From Red To Black
CHARLESTON, W.Va.-Dan McGowan has helped turn around the fortunes of Pioneer West Virginia FCU, and said the credit union owes much of its success to making timely decisions with fresh data.
McGowan, who received NAFCU's Professional of the Year Award for credit unions below $150 million in assets, has been part of a team effort here at PWVFCU that halted a 14-month lending skid during which the CU's outstanding loan balances dropped for each month during that time. Now, Pioneer West Virginia is in its eighth consecutive month of loan growth, the SVP/CFO told Credit Union Journal.
The credit union also improved loan-to-share ratio from below 50% to 70% today. ROA went from negative in 2009 to 47 basis points through March 2011.
McGowan arrived at PWVFCU shortly after new CEO Dana Rawlings was brought in a year ago to improve a credit union that was struggling. Things turned around quickly, thanks in large part to the CU's new daily dashboard of performance metrics and business results that McGowan instituted.
"We call it the Daily Status Report, and we have one single legal-size landscape sheet of paper that pretty much contains everything we need to know about where the credit union is today," said McGowan. "This information can be updated almost instantaneously. It just allows us to pay attention to the details of what is affecting the credit union on a daily basis. If things are left go to fester, bad things happen."
McGowan contended that a lot of the problems the credit union experienced before the Status Report was instituted were due to decisions made on stale data, often weeks old. The credit union now uses IBM Cognos TM1 OLAP software to pull information from its core processing system, mortgage processing system, and credit card processor.
"All of those systems and more," stated McGowan. "Now when we come into work every morning, we know exactly where we are across all of our systems. We know our total asset position, our capital ratio, our loan-to-share ratio, and loan to assets. We know by product line what happened in the previous day. We know whether new loans that were generated were a compilation of refinancing money or new money to the institution. We know exactly where out delinquencies are. We also know our loan composition regarding paper grade. We manage better and just make better decisions."
For example, going back more than a year before Rawlings took over, the CU's delinquency ratio was 2.50%. Pioneer now has the figure below 34 basis points. "In 2009 WE had been running about $40,000 to $60,000 a month in net charge-offs. We believe that by the end of this year our total net charge-offs will be slightly over $100,000."
Having a much clearer picture of its investments, loans, and deposits has allowed Pioneer West Virginia to manage its margins better, as well, McGowan said. "We had something on the order of $62 million of a total $129-million investment portfolio sitting in cash, with $20 million of that parked in overnight funds. So we had to do something quickly to generate some interest income to improve margin. We went into the securities market and improved our annualized yield on that little portfolio by 151 basis points-about ten times the earnings improvement."
A creative new 10-year first mortgage loan product boosted loan-to-share ratio, and year-to-date loan growth to $20 million. "We went from about $63 million in total loan outstandings to $85 million."
McGowan said the credit union has turned its fortunes around because in won't accept doing things halfway, much like McGowan's own philosophy on life.
"I have a great deal of passion and enthusiasm for doing things well, and so does the credit union. When staff begin to feel they are part of something bigger than themselves, where a small institution in Charleston can in fact distinguish itself as something special, they take pride in their jobs and in moving things forward. It has a synergistic effect, much like the miracle of compound interest."