CINCINNATI, April 20, 2007 (PRIME NEWSWIRE) -- Credit union executives were advised today at the Ohio Credit Union System's well-attended ZENITH07 annual convention (www.OhioCreditUnions.org) of the challenging environment and their need to find ways to continue to thrive and stay competitive.
For the past year and a half -- and for the first time in credit union history -- average net interest margins have been running lower than operating expenses, according to Jared Cahill, National Director of Alliances for John M. Floyd & Associates, Inc. (JMFA). He added that credit unions need to grasp the new drivers of return on assets in order to compete and succeed.
Cahill addressed more than 200 conference participants during an educational break-out session at today's meeting. Using statistical information to support his analysis, he outlined the new business model that is needed in order to survive and thrive in the challenging competitive environment.
Cahill advised that net interest margins have eroded, forcing credit unions to turn to other sources of earnings. Credit unions are facing the same challenges that Cahill is seeing across the whole financial services industry. To address the margin erosion, non-interest income has become an essential tool to maintain profitability. The new business model for credit unions to remain competitive includes a variety of methods to:
* increase non-interest income; * lower operating costs; and * grow members and product penetration.
"In order to be competitive, executives must understand the credit union's operating cost structure. Inefficiencies can't be passed on and operating costs and product pricing are not in separate silos," indicated Cahill. "These new market conditions are not an anomaly -- there is a new paradigm and credit unions that respond to the new environment will thrive."
As evidenced by the increase in merger activity, Cahill commented that there are a variety of reasons that credit unions might be merger candidates -- especially if they don't respond to the changing environment.
Cahill's remarks are supported by facts in CUNA's 2006-2007 Credit Union Environmental Scan (Escan), the leading strategic planning resource for the credit union movement, which stated, "For a variety of reasons including increased competition putting downward pressure on earnings, consolidation of the credit union industry will continue over the next few years. Expect the number of credit unions to decline by 350 per year."
Cahill concluded his remarks by encouraging all participants to begin a concerted effort now to develop a plan to increase non-interest income, lower operating costs and grow in order to compete effectively in the ever changing financial services marketplace.
"In a low margin market it is particularly important for executives to consider a variety of solutions to enhance their credit union's profitability. There are growth opportunities available for those credit unions that learn to navigate the maze of financial change. Your efforts now will have an immediate, positive impact on your credit union's short-term performance and its long-term ability to survive and thrive."
Credit union executives interested in receiving a free Net Operating Analysis, a valuable tool to use in this challenging environment, as discussed by Cahill during his presentation should visit www.jmfa.com/noa.aspx. And, for a copy of the presentation contact him directly at Jared.Cahill@JMFA.com.
The Ohio Credit Union System ZENITH07 is one of the largest and most prestigious credit union conventions in the nation. It attracts the state's most progressive CEOs, board members, volunteers, and staff members from both large and small credit unions. There are 463 credit unions in Ohio, with total assets of $16.91 billion serving nearly three million credit union members. Each year, the Ohio Credit Union System's annual convention and exposition grows in reputation and in size. Companies with an established presence in Ohio, along with those looking to break into the Ohio market, find this convention to be incredibly valuable.
Cahill is a former vice president of the Credit Union Association of New Mexico subsidiary that develops markets and manages fee-based services to that state's credit unions. He organized, chartered and managed the community-based Saguache County Credit Union in Crestone, Colorado. He also previously provided merger, acquisition and consulting services to mid-market companies and individuals, and was a bank commercial lending vice president managing a $300 million commercial loan portfolio.
About JMFA:
John M. Floyd & Associates (JMFA) is a profitability and performance improvement consulting firm and a leading provider of overdraft privilege programs serving more than 2,000 financial institutions in 49 states and Central America. JMFA is also recognized for training, account acquisition, executive placement and earnings enhancement programs, as well as product, service, pricing and technology improvement consulting. As a direct result of our programs JMFA has helped thousands of clients dramatically improve their performance and bottom line. To learn more about JMFA please visit www.JMFA.com or call 800-809-2307.