The economy may be recovering and the credit picture improving, but lending institutions still find themselves coping with some troubled portfolios. Plus, they always need to be prepared to identify high-risk accounts. What they can discover is that turning around a challenged loan portfolio requires taking just a few basic steps. In 2008, Arizona Federal Credit Union, not unlike many lending institutions, found itself with a money-losing portfolio. While it had solid reserves to weather the storm, it still found itself on the “bleeding edge” of the financial crisis. As its deteriorating situation became very clear to Arizona Federal, business as usual couldn’t continue. A proactive strategy to manage its portfolio was required. The institution recognized it had to reduce exposure with its high risk members while still retaining the human touch that characterized its customer service. It simply had to make different decisions — and it had to do so quickly. How Arizona Federal reversed its misfortunes to emerge two years later prosperous and with $30 million in profits illuminates what lenders can do to manage troubled portfolios and reverse poor performance.