Turnaround CEO: Not There to Make Friends
LAS VEGAS – Dale Johnson successfully turned around the $310 million Sun Community Federal Credit Union, and shared his efforts with attendees at NAFCU's Annual Conference.
Sun Community serves a low-income area in El Centro, Calif., located near the Mexican border. The primarily agricultural area has a 25% unemployment rate. Johnson, who started as CEO in 2010, said the credit union was in the red more than $1.5 million 2009. In 2013, Sun Community's profit was $2.4 million.
The credit union grew from earning $1.3 million per month in revenue to $6 million. Commercial loan originations at Sun Community are up 100% and its yield on investments is 1.80%.
Johnson stressed that a credit union needs to make a profit to survive. To make a profit, Johnson said his credit union had to make major changes.
“If you want good talent, you have to pay for it,” he said. “We changed the management at the consumer loan department. We cut the turnaround time on loans from four days to 15 minutes.”
Johnson also decided to cut out indirect lending. “The car dealers got paid to overcharge our members,” he said.
Sun Community was paying its broker $30,000 per month to manage investments. “We now have an investment adviser who is paid $10,000 per month,” he said.
The credit union also began charging a checking account fee, resulting in 1,000 closed accounts. However, deposits increased $6 million.
“Don't be afraid of your members. You have to look out for their interests but you can't give them everything for free,” he said.
“We cut our overall expenses by $2 million and what was our profit? $2.4 million.”
Johnson recommended that all credit unions form an expense committee to examine every dollar, particularly vendor expenses.
He added that he reduced headcounty by 10% and outsourced HR and IT. “You can't be everybody's friend as CEO,” Johnson concluded.