TEXARKANA, Texas–The economy may be improving and several CFOs indicated their credit unions are seeing double-digit loan increases, but that hasn't lessened the importance of managing margin, they agreed.
"One thing our CU has always looked at is the spread," said Sonya Jaynes, CFO at Red River Employees FCU.
Jaynes noted that Red River Employees FCU has a competitor offering 1.99% auto loans with risk-based pricing. "We have not started doing 1.99% on auto loans," she said. "We have reduced the cost of funds to help with that spread, but you can only go so low on cost of funds. … It's hard to get used to that lower spread, but that's probably how it's going to be for a while."
Bill Kennedy, CFO at Jersey Shore FCU, noted that it's important to focus on deepening relationships with members so that there are income possibilities beyond just the spread. "We need to develop a relationship with the member where we get a lot of ancillary income," he said. "I think margin management is important, but it's becoming less important than the total relationship with the member."
Similar to Jaynes' CU, Kennedy Jersey Shore can not compete with 1.99% offers, "but we can compete on other areas, like our gap and warranty costs," he said. "We need to educate the members that if you look at the rate, the difference between 1.99% and 2.99% is really nothing. But when you can save as much on warranty and gap, you can save a lot."
