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RALEIGH, N.C. – For many years, the chief financial officer had a well-defined place in the credit union pecking order. Sitting right below the CEO, the CFO was in charge of financial functions like accounting and reporting, planning, risk management, and corporate finance. Today, the CFO is emerging as the link between the worlds of finance and technology and lately, CUSO operations. For most credit union CFOs, gone are the days of the traditional “bean counter.” “The CFO has a reasonable perspective of what it takes to move a credit union forward. The need to become more knowledgeable in many other areas has since grown,” said Mike Lord, senior vice president and CFO at State Employees Credit Union in Raleigh, N.C., adding “there are a lot of CEOs that were once CFOs.” As the second largest credit union in the nation, with more than $10 billion in assets, SECU is certainly an “anomaly” in terms of the CFO role because of its sheer size, Lord said. The numbers show why: more than $11 billion on the balance sheet, $3 million each month for operational costs, 164 branch offices, 775 ATMs and 2,800 employees. The evolution of the CFO role is clearly seen in Lord’s 28-year career at SECU. He started out as a loan officer, a manager and then oversaw the accounting department. Today, he has five vice presidents that report to him and a staff of 40 in the finance department. Since 1998, Lord has also served in a non-compensated role as president of NC Press Federal Credit Union, a position he had to vacate in August 2003 because of time constraints. Since the mid-1980s, SECU employees have staffed NC Press, which has $4 million in assets. Another non-traditional CFO role for Lord involves his input with SECU’s early planning of a foundation that will fund housing in rural parts of North Carolina that are in desperate need of teachers. So far, the foundation has achieved 501(c)(3) non-profit status and SECU’s board has had some discussions about funding affiliated projects. Working closely with a project manager, Lord will oversee the accounting and the regulatory compliance for the foundation. Lord is also responsible for the accounting, balancing and reconciling of SECU’s `Salary Advance’ loan, what the credit union touts as an alternative to a payday loan available through check-cashing stores. SECU has since expanded into yet other areas such as insurance, holds an equity stake in XCU Capital Corp. and a growing ATM and branch network, the logistics of Lord’s role “makes it more of a challenge.” Still, “the challenge for us is to keep it simple,” Lord said. “We don’t do risk-based lending, we have one checking account with no minimum balance and the interest rate is higher than most banks. But at the same time, we’ve expanded into auto and homeowners insurance and we’re looking at mutual funds and how we can deliver them more efficiently.” Alan Wade’s progression from accounting manager at Member One Federal Credit Union in Roanoke, Va., is just as evolutionary. During his 14-year career, he’s seen the credit union undergo a name change, his direct reports increase from two to 18 and with the growth in members and assets, two new titles – senior vice president of finance to his current CFO role. Wade is also a member of CUNA’s CFO Council’s executive committee and serves on Virginia Corporate Credit Union’s board of directors. “Once upon a time, it was `let’s just get the books right,’ ” Wade said. “ It’s much more than a bean counter (role) because you have product development, asset liability management and strategic planning. There’s a heightened need to identify key issues more quickly.” Indeed, the unpredictability of member behavior, the influx of deposits seen by credit unions over the last 24 months, the shakeups in the equity market and international unrest all affect how the CFO will respond, said Scott Waite, CFO of Patelco Credit Union and chairman of CUNA’s CFO Council. “You respond to savings shifts that have different implications,” Waite said. “If you’re getting more of an influx and are flush with liquidity, then you’re looking for ways to increase loan-to-share. Credit unions are trying to get an understanding of how member business lending works. Many credit unions have put a lot of mortgage loans on the books over the last two years. All of these factors contribute to what types of shifts in a credit union’s business model will result in optimum performance.” Waite said by far the most pressing changes for CFOs on the horizon are not only a growing list of responsibilities but juggling the ability to change with the times and remembering the old. “CFOs are now revisiting important topics such as what impact will rising rates, have on credit unions in terms of earnings and capital,” Waite said. “The aftermath of Enron, WorldCom and Sarbanes-Oxley have reopened and revisited accounting standards, and introduced new regulatory changes.” Like most credit unions, competing with banks, brokerages, check-cashing stores and insurance companies is an ongoing concern. For the CFO, having significant and vocal input on what it takes to stay competitive means surviving another day. There’s also a heightened awareness on profitability. “More so than ever,” Waite said. “CFOs have gone beyond just understanding the micro financing, there’s more of a need to understand the results of product profitability. More credit unions are looking to non-interest income and CUSOs are providing relief here.” Steering Ahead of the Curve With more on his CFO plate than he had more than a decade ago, Wade said one of the challenges is keeping the lines of communication open with different departments. To stay abreast, Wade has weekly meetings with the vice presidents of the information systems and financial services departments on strictly “current, front burner issues” such as equipment needs, member issues and any concern that can be addressed within a 30 to 90-day time period. As accounting manager, Wade’s duties were “pretty straight and narrow” and included overseeing the accounting department, general ledger functions, ACH operations, checking, ATM and payroll operations. Originally chartered as N&W Federal Credit Union, it changed its name to Member One in 1996 and that new moniker resulted in Wade’s role being elevated to senior vice president of finance. The accounting department split into member services and accounting/ finance, Wade said. Member One’s board of directors recognized Wade’s expertise in investments and while producing the financials such as daily cash management and long-term instruments were already part and parcel, the new SVP transitioned from simple investments like CDs to treasuries, agencies, mortgage-backed securities and collaterized mortgage obligations (CMO). Wade’s recent evolution came in 1999 when he became the CFO and was given additional duties of overseeing information systems and financial services. Both vice presidents of those respective departments report to Wade. The new title also meant that Wade would present the financials at board meetings not the CEO. Wade said that was a “very astute” decision by the CEO. “I don’t isolate myself, I consider myself a walk-through type,” Wade said. “I need to communicate with lending, operations, recovery and the branches so that I can give myself a better perspective of the big picture.” SECU’s quest to be the primary financial institution for its million-plus members means walking a tightrope of staying competitive and touting the differences above banks and other financial players. In the midst of it all is the CFO who’s got one hand on the big picture while remembering why many of its members chose to open an account at the credit union in the first place. “Being able to survive without losing the credit union philosophy ranks up near the top in terms of challenges,” Lord said. “We’ve got a large staff, it’s a group effort here and that helps in evaluating the options we may want to offer to members.” [email protected]

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