Floyd Rummel III
Floyd Rummel III, CEO, Northern Hills Federal Credit Union

The AI imperative

Artificial intelligence allows small credit unions to stay competitive and relevant.

September 1, 2021

It’s just as important for small credit unions such as $125 million asset Northern Hills Federal Credit Union in Sturgis, S.D., to use artificial intelligence (AI) to boost lending as it is for their larger counterparts.

“To stay competitive, exploring AI is imperative,” says CEO Floyd Rummel III. “Small credit unions have to get into AI because you need a strong loan-to-share ratio to survive today.”

Northern Hills Federal is working with Scienaptic Systems Inc. to introduce an automated loan decisioning tool. It aims to boost its loan-to-share ratio, which decreased from 78% to 68% during the pandemic.

The tool will provide automated loan decisioning, including immediate approval for online applicants who meet lending guidelines. But Rummel says its greatest appeal is the ability to help Northern Hills Federal modify lending guidelines to make more loans. 

“Loan underwriters and loan officers are spending an inordinate amount of time looking at applications that should be automatically approved,” he says. 

The AI tool will separate applications into a “green” group that is approved automatically, a “red” group that is rejected, and a “yellow” group that requires more review. 

‘Loan underwriters and loan officers are spending an inordinate amount of time looking at applications that should be automatically approved.’
Floyd Rummell III

As loan officers review “yellow” applications, the AI tool will “learn” from every decision for future decisions. That information will refine lending guidelines so more loans can be immediately approved or rejected. 

The AI tool also incorporates information from a broader range of sources, such as the LexisNexis database, to help review “yellow” applications.

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The tool is projected to increase loan approvals 25% to 40%, based on a review of five years of Northern Hills Federal’s loan data. Rummel says that will make a significant difference to both the credit union’s 9,500 members and the bottom line.

In the future, Rummel hopes to explore how AI could increase income by capturing more gains from investments.

He urges his small credit union colleagues to explore AI now to keep their services competitive for members. “This is the perfect time for small credit unions to get into AI to help themselves stay relevant.”

This article is part of Tech21, CUNA News’ special focus on innovations and developments in technology. Search for the hashtag #Tech21 to follow the conversation on Twitter.