Perfecting The Process
Looking over the last 12 months, what has happened to your credit union’s net interest margin? If yours is like most credit unions, the answer is it has declined. Competition for loans and low interest rates continue to erode yield on assets. Cost of funds has declined but (for most places) not enough to completely offset the reduction in asset yields.
If interest rates remain low throughout 2012, the yield on assets will continue to decline. Can the cost of funds be reduced further? For some, the answer is yes; however, others are at, or near, the floor.
Below the margin, many credit unions have made cuts to operating expenses over the last couple of years. Most of the “low hanging fruit” has been picked. Some credit union managers are feeling they have done everything they can do with operating expenses, yet earnings still aren’t where they would like them to be. What can you cut after you’ve cut everything?
Sustainable expense reductions often come not from cuts, but from improving processes. Have you examined and mapped out all the processes at your credit union? If so, were you surprised (shocked?) by what you learned? We’re doing what!?!
Improving processes to remove unnecessary steps, to move members through the process faster and free up employee time, can both reduce expenses and increase revenue. Remember that every minute a frontline employee spends completing a non-value-add step in a process is a minute less they spend interacting with members.
