LAS VEGAS – Dale Johnson, CEO of the $310 million Sun Community Federal Credit Union, said a credit union should hold at least 10% net worth to stay afloat and pay more for strong talent to achieve success.

“Be sure you have enough capital,” Johnson said at NAFCU's Annual Conference during a session entitled, “How a CEO Turned Around a Credit Union.”

“We're at 11.5% at Sun Community. You've better always have at least 10% of capital, if not 11% or 12%,” he added.

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, with Johnson crediting talented management and staff.

The credit union went from bringing in $1.3 million per month in revenue to $6 million per month. 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.

“Profits are the only way to grow capital,” he said. “No company can stay in business without making a profit.”

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 advisor 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.”

As a way to reduce expenses, Johnson recommended that all credit unions form an expense committee to examine every dollar, particularly the funds being spent on vendors.

“We reduced our employee headcount by 10% and outsourced HR/payroll and information technology,” he said.

“You can't be everybody's friend as CEO,” he added.

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CEO Details Credit Union Turnaround: Onsite Coverage

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