LIMA, Ohio—Phillip Buell is concerned for many small credit unions that aren’t diversifying their income streams and instead are focusing too much on one aspect of their business. That’s just one point he’ll be emphasizing in upcoming remarks to the CUTomorrow Conference.
Buell, CEO of the $853-million Superior Credit Union, which has solid net income ($11.2 million in 2017), ROA (1.52%) and overall growth numbers due to revenue diversification, said a lot of smaller credit unions are approaching him about merging, often because they have too many eggs in one basket.
“A common theme is appearing during those discussions,” said Buell, noting that Superior is expected to merge in a total of six CUs in a two-year period, having most recently merged in Classic FCU. “What we are seeing in these smaller credit unions is they never tried to develop a number of income streams. They tried to hit home runs with one product and then developed concentration risk and then maybe that product did not turn out so well for them. They still have a good membership base, but they did not take the right products to them and develop things properly. That is the biggest thing we see.”
Superior Credit union was recently ranked second in the country among “top performing” credit unions, behind only Idaho Central Credit Union, by S&P Global Market Intelligence.
Sept. 9-11
Buell will be sharing his observations as part of The CUTomorrow Conference (cutomorrow.info) is scheduled for Sept. 9-11 at the Omni Hotel in downtown Austin. The meeting, price
Phillip Buell
d at just $499, was put together in response to feedback to CUToday.info and is for credit unions that are not seeking to merge, but instead want to be a part of an old-fashioned credit unions-helping-credit unions collaboration. Sessions are focused on practical, pragmatic real-life examples of successful programs from peer-group leading CUs.
“You just see some of these business models that neglect the core members,” said Buell.
The focus at Superior is on diversifying revenue streams, with Buell emphasizing that a number of small streams eventually become a “river.” Superior’s total interest income for 2017 was $21.9 million and non-interest income came in at $14.8 million.
Buell emphasized that income diversification not only sets the credit union up well for the future, but insulates the organization against negative effects from interest rate cycles.
“Since we have a consistent flow of non-interest income, when margin compression hit over the last ten years, we have always made great income because we had strong fee income,” he said.
But Buell quickly emphasized that the fees Superior charges are not predatory and, in fact, save members money. He explained that the fees the CU receives are from services delivered from the numerous business lines the credit union has—such as its brokerage service and title company.