Credit union lending strategies take center stage as host Mark Ritter of Credit Union Conversations welcomes Erik Harwood from Sun East Federal Credit Union. Erik shares insights on navigating today's commercial lending landscape and adapting to the normalized liquidity management environment of 2025. The conversation explores innovative residential mortgage lending programs, including Sun East's pioneering 40-year fixed-rate mortgage programs for credit unions that address affordability challenges. Erik discusses loan portfolio growth tactics, pricing approaches in fluctuating interest rate environments, and the evolution of credit union lending strategies in competitive markets.

What You Will Learn in This Episode: 

✅ How credit union lending strategies adapt to normalized liquidity management conditions after pandemic-era extremes, including balancing inventory costs with loan portfolio growth targets and strategic borrowing decisions for sustainable lending operations.

✅ Innovative residential mortgage lending solutions like 40-year fixed-rate mortgage programs for credit unions and community heroes programs that provide affordability programs for first responders, teachers, and medical professionals while maintaining sound underwriting standards.

✅ Essential commercial lending approaches, including the three-door loan pricing strategies philosophy that empowers borrowers with choices while protecting yields, plus navigating business loan program caps.

✅ Why treasury management services development is critical for credit unions to expand beyond real estate lending into business and asset-based lending, and how to evaluate FinTech partnerships and third-party originators through rigorous vendor management diligence.

Subscribe to Credit Union Conversations for the latest credit union trends and insights on loan volume and business lending! Connect with MBFS to boost your credit union’s growth today.

TIMESTAMPS:  

00:00 Intro: Meet Erik Harwood from Sun East Federal Credit Union

03:30 The differences between community banks, large banks, and the local credit union, mainly focusing on commercial lending

11:06 Erik explains liquidity management challenges and discusses loan portfolio growth 

12:58 Discussion of loan pricing strategies using the "three door" philosophy, car loans and interest rates

18:18 Erik details their residential mortgage lending programs, including the 40-year fixed-rate mortgage programs for credit unions 

21:42 Discussion of business loan programs, treasury management services, business loan caps, and opportunities in real estate lending

KEY TAKEAWAYS:  

💰Credit union lending strategies are normalizing in 2025 after years of extreme liquidity management challenges, with institutions finding a balance between deposit costs and lending opportunities while utilizing borrowed funds strategically for loan portfolio growth.

💰Sun East's innovative 40-year fixed rate mortgage programs for credit unions priced at parity with 30-year terms provide $220-$250 monthly payment relief, helping borrowers overcome debt-to-income ratios barriers while maintaining substantial risk mitigation through minimum credit scores and maximum LTV requirements.

💰The interest rate environment remains unpredictable, with treasury bond yields not correlating to federal funds rate cuts as expected, requiring lenders to adapt loan pricing strategies based on cost of funds rather than traditional Fannie Mae floating rates.

ABOUT THE GUESTS:

Sun East Federal Credit Union

Erik Harwood - LinkedIn

RESOURCES MENTIONED: 

Mark Ritter - Website

Mark Ritter - LinkedIn

SEO KEYWORDS: 

Credit Union Conversations, Mark Ritter, MBFS, Credit Unions, CUSO, Credit Union Lending Strategies, Commercial Lending, Liquidity Management, Residential Mortgage Lending, 40-Year Fixed Rate Mortgage Programs For Credit Unions, Loan Portfolio Growth, Interest Rates, Affordability Programs, Asset-Based Lending, Real Estate Lending, Business Loan Programs

[00:00:30] So, please, uh, feel free to subscribe and listen on your favorite audio network. Give us a review. If you can track me down at a conference when you see me out and about, and let me know what you like and what you don't like about the show. So joining me today is Eric Harwood of Sun East Federal Credit Union.

[00:01:07] Erik Harwood - Guest: I'm flatter. We'll get you everywhere, my friend. Uh, I'm happy to be here.

[00:01:12] Mark Ritter - Host: So this should be a, uh, pretty easy, uh, episode to record. We have these conversations all the time between the two of us, and, uh, it's about time we memorialize it out here on the internet for generations to listen to. So you ready to roll? Let's do it. All right. Well, first of all, you know, I've always enjoyed our relationship going back years and working together.

[00:01:51] Erik Harwood - Guest: Take

[00:01:51] Erik Harwood - Guest: ab, absolutely. Uh, I, um, moved to the great state of Pennsylvania in 2018 to accept my current position with Sunny's Federal Credit Union.

[00:02:08] Mark Ritter - Host: There you go.

[00:02:16] Spent 40 years there, born and bred and, uh, you know, frankly was, wasn't quite sure what I would be experiencing moving up north, but, uh, I digress. It's been a great transition. Got into banking in oh two, so 23 years in the industry. Uh, I've worked for four community banks, two credit unions. Started as a teller.

[00:02:57] Mark Ritter - Host: Now. Now me and you both [00:03:00] know, credit unions are perfect. There's no issues working. Credit unions, we love it. Everything's good a hundred percent of the time, but you have a, you know, pretty varied background with a lot of different roles, responsibilities, working your way up through the system, different areas, and even in the community, banks versus the credit unions.

[00:03:30] Erik Harwood - Guest: I'm gonna break mold for, for a little, you know, a little bit here. Um, the traditional differentiator of the credit unions are all about customer service, member service, and banks aren't.

[00:03:59] Mark Ritter - Host: [00:04:00] All the talking, all the credit union talking points.

[00:04:19] I think that they're, they're really pulling in the same direction, slightly different motives, uh, but a lot of similarities there. That being said. I will tell you that the information sharing amongst the credit unions that I've experienced here locally, regionally, and even nationally, when I go to any kind of events or, or educational seminars, things like that, it's much more free flowing.

[00:04:53] Commercial lending.

[00:05:03] Erik Harwood - Guest: Uh, we were originally chartered in 1949 for the employees of the local Sun oil refinery. People today would recognize sun oil under its current name, Sunoco. It's no longer, um, you know, seg centric as if this is the case with many credit unions.

[00:05:39] We, we have plans to expand, but right now that's our profile. We, our footprint for business is the states of Maryland, Delaware, Pennsylvania, New Jersey. And, uh, we enjoy that, that open kind of, uh, field of membership that some credit unions are still limited by live, work, worship in, uh, you know, a handful of counties.

[00:05:58] Mark Ritter - Host: So, uh, an [00:06:00] easy way to say it is wherever there's Wawa and Eagles fans, there's probably a Sun East member nearby.

[00:06:09] Mark Ritter - Host: Yeah, I, I always, it took me forever in the credit union space 'cause there's a lot of. Credit unions with like sun blank in their name, something, sun in their name.

[00:06:34] Erik Harwood - Guest: I've had similar conversations with my friend Brian Kelley over at Sun Federal. They have offices here, but they're headquartered in Ohio.

[00:06:49] Mark Ritter - Host: Yes, absolutely. So you grew up in the Florida section of Florida, as I like to call it. And you've been here in Southeast Pennsylvania now for quite a while. [00:07:00] One of my pet peeves. Is when people use the same cliches over our area is overbanked.

[00:07:40] You know what? What's some of the pieces where you said, I had to say, oh, that's different.

[00:07:50] Mark Ritter - Host: Yes.

[00:07:56] It was a big leap. Uh, the first thing that I, that really took me [00:08:00] aback was, um, you, yourself aside, as a diehard Penn State football fan, of course, but by and large, college football is not something people pay attention to much up here.

[00:08:11] Yeah,

[00:08:27] Other than that, they're not as big as I'd imagined. Uh, you know, the city's one thing is any big city, top tier city like Philadelphia is, but out in the suburbs where we are. People are very similar. The, the accents are different, obviously. Uh, the food is different. I'll tell you, there's lots of great Italian food up here.

[00:08:48] Mark Ritter - Host: I, I, I, I Ms. Good quality fried shrimp and, well, I eat way too much as my doctor would tell me when I go to the Florida. Right. [00:09:00] What about I, I couldn't believe the other day when you were telling me that you had an old school boss and actually had to wear a suit in Florida all year round.

[00:09:24] Yes. But, uh, yeah, in the middle of July and August, a hundred degrees outside. Feels like 115 with the humidity and we're in full suit and tie. That was fun. Uh, I will tell you that I, I very much appreciate the fact that Sun East is not like that.

[00:09:45] Actually, it's been probably more than a year where I walk into a credit union and it's a suit and tie or at least kind of the formal tie. It is a rarity from what I see anymore. So let's [00:10:00] start to, I got some topics here. We'll solve all the world problems. Round Robin. Get your state of the world and, uh, you ready to roll?

[00:10:42] We have a few CD specials, we get deposits and things are pretty good. And subsequently, you know, we're, we're seeing loans starting to rebound. You know, what, what's kind of your outlook in the world today? What's working? Um, you know, kind of what's your [00:11:00] overall strategy, what areas you see, uh, there there's opportunity and areas, uh, maybe they struggle a little bit more.

[00:11:23] I mark it up and then lend it out and I need inventory. So that liquidity crunch really hurt us. We actually had to pause our commercial lending as well as other ancillary lending channels like our indirect lending and, and so forth when we had that liquidity tightening. Um, and now we're in kind of a balance.

[00:11:58] Right? So we have [00:12:00] access to that and we're really clo all of those levers and trying to balance appropriately. To maintain our yield, our growth targets and everything else, strategy wise, as far as volume, I mean, you and I both saw that, that in a rising rate environment, we still had volume because business people just incorporate that into their cost to get sold.

[00:12:46] And that's, that's certainly a benefit that, that we try to capitalize on as far as like, you know, approach. I try to keep the, the deal structuring simple versus the negotiation deal by deal. And I, I kind of follow the door. Number one, [00:13:00] door, number two, door number three, philosophy and give borrowers three options.

[00:13:22] Uh, you know, inset a, a shorter period of the intro rate, uh, or a longer period, depending upon whether we're in a rising or declining rate environment. And that's been very successful for us. Consumers walk away from the table feeling like they got a good deal and so do we.

[00:13:41] Between the price of cars, rising interest rates, supplies are good, supplies are bad. What, how, how has the auto business, uh, been for you these days and what's kind of your, uh, perspective on how things are going?

[00:14:01] When we had the microchip issues for key fobs and, and other things, when we had the Suez Canal issue that was prohibiting transport of goods. Uh, and now we have tariffs in the mix and uh, our dealer network is basically told us, look, you know, you guys still have competitive program. It's not your rates, it's not your reserve.

[00:14:33] Mark Ritter - Host: Yeah. It, it's a, it's a tough one. And, you know, uh, uh, who knows?

[00:15:10] Yes. One rate is coming down the fed, uh, the without the fed controls. Yes, that is coming down. So on your variable rates, your short term, your lines of credit, you, you're, you're gonna benefit. Treasury rates are pretty, staying pretty consistent, and, and we're not seeing the big plummets, uh, like we are. Uh, and, and the fed's probably gonna, you know, they're gonna say, they're gonna tell us, uh, you know, one way or another that the rates are probably gonna inch down a little bit into this year and next year.

[00:15:56] Erik Harwood - Guest: Woo. Uh, I will tell you, I am no decorated economist, but I did stay [00:16:00] at a Holiday Inn Express last night. My personal perspective is that, you know, in, in economics, we were taught that the, the federal government has three main tools to control money supply.

[00:16:25] But there's a lot of variables that have crept into the picture, I think in, in the last several years that that kind of taint that model a little bit. You know, for example, treasuries always being considered, you know, the risk-free. Uh, you know, benchmark if you will, but when you, when you look at how, and for, for no other way to describe it, weird.

[00:17:01] It's maybe not as risk free, uh, from, from the outside looking in as perhaps people usually anticipated it to be. So the correlation we would see. With a federal funds rate dropping, we would expect to see some bond yields drop. Those are, those are maintaining and, and it's really, I think it's to learn as we go through the Federal Reserve will continue to balance their dual mandate with regard to the federal funds rate and, you know, as it impacts inflation, uh, and unemployment.

[00:17:42] Mark Ritter - Host: So, so Eric, the, the next item I'd like to touch on is kind of that boomer bust, uh, business that we know as mortgage business, the home lending business. For, for a while there it was nonstop interest rates. Interest rates, rose. Things really [00:18:00] cooled down. I'm hearing. Some stability in the marketplace.

[00:18:18] Erik Harwood - Guest: Yeah, that's, uh, obviously, uh, another one I pay close attention to. And again, just to echo my previous comments on the bond, the 10 year bond is the, the benchmark basis for typically the Fannie Mae Freddie Mac pricing.

[00:18:50] But, you know, you hit on the, you hit it on the nose, high rates and high prices. Have created an affordability crunch. When you combine that with low inventory, I mean, it's, it's just [00:19:00] really, it's a fickle, fickle business. And so, you know, what we've tried to do is create some internal portfolio programs. If we're not gonna go fanny pricing, then let's think of it as a, as a balance sheet play versus an income statement, revenue generation play, and we're booking our loans to the balance sheet we've created.

[00:19:34] And our, our latest edition is something I'm very proud of. We launched earlier this year, a. 40 year conventional fixed rate mortgage. And what we did was we actually priced that in parity with our 30 year to help those borrowers who were kind of on the cusp of qualifying from A DTI perspective move into an approval.

[00:19:56] Mark Ritter - Host: Now does that loan balloon or the rate [00:20:00] adjust or It is a 40 year,

[00:20:15] But as far as the pricing, we, the whole idea was to create. Or to enhance rather affordability for those that couldn't quite make it. With a 30, when we ran some numbers at an average of, I don't know, three $50,000 loan, it, it created additional 220, $250 in, in payment relief that those folks could then qualify for those mortgages.

[00:20:37] Mark Ritter - Host: My daughter is a, uh, 23-year-old public school teacher and, uh, very stable income. And, uh, I, I, we, me and my wife will look and say, wow, what, what home are they gonna buy in, uh, Southeast Pennsylvania? Uh, in an elevated price, in an elevated market. So hopefully that, uh, helps out and gives them some relief to, uh, live that American [00:21:00] dream.

[00:21:21] Mark Ritter - Host: I'll have to tell her she's a hero.

[00:21:42] Erik Harwood - Guest: The credit union space is very real estate centric. As you and I both know, coming from the banking space, I was more accustomed to some c and i in the mix analysis accounts, treasury management, I think credit unions as an industry, not singling anyone out, um, and we would be included in this.

[00:22:19] Uh, I think the business loan cap in the credit union space. For those that don't have low income designation or CDFI designation is certainly impactful. We're pushing up against ours. We've got about 10 million left and, and you know that's a good problem to have. We went, we're still de novo. We launched our program in 2019 and thanks largely to our partnership with MBFS.

[00:23:03] Mark Ritter - Host: Yeah. And, and I think there's a lot of opportunities, like you said, and one of the areas that I've been telling people. When, when you're looking at loans today and you're in the sixes pushing 7% when they qualify, that's a good indicator that that's a strong company. When rates were three and a quarter, three and a half percent, you know, you, you, you had a little bit more room for error with some weaker companies qualified on some lower interest rates and.

[00:23:51] Erik Harwood - Guest: Office space has been problematic. It's, it's one of those that was, uh, the golden goose.

[00:24:02] Mark Ritter - Host: Those were the highest quality credits as I was told. Mm-hmm. So I am sure you get flooded 'cause I know I get flooded. I'm sure you do too. Of every FinTech third parties. New systems, new loans.

[00:24:47] Erik Harwood - Guest: With a machete. Uh, I, I, I think I, I, you know, I look at that as, um, there's a lot of fly by night, always has been. And, and I, you know, I won't necessarily say it's all snake oil, but we have to be very careful when, when we look into [00:25:00] this it, for us, it's based on need and trying to determine, Hey, is this just the next new shiny thing or is it a real solution to an actual problem that we're facing today, or we foresee on the horizon, uh, in the event that it gets through any of an initial smell test kind of.

[00:25:29] Oh, you know, all that kind stuff. Uh, but also always bearing in mind that just 'cause it's out there and just 'cause it's loud and proud and, and bright right now doesn't necessarily mean it's something we need.

[00:25:57] Erik Harwood - Guest: lending markets.

[00:26:00] Mark Ritter - Host: Yeah, it, it's, it's really, you know, fascinating because. You know, I grew up with a community bank. You were in the community bank space. We've both been in credit unions now for a long time. You know, we're kind of getting to be grizzled old men in this business. Competition, online competition.

[00:26:43] Erik Harwood - Guest: That I, I think it's real and we have to take it very seriously.

[00:27:14] There will be, and, and really the biggest thing to, to keep in mind isn't what we think about this FinTech and how appealing it is, but what will the consumer think? It's the consumer mentality and how they frame. Their need versus the potential solution that's being presented. And if we can produce something that captures, you know, in essence most of their need satisfaction and do it in a local way with a blend of digital, with di, a blend of, you know, brick and mortar.

[00:27:48] Mark Ritter - Host: Well said, well said. Well, Eric, I always enjoy our conversations, uh, when it's gonna get posted on the internet and when it's not. Thank you for joining me today.

[00:28:05] Erik Harwood - Guest: We always tell people about our 24 7 website, www sun east.org, and that's the sun rising in the East. Uh, our main line number is 6 1 0 4 8 5 2 9 6 0. And if you have any specific lending, uh, needs, uh, as a, as a career lender, I always feel like answering the phone has gotten me a lot of business, has always been in my good interest.

[00:28:33] Mark Ritter - Host: Well, joining me today was Eric Harwood of Sun East. Uh, we figured out what's gonna go on in the next few years, so you can write this down and take it as gospel. Eric has some great advice for credit unions. So thank you to Eric for joining me, and please, uh, listen to credit union conversations just.

[00:29:13] Thank you for joining me and we will talk to you very soon.