LAS VEGAS-It is time to get back the fundamentals of lending and finance, according to Brad Beal, president/CEO of Nevada FCU.
As head of a CU in the city that leads the nation in foreclosures, Beal believes that the last two years of recession have proven the credit union's model of sound financial management and eschewing risky investments to be most effective in all environments.
The lessons made clear by the current downturn, according to Beal, include the need to stay away from practices such as financing upside-down automobiles and allowing dealers to plug the negative equity into loans.
"We really needed to do the due diligence we would do for any type of investment," he said, referencing the corporate meltdown that led to the failures of US Central and WesCorp. "Even for those of us who did, it's a good reminder that we need to apply the basic Finance 101 stuff we learned way back when."
Though the credit union has not changed its model for analyzing branch value, its expansion plans have slowed considerably. But a good chunk of that slowdown was not Nevada FCU's decision; it planned to open branches in new developments, but a number of those have told the credit union they simply would not be able to go forward with the projects.
Lasting Effect On Expenses
As the financial crisis begins to ease and "green shoots" slowly emerge, Beal said one lasting effect will be the greater attention given to expense management.
"I think we've become much more selective in all of our purchasing and acquisition in terms of office supplies, new branch locations, equipment and software," he explained. "We've become much more demanding of our vendors, and I think we'll continue to do that even after the economy recovers."
During the boom years, Nevada FCU was extremely conservative in its capital management, maintaining a ratio nearly double the 7% line of a well-capitalized institution. But while other financial institutions in the area have failed or fallen into serious trouble, the $814-million credit union has been able to keep its head well above water despite rising delinquency rates and a horrific housing environment.
"We ran our capital ratio up to just over 13% and looking back on that we feel fortunate that we did that," Beal said. "We're sitting at about 10.5% with the losses we've taken in the real estate market. We saw the bubble and we knew there was going to be a burst, but we did not anticipate that it would be this severe."
