Cream Of The Crop

Diligent oversight and superior rates help this Iowa credit union raise its ROM.


Jeff Disterhoft is the CEO of University of Iowa Community Credit Union ($1.2B, Iowa City, IA). The credit union had a banner year in 2010 and is continuing its successes into 2011. Just in time for spring planning, Disterhoft spoke with about challenges and opportunities, branch expansion and ROM.

Rebecca Wessler: What were some challenges you faced and successes you claimed for first quarter 2011?

Jeff Disterhoft: We had a couple of big challenges, both were man-made. First, we opened a new office in a new market, so that’s a new endeavor that requires new marketing and presents new challenges. Second, we converted our data processing system. We actually just finished that up a few days ago. So that was a tremendous draw on our resources.

On the success side, the new office was a huge success. It has exceeded our expectations. Overall in terms of performance, in aggregate our annual first quarter loan growth was 25% and our annualized deposit growth was 29%. For earnings, we achieved ROA of 1.51%.

12-Month Loan Growth by TypeROA

Click on graphs to view larger size. |  Source: Callahan & Associates' Peer-to-Peer

RW: Where has that loan volume come from?

JD: It’s relatively broad-based. Approximately 40% of that growth is in first mortgage, 20% is in indirect auto lending, 20 to 25% is from over-the-counter consumer loans, and 10 to 15% is in commercial. So it’s a little bit of everything.

RW: So growth has been pretty much across the board; are there specific promotions you’ve found that resonate with your members?

JD: We have had a couple of promotions, but they are all rate driven. Our business model is really built on providing best-in-market pricing and effectively marketing that message. We are a market leader if not the market leader in pricing. We had promotions for autos, and we always do a spring home equity promotion. It’s nothing new; we just make members aware of our pricing.

RW: Have you seen the Iowa Credit Union League report? Do you feel like your credit union is representative of the credit union environment in Iowa?

JD: Yes and no. Lots of credit unions in Iowa have enjoyed deposit growth similar to us, and earnings for credit unions in Iowa are better than the rest of county in general. But I don’t know if all credit unions here have enjoyed the robust loan growth we’ve seen. So, the answer is: We’re a little representative but not totally representative.

RW: Although Iowa has seen some affects of the recession, it hasn’t faced the dramatic troubles facing the Sand States. How did you manage the credit union and member expectations through the past couple of years?

JD: I don’t really have much of an answer for that. We’re not alone. The local banks are doing just fine; the local credit unions are doing just fine. There isn’t much to be done to manage consumer expectations in the Midwest. Our members knew by and large that most of the problems were taking place on the coast, or in the Sand States, or the Southeast. We didn’t have to do much to manage expectations. For the most part, I don’t want to say it was totally business as usual, but it was pretty close to business as usual. We’ve been lucky.

RW: University of Iowa Community merged with Best of Iowa Community Credit Union last fall (Best of Iowa represented approximately 5% of University’s asset base). What opportunities did that merger present?

JD: It gave us a chance to have a congregation and a church. Best of Iowa had a branch and it had the membership in and new market. We had members in that market but not a branch. So off the bat, the merger gave our members access to a physical location. It gave University of Iowa Community Credit Union a footprint in that market. And then we augmented that foothold with the branch I mentioned before.

RW: How does the merger increase member value for Best of Iowa Community Credit Union?

JD: Our pricing was very valuable to them. We’ve increased their deposit base, and we’ve added a lot of value just based on the results of what we are seeing on the deposit side.

RW: You consistently rank in the top echelon of Callahan’s Return of the Member (ROM) score. Last quarter you ranked No. 2 out of 169 credit unions in your $1B+ in assets peer group. What are the challenges in keeping the member service standard you’ve set when introducing a new membership? What’s your strategy for how you plan to retain that ROM score?  

JD: Our business model is built on price, so it’s incumbent upon us to run as efficient a cooperative as we can so we can give those savings back to members in terms of great rates and we can give those savings back to employees in terms of salary. That business model has worked well for us over the years. The challenge we face is to remind ourselves of that business model. If we merge, if we open a new branch, if we convert to a new data processing system, those activities all add costs. So how do we bring those costs back down so we can give back to our members? That’s our primary challenge: How to constantly stay focused on the business model that has made us so successful.

RW: Any thoughts on the prize-linked legislation not passing?

JD:  I was disappointed because ultimately any enticement we can provide consumers to save and develop good savings habits, especially in today’s economic environment, is positive for not only Iowa but also all consumers.

Specifically for the state, this is probably somewhat of a reflection of the opportunities credit unions in Iowa have to improve relationships with lawmakers. Banks have strong legislative relationships in all states, so this is another reminder of that balance of power.

RW: Do you have any parting thoughts about the direction of the credit union industry?

JD: As an industry, I hope we have the worst behind us. I don’t know that the industry will see the same robust numbers we saw, say, five years ago, but I am cautiously optimist that this will be the start of a new era.