So that’s our expertise, and, and, yeah, we enjoy being in that market.

[00:21:12] Vince Passione: I was looking at borrowing and, and today, I guess it really kind of leads into cost of funds, right? I mean, all credit unions struggled a bit like two years ago. Got really, really tight. It’s gotten looked better in the last few years, but deposit betas are still up, right? I mean, you know what we saw happen with Silicon Valley Bank and and now, especially consumers can move money so quickly. How are you managing this balance between CDs and your share accounts versus, you know, going to the Home Loan Bank and borrowing. I mean, you have to run a business, right? You have to write loans. You know, your loan to share, it’s typically well over 100% right? Where are you now?

[00:21:53] Kara Van Wert: We are right around 108% we, we Yeah, and that’s where we like to be, because, you know, when you talk about a balance sheet, it is a balance it is balancing loans, it is balancing deposits. But we’ve also taken a very strong look at balancing that as well with borrowings. And there are times where you can borrow at a rate lower than you can, you can offer deposits on so managing those three areas has is, is a priority for us, and we continue to do that daily. And there have been opportunities where our borrowing opportunity has been really low. We take advantage of that and then turn around and lend that at low rates as well.

[00:22:46] Vince Passione: Well, certainly your net, your net interest income growth, is showing that. So last question, as we think about 2026 you’re going to go into planning soon, if you haven’t done so already, predictions, when you think about, you’re excited about in 2026 for reading in a Creighton system, you’re system, you know, give us a couple of the things that you’re excited about, either for your credit or the industry going to 2026

[00:23:10] Kara Van Wert: Yeah, I’m really excited about, you know, our, our expansion efforts, of course, you know, we’re, we’re just done. Just did the groundbreaking in in Eden Prairie, we’ve got some, you know, other opportunities in that market, expanding our digital presence and making our our digital even easier and even and really focusing on Our membership and what, how, what learning we can use from their behavior to market to them for what we offer, and what maybe they’re not using today and maybe don’t even know about, and using AI to build on On that marketing presence. Some other things that we’ve got, that we’ve done to our planning, is continuing to look at what other things we can do in the lending space. You know, where are our gaps? Where? Where are our members still needing us to be and not our members, not only our members today, but our members in the future, the younger generation, what? Where are our gaps with what they need today and and how can we build on that to to be viable in the future?

[00:24:35] Vince Passione: Awesome, well, Kara, thank you so much for joining us today. I do appreciate it. Yes. Thank you. Thanks to our listeners as always, and please be sure to subscribe so you never miss an episode. And we’d also love if you’d leave a review to help more listeners discover 22 minutes in lending so we’ll see you back here next time. Thanks again. Thank you. Kara,

[00:24:52] Kara Van Wert: You’re welcome. Vince,

[00:24:54] Narrator: Thank you for listening to the 22 minutes in lending podcast. We hope you enjoyed today’s episode. You’ll find links to any resources mentioned in the show notes. If you’re enjoying our show, be sure to subscribe and leave us a five star review you.