2 min read January 2022 — Central Minnesota Credit Union is unique in its emphasis on commercial transactions and has emerged as a leader in supporting businesses through the turbulence of the pandemic. “We have been good about pivoting quickly and taking advantage of opportunities in the market,” CEO of the credit union Charles Friederichs told Invest:.
What have been some key successes for Central Minnesota Credit Union over the past 18 months and how are your priorities shifting in 2022?
We are the only credit union in Minnesota with a SBA Preferred Lending status, this allowed us to move quickly for the PPP processing in 2020 and the second round in 2021. CMCU originated about half of the PPP loans made by Minnesota credit unions. During 2021, almost $120 million of PPP loans CMCU granted were forgiven or paid off, but we were able to experience growth in our traditional loan portfolio. Our members have increasingly shifted their transactional banking to digital channels for convenience, breadth of services and overall experience. Digital transactions at CMCU cost $0.28 versus an in-branch transaction cost of $2.60.
As we move into 2022, our priorities will shift to managing the net interest margins, expanding our digital offerings, and evaluating potential acquisitions that provide value and synergy for all members. We continue to emphasize a great member experience and look to generate more revenue opportunities, while deploying solutions that create a more personalized member experience.
What do you see as significant opportunities for 2022?
CMCU launched a commercial lending focused credit union service organization (CUSO) that allows other Credit unions to offer commercial loans to their members or become a more substantial player in their markets for commercial lending opportunities. Our CUSO will allow our expertise in commercial underwriting on a national scale and help credit unions that have limited commercial resources to expand their market share. Additionally, SBA used to be considered a last resort for direct lending, but with the success of PPP, businesses are seeing the benefits of these types of loans and they pair well as a product offering from credit unions.
What do you see as the impact of interest rates creeping back up and the effects of inflation?
I believe there will not be any significant jumps that will shock the system, but I do think they have to start raising rates with the increasing inflation. This will cause a further narrowing of financial institution margins as liabilities will reprice at faster rates then the underlying assets. However, CMCU’s market is fairly diverse which limits our exposure to any single segment or community concentration. Our agricultural businesses will probably face more of an impact to rising rates and inflation especially coming out of a very dry year that lowered production.
What do you see as the chief factors driving consolidation forward?
It is multifaceted because some businesses with low capital ratios cannot weather the storm. On the banking side, when Build Back Better legislation was proposed, bankers wanted to sell to avoid capital gains increases. On the credit union side, it is hard to drive capital, build income and manage expenses when relying on sub-2% auto loans in today’s market. There are several factors with no single standout one that is causing this consolidation phenomenon.
How are credit unions embracing technology to drive the industry forward?
Prior to COVID, we strategized our digital needs in order to compete with fintechs and large banks. We were in a capital position to allow us to invest in digital projects which was beneficial as the pandemic shifted how members interact with their financial institution. Members have adopted digital and technology at a rate that was unanticipated pre-pandemic. Implementation and adoption of these technologies require the appropriate internal infrastructure, resource capacity and expertise.
The adoption of data analytics, specifically predictive and prescriptive, will play an important role in driving the industry forward. Descriptive analytics has served credit unions well in the past, but data needs to be used to predict members’ product and service needs.
What strategies has Central Minnesota Credit Union implemented to offset national issues like the labor shortage?
We have shifted our branch employees into a banking consultant role who greets members at the door. As subject matter experts, they assist members, answer questions and connect members with our resources as needed. We have implemented interactive ATMS to allow members to conduct most transactions at the ATMs or with help from virtual banking consultants. We have also embraced digital and analytic technology that allows us to have a smaller branch footprint and less branch staff to manage members’ needs. We provide market-competitive compensation and benefits to our employees to keep them engaged with the organization and focused on what is important, our members.
For more information, visit: https://mycmcu.org/