RIDGECREST, Calif.-When it comes to managing growth at a small credit union-where the numbers can be skewed more easily-the advice from Eric Bruen is simple: don't get in over your head.
Bruen, CEO of $21.5-million Desert Valleys FCU here and chairman of the Shapiro Advisory Committee, an affiliate of the California CU League formed to help small credit unions, said it also is important not to try to be what everybody else wants the credit union to be.
"If you have a great idea bounce it off somebody first, and make sure it fits the strategic plan," he advised "Then pay attention. Look at financials two or three times per month. Are products priced correctly? Be aware of what is going on inside your shop.
In the current low-rate environment, management cannot "magically turn faucets on or off," Bruen continued. He said CU management and boards at small CUs need to ask themselves a simple question: do we want everybody?
"Getting 1,000 new savings accounts doesn't help right now," he observed. "I ask if we are getting too much growth and act accordingly."
Jon Hernandez, who is CEO of three neighboring CUs in greater Los Angeles: $8-million City of Downey FCU; $24-million Mattel FCU, El Segundo; and, $58-million CalCom FCU, Torrance, said he is trying to encourage growth in product penetration, but not necessarily growth in assets or deposits.
"We are making tough decisions, including closing branches," he said. "We promote products with every marketing piece. We have worked with employees to improve cross-selling. I was opposed to doing sales, but I realized I had to adjust. It's not about what I like, it is about what we have to do."
At $24-million Mid Cities CU in Compton, CEO Melia Keller said deposits have been dropping.
"In our area we don't have the same problem as at other credit unions," she said. "We are trying to encourage deposits because we have so many loans. We are doing an outbound phone sales campaign to bolster business lending, which is very unusual for credit unions."
Taking Advantage of CDFI Status
Another credit union that serves a disadvantaged area is Pacoima Development FCU in the north end of the San Fernando Valley. Antonio Pizano, manager of the tiny credit union that recently topped the $4 million mark, said it revised its business plan a few months ago to show not only its expected growth but the mitigating factors it is facing from an economy that has hit the working-class suburb of Pacoima hard.
"We have stuck to having a 7% capital ratio at the risk of not taking on more deposits as aggressively as we would like to," he said. "We are taking advantage of our CDFI status to increase deposits at low rates. Because we have a low-income designation we have depositors who are willing and able to deposit into our institution. But we have to be aggressive in managing our growth so it does not hurt our capital ratio."
Now that Pacoima DFCU has reached the $4- million mark, instead of looking for more deposits Pizano said he wants to use the capital to make more loans, especially member business loans.
Why Restrict Growth?
Unlike many of her counterparts, Suzanne Leedale, CEO of $32.6-million SLO CU in San Luis Obispo, is not freezing out depositors with 0.1% CDs.
"Why would I want to discourage growth when there is an opportunity? This is one of my biggest pet peeves," she declared.
Leedale said she was angered by what she termed "the corporate fiasco" and having to pay the assessments, but she "got over it."
"It is a fact of life that will be with us for the next 10 years, so you budget for it and move on. There is no reason with all that is going on to discourage deposits," Leedale told Credit Union Journal. "I am not going to turn anyone away and I am not going to pay my members to take their deposits elsewhere. I won't pay above-market rates, but I will pay a good rate that we can afford and it will probably be better than what they can get at Bank of America."
