TALLAHASSEE, Fla.-There won't be a rush to gobble up the remains or marketshare of failed corporate CUs by other corporates until 2011 or later, according to sources who spoke with Credit Union Journal. And that's if there's any rush at all.
The reason: many corporates must still get over the hurdle of securing permanent membership capital and must retool operations to drive greater efficiencies. The presence of bridge corporates, too, is preventing panic among natural-person CUs.
Brad Miller, president of Southeast Corporate FCU, is among a number of corporate CU CEOs who don't foresee a race to grab business from natural-person CUs. "I don't think there will be a mad rush to try to get credit unions from all across the country, because we have to manage our balance sheets closely and improve operations efficiency," Miller said. "The old model of building up your balance sheet as high as it can get and leveraging that capital is gone."
Southeast Corporate has already reduced many operating expenses, yet Miller said more cost reductions are coming, with an objective of streamlining operations so fee income covers operating expenses. "We are not raising fees, but finding efficiencies in our operations and consolidating some of out backroom functions, and that could be with other corporates or CUSOs."
In Birmingham, Ala., Corporate America CU has already moved off U.S. Central's payments system and been working to eliminate operating inefficiencies (CU Journal, Oct. 4). CACU's track record is all that's needed to bring in additional business, said CEO Thomas Bonds. "A lot of people will try to rise up and take advantage of the carnage that is out there. We are taking a little different approach, simply putting forth our business model and our history, letting folks know that if they want an alternative, we'll be happy to serve them."
The philosophy has worked during the corporate shake-up, with Corporate America increasing membership by 70% in the last 12 months. "We have raised about $70 million in new money, paid-in capital, during this crisis. We are in a very good position to assist natural-person credit unions in the event they want a new service provider."
Long-Term, Organic Strategies
In Columbus, Ohio, Corporate One has also been fielding a number of inquiries, according to CEO Lee Butke, who noted 33 new CUs have come aboard this year. "Admittedly we are trying to pick up a few credit unions and have some good recommendations. We are trying to grow organically versus through a merger or a major pick-up. We try to match up the things we do well with the needs of the natural-person credit union."
The approach, Butke believes, leads to greater long-term success. "Like a lot of businesses, we are only as good as the next implementation or the next credit union we bring on, because CUs talk. As far as being aggressive toward growth, being aggressive to me means taking unnecessary risks or shortcuts with implementations. We will accept only the business we can handle."
What will certainly slow corporate CU acquisition strategies, noted Rick Veach, president of Volunteer Corporate CU in Nashville, is that many corporates must first focus on securing membership capital. "We are having a town hall meeting this month in which we will ask members to stay with us and convert membership capital into permanent capital."