The $1.4 billion Alloya Corporate FCU's 2012 net income of nearly $6 million is about twice what the Warrenville, Ill.-based institution budgeted.

How did President/CEO Chuck Furbee and his team do it, particularly in an era of low investment rates and little loan demand?

“We adjusted things on the fly,” Furbee told Credit Union Times on Friday. “Some parts of the operation weren't very efficient, and weren't contributing to income so we changed that.”

A key strategy was outsourcing to vendors. Alloya tapped the Duluth, Ga.-based VSoft to take over its item processing and the Naperville, Ill.-based WorkNet to provide IT services to the corporate and its members.  Such outsourcing helped reduced Alloya's salary and benefit costs from $24.7 million in 2011 to a little less than $17 million in 2012.

Alloya once counted 1,800 members as Members United, emerging from its recapitalization drive with around 1,000.

The size difference is apparent in the balance sheet, especially in its positive effect on interest expense: 2012 required only $4.5 million worth of dividends payouts, compared to $28 million in 2011, according to the corporate's latest financial reports.

“We maintained our dividend rates, but we had fewer people to pay out,” Furbee said.

That successfully balanced a big reduction in investment income, which fell drastically to $6.5 million as of year-end 2012, down from nearly $40 million the year before. Legacy asset investments and their higher earning yields were removed from the books when Alloya emerged from conservatorship, causing the drop.

Furbee said Alloya had budgeted for an even larger interest income drop than experienced, but the delay in shuttering U.S. Central resulted in Alloya keeping some relatively high-yielding certificates longer than anticipated.

Much of the income windfall went into capital. Alloya reported a 1.7% retained earnings ratio, far higher than NCUA requirements. Nearly $26 million worth of retained earnings combined with nearly $70 million in perpetual contributed capital and some non-perpetual capital leaves Alloya with nearly $103 million in total capital to cushion against $1.5 billion in moving daily average net assets.

Furbee said Alloya's merger with the $1.5 billion Central Corporate CU of Southfield, Mich., is still proceeding as planned. The NCUA is still reviewing the request, but Furbee said he expects the federal regulator will approve it as soon as this quarter.

Upon a successful vote by CenCorp members, Furbee said, he will return to retirement, and CenCorp President/CEO Bill Walby will lead the merged entity, which will retain the Alloya name.

Furbee said Alloya plans to grow both through mergers and organically, and said he thinks the corporate will be well-positioned to expand as time passes, rates rise and liquidity demands increase.

Members that recapitalized Alloya are also satisfied with the new corporate: Furbee said a November member service survey revealed members ranked Alloya a 4.5 for overall service on a 1 to 5 scale, with 5 being the highest ranking.

Alloya's December 2012 financial reports are available for the public to review on its website.