Jim Merrill (L) with Brandon Beaumont
BRISTOL, Penn.—One small credit union that has grown its assets by 25% over the past 18 months says the key is to have a detailed plan and be willing to take some calculated risks.
With the full backing of the board, Jim Merrill has engineered sweeping changes at the $105-million Inspire FCU here, knowing the organization had to grow to survive.
“That was clear,” said Merrill. “And the board in their search for my position understood that if things did not change the conversation would change from how do we grow to who should we consider to merge into.”
To avoid that end, Merrill said the plan Inspire set out to address under his direction has been based on building a strong foundation.
“This credit union was not built to support growth,” said Merrill, noting that assets hovered in the $70 to $80 million range during the decade before he took the job. “This credit union was built to maintain business. And if we going to have a strong, aggressive growth strategy we needed to strengthen the foundation. We couldn’t build on a weak foundation that would crumble underneath us when we started to achieve growth.”
Strong Year
Merrill said that 2015 was perhaps the strongest year financially in the history of Inspire. Net income that year was $679,922, driven largely by total loans growing from $54,790,929 to $82,863,875. ROA moved above 70 basis points. Assets grew to their current mark from $82,900 at the end of 2014.
“This represents over a $28-million growth spurt, equating to an annual increase of slightly over 50% from prior year,” said Merrill. “This loan growth was achieved while continuing to manage loan delinquency to a ratio of 0.28%, which is about three times less than peer credit unions.”
Total shares increased 20%, moving from a balance of $74,205,416, to $87,187,368 at the close of 2015.
Merrill acknowledged that it is not easy for a small CU to grow. But without focusing and executing on a carefully crafted strategic plan that holds people accountable, including the CEO, the small CU won’t grow at all, contended Merrill.
“I think where many small credit unions get off track is by not having a plan and strategy,” Merrill said. “They show up every day, get caught up in how busy they are and how much they have ahead of them that they end up simply maintaining. Growth is about a strategy and a mindset, and convincing the organization you have the right plan and can do this. It’s also about tracking and monitoring progress.”
Tough First Step
The first step in Merrill’s plan was the most “painful.” The CU needed to bring in a number of new people.
“I hired a CFO who has done wonders for us, including structuring our balance sheet,” said Merrill, who explained the board gave him complete authority to address staffing. “There was a lot of changes and turnover. People who were here for a long time left. But I felt we needed to do this to move the credit union forward.”
Jim Merrill
While Inspire Federal better managed its expenses, that part of the plan was not focused on cost-cutting, but instead redirecting money into areas that would drive net income.
Inspire spent dollars on technology to speed the lending process, such as e-signature, a new loan origination system, and auto decisioning. The credit union also revamped its lending policies.
Participations Purchased
Inspire boosted its portfolio, too, through loan participations, purchasing loans across the lending spectrum. An indirect lending program began, as well.
“We got back into indirect auto lending. We moved from zero in indirect loans to funding more than $2 million in 2015, which is a big jump for us in a short time, especially when we had to build all new indirect relationships,” explained Miller, who said diversification was a key to the lending strategy.
The importance of diversification isn’t limited to loans. On the deposit side, Inspire added competitive CDs, including specials for a 1.89% APY nine-month CD and 2.02% for 12-months.
“We have also taken in non-member deposits through institutional CDs,” said Merrill.
Access to the credit union has been improved, as well. Inspire added sophisticated ATMs that Merrill said function like a 24/7 teller, and it just opened an office in Langhorne, Penn. The branch eliminates teller lines and uses new technologies such as touch pads and tablets to speed up service and improve the overall member experience.
2016 Looks Good
For 2016, Merrill said Inspire will continue its strong growth pace, just not at last year’s levels. The CU is projecting 12% asset growth and 17% loan growth, both of which are well above peer, Merrill noted.
The small credit union has to be willing to take calculated risks and make some big changes or it won’t grow, insisted Merrill about the plight of many small shops.
“You have to have plan and be willing to take chances. Granted you have to be able to assess a situation and determine if a risk is worth taking,” said Merrill. “We did that. And we created a very clear plan for driving net income growth and we are following it.”