One Photo, Hearts on Fire, a Credit Union and Community Respond to a Vital Human Need

Clearwater Credit Union, Missoula, MT, is involved with solutions to one of the most difficult challenges facing their community, the nation and the world: refugee immigration.

Every day this story moves from Afghans on the front page to Haitian migrants huddled under a bridge over the Rio Grande.  Politicians pose and procrastinate while hundreds of private organizations, individuals and communities respond to this never-ending need for human relief.  The temptation to stir up public fear is never far away.

This is the story of how Clearwater and its community joined to respond to this on-going human tragedy .  

Founded in 1956 by eight police workers, Clearwater Credit Union is the second largest of Montana’s 47, with over $850 million in assets plus a $250 million mortgage servicing portfolio. 

It is the state’s largest Community Development Financial Institution (CDFI).

In 1979 Missoula was a resettlement community for Hmong refugees from Southeast Asia, allies during the Vietnam war.  Today, that community includes farmers, food service operators and active vendors in local open markets.  The forty year history of this immigration experience is described in this 2016 article  in the Missoulian:

While their contributions to the outdoor markets are perhaps most visible, first-generation Hmong immigrants and their offspring are bankers and real estate agents; decorated war heroes and high school valedictorians; sports standouts and chefs; entrepreneurs, business owners and probably a dozen other things around town.

The Need Arises

In 2016 the refugee resettlement needs rose again in Missoula with people from Syria, the Congo, Iraq and Eritrea trying to find a new place to raise families, often following harrowing escapes.

The turning point for the credit union and many in Missoula was the picture of Alan Kurdi, a three year old lying on an island beach off the coast of Turkey.  His mother and brother also perished-all Kurdish refugees hoping, somehow, to get to Canada.

In memoria aeterna erit justus  (The righteous-innocent-will be in everlasting remembrance)

The still boy beside moving waters. This face of tragedy energized a community.  

Mary Poole, who had been a tree-climbing arborist before her first child, found the photo gut wrenching.   She was determined to do something and raised the topic with her local book club. They began research to find out what worked well in other successful refugee programs. Montana was one of only two states that did not have a path to welcome refugees. 

This grassroots group invited the International Rescue Committee (IRC) to open an office in Missoula and serve as the city’s resettlement agency, creating that path.  They then founded a 501(c)3,“Soft Landing Missoula”, to support newcomers and connect them with all aspects of community life.  

Her story and this remarkable organization, can be seen in this 2017   8 minute video.   

Transforming the Credit Union

Jack Lawson became Clearwater’s CEO in 2013.  His prior roles included Founder and CEO of Brooklyn Cooperative FCU (1998-2008) and COO, Self-Help FCU ( 2008-2013).  After making sure the trains ran on time, Jack posed the question how the credit union could differentiate itself for its employees, members and from competitors.  The credit union chose to implement a values-based approach to business strategy.  

The history of this transformation and what it meant for the credit union’s priorities  is described  in their 2018 Annual Report.  As Montana’s largest CDFI and their strategic repositioning, refugee settlement was exactly a situation for which the credit union intended to have a positive impact.

Jack too had been moved by the photo. The credit union was chosen by the local office of the International Rescue Committee (IRC) to be the designated provider of financial services for refugees.

As Jack related: “It was an easy fit for us.  We saw it as a way to improve the financial well-being of some of our most vulnerable new neighbors.” This support involved the following initiatives:

  • Becoming a financial services provider for both Soft Landing and IRC
  • Coordinating with IRC to provide financial accounts for all incoming refugees
  • Adopting telephone bank translation services, at the credit union’s expense, to help each branch team serve people speaking languages they do not know-for example, Swahili, French, Tigrinya, and Arabic.   
  • With IRC, developing financial education classes for refugees to help them understand the US financial system, products, and services
  • Providing credit builder loans to build credit histories for the new arrivals
  • Contributing tens of thousands of dollars of philanthropy toward Soft Landing and IRC
  • Publicly celebrating the credit union’s work with the refugee community to help normalize their presence as neighbors

Refugees typically have no credit or personal financial history. The credit union teaches them how to participate in the financial system and establish a personal record.  The credit union has now hired its first refugee employee from among those  who have resettled in the community over the past five years.  

But the credit union’s role was much broader than offering financial services. As related by Mary Poole, CEO of Soft Landing:

“I met Jack on a soccer playing field.  He is part of the community and attends multiple public events. He knows the community and cares for its people because he is a part of it.  He came to us and asked what the credit union could do.  They supported local sporting events, annual fundraising, provided volunteers–we now have a CCU employee on our Board.  

There is a whole culture at the credit union reflected in their support for our work.  This is not just part of Jack’s job or the credit union’s service efforts.   It is how they interact with everyone and view their mission.  They are a thought leader in the local and world community-it’s the culture of the credit union.”

In the new federal fiscal year starting October 1, Soft Landing anticipates 75 Afghan and 150 other country refugee arrivals will be resettled in Missoula by the International Rescue Committee.  When Soft Landing first announced the idea of welcoming new neighbors in 2015, over 300 community members signed up to volunteer to help with school, housing, learning English, transportation and the dozens of other immediate personal needs of new arrivals- all before a single refugee came to town.

This interest has not faded, and has recently been  invigorated by the needs of  incoming  Afghan evacuees. Community connections are what makes these life transitions effective. The programs also celebrate the diversity, skills and experiences refugees bring to their new community.  

The Credit Union’s Strategy

Having moral imagination is expected of leaders, but nonetheless difficult to fully practice. Many in positions of authority ignore the imperatives of ethical truth in moments of life’s difficult choices.  It is much easier to follow the utilitarian pragmatism which suffices for many a leader’s everyday decisions.  

But there is another model.   To be moral is to be oneself.   Instances of compassion multiply and attract others of similar purpose. A person with this leadership capability is celebrated in the oldest of all literature:

Beatus vir, qui timet Dominum. . .

Generatio rectorum benedicetur.

Et justitia eius manet saeculum saeculi.

Exortum est in tenebris lumen rectis

Blessed are those who fear the Lord. . .

The generation of the upright will be blessed.

And their righteousness endures for ever and ever.

Unto the upright there arises light in the darkness. 

That is the vision Jack has set for Clearwater.

An Example of One Refugee Family: From the 2018 Clearwater Annual Report 

A refugee family moved to Missoula from Eritrea, Africa. Thanks to the credit union, they had the help they needed.

On average, it takes a refugee two years to resettle — that’s two years of waiting and wondering what’s next. Here’s how we helped Desbele and his family make themselves at home.

Desbele Tekle and his family came to Missoula from Eritrea, Africa, in May of 2017 during the magic of a Montana springtime. His sister and her family came too, and they all quickly grew to love the mountains, the people, and the “long-running river.”

Staff from International Rescue Committee (IRC) Missoula met the family at the airport and brought them to their new home. After settling in, Desbele and his wife Samrawit attended our “Understanding the U.S. Banking System” class for refugees, which IRC Missoula and Clearwater Credit Union created together.

This class teaches families like Desbele’s how to write a check, use an ATM machine and debit card, and understand the difference between a savings account and checking account, with trainings offered in Arabic, Swahili and Tigrinya through on-site interpreters from IRC Missoula.

The Family Needed a Car

Some challenges of resettlement are distinct, like language and culture.  Others are universal.  In a family of six, everyone has different schedules, Desbele’s children (ages 5,8, 13 and 15) go to daycare, elementary school, middles schools and high school.  Any parent will tell you that four kids in four schools plus after school activities, will make transportation tricky.  

Clearly they needed a vehicle.

Desbele went to a dealership first, where he tried to navigate a car purchase with a $500 credit card in hand. When that didn’t work, he called a friend (our translator for this interview) and together they went to our credit union.  Because of the banking classes he had taken, Desbele knew we would be able and willing to help with his first purchase here.

With a loan from the credit union, Desbele was able to purchase a minivan Now he can run errands and transport his entire family to church and school.

He can also get work.  Back in Eritrea, Desbele was a midwife.  Now, because of the car, he can make the commute to the Village Health and Rehabilitation Center, where he’s now employed.   Desbele is thrilled to be working again in the medical field. 

“So happy getting a loan because otherwise, it would take a very long time to get money to get a car, which would distort our plans.  This opportunity allows us to dream.”

With his family all together, a reliable set of wheels, and help from the local credit union, Desbele and his family are finding their place here in America — a place where their dreams can come true.

Recently, that dream led them across the country to join up with long-separated family and friends and a life in another city.  The start and “soft landing”they experienced  in Missoula provided them a solid foundation for success in their new home as well as life-time friends to return to visit in this little mountain town.

“Institutional Memory” Keeps a Student Co-op Relevant for their Community

NASCO is the acronym for the North American Students of Cooperation.   The organization serves student cooperatives, primarily those providing housing and dining options on college campuses.

Their monthly newsletter presents stories about their members.  This month’s edition linked to an article in The Oberlin Review, the student newspaper published on October 8th.

It opened as follows: After temporarily closing its doors during the pandemic, the Oberlin Student Cooperative Association (OSCA) has resumed housing and dining operations.  Harkness House member Tal Clower says, “It’s so important that we make first-and second-year students aware of OSCA because it gives people a sense of place-a special community that makes you feel like you belong.”

The full article is here.  

I found several points insightful as an example of the appeal of cooperative solutions.

  • It is a student-owned, nonprofit organization that offers housing and dining services to almost a quarter of Oberlin’s students.
  • An OSCA member since 2018, a senior, said the co-op experience provides an intimate, close-knit community, and has given her skills she feels will inform the rest of her life.
  • Preserving co-op traditions is the most important way to attract returning students now. In house meetings, older students are presenting Harkness House’s “personality” to potential members.
  • So vital is preserving OSCA’s historical role, that campus co-ops such as Harkness and Tank (another dining option), have created “institutional memory” positions. These story collectors document newsworthy events, take pictures, record oral histories, write articles, and tell the co-op’s role as OSCA reintegrates into daily life on campus.

What Credit Unions Can Take Away

While this story is location and business specific, the re-introduction of the coop option to a new generation is an ongoing challenge no matter the service provided.

Re-presenting your organization after a partial or full closure due to Covid is a universal challenge.   How do you restore the “sense of place” where members feel they own and belong?   Do you have a process to document your institutional memory?   What kinds of creativity will be necessary to reintroduce yourself into member’s lives, especially as they have become more proficient in on-line search options?

How might a credit union partner with these student led coops to broaden their experience with other coop services?  NASCO has a list of these campus-based student owned housing efforts.  This feels like a win-win situation for a credit union seeking the next generation of members.

Combinations, Corporations, Culture and Credit Unions

Are credit unions corporations?   Not in the technical legal sense, but in the way they see their role in society as they grow?

A critic of many aspects  of corporate activity is writer Jared Brock.   His posts cover many segments of endeavor, but always come back to an institution’s impact on individual lives.

Here are some of his recent assertions:

The entire point of multinational corporations is to shatter local resilience and self-reliance, disconnecting people from land and place and generational skillsets, creating a system of utter corporate dependence.

But as you can see, much of our shopping is human-scale and relational.

If you’ve ever been to a corporate “community event” or witnessed a corporate-created “grassroots campaign,” you know exactly what I mean. Everything’s a bit sanitized and clean and proper and nice and… off.

That’s because corporations aren’t relational — they’re transactional.

They can’t give freely and creatively.

Their legal fiduciary reason for existence is to take.

And human beings can smell it from a mile away.

People create culture → Corporations kill culture.

A question for credit unions:   Given his critique, do mergers of financially sound and long serving credit unions promote cooperative culture? Or are they examples of the transformation to a corporate mindset?

Learning from Other “Movements”

Richard Rohr is a Franciscan Scholar who  created the Center for Action and Contemplation in Santa Fe, New Mexico.

His writings focus on the universal themes found in all spiritual traditions.  Often his concerns are directed at the transformation of religious activity as a source of hope and societal betterment through love, to becoming part of established authority and values.

Richard: It’s possible to trace the movement of Christianity from its earliest days until now. In Israel, Jesus and the early “church” offered people an experience; it moved to Greece, and it became a philosophy. When it moved to Rome and Constantinople, it became organized religion. Then it spread to Europe, and it became a culture. Finally, it moved to North America and became a business. This isn’t much of an exaggeration, if it’s an exaggeration at all. The original desire or need for a “Jesus” experience was lost, and not even possible for most people. Experience, philosophy, organized religion, culture, business—in each of those permutations and iterations, Christianity was seen as above criticism. It simply was the religion, the philosophy, the culture.

Parallels for the Cooperative Movement

Credit unions are just over a century old versus the two millennia of Christianity’s evolution.   But it is hard not to see a similar transformation occurring in this very short experience.  From a movement, to a self-supporting system, to an industry, and finally just becoming another option in the financial services business sector.

The “member’s best interest” has become a rhetorical phrase to justify leadership actions, organizational priorities and political lobbying positions that have nothing to do with member’s well-being.

While individual credit unions may pursue their own plans for a while, the two strategic choices would appear to be:

  1. Continue the transition to becoming an indistinguishable part of the broader banking industry, or
  2. A reformation where the member’s involvement and benefit are once again the primary reason for a credit union’s being.

Is there a third choice?




The Cooperative Leadership of Ralph Swoboda (1948-2021)

(Editor’s note:  The following remembrance of Ralph’s leadership at CUNA was contributed by several of his colleagues.  CUNA’s announcement on September 14 of his passing  can be read here.)

A uniquely talented executive, Ralph successfully led the Credit Union National Association (CUNA) during a critical period of credit union modernization in the 1980s and 1990s. Modernization required transforming the movement’s structure that had remained unchanged since passage of the Federal Credit Union Act in 1934 and soon thereafter, the creation of CUNA. Modernization ensured credit unions’ viability into the twenty-first century by enhancing their capabilities to compete in a deregulated market. It is this historical transition that best captures Ralph’s contributions.

His credit union work began when he joined the Credit Union National Association (CUNA) in 1974 just as the movement recognized the need to change. It lasted through his untimely death while working on behalf of Irish and British credit unions through the nascent Centre of Community Finances Europe that he cofounded.

He initially served as CUNA’s general counsel and then as CUNA’s CEO from 1987 to 1995. He had an innate set of skills that included the foresight to anticipate new challenges before they appeared and overcome the unexpected but inevitable obstacles every endeavor confronts.

By any measurement of the qualities necessary to be a leader, Ralph met them all. He possessed vision, steadfastness, empathy, resilience, and compassion. Those traits – blended by his splendid intellect and indefatigable personal energy – defined Ralph as an unusually gifted executive.

The Forces for Credit Union Modernization

Ralph was at the center of the credit union movement from the early 70s on. The number of credit unions reached a high near 23,000 in 1972. However many credit unions lacked a too narrow a base from which to grow. Chartering new credit unions became challenging.

CUNA embraced the new regulatory era initiated by the National Credit Union Administration that allowed credit unions to accept small employee groups in their membership so long as each group had a common bond.

Ralph’s leadership during this transformative period is incalculable. Playing an instrumental role in ensuring credit unions had the tools to compete and thrive, Ralph advocated changes to the structure of the credit union system that served the movement since the 1930s.

Organizational Change

Among the reforms led by Ralph was the creation of new movement entities that enhanced the competitive capabilities of credit unions by leveraging their ability to collaborate.  It required a transformation of CUNA’s Governance structure. Formed initially as an association of state associations, CUNA’s Governance needed to blend the role of both credit unions and their state leagues.

CUNA Service Group, a CUNA and league subsidiary, was created to enable credit unions to become full-service financial institutions. Through partnerships with reputable financial-service companies, credit unions were able offer a range of new services beginning with a form of checking called share drafts that new legislation had enabled. As an attorney, Ralph played a prominent role in creating the share draft program from its successful pilot to the national rollout.

Within a few short years and under Ralph’s leadership, additional partnerships were formed to enable credit unions to offer members credit cards, mortgages, and a new service called individual retirement accounts (IRA’s)created by Congress to improve retirement savings options for consumers.

Ralph helped create U.S. Central Credit Union that functioned as a corporate credit union for natural-person credit unions.  It then evolved to become an integral part of a new Corporate Credit Union Network providing a full menu of wholesale services to credit unions.

Under Ralph’s leadership, the CUNA Foundation progressed from supporting credit unions  responding to environmental disasters into the influential National Credit Union Foundation. In addition to CUNA’s president and CEO, Ralph was president for each of these organizations.


While modernization reduced the number of credit unions, the number of members and assets grew exponentially.  Their growing operational independence created different relationships between credit unions and their associations. The CEOs of large credit unions sought greater direct input into their national organization.

Under the movement’s original structure, credit unions belonged to the state leagues and the leagues belonged to CUNA. Ralph initiated the first steps of revamping this ownership structure. He created a task force of credit union and league executives which proposed recommendations that led to a significant changes and new association bylaws.

Called “Renewal,” the process provided a combination of credit union and state league representatives on CUNA’s governing Board. For the first time credit unions became members of CUNA. Elections to the board were regionally based.   Divisions representing credit unions of differing asset sizes ensured fair representation among an increasingly diverse movement, while still including a membership category for leagues.

Modernization and the growth of large credit unions required more sophisticated educational and training services for the growing numbers of professionals joining the industry. Credit Union marketers approached Ralph to propose the creation of a Marketing Council run by the marketers themselves with CUNA providing support services. This first council led to more organized around the professionals now employed in credit unions—finance, lending, technology, human resources and operations. The councils now have a multi-decade record of sharing their knowledge among over 6,000 members.

Regulatory modernization, credit union growth, and the rise of professional staff led to concerns that the movement would lose touch with the cooperative philosophy of its roots.  In response Ralph supported a program called Development Educators so credit union personnel could be ambassadors to explain the cooperative tradition of service over profit and the importance of credit union’s historical role.

Leading In an Era of Change

Ralph’s tenure during this era of multiple modernization forces was in many ways equal in importance with the founding years credit union development. Ralph’s leadership role was as vital to credit unions today as those achieved by the movement’s founders.

Leaders earn respect by combining a commitment to the execution of strategy with sensitivity for the people with whom they work.  Ralph understood that compassion does not dilute a leader’s strength. It complements it. Humility is not a weakness, but it is a sign of confidence. All leaders make unavoidable difficult decisions.  Ralph made many, but he never lost sight of such decisions on people.

His recent death in Dublin, Ireland while continuing his credit union work with Irish and British credit unions was stunning. It is difficult to conceive the loss of such a vibrant individual who played an instrumental role in credit union modernization. To those who worked with him through his long commitment to the mission of credit unions, he will always be remembered with great fondness and deep respect as an exceptional person and an astoundingly skilled leader.

These personal attributes made him a leader who earned the admiration and respect of credit unions worldwide. He will be missed.

(Editor’s Note:  Ralph was succeeded by former democratic congressman Dan Mica as President and CEO in July 1996.  This leadership choice resulted in moving the CUNA President’s principal office to Washington DC. Political lobbying became CUNA’s primary activity.)

NCUA’s 2021 Year End Forecast for Credit Unions

At the September Board meeting, CFO Eugene Schied presented the forecast for the NCUSIF’s year end NOL.   The ratio he gave was 1.28%.    The slide showed the outcome  and the formula, but not the numbers used to calculate the ratio.

NCUA’s public affairs officer Joseph Adamoli has provided that data.

Large Slowdown in Share Growth Last Six months of 2021

NCUA staff projected yearend insured shares totaling  $ 1.597 trillion.  This would be an 8.8% growth from 2020’s yearend total of $1.468 trillion.

Since we know the midyear insured shares were $1.580 trillion, this indicates NCUA believes credit unions will add just $17 billion more in the second half of the year.

The 2020 yearend share growth was 20.9%;  the 12-month growth at June 30, 2921 was 15.4%.    Therefor NCUA foresees a significant decline in new deposits from these actual double digit  trends.

Net Income for the NCUSIF

The yearend retained earnings are estimated to be  $ 4.701 billion which would be a decline from the NCUSIF’s  July report of $4.739 billion.   In other words, NCUA projects an operating loss for the final five months of approximately $38 million versus a positive net income through July of $118 million.

There was no information to explain the decline in net income. Since monthly investment income more than covers all operating expenses, the agency must be projecting an increase in  the insurance loss expense.

2021 NCUSIF Equity Ratio

NCUA’s two yearend forecasts of $4.7 billion of retained earnings and insured shares of $1.597 trillion, results in the fund’s equity ratio of .294%, or almost at the 1.3% historical NOL level.

This forecast shows the importance of the NOL cap.  For if retained earnings exceed the NOL, then any overage must be paid in dividends to credit unions.

If instead of negative net income for the final five months, the NCUSIF were to report a gain of just $52.8 million, the equity ratio would be right at .3%.   Even that result would be less than half the net reported in the first seven months.

Transparency and Responsibility

No matter how close NCUA’s estimates prove to be, the first conclusion is that this will be a good year for the NCUSIF, even if share growth ends up higher than the forecasted 8.8%.

The estimates also demonstrate the importance of resetting the NOL based on actual historical performance versus hypothetical scenarios with no objective validation.

We don’t know if there will be an NCUSIF update during today’s Board meeting.   If there is, the credit union owners have the data necessary to track performance which is one of credit union’s most important responsibilities.

For if the owners and contributors of the 1% perpetual underwriting show little interest in the NCUSIF’s performance, the prospect of a dividend or effective use of the fund’s investments, then the  accountability for oversight built into this unique  co-op model will break down.

The transparency from NCUA is helpful, but only if credit unions use it to monitor the fund and provide comments  to the board.   For the next big NCUSIF decision will be setting a new NOL level (currently 1.38) at one of the two monthly board meetings remaining this year.




Would Your Competitors or Peers Invite You to Talk to their Senior Management Team?

Yesterday Kelly Evans, a CNBC host, reported a meeting last week between Elon Musk and the senior management team at Volkswagon.  And no, it had nothing to do with merger or buying technology.  Here is the opening of her story:

Here’s a headline that should stop you in your tracks: “Tesla’s Musk dials into Volkswagen executive conference.” My first thought, when I saw this, was that it must have been either some kind of quirky Elon Musk prank or a weird fluky accident.

But it was neither. It was, in fact, an invitation by the CEO of Volkswagen for Musk to address a meeting of 200 top Volkswagen executives in Austria, in order to “galvanize [their] top brass for a faster pivot to electric vehicles,” according to Reuters. I’m sorry, what?! Can you imagine, circa 2015, “Microsoft invites Adobe CEO to talk about transitioning to the cloud,” or today, “Facebook invites TikTok CEO to talk about their success in short-form videos and algorithms.” Or maybe, “Jacksonville Jaguars invite Patrick Mahomes to talk about success on offense.”

Anyhow, Volkswagen’s CEO, Herbert Diess, confirmed his invite and Musk’s “surprise” Thursday video appearance on Twitter and LinkedIn. “Happy to hear that even our strongest competitor thinks that we will succeed [in] the transition if we drive transformation with full power,” he wrote. You have to give Diess credit. He sounds like a disgruntled CEO who sees the future but can’t pivot his company fast enough, and is now pulling out all the stops to get there–including inviting his “strongest competitor” to give his own employees a pep talk.

How did this happen? How could the CEO of the world’s largest automaker for much of the last decade be calling a company that won’t even deliver a million cars this year his “strongest competitor”?

The Credit Union Analogy

Would your credit union’s success be such that a bank or other financial institution (mutual fund, insurance  firm or broker dealer) would invite you to share your vision for the future of financial services?

Or, is the bank just inviting you over to see if you would like to buy them out at a multiple of book value?

Unfortunately, banks are unlikely to ask for an Elon-Musk kind of briefing thinking they there is little to learn from credit unions.  They believe coop success is due to an uneven playing field, especially the tax exemption.

A good test of how your competitors, local and otherwise, view your effectiveness is not the dollars they spend lobbying, but rather whether they seek to emulate your credit union’s perceived advantage.

Unlike Volkswagen, I have not heard of any banks trying to become credit unions in practice or by conversion.   But I read a  lot about credit unions buying banks.

Which model do you think has the real competitive edge? And which is most likely to transform financial services as they exist today?

When competitors respect you, then you know you are doing something special in their eyes.

Even when interest in your business initiatives are only from your co-op peers, that is one indication that your credit union could be “driving transformation with full power” using Elon’s criteria for strategic advantage.







What Can We Learn from the Oldest FCUs?

An S&P 500 company was projected to last for more than 60 years in the last half of the 20th century. Today that lifespan is down to  18 or fewer years.

Many believe this shortening  of business’ existence is  merely the accelerated playing out of economist Schumpeter’s theory of creative destruction, i.e. the free market at work.

However there is another way of looking at business sustainability by asking which are the oldest business still operating today.  What can their stories tell us versus the inexorable extinction  that seems to be the market’s dominate outcome?

Several articles trace the origins of these Methuselah-like firms that have existed for centuries.  Their commonality is that they provide products or services that people always need: wine making or breweries, inns and hotels, weaponry/foundries and mints,  and personal services such as Shore Porters or an Istanbul Turkish bath.

The Oldest Federal Credit Unions

NCUA’s June spread sheet of all 5,032 federally insured credit unions gives everyone the chance to analyze FCU charters by longevity.  The latest financial performance information is laid out in charter number order. Starting with charter #1 Morris Shepard Texarkana to # 24,927 Credit Union of New Jersey, a conversion from a state charter founded in 1943.

While some FCU’s conversions from states are much older than their indicated by their fed charter order, the vast majority listed through the early 1980’s are an accurate indication of institutional longevity.

While most credit union adherents know the first charter was from a state, St Mary’s Bank in 1909, the evolution of the federal charter is less documented.

Of the initial 100 charters granted by NCUA, 22 are still active. These are listed below.

These initial charters were granted in 1934/5 during the Great Depression, immediately following passage of the 1934 Federal Credit Union Act. These startups have persevered through nine decades of economic cycles, WWII, financial deregulation, competitive reconfigurations, and technology changes unimaginable by their founders.

Their survival rate, 22%, is almost double that of all FCU’s which is 12.6% (3,146 active charters and 24,927 issued). What can we learn from these long- serving charters? How can their stories provide insight for today’s credit unions? Is there a reason they have twice the sustainability as FCU’s generally?

Initial Observations on Sustainability

I am not familiar with any of these credit unions, however reviewing the data here are some initial thoughts along with questions that might be interesting to  pursue.

The 22 are diverse in size, number of members and geographic location. From $2.4 million to $5.3 billion in assets, they demonstrate the diversity and flexibility of the coop charter.   It serves all institutional sizes, towns and cities and geographic regions.

Of the eleven states where these credit unions operate, four are in Connecticut. Why? Was there not a state charter option, and therefore the initial credit unions were all federal?

Many of these initial charters served persons working in the public sector: firemen, postal workers, teachers, state employees and a university. Even Morris Shepard, charter #1, initially served the city employees of Texarkana. These public sector sponsors still exist and in many cases have expanded.

Is the relative stability of their public employment a key to credit union sustainability? For example, Long Island Postal Employees reports only 244 members and $2.5 million in assets. But it is still supported by these  members with an office in the basement of the Post Office.

Credit Union History Still Present For Us

Understanding credit union history is about more than honoring longevity. Their experiences can be instructive for present day prognosticators.

Cooperative design is intended to be perpetual.   Privately owned firms rarely transition beyond their initial founders.  Public companies including banks can be bought and sold in the open market at any time.

Coop capital is paid forward to benefit future members.  While every credit union is subject to the forces of a competitive market, outright failures are rare.

However there are a number of seers who routinely offer their view that coop design is not sufficient for longevity.  In their foretelling what is required  is size (scale), the latest technology and  “innovative” strategies which emulate their competitors.

While several of these long-timers might validate these tactics, most do not.   Rather the common factor that seems to sustain is what created the credit union in the first place:  the  service to and loyalty from the members.   Morris Shepard FCU’s origin statement on their website says it  clearly:

As a member-owned, not-for-profit financial cooperative, Morris Sheppard Texarkana FCU will continue to uphold its fundamental responsibility to actively serve people within our field of membership, which consists of the employees of the City of Texarkana TX, City of Texarkana AR, Bowie County and their spouse, children, and grandchildren. We will continue to deliver a range of low cost products and services to the diverse economic and social makeup of our members and potential members.

They continue to celebrate their first in the country creation:

Our History

Morris Sheppard Texarkana Federal Credit Union was named in honor of U.S. Senator Morris Sheppard, who represented Texas in the Senate from 1913 to 1941 and was one of the credit union movement’s greatest supporters in Congress. Senator Sheppard drafted several pieces of credit union legislation in the early 1930’s. But it wasn’t until 1934 that the passage of a Federal Credit Union bill appeared likely, thanks to the efforts of Sen. Sheppard and another Texan who had become convinced of the bill’s importance, Congressman Wright Patman. Our local credit union chapter, an affiliation of credit unions, is named after Congressman Patman.

What These 22 FCU’s Help Us See More Clearly

I’m not sure what is in the cooperative DNA of these credit union managers and boards.   But it might be worth learning more about.  For if their attitude and efforts had been shared by the entire FCU system, the could be as many as 2,338 more credit unions active today.   They would not necessarily be a State Employee or a Long Island City Postal, but they would be serving  a perpetual need human need with an institution they own.

Today credit unions rarely close due to external forces or financial failure.  Rather leaders of sound institutions  at the close of their tenure merge their credit union to reward themselves with an additional cash payment.  Unfortunately, credit unions are not exempt from personal cupidity.

One of the lessons these 22 and the oldest commercial companies provide:  the needs for these services does not go away.  That alone should be enough to keep the lights on when the harbingers of combinations issue their predictions of inevitable consolidation.

And the enduring need for values based, honorable leadership of these organizations.



Needed: More Inter-coop Marketing Alliances

A response to my post last week on Marketing: A Critical Credit Union Advantage promoted a broader view of the situation.
Leo Sammallahti, Marketing Manager for the  Coop Exchange in Finland suggested a different framework.   Specifically he believes coops serve individuals who would have a natural interest in knowing about other cooperatively owned business.  Here is his idea.
I’m not familiar enough about credit union marketing in the US, but have some thoughts more generally about marketing within coops.
I recently talked with a friend who helps run a food co-op. He mentioned that they have 2000 people on their email list. A while later, another friend told me about a retrofitting (housing) coop that is raising money through an equity crowdfunding campaign.  The UK has a special financial instrument called “community shares” tailored for coops to raise capital through crowdfunding.
I believe there is an opportunity for a simple website with a directory of coops (in communities or a state) that want to promote other coops through their email lists. I sent a survey to 10 small and medium sized (SME) coops asking if they would like to promote other coops in their email list. Every single one of them said yes.
This interest caused me to realize this is an advantage coops have in marketing – coops (at least small and medium sized coops) want to promote each other.
Had I sent a survey to traditional publicly owned stock owned firms asking  if they would like to promote other businesses because those businesses have stockholders, they would have found the question absurd,  “Why would I do that?”
My suggestion is that the platform allow co-ops to make different type of arrangements to promote each other in their email lists. They can set up cross-promotions (I promote you if you promote me) and “cross promotional circles”–I promote another co-op every month in my email list and my co-op gets promoted in another co-ops email list every month. In addition, they can  require the coop to put out a coupon code or some similar special offer for them to promote.
What’s the relevance to credit unions in the US?  Not sure, yet. But if we create an ecosystem of many coops promoting each other, that can be powerful for credit unions as well. The US credit union movement has over 100 million members.  Credit  unions communicate via newsletter or social media regularly.
If they would systematically promote other coops in their messaging, and other coops would systematically promote credit unions, this could a create virtuous cycle.
From the point of view of a customer, when they become a customer of one coop and receive their communications, those  would include promotions of other coops. As a result, they learn about other coop possibilities and could become patrons.
This effort  could be more even more practical if regulations that limit investing in coops and promoting such investment opportunities were more encouraging.
Once the market for coop financial funding in an area reaches a critical mass, it could possibly lead to common funds that enable ordinary people to make recurring, low-cost, passive, diversified investments across small and medium sized coops.
This community investment evolution is being developed in the UK and could be a model for the US. Here is a recent report:  Understanding a maturing community shares market – new report | Co-operatives UK