LAS VEGAS — Despite operating in one of the most distressed markets in the country, Clark County CU not only made a profit in 2008, it returned a dividend of more than $2.8 million to its members and maintained capital of more than 10%.
The $600-milllion CU's secret? Keeping costs down.
Wayne Tew, CCCU's CEO, told Credit Union Journal the main factor in the credit union's successful 2008 was its low operating expense ratio. "Our loan losses are significant-and probably the highest since 1986-but we have been able to absorb those losses," he said.
Primarily, Clark County CU survived 2008 by being "operationally efficient," Tew continued. Even as large as CCCU is, it has fewer than 100 employees.
"We only have six branches and we are very highly automated," he said. "We have a high usage of home banking and direct deposit. We have a very high deposit-per-member rate: more than $14,000 per member. And, we have great select employer groups to work with."
Roy Holmstrom, who is the credit union's CFO and CIO, echoed Tew's assertions as to the importance of keeping costs down. Holmstrom said there is an organization-wide commitment to efficiency and cost savings.
"For us it is a combination of things. We put a lot of effort into having as much internal automation as we can bear. Also, we have a pretty aggressive expense control strategy. The third factor was our sales people have their compensation heavy on the commission side and light on the fixed side. So when loan volumes went down some of those people moved on to other opportunities-the staff self-adjusted in size."
Holmstrom offered numerous examples of CCCU's successful cost-cutting strategies. He said the credit union has earned such a reputation in the industry that he receives inquiries from more than a dozen CUs a year asking how it controls expenses.
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Technology expenditures are managed by using just one model of servers, printers and computers across all branches. "Not only do we service them all ourselves, the servers and workstations we build ourselves," Holmstrom said. "Buying a server from Dell is $25,000; but we can build one with the same capabilities for $15,000 to $18,000 depending on what we need it to do. And then we don't have to pay outside for maintenance."
Plastic cards likewise are made in house. Holmstrom said the cost was $3.60 per card from an outside vendor, but CCCU reduced it to $1.45. In addition to saving money, members love the fast turnaround: instead of seven to 10 days, they can pick up their cards the next day.
Teller efficiency: transaction data is provided to all branch managers to ensure tellers in the right place at the busiest times so there are as few idle tellers as possible.
Staff motivation: Holmstrom said a portion of the bonus dividend to members is awarded to employees, "So they have a vested interest in keeping expenses down and efficiency up because they share. It takes management out of the position of having to be the sole driver to find cost savings and make things work better."
Staff Initiative
One example of staff initiative came from a group of branch managers that had a service delivering five-gallon bottles of water plus coffee and occasional snacks. Holmstrom said the branch managers independently got together and looked for ways to cut this cost. They installed a water filter system at their branches and took turns purchasing coffee and other supplies at discount stores. The result: costs were cut by 60%.
"These are just some examples, our cost savings come from a lot of things," Holmstrom said. "Even our facilities and maintenance people are part of it. It is spread throughout the organization. Since all of the money that we make in excess of capital ratio is distributed back, there is no hiding expenses."
Though the CU keeps a keen eye on cost cutting, it also works to ensure that service doesn't get cut along the way, Holmstrom said.
"We don't rest on our laurels-last year was last year and now we need to improve productivity in the new year," he declared. And that won't be easy. CCCU's management anticipates it will be "very fortunate" to break even in 2009, Tew assessed, as the end of the recession is not yet in sight.
Real Estate Lending Not Too Bad
Despite the large number of foreclosures that have slammed the Las Vegas valley in the past two years, he said real estate lending, "has not been that bad, but the collateral damage from people losing their jobs has led many to give up their cars. We have more loan losses on vehicles than real estate; which is not to say we won't see real estate losses increase this year. We don't know for certain, but we are particularly concerned about home equity loans we have that are behind first mortgages."
Tew said a decision made approximately four years ago gave CCCU yet another way to trim costs: the credit union got out of indirect auto lending.
"Once those car loans were paid off, we didn't get much out of those members," he recalled. "And, those were expensive loans because we had to pay the dealers."
According to Tew, many of the cost-cutting initiatives at Clark County CU "are not highly unusual, but they are different from the norm" of many credit unions.
"All that said, we have our fingers crossed for 2009," Tew said. "We are doing OK for the market, but we don't know what is going to happen. However, we do feel we have the capital to withstand difficulty.
"We are in a status quo mode; trying to get through the year," Tew added. "We are hunkering down, like everybody else, and working with our members who are struggling. For those who are willing to work with us, we are doing loan modifications. We don't want their homes, we don't want their cars, we want to work with them."
