CHARLESTON, S.C. -
Lockwood started his career at a branch of CPM Federal Credit Union 21 years ago, finally working his way up to CEO three years ago. While the credit union has grown to $169.6-million in assets, more remarkable is how its bottom line return on assets has soared-from .69% during 2004, to 2.57% in 2006, making CPM FCU the second highest returning credit union among the 656 in the $100 million to $250 million asset range (collectively returning an .72% during 2006).
While many credit unions have been struggling to grow loans, attract new members and curb shrinking margins, not CPM Federal. During 2006 the credit union grew loans by 11.2%, added more than 2,800 new members and expanded net interest margins (as a percentage of average assets) to 4.33%, up .32% from 2005. Surprisingly, it does not have the narrow field of membership normally associated with many high returning credit unions-CPM FCU has nearly 500 SEGs and a nine-branch network spread throughout South Carolina.
Not surprisingly, CPM FCU's relatively large branch network creates a high gross operating expense as a percentage of average assets - 6.29%. However, a healthy 5.06% fees and other operating income to average asset percentage effectively offsets operating expense driving up the bottom line. Non-interest income levels grew to $7.7 million during 2006 from $3.8 million in 2004, driven by a combination of a new courtesy pay (overdraft protection) program and a revamped employee incentive plan. When the courtesy pay program went into effect, check charge fees were reduced or eliminated, as were ATM surcharges for member use of any card.
According to Lockwood, the incentive plan the credit union implemented has gone a long way toward helping it to fulfill one of its strategic goals, to focus on exceeding member expectations. Tellers and new accounts representatives receive monthly incentives based on product and online services sales that are reevaluated quarterly, he said. Loan officers are also incented based on loan volume and cross-sales of insurance products. Lockwood described the incentive plan as generous, and all employees are eligible for an end-of-year bonus based on loan growth, services per member and other measured bottom line factors.
"Our team is committed to our new tag line, 'With us its personal'-and our objective to exceed member expectations," explained Lockwood. "Members will pay more for exceptional service. However, if you provide mediocre service-it doesn't matter how good prices are-members won't stay. Succeeding requires exceptional training, hiring the right employees and a good incentive plan."
Lockwood stressed the accountability is also important, which is why benchmarks were established for credit union performance. As part of that, CPM FCU recently expanded its strategic planning process, from a one-year annual budgeting process to a comprehensive three-year planning horizon engaging several levels of management and the board.
CPM FCU has been able to boost its lending without increasing delinquencies. In fact, its low loan delinquency rate, .36% of total loans, is less than half of the .75% reported by the credit union's NCUA peer group. Similarly, its 2006 loan yield of 7.41% is significantly higher than the 6.64% peer group average. According to Lockwood, seasoned loan officers have successfully have been using a risk-based loan pricing model for seven years.
Separately, a recently implemented member financial counseling service is also proving helpful to both members and the credit union alike. The program encourages members to discuss credit challenges early to prevent problems later, and is expected to get more usage as the credit union moves into some underserved markets it has been approved to serve.
CPM FCU is also now looking to deploy more paperless imaging strategies to drive greater efficiencies. The credit union uses Valley Forge, Penn.-based USERS as its core processor.
