RALEIGH, N.C.-There's a lot of interest in Leap Year. And for credit unions, that can quite literally be the case.
February 29, the day added to the calendar (almost) every four years to compensate for the earth's orbit around the sun, will be marked in 2012 on the last Wednesday of the month. While it won't mean much to the individual credit union, across the CU community Leap Day will add up (and at least one credit union is leveraging Leap Day in a lending promotion-see related story).
Mike Lord, SVP of finance and accounting at State Employees CU (SECU) here noted that the extra day doesn't mean additional HR costs at his CU, since all staff is salaried and janitorial services are contracted on a monthly basis. But SECU, the country's second largest CU, does pay interest on a daily basis, meaning an extra day of payments gets added to the books.
Lord noted that in the last fiscal year, SECU earned a daily average of $1.96 million in interest paid by members on loans and investments, while it paid out an average of $825,000 per day in dividends. Lord said that the biggest issue isn't the extra outlay of funds, but making sure every four years that the fiscal calendar and yearly calendar are properly aligned in core systems so that everything is compounded correctly.
Suzanne Weinstein, CFO at Orlando FCU and a member of the executive committee for CUNA's CFO Council, noted that her credit union earns nearly $25,000 each day in interest and fee income, compared to less than $2,000 paid out in dividends. The extra day, she said, means one more day to book loans and collect payments, all of which helps the bottom line and satisfies regulators.
But Weinstein noted that for smaller CUs, the day can also be the difference between positive and negative net income for the month. "We're a $160-million CU now, so it doesn't impact us like it would a credit union probably under $100 million," she said.
Jason Peach, SVP/CFO at West Community CU in O'Fallon, Mo., said his CU earns about $16,000 per day.
"We're projecting this year to make roughly 75 basis points ROA," said Peach. "What that means at our size is $16,000 is a little over 1% of our net income projections. I don't sneeze at 1% in any case. If it was one-tenth of 1%, maybe I'd say ho-hum...We're not going to win the day on home runs; we need a lot of singles, and this is another single toward winning the game."
