Category: Co-ops in Capitalism

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IRS 990 Filings Should Be Required for All Credit Unions

Last week a proposal that federal credit unions be required, as state charters must now do, to file an annual IRS 990 was reported.

There is useful information in the IRS form that is not available elsewhere, including details about the compensation of the CEO, senior managers and board (when applicable).

Here is a link to a sample for the largest state charter SECU-North Carolina at their fiscal yearend, June 30, 2024.  The initial pages are similar to call reports. Additionally, many yes-no questions about governance link to data in the subsequent schedules.

This full report would be even more valuable if the data of the two federal credit unions closest in size, Navy and PenFed, were available for comparison.

One part of this initial data includes the question about the disclosure/availability of thefiling to the public.  Most credit unions only check this option:   Upon request  In other words, filed, but not readily available.

Information not provided in other required call reports includes:

Schedule I:  Cash grants and Other Assistance to Domestic Organizations and Domestic Governments.

Schedule J: Compensation-Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees.   Also, Loans to and/or From Interested Persons including those funding split dollar life insurance-a retirement benefit described at the end of this post.

Schedule O:  Supplemental to Form 990 includes information on governance,  elections, salary oversight process et. al.

Should Federal Credit Unions Be required to File this IRS form?

I believe it is in the interests of individual credit unions and the industry that federal charters be required to file the same data as state charters.

Here’s why this filing should be standard operating practice.

Transparency is critical to democratic governance and accountability for credit unions’ elected leadership.

Compensation for CEO’s and senior staff (and when permitted board members) is the single most important indicator of personal stewardship of members financial assets.

It is vital in organizations that receive a tax exemption to maintain accountability in return for this benefit.  Especially so when most credit union competitors pay taxes.

State charters have been disclosing this information for over five decades. There has been no downside from the practice.  Public disclosure is a responsibility in return for this significant exemption.

There are problems with the practice, however.  The due date for filing is the 15th day of the fifth month after the fiscal yearend.  That would be May 15th or November 14th for December or June fiscal years.  Many credit unions seek an extension; for example the SECU report was filed on May 29, 2025, versus the November deadline.  This means the information is often a year old.  Ideally the report would be sent to all members in their Annual Meeting information, as part of the year’s financial report.

Filings  Reviewed as Part of Examinations

Also when seeking specific reports via public sources such as Pro Publica, it is not unusual to find that some credit unions are apparently not filing.  There appears to be no regulatory enforcement or review to see if the information is correct.

Failure to file for three consecutive years results in a revocation of a credit union’s tax status-certainly a safety and soundness problem. No state charter should be approved for merger unless the most recent IRS 990 is available, as that information is critical to understanding the required Member Notice compensation disclosures.

Credit unions should support this 100% public filing for the movement.  That would demonstrate public responsibility and respect for the member-owners.

 Summary of 990 Filing Requirements for Credit Unions

All state-chartered credit unions that are tax-exempt under section 501(c)(14)(A) are required to file an annual information return with the IRS (either Form 990, 990-EZ, or 990-N), with the specific form dependent on their financial activity.

There is no asset level that completely exempts them from this filing requirement.

The specific form to be filed depends on an organization’s gross receipts and total assets:

  • Form 990-N (e-Postcard): For organizations that normally have annual gross receipts of $50,000 or less.
  • Form 990-EZ: For organizations with annual gross receipts less than $200,000 and total assets less than $500,000.
  • Form 990: For organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more.

Federal credit unions, in contrast, are exempt under section 501(c)(1) and are not required to file an annual information return with the IRS.

Failure to file the required return for three consecutive years will result in the automatic revocation of the organization’s tax-exempt status. The IRS provides resources on the Form 990 series filing requirements on its website.

Split Dollar Life Insurance-Employee Benefit Description from SECU NC’s latest 990 IRS filing.

SPLIT DOLLAR LIFE INSURANCE: THE CREDIT UNION HAS GRANTED NONRECOURSE LOANS FOR LIFE INSURANCE PREMIUM PAYMENTS TO SELECT MEMBERS OF SENIOR MANAGEMENT. THESE LOANS ARE COLLATERALIZED BY THE ASSIGNMENT OF THE CASH SURRENDER VALUE OF EACH RESPECTIVE LIFE INSURANCE POLICY. THE POLICIES ARE OWNED BY THE EXECUTIVES AND THE OWNERS HAVE SOLE CONTROL OVER THE LISTED BENEFICIARIES. UPON DEATH OF THE INSURED, THE PROCEEDS FROM THE DEATH BENEFIT OF THE LIFE INSURANCE POLICY ARE USED TO PAY THE OUTSTANDING BALANCE AND ACCRUED INTEREST OF THE LOANS. THE LOANS ARE CONSIDERED NONRECOURSE AND AS SUCH, THE CREDIT UNION HAS RECORDED THE BALANCE AS THE LOWER OF THE OUTSTANDING LOAN BALANCE PLUS ACCRUED INTEREST, OR THE CASH SURRENDER VALUE OF THE LIFE INSURANCE POLICIES.

 

 

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Thrivent Bank’s Post Credit Union Strategy

On June 1, 2025 Thrivent FCU converted to a state issued Industrial Loan Chatered (ILC) bank with FDIC insurance.   There are only 24 such charters  operating in the US,

The process took three years and had to be approved by the credit union’s member-owners with at least 20% voting on the change.. The conversion resulted in the full payout of the members’ collective equity, plus a bonus dividend on shares.  The full details are reported in the post Thrivent Members Approve Sales to a Bank. 

Thrivent Bank’s Sponsor

In its June 2 launch announcemnt, Thrivent Bank reported $1.09 billion in total assets.  It is a wholly owned subsidiary of Thrivent Financial.

The parent company,Thrivent Financial for Lutherans,  is a member-owned, fraternal benefit society.  It is a non-profit , managing over  $193 billion in administered assets, with a tax exemption based on religious affiliation.

According to Thrivent Financial’s 2024 Annual Report, it holds $18 billion in capital and serves 2.4 million members. Its primary products inlude insurance, annuities and health care programs.  The Report has statistics on its community contributions and volunteer efforts.

The parent company’s CEO said the new charter: “combines our legacy of trusted financial advice with a modern, client-first banking solution. Thrivent Bank will help us build relationships with younger clients earlier in their financial journeys – who we can then serve throughout their lives.”

The New Bank’s Strategy

In a November 12, 2025 interview with a Banking Dive reporter, the CEO outlined his focus. The conversion “aimed at broadening the financial institution’s reach nationally and attracting new clients.”

Located in Salt Lake City, the bank is digital only with no branches.

The CEO. Brian Milton’s value proposition is to combine its digital platform with  live personal advice and  the financial expertise of the Thrivent  organization:  “everything that we see out there seems to be having to pick one of those two,”

The new web banking platform is still under construction.   The current site provides a fairly standard listing of consumer services.  Savings rates would appear to be at the lower end of the market.  Auto loan rates are based on a matrix of model year and loan term.

The bank’s business financial services  appear targeted to the non-profit sector:

It takes organization, planning, passion and vision to run a business, church, school or charity. It also takes the right financial institution to help you navigate the nuances of business and nonprofit banking. Whether you’re a new or established business, church or foundation, business banking tools from Thrivent Bank will help you every step of the way.  

The one unique prodict focus would be its specfic contact center for studen loans.

A Strategy Combining the Best of Credit Unions and Banking

The web site is still under construction so there is not a lot to see at this time. The CEO stated the bank would rely on ouside vendors to meet its technology (presumably digital banking) solutions.

The banking charter gives the possibility of national reach for younger geneations of retail customers. Those at the beginning of their financial lives may not be the sponsors prime target for insurance products today.  Rather loans may be their first financial need along with basic transaction services.

The bank’s differentiation will be personal service: “We’re not going to be putting bots in front of clients, The human piece is extremely hard to replace.”  This approach is called “purpose based advice.”

The de novo has a lot going for it.  A 120-year old non-profit financial sponsor-owner with deep pockets; the experience and start up relationships from the credit union; and a philosophy of service seeking life-long member relationships.  It has an affinity client base from the parent as an initial focus.

The critical question is whether a digital only delivery strategy can effectively compete with local, personal credit union service centers staffed with experienced personnel.  Being present in and an active part of the communities served is both the foundation and special advantage of credit unions.

Digital offerings for most credit unions, compliment but do not replace  the option for in-person service.  And community presence and involvement. In the few cases where digital-first is the primary go to market effort, those credit unions are struggling compared to the performance of their more grounded peers.

The Thrivent Bank is very unlikely to fail.  The real question is how successful the digital only strategy will be? And at what cost to create a clear value advantage for users?  Especially in a virtual world where options are just a click or AI search away?

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On Mergers: Everyone is Doing it-Why Shouldn’t My Credit Union?

I received a communication from an experienced, throughtful and committed credit union leader last week.   He believes in the unique role of  cooperatives in the American financial system.

But he is throwing in the towel, so to speak.  He has been an advocate for member value, especially in merger situations.  That strategic choice, he believes,  should be especially well-documented with data and plans.  Because it ends the independence and member choice of a long serving institution.

Most importantly he supports the position that owners, whose loyalty created the credit union’s mutual equity, should benefit from such combinations.

No more though.  For his stance for cooperative integrity has resulted in an anti-merger reputation.  In his words: We live in a capitalist society, and we have a cooperative movement that often co-opts cooperativism while fully embracing capitalism. . .  So rather than spending my energy in opposition to that current, I’m shifting toward supporting the institutions that actually want to grow strategically and maintain themselves — the ones who want to remain independent, sharpen their execution, and live more fully into their cooperative identity.

He will find that there are plenty of cooperative leaders who still embrace that approach.

Moral Relativism and the Erosion of Public Trust

But there is another rationale I hear repeatedly from credit union leaders defending the growing merger frenzy. This logic asserts: Mergers are the wave of the future; everyone is doing it; so let’s not be left out of this treasure-scavenger hunt now going on.

This defense, everyone is doing it, is common in many areas of life, not just in business.  It quickly leads to moral relativism.  That is, some asset,  cooperative values must keep up with the times and current practices.

Last week the Wall Street Journal published an opinion piece of this frequently stated defense for leaders’ actions. Here are excerpts from that article by Gerard Baker: (link)

Moral relativism is enticing. It enables me to establish the moral value of everything I do by reference to the behavior of others. It allows me to avoid censure by judging my intentions, choices and actions not on the basis of whether they are intrinsically right or wrong, but by the lesser standard of whether someone in a similar position might have done something similar.

It is deeply corrosive of personal mores and social trust. Over time it dulls the conscience to any moral hierarchy. It is never a legal defense and shouldn’t be a moral one.

Moral relativism is hardly new in public life. Self-exoneration through false moral equivalence by public figures is as old as time itself. But when it becomes the controlling ethical architecture of public behavior, we are in serious trouble. Its effect is to give leaders permission to do just about anything they want, unconstrained by guilt, shame or political sanction.

Moral relativism and the ratchet effect will ensure that there is always some precedent close enough to persuade people to shrug even when confronted with some evidence of genuine turpitude on their own side.

The Questions for Coop Mergers

Isn’t it time for credit unions who believe in the special role of cooperatives to ask whether this increasing frenzy is really serving members or merely the acquisitive ambitions of CEO’s and passive boards?

Only about 3-4% of  of credit unions will  complete a merger in any one year.  Yet the vast majority remain silent as some of their peers become coop predators.

Are leader’s  uncritical acceptance of this restructuring a sign of the system’s strength or a fundamental weakness?

There are many more questions that should be asked. (link)  But the most important one is Qui bono, Latin for who benefits?

Required disclosures in the NCUA approved Member Notices suggest it is rarely the members.

 

 

 

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The Fallacies of a 50 Year Mortgage for Consumers

Last week the Trump team floated the concept of a fifty year mortgage as a means of improving housing affordability.

It is a dubious financial proposal that would bascially turn a new home owner into a “long term renter with a mortgage.”  It gives the appearance of building wealth without any substance.

Home ownership is key to longer term  personal financial well being.   But a twenty year  extension of the 30 year standard mortagage means that almost all of the initial decade of  payments are for interest only.  Little equity is being built.

The average life of an initial home purchase, before moving up or on,  is generally under ten years.  Equity accumulation would most likely come from a gain in market value on sale versus any paydown on the mortgage  loan itself.

Most first time home owners are in their late 20’s or early 30’s. The idea of paying on a mortgage till age 80 would not appear to be a realistic financial plan-unless one hopes to refinance with a shorter term when higher income permits.

In the short term, a 50-year mortgage may appear cheaper.  The payment on a 50-year mortgage, for instance, for a $200,000 loan at 6% would be about $1,052, where a 30-year loan would have a payment of $1,199.

However, a long term mortgage is always likely to have a higher rate than a shorter term or an adjustable rate loan.

Finally if for reasons not otherwise obvious at this time, if a 50 year mortgage did increase purchaser’s buying power, it would likely increase demand for homes.  When demand goes up, so do prices.

More Creativity Not Impractical Ideas

The 50 year mortgage  is not a solution for housing affordability.  Rather other creative innovations such asf coop ownership, shared equity or creative financial terms would appear more in the member’s best interest.

Housing  affordability is a fertile area for credit unions’ ingenuity.  Because they still portfolio mortgages they can  invent new financial approaches to home ownership and not merely conform to secondary market requirements.

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Two Credit Union Initiatives Challenged by Current Events

Credit unions are stewards for vital member owned assets:  shares and their loan IOU’s.  Both are critical in any member’s financial life.   Wise deployment of members’  funds is critical to their confidence and an institution’s reptation.

Cooperative stewardship has many aspects beyond financial soundness. A failure in any of these responsibilities, whether big or small, can create cracks in the foundation of member-owner trust.

Market events this past week raise important questions on two initiatives that are central to some credit unions’ strategic priorities.  The first is out of market mergers/acquisitions for growth.  The second is offering to assist members  purchase of digital assets, for a fee,  as an extension of the credit union’s service profile.

Entering Far Away Markets

As local merger opportunities become less available, credit unions have increasingly sought acquisitions far beyond their core markets.  These involve out of state mergers where there is no prior  connection by occupation, sponsor or other affinity. The continuing credit union brings no prior market recognition.

Sometimes these out of area mergers result in the  jettisoning of all prior local relationships and branding legacies for both institutions. (link)  A complete makeover of market positioning is necessary for the surivor  in both its old and new markets.  This can sacrifice generations of member goodwill, attention  and loyalty.

Last week a major regional bank pushed back against this opened-ended territorial expansion in a presentation to his banking peers.   The story was reported in the Daily Banking Dive on November 7:  M&T eschews the temptation of national presence.  It reads in part:

The Buffalo, New York-based lender remains focused on dominance in its current markets, said CEO René Jones, expressing some doubt that banks can perform at optimal levels as they expand. 

“The most active bank merger-and-acquisition environment in years has lenders chasing scale in far-flung areas of the country. But regional bank M&T is taking a different tack. . . 

 The $211 billion-asset bank has about $162.7 billion in deposits and 960 branches across 13 states from Maine to Virginia. Jones, for his part, seemed to cast doubt on banks’ ability to execute at the same level as their footprint expands.  

“As you get further and further away from home and [add] more geographies, I think the management challenge goes up, because you’re really an organization that is built around culture, and cultural norms, some of which are documented, many of which are not.” 

“Having enough people to deploy across that kind of a geography, who will make the same decisions that you make, I think, becomes more and more challenged as you get larger, 

He acknowledged buzz around national scale, “but the question is, what is your reputation and the awareness and how well you do your job for those people that you concentrate on?” 

“We’ve decided not to be a national bank, so we better be focused on achieving our goal where we are.”   He added. “Mergers of equals “don’t make sense.”

The article has further M&T history.  But he is taking a public strategic position that is at odds with many of his peers, industry consultants and forecasters of banking’s future.

Is there a message for credit unions from his experience and performance?  For credit unions, what is the track record of member benefit with out-of-area acquisitions? How do such efforts help the surviving credit unions member-ownes?

Facilitating the Sale of Crypto Assets to Members

Offering members the ability to invest in digital assets in partnership with third parties has become a front line service extensions for an increasing number of credit unions.

This past week the value of bitcoin  declined about 15% from its peak.  This has resulted in sharp declines in the  stock of firms holding significant crypto assets (sometimes called treasury- companies).  These stock traded firms buy bitcoin or other crypto currencies intending to benefit from the  increasing investment hype in these new assets.Their value proposition is to provide consumers indirect exposure to these assets without the hassle of direct ownership.

The market leader in this effort is the company Strategy.   Here is the November 9th Wall Street Journal  story about the performance  of these indirect crypto investments so far this year:  The Year’s Hottest Crypto Trade Is Crumbling.

It describes hownthe recent market selloff in bitcoin and other digital tokens has hit  these crypto-treasury company stocks .  It provides multiple examples of price declines of over 30% in one month.  It documents how ”the hottest crypto trade has turned cold” gives multiple examples of wealthy individual investors and companies who have lost money.

These October events have caused some to reiterate their skepticism of crypto as a store of value. With no performance or use, it is pure market speculation.  While true believers say this is a “buying opportunity” asserting  “bitcoin is on sale.”

The Wisdom of Crowds or the Greater Fool Theory of Speculators?

The Trump administration is certainly crypto-friendly.  There are numerous efforts to bring crypto into the financial mainstream as a “routine” financial investment.

But should credit unions be facilitating diect or indirect transactions at this very uncertain point in the future of alternative currencies?  The fees can be attractive when members both buy and sell.   The credit union would seem to have little to no risk exposure  in the traditional understanding of that term.  The payment is in cash and a third party offers and holds the asset.

But is it wise for the members whom the movement was formed to serve?   Credit unions present themselves as expert in many areas of a member’s financial life.  They offer through third parties, or  CUSO’s, insurance products, mutual funds and stocks, and financial advice, planning and  consultation.

Crypto as a financial assetand  has a vary different character than other currency assets.  The coins are offered via third parties (not governments-yet).  Some stable-asset coins are in theory backed by government issued currency or bonds. But the oversight of this structure is unclear.

Yes, members can go elsewhere to purchase crypto  assets directly or via EFT’s or “treasury company’s” stocks.

But I know of no one recommending that a large part of a person’s savings be put in crypto. The future value is a gamble.  All of he experience so far is at best erratic and uncertain, exuberance followed by quick periods of decline.   Crypto based options appears to be speculation, not an asset of proven value.

The Efficacy of NO

Sometimes the best response a credit union can give a member request is No.  We don’t believe the member’s request for a loan for a specific car, or selling lottery tickets or crypto is a wise decision for  our member(s).

Oftentimes we recall persons in institutions that said No to us.  Especially when we wanted something strongly.  Even though it is hard to understand the No, later we realize it was a decision made for mutual interest-yours and the institution’s reputation.   I believe in time, we remember and respect these moments of wiser concern than what we can grasp, at the time,  on our own.

The Wisdom No

The market is saying something important in both of these recent examples.  Are we willing to examine other’s judgments, not just take our own counsel?

For our purpose is to be wise stewards of our members’ financial well being through example and deed.  And not simply join a herd heading to who knows where in the future.

 

 

 

 

 

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At a Merger Inflection Point-What Should Credit Unions Be Asking?

The ordinary human being does not live long enough to draw any substantial benefit from his own experience.  And no one can benefit by the experience of others. . . each (generation) must learn its lessons anew.  (Albert Einstein) October 26, 1929)

On October 20, 2025 Callahan published an analysis with multiple charts showing how mergers are changing the institutional character of the credit union system.   The graphs have ten and twenty year times lines documenting the number, size and source by peer group of this consolidation.

The analysis, Credit Union Mergers on the Rise, provides essential macro trends to track how this consolidation is affecting the institutional structure in the credit union system.  One example is that over the past ten years the average credit union asset size has increased from $188 million to $538 million.

There are many other data points one might take from the article to help frame critical questions that should be considered, but are often overlooked.  For  many view this consolidation as inevitable and necessary.

Some Important Questions that Need Answers

The basic financial math of a credit union mergers is simple:  1 + 1 = 1.  There are no added members, shares, loans, employees or outlets.  Instead in most cases a financially strong long-standing coop has turned over all of its members’s assets, equity and future direction to another organization whose leadership they had no role in evaluating or choosing.  Sometimes the new management’s head office is hundreds or even thousands of miles distant with no connection to the merged  credit union members and community.

Credit unions are built on relationships/bonds and generations of member-owner loyalty.  That commitment was their initial capital and the foundation for much of their public reputational goodwill today.

So it is important to consider whether these trends and sometimes questionable activity are helping or hurting the system’s future.  Are mergers a symptom of a system’s weakness, an inability to sustain organic growth,  or a strength?

The Need for an Industry Conversation

Other questions that could help member-owners and cu leaders better understand and evaluate what is occurring could include:

Is consolidation resulting in fewer charters inevitable?

How has the coop system’s approach to merger changed over the past decades?  What role and benefits are third parties gaining in these combinations?

What are options for credit unions who feel the need to merge?

What should member-owners know when asked to approve the transfer of their entire coop’s assets and legacy about the performance, business priorities, and  leadership of the continuing credit union?

What is the fiduciary duty to the member-owners when leadership decides to seek a merger? How should the conflicts of interest be addressed with CEO’s negotiating their own merger benefits? 

What is the regulator’s role when reviewing merger applications?  What is their obligation to the member-owners?  Are they responsible for the information owners receive when approving the Member Notice announcing members’ voting role?

Has there been any multi-year studies of well capitalized credit union mergers and the before and after performance trends over a fiveyear period?  How did members value change? What happened to their community relationships and employees?  What are the additional immediate costs incurred by mergers?

Who Will Lead These Dialogues?

How one introduces an issue will often determine what actions are necessary.  With mergers occurring  at an average of three to four per week, there has been no industry discussion of the  implications and the benefit or hard to the members-owners.

Now, not later is the tme to understand the consequences of mergers.

Individual instances of multibillion dollar cross- country combinations or when one credit union completes three mergers in  one month (and ten in one year) are routinely announced.  But these apparent individual actions will have significant consequences for every other credit union.

For no credit union stands alone.  All are part of an interdependent  system that creates individual  opportunities and vulnerabilities.

Merger activities are having  important conseqences for the member-owners, their communities, and the shape of financial options in America.

The future of the coop system’s will be different.  This is not an effort to go back to what was.  Rather it is a necessary examination as Einstein might suggest, to plumb our wisdom now and not wait for future generations to assess past events.

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From the Field: Lending in the Member’s Best Interest

First, a recent CEO’s update to staff on the federal governments shutdown and the credit union’s response for members:

SHUTDOWN ASSISTANCE: The credit union is offering numerous options to members impacted by the government shutdown. We are offering unsecured loans based on the member’s normal net weekly or bi-weekly pay with a 7.25% APR up to 12 months. We have also extended the interest free period to 90 days and allow for a term up to 48 months to assist even more members  through this tough time. From the beginning of the shutdown through November 1st, we helped 387 members with total loans of approximately $1,911,167.00. We have also processed a considerable number of skip payments for members without any fee.

An Impact Maker Counsels a Member Not to Make a Loan

CEO’s introduction: This month’s Impact Maker is a great example of living our mission and doing good for people. We’re a lending organization and love to help members with their borrowing needs. But any loan needs to be in the members’ best interests.  In this situation, not making the loan was the better decision.

“Tammy recently spoke with our member, Betty (name withheld), who expressed interest in opening a Home EquityLine of Credit. Over the course of the conversation, the member divulged that she was taking out this loan to give funds to her daughter for flooring and renovation expenses.

Tammy dug in further – uncovering that the member really didn’t want to do this loan or assume another loan payment given her fixed income but was being pressured to do so by her adult daughter.

Tammy listened to the member’s situation but advocated against taking out a loan she wasn’t comfortable with, and explained to the member the loan options available to her daughter, should she want to apply in her own name.

Later on, the member texted to Tammy, detailing that her daughter was screaming and banging on her door, irate that Betty wasn’t moving forward with the loan. Tammy continued to support and encourage the member, advocating for her safety and for her choice to do what is best for her own financial situation. 

Betty was extremely grateful for this support, thanking Tammy for her “thought provoking” conversation.”

A Member’s First Credit Experience

This CEO’s story is about Jose (name withheld), who was aided by Isaiah  a financial coach at a local Member Center. 

“Isaiah opened Jose’s membership in February of 2024 at the  Member Center. Jose is an older gentleman with very limited credit for his age, but he wanted to start building it. Isaiah was able to help him obtain a $500 First Time User Credit Card in addition to his checking account and debit card. 

The member would reach out to Isaiah from time to time and update him about his credit score. Overtime, Jose was able to qualify for a higher credit limit. He started the process of trying to buy a car. However, he was challenged by his limited credit history, car prices and the loan to value on the cars in which he was interested. 

Overtime, Jose continued to pay on his new credit card and qualified for a larger limit again, but he still was not having success with purchasing a vehicle. Isaiah worked  to get him pre-approved for a dollar amount and began reviewing specific vehicles with their price and loan to value compared to blue book values. Finally, Jose found a vehicle he liked and qualified for.  The credit union approved his financing. 

Recently, the loan was closed, and Jose was driving his “new” car. The loan took over a year and the credit building process was over a year and a half. 

Thank you, Isaiah, for your persistence and caring approach with Jose. You lived out our purpose to build hope by being a caring financial partner.”

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A Departing CEO’s Lament

Starting an odyssey to change cooperatives.  Before you read this CEO’s statement from LinkedIn, consider a brief thought from Emily Dickinson, By a Departing Light:

By a departing light
We see acuter, quite,
Than by a wick that stays.
There’s something in the flight
That clarifies the sight
And decks the rays.

A Course Change By a Credit Union CEO

 I have always been a bit of a square peg struggling to go into a round hole. I have always pushed against the grain regardless of my role. Sometimes that has been appreciated. Other times, it has been criticized.

I have debated for years how I can best serve this wonderful industry. In a space that is riddled with hypocrisy and attrition, I have concluded that I am of more value outside the bubble than inside.

I’m not only stepping down as a CEO. I’m stepping away from working inside credit unions altogether.

There is never a good time. There are always what ifs. Unfinished work.

December 18th is my 25th anniversary in the credit union industry.

In my 25 years, we have lost more than 50% of our neighborhood or community credit unions across the country.

So what are my motives? Family. Opportunity. Change. Fit.

Change. Something has to change.

I could sit in a credit union trying desperately to conform to my round hole. To complacency. To status quo. To fit.

Or…

I can dedicate myself to change. Change to challenge complacency. Change to disrupt the status quo.

I’m betting on myself. For my family. For opportunities. But also for a chance to make an indelible change to our industry.

If we want future generations to know credit unions, we must be about the work of saving them.

If I am fortunate, I have 25 years left in my career. During that time, my priorities will be God, Family, Career. In that order.

The second half of my career will be focused on finding as many ways as possible to help our credit unions win. Creative Strategy. Next Level Results.

I won’t stand by idly watching credit unions get regulated out of existence or go quietly into the night.

So this is not a goodbye. This is a hello.

I am not leaving the fight. I’m just getting started.

November 14th. I close one door so that I can run through another.

See you then.

(James McBride, CEO, Connects Federal Credit Union)

 

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A Surprise for 1,254 Credit Unions & Heads Up for Everyone Else

Vendor relationships are an essential requirement of managing a credit union.  All credit unions contract with an external vendor for their core processing operations and many ancillay addons.

Only one or two of these vendors are credit union owned CUSO’s.  The others are for profit companies some privately owned and others public.  Some serve primarily credit unions; others the entire financial market.

Credit Union DP’s Market Share

The largest market share for critical back office operations is Fiserv.  In a 2024 survey, they served 1,264 credit unions or 27% of the total market.  This share is provided through almost a dozen core options.  This variety reflects FiServ’s business model of growth through acquisitions of independent credit union dp providers.

The next highest dp vendor’s share is Jack Henry with 544 credit union clients on a single platform.

A $30 Billion Loss in Market Cap Creating a Decline of 42-44% in Share Price

Yesterday Fiserv announced its operating results for the third quarter.  The surprise result stunned the market.  From Bloomberg’s Evening Briefing:

Fiserv stock suffered a record plunge after the fintech slashed its outlook for full-year earnings and unveiled third-quarter results that confounded Wall Street analysts. Chief Executive Officer Mike Lyons, who took the reins in February, said he discovered that Fiserv wasn’t going to be able to deliver on its previous promises after a broad-based review of the business in recent months. Lyons’ predecessor running Fiserv was Frank Bisignano, who left to join the Trump administration. 

“More financial surprises emerged in the start of Q3,” Lyons told analysts on a conference call. “That prompted not just the annual strategic planning process, but this much more rigorous review into our financials. And that was also driven by some of the stuff we’re hearing from our clients.” (emphasis added) 

Analysts expressed surprise at how quickly the business appears to have soured. Trevor Williams at Jefferies said the magnitude of the earnings miss and forecast cut “is difficult to comprehend.”

“To be frank, we are struggling to recall a miss and guide down to this degree in any of the sub-sectors we have covered during our time on the Street,” Matthew Coad, an analyst at Truist Financial, said in a note to clients.

What’s Next for Fiserv?  For its Credit Union Clients?

The most revealing phrase in Fiserv CEO Lyons call was the reference to some of the stuff we’re hearing from our clients.  That is pretty frank talk from a CEO facing a market confidence meltdown.

What’s next for credit unions?  With up to twelve different core solutions and serous earnings pressures, some consolidation forgreater efficien would seem inevitable.

In addition to being aware of what changes may be coming, the next important question is what are my options?  For the short run?   And the longer run when my dp contract is up?

This uncertainty will  put the focus on other credit union dp providers, especially those who may be credit union owned.   Or credit union focused vendors who would appear to be financially stable, and not positioning for an eventual windfall sale to an outside party.

With all the public focus on new technology, it is important to remember the value of long term reliable relationships.   The unique credit union solutions of creating CUSO’s to serve common tasks becomes more promising than ever.  While CUSO’s must compete with for profit alternatives, often with greater resources, they do not confront the prospect of market sell offs driving business decisions.

Whatever the outcome of Fiserv’s fall from market grace, it should prompt a greater awareness and examination of each credit union’s core provider. What do you know about the company’s financial circumstances and client satisfaction?

 

 

 

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Why Member-Owner Participation in Credit Union Board Elections Matters

In a response to yesterday’s post citing PenFed, a member sent me the following notice requirements for an owner to be nominated for an open board potions at the credit union.

The 1% standard cited would require 28,128 member signatures based on the latest call report.  It is a mere pretense of democratic owner control.

The member added this comment:  Credit unions are becoming more like Fortune 500 companies every day. They exist not to meet the needs of customers or shareholders but entitled corporate executives. 

The notice also contained short bios of the three board nominated candidates.  The first is a retired army colonel who has been on the board since 2008 and serves on the Planning Committee.

The second is a retired USNR aviator who served for ten years on the Supervisory Committee before “joining the board” in 2022.  He also serves on multiple committees including planning and risk management.

The third board nomination joined the board in 2005 and has just retired from a 38 year career working for the federal government.  This person is the board treasurer and chair of the financial and risk committee and on the planning committee.

All have earned advanced degrees and have served in multiple professional civilian roles.  No one would question their credentials.  However their candidate descriptions include no statements about their priorities for the credit union and its current performance.

 PenFed’s Recent Trends

At September 2023 PenFed’s total assets peaked at $35.4 billion.  As of this June the total was $30 billion.  This $5.4 billion asset decline is a continuing trend.  In the 12 months ending June 2025, shares have fallen by over 10% or $3.0 billion, and loans by 13.2%, or $3.6 billion.

In the income and expense comparison for the first six months of 2024 and 2024, total revenue is down 14.1% and operating expenses by 3.75%   The net income for both half years is positive with ROA’s of .27% and .54%.  However these  results were achieved by recording “non opeating gains” of $86.3 million and $95.3 million in the two periods.  Otherwise, net income would be negative. Non-operating gains result from the one time sales of assets such as buildings or loans.

In the past 12 months, there has also been a decline in the number of branches (4), employees and members.  It has downsized its balance sheet by reducing external borrowings from $3.8 billion at December 2023 to $756 million as of June 2025.   The reduction in total assets has resulted in a net worth ratio between 9% and 10% even with minimal earnings in the past 24 months,

In sum, PenFed is moving steadily backwards.

The Strategic Catbird’s Seat

PenFed has one of the oldest and most recognizable brands in credit unions.  It portrays strength and security suggesting a direct affiliation with the government.  The credit union  has an FOM  charter open to anyone, reporting  342 million potential members.

During the past decade, the credit union has merged over 25 credit unions across the country, acquiring their equity.  Often, after a brief transition, the local branches are closed, employees laid off, members offered only virtual services, and the buildings and other assets sold.  The local legacy relationships, representation, community presence, and reputation are gone.

PenFed has had strategic advantages many other credit union’s covet.  Scale, open membership, diverse products, a recognizable brand, multiple acquisitions of other credit union with their equity and increasing conversions to virtual and remote services.  Yet it is in decline.

Where Are the Overseers?

These declining financial trends have taken place for at least the past two and a half years.  What has the board been doing?   What changes have been tried?

Members are not being served well by their director representatives.  But what recourse do they have other than to close their account and leave?

This situation is a concrete example of why member-owner elections are important versus the habit of routine ratifications of board incumbents.   All three PenFed nominees would seem to have exceptional  credentials.  But in practice they are shepherding a significant institutional dwindling.

The financial engineering to maintain a net worth above 9% by selling off assets to record non operating gains is not sustainable.  Does the credit union even have a plan or leadershlp capable of reversing this diminishing?

This situation is why annual meetings should matter. Elections are moments for accountability not merely PR exercises.  Democratic elections empower owners and promote leader responsibility.  In the absence of member participation, there is no answerability by those in leadership positions.

When the regulator is the last resort for addressing financial and operational shortcomings, the credit union has lost its autonomy.  And member-owners’ needs are sidelined to meet the priorities of the government overseer.

When democracy as the means for leadership accountability is abandoned,  the outcome is rule by habit or authority.   Neither is a sustainable approach for long term success.