For the last five years, smallish Family Focus Federal Credit Union (Family Focus) in Omaha, Nebraska, has defied the odds. While most credit unions at its asset size, $31 million, have struggled, and many have given up entirely by merging with larger credit unions, Family Focus has thrived. For the five years ended December 2015, ROA averaged 1.4%. The high was 2.04% and the low was 1.13%. For the year ended December 2015, net interest margin was 5.26%. By any yardstick, attaining this level of success borders on phenomenal. In this article, we will endeavor to uncover and explain the key factors for the success of this credit union.
Family Focus is primarily a single SEG credit union serving employees and family members of the Metropolitan Utilities District (MUD) in Omaha, Nebraska. Its field of membership is small, with a count of 850 employees in the SEG group but also serving family members. Although this field of membership is well paid, it is maturing and does not present the opportunities for loan demand that it once did. In fact, for many similar credit unions, this is the recipe for stagnation and ultimate failure—not because members don’t pay back their loans, but because members mature out of the lending categories into savers and the credit union is unable to transition and acquire new borrowing members. Family Focus has overcome this obstacle with a dedicated marketing culture and commitment to members. It offers traditional credit union products and has avoided indirect lending. In fact, the credit union does not have a single indirect loan on its books. It does deploy a risk-based lending strategy in which loan rates are based on credit worthiness. For the year ended December 2015, loans-to-total assets were 79.5%, leaving a liquidity fund, some very short-term liquid investments, and the new building to round out the assets. The liability side is traditional shares and certificates. Net worth is above peer group.
This credit union clearly is doing some things right. Let’s identify some of them and then focus on the ones that seems to be most impactful. The credit union operates very efficiently. It is in every sense a full-service credit union with a free-standing new, albeit small, building and a menu of member services that are as robust as those offered by larger credit unions. Operating hours are what you would expect. In the past ten years, the credit union has doubled its asset size without increasing the number of employees. In other words, every employee is managing twice the assets that he/she was doing ten years ago. The credit union is staffed with employees who truly understand what credit unions are all about. As I interviewed employees and directors, the word “love” kept popping out spontaneously. The management of the credit union, starting with the Board of Directors, has truly cultivated an environment where members are looked at and cared for as family. On the other hand, each employee and volunteer that I interviewed understands unequivocally that the credit union is a business and absolutely needs to be managed in a businesslike way in order to prosper over the long-run. The credit union excels at walking the fine line between looking out for its members and managing the credit union in a businesslike way where it can earn net worth and capitalize future growth. Over the last five years, the net worth ratio has increased from 10.8% to 13.7%.
As I interviewed the volunteers and key management employees, the most apparent difference between Family Focus and 3,000+ similar credit unions in the U.S. is the credit union’s commitment to a sales/marketing culture. Management, including the Board of Directors, recognized a decade ago that business as usual would not produce success. When her predecessor resigned to manage another credit union, Amy Brodersen was promoted to the CEO position of the struggling small credit union. At the time, Amy had been employed with the credit union 16 years, starting as a member service rep in a three-person office. Amy says she loved the credit union from the start. The members were great and the credit union’s business philosophy fit her personal outlook. Her previous experience had been in a savings and loan where the only goal was profitability. She had found a home at the credit union.
Amy tells us that it took her about two years to determine what needed to be done for the credit union to prosper. Even in 2006, the aging field of membership was shifting its emphasis from borrowing to savings. The decision was made that the credit union would convert itself into a sales/marketing and member service institution and ultimately was reorganized along those lines. An outside consultant was engaged to assist in the conversion. The transition was complicated and painful for some employees. Mistakes occurred and it was a two-steps-forward-and-one-back-process.
The credit union staff is now organized into two distinct divisions which are referred to as Day 1 and Day 2. Day 1 serves members when they have an initial need or a new need recurs. If a prospective member walks in the door, they will be served by the Day 1 staff. A current member who has a new need, a new loan for example, or who wants to open a new share relationship or certificate, will also be served by the Day 1 staff. The second segment is referred to as Day 2. These staff members serve the recurring and more traditional needs of the credit union’s members.
The sales/marketing culture resides with every member of the staff. However, the primary responsibility for new business lies with the Day 1 group. That includes new loans, new members, and new depositary relationships. Loans and deposits are both important to the credit union. It is effectively totally loaned out and always looking for new deposits.
The leader of the Day 1 effort, in other words, the marketing effort, is Kari Rager, Chief Solutions Officer. Kari is a long-time credit union employee who predates the conversion to a sales culture. However, she recognized the need to change and enthusiastically endorsed the new sales culture. Her chief responsibility is to oversee the marketing function. She is strategic minded and results focused. She shares the deep commitment to the credit union and its members. Commitment is a common thread discovered in almost every interview with the volunteers and staff. Kari is totally committed to the marketing environment. Her responsibilities include driving business growth and new products. Her primary focus is on ensuring the credit union’s sales culture functions effectively. Her enthusiasm is contagious.
Dave Lorimor is the Member Solutions Consultant. He describes his job as 90% sales. Dave never worked at a credit union before Family Focus, but had extensive sales experience at car dealerships and call centers. Prior to coming to Family Focus he had never belonged to a credit union. His college degree is in secondary education. Dave’s comment was, “Sales is sales; product knowledge is important, but never sells anything.” Every request for a new loan or share relationship goes through Dave. He is the member’s advocate. He also describes sales as a contact sport—the more contact, the more success. He visits the small branch located on the MUD headquarters on paydays, promotes a barbeque with members, and participates in the MUD employee events. He is a unique individual in the credit union environment.
Most credit union loan officers did not start out in sales. In fact, most credit union loan officers are what they are because they don’t want to be in sales. In sales, things are often stressful. Successful salespersons are extremely well-paid. This is the point at which many attempts for credit unions to remake themselves as sales or marketing organizations fall apart. Many sales professionals do not have the temperament to work at a credit union. Finding an effective salesperson willing to work for less pay but a more comfortable environment could be tricky. For Dave Lorimor, it was a tradeoff. He traded a 70- to 80-hour a week, high-stress, well-paid sales position for a job that allows more regular hours, but less pay. He does receive a salary, but the majority of his compensation is based on sales success. Sales success is defined as new loans and deposits.
Dave’s counterpart is Carol Nary, Member Solutions Analyst. Carol is an experienced loan underwriter and performs that function independently. This is where the control function for sound lending comes in. Dave, the salesman, finds the loan applicant and completes the loan application. Then Carol underwrites and approves the loan. The marketing function has no approval function. A third clerical staff person also supports Dave and Carol in originating loans. Yes, it’s true there are conflicts. Dave effectively is the member advocate. Every loan application is a great one in Dave’s mind. Carol represents the credit union and looks after its interests. Basically, they work it out.
What the credit union refers to as the Day 2 staff are the employees who serve the credit union’s members on a day-to-day basis—what many of us would call member service reps and tellers. While their function is more traditional, each employee of the credit union understands and is trained extensively in the marketing function. The Day 2 staff can augment their regular salary with marketing incentives by providing leads to the Day 1 group. Each knows that their livelihood and continued employment depend on the success the credit union achieves in attracting new loans and deposits.
So, who’s responsible for the success the credit union has achieved in recent years? Is it the CEO, Amy? Her marketing staff? Or maybe this vision originated with the Board of Directors. Each of the above deflect credit to the others. Amy credits the Board of Directors and the staff. The staff credits Amy and each other. The Board credits Amy and the staff. Amy emphasizes the board’s involvement and support. In the end it appears to be truly a team effort with each team member understanding and effectively carrying out their respective roles.
An intense sales culture such as Family Focus is challenging to achieve. It takes time and total commitment by the board, management, and team members. It may not be for every credit union. But for Family Focus it has meant the difference between achieving success or being an also-ran.