Capitalize on Changing Interest Rates

By December 5, 2019 No Comments

In our most recent blog post, we took a deep dive into the interest rate environment to examine why rates change and what you need to think about in a volatile interest rate environment. Now we look at some use cases to capitalize on changing interest rates.

It is difficult to predict future interest rates but one thing you can count on is interest rates will change. To react most effectively to a changing interest rate environment, you need to understand your credit union’s value proposition to members. Identifying how you will quantitatively maximize the value you’re providing membership will help drive your success.

Let’s look at how VyStar Credit Union capitalized in this changing interest rate environment:

VyStar’s Strategy

VyStar Credit Union is a $9 billion credit union headquartered in Jacksonville, Florida. They have a diverse loan portfolio and are focused on expanding that diversity. Understanding the volatility in the interest rate environment, they have taken steps to grow portfolio segments that are shorter in duration, that generate non-interest income and/or are potentially variable rate products. This variable rate strategy will help to insulate them in changing interest rate environments.

Using data analytics provided by Twenty Twenty Analytics, VyStar was able to validate that they had low loss rates even within higher credit risk tiers which provided the opportunity to provide products to a broader scope of membership.

Direct Auto Market

VyStar Credit Union wanted to increase volume for direct auto loans through an auto loan purchase and refinance program. Their goal was to generate $10 million in new loans.

Using data, they identified members who;

  • Likely have an auto loan with another institution and notified them that VyStar can reduce their payment, or
  • May be in the market for a new vehicle

How did the initiative perform? With a 1.05% response rate from the mailers, VyStar funded $18.1 million in direct auto, motorcycle, RV and boat loans and $12.1 million in indirect auto loans for a total of $30.2 million, exceeding their goal by over 50%.

They also benefited from the right now impact of non-interest income that comes with making direct auto loans (Credit Insurance, Gap Insurance, Warranties, etc.).


Credit Line Increase Program

VyStar Credit Union wanted to improve member use of open ended products. To achieve this they implemented a credit line increase program. Using data analytics, VyStar;

  • Identified spending habits of their members, are they a revolver or transactor?
  • Provided credit-worthy borrowers line increases to meet their needs
  • Used debt to income and income estimates to quantify ability to repay.


In the 90 days following the increase, balances on lines that were increased grew by approximately 48% compared to 4% in lines that were NOT increased. These increases earned VyStar approximately $375,000 after expected losses and cost of funds.

In addition, after the line increases were implemented, they experienced a 15% increase in the percent of active cardholders. Among active cardholders who received a line increase, purchases grew by 13% and interchange income grew by 14%, year over year.

A volatile interest rate environment impacts the economy, your credit union, and your members. You can capitalize on changes in the interest rate market by understanding your value as it relates to your peers and your members. Quantifying your objectives will help you understand if initiatives are working and are building the success of your credit union.



Dinny Lechman and Dan Price

2020 Analytics


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