Neither snow, nor rain, nor final exams distract the executives of the studentrun Georgetown University Alumni and Students Federal Credit Union ($16.6M, Washington, D.C.) from their goal of bringing cooperative financial services to the nation’s capital.
With nearly 8,000 members that include a fluctuating student base as well Georgetown alumni, the credit union is seldom at a standstill. But careful balance sheet management by the executive team ensures the momentum is always driving the credit union in the right direction.
“Our cash position is very good, as are our investments,” says Jack Mohr, treasurer for the credit union. “We do a great job of trying to have the yield we want and that higher return on our investments, while still staying cognizant of the duration of our investments so that we also have liquidity.”
A Unique Balance Sheet
As of 3Q11, net loans represent less than 10% of the credit union’s assets. The credit union has approximately 60% in investments and roughly 28% in cash or other equivalents, according to Callahan & Associate’s Peer-to-Peer Software.
“We keep more cash on hand due to our cash volatilities and the seasonality of our member base, which is something you can’t really prevent,” Mohr says. “From March to May, we have kids graduating and pulling their money out. In August, we’ll have kids coming back to campus and we’ll see a huge influx of money.”
This volatility is a challenge, but it’s also a learning opportunity. Because the credit union has been able to analyze these trends over the years, leadership can create a fairly solid projection of its position for upcoming quarters and understands how future rates and fees might impact these trends.
“Having that knowledge makes us more comfortable in making investment, liquidity, or duration decisions,” Mohr says. However, the benefits and drawbacks of each option are not always clearcut. For example, in 2010, the credit union saw a massive influx of shares, with the majority being in savings accounts.
“We were offering a 1% rate during that time and maintained it while other institutions were dropping their rates significantly,” Mohr says. “Word got out that we had some of the highest saving and CD rates in the country, which is great, but so much growth in such a short amount of time does have an impact on your bottom line.”
Moving forward, the credit union is looking for ways to encourage balanced organic growth in both income and assets.
The credit union operates with only a single primary branch location and has increased its accessibility through an extensive Allpoint ATM network and online banking. What’s more, although these investments have come at a high cost, the credit union’s business model has helped it keep expenses in check.
“Because employees are not paid, it makes things easier in terms of managing operational costs,” says Greg Francfort, chief financial officer. “But we’re always looking for ways to increase efficiency because it boosts income without impacting members as much.”
Instead of trying to spread the cost, as other for-profit institutions might, the credit union turns its efficiency focus inward, through practices such as consolidating its vendor contracts to minimize expense and enhancing service.
“We can’t invest in everything and we can’t do everything, so we have to ask what services add the most value for our members,” Mohr says.
Read more about Georgetown University Alumni and Students Federal Credit Union's lending portfolio in the 3Q 2011 edition of Credit Union Strategy and Performance (CUSP).
Watch the video series: "Anatomy Of A New Generation"