FORT LAUDERDALE, Fla.- Nader Moghaddam admits his first day on the job as CEO was nearly his last.
Moghaddam recalls that on the day he arrived as CEO at Financial Partners Credit Union in Downey, Calif., in 2005, "I almost walked out." It was obvious there had been significant "deferred maintenance," and excess office furniture could be found in the parking lot.
"The organization had a proud tradition and nice people, but it was very insular and not necessarily the most effective organization," said Moghaddam.
Today Financial Partners CU has grown to $740 million in assets with net worth of 8.81%. It reported $5.2 million in 2011 net income in a tough California economy that it serves with a community charter (plus 300 SEGs).
Today, with its vision built around the theme "Building Lifetime Financial Partnerships," the former Rockwell Credit Union is in the black and growing. But all of that has come only after FPCU passed through three phases, according to Moghaddam, who shared his insights with the CUNA CFO Council's Annual Meeting.
Foundation Building, 2005-07
"The issue was fixing the credit union and getting our strategy right, followed by getting our sales and service culture right," said Moghaddam. "We lived the life of the butterfly on the sales front; we are born on Mondays and die on Fridays. We did core and sub systems conversions. In 2006 pretty much everything in the credit union was converted. This means you have to be very good in project management, and it is very helpful when you go through mergers. We revamped all our branches and made a decision not to open any additional branches and instead to focus on electronic delivery."
When it comes to what he described as "talent acquisition," Moghaddam said that today the credit union has fewer employees, but they are "much better compensated. Having more employees doesn't mean it's better."
Economic Recession, 2008-10
The Southern California market was hit hard by the downturn, and Financial Partners wasn't immune. "We did scenario planning and our worst case scenario projected a 25% reduction in home values. We were seeing 50%. We had no idea," said Moghaddam.
Financial Partners had sought to grow organically and through mergers, three of which it has completed. Internally, Moghaddam said it has established three groups tasked with right-sizing the balance sheet, increasing the top line, and reducing costs.
"This has meant controlling the balance sheet's growth," said Moghaddam. "But how do you nurture a sales and service culture if you might even shrink the balance sheet to some degree. We weren't going to forego growth, but we were going to grow in a slightly different way."
The credit unions Margin Team, made up primarily of its ALCO, reviewed pricing and as a result oversaw a repricing that had Financial Partners in the bottom 25% of its market. "I think we had enough service quality value to justify our value proposition," said Moghaddam. "We looked at product opportunities and established credit risk and interest rate risk postures."
Financial Partners has changed its loan mix, with a big reduction in its real estate portfolio. It had been selling nearly all its production to the secondary market, and now has a servicing portfolio of more than $1 billion. Mortgages generated 172 BPs in 2010, 130 BPs in 2011, and now FPCU is looking at putting some mortgages at 4% on its books. "How far have we come on that one?," observed Moghaddam.
Financial Partners also reviewed its fee schedule and took what Moghaddam described as a focused approach to overdraft protection. "We also did staff training., which was key. How do we make sure we don't give away anything for free. If we give up a fee, we talk to the member about other ways to get value from the member."
A review of FPCU's contracts and subsequent renegotiations (using a third party) cut between $600,000 and $700,000 in annual costs, while it also reduced staffing by 14%. "We could have put this off, but we're glad we jumped on this in the morning. It sent a message to the whole staff. It wasn't just a million dollars in saved comp expense. It sent that clear message."
Financial Partners has generated additional non-interest income by expanding its investment program, which now has $190 million in assets under management.