Chip Filson
Kiev Symphony and Orchestra welcome all to this season of joy and war, with song.
(https://www.youtube.com/watch?v=vjGM3mtqmv0)
A children’s puppet show.
The Messiah sung on December 9, 2024 in Kiev. Familiar music but a new experience when heard in the Ukrainian language. The promise of peace in a time of war.
(https://www.youtube.com/live/SuALTmDE1I8)
A principle of both internal and landscape architectural design is that “form follows function.” The concept was developed by Louis Sullivan, who used the phrase when he designed the Wainwright building in Chicago. It was utilitarian in design reflecting the office work that would take place within.
Examples of this premise can be found in numerous areas of biological evolution:
More to the point, credit union organizations are subject to this same evolutionary principle. The member owned, self-funded, locally focused, democratically elected leadership reflected the founding purpose of a financial cooperative. That is to combine individuals’ resources to assist those left behind or preyed upon by existing consumer options.
This special economic focus on those on life’s financial margins was supported politically with a blanket exemption from federal taxation. Credit unions were seen as an example of doing good for communities and groups rather than rewarding institutional profit and private ownership.
Today with abundant financial choices for almost all levels of society, the original purpose seems somewhat muted. The middle class of employed workers is doing well. Those with home ownership and savings in ever rising markets, even better. Serving those left behind is hard. These groups today are often the focus of special governmental or nonprofit programs
What happens to credit union design when the original function, or calling, is changed by market forces?
As in many other areas of life, the form changes as the focus of an organization evolves to serve all-comers not just those left behind by America’s promise of opportunity. The previous cooperative design elements are replaced by institutional priorities of growth, increased marketplace visibility and reach. These ambitions are driven by CEO’s and boards who inherited a legacy of financial resources held in common, but who chose to pivot away from traditional community and member investments.
This evolution places profits before people, thus turning upside down the cooperative priority. Growth comes from acquisitions using the collective capital pursuing other financial organizations. Internal value creation for the member-owners is seen as boring. Geographic diversity, new revenue sources and investing in fintech startups are the key to future success.
In short, these new designs make some credit unions indistinguishable from their for-profit privately owned competitors. Members are no more than customers, each a potential revenue or profit center.
This evolution is neither inevitable nor the ultimate outcome. But it does garner the headlines and lots of external brokers, consultants, advisors who introduce credit unions, as their next meal ticket, to the wonders of market capitalism. Credit union boards, executives and even external advisors who have limited grasp of their organizations’ legacies are easily seduced by the thrills of this market-place capture.
Self-awareness and self-restraint are hard characteristics to nurture when one is in a position of power and privilege. However, I believe the leaders of credit unions in the year ahead will be those whose vision may seem modest compared to more dramatic short term activities.
For values that sustain are not the result of temporary market success, but rather the hard-earned relationships nurtured over years. These values shape the functions to which leaders give priority. For those in positions of credit union leadership, cooperative design is still true to the original purpose.
I just discovered the movie Yes Virginia, There is a Santa Claus. the family drama based on a fictional story of the creation of this most reprinted of all newspaper editorials.
The New York Sun editorial, printed in 1897 by Francis Church, responds to a letter from an eight-year-old Virginia O’Hanlon asking if Santa Claus is real. The film presents social circumstances still present today—anger at immigrants., poverty and unemployment, the corruption of big money, women’s roles, and the sanitizing power of the press.
But the editorial’s message resonates still because it offers an understanding of belief and hope. After affirming Yes, There is a Santa Claus, the writer provides his logic:
Alas! How dreary would be the world if there were no Santa Claus! It would be as dreary as if there were no Virginias. There would be no childlike faith then, no poetry, no romance to make tolerable this existence. We should have no enjoyment, except in sense and sight. The eternal light with which childhood fills the world would be extinguished. . .
. . .there is a veil covering the unseen world which not even the strongest man . . . could tear apart. Only faith, fancy, poetry, love, romance, can push aside that curtain and view and picture the supernatural beauty and glory beyond. . .
No Santa Claus? Thank God he lives and he lives forever. A thousand years from now, maybe 10 times 10,000 years from now, he will continue to make glad the hearts of children.
The editorial captures the hope of this season. It is rooted in the lives and circumstances we all share. Hope “exists as certainly as love and generosity and devotion exist and give to our life its highest beauty and joy. “
It is these diverse presences, not presents, that bring forth this season of gratitude and love.
The World as it is: By English artist Banksy
The World as we wish it to be: Bethesda Meeting House being reborn
Ravalli County FCU is a $75 million credit union with its main office in Hamilton, Mt.
It is an organization led by three women who believe and daily implement the credit union spirit. It is the same commitment memorialized in the Christmas classic movie, It’s a Wonderful Life.
With 17 employees and 5,924 members out of a county population of 48,000, its focus is lifting up the entire community. Their mission statement:
We Believe in Our Community!
At Ravalli County Credit Union, we believe in “People Helping People”, we believe in better banking, and we believe in creating beneficial, life-long, financial relationships for our members and community. As a credit union member, you can take pride in knowing you are part of something bigger. Throughout the year, Ravalli County Credit Union volunteers, sponsors, and donates to local non-profits and schools to enrich the lives of those in our community.
Examples of this commitment on its website are the Thanksgiving meals provided, scholarships awarded, completed VITA tax returns and the volunteer hours by employees and the organizations they support.
It’s $53 million loan portfolio is growing over 8% this year. The delinquency rate is just .06% with net recoveries of $117,710. Capital is 12.8%.
What caught my attention was a December 2, 2024 article in Next City by Connie Aitcheson, In One Montana Town, Women in Need Get New Financial Support.
The article describes the credit union’s initiative helping single mothers and working women in poverty to improve their opportunities.
The need: “There are so many women in our area living at the poverty level,” says Darci Parsons, the president and CEO of a local credit union called Ravalli County Credit Union (RCCU). Some of the reasons for the large amount of women living at the poverty level are the death of a spouse, divorce, unplanned children, domestic violence and the high cost of housing in the area.
For single mothers in the area, poverty rates jump to 49%, also according to the American Community Survey 2019. In Hamilton, the largest city in Ravalli County, a staggering 83% of single mothers are in poverty and earn 75% less than married couples with children — an average of $18,074 vs. $71,429. About 30% of RCCU’s clients are female-headed households, and their median earnings are 20% less than men.
The article summarizes the recent demographic changes occurring in the county:
Their community of Ravalli County is experiencing a tension familiar to many metro areas across the country. A new wave of retirees and remote workers — in part sparked by COVID-19 — have moved into Montana, increasing both housing costs and the general cost of living. The median price for a home in the county, according to Realtor.com, has risen to nearly $770,000.
The good news is that the credit union has received a $560,000 grant from the US Treasury’s CDFI fund to underwrite this effort.
“There are a lot of people who move to our area with means,” Parsons says. “And, unfortunately, there’s a lot of people in our area who are underserved, who are struggling to make ends meet. Our job is to have that balancing act of where we’re serving new members who move into our area who have funds as well as the large population of people in our area who do not — primarily women.”
How the CDFI grant will be used: “We can write loans for people who are maybe more credit challenged … or who might have collections.”
The credit union also offers an account that protects against overdraft fees and offers a $500 line of credit — regardless of someone’s credit score. They also do not perform background checks on any applicants. “If they’ve had problems at other financial institutions, they can still open a checking account with us,” Parsons says. “We can write loans for people who are maybe more credit challenged … or who might have collections.”
According to Parsons, many women “don’t have that confidence in themselves.”
“As a credit union, our mission is helping people, and that’s what we do every day,” Parsons says. “I have an amazing staff who embody that and make a difference in the lives of our community.”
The angels from George Bailey’s story can now be found, collectively leading a Montana cooperative.
Darci Parsons, Ravalli County FCU – CEO
Why Ravalli County FCU? The better question is WHY NOT Ravalli County FCU? Our philosophy is all about people helping people and our promise to you is to: simplify your financial life, work in your best interest and partner with you to achieve financial success. We get it.
Sirikit Vieyra, Ravalli County FCU – COO
Ravalli County FCU has served this amazing community for 66+ years and is going strong! We even added another branch in Florence, MT. It is a privilege working for you and with you and as we update and increase our services, I’ll always strive to meet your financial needs and goals. We get it.
Laci Rose, Ravalli County FCU – CFO
At Ravalli County FCU we ARE people helping people. I love that we are constantly working to improve technology and increase services to better serve our members with all their financial needs. We get it.
Yesterday I compared credit union’s public personas to the tragedy-comedy masks of ancient Greek theater.
The face I discussed was that of credit union’s institutional achievements: the growing sponsorship of stadiums and sports teams, the continuing mergers of long standing organizations with no member benefit, and the rebranding from legacy origins to aspirational names (Bethpage FCU to FOURLEAF FCU).
Today’s alternate face is member focused. They celebrate the many ways credit unions are sharing and enhancing their value for members and communities.
It is for the reader to decide which credit union expression may be tragic or life affirming.
The most frequent member-centric announcements this time of year are the numerous bonus dividends credit unions pay members. This is a pattern of member value sharing that goes back decades. Some examples.
The largest yearend bonus in credit union history. That is how the Ogden, Utah Goldenwest Credit Union described its recent $3.5 million bonus dividend. It added, “During the last 21 years, Goldenwest has returned more than $30 million to its members.”
These distribtutions are is not new or unusual. If one types “bonus dividends” into the search box on CU Today’s home page, 2,482 matches are listed. Some stories go back decades of coops sharing success their with member-owners.
These payments can be structured in many creative ways. On December 2, 2024 CEFCU (Peoria, Il) announced a $55 million Extraordinary Dividend: $52.25 million shared equally between borrowers and savers, and $2.75 million going to CEFCU Debit Mastercard users. The video announcement states the credit union has distributed over $500 million in bonus dividends since 2000. Listen to CEO Matt Mamer’s explanation for why and how this bonus was paid. You may view one of many member’s stories featured on the site, that of a single women buying her first home.
The $1.9 billion Tyndall CU paid $1.6 million using the following formula: To get their holiday cash, members had to participate in everyday banking activities, such as online banking, bill pay, direct deposit, card usage, e-statements, and loans. Each member had the opportunity to receive up to $700.
Being part of a community is more than sharing financial success. It is leaders’ personal participation in special events as described in these LinkIn posts:
From the CEO of Desert Financial: My family and I had the opportunity to volunteer with the Desert Financial team at a special Hometown Heroes event last night at the Phoenix Zoo. The highlight of the night was seeing the kids’ faces light up as they picked out gifts and met Santa. This initiative is a small gesture of gratitude for the sacrifices these veteran and first responder families make for our community and country.
From San Francisco Fire’s CEO: This is my favorite time of year when SF Fire Credit Union staff volunteer alongside members of the San Francisco Fire Department and others to give out toys to children in our local community as part of the annual SFFirefightersToyProgram. Thanks to all who joined us and everyone who supports this amazing program.
From the December 11, 2024 Youngstown Business Journal:
YOUNGSTOWN, Ohio – The city has selected 717 Credit Union to administer $13 million in American Rescue Plan Act funds across three programs to improve housing.
As part of the Youngstown Affordable Loan Program, the city allocated $8 million for the construction and/or rehabilitation of quality affordable housing. The credit union proposed to parlay the $8 million into not only funding for housing development, but also $35 million worth of discounted mortgage financing.
To begin development, 717 will create a $5 million revolving commercial development fund to be used for developers to rehabilitate vacant downtown buildings into residential condos, to build homes on vacant lots and to develop neighborhoods. After renovation or construction, the units will be sold to individual buyers and the funds recuperated to be invested in additional projects.
A press release yesterday from SECU North Carolina:
| SECU Foundation Initiates Phase Two Disaster Relief Package of $1.75 Million for Western North Carolina |
RALEIGH, N.C. – SECU Foundation’s Board of Directors approved a phase two disaster relief package with an additional $1.75 million in grants to three organizations, providing intermediate assistance to the hardest hit residents and communities impacted by Hurricane Helene. Funds awarded will help address temporary housing needs, financial crises, and food insecurity. Grantees include:
Phase two funding builds upon the Foundation’s $3.75 million relief package announced in October to help expedite provisions of water, food, supplies, shelter, and other emergency services to Western North Carolina. |
The annual polar plunge with purpose video from Affinity Plus FCU (St. Paul, MN) for the Special Olympics program.
(https://creditunions.com/features/polar-plunge-with-a-purpose/)
Every day in numerous communities, credit unions put their members’ well being first in all they do. They are the current expression of George Bailey’s mutual savings and loan in Frank Capra’s memorable film .
Here is one real life example from Wright-Patt Credit Union in Dayton, Ohio:
(https://www.youtube.com/watch?v=yMJT0nneRaM&t=18s)
Which mask, the corporate or the member facing one, will the American public see in credit unions today?
Will it be the continuing acquisitions fueled by payments to senior leaders, the public branding campaigns and naming rights on buildings, suplemented with continued efforts to purchase banks? Or, wlll member-owners recount stories of goodwill, shared financial success and innovative projects with partners to advance their communities?
If institutional success dominates public discussion and headline events, the results could be tragic for a separate, member-owned cooperative system. Does American really need more growth maximizing financial firms fueled by internal and external acquisitions?
If special member value delivered results are the lead story, America could certainly benefit from these modern day George Bailey-like coops. Ones where purpose for member and community progress are the priority.
I believe it is clear which expression members prefer; but will their leaders meet this moment for their institution’s choice? And the movement’s future?
In theater comedy and tragedy are a pair of masks, one crying and one laughing. Originating in the theatre of ancient Greece, the masks were said to help audience members far from the stage to understand what emotions the characters were feeling.[1]
Today these two masks are a metaphor for two contrasting public faces of the credit union movement. One is the corporate face. The other the member one. I will present one persona today of the corporate face; tomorrow the member one.
The reader can decide which of the Greek interpretations might apply to their credit union face.
Here is an excerpt from an October 2024 article by Aaron Klein a senior fellow and financial regulatory commentator with the Brookings Institute. The full article is called Why Are Non-profit Employee Credit Unions Spending Members’ Money on Stadium Naming Rights? An excerpt of one example in his analysis:
Northwest Federal is quite small, America’s 91st largest credit union. Two years ago it spent a total of $2 million on advertising. But in August, it secured naming rights to the Commander’s home stadium – now Northwest Stadium. According to news reports, the deal runs eight years at a higher cost than the roughly $7.5 million a year that previous rights-holder FedEx paid.
How is this a safe and sound decision in the best interest of Northwest Federal’s members? Why would CIA employees want their credit union’s name on a football stadium? How can one argue that money is better spent on the side of a building than on serving the needs of Northwest’s members, particularly those living paycheck to paycheck?
I asked the nation’s top credit union regulator, NCUA Chairman Todd Harper, about credit unions buying stadium naming rights. His response was spot on: “If I were on a credit union board, I would be advocating that rather than spending that money necessarily on naming rights, I’d be pointing in the direction of what can we do to lower the prices of our loans and increase the service to our members”.
But Klein could have chosen many other examples of this growing marketing practice. In October Dort Financial Credit Union announced a ten year extension of naming rights to the Dort Financial Center Flint Firebirds hockey team through the 1934-35 season. The first sponsorship agreement was signed in 2015.
Two months later, Credit Union Times on December 17 reported that Flagler CU Signs Major Naming Rights Deal With Florida Atlantic Athletics.
The article points out that the $2.3 billion Dort Financial’s head office is in Grand Blanc, MI. In 2023 the credit union purchased the $513 million Flagler Bank in West Palm Beach. CEO Brian Waldron in the purchase announcement noted. “This is a big step in Dort Financial’s strategy, allowing us to better serve our members who spend winters in Florida.”
When completed the bank was renamed Flagler Credit Union, a Division of Dort Financial. Dort also shows over $68 million of goodwill in its latest call report, presumably the premium paid the bank’s owners in excess of its net book value.
Dort gave no data to support the number of members who visited this part of Florida. However it follows a pattern of two other Michigan credit unions, Dearborn and Lake Michigan, who purchased banks with a similar rationale. It makes one wonder what Michigan members who vacation in Arizona think of these justifications.
Subsequently, CBS News reported in a December 16 article that: Florida Atlantic’s board of trustees is expected to approve a $22.5 million, 15-year deal that would give Flagler Credit Union the naming rights to the school’s football stadium.
The deal — both in terms of total and average value — would be the biggest publicly known naming rights agreement for any school in the American Athletic Conference currently with an on-campus stadium.
The Flagler bank purchase and naming rights with FAU means that the Michigan based Dort will have invested almost $100 million of members’ money in their Florida expansion.
The most memorable movie replayed again and again this time of year is the story of George Baily’s savings and loan. It is the story of a local financial institution which served its community faithfully, only to face a takeover by Potter, a financial predator to whom George owed money.
Credit unions are increasingly reversing this whole story line. It shows Potter’s fundamental negotiating error. Instead of just paying off George in a private deal, he tried to take the mutual direct from its local owners who turned up to support George when he most needed their cash.
Here’s how the reversal plays out in credit union land now. Two days ago the $2.6 billion Addition Financial Credit Union in Lake Mary, Fla., and the $871 million Envision Credit Union in Tallahassee, Fl announced their intent to merge by the end of 2025.
As reported in the Credit Union Times article the reasons for this $3.5 billion combination according to each CEO include:
“This merger will significantly increase the ability of Addition Financial to serve more members, and support both communities,” Addition Financial President/CEO Kevin Miller said in a prepared statement. “By joining forces with Envision Credit Union and the people-first culture they have cultivated for 70 years, we can provide even greater value to our collective members and team members and continue our shared mission of supporting our communities.”
And, “This merger enables us to provide more access to services, broaden offerings of innovative products, and deliver personalized support to every member and future member.”
The final paragraph of the article may best describe the motivation behind the rhetorical flourishes in the announcement:
If the consolidation is approved, Worrell is expected to continue on in a strategic role with Addition Financial through his planned retirement in 2027, according to an Envision spokesperson.
Just another example of a CEO who reached the peak of credit union leadership, and then pulled up the ladder so no one else will have the same opportunity.
It should be noted that in this as in most mergers, members are promised nothing that they don’t already have the capacity to receive from their own independent cooperative.
An even larger merger announcement of two successful credit unions was announced earlier in this Christmas, Wonderful Life, season.
On December 5, the members of LA Financial Federal CU were sent a formal letter by the Board chairman announcing the credit union’s intent to merge into the Credit Union of Southern California, creating a $3.9 billion combination. LA Financial’s official Member Notice can be read here.
Members will receive nothing from the merger that they do not already have. However, the CEO Carol Galizia, who has worked at the credit union for just 11 years will receive a 7-year contract for giving up her leadership role. Her new title: Chief of Strategic Initiatives. Four other senior executives will receive various bonus amounts for helping complete the merger, but the member letter makes clear they are “at-will” employees. A term that undoubtedly extends to all other employees of the credit union.
Chartered in 1937 the member-owners will receive nothing for their 87 years of loyalty, their collective shavings of $483 million, $409 million of performing loans and accumulated net worth of over $ 47 million.
If this privately negotiated deal had been a public transaction at true market value as in the Flagler Bank purchase by Dort credit union, the owners would have been paid upwards of two times their net worth in cash. Or one can compare this to the member-owners of Thrivent FCU which received their entire collective reserve plus a premium at 12% of each members total savings in selling to Thrivent Bank.
Instead, the CEO gets a 7 year contract, at an undisclosed amount, for turning over the entire credit union’s resources and members to a credit union they know nothing about and had no role in their success. This change of control is the exact opposite of the Wonderful Life outcome. Potter’s approach was all wrong—all he had to do was to payoff George and he could have controlled the mutual for free.
Except in this case Credit union of Southern California is getting paid almost $50 million for merging this very stable, long serving and successful credit union. The member-owners get nothing.
Both tragedy and comedy are present in Greek theater. But which face will the public see in these corporate announcements? Is Aaron Klein’s critique fair?
Tomorrow I will describe some of the member facing announcements by credit unions. Then the reader can decide which mask best expresses their credit union’s circumstances.
For the stories that resonate with the public, professional analysts and ultimately political leaders are the ones that will shape the future of the cooperative option for America.
In a beautifully composed family Christmas letter, the final paragraph is the closing stanza of a poem Walls and Bridges. It was written by the husband to his wife in celebration of their 53 years of marriage. The poem recounts his thoughts listening to a priest’s sermon in Hamilton, Montana during the peak of the 2024 election season.
You asked me why I go to church,
When so many that we know no longer do.
And I replied,
I don’t know where to find
A better explanation of the world
The way it is and the way
We want it to be.
The opening paragraphs of this December 11 article by Cinnamon Janzer of Next City:
In 2022, Etsy’s earnings topped $109 million in consolidated net income. “Despite significant macroeconomic headwinds, we maintained the vast majority of our pandemic gains and delivered double digit revenue growth and excellent profitability for the year,” Etsy CEO Josh Silverman said in a press release.
Days later, Silverman announced that the marketplace platform would raise the transaction fee Etsy takes from each sale from 5% to 6.5%. In response, some 14,000 Etsy sellers closed their shops and went on strike for eight days.
The article presents details of the initiative to build a better digital marketplace where members would own the platform.
The goal was to create an organization with a direct stake in the livelihood of its user artisans.
The Artisans Cooperative was launched in the fall of 2023.
The funding model is described on the website and includes both members and owners. Outside assistance from groups like Start a Coop, Operation Buffalo and Seed Commons was also important.
The effort is still a work in progress. No credit unions have apparently been involved yet. But it would seem a natural affiliation and potential further benefit of membership for the coops users.
The most important message is the artisan-organizer’s belief that people have the option to organize and manage their economic efforts with a cooperative design. Certainly a spirit much in need of rekindling in the much older and larger credit union system.
Read and ask if your credit union has this belief in its mission for its members.
