Chip Filson
The Listeners (1912) by Walter de la Mare conjures the spirit of Halloween. A seemingly empty house, night time, silent souls, the rider’s horse eating grass, and the Traveller, all alone, knocking loudly for a response.
The poem presents a mystery-I kept my word and the one left awake.
It ,might be interpreted as a literal event, “does anybody care“; or metaphysical, spiritual metaphor- is there anybody there who will answer?
The haunting atmosphere evokes Halloween, the night of All Souls.
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Many challenges confront credit union focused news reporting. Publishing daily via social media is hard. Staff is limited. Original stories take time to develop. Amplifying press releases is often an easy solution when faced with daily deadlines.
Credit Union Times and CUToday have developed important reporting niches however. If readers follow these original stories, they can provide insight into events that have consequences for the future of the cooperative system.
Peter Strozniak of Credit Union Times follows court cases about credit unions. On October 4, he reported on the embezzlement at the $3.2 Prairie View FCU: Former CEO Pleads Not Guilty to Embezzlement Charges. Some of the details in his coverage included:
In eight of this ten-year fraud time frame, the credit union reported annual operating losses on its call reports. The credit union was merged in the first quarter of 2022 due to “its poor financial condition.”
The question that jumps out is how could NCUA examiners have continually missed this illegal activity for ten years?
Peter did not go there with this story, but the details certainly raise a core question about NCUA’s supervision of the FCU. It was small, with few employees and only 600 members. The call reports showed losses for most years. What does this case imply about the efficacy of NCUA’s annual examinations?
For most of this year, CU Today has summarized the merger activity posted from NCUA’s web site, Comments on Proposed Mergers.
Their latest reviews showed “CUs seeking to merge in multiple other CUs at once, combo’s in which the merging and acquiring CUs are both losing money, and several examples of credit unions reaching across state lines and even across country for merger partners.”
This reporting which includes the latest data and quotes from the member notices, takes a lot of work. Some examples.
One summary is for AIM Credit Union in Dubuque, IA. It is merging two Keokuk credit unions. Members of both merged credit unions were given identical Notice statements. They will be voting on the same day at the same location, First Christian Church. The two towns are 150 miles or about three hours apart. Was a local merger of the two credit unions considered?
In the merger of two Michigan credit unions, Community Alliance Credit Union ($108 million) with People Driven Credit Union ($355 million), the top three executives can receive a total of $542,000 in severance.
Community reported midyear capital of 8.39% and a loss of $73,000. The members were offered nothing of the over $8 million in capital being transferred. Is this an example of taking the money and running away?
The three-year old Maine Harvest FCU with 56% capital is merging so that “its mission of lending to farms and food producers will be better preserved with a larger credit union that embraces that mission.” Was this option researched at the start? Why not create a partnership, versus merger, with a larger credit union if more services are needed?
The $210 million Emory Alliance Credit Union in Decatur GA is merging with Credit Union 1 whose main office is listed as Rantoul, Il. One wonders why? Were no local options available? Did Emory do any due diligence on behalf of their members, especially of Credit Union 1’s recent initiatives before recommending this out of state takeover?
Finally, the $226 million Parsons FCU in Pasadena, CA is merging with the $1.1 billion Skyla FCU in Charlotte, NC. Parsons has almost 11% capital. Merging with a credit union across the country, especially with very strong instate options, would appear contrary to every common sense notion of member service and value. What is the reason for this “merger” almost 3,000 miles away.
CU Today and Credit Union Times are serving a vital public, cooperative service developing this fact-based reporting.
Both media raise important questions about motivations and fiduciary duty of persons responsible for these events.
This original reporting raises critical questions about the directions of credit unions, the regulator’s oversight and how members’ best interests appear to be so cavalierly and repeatedly disregarded.
Sooner or later the stories behind these events will come out. The political and repetitional consequences will impact every credit union even when excesses may be the work of only a few.
A diligent, informed and questioning press is critical in holding those in positions of responsibility to account. CU Today and Credit Union Times are doing the job of the 4th estate. Are credit union leaders getting the message?
(by Jim Blaine)
George Orwell masterfully described the erosion of values and the rise of exploitation in his classic novel Animal Farm. The book written in 1945 is a satire of the decline in the Russian Revolution from idealism to the overlord State of Stalinism. To Orwell, what the Revolution had become in post-WWII Russia bore little resemblance to the high hopes of 1917.
In case you’ve forgotten the plot; in Animal Farm the slothful, tyrannical human proprietor of Manor Farm is overthrown by his much abused and neglected farm animals. The revolutionary animals quickly come to realize that when united in cooperative effort, they are quite capable of sensibly managing the farm and their own affairs.
Each animal, by nature and design, has different capabilities and unique qualities. Separately they are weak. But, cooperatively, working together; the united effort becomes far greater than the sum of the individual parts. Each animal contributes in full measure, in its own special way, to the overall success of the enterprise.
The cows and chickens provide milk and eggs for food. The sheep provide wool for cloth; the dogs provide protection; and the horses provide strength for plowing. The pigs, who seem to be the brightest, provide direction and management (surprise, surprise!).
Every civilized society, every social movement, every cooperative effort needs and creates a set of guiding principles – a social compact, a credo, a charter which explains shared beliefs and values. The animals of Animal Farm were no different. They carefully crafted rules for their new social order and painted them on the side of a barn for all to see.
Over time, several incidents occurred which seemed to be out of keeping with those original purposes. The pigs were found sleeping in the former owner’s bed; alcohol reappeared at social gatherings of the pigs; an animal who complained about the changing values was killed; and the pigs seemed to be working less and consuming more than their fair share.
When the animals returned to the barn to review their original principles; they found, much to their surprise, that those principles somehow had evolved into something a bit different!
The pigs, however, were always there to explain away questions, concerns and objections. Bad became worse at Animal Farm! Eventually, when the animals returned to the barn, they found a whitewashed wall with just one remaining principle.
“All members are equal, but some members are more equal than others.”
“Isn’t that what we originally revolted against?,” some quietly asked.
So, what’s the point? In the beginning, there were several essential ideas which formed the core values of the credit union movement: one member, one vote; cooperative; non-profit; equal service to each member; consumer advocacy; volunteer leadership; unstandard answers; shared concerns; us not me.
Hey really, what happened…
On a recent trip I talked with a CEO to find out how the credit union was responding to four events: Covid, interest rate hikes, liquidity and the regulatory environment. Here are my notes.
CU still on hybrid work model. Employer sponsor went all remote, but is now back in person, with little remote. The community around the head office, especially retail shops, became a ghost town. Kept all branches open, but back office staff is still mostly remote.
Expect hybrid work to continue. Commute for head office is a minimum of 30-60 minutes. Labor market extremely tight especially for retail.
Have re-evaluated every customer facing position including salaries, variable incentives, paid lunches and increased job tiers.
The 30-year fixed rate mortgage is now at 7.5%. Member interest has evaporated and don’t see it coming back until late 2023. Increase in second mortgage demand.
Member spending is still strong and credit card volume has surpassed pre-pandemic levels. Will recession hurt consumer spending? Labor market great for employee, but creates inequities with current staff.
Biggest concern is inflation’s impact on costs and operating expense structure. Large increases in vendor contracts which have the ability to pass through costs based on a CPI index. In some cases this will be 8.5% to as high as 15%. Fortunately, we have caps in our contracts but many credit unions do not.
We are a unionized shop with approximately 70% of employees covered under a labor contract. Sponsor negotiates contract and we will have to see what happens to those costs.
Have difficulty selling to secondary market. Rates are extremely volatile day to day. Our mortgage pipeline is down 60%. Refinancing has all but stopped.
In ’20 and ’21 had share growth of 20% and 13%. Money stayed with us. This year members feel it’s time to spend. Grown only 2% in shares so far, but may end up flat at the end of the year.
Even though originations are lower, loans are staying on the balance sheet because there is no refinancing.
Paying up for CD’s: 11 month at 3.25% and 15 month at 3.5% with a minimum of $5,000.
Actively monitoring our wholesale funding sources. FHLB is about 100 basis points more expensive than CD’s. Also have brokered CD’s with SimpliCD.
So far this year ROA is at 80 basis points down from 92 bps in 2021. But for our 28 state peers over $500 million, the average is closer to 50 basis points.
Our top operational priority will be managing expenses.
State chartered. All exams remote. The beginning of the year I was really concerned about the NEV test that would put us in the extreme risk category. But they have backed off with just a “high” rating.
Definitely a different level of NEV risk now and more pressure on liquidity.
Looking past current events there are two items. Should we move beyond our sponsor’s brand and FOM to open up markets for further growth? We have several special loan programs, credit card and provide financial literacy events. Sponsor brand is ours as well. So not a simple issue.
Secondly, we have always been a state charter; would a federal charter be an option for the future?
However our biggest challenge going forward is to control operating costs.
One of the traditional advantages of credit unions is their local knowledge. This includes members’ circumstances, critical business trends in the area and continuing reinvestment to improve collective and individual opportunity.
As credit unions expand their market aspirations and growth ambitions, knowledge of and commitments to local communities can wane. The local knowledge and the resulting advantage of loyalty and member trust can be forfeited.
Next City is a nonprofit news organization that believes journalists have the power to amplify solutions and spread workable ideas from one city locale to the next.
It features actual projects. Case studies are the core of its reporting. It publishes an almost daily blog.
Here is a portion of the October 19 email update featuring mutual financial firms. It asks a critical strategic question about credit unions.
| While reporting a few years ago, I came across this startling fact: In 1986, the number of community banks across the country peaked at 15,717, but today there are fewer than 4,500.
Now I can’t remember the last time I went a whole day without thinking about it. I vaguely recall, as I’m sure many others do, the wave of bank mergers that really took the country by storm in the 1990s. Maybe some of those mergers made sense, given changes in technology and the world. But the rising tide of mergers went along with a drought in the formation of new banks and credit unions. I still don’t think we’ve fully processed what this shift in the banking system has meant for our cities and communities. Even today I don’t think we have a full picture of what was once possible, why it’s no longer possible, and maybe why we should make it possible again. I hope today’s story helps make that picture more complete, if not more clear. |
Banks With No Shareholders? The Curious Case Of Mutual BanksPonce Bank, founded in 1960 in the Bronx and currently New York’s only Latino community bank, shows the possibilities of lending as a mutual bank.
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Shouldn’t credit unions be in this reporting?
The first question in many gatherings is, where are you from?
I answer Springfield, Illinois which is where I finished high school 60 years ago. The class gathered again this past week, the first time since the 50th reunion.
The experience is truly a re-union. I was able to interact with the city, the school and classmates. The event reconnected past recollections and the present. The impressions may even continue to shape the future for some or all.
Michael De Sapio has written about the importance one’s local community:
We spend much of our time concerning ourselves with places and people far removed from us. The things closest to us, by contrast, often become negligible and disposable. If you make an effort to reconnect with your neighborhood, town, and community, you may come to see your home in a new light—hallowed by time and … and history, and perhaps even imbued with heroism or romance.
Reunions remind attendees of the influence of the place we once, or maybe still, call home. It made a difference in who we are today.
Abraham Lincoln defines Springfield’s soul. On February 11, 1861 he delivered a farewell address to his fellow residents. He would never return. His parting words are remembered for their emotional honesty. They illustrate his debt to a place that helped shape who he was.
My friends, no one, not in my situation, can appreciate my feeling of sadness at this parting. To this place, and the kindness of these people, I owe everything. Here I have lived a quarter of a century, and have passed from a young to an old man. Here my children have been born, and one is buried. I now leave, not knowing when, or whether ever, I may return. . .
Springfield is flat, except for the meandering of Lake Springfield at the outer edge. The sky and corn or wheat/hay fields on the way seem to stretch to an endless horizon.
The city’s topography is a geometric with one-way streets to facilitate traffic. But there are few cars, even in rush hour. Downtown is dominated by buildings whose former lives are now lost in their current role as state office buildings. Vacant lots are paved over for parking; but we never saw a lot filled.
(Capital spire and former State Armory)
The city is so level that sounds travel great distance. Amtrak and freight trains still run through the center of town along 4th Street, day and night. The doppler effect of train whistles’ signals this constant coming and going.
We were stopped at a railway crossing for a freight train consisting of only flatbeds carrying one or two shipping containers. I counted a freight car passing every second. The gates were down for over five minutes. And there was even a second engine in the middle of the train for more power. The train extended for at least three miles.
There is a church bell in the center of town that sounds every 15 minutes and strikes the hour. This passing of time is heard throughout the downtown.
The capital building dominates the skyline. Empty lots, some still grass but most paved over, were meant to accommodate people driving to work. But the legislature is out of session. The elected representatives and lobbyists have gone. Offices are quiet and often closed. The town seems empty even on a work day. Is this the mirror side of working from home?
Sixty years ago Springfield was a manufacturing and business center, as well as the state capital. Allis Chalmers and Sangamo Electric had manufacturing plants. Franklin Life and Horace Mann had their corporate insurance headquarters near the city center. Frank Lloyd Wright designed a prairie style home in the same area.
Today state government and the service sectors dominate. A modern downtown brick constructed Methodist church is now the office of the Springfield Chamber of Commerce, complete with steeple. The state capital is across the street.
Tourists trace Lincoln’s legacy beginning with the two blocks reconstructed as they existed in 1860 around his home. The Old State Capital and new Presidential museum and library are major draws.
Health care and new community and college campuses are additions to the city’s evolving economy.
The density and intensity that is characteristic of larger cities is absent in Springfield.
The pace feels more akin to farming than to the modern workday culture. Saturday’s farmer’s market in downtown was the most crowds we experienced. Lots of younger people were here as well, both shopping and making a living. Every stall is carefully ordered in its presentation, except for water color paintings.
Amongst these every day events, there is a feeling of something more consequential about the town. Lincoln’s heritage is central. The spirit of the place which formed him still animates today. Patient and timeless lessons seem to grow in this center of flatland farms of corn and endless, open sky.
The Springfield poet Vachel Lindsay referenced this spirit in his 1914 poem Abraham Lincoln Walks at Midnight. Both the sense of place and Lincoln’s profound insights seem timeless, especially relevant to today’s events.
It is portentous, and a thing of state
That here at midnight, in our little town
A mourning figure walks, and will not rest,
Near the old court-house pacing up and down. . .
A bronzed, lank man! His suit of ancient black,
A famous high top-hat and plain worn shawl
Make him the quaint great figure that men love,
The prairie-lawyer, master of us all. . .
His head is bowed. He thinks on men and kings.
Yea, when the sick world cries, how can he sleep?
Too many peasants fight, they know not why,
Too many homesteads in black terror weep. . .
He cannot rest until a spirit-dawn
Shall come;—the shining hope of Europe free;
The league of sober folk, the Workers’ Earth,
Bringing long peace to Cornland, Alp and Sea.
This reunion reconnected us with a momentary phase of our lives. Springfield’s special history sits amidst an ever evolving generation of new enterprises. Revisiting our one-time home sparked new insights. A place alive with past and present activities busily weaving a new future.
In later blogs I will share how my high school has changed, yet still remains the same, and impressions from former classmates.
Today is NCUA’s public hearing on its proposed $367 million budget for 2023.
Inflation is the number one topic on many people’s minds. An NCUA board member has presented numerous examples on LinkedIn of the impact of inflation on consumers. The posts include reporting on the price of beer in sports stadiums, the cost of a Five Guy hamburger and presenting the two decade chart below tracking price increases in various sectors of the economy.
His latest comment reads as follows:
Ouch. Average monthly payment for new cars hits $738. Throw in gas, insurance, registration and that’s $1000 a month just to drive around.
Now he is in a position to do something about his observations.
The Bureau of Labor Statistics chart below is a 21-year history of the price changes of various services and products from 2000 through June of 2022. The changes are compared with the average hourly wage increase.
Some services or products are “more affordable” as their price changes are less than the increase in wages. The “less affordable” group have seen prices rise faster than wages.
The overall inflation in the period is 74.4%. The highest increase in this 22 years is in hospital costs with a 240% price surge, just ahead of college tuition.
At the same time TV’s, computer software, and cell phones have become more affordable with price rises less than the increase in wages.
Where would NCUA’s ever swelling growth in total regulatory costs paid by credit unions be on this chart ?
In 2000 total NCUA expenses for the operating fund, NCUSIF and the CLF were $129.9 million. For the 2023 budget NCUA proposes spending $367 million.
At yearend 2000, NCUA oversaw 10,316 federally insured credit unions. At June 30, 2022 the number was 4,853.
NCUA’s proposed new budget would result in a 283% increase for this 22 year period. This places the agency number 1, at the very top of the chart of price escalations across all sectors of the economy.
Inflation is the most urgent economic challenge facing the country. The only sure way dealing with this challenge is to reduce costs. Companies across the economy have announced hiring freezes and layoffs to control their ability to compete.
Even some credit unions are announcing layoffs especially in their mortgage lending personnel.
The issue for the NCUA board members is whether they just want to talk about inflation; or, will they have the courage and capability to do something about it in this area of their direct responsibility?
The email marketing headline read: Is there a merger in your future?
Another suggested the opportunity to protect the CEO’s fate by adding a “change of control” clause to the manager’s contract.
Many credit union leaders and most vendors are selling a vision of the future they want to help implement. The focus is on the future, not the present circumstances.
The more apocalyptic the future predictions, the more urgent the message. These prophets pretend to know the unknowable. But the failure is not in their projections. It is their misunderstanding of the present.
When leaders present their vision, they are making predictions about the future they hope to bring. In fact, prophets do exactly the opposite! They insist the future is highly contingent on the now.
From all the flotsam of events, beliefs and analysis, real prophets have the ability to identify what really matters. Focusing on this is essential for ongoing success.
That’s not predicting the future as much as it’s naming the way human reality works today and tomorrow. The true prophet dares to tell what is essential in the face of marketing hype, rhetorical cliches and the latest innovation that will cause members to leave current institutions behind.
Decades ago I first met Rudy Hanley, the long time CEO of SchoolsFirst FCU in California. He asked how I approached strategy. As I outlined the model and summarized growth options, he stated that the credit union’s primary goal was not growth. It was ensuring the members’ trust. No matter the circumstances or cost, the critical success factor was continuing to place member confidence at the center of every decision.
If member relationships were built on this foundation, he believed growth would naturally follow.
This is not every CEO’s priority. Some believe size guarantees success, the bigger, the stronger and the more resilient. Others put their trust in technology and introducing the most compelling solutions or latest crypto offering. When winning in the open competition of the market seems to slow, others will chase the chimera of buying out or merging competitors.
All these approaches can bring short term success. However member-owned cooperatives were established and succeeded as an alternative because of the unique consumer-member relationship. Emulating the corporate strategies of banks and other commercial firms is following false idols.
There are a host of idolatries at the center of the cooperative system today. Many aspire to the prestige and stature of banking competitors. Making money becomes the number one priority albeit always clothed in the phrase of serving members.
Instead of seeking those who are often victims of current financial choices, credit unions aspire to serve everyone. Speaking truth about why coops exist becomes prophetic because the “powers that be” that benefit from the system, cannot see this simple message.
The challenge of understanding who coops are and how credit unions are unique is especially front and center in leadership transitions.
One CEO who recently oversaw this change in his institution observed these dynamics:
It’s hard for today’s leaders to make their bones when they are up to bat.
Then lazy new leaders simply fall in line with the best practices of the day, currently community banking tactics 101.
New leaders will not see staying the course as the means to their hopeful ends. They have been given the reins for change, not just continued success. They are vested in their peer’s approval not their members, nor history’s standards.
The new actors today are vested in their choices. Logic will not be enough – it’s too nuanced to turn back the belief that change is the catalyst to bigger things.
These are a prophet’s words for the present. Will anyone hear the message? Or will there have to be a cost to chasing idols versus trusted service, the core of Rudy Hanley’s leadership?
The largest, most powerful land animal is the elephant. In many of their traditional habitats in Asia and Africa, their numbers are falling due to the loss of their traditional habitat and poachers.
The Elephant Whisperer is the story of a person who lived with elephants on a game preserve to try to preserve a “rogue” herd.
The author Lawrence Anthony devoted his life to animal conservation protecting the world’s endangered species. He was asked to accept a wild elephant herd on his Thula Thula game reserve in Zululand. His common sense told him to refuse, but he was the herd’s last chance of survival: they would be killed if he wouldn’t take them.
To win the herd’s trust, he had to convince the Matriarch of the herd. The eldest female is the leader, until she relinquishes it. He slept in his Land Rover near them until they accepted him.
In the years that followed he became a part of their family. In creating a bond with the elephants, he came to realize that they had a great deal to teach him about life, loyalty, and freedom.
He learned elephants mourn their dead , and recall the time lapse of a year to the day of death to assemble round the remains. When Lawrence Anthony died in 2012 , they gathered to mourn him.
Elephants care for newborns together. When one is unable to stand up to nurse, they surround to help lift her up to the mother. Sometimes realizing the infant needed more nutrition, they would seek out Lawrence and his team.
The elephants thrive very much together, protecting and playing with each other but ferocious if threatened. They will accept help from humans they trust.
An iconic picture of this group effort is when the herd will lie down to sleep for several hours each day. As shown below the matriarch is at the top, the smaller, younger elephants protected by the older ones. Most importantly, the picture shows how each member stays touched by another as they sleep.
Is there a lesson for cooperatives from this natural behavior of the world’s largest land animals?
Two credit union press releases this week reminded me of the 2012 post below by Jim Blaine.
The first was the announcement that five Minnesota credit unions had loaned $31 million to Opal Holdings, a New York real estate developer and investment firm, to purchase a 17 story office tower in Bloomington, MN. “The financing included two senior secured notes on equal footing issued in June: One for $22.1 million at 5.1% for 36 years and the other for $8.1 million at 5.32% for 40 years.”
The second from Summit Credit Union stating it had completed the purchase of the $837 million Commerce State Bank “in the largest credit union acquisition of a bank in the state’s history.”
“Twilight Zone” (by Jim Blaine)
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Nobody said it better than Golden Earring. No, this is not the golden earring you fearfully imagine sprouting some day from your teenager’s nose or navel. It’s the late ‘70s rock group and the song is “Twilight Zone”. The question: “Steppin’ out into the twilight zone. Entering the Madhouse, fears that have grown. What will become of the moon, and stars? Where am I to go, now that I’ve gone too far?”… The answer: “You will come to know, when the bullet hits the bone! Yes, you will come to know, when the bullet hits the bone!”
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| The Heartland….
The Amana Colonies, 26,000 acres of picturesque Iowa farmland, sheltering seven immaculate villages, are up Highway 151 about 100 miles east of Des Moines. This is the Midwest, the Heartland. The place where the Deere and the antelope play. A warp in time through which, you may, perhaps, be able to catch a glimpse of the future – the future of the credit union movement. |
The Amanas were settled in 1855 by the Society of True Inspirationists. The sect was formed in Germany; adopted a communal structure; and had unique, idealistic, and firmly held beliefs – sound vaguely familiar? The communities were self-sufficient and prospered richly.
All things were shared. Products, such as woolens, handmade furniture, meats and wines, were sold to the outside world. A sterling reputation was built upon high standards of craftsmanship and a close attention to detail. The “Amana” name – remember that refrigerator? – became synonymous with quality and value – sound vaguely familiar?
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| “Why don’t you download this app…” |
The Amanas appeared to be the true Utopia, the new Eden. But trouble, eventually, always comes to Eden. At first, the Inspirationists called it “The Reorganization”, then “The Change”, and finally, “The Great Change”. It started as a murmur, became a grumble, heightened to an argument, and ended in 1932 as a split.
Eighty years of success forced onto the scaffold of change by a diminished intensity of beliefs, a cooling of religious fervor, a forgetfulness of original purpose and vision – sound vaguely familiar?
Their world, however, did not come to an end in 1932. The Amana Colonies continued on. The communal structure was abandoned; the religious and the secular were separated. Homes and personal property were divided; stock was issued in the businesses and agricultural interests.
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| “… destination unknown.” |
“Steppin’ out into the twilight zone. Falling down a spiral, destination unknown. What will become of the moon and the stars. Where am I to go, now that I’ve gone too far?
…You will come to know, when the bullet hits the bone. Yes, you will come to know when the bullet hits the bone.”