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RANCHO CUCAMONGA, Calif.-Taking checking business from banks should be near the top of nearly every CU's 2012 strategic planning list, says Stan Hollen.

The CEO of Co-Op Financial Services believes the outcome of the Durbin Amendment-and the subsequent difference in interchange rates between banks and most CUs-will allow credit unions to gain checking share as banks remove debit rewards and add fees. "There are always large numbers of credit union members who do not have your checking account. That is the market to target."

Hollen believes the exemption for FIs under $10 billion in assets in the new interchange rules could work. "The Fed has made it clear they want the exemption to hold for small financial institutions. For the foreseeable future debit interchange, and ROA, won't take the hit we thought they would."

Based on all the numbers and trends Hollen has seen, he expects loan growth to be moderate to weak throughout 2012. "I do think lending is an area credit unions will really have to address and work hard to keep their loan-to-share ratio from falling backward in the coming year, primarily automobile. We are not getting the market share. It's a good time to increase spending on auto loan marketing rather than backing down. Get involved in indirect lending if you currently are not." Hollen further urged CUs to emphasize credit cards.

Expenses can still be cut, especially in mid-size CUs, Hollen said. He advised looking at more outsourcing opportunities and investing in image-capable ATMs.

"The credit union movement is falling way behind banks in upgrading their ATM fleet to check deposit and image deposit. The big banks are advertising this aggressively. Image capable ATMs bring good ROI. If you have an ATM in a remote location you don't have to go to the machine every day and pick up the checks, which saves you time and resources, and consumers really like it."

Hollen commented that credit card processing is ripe for cost-cutting at some institutions. "About one-third of credit unions handle credit cards via pass-through processing-they use their core system for statements and handle the payments themselves. About two-thirds use more expensive full-service outsourcing. Move to the pass-through in-house model and you will achieve considerable savings."

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