TEXARKANA, Texas–After two years of focusing on cost cutting and expense management, credit unions are beginning to invest again in ambitious, long-term projects aimed at both better serving members and enhancing the bottom line.
Credit Union Journal spoke with a trio of CFOs–all members of the executive committee for CUNA's CFO Council–to get an idea of where the priorities are this year and what the future holds.
Sonya Jaynes, CFO and strategic planning coordinator at Red River Employees FCU here, noted that her credit union (and the region as a whole) did not suffer to the extent that many others across the nation did over the past several years. This year has already seen the completion of the CU's new corporate office, and Red River Employees plans to renovate some existing facilities later this year, but will not be doing any further branch expansion at this point.
Another place the $587-million, 63,000-member credit union is investing this year is technology, including upgrading existing systems. "We've already got some virtual servers in place, but we're going to virtualize even more servers," said Jaynes. "We do have a half-million in our budget for capitalized expenditures for technology. It doesn't sound like a lot for a credit union of our size, but it is a lot compared to our overall budget. It is over half our budget, as far as capitalized expenditures go."
Jaynes added that with the major project involved in building the new corporate office complete, now was a good time to focus on technology. She noted that RREFCU is projecting it will see some ROI on that investment in improved efficiencies and the ability to serve more and more members. "We have a lot of lobby traffic," she pointed out. "If we build a branch, they will come, even if we're just building a branch to alleviate traffic from another branch."
At Jersey Shore FCU in Northfield, N.J., the focus in 2012 is on expansion. "We need to grow to get economies of scale, and our team believes that we have farmed this farmland enough and we just need to expand into different territories," said Bill Kennedy, CFO at the $111-million credit union. Jersey Shore is the largest of the five CUs in its region, with 10,000 members spread across five counties. The challenge now, he said, is to expand beyond that.
Kennedy recalled hearing his congressman mention during CUNA's GAC that he serves 118,000 members in his two counties.
'We Need To Get Out There'
"Right there, that's telling me that we have 70,000 or 80,000 people in our area that are members of other CUs that aren't in our area," said Kennedy. "That tells me that we need to get out there. Is it going to be an immediate ROI? No. We understand that, but we need to look to the future, and I think the only way that we're going to make a difference is to farm new farmland."
While mergers have decreased in the last two years, Kennedy predicted that there will be "a significant uptick" once the economy turns around. "I personally believe that if you're not moving toward $250 million, in five or 10 years, you're going to have a hard time surviving."
At West Community Credit Union in O'Fallon, Mo., SVP/CFO Jason Peach noted the strategic plan in 2012 remains the same: finding ways to get more members and more business from the members.
The credit union invested in additional underwriting, frontline sales and processing staff in 2011, and Peach said the CU reaped the rewards with 14% loan growth. As such, West Community is set to make an additional $800,000 in interest on its loan portfolio during 2012. But that growth will require further investment down the line.
Additional Facilities Will Be Needed
"We had 5% membership growth last year," Peach noted. "I think in the next few years we're going to see additional facilities needs. At the same time, we we're having to invest in mobile technology, so we're making additional investments–iPhone apps, account aggregation or financial management systems through our home banking. We're trying to bring the technology to our members, but we also need more brick and mortar. It's going to lead to more investments in the next couple of years, but for 2012 we're trying to leverage the investments we made last year."
