By Ray Birch
SIGNAL HILL, Calif.—Doing the same thing over and over again and expecting a different outcome is one of the biggest issues facing many small credit unions, according to Christine Wood.
The CEO of the growing VA Desert Pacific FCU here spoke with CUToday.info about what small credit unions need to do to survive and thrive, including what has driven VADPFCU’s success.
“That is the million-dollar question,” she said, acknowledging how NCUA data show the divide among small and large credit unions continues to grow—with the large CUs grabbing the lion’s share of industry’s growth while smaller shops stagnate or move in the wrong direction.
The $87-million VA Desert Pacific FCU has grown by $16 million in assets over the last four years, making about $1 million in net income annually over that time. Net worth is 17.37%.
Recognizing the answers to the plight of small credit unions are often difficult to find, Wood said those doing well are taking active steps to do things differently.
“Here, we have expanded our means to bring in more revenue,” said Wood, who believes many small credit unions are reticent to do that. “We're not afraid to try new things. We are always looking for new ways to create additional income—and I am not talking about fee income or interest income or investment income.”
The credit union, explained Wood, focuses much of its energy on its brokerage relationship with Quicken Loans.
“We're not large enough to portfolio these loans, but we have partnered with Quicken in recent years to create about $20,000 to $50,000 in non-interest income a month,” she said. “That's a significant sum for a credit union of our size. And we don't take on any of the portfolio risk with these loans. Quicken underwrites them and the loans conform with their standards. We just collect the fee income from producing the loans. We have been very aggressive on this brokerage relationship.”
Christine Wood
Investing in Technology
While VA Desert Pacific is always looking for new growth opportunities, Wood said the CU has also consistently spent money on technology to keep current with larger financial players.
“We’re sitting near 18% capital, but we invest it back heavily into technology,” she said. “I probably have the latest and greatest with mobile, as much as anyone in our area has. We can support our members anytime, anyplace. We can actually compete on that level with bigger banks.”
Still, VA Desert has to look for ways to continually improve, said Wood.
“We still need to be faster with our lending, especially consumer lending,” she said. “One of the biggest challenges we have yet to overcome is we take too long with our loan processing and underwriting. You can get instant decisioning a lot of places now, if you’re A and B paper. We can get there in 24 hours, and that is too slow. We are investing heavily here to get faster, and that is a big goal for us in 2021.”
A Frequent Mistake
But Wood fears many small credit unions don’t spend enough of their capital on high-cost technology.
“I think some of them say, ‘Do I really need that?’ which is a mistake,” Wood said. “A lot of small credit unions are just too conservative and just want to do the same thing over and over again and expect a different outcome.”
Focus, too, is critical for a small credit union, said Wood. VA Desert Pacific serves the local area Veterans Admiinistration hospital system, and has not wandered from those roots. Wood said expanding to be everything to everyone might not be a good move for a number of smaller CUs.
“It starts with really knowing your membership and designing products and services to meet their specific needs,” she said. “There was pressure here once to go above and beyond our current field of membership, but fortunately we did not.”
Often Heard, Seldom Practiced
Wood pointed to another word—collaboration—that is kicked around a great deal when the plight of small credit unions is raised.
“We need to work collaboratively, and help one another. The needs are there, but everyone says, ‘Oh, I'm too small to do anything,’” she said. “But I think collectively we are large. But I don't know how to get people do more than get together and discuss this issue…We need to get together and share resources, especially on the back end of the business. This is critical.”
What Wood said typically happens among small credit unions is they do talk about collaboration with good intentions, but when they return to their own operations they are hit by the “whirlwind of the day-to-day.”
“Then they say things like, ‘I’m too busy. I have to focus on my membership’…But we all have to get past this roadblock,” Wood said.