GLENDALE, Calif.-Job 1: plugging the holes. After that, it's time to take a closer look at the entire business model, according to Ron McDaniel, CEO of California Credit Union.
"These are challenging times for all credit unions - we know our bottom lines are not where we expect them to be," he said.
The first goal, McDaniel said, is "plugging the holes." Once issues are addressed, then the business model can be examined thoroughly.
"The expansionary period went on for so long, many were not expecting quite the fall off the cliff," he assessed. "No one handled the end of the cycle well."
Provision for loan losses has grown from a minor item to a "very large expense," McDaniel continued. "I expect it to continue to be a large expense in 2009. 2009 will see the meat of the loan losses."
Despite the anticipated problems in lending, McDaniel said there are many steps credit unions can take to cut expenses. "But, there is not a lot of discretionary spending that can be cut without affecting the credit union, member service or staff morale."
McDaniel's recommendations include keeping fees aligned to the local market and avoid "gouging" the member. "Credit unions also need to look at past strategies and see if any of them should be altered. For example, most credit unions are portfolio lenders. Becoming a secondary market lender probably is a good strategy."
