Strict Cost Controls Create High ROA

Overall return on assets for CUs rebounded to 68 basis points at year-end 2011.

January 13, 2013

Although credit unions’ overall return on assets (ROA) rebounded to 68 basis points (bp) at year-end 2011 (up from 18 bp in 2009 and 50 bp in 2010), this measure remains below historical averages, according to CUNA’s economics and statistics department.

But some credit unions are bucking this trend. Case in point: Baton Rouge (La.) Telco Federal Credit Union, which reported a robust ROA of 146 bp in 2011 due to a strict focus on expense control, says Darryl Long, CEO of the $221 million asset institution.

He cites several ways the credit union keeps expenses in check:

  • Don’t be all things to all people. Focus on what services are important and ignore the rest.
  • Have few branches and limited hours.

    Instead, embrace Web-based services and shared branching.
  • Offer simple accounts. Make accounts easy to explain and to understand. Don’t over-complicate.
  • Answer the phone. Resolve staff and member issues right away.

  • Respond to emails right away to prevent duplication of effort.

    “Procrastination is expensive,” Long says.
  • Skip the call center. Fully utilize all staff.

    Most employees can answer phone calls along with their other duties, he says, although this must be monitored and encouraged.
  • Have meaningful evaluations. Hold staff accountable and reward high performers.

  • Hold few meetings but make them meaningful. Make staff aware of your goals and successes.

  • Have few layers. A flat organization chart allows for faster reaction times.

  • Employ no executive assistants.

  • Market sparingly. Rely on word of mouth and make sure marketing promotions are justified.

  • Compare your expenses and efficiency to your peers.

“You can’t improve,” Long says, “if you don’t keep score.”