Month: August 2024

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Are Members “Gaming” Their Credit Union?

From the field. A recent story by a colleague working on site with a client.

I just wrapped up a meeting with a $6 billion CU that does a lot of indirect lending.

  1. Used car values are falling.
  2. Manufacturers are providing strong incentives for new vehicle purchases.
  3. Some credit unions are desperate for income and are attracting business with below market rates via their indirect relationships.

The CFO shared that members with an expensive to own, drive, and insure car are going out and buying another car that is much cheaper to own, drive, and insure–both new and used models.   But from a different funding source. For example,  another credit union who will extend credit because the member’s credit score is still good, but about to take a nosedive.

The member knows they can’t afford to keep their existing vehicle.  Then after they purchase the “cheaper to own” car, they bring the “expensive to own” vehicle to the credit union and hand over the keys.

The result is that the credit union is experiencing higher than expected losses because used car values are falling, and the cars being turned in are more expensive to own.

Long Story Short

The  member lowers monthly payments and the cost to own a vehicle.  The old car is turned back to the credit union.  The member is unconcerned about how it impacts their credit score going forward.

The credit union has limited recourse because the “member” has just a “$5 savings account” required to join the credit union.  (This is an indirect relationship only)

I am hopeful for a soft landing from this financial substitution scheme, but not everyone is on the same flight.

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Credit Unions and the Presidential Contest

Presidential candidates Trump and Harris are unlikely to engage in any dialogue that directly address credit union issues.

Nonetheless,  one’s voting preference  from a purely credit union perspective may be influenced  by reference to more generic policy positions such as regulatory burdens, affordable housing plans or even commitments to community development.

At this point I know of only one datapoint from either candidate that may be relevant.

In his new book, Community Capital Race, Equity, and the Credit Union Movement author Clifford Rosenthal tells of the decades of efforts to secure political support and government funding for community development institutions.   In 1980 he joined the National Federation of Community Development Credit unions.  It is the cause to which he has dedicated the rest of his professional life.

He would later spend two years at the CFPB trying to supporting these instituions.  His successor in 2012 was Cathie Mahon who in 2019 would rename the organization as Inclusiv and expand to an even  more ambitious role funding community development efforts.

In the final chapter of his book, Rosenthal brings the government’s funding  up to the recent covid driven programs in the Biden administration.  On page 249 he describes inaugural grants totaling $1.73 billion from the US Treasury’s CDFI Fund for the Equitable Recovery Program (ERP).

Vice President Harris in the April 23, 2023 Treasury press announcement is quoted as follows:

“When we invest in community lenders, we help build a future where all people—no matter who they are or where they start—have the resources they need not only to succeed but to thrive.

“These grants—representing the largest CDFI grant program in history – will enable hundreds of community lenders to invest in small businesses and entrepreneurs, and also provide home loans for families, financial services for local nonprofits, and capital for community organizations.” 

The press release lists the number of grants and total dollars by CDFI sector.  The 203 credit unions recipients were awarded a total $590.3 million, or 34% of all funding.

This is the only specific reference I can find at this point from either side.  Obviously much bigger issues are at stake in this campaign about America’s future. However, I would welcome any further examples readers may discover about candidates’ awareness of credit union topics.

As for Cliff Rosenthal, to honor his pioneering role in supporting community development as a policy priority, on October 3 he will be inducted into the Cooperative Hall of Fame in Washington D.C.

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Two Leadership Departures:  What They Suggest About the Future of Credit Unions

 

(Text updated in PM of August 28 from initial posting)

Last week and approximately one year ago in 2023, two leaders announced their departure from senior positions of organizational responsibility.

CEO Susan Conjurski’s merger announcement  was in the now familiar language of the required merger Member Notice. In this case there were two disclosures due to  the simultaneous combinations of her dual oversight of both credit unions.  Here is the wording from the first member Notice:

NCUA Regulations require merging credit unions to disclose certain increases in compensation that any of the Merging Credit Union’s officials. . . (who) have received or will receive in connection with the merger above a certain threshold. The following individuals are eligible to receive such compensation, which is reasonable and commonplace in the financial services industry:

Susan Conjurski, President/CEO

  • Ms. Conjurski will continue employment as the Continuing Credit Union’s Vice President of Strategic Initiatives under a five-year employment agreement and will be eligible to receive a one-time retention bonus of (gross) $14,000 (less lawful deductions) if she remains with the Continuing Credit Union for at least 6 months after critical post-merger information technology systems integration.
  • Ms. Conjurski, President/CEO of Printing Industries Credit Union, serves simultaneously as the President/CEO of both Printing Industries Credit Union and Pacific Transportation Federal Credit Union. The members of Pacific Transportation Federal Credit Union are also voting on a merger with Credit Union of Southern California. Ms. Conjurski does not have a supplemental retirement plan with either Credit Union. To reward her meritorious service and to retain her services going forward, as part of our Credit Union’s merger, Ms. Conjurski will receive a Supplemental Executive Retirement Plan (SERP) with a maximum of $300,000 after five years of employment with Credit Union of Southern California.

While not connected to this merger, Ms. Conjurski will receive a SERP in connection with the merger of Pacific Transportation Federal Credit Union and Credit Union of Southern California with a maximum of $700,000 after five years of employment with Credit Union of Southern California. Ms. Conjurski would be eligible for a reduced benefit if her employment is terminated for Total Disability and she would forfeit benefits if she voluntarily resigns or is terminated for cause before reaching the final vesting date in 2028.

  • The total maximum potential amount Ms. Conjurski will be eligible to receive in connection with this Merger is (gross) $314,000 (approximately $188,400 after taxes assuming a 40% tax rate). After taxes, this equates to approximately $885 for each month of service from Ms. Conjurski’s first day of service with Printing Industries in July 2020, to the end of the plan, thereby recognizing Ms. Conjurski’s combined 17 years of meritorious service to the combined credit unions.

Prior to these concurrent CEO roles, Conjurski had been Executive Vice at Arrowhead Credit Union from 1979 – Jan 2009, 30 years and 1 month, where she presumably participated in their retirement benefit plans.

The Second Merger Notice

Following is the parallel disclosure required in the simultaneous merger of Pacific Transportation FCU:

“Ms. Conjurski will continue employment as the Continuing Credit Union’s Vice President of Strategic Initiatives under a five-year employment agreement and will be eligible to receive a one-time retention bonus of (gross) $8,000 (less lawful deductions) if she remains with the Continuing Credit Union for at least 6 months after critical post-merger information technology systems integration.

Ms. Conjurski, President/CEO of Pacific Transportation Federal Credit Union, serves simultaneously as the President/CEO of both Pacific Transportation Federal Credit Union and Printing Industries Credit Union. The members of Printing Industries Credit Union are also voting on a merger with Credit Union of Southern California. Ms. Conjurski does not have a supplemental retirement plan with either Credit Union. To reward her meritorious service and to retain her services going forward, as part of our Credit Union’s merger, Ms. Conjurski will receive a Supplemental Executive Retirement Plan (SERP) with a maximum of $700,000 after five years of employment with Credit Union of Southern California. . .

The total maximum potential amount Ms. Conjurski will be eligible to receive in connection with this Merger is (gross) $708,000 (approximately $424,800 after taxes assuming a 40% tax rate). After taxes, this equates to approximately $3,012 for each month of service from Ms. Conjurski’s first day of service with Union Pacific Federal Credit Union in July 2016 (Union Pacific FCU merged with Pacific Transportation in December 2019), to the end of the plan, thereby recognizing Ms. Conjurski’s combined approximately 12 years of meritorious service to the combined credit unions.”

The Financial Payments and Assets Transferred

In May 2023 the merger with Printing Industries was completed. Pacific Transportation FCU’s merger was finalized in September 2023, both with the Credit Union of Southern California (CUSoCal).

If the reported start dates as CEO are accurate, I calculate she served less than 3 years as CEO of Printing, and seven years at Pacific, for a total of ten years. The combined bonuses and SERP funding are $1.022 million.  In addition she is given a guaranteed employment contract for five years at an undisclosed salary, presumably with ongoing benefits.

In return for this payment and five year salary, CuSoCal gains $97 million in assets ($67 million in loans), 11,000 members an $15.2 million in net worth.  This free capital transfer is after the Pacific members received a special dividend not to exceed $2.2 million.  The $1.022 million and five year salary are a small fraction of the real financial value transferred to the Credit Union of Southern California.

NCUA’s Western Region Director Retires After 37 Years at NCUA

In last week’s retirement announcement, NCUA summarized Regional Director Cherie Freed’s nearly four decades of service.

After serving as an examiner, Freed took the position as a problem case officer in 1991 and later became a corporate examiner. Freed then became associate regional director for the Western Region before being selected as regional director in 2016.

Chairman Harper commented:  “Cherie’s dedication to public service and the NCUA has been nothing short of exemplary. . . She excelled at building internal and external coalitions, she was passionate about meeting organizational goals and customer expectations, and she produced results at the highest level. Cherie has exhibited sustained excellence throughout her career, inspired others, and made innumerable contributions to the NCUA.”

What Unites These Two Leadership Resignations

What is left out of NCUA’s description of Freed’s 37-year career is any specific involvements with credit union events or contributions as she progressed up  the listing of increased responsibilities.

There were significant industry and financial events during her regulatory roles.  When she joined the  agency in 1987, NCUA insured 14,520 natural person credit unions. The corporate network numbered 39 federally insured corporate credit unions.

Today there are just over 4,600 credit unions a decline of over 10,000.  NCUA’s liquidity lender, the CLF, is dormant.  New charters are as scarce as hen’s teeth.

In that first year when Freed joined NCUA, the S&L industry still had its own insurance fund, the FSLIC, overseen by its own federal regulator, the Office of Thrift Supervision.  The system’s liquidity lender, the FHLB, predominantly served the S&L’s, even though it had been expanded to include other financial real estate lenders.

Today the separate S&L system no longer exists.  All of the remaining 556 “Savings Institutions” with total assets of $1.2 trillion are FDIC insured.  Their regulation is divided between the FDIC, the OCC and the Federal Reserve.

Both persons in the NCUA announcements above began their final leadership roles in California about the same time 2016-17.   By rule, Freed oversaw the two mergers and payouts described in the Member Notices above.

In both Member Notices there is misinformation, disinformation, irrelevant data and omission of vital facts–eg. the total dollar value of Conjurski’s new five year employment contract.  The credit unions’ member-owners were ill-served by this required regulatory review and approval.

Losing the Cooperative Future

The coop industry, unlike the thrift sector is not consolidating because of safety and soundness concerns.  Rather many of these mergers are driven by personal greed and ambition.  Pacific Transportation FCU reported 21% capital at December 2022 prior to announcing its merger. Printing Industries’ net worth was 11%.

Conjurski’s windfall was not an isolated event under Freed’s administration.  Another CEO negotiated a $1.0 million merger bonus.  In a separate situation the Board Chair and CEO diverted $12 million of member equity to their recently established nonprofit.  The intent was to use these members reserves to continue their veneer of public philanthropy even though they had given up all leadership positions.

The merger examples show that credit union leaders are not immune from the “animal spirits” at the heart of market capitalism.  Cooperatives were supposed to be an alternative to the self-interest that drives “free enterprise.”

This disease of self-enrichment now infects the cooperative body.  The regulators have failed to enforce their own merger rule.   The NCUA board and senior staff board appear to lack either conviction and/or the courage to speak to this usurpation of the members’ collective wealth.

And the money being transferred has created a whole sponsoring eco-system of enablers including consultants, compensation advisors, former NCUA employees, accountants and lawyers who grease the paths and fill their own pockets.

The Increase in System Risk

The NCUA board and the regional administrators signing off on these events are mute about these examples of blatant self dealing.  They pretend not to notice as these privately arranged deals are announced followed by the asset stripping of long- standing sound credit unions after the combinations are complete.

To see the increased risk, one need only ask whether the future of the cooperative system is likely to be more sound with ten credit unions in the $500 million to $1.5 billion asset range or one $10 billion credit union with a generic brand operating over multiple states and markets?

The answer I believe is obvious.   If one doubts this, just revisit how the S&L system totally collapsed.  It was not because of small institution failures.  And the largest failures were all sold to banks.

Ultimately this pattern of corporate ambition could end up in the full conversion of the cooperative system to their exact opposite–for-profit banks.   Why should credit union leaders  buy banks at a premium when they can convert all this free reserves to private gain?

Freed oversaw and approved these self-dealing events firsthand.   The irony of her 37 years of service is that in all likelihood her professional opportunity no longer exists for someone entering the agency today.

For in the next four decades, the trends are clear—there will not be an independent NCUA.   Credit unions will have become too powerful, consolidated and independent in purpose for a separate  agency to oversee what was intended to be a cooperative, member-focused tax-exempt system.

If a system can’t learn from its past and that of its financial brethren, it has no future.

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The Members Awaken at SECU: Part II-the Board Responds

In my earlier blog about SECU’s October 2022 Annual Meeting, former CEO Jim Blaine made a lengthy statement asking questions about six areas of SECU’s direction.   The members’ approved two motions he moved which requested the Board and management respond to the issues and publish SECU’s strategic plan.

SECU’s leadership went into immediate action.

The board and senior management held three “fireside chats” with employees, advisory board members and invited speakers.  In January 2023 SECU released an hour and 50 minute video which  “pulls clips from speakers across all three days and covers the full content of the event.”

Presenters included CEO Jim Hayes, board members, Dwayne Naylor, CEO of Local Government Employees FCU, the CEO of the North Carolina league and even a SECU manager who explained the reasons for discontinuing the Tax Preparation Service.

In tandem with this video report of the dialogues, Chairman Ayers and CEO Hayes released a six minute video summarizing SECU’s vision, mission and strategic plan.   It presented  SECU’s four strategies along with the tactics and goals to achieve them.   As of January 2023, the video registered 2,912 views.

Blaine continued  his daily blog  expressing  frustration and disagreement with several of responses to the issues  he had outlined in the meeting.   A reader can skim his posts for examples . He  engaged with HB 410 which state-chartered credit unions and the NC League submitted to the state legislature.to create broader authority for North Carolina credit unions.

The most salient issue for Jim at an operational level was the introduction in mid 2023 of risk based lending (RBL).  This replaced the uniform pricing approach in which each member paid on the same interest rate for loan products. Now each member’s loan rate would depend on their FICO score.

SECU was the only large credit unions that had not implemented RBL.  Multiple blogs laid out his views that this new pricing approach was discriminatory and inconsistent with cooperative purpose.

Changing the CEO

As Blaine’s blog challenges to SECU’s direction continued, one new critique was questioning the hiring of CEO Hayes.   He specifically singled out Hayes’ role at WesCorp which was taken over by NCUA in 2009 and liquidated in2010.

Jim’s challenge of this CEO selection prompted  SECU’s board to send an extended letter to staff on May 23, 2023 which began:

The SECU Board of Directors writes this letter to address recent conversations and rumors about the leadership and direction of our credit union. We recognize that changes bring questions and uncertainty, and we want to ensure that we provide clarity to you, the people delivering value for our members every day.

The board of Directors fully and unanimously stands behind Jim Hayes as CEO and is excited about his ability to lead SECU through the advancements and improvements our members demand and deserve. .

The New CEO

On June 13, 2023 SECU announced that Hayes had resigned to become CEO of State Department FCU.   Leigh Brady was appointed as the new CEO.  She is a thirty-five  year SECU employee who was Senior VP of Operations.   She introduces herself in this two minute video.

She along with board then began a six-city tour meeting with advisory board members, employees to present her views and the need for change.   This video summarizes the messaging as: “We Are SECU: On The Road” tour, coming together to discuss progress at SECU, listen, and connect.”

The Board Changes Election Process and Timing

While these public controversies continued, SECU’s board on April 2023 adopted new board nomination and election procedures.  Then on June 30 the board adopted new bylaw changes which altered the 2023  Annual Meeting format and order of business.  Per Chairman Ayers the reasons for these changes as given in this North Carolina Business article  “are designed to ensure the annual meeting remains orderly, respectful and true to our primary purpose” of electing directors.”  Blaine opined the changes were meant to stop change.

These two procedural modifications ended the traditional meeting agenda of other business and outlined extensive changes for member-nominated, versus board selected, candidates to fill open positions.   Blaine repeatedly asked if these changes required the approval of the North Carolina’s Administrator of Credit Unions.

Jim’s complaint:  it is simply illegal for the SECU Board of Directors to exclude any SECU member, who is 18 years old and willing to serve, from independently petitioning to become a candidate for the SECU Board of Directorswent unanswered.

The new election procedures had tight deadlines for “outside” candidates to be nominated if not chosen by the board.

Thursday, July 20 was the deadline for members to apply to run for the SECU Board of Directors and the three open positions.  However the nomination committee did not announce its approved slate until August 11, 2023.  Their candidates were all current board members.

If not selected to be the official slate of candidates, a member who wishes to self-nominate must obtain the signatures of 500 members to be eligible to run. The “New Election Procedures” added  a requirement that those signatures must be obtained on an “Official Nominating Petition,” which the SECU Board did not release publicly until August 11, 2023.  These petitions had to be returned by August 21, 2023,  a period of just ten days to become “member-nominated.”

Members who shared Blaine’s concerns followed the new member-nomination procedures,  submitted petitions with the required number of signatures and placed three candidates to oppose the three incumbents nominated by the Board.

The Campaign and Member Vote

Blaine’s blog then turned into a platform supporting the three member-nominated candidates in September and October.  The first post was on August 28,  Why Not Vote For The Member Nominated SECU Board Candidates?

In addition to introducing the three challengers Perkins, Stone and Clements, he also took on the positions of the incumbent candidates.   Every post included links for how to vote in person or absentee, a process that began on September 1 and extended to the Annual Meeting in October.   The campaign’s theme was “Let’s put members back in charge of the credit union.”

The Voting Outcome

I cannot find posted at this time the complete video of the 2023 SECU annual meeting.   At minute 1:28 through 2.33 is the member forum with multiple comments about the direction of he credit union.

At the conclusion of the meeting, Ernst and Young provided the results from all absentee and in-person voting for the Board Election. All three member-nominated candidates won.

Democracy Is Hard Work

This account shows the tenacity and effort needed to implement meaningful member involvement in credit union governance, especially at the annual election.

Those in charge, volunteers and senior executives, will pull out all the stops to keep control of the process.

SECU shows that member involvement takes informed commentary, organized and continuous monitoring and most importantly issues or positions that resonate with members.   Blaine is not the only former CEO who has opposed a successor’s decisions—most frequently the merging of the credit union.

What is unique is his website platform and skills as an advocate.  In a later post I will summarize the state of play in this year’s election to the Board.

However in this public clash of personalities , there is a much deeper issue at play.   That fundamental topic is what is a credit union’s purpose and whose interest is it meant to serve.

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A Credit Union Enters the Valley of Dry Bones

The description of the  Valley of Dry Bones in Ezekiel is always brought back to life with  Halloween.  And in the song Dem Bones or the spiritual version  Dry Bones. “Toe bone connected to the foot bone, foot bone connected to the heel  bone etc .”

However this metaphorical story came to mind when reading the announcement of the proposed merger of the $1.3 billion Community Credit Union-Florida (CCU) with Launch Credit Union. also $1.3 billion.

Both are in sound financial condition with CCU maybe a step or two ahead on several vital indicators. However the main occasion for the merger appears to be the announced retirement of CCU’s  CEO, a 29year employee, in October of 2023.

This is certainly the outcome reported in the mid-August 2024 public  merger announcement:   “Joe Mirachi, president/CEO of the $1.3 billion Launch in Merritt Island, Fla., would lead the combined financial institution. Laurie Cappelli, president/CEO of the $1.3 billion Community Credit Union of Florida in Rockledge, would retire and would serve in a consultant’s role as needed through system integration.“

These two announcements meant that for almost a full year, the five member CCU board and CEO have been working on a merger versus hiring a new CEO to lead this very successful credit union into the future.

CCU’s web site About Us describes the founding in 1963 as Brevard County Teachers credit union stating:  Eight of the ten teachers signed a Certificate of Organization, and each of them subscribed to one share in the Credit Union for a total of $40.” Today the credit union manages $1.142  billion in shares for  57,938 members.  The net worth ratio is over 11%.  What happened?

Who Is Responsible for This Decision?

Who made this decision about the future of these 58,000 owners?   From the public record, just six persons: the five board members and the CEO.

CEO Cappelli joined the credit union as a member service representative in January 1996 or over  28 years ago.   She became CEO in February  2018.  She  describes herself on LinkedIn as  a “Servant and Motivational Leader, Credit Union Advocate, Positive Influencer.”

Prior positions were at Black Hills FCU  (13 years) and  Kennedy Space Center FCU ( 2 years). Her public resume shows this is a person who would be fully aware that this act pulls up the ladder she used to ascend to leadership from all those now serving with her.

The public and professional credentials of the five-person board with their service tenures are described on the CCU website.

Board Chair Patmann has been a director since 2006 .   Now retired he lists numerous community and board leadership roles.

Vice Chair Marvin has been on the board since 2016 and on the audit committee prior.  He started his own company and has served on many educational and civic positions of leadership.

Board Secretary and Treasurer Dale joined the board in 1994.  She is a CPA who owns her own firm and has served on multiple other public boards.

Board Member Gindling is the President/CEO of Space Coast Health Foundation and a board member since 2016.

Board Member Rains serves as the Executive Director of Communications at Eastern Florida State College and joined the Board in 2022.

All six of these leaders have extensive responsible community positions, individual professional qualifications and longtime roles with the board and credit union.

Why have they decided to transfer all of the credit union’s substantial resources to a leadership team with no history, no local involvements and no legacy relationships that built their credit union’s success since 1963?

One would have expected there to be a thorough strategic assessment, an in-depth due diligence of options and explicit member-owner benefits to justify the transfer of this self-sustaining, six decade old, member-owned financial firm.

Unfortunately, the press release was full of the rhetorical cliches and absent any specific facts or data that would substantiate why this option was chosen.  Here is a typical excerpt:

“This collaboration demonstrates the credit union philosophy of ‘People Helping People,’ because together our combined resources and shared commitment enable us to offer enhanced products and services to our members while maintaining the high level of personalized service our members have come to expect,” Mirachi said. “We are excited about the opportunities this merger will bring and the positive impact it will have on our communities.”

Together, we will build on our legacies of trust, integrity and exceptional service to empower our members towards financial success,” Cappelli said. “We look forward to a very bright future together.”

Sounding Out Any Opposition

Moreover the FAQ’s with this public announcement appear to be a public “tolling” to see if there will be any  opposition to this charter’s death:

We know it is not typical for a merger to be announced while still in the pre-agreement stage, however, we believe strongly in the benefits of this merger and believe that being transparent with our employees and members to keep them involved and informed throughout this process is the right thing to do. This also means we do not have all the answers as the boards are working to ensure all details are carefully considered. As the merger process continues, Community Credit Union will keep members informed of progress, including sharing important notices, dates, and events.  

The Failing of the Cooperative Model

This case is not an isolated example of a deeply troubling reversal of the whole legislative and political justification for a non-profit credit union option in America.

Based on the public information and the latest financials, there is no member benefit to be gained, and no future service that the credit unions could not each accomplish.  CCU’s board  and CEO appear to have  failed in their most basic  fiduciary duty: to have a leadership succession plan for this 167 employee organization founded almost three generations earlier.

The CEO’s retirement announcement in the fall of 2023 was instead a mating call for other credit unions to step up with an offer.  The details of that offer by Launch have yet to be disclosed.

A Sellout Worth $300 Million

Given the board’s abdication of its most important responsibility for CCU’s self-sustaining, it is virtually certain the members and the employees will receive nothing for their decades of loyalty and effort.

This is a blatant failure of democratic cooperative governance-a board oblivious to its accountability to the member-owners.  Credit unions were designed to reflect a new and more equitable approach to consumer choice.  A critical goal was to place the welfare of the community first and not the preferences and rewards for those who gained positions of power.

This sellout to a third party is unfortunately another example in which the members receive nothing except that which they already have—the promise of future service.  This charter surrender is a betrayal of the credit union owners and the cooperative system.   We know from multiple credit union purchases of banks that the owners of an institution with this track record, financial strength and market position would easily command a price of 1.5  to 2.0 times book value –or up to $300 million in an actual market sale.

Moreover bigger does not mean more success.  This merger, like others, undermines the trust that members have placed in their leaders to do the right thing.  Without trust there is no foundation for the future.

Into the Valley of Dry Bones

The source of this leadership failure stems from a breach of faith.  This is a current example of the old story of the Valley of Dry Bones..  Instead of an organization that is focused on sustaining member welfare, the owners are left with only their separate individual resources.

Their collective future is transferred over to another board and leadership team they do not know, and did not select.  They are now disconnected from each other and from their past legacy.  Their loans and savings accounts are just a heap of dry bones with no special purpose, history or connection.

These six “leaders” have lost the passionate spirit that cooperatives require to be successful in serving the common good.  The eight founders who contributed $40 to gain a charter did not succeed because of their financial capital.  They possessed something much more important–the inextinguishable human spirit committed to the success of this singular financial enterprise.—in perpetuity.

And that is what Ezekiel‘s prophecy illustrates by the metaphor of the Valley of Dry Bones: “I will put my spirit within you, and you shall live, and I shall place you upon our own soil.”

The spiritual Dry Bones is about broken connections between people.   It also states what is required to put all these bones functioning together again.

When that spirit is missing, this most critical contribution of human capital, the  enterprise falls apart.  These one-time credit union leaders are now sending their members into a Valley of Dry Bones.

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A CEO’s Lived and Led Business Strategy

“Empathy emancipates making us greater than hate or vanity;

That is the American promise powerful and pure.”

(A phrase from poet Amanda Gorman’s, The Sacred Scene, read on August 21, 2024, Chicago)

I reached out to Great Basin FCU’s CEO Jennifer Denoo to discuss three topics:

  1. To learn about the credit union’s announcement of an affordable housing project with the FHLB San Francisco. How would this help and what was their role?
  2. Why a 2010 video of an interview of the  first President and his wife about the credit union’s founding in 1951 was linked to their website.
  3. The reasons why that website presents a very different “vibe” than most.

The Financials

At June 30, 2024 Great Basin reported strong financials, partly due to a recent small merger with another Reno, NV credit union.

Total assets:  $313 million; Loans $215.5 million; Net worth 11%; Delinquency .47%; and ROA of 1.93% and share growth in double digits, results helped by the merger.  It serves 25,000 member-owners.

The Affordable Housing Initiative and Goodwill

The credit union had joined the San Francisco FHLB in 2023 to have a liquidity backup.  Jennifer asked questions about other FHLB services offered. As a member-owner, she wanted to learn if services could be more than a transaction.  Was it a relationship opportunity?  She learned that few other Nevada financial firms were taking advantage of recent federal government funding and FHLB grants to support affordable housing projects (AFP) in the state.

One such program was undertaken by a non-profit developer, Sunwood Housing. It approached the credit union to partner in a new development in Lovelock (pop. 2,000), the only incorporated town in a very rural county.

The credit union’s role was to monitor the disbursement of the $663,000 FHLB’s AHP grant.  The oversight required their expertise and time; there was no interest or fee income.  The grant then freed up other federally authorized funding for this 24-unit development for low income residents.

Jennifer said the credit union’s support for this affordable housing project could open further possibilities with the developer, the county commissioners and residents, and the FHLB.  The expertise, market awareness and goodwill could lead to future AHP partnership opportunities; but the immediate gain is the positive impact on a small community she serves.

 The Founding Video-History Never Gets Old

The credit union created a video interview of its first President Jack Dunn and his wife Laura in 2010.  It tells the story of the beginning in 1951 as the Reno-Bell Phone Company Employees FCU.

NCUA required the credit union raise $25 in shares to receive a charter.  The eight organizers were $12.50 short.  So, Jack put up the rest and became the first President.  At the end of the first year there were several hundred members. Records were kept in a founding member’s garage. The credit union was offering loans to members that banks would not, because the volunteer leaders knew their members as “family.”

Jennifer said the video was created so every employee understands “who we are.”  She explained, “As we grow the FOM, now covering 12 counties, it would be easy to be seen like a bank.  We never forget how we were started.  We show it to every new employee so they can feel the passion and mission of the credit union. History never gets old.”

Bank Like a Boss: Members Are the Owners

Jennifer became CEO in 2018.   She began as a teller thirty years earlier but had trouble balancing out her cash drawer. The CEO at the time saw something in Jennifer and suggested she apply for another position–being a collector.  The result: “Best job I ever had.  My goal was to recover payments and assets through empathy and understanding of the member’s situation.  To make them feel like their current financial situation did not define who they were.”

When she was 30, that same CEO and her cherished mentor in the credit union died unexpectedly. She thought about going back to school to become a hospice nurse while raising her three children.  Jennifer saw a parallel between what a hospice nurse does and what a credit union leader does – they teach, they hold hands, they give dignity and grace.  Once she realized she was doing what she was already passionate about– leading with empathy – she chose to stay at the credit union as it evolved its member-centric focus.

Making Member Love a Reality

The credit union’s website feels different.  Here are two prominent statements:

We give a DAMN about every member.

Let us show you why we’re not just member-owned, but member-loved, too.

As CEO she continued the mission and vision of member love.  She admitted the site may feel quirky, but it was based on communicating a fundamental business competitive advantage: employee empathy.  It drives everything the credit union does.  It is the number one skill every employee develops.

Her personal commitment to this effort is shown in her first video as CEO, Just Ask Jennifer.

The skill is practiced in training sessions.   Scenarios with the words to use that first acknowledge how the member feels, in a non-patronizing way–“Say it, to live it.”—before resolving a problem or opening a new service.

Even when the member is not always right, empathy is the first action when taking responsibility for a solution. For example, an older member came into the credit union angry that the credit union would not give him his tracking number for an insurance payment.  He insisted the credit union had it; but he was using the wrong word. He needed the routing number.

The employee put themselves in the shoes of the member, imagined how overwhelming it must be to set up a new insurance deduction and led with an understanding heart before fixing the problem.

Or the 11:00 PM Just Ask Jennifer member query about how to change a password.  Jennifer takes pride in answering each of these inquiries, even at night or on a weekend because she feels how unsettling it is to not access your account online.

The service promises and values stated on the web site are specific.  Take ownership of the situation, show appreciation, step in the other’s shoes, etc. All are important for making these employee skills an essential part of the credit union’s brand.

The overall strategy is to build relationships not merely transactions. For she asserts “It is relationships that will carry the organization over the next bump in the road.” 

Jennifer’s leadership skills have resulted in positions on four other credit union and financial collaborative organization’s boards.   Her bottom line is “You just have to believe in people-and give a damn.”

A sound strategy not just for leading a credit union, but for life.

 

 

 

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The Windy City in Poetry

Chicago

by Carl Sandburg

Hog Butcher for the World,
Tool Maker, Stacker of Wheat,
Player with Railroads and the Nation’s Freight Handler;
Stormy, husky, brawling,
City of the Big Shoulders;

They tell me you are wicked and I believe them, for I have seen your
painted women under the gas lamps luring the farm boys.
And they tell me you are crooked and I answer: Yes, it is true I have
seen the gunman kill and go free to kill again.
And they tell me you are brutal and my reply is: On the faces of women and children I have seen the marks of wanton hunger.

And having answered so I turn once more to those who sneer at this my city, and I give them back the sneer and say to them:
Come and show me another city with lifted head singing so proud to be alive and coarse and strong and cunning.
Flinging magnetic curses amid the toil of piling job on job, here is a tall bold slugger set vivid against the little soft cities;
Fierce as a dog with tongue lapping for action, cunning as a savage pitted against the wilderness,
Bareheaded,
Shoveling,
Wrecking,
Planning,
Bulding, breaking, rebuilding,
Under the smoke, dust all over his mouth, laughing with white teeth,
Under the terrible burden of destiny laughing as a young man laughs,
Laughing even as an ignorant fighter laughs who has never lost a battle,
Bragging and laughing that under his wrist is the pulse, and under his
ribs the heart of the people,
Laughing!
Laughing the stormy, husky, brawling laughter of Youth, half-naked, sweating, proud to be Hog Butcher, Tool Maker, Stacker of Wheat,
Player with Railroads and Freight Handler to the Nation.

(Editors note:  My hometown from 1974-1981 when working at First Chicago and then Supervisor of Credit Unions for Illinois’ Department of Financial Institutions)

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“I’ve Been Seen”

Real political rhetoric, much more than every day punch and counterpunch,  is in full season.  Last night I listened to the Obamas’ twin presentations at the Democratic national convention.  Afterwards all the TV channels offered their pundits’ assessments of the evening, especially the keynotes by the former President and First Lady.

Sometimes it is hard to know whether one’s reaction to an event is shared by others.  Or even what to think about it until we hear how others appraise their experience.

As the PBS panel went from person to person, one commentator’s reaction stood out from his colleagues’ traditional analysis of each speakers’ effectiveness.  His was a personal reaction, not a reporter’s professional assessment.

He had reached out to a colleague for a handkerchief during the former president’s speech, weeping.  The reason for his reaction was summarized in one phrase.  Reacting to Obama’s description of what America could be, he said “I’ve been seen.”

A Credit Union Counterpart?

His reaction reminded me of a conversation last week with a CEO’s who has an unusual approach to leadership.   I had reached out to learn about the credit union’s participation in an affordable housing program.  To prepare for the interview I went to the web site and looked up the June 2024 financials.

The numbers were impressive.  But the website had a different “vibe” than most.  It had a ten-minute 2010 video interview with the first president and his wife, a reminder of the commitment necessary to start a credit union in the 1950’s.  Then there was this vision: “To be member loved.”

Was this phrase just another cute PR effort?   How could an emotion be translated into a real business strategy?   Who was behind this approach to credit union leadership?

Tomorrow I will share my conversation with the CEO who developed this unique effort of “seeing others.”  It is the central tenet of the credit union’s business model and market advantage.  It takes effort, and it works.

 

 

 

 

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A Movement We Should All Know About

Christian Nationalism is an unholy union of American exceptionalism, White supremacy and Christian identity parading across stages at rallies and worship services.

Many people, especially traditional believers are confused and left wringing their hands about how to respond?   Is this just a temporary merging of the political right and politics facilitated by leaders who will leave the scene after elections are over?  Or is it something more permanent in our confused and complex American belief system.

During the past six months NPR has presented a number of in-depth stories on Christian Nationalism.  Here is a link to a 25 minute report from July 9.

This week Presbyterian Outlook told the story of three Seattle area church ministers working together to develop a faithful and reasonable response to this distortion of the denomination’s historical Christian doctrines.

How do we keep our sanity amid a chaotic political-religious climate?

On July 7, 2024 Dr. Matthew Taylor spoke on this growing influential force in our social and political discourse.  His talk was called Christian Nationalism, the Capitol Riot and the Rising Threat to American Pluralism.

It was presented as part of the summer speaker series at the National Presbyterian Church in Washington, DC.   His approach is analytical with multiple examples to document  his major points.  Because his talk is almost an hour, here is a brief outline.

  1. The Christian Nationalist presence and role in the January 6th events was neither accidental nor incidental. He provides numerous photos and videos showing this involvement.
  2. These seemingly independent mega churches and evangelical charismatic movements are networked together in an “ecosystem” of social media, round tables, and shared view of the five roles of church leaders. The prophetic and apostolic roles carry the highest authority.
  3. The churches believe in “strategic spiritual warfare” with a mandate for their followers to achieve leadership of the seven mountains of American society.

Every part of his analysis is documented including the leaders’ original outreach to Trump as a candidate in 2015 and then subsequent involvement in his administration.

Dr. Taylor’s goal is to call attention to this growing force which is counter to the historical American openness to diverse points of view whatever the topic.  He shows how the group’s symbols are becoming increasingly mainstream embraced by the current House Speaker and a Supreme Court Justice in their display of the Appeal to Heaven-Flag of Liberty- a prominent symbol seen on January 6 in the Capitol riot.

He cautions these people are “true believers” not temporary cynical hustlers after money and power.   He observes that these coordinated efforts might appear bigger than each of us, but not bigger than all of us.

I believe this factual and historical presentation of this movement is vital as it seeks to impose their vision for all of America.   Movements started with pure intent, can become distorted, even perverse.  Leaders can use their collective resources gathered for one vision, to expand to a much greater goal: power over others.

It has happened before in other countries, when democratic processes are used to support authoritarian prescriptions and then veer into fascism.

Awareness is the first goal in setting bright lines for the freedoms America provides the entire spectrum of believers or non.  Christian Nationalism is a step too far away from an open, diverse and tolerant society.

 

 

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Awakening the Members’ Spirit at SECU  (Part I-The Beginning)

Democracy is hard work.   Most people have  more urgent personal priorities than worrying about the direction and leadership of their credit union. Or for that matter even the circumstances of the many other organizations organized on democratic principles in which one participates.

However in credit union design, democratic governance–one person one vote–at the annual election of directors is the most powerful tool the member-owners have to exercise their oversight.  The reality is that contested elections are a rarity.   Most boards are self-appointed in a perpetual process of nominating just the actual number of internally selected candidates as there are current openings.

Even routine member Q&A at annual meetings rarely happens when the agenda comes to the “other business,”  item.  Comments are carefully controlled if even allowed.  “All questions must be submitted in advance.”  “Speeches will be limited to two minutes.”  etc

The annual meeting’s formal rules are controlled by the incumbents’ chosen parliamentarian who rules out of order,  any motions or conduct not consistent with the board’s intentions.

A Member-Owners’ Representative Takes the Floor

On October 11, 2022 at SECU’s annual meeting the unexpected happened. A member and  former long serving CEO, Jim Blaine, rose to make a statement about the “change of culture and new direction” the board and recently hired CEO were taking the credit union.

His statement had three parts.

  1. A history of SECU with its strategic and business priorities and overall performance since chartering in 1937.
  2. A description of six current activites for which further explanation to the membership was requested. These changes he called Open Membership, Merger with Local Government FCU, Introduction of risk-based lending (RBL) for consumers and business lending, Cancelation of the tax preparation service and Expansion outside North Carolina.
  3. Two motions were proposed after describing these initiatives. The first called for a response to specific questions about the six areas and the second: The Board update, publish, and make available to all member-owners its’ Strategic Plan for SECU no later than 90 days prior to the 2023 Annual Meeting.  

Several members spoke up in support.  Both motions were approved without any voiced opposition or objection.   Thus SECU’s member engagement and awakening began.

A New Blog: SECU-Just Asking

Blaine’s full statement given at the meeting is here.  He also posted it on his new internet blog called SECU-Just Asking.  The site evolved to become a public dialogue on the board’s response to the motions.  Almost daily updates are being posted on these topics and other events related to SECU’s priorities or performance issues.

Blaine’s writing style is forceful and creative relying on logic and data to support his positions.  He is an ardent advocate for his views.  He is committed to the daily task of presenting observations and alternative views to prevailing priorities.  The blog has become an open forum for multiple member comments.

As of now some of these six topics have been put on hold: the proposed merger with LGFCU, the change in FOM and expanded operations outside North Carolina.  Tax preparation services have been discontinued.

The most significant issue remaining at the forefront of current posts is the impact of  RBL and the financial performance of SECU.

Jim Hayes the CEO resigned in mid 2023 to become CEO at State Department FCU .  He was succeeded by longtime SECU senior executive and Chief Operating Officer Leigh Brady.  She has continued the RBL and other internal projects initiated by Hayes.

A First Takeaway:  What  Democratic Practice Entails

Most CEO’s to whom I spoke about this event were critical of Blaine’s 2022 spokesperson’s role in challenging the credit union’s direction.   Most asserted he had ended his tenure at leadership.  Now it was time for him to be silent and give the new CEO and the board who chose them, the freedom to take the credit union in whatever direction their collective judgement decided.

For Blaine this was not a solo exercise.  His statement distributed at the Annual Meeting was prompted by numerous calls from current and former employees, members and others who were deeply concerned about the direction and new “culture.“ They asked that because of his standing in the cooperative community, he take the floor to articulate their worries and seek public dialogue between the  credit union leadership and the member-owners.

Blaine’s presentation-request is the first lesson in member governance.  Democracy is a public, not a private event.  It entails open meetings with points of view which may challenge current wisdom or practice.  Such public dialogue is often uncomfortable for those in authority.

From the annual meeting video, the moderator seemed surprised at Blaine’s ask  on behalf of the owners.  The  members quickly approved the two motions made under the regular rules order for the meeting.

The first condition for democratic government is public “speech,” ideally full and open to all points of view.  It is no accident that the 1st amendment to the Constitution was for freedom of speech. Or that the public press in America is called the fourth estate, a necessary parallel to the proper functioning of the executive, congressional and judicial branches of government.

Uncomfortable in Public

For those in positions of authority, public dialogue can seem threatening to their prerogatives and assumptions about leaders’ roles.  The response to critics is often PR or marketing campaigns designed to overwhelm one side of an issue.  Sometimes even special crisis managers or experts in publicity are hired to promote the message.

For those in positions of public service, direct dialogue with constituents can be uncomfortable.  Written statements are preferred sometimes with FAQ’s attached, or “no comments” issued about key events.  Public board meetings are carefully controlled and sometimes cancelled.   Speeches by principals to their audiences are made over zoom avoiding live in-person contacts.

Democracy depends on public expression.  Whether it is public rallies to oppose a dictator’s rule as in Venezuela, or the weeklong public conventions shows by the two parties, democracy is best served by open meeting spaces.

The Next Event in Democracy’s Awakening at SECU

Readers can follow the details about the Board’s response to these two 2022 motions by going to Blaine’s blog.   I will pickup the story further down the road  when the board decided that this exercise in member democracy was too unsettling to be left open ended in future annual meetings.

The SECU board’s surprise to this event is itself instructive. Most persons in elected or appointed positions of responsibility believe in their presumed authority.  “I was chosen to make these decisions based on my personal ability.” Or just the explanation, “I’m in charge now.”

An outsider might ask of SECU’s leaders as they would any group in this situation: Were   there no ears to the ground?   Did the board and executives truly grasp the scope of the changes they were introducing?  Were the strengths and advantages of the previous SECU model and its decentralized leadership understood?

As one watches this two-year-old drama unfold, look around and assess one’s own awareness of the organizational environment in which one navigates.   Is there open dialogue on critical issues—or just public posturing?   Are leaders approachable or hiding behind a veil of press releases and written speeches?   Do boards actually meet and discuss vital issues, or just keep the group consensus intact to avoid personal controversy?

Democracy is hard work. It takes practice.  It entails public events.  Many are uncomfortable taking this role; but we can learn from those who do, whether we agree or disagree with their positions.