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.
A Critique of the Credit Union’s Corporate Persona
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.
Reversing the Plot Line of It’s a Wonderful Life
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.
Which Credit Union Mask Will the Public See
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.