SAN DIEGO-Give John Tippets credit: he is not willing to take a bow if he feels he has not earned it.
The former CEO of American Airlines FCU in Dallas was brought out of retirement late in 2009 to take on the challenge of helping North Island Financial CU rebound from being classified as "significantly undercapitalized" last year by NCUA (North Island's
After a loss of $52 million in 2009, the $1.4-billion CU posted earnings of $11.2 million for the first three months of 2010. But Tippets was quick to point out that of the $11.2 million, $11 million was from accounting reversals.
"We have had steady improvement in expenses and operations," he added, "but they are slightly negative still. We are making progress. The biggest problem, besides expenses, is revenues continue to decline. This is because of lower loans outstanding and lower interest rates."
How much of North Island's improved numbers are due simply to the fact the economy is turning around?
According to Tippets, "The economy is getting better and we are benefitting by it, but things are going slowly. It is going to take a while. We continue to have significant charge offs and write-offs."
Steps To Recovery
The turnaround follows a number of steps the CU has taken to reduce costs, along with policies to guide it moving forward. "We are working on a third series of layoffs," acknowledged Tippets. "We are having some success on our continuing efforts to renegotiate vendor contracts. One unusual thing is an additional tenant will be leasing space in our headquarters building, which will mean more income."
Tippets said North Island has added a new line of credit product, and made plans to add a credit card in 2011. The credit union sold its previous card portfolio in 2001.
"We are talking to other credit unions about cooperation that will be mutually beneficial," he said. "This will be short of forming the superstructure of a CUSO, but if we can do it without any more bureaucracy than necessary, less paperwork, we'll do it."
The San Diego economy has been hit hard by the recession, as the financial performance of other credit unions in this very competitive CU market has shown. "San Diego is an insular economy because of geography. We have an ocean to our west, a foreign country to the south, mountains and desert to the east, and to the north, the Marines at Camp Pendleton to protect us from Los Angeles. San Diego has started to return to economic health earlier than the rest of the country."
Geri Dillingham, North Island's EVP and chief operating officer, noted that over the next four years the number of home-ported ships in San Diego will go to 82 from 53. "So by 2014 this should really help the local economy and our membership [which includes all active duty and retired military members and their families]."
Tippets concurred, adding, "On both sides of the bay the docks have been expanded, which brings construction and maintenance jobs. I think San Diego has a slightly brighter crystal ball than the rest of the country, which is not yet assured of a decent recovery.
Risks Go Beyond Economy
"Our risks are not just the economy, though," Tippets continued. "Our credit union world has share insurance issues, and lawmakers in Congress are thinking of ways to make our lives miserable-interchange is one of those. Business participation loans might get very complicated if credit unions go down, and private insurance continues to carry its own risks. There are risks in our system that are beyond the general economy. We are pleased with progress and hopeful about more progress, but hope is not a strategy."
