Finance challenges and opportunities
Skyla Credit Union CFO Brett Fisher offers insights on the year ahead.
Credit risk and margin compression are two of the biggest challenges facing Brett Fisher, chief financial officer at $1.5 billion asset Skyla Credit Union in Charlotte, N.C., and a member of the America’s Credit Unions’ Finance Council Executive Committee.
He offers insights into those and other challenges, opportunities in the year ahead, and the importance of communication.
America’s Credit Unions: What’s going on at your credit union right now?
Brett Fisher: A few things top the list. We transitioned to contactless debit and credit cards in 2024, and to a new online banking tool in 2023.
We continue to expand our digital offerings to members. That will include a revision in new account opening and loan origination system platforms; tentatively in the second half of 2024.
We finished our second recent merger in 2023, and we continue to work on culture and merging the best components of each credit union.
We rebranded in late 2022, and we actively focus on brand awareness and expansion.
Q: What are the biggest finance-related challenges you’re currently facing?
A: Credit risk. The abrupt increase in industry credit risk certainly has our attention. Skyla hasn’t been immune to changing credit risk experienced through both loan charge-offs and deposit fraud.
Changing credit risk expectations under a current expected credit losses (CECL) environment is a first for our industry, so we’re as curious as any as to how quickly loan loss reserves must adjust to new conditions.
The unique phenomenon at play is that many economic characteristics remain positive, including traditional benchmarks such as unemployment. Therefore, traditional economic metrics cited under CECL qualitative and environmental considerations may not adequately forecast changing credit risk.
No credit union is immune to current or projected forecast adjustments, even if adjustments simply consider altering industry trends.
Another challenge is margin compression. The industry enjoyed margin expansion for years, yet deposit-rate escalation and, more importantly, share migration into higher-rate certificates is catching up and directly impacting margins.
Therefore, certificate concentrations and the related interest expense represent a growing challenge for both Skyla and our industry, especially as members consider certificate renewal or look elsewhere for better rates.
Q: What challenges do you see on the horizon?
A: Certificate renewal. The push for certificates in 2023, especially later in the year as rate premiums escalated, will come back front and center when maturities come due.
Many credit unions followed the yield curve and, therefore, targeted short-term certificates, many of which will come due later in 2024. Depending on the rate environment at the time and liquidity needs, credit unions may be forced to bid up rates once again to keep deposits that could prove quite volatile.
Also, regulators and so-called “junk fees.” NCUA now requires credit unions to report overdraft and nonsufficient fund fees. Regardless of how justified a credit union may be in their position to offer and charge fees for such services, NCUA’s request will open the industry to the potential for negative public perception due to twisted media messaging.
The negative perception could force credit unions into a corner to respond in a way that may reduce services offered to members, particularly those who need a personal liquidity backstop.
Restructuring services could have adverse financial consequences for noninterest income, but also impact credit risk as credit unions may need to alter and/or eliminate overdraft protection and with it the lifeline members desperately need.
Another challenge is relevance. Skyla’s mission is to “help make your possibilities a reality,” and our vision is to “build financial freedom for all.” The open-ended nature of our mission means we’re in constant pursuit to align products, services, and rates to better position members for financial success.
This means we must stay relevant to our members’ expectations. Although it’s hard to define the direct financial impact, it’s a constant challenge we must address, intersecting technology with member demand.
Q: What opportunities do you see for 2024?
A: Deposit management. In an effort to offer more succinct and deliberate products to our members, we’re revising our checking accounts in a way that better appeals to our membership.
We believe by offering a premium-rate checking product in a way that caps interest expense, we’ll better appeal to new account acquisition and capture some term deposits.
We’re also in a continuous search for ways to improve operational efficiencies. As margins tighten, the industry may have to focus on improved efficiencies to maintain earnings.
Q: What advice would you offer new finance leaders?
A: Never assume you have the right answer. We’re surrounded by so many talented leaders in our industry and inside our credit unions’ walls. I’m a “learner” per Clifton Strengths, and always eager to seek out new perspectives and processes to improve myself and my credit union.
Finance professionals might not be the favorite in the room, but typically we’re highly respected. Be comfortable delivering tough information in a direct and succinct manner.
Communicating is the most challenging part of my job. Knowing your audience is critical in delivering information in a way that enhances retention. A wise peer once advised me to have an A-, B-, and C-level response for all topics, knowing that your “smartest person in the room” response is seldom the best route.
Q: What do you like to do in your free time?
A: Free time is a rarity as I have two young kids with active lives. I’m an avid car enthusiast, and I always feel more accomplished at the end of the day if I’ve fit in a workout at some point.