LANSING, Mich. -
We'll be talking to credit union experts about everything from cost-cutting and profit-boosting techniques, to trends in recruitment and retention. This, the second in the series, hones in on how to boost the bottom line.
1. "Fee" Is Not A Four-Letter Word
Several CFOs suggested reevaluating fees as a means to bump up the bottom line.
"One of the things we have come to realize is that our members are willing to pay for a good deal," observed Brian McVeigh, CFO of NuUnion CU and chairman of CUNA's CFO Council. "We don't believe our members are looking for a free ride."
The mandate from the NuUnion board: give members the option to either pay based on margin or pay based on fees for service. "What we're finding is that it's nearly a 50-50 split," he related. "We try to set the pricing so that it is neutral to the credit union, and it gives members the choice of how they want to pay."
2. The Other Non-Interest Income
"I think the best opportunities for income streams lie in non-interest income sources other than direct (punitive) fees to members," offered Bob Warren, CFO of Virginia CU and a member of the executive committee of the CUNA CFO Council.
"One of the greatest sources is interchange from signature-based debit cards...Some possible strategies if penetration has not been as deep as you would like could include mass issuances to your checking account holders. Also, promotions that encourage signature-based transactions over PIN based transactions may also be helpful. Other opportunities for non-interest income include insurance and other financial product sales."
3. Supersize Your Buffet
"Offer a wider array of services," suggested Jay Scungio, CFO of Freedom CU and another executive committee member of CUNA's CFO Council. "This gives you more opportunity for both fee income and interest income, the more products and services you offer, the more opportunity you have, so you increase the size of the buffet table."
4. Invest In Training
"One of the things we are doing is implementing a new sales program," advised Peg Lamb CFO Council executive committee member and CFO of Capital Community CU. "We are working with Cohen Brown, and the goal is to have more business from within our current membership. Rather than growing by adding new members, we are focusing on growing from within our current book of business."
Sometimes, it's even simpler than that, noted Marvin Garland, CFO, FCUL Service Group. "A lot of employees don't really understand what is expected of them," he suggested. "If you're looking for performance improvement, make sure you spell out what you want to see from your staff."
5. Cut Costs
Leave it to a bunch of CFOs to find a way to have their responses count twice, but indeed, one way to help boost the bottom line is to rein in expenses, so all of the CFOs suggested that their cost-cutting tips from the first story in the series (CU Journal, Jan. 15) should also count as profit-boosting tip, as well.
6. Consider CUSOs
"CUSOs are a great way for credit unions to explore other opportunities for income," said Scungio. "It's a great way to offer more products and services and get into other areas." Member business lending is a good example, he said, noting that although credit unions can do this without a CUSO, going the CUSO route is one way to make sure the CU doesn't run up against the regulatory cap.
7. Get Your Free Money Here
That's right, we said "free money." This profit-boosting idea comes from CUNA Mutual Group CEO Jeff Post, who said CUNA Mutual's MEMBERS Capital Advisors has successfully piloted "Investment Advisory Services" with approximately a dozen credit unions in which it uses its market heft of $16 billion in capital and access to Wall Street to deliver an extra 25 to 50 basis points on a credit union's excess capital. "It's a mid-term money product with a two to three-year duration, so it's not in competition with the corporates," said Post, noting CUNA Mutual was able to add 100 basis points to its own rate of return using the same investments.
"There is a major squeeze," acknowledged Post. "We have three to four products we call ROA Enhancement products. I know (NCUA Chairman) JoAnn Johnson has expressed the view that credit unions do not need positive ROA; that's from a solvency point of view. But I'm afraid that some people will take their foot off the gas. I think that today with all the competition in this space that credit unions need to be more focused than ever on making money."
Post said it is not necessary for a credit union to have a huge ROA on the income statement, but it is necessary to offer rates that members, especially rate shoppers, have come to expect.
"Given the competition from ING Direct or GE on deposit rates, credit unions are not as high on deposit rates as need to be relative to the competition," Post said. "The reason is not making enough money to pay the interest rates or charge the interest rates on loans that credit unions need to."
