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Karen C. Harbin, President and CEO of Commonwealth Credit Union in Frankfort, Kentucky, joins host Rodney Hood to share how watching her mother keep books at home led to a 40-year career at one credit union, which she has grown from $897 million to about $3 billion in assets since 2012. Karen explains why Commonwealth went live with Zest AI underwriting in 2021 to cope with departing underwriters and say yes to more members, how her team keeps humans in the loop, and what a credit card pullback taught them. She and Rodney also cover fraud and cybersecurity, why the efficiency ratio is the metric she watches most, and her advice for new NCUA Chairman John Crews on the interest rate cap and loan maturity limits.
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Origination is where the leaders of consumer lending come to tell their story.
Each episode unpacks the origin story behind a leader's progression in lending, and the industry challenges they're working on right now. They’ll dive into topics like growth strategies, modernizing legacy processes, how to adapt to changing borrower expectations, and competing in an evolving lending landscape.
If you make lending decisions for a living, or are building the technology behind them, this show is for you.
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The Origination Podcast - Karen C. Harbin
Recorded 2026-09-28
Rodney Hood: Hello everyone, welcome to the Origination Podcast, the people, ideas, and technology shaping the future of lending. I'm your host today, Rodney Hood. On this show, I sit down with leaders across consumer lending to hear the stories behind their careers, get their perspective on where the industry is headed, and explore how they're using AI, technology, and new ideas to better serve their member owners, their consumers, their borrowers. How do they use it to drive responsible growth and prepare for what's next? Today, ladies and gentlemen, I am pleased to welcome Karen Harbin, President and CEO of Commonwealth Credit Union in the great state of Kentucky. Today, we're going to talk about key industry issues. What are some of the things she's thinking about as it relates to artificial intelligence and the future of lending? With that being said, Karen, welcome to the Origination Podcast.
Karen C. Harbin: Thank you so much, Chairman Hood. I'm so glad to be here.
Rodney Hood: Well, I'm so glad to see you. I have known of you and your great work for years since I've been in the industry, but many of our listeners and viewers today don't. Tell us a little bit about you. What is it about your journey that led you to where you are today? How did you get there?
Karen C. Harbin: So I will start when I was a young girl, I'd say, and my mom was a bookkeeper at home and she stayed at home because I have an identical twin sister and she wanted to be a stay-at-home mom. So she did books at home and I was instantly attracted to the debits and credits on the green bar paper, and I thought, you know, that's something I'm really interested in. So I went to college, decided I was gonna be an accountant, got my accounting degree, and then passed the CPA exam and really got my first job with Commonwealth Credit Union here in Frankfort, Kentucky. And I have been with Commonwealth for over 40 years. So I've pretty much started my career at a credit union and will end my career at this same credit union. I'm very proud of that. When I took over as President and CEO in 2012, we were $897 million in assets. And we're now today about $3 billion in assets, have about 400 employees, 18 branches, and just very proud of the team that we've built here and everything we're doing in the industry.
Rodney Hood: I think that's a wonderful sort of background, and again all because you had a family member, your mom, that was engaged in bookkeeping, that sort of propelled you into thinking about a career in accounting. Karen, you and I have never talked about this, but I studied accounting in college, and even as early as high school, I was an intern at the accounting firm known as Arthur Andersen. So I'm glad to know that we both share accounting as a part of our heritage, and it certainly makes one a heck of a CEO when they have the degree of accounting that you've obviously studied. With that wonderful background and with your technical skills, how are you using those technical skills combined with artificial intelligence, machine learning, and innovation to drive some of the change that you want to implement there at your credit union?
Karen C. Harbin: So you know, talking about AI, really that journey for us began around the pandemic and we were trying to solve two things. One, we were seeing a lot of tenured underwriters leave the credit union. They were going to other jobs or wanting to be remote, and we knew that we had a Great Resignation, just like in the rest of the country, and we needed to upskill our underwriters in a relatively short period of time. So that was an area that we had benefited from quite well in the past because we had a very tenured group of underwriters, and like I said, they were leaving. So with the size and the diversity of our consumer loan portfolio, we knew we had to do something pretty quick, and that was an issue that we couldn't ignore. And then the second piece was the member experience. We wanted to increase the experience that our members were getting from us. We had a new digital account opening and loan application experience, and we knew that implementing something with an automated underwriting like Zest would help us say yes to more members. So we went live with Zest in 2021. And it was really about an experience across all our lending channels that we knew we needed, but we also wanted to maintain strong credit quality and sound risk management. And at the end of the day, it wasn't just about automation. It was helping us address a workforce challenge, creating more consistency in our lending process, and then improving that member experience while continuing to grow responsibly. And we've been able to do that. Our delinquencies and charge-offs have remained below industry standard while our portfolio has really increased, and in all the lending channels with Zest underwriting, we've said yes to so many more members, lending deeper. So it's just helped our credit union really grow.
Rodney Hood: Well, Karen, that's a wonderful response. And in fact, I am a proud board member of Zest AI. And as you know, I chaired the NCUA. I was Acting Comptroller of the Currency for a bit. And the one thing that remained constant in all of my work as a financial regulator was wanting to promote financial inclusion. You've been in the audience when I've said financial inclusion is the civil rights issue of our time. How I want to help those 40% of American households unable to obtain $400, those credit invisible folks of which no one has a credit score, which means they can't get a loan or get a house or a car. But Zest, I firmly believe, and you've just attested to it, helps you open the credit aperture without any diminution in asset quality or credit quality. And that is great that you're finding that to be the case. Could you talk about how you've been able to use that as a member development tool, not just to attract but to retain members through using innovation?
Karen C. Harbin: Right. So you know, it used to be that primary financial institution was something that every credit union wanted to be for their members. And these days it's not. A single-source member is just as important and has gained value for credit unions compared to the past. And I believe that is due to the automated underwriting that we can do with Zest, because people know that they can get their loans approved by us where we might have said no in the past. They can come to us and get their loans approved. And you know, people aren't stuck with a PFI anymore. With digital offerings, they can go across the street, they can go online and get loans. So the attraction that we have for members to get approved quickly is certainly a good thing for our members. It's also been really good: we've been able to increase our indirect lending because we get approval very quickly for these loans, and at our credit union we fund very quickly. We've been told that by our indirect dealers. So it's just helped our automation and approval throughout our portfolio.
Rodney Hood: It's about speed, it's about efficiency. If there's anything that we see with artificial intelligence, it's the ability to help institutions of all sizes really scale up, gain more share. But in your case, or our case, helping those member owners have a more seamless member experience. And one of the most seamless ways is giving them a speedy loan approval. And back to what you're saying, it has not come with any cost or diminishing in credit quality or anything like that. You touched on something that I want to go back on. I think many people think that when we use innovation and artificial intelligence, it means there's not a human in the loop. You are actively engaging still your sound credit underwriters and all the other people. You're not just setting the AI and saying give us a report. Could you talk about the human in the loop aspect?
Karen C. Harbin: Right. So I'll start with the human in the loop in the beginning. So our loan policies, all the parameters we set with Zest's assistance, certainly require human intervention. And then on the back end, we are looking at loans and looking at either why we did not approve a loan, or the difference in how maybe we would have underwritten it versus how Zest underwrote it. We compare the portfolio in the past to the portfolio now. And we have a team of finance people, data people, lending, business operations people that are continually looking at the portfolio to make sure that we know about our trends, that we're following what's happening in the portfolio. If we see something that we need to be alerted of, we go back and look at why this might be happening. Like recently, we felt like our credit card delinquency was a little bit too high. And when we went back and looked at it, we as a credit union had decided to go a little bit higher than what Zest had recommended for that score for a credit card member. So we pulled back and are seeing the results of that right now. So it's a continual look back at the loans we've made, and look forward to the loans that we will be making, based on information that we receive from the portfolio and from our partners at Zest.
Rodney Hood: Karen, I agree with you. It is a continuation, it's an iterative process, and you've just clearly enunciated: you just don't set it. You still need to constantly evaluate. The model will be tweaked as economic conditions change, as your risk tolerance levels increase or decrease, and things of that nature. So again, it's really worth noting that you all are actively engaged. Tell me this: you and I are in an industry, I've been in this industry now for over 35 years. You're young, you've probably been in it for about 20 years, give or take. I know you mentioned 40, but you seem like you've only been in it for about 20 years. But what has happened? I went from recognizing when we went away from carbon paper to when we were using computers and doing things of that nature. Could you talk about how innovation and AI in particular has changed the nature of your sales force and your consumer lending force?
Karen C. Harbin: I think that AI is certainly something that we all use in different aspects. I know personally my favorite thing to do with AI is to redecorate a room. And so there's all kinds of different usages of AI. We found that it simplifies, it summarizes information so easily, and our workforce uses it for, you know, putting ideas into, say, an email or a letter or whatnot, and then it spits it out in a very cohesive way. And then we use AI for, of course, underwriting. We have it for fraud detection. And those are just a couple of things that we use it for here at Commonwealth Credit Union. But the future I know is just more and more AI-centric. And we're on board with that.
Rodney Hood: It certainly is. It certainly is. And I was chuckling when you were talking about using it for the decorating, because I have a new garage and I put in the picture of this blank canvas and said, "How do I turn my garage into a man cave?" And ChatGPT, not to name them, gave me some wonderful ideas, and then I said, take it and explain step by step. So there are some wonderful use cases and things like that.
Karen C. Harbin: I'm not gonna tell my husband that you want a man cave, 'cause we're not doing that.
Rodney Hood: Well, you're not gonna do that. But to that point though, we do have the technology that can be used for a number of use cases. Has it changed how you recruit? When you're recruiting now, do you still look for that same level of person who's able to analyze and look at credit, or are you now asking about their digital and AI knowledge base and capabilities?
Karen C. Harbin: So definitely we're asking about AI and what experience they have. We found that a lot of new employees coming out of college certainly have the experience with that. But not only those. More tenured people also want to know about AI and want to use AI more. Going back to your human intervention, though, I think there'll always be a need for human intervention in our branches, as people want help on things or advice.
Rodney Hood: That makes a lot of sense. And as we've talked about what you've accomplished with artificial intelligence, I'd be remiss if I didn't ask. Was there one thing in particular that led you to believe that, hey, I need something, there is a problem? Houston, we have a problem here. What was it? Was there one thing or any particular things that put this on your horizon, that you needed to embrace it and act on it?
Karen C. Harbin: Well, I think going back to the pandemic and the loss of the tenured employees that we were seeing in underwriting, and we needed to upskill that particular area of the credit union very quickly. And we had been talking to Zest for a number of months, but we knew that using Zest underwriting, we would not have to... we could not replace the tenured underwriters that we had in such a short period of time. So I think that was probably the key thing that led us to employ Zest at that time. And then it was just like, we love Zest. I mean, it's been great for our institution. We've been able to grow our portfolio so strongly without the delinquencies and charge-offs, without increasing our risk, and saying yes to more members, going deeper. And that has also helped our margin. So it's just been a win all the way around.
Rodney Hood: Well, it sounds like a win-win, and again, you run a very strong multibillion-dollar institution that's continuing to grow. I believe you have over 150,000 members, and that is largely because of the leadership that you display every day and the wonderful team members that you have.
Karen C. Harbin: Well, thank you, Rodney. Certainly something I love.
Rodney Hood: We talked a lot about lending and the uptick and the increases that we're seeing on your volume. I'd love to talk about some of the sub-benefits that you are also experiencing. You mentioned fraud, and sadly that is the one thing, whether you're a bank or a credit union, no one is immune from fraudulent activity in today's environment. You have to be twice as quick as the bad actors that are out there. Could you talk about how you are identifying fraud and how you're using innovation to tackle that? And I don't want you to tell all your trade secrets, 'cause you know the bad actors are probably listening to us today. But with that being said, how are you addressing fraud through AI?
Karen C. Harbin: Well, the bad actors, as you say, are probably already several steps in front of us. But we use tools to help us identify trends, whether it be multiple transactions, fraudulent transactions, that kind of thing that's not in the normal activity that you'd see in an account, and then we're alerted to those transactions, and it helps us get on top of those very quickly. I mean, we use Verafin, we use BioCatch, a lot of those tools in our enterprise risk management department. And you know, we do a series of television segments with one of our local stations. It's called Backroads to Better Money. And we have various topics every month that we do. One has been on elder abuse, one of them has been on fraudulent scams, and the most recent one was cybersecurity. And one of the stats that I find just amazing is that the FBI last year received, I think it was over a billion cybersecurity complaints. Far more than the previous year.
Rodney Hood: That's correct. I saw that same statistic.
Karen C. Harbin: So the bad actors are just ahead of us, and we have to do everything we can to fight them and to protect our members, because that's what it's all about.
Rodney Hood: Again, in the credit union system, it's about people helping people, where the credit union Net Promoter Scores are so high because of the trust and the respect that they have garnered for our credit unions. So I love that you are fighting it head on, at least seeking to address it. Thank you for mentioning cybersecurity. One of the things that I often mention is that yes, I'm a proponent of technology and innovation, but in doing so, we must continue to remain vigilant about cybersecurity and battening down our defense mechanisms. I'm sure that's something that you think and talk a lot about as well with your team: cybersecurity, and what's your posture around operational resilience.
Karen C. Harbin: Yes, so we employ a very strong IT team here. They are educated, not just, you know, college education, but continue getting certifications in cybersecurity. And we as a credit union have invested in one of our local universities and are partnering with them for a cyber financial technology and cybercrime certificate. And this is training not just students at the university, but the general public, like examiners and company employees that need help on cybersecurity. And it is a certificate that they earn. They can do it online, and it really helps train the workforce on how to address cybercrime. So we're very proud of that initiative that we've done here at Commonwealth.
Rodney Hood: Well, I'm glad to know that Commonwealth is moving in that direction and looking strategically at cybersecurity. And in fact, I just gave a talk recently where I tell folks if you're gonna embrace innovation, digital assets and fintechs, you're gonna be a little irresponsible if there's not a heightened focus around your cyber strategy. So it's good to know that you all are keeping that top of mind. Karen, I'm gonna go back to what you said earlier, and again, I've respected you for years. But now knowing that we share accounting in common, I'm just gonna think about you more and more often, because that's so key. I do think that's what helped us both succeed in financial services. But that being said, you are very detail oriented. What's the metric that you think everyone in our industry needs to focus on more and more if they're gonna be effective? What's the metric that you like to look at most? They're all important, but what's one?
Karen C. Harbin: I'm gonna say the efficiency ratio, and I would couple that with your operating expenses. So we have tried here at Commonwealth over the last two years to really bring down our efficiency ratio, to be much better stewards of the money we spend, and we've been successful at that. So you know, knowing that for every dollar that comes in, how much we're spending in expenses, we're trying to continue bringing that efficiency ratio to a level that we can be proud of. And we're under 60% right now.
Rodney Hood: Karen, I think that is remarkable. And of all of my years of overseeing both banks and credit unions, you are the first credit union executive to whom I've ever spoken that mentioned the efficiency ratio. That is important. I think that shows strategy and it shows vision. Of course, we all like to talk about ROA and ROE and ROI, but the fact that you're looking at that efficiency ratio, I think, is so important. And I hope that's one of the things that others who listen to this will walk away with. You obviously are staying current and up to date. How do you stay so informed? Who do you read? Are there any particular publications that you're reading daily to stay current?
Karen C. Harbin: So I definitely read anything that comes out from America's Credit Unions. I'm the chair of the board of America's Credit Unions, and they put out advocacy alerts and things like that. I'm a big proponent of advocacy for credit unions, as I know you are, as NCUA chair. So I read everything I can from America's Credit Unions. Other than that, I'd say the Wall Street Journal, the New York Times, and then I have to stay up to date on local news too, because I have to know what's going on here in Kentucky.
Rodney Hood: Karen, it's good to hear you say that. And I agree with all the publications. That's how I also stay current. I especially get a lot of insight from the Journal. And because I also am looking at a lot of global things, I throw in the Financial Times, which is another good piece. But Karen, you said something that, whenever I'm meeting with young credit union lenders and young bankers too, I tell them: when you're traveling, or even when you're in your local market, are you watching that local newscast? We have so much national news, and I'm not picking on the national news outlets, but it's what's going on in that local Channel 9 or Channel 6 affiliate. What you learn about the kids' soccer game or that Good Samaritan. That is something that I have found very helpful when I fly in to give a speech in a city, because I've watched the local news, I can talk about things that I learned in that newscast. And that is so important if you're gonna strengthen communities and, certainly in our case, help other people.
Karen C. Harbin: Totally agree with that. And we're very involved in our communities in all the markets here in Kentucky. And, you know, our give-back is very high. We have a foundation here at the credit union, and we just do a lot of community engagement and community giving. So of course I'm very proud of that. And, you know, I agree that when we go out and talk to people in the community, we need to be able to respond and talk about things going on in that community, things they care about locally.
Rodney Hood: Exactly, exactly. Now, as you know, NCUA has a new chairman by the name of John Crews. He's now been at the helm for the past two weeks. I just spoke with him the other day, and he's so excited about getting out and about and getting to meet folks in the industry. And of course, as America's Credit Unions chairman, if you haven't seen him yet, you will certainly see him soon. But Karen, until that day comes, what do you want him to know about the credit union system and the role that he plays as chairman? Do you have any advice for him? Or any rules you'd like to see redone?
Karen C. Harbin: So first, I did get to meet him at the Congressional Caucus, which was a couple of weeks ago. That was his first time to give a speech as the newly appointed chair, and he did a wonderful job. One of the things I really liked that he said is he wants to continue the deregulation that has started, and know that one size fits all does not work for our industry. One of the things I would love is if NCUA would reconsider the interest rate cap. I understand why it's there, because we want it to be more affordable for consumers. But the fact that it's 15% and then has to be revisited to 18% periodically... In the age of underwriting with AI, it seems like we should possibly be able to even go above 18%.
Rodney Hood: I certainly would support that. I know that there are those in the industry that have long said, if credit unions charge more, what message does it send? Well, the message to me it sends is that credit unions are evolving, and they can still serve others and do well by doing good, by having those rates that really reflect today's reality. And let's hope that we get that message out there. That would require a bit of legislation, but I would like to see us pursue that, because we're leaving a number of folks that remain underserved, that 40% who don't have the $400, or the 65 million who are credit invisible. So yes, I could not agree with you more. Anything else for the new chairman that you'd like to see?
Karen C. Harbin: Well, yes, one more thing. But just to add on to that, you know, we are taking on more risk, I feel like, with going deeper and saying yes to more members, so the interest rate would certainly help. But the other thing is the loan maturities, and that's something that America's Credit Unions has advocated for: increasing the loan maturity limits from 15 to 20 years.
Rodney Hood: You know, we looked at that when I was at the agency, and let's hope that really does come to fruition soon. Karen, you talked about the certification and the program at the local school that's there. If you could teach a class at one of the wonderful colleges there in Kentucky, what would you want to teach and why?
Karen C. Harbin: I would want to teach personal financial management. I see it with my children. I see it with so many people. They don't understand lending, they don't understand interest rates, they don't understand compound interest, the difference in debit and credit, and budgeting, and just the whole gamut of financial well-being. And so I know it's a big thing in our industry right now. It's a big thing for everyone. But I would love to be able to do that. I think that's what's needed.
Rodney Hood: And I think you would do a great job, with what you do every day at the helm of Commonwealth and your technical accounting background. I think that would really bode well. Who in the finance world, dead or alive, Karen, would you most like to have coffee with? And it doesn't have to be me. I just want you to know that.
Karen C. Harbin: You know, it would probably be Warren Buffett. I think he just, you know, started at a young age being an entrepreneur, and he's done so many things. It's not because he's the richest man in the world by any means, but the businesses he's been in have been a success. I think he's extremely smart, and I also think he's a philanthropist. I mean, he is very, very giving. I think I read something where he gives back 90% of his fortune to others.
Rodney Hood: That is amazing. And we're going to end with one last question. When you're not working, what do you enjoy doing most?
Karen C. Harbin: I enjoy being with my family and traveling. That's my favorite thing. And then if I'm not doing those, then I'm reading the good book.
Rodney Hood: Anything good that you want to share with our audience?
Karen C. Harbin: About a book I've read?
Rodney Hood: Yes, what are you reading now? Or is there anything good you want to share that really captivated you?
Karen C. Harbin: So the book I'm reading now I won't share, because it's a mystery. I like suspense and mystery. But the book Unreasonable Hospitality by Will Guidara, he spoke at GAC a couple years ago. And we at the credit union have had a book club with Unreasonable Hospitality, and even taken it down to our managers, and we have a quarterly breakfast club meeting with them and we're talking about the book in those meetings. But it has really tied well to our culture, because we believe in unreasonable service, going above and beyond expectations. It's a culture of leadership lessons, service philosophy. And I learned early in my career that, you know, the service you provide your members needs to be top notch or you're not going to keep the members.
Rodney Hood: Great. Well, that's a good book, and I look forward to getting it. I will make sure to go to my local bookstore and get a copy of that. It sounds great, especially for someone like us who's deeply involved in the credit union mission.
Karen C. Harbin: Yes. It's a very good book that we focused on here at our credit union to just continue improving our service to members. You would enjoy it.
Rodney Hood: Karen Harbin, this has been a great conversation. Thank you for joining me and sharing your experience, your insights and perspectives with all of us today. And thanks to everyone listening to the Origination Podcast. If you've enjoyed today's conversation, please be sure to follow the show and leave us a review wherever you listen, and join us for more conversations with the leaders and innovators who are shaping the future of consumer lending. The Origination Podcast: the people, ideas, and technology that are all shaping the future of lending. Thank you all. I'm Rodney Hood. Look forward to seeing you again soon. Bye.