With a 62-basis-point impact on ROA staring them in the face due to an unbudgeted NCUA premium, many credit union leaders are trying to decide whether to proceed with strategic plans or to put them on hold until times get better.
And, as we often realize in an industry as diverse as ours, there is no absolute right or wrong answer for all credit unions as a whole. This is a case-by-case question for credit unions-often driven by your capital ratio.
Regardless of whether your credit union will hunker down or press on in 2009, there are certain decisions that every credit union should consider in any environment and especially in the challenging times.
Police your policies. Credit unions should perform an in-depth review of every policy on their books on a regular basis. Annually would be best. What better year to begin an annual review process? Spread it out so that it isn't burdensome, but 2009 would be an excellent year to start this important review process that all fiduciaries should support as part of their responsibilities.
Check your checking. Banks are at an all-time low in public credibility today, all of which makes the public more willing than ever to consider an alternative for their most basic consumer bank accounts. Credit unions should use this opportunity to give a serious look at their checking accounts to make sure that they are more than competitive-they should be the best in town.
No account meets the needs of persons of modest means more than a checking account. No account relationship values personal touch more than a checking account. No account produces more income to reinvest back into members than a checking account.
Perform an intense self study of your checking account program. Make sure that it has all of the rewards and benefits that the most successful checking accounts offer today. Free isn't good enough anymore.
If your member penetration rate for checking accounts is less than 50% (and the credit union average is around 40%), this is an excellent time to conduct an unbiased review of your checking account competitiveness. If you can't do it without a pride of authorship in your existing program, bring in a third party.
Overhaul your overdrafts. While you are reviewing the competitiveness of your checking account program, do some due diligence on your overdraft or courtesy pay program at the same time. The rules have changed significantly over recent years and compliance should be a top priority. Nothing could be worse than to risk losing such a valuable program to compliance issues.
Overdraft programs have their critics but from my experience, the members love the assurance that they won't face merchant fees and late charges because they occasionally run out of money before they run out of month. The income from the program is also vital because it enables credit unions to invest more in new branches, products, and technology, among other things.
Whether hunkering or pressing forward, you should resolve in 2009 that your overdraft program should be producing a minimum average of $100 per checking account annually. Credit unions are reaching that figure and more. If yours is not, then it could be ramped up for greater benefit to both your members and to your credit union.
Collaboration and CUSOs. Maybe yours has always been one of those credit unions with a do-it-yourself mentality. There is definitely a time for self-sufficiency; however, collaboration might enable you to continue the pursuit of your strategic goals in an otherwise difficult year.
Loan participations can help keep you in the lending business when your liquidity or concentration levels become stressed. Shared branching can help you get into a market area where you can't afford to build a branch this year. ATM networks can help you advertise even more cost-free access points to your members.
Manage your marketing. Whatever your expense strategy, you will not be able to completely shut off your 2009 marketing efforts. Once this fog lifts, as all fogs inevitably do, you cannot start re-building your brand after having dropped off the planet for a year or so.
Use 2009 to demand more data to assist you in managing your marketing dollars smarter. Your marketing partners, advertising agencies, core processor-all of these can be a source for the data you need to target your limited marketing dollars as directly as possible. If these resources cannot help your target your message better during a difficult year, maybe it's time to look at a core processor change or a new marketing firm.
Commitment to community. No matter how tough the year, you must keep your community profile high. You need to be involved in the community so that you can answer questions and be reassuring about the safety and soundness of your credit union while people are reading negative articles daily about the financial industry.
Community involvement positions you well whether you are swinging for the fences or taking a pitch this year. Your presence in the community says, "we're still here for you," and it is a crucial element of the advocacy efforts that will be so important to credit unions in 2009 and beyond.
Whether you feel hunkering down or pressing on is your best 2009 strategy, don't sit still on these six items that will place you in a better position for when the current fog lifts. And the fog will lift.
Dennis Dollar is a principal with consulting firm
Dollar Associates. He can be reached at 205-991-1525