Not Your Typical Strategic Planning Question

Lots of talk about strategy is happening now.  For 2026 and beyond.

This public dialogue asks a different question from those posed in traditional planning retreats.

How would you answer?  It could make a difference in your firm’s priorities.

 

Question from a CEO:  Have we become so changed that our shared purpose and collective action is no longer a movement, but instead an industry like so many other market driven and profit making organizations? Even our credit union leaders and advocates refer to us as an industry in the daily rags that I read each morning. What are we now? Are we no longer a movement, whose mission is socially driven?

Response: Ancin Cooley, Principal, Synergy Credit Union Consulting,Inc

To answer your heartfelt question directly:

We are no longer a movement.

What we now have is something far more compromised. What remains today is a quasi-cooperative system—held together by legacy language (”We stand for hashtag#mainstreet values”), but driven mainly by pure capitalists in cooperative costumes.

If you pay close attention, you’ll notice something strange: No one publicly defends these credit union mergers.

Not on video. Not on LinkedIn. Not at conferences.

Why? Because there’s an inherent contradiction between what’s happening and what a cooperative is.

But here’s the truth: this trajectory could shift swiftly if just 20 to 30 credit union CEOs joined their league boards and made their positions known.

Yes, it might cost some relationships. But if someone can’t respect your position, you were never friends in the first place. Your friendship was predicated on compliance. So what if you don’t get invited to DC to take your fourth picture with your local congressman?

If you’re doing right by your members, community, and credit union, those congresspeople will come to your office, not the other way around.

Impact draws attention. Service builds power.

 

A Past and Present Story to Make Every CU Member Proud

A three year old credit union with just 8,000 members received the movement’s highest honor for “Outstanding Achievement” in the 2003 Herb Wegner annual award dinner.

Chartered in February of 2000, in three years the credit union had only $11.0 million in assets. But it was powered by passion, vision and a vital mission.

This excerpt from the Night of Stars video is Chairman John Herrera’s acceptance speech.

In just eleven minutes it is a timeless and powerful message for the difference credit unions make for members, communities and the country.

Several moments to note:

  • The size of the credit union’s “family”on stage with him;
  • His gratitude to the many credit union supporters in North Carolina who helped the startup–at one point he asks those in the audience to stand.
  • Two iconic credit union leaders on stage with his board and staff, Martin Eakes and Jim Blaine (around minute 5:00) who played special roles in this new charter’s progress.
  • His comments on the needs of the country’s 28 million new immigrants: “there are no illegal humans.” (around minute 9:00).  A message for today.

(https://www.youtube.com/watch?v=T9UfOhtljws)

This talk is as relevant now as it was in 2003. It shows the collaborative capability of credit unions to respond to critical human needs.  Service was an essential factor–the staff speaks five languages and although when hours are from 7:00am to 7:00 pm on Mondays and Fridays, the credit union doesn’t close till everyone in line is served.

Latino Community’s Example Today

For the next two decades, Latino Community has been one of the fastest growing credit unions in America.

At March 2025, Latino reported 133,000 members served by 320 employees in 15 branches.   It has a loan to share ratio of 114% with 75% of the portfolio in real estate loans.  Its net worth ratio is 22% augmented by $99 million of subordinated debt.  Without the debt, the equity ratio would be 13.5%.

New credit unions are rare.  Soul Community FCU, chartered by NCUA in December 2024, was closed six months later by the agency.

The capacity to begin new credit unions still exists.  The needs of individuals and communities is as great or maybe even greater in terms of the nation’s wealth inequality.

What is lacking is the spirit at many levels in the coop system to join with and support the passions of the approximately 100 new charter applicants and/or inquiries resting at NCUA.

One of the persons who assisted the Latino start up was Jim Blaine, then CEO at SECU.  He describes the reason this effort succeeded as follows:

In 2000, SECU joined with a host of community activists, churches (the local Catholic Bishop), state/federal regulators (especially NCUA’s RD Alonzo Swann), and numerous other credit unions to help charter Latino Community Credit Union. It was a remarkable cooperative effort. Our unserved and financially at-risk Latino neighbors were the challenge, community was the answer. 

Each group brought a unique expertise but shared the same purpose. SECU provided the operational systems and “back office” support which gave the staff time to learn and grow – time to focus on their community – without the threat of failure.

SECU also sought low-cost deposits for lending from credit unions nationwide; the credit union community responded with over $10 million. Folks often miss what’s most important about LCCU.  Latino yes, but  a credit union community most! 

Would it be so today!  Go back and listen to the last two minutes again for a message that should  be close to everyone’s heart now.

 

Putting the Members and Democractic Practice into the Merger Free-for-All

The credit union system faces a major challenge to its values and identity in the capitalist-inspired takeovers via merger of financially strong, long-serving credit unions.

The process has been distorted by leaders with member-owners with no meaningful role at any step.  The so-called member vote is a charade.  But regulators are scared, intimidated or just simply impotent to stop the self-dealing, self-enrichment  and sometimes, outright corrupt practices.  They hold a fig leaf, well the members voted for it,  to hide their private unexamined approvals of the official disclosures required in the Member Notice.

What is to be done?  There is one very simple step in the process that would both address the lack of transparency and the absence of any real member-owner say.

The Failed Merger Process

When the updated voluntary merger rule was passed in2017, disclosures of special payments was supposed to fix the outright self-dealing by senior managers used to induce combinations of strong charters.  See The Art of the Steal.

But the process was fundamentally flawed.  When implementing the rule, NCUA placed itself in the sole role of protecting the members’ “best interests.” It gives final approval to the required disclosure in the members’ notice  letter. This is before members have any input let alone facts about the reasons and plans for the transaction.

Today, two healthy credit unon CEO’s announce their intent to merge for a brighter future, but then the process goes backstage.  Occasionally there is a general member update  or two several months in, saying the credit unions are working on it.  The IT in reality is getting regulatory sign off on what to tell the members when calling for a vote.

The  NCUA is in fact acting as an  in loco parentis role about what members should know to approve their charter transfer.  The minimal mostly marketing information in the official Member Notice, will be  the first and only time members learn any details.  But the CEO’s now have the OK to proceed with the vote knowing this content is all they have to say as the regulators have signed-off on the transaction.

These Notice disclosures are proforma generalizations, a listing of locations and  with merger reasons sometimes copied from a previous application.  There is no meaningful financial or business content that a concerned owner might need to have for an informed decision.

If members are upset when the required self-dealing information is presented, they are effectively powerless to do anything about it.  It is just individuals fighting an entrenched leadership with all the resources needing only a margin of one vote and the deed is done.  99% of mergers that go to a vote are approved.

These are not votes about a choice. Rather they are presented as a mere administrative act to ratify  decisions already made and approved by those in authority.  Decisions made without any owner input or options in the matter.

There is no secret about the lack of any member role or benefit in the majority of these ;private deals.  The credit union merger arena has become a Roman amphitheater where  lions and beasts prey on unarmed Christians.

But there is one simple event  that if added to the merger steps could change the entire process, restore opportunity for member participation, and make the member voting process more informed and democratic.

Resolving he Merger Madness

The solution: require that within 10 days of mailing the Member Notice, the credit union hold a public hearing open to all members in person and online.  The CEO and board initiating the merger could present their plan and attendees could ask questions.  Members, the press, community organizations, sponsors and other interested parties would have a right to participate.

The hearing would be led by a hearing officer appointed by the regulator who would moderate the agenda and make a record of the meeting, to be available for all to access.  This public step would be required for all credit unions that have at least 7% net worth.

Whose idea is this?  It’s NCUA’s.   On July 3rd the agency posted a notice of a public hearing for an FOM request.  The notice outlines very elaborate procedures, registrations, deadlines etc.  However a merger hearing need not be this bureaucratic. Credit unions are used to holding member meetings as a standard bylaw annual requirement.  The only difference is that this event would have a neutral moderator and be open to all members and the public.

Public meetings with those in positions of leadership is part of America’s democratic tradition.

NCUA’s Pioneering Example

NCUA itself inaugurated the concept of open meetings, not just in DC, but across the country.

On May 20, 1982 the NCUA broad met in Boston’s Faneuil Hall marking the first NCUA meeting held outside DC.  This was part of Chairman Callahan’s grass roots effort to bring the agency closer to the credit unions and members it supervises.

These on the road meetings continued throughout Callahan’s tenure.  The second meeting was in July 1982 in conjunction with NAFCU’s Annual Members Meeting in Chicago, Ill.  It also was the week after the largest bank failure, Penn Square, to that point in FDIC history.

NCUA staff not only participated in this monthly board meeting but also held an open press conference following to answer questions on credit union’s exposure to  uninsured CD’s placed with the bank.  I can still remember the first press question:   Does the Penn Square failure  mean NCUA will propose a rule to limited credit union investments to the $100,000 insured limit?  It was a directed at the deregulation policy of the NCUA.  The answer was no.  But we also outlined the help that would be provided by the CLF and NCUSIF 208 assistance if necessary.

These public board meetings were held in each of the six regions on a rotating basis.  They often coincided with League Annual Meetings or other national industry conferences.  Regional senior staff were part of the presentations.  The local press was notified. Sometimes a new charter would be presented to organizers in person.

The effort was to promote the democratic, member owned system in all of its multiple  capacities.   It  introduced NCUA and the credit union option to the public press in cities across America. For many members, it was their only chance to meet and chat with NCUA staff in open dialogue.

Credit Unions:  Made in America

Public meetings are part of America’s democratic character and practice.  Norman Rockwell captured this town hall spirit in his Freedom of Speech, a part of the Four Freedom’s WW II poster.

Public hearings enable public accountability.   The “member special meeting” that wraps up the merger process on the last day of voting is anything but a public event.  The votes are mostly by mail ballot sent along with the initial Meeting Notice—urging a Yes vote.  There is no way for persons to learn or hear the details that would make the process meaningful with different points of view.

Public hearings are the easiest, most immediate and democratic way for members-owners have a say about whether their charter and relationships should be sold to a third party.  They require no NCUA board action.

Members should have the chance to play a real role in this process and not merely  passive ratifiers of authority.

Whether a credit union believes that mergers are  inevitable or harmful to the future because of the shenanigans  now occurring, everyone should be in favor of giving the owners a real voice in this live or die decision.  Let the Regions get on with it.

 

 

 

Hanscom FCU’s $50 Million Bet: Is This Financially Sound and in Members’ Best Interest?

Summary: Hanscom FCU’s proposed bank purchase raises questions of financial and business soundness, transparency and whether it  benefits  the credit union’s member-owners.  While writing this follow-up, I became aware of a unique group of member-owners who for  over 18 months had been documenting and asking hard questions of the credit union’s board and management about the credit union’s performance. This included the bank purchase.  The group’s name is Hanscom Loyal.  I reviewed their communications. Their ongoing efforts, which are much broader than the bank transaction, is what makes this situation a valuable example for all credit unions.

On February 7, 2025, I wrote a post, Time to Ask WHY? about the announced purchase of The Peoples Bank ($306 million), in Chestertown, MD, by Hanscom Federal Credit Union ($1.8 Billion), headquartered on Hanscom AFB in Massachusetts, with its operations center in Littleton, MA.

This sale was singled out in a Washington Post opinion article by the former FDIC Chair Sheila Bair as an example of credit unions’ tax-free status thriving at public expense. 

The more important question: Is this a wise, sound transaction in the member-owners of Hanscom FCU’s best interest?

Why a $50 Million Price?

The Peoples Bank announced the $50 million price in their 2024 Annual Report. Hanscom FCU has released no information other than a single press release from December 20, 2024 about the purchase.

Because Hanscom FCU will be paying the 619 owners of Peoples $50 million in cash in return for the firm’s assets and liabilities, the first question should be,  “Is this price justified?”

Because Peoples is a public company with their stock traded daily (PEBC), we have much published data on their performance.  There are several ways to analyze this purchase amount.

On a price-to-12-month earnings ratio, the sale price amount is 15 times the bank’s $3.3 million net income in 2024. That is, if current earnings continue, the time to earn back the $50 million cash outlay could be as high as 15 years.

A second ratio is price-to-book value. The $50 million is 1.4 times, or a premium of $15 million, on the net equity reported in the audited statements on December 31, 2024.

Because the bank’s stock price is traded, we can compare the market’s valuation (market cap) before and after the December 20, 2024, purchase announcement. Prior to the release, the stock had traded in the $31 to $33 price range for a total market capital value of approximately $24 million (729K shares outstanding). That is, it traded below book value. Upon news of the proposed sale, the stock price jumped to $60 per share and closed last week at $58 for market value of $42.2 million. That market cap is still less than the $50 million being offered by Hanscom FCU.

These ratios will be subject to valuation and other adjustments. For example, since Hanscom FCU pays no federal or state income tax, should that amount ($960,153 in 2024) be added to projected earnings? Or, are the balance sheet assets of good will and deferred income taxes of any value to a tax-exempt credit union?

The bottom line is that the 619 bank shareholders are getting a good deal. We can see why they would want this sale to go through. The question is whether this transaction is in the best interest of the member-owners of Hanscom FCU. Their $50 million cash outlay to the bank’s owners is 22 times the credit union’s 2024 net income.

What Is the Business Case?

There has been no information from Hanscom FCU other than the press release referenced earlier to support this $50 million investment. In that release, CEO Peter Rice promises more investments in Peoples: “Through this combination, we expect to expand Peoples Bank’s ability to invest in its communities across Kent, Queen Anne’s and Talbot Counties.”

Other than cash, what expertise does Hanscom FCU bring to this 110-year-old community bank serving three mostly rural counties in Maryland? How do Peoples’ business priorities align with Hanscom FCU’s strategy? Its 15 locations are mainly concentrated around metro Boston, with one small branch in a restricted access building at MITRE in McLean, VA. The three rural Maryland counties Peoples serves are 400 miles away from Boston in a very different demographic and economic setting.

Peoples has two business lines. As a community bank, only 0.5% of its loans are to consumers ($872K), 50% to residential real estate and 38% to commercial real estate, development and general commercial loans. The commercial loans include agriculture for land, cattle, ag equipment and waterman loans for people who make a living from the ocean and farming. This traditional, long-time commercially focused bank contributed 64% of 2024 net income and managed $301 million in assets.

Their insurance segment is managed by a subsidiary, Fleetwood Insurance Group, and offers a full range of insurance coverage to businesses and consumers. The business has two offices, contributed 36% of the holding company’s 2024 net income, and managed just $7.8 million of assets before intersegment eliminations.

According to Hanscom FCU’s chairperson Teresa Conrad’s quote in the May 29, 2025, press release, this business was an important part of the acquisition: “The Hanscom team is also finalizing the Peoples Bank integration, ensuring a seamless transition and united experience for every member. With the Peoples Bank acquisition, we will fill a critical gap in our financial offerings with the addition of a new insurance company that offers a robust set of new products and services.”

There are two major issues to this goal of “filling a critical financial gap in offerings.” The first, how does a two-office insurance agency in rural Maryland serving small towns and businesses with long-time, local relationships compete in greater Boston’s saturated insurance market? Why not just buy an already established agency in that market?

Secondly, that “seamless transition” is not in the business plan announced in the December press release: Following the close of the transaction, Peoples Bank branches will be regionally managed and continue to operate under the same name and brand. The Peoples Bancorp. Inc.’s common stock will no longer be listed on any public market.”

Instead of “seamless,” the intent is to continue with the Peoples name and brand and business model. Not only is this a dubious legal way for DBA positioning, but it also begs the question of any operating savings from inter-company efficiencies. It suggests that post transaction, the financial operations will become a standalone effort drawing more cash from Hanscom FCU as a “parent” company.

The business case is completely undocumented.  It is  a collection of generalities that suggest little effort for how the future of the two organizations will be managed. That should concern Hanscom FCU’s member-owners.

The People Bank’s 619 owners have their $50 million in cash while the credit union’s 100,000+ member-owners are left to ask: Can their leadership actually manage an acceptable a return on this investment of their funds?

This purchase appears to be a very risky, big time financial wager with the members’ money.  Whatever the price tag, if as presened below, Hanscom is unable to achieve a stable, minimum return on the assets it now has, then the whole insitution-and its member owners-suffers by just buying more at a premium price.

Hanscom FCU’s Financial Trends

I  reviewed the track record of Hanscom FCU under CEO Peter Rice, who replaced the long-serving David Sprague in 2022.  Sprague’s service was profiled in this press release:

Sprague has been Hanscom FCU’s top executive since 1996, a well-loved and respected senior leader managing over 250 employees. The credit union’s assets have grown to $1.7 billion, and membership has more than quadrupled to over 90,000 members during his 25-year tenure. He has steered Hanscom FCU to become the fifth largest credit union in Massachusetts.

Since year-end 2021, the final year of Sprague’s tenure, the following are the major firm trends under Rice for 2022 through Q1 2025 or three and a quarter years performance:

  • Shares have declined from $1.610 billion to $1.560 billion (Q1 2025)
  • Loans have increased slightly from $1.405 billion to $1.497 billion (Q1 2025)
  • Employees (FTE) have fallen a bit from 243 to 230
  • Number of branches has fallen from 22 to 15
  • Membership has grown from 91,577 to 102,714
  • Net worth ratio has increased 9.59% to 11.66%
  • ROA in 2021 was 0.80% and for full year 2024, 0.13%

The December 2024 bank purchase announcement coincided with the poorest financial performance in Hanscom FCU’s recent history. Annual growth in shares and loans was negative. The net income of $2.3 million (0.13% ROA) was down 90% from the $23.2 million in 2023.  Hanscom FCU is five times the asset size of Peoples but earned $1.0 million less than the bank in 2024.

These negative balance sheet growth trends continued in Q1 2025. That quarter’s earnings of $952,000 (0.21% ROA) were down 66% from the prior year’s first quarter.  Peoples Bank again had higher net income, even after reserving for taxes.

The most concerning first quarter outcome was HFCU’s $10.8 million in net charge offs, up 642% from the $1.5 million in 2024’s quarter.

In sum, the new CEO’s leadership in the last three years has been marked by inconsistent performance and by a sharp decline in critical financial indicators over the last 15 months.

This erratic performance raises two questions. Why is this decline occurring? With this uncertain track record, what justifies sending $50 million to the Peoples Bank owners, to purchase a firm that would seem to have no geographic, strategic, or business similarities to Hanscom FCU’s core market?

Why the Instability in Hanscom’s Financial Performance?

Here are the last 12 months of Hanscom FCU’s financial trends compared to all credit unions in the $1 to $5 billion peer group range. This comparison shows that the industry continues to grow positively on key balance sheet and income statement indicators, but not Hanscom FCU. Why?

The inconsistent trends plus the current declines in operational outcomes raise the questions about the credit union’s leadership, the CEO, and senior management, along with the Board and Supervisory Committee’s oversight of processes and procedures.

For example, one looks in vain for any transparency or explanation to Hanscom FCU’s members or the public about this $50 million transaction. The Peoples Bank owners get a full confidential term sheet to approve the sale; the buyers paying the bill are given nothing.

I have not been able to locate a 2024 Annual Report or detailed information about the annual meeting for Hanscom FCU members, apart from a brief website announcement. There also does not appear to be any readily available confirmation of the election of directors or minutes from previous meetings. The May 29 chairperson’s statement includes no context to understand how or to whom the message was intended. It is full of marketing and PR spin about community activity, but no mention of Hanscom’s steep financial decline.

Those Closest to the Action Speak Up

In response to my February post on the Peoples Bank purchase, I received an email from a group called Hanscom Loyal. They describe themselves as a cohort of approximately 40 current and former credit union employees, many also member-owners, deeply concerned about Hanscom FCU’s leadership.

They did not go public with their concerns. Instead, they sent detailed communications, including letters and emails, to Hanscom FCU’s individual board members, Supervisory Committee members, and copies to NCUA examiners. The FDIC was copied after the bank purchase was announced.

These multiple communications contain specific examples of violations of bylaws, board, and credit union policy, as well as questionable personnel and account transaction events. As these employees saw  and experienced actions of senior management and the Board’s role, if any, the group alerted those with authority over the institution to their concerns. They did not act like whistleblowers creating public alarm. They simply asked those in positions of responsibility to investigate the factual events they listed.

Over 18 months they documented an absence of internal controls, lack of following in-place processes, and regulatory compliance failures. Their examples included specific instances of improper transactions with member accounts. They included examples of incorrect information in web and other communications. One example they provided was a credit card promotion mailer stating that Hanscom FCU was FDIC insured.

Leadership and Staff Turnover

Their primary concern focused on the continued turnover and forced departures of experienced credit union personnel. The majority of Sprague’s senior team with experience has left the credit union. In instances, the resignation demand was presented as a choice: voluntarily resign to retain benefits or immediate dismissal with none.

On March 25, 2025, one employee filed suit for her dismissal. Another has submitted a formal complaint to the Massachusetts Attorney General’s Office concerning unfair wage withholding.

Such turnover in the past three years, estimated as high as 50%, is not normal. Even Hanscom FCU’s chairperson in her 2024 summary  remarks acknowledges 44 internal promotions within a constant staff size of 230. This continuing exodus not only undermines morale, but it also can result in new hires or promotions without relevant experience and knowledge for the new positions.

Such internal turmoil undermines institutional performance. When informed of such institutional problems by outsiders, often the response by those in authority is to dismiss a group like Hanscom Loyal as disgruntled former employees or “troublemakers.”

Certainly, all members would or should be disappointed with these performance shortcomings.  This group invested great effort to document wide-ranging examples of leadership and institutional shortcomings, with facts, not opinions. Their stated goal is to return Hanscom FCU to its prior level of member focus and service.

Both FDIC and NCUA have acknowledged receiving Hanscom Loyal’s specific detailed complaints of the past 18 months. One of NCUA’s responses on August 21, 2024, included the following:

I just want to confirm receipt and assure you we take these concerns seriously.  As you are aware, we are responsible for enforcing certain rules and regulations.  Employment matters, in general, are not under our purview and are governed by state law.  As frustrating as those issues might be, they are not matters we regulate or enforce.  Those are more matters for the credit union’s Board and your legal counsel, should you choose that route.  

The Regulator’s Oversight

NCUA’s characterizing these detailed concerns as merely employment matters completely misrepresents the internal management issues that Hanscom Loyal described in detail. Suggesting these events are only for the Board and Hanscom Loyal’s legal counsel to address dismisses the ‘M’ for management, in the NCUA’s CAMELS rating.  This exam component specifically assesses senior management’s performance, firm governance, and procedural oversight, including member annual meetings.

Hanscom FCU’s declining financial performance, lack of routine transparency with members, and the Board and Supervisory Committee’s failure to address documented concerns suggest a dysfunctional management team and a board and supervisory committee unable or unwilling to fulfill their responsibilities. To propose that member-owners may need to hire legal counsel is a parallel failure by NCUA to acknowledge their supervisory obligations.

Should Hanscom FCU’s $50 million proposal to purchase a bank be approved by NCUA? This effort to acquire a bank 400 miles away — without a clear business plan demonstrating any benefit for its member-owners — appears to be another example of poor management judgment.  Moreover, paying out $50 million in cash adds significant financial, operational, and market risk to the credit union, already in a financial stall.

This transaction does not appear to be a carefully considered strategic initiative; instead, it appears to be a reaction to an opportunistic proposal from brokers eager to strike a deal with a cash-rich credit union.

If the 729,000 shares held by Peoples’ 619 shareholders receive the same pro rata of the $50 million purchase, the per-share price would be $69 dollars. That is more than double the bank’s market value before the offer. So how does this transaction serve Hanscom FCU’s member-owners whose funds would pay out the bank’s owners?

What’s Next? Who Will Own Responsibility for the Credit Union?

The Hanscom Loyal group has provided Hanscom FCU’s Board of Directors, Supervisory Committee, and federal regulators with details of documented mismanagement that directly affect the credit union’s financial performance. This is most evident in high employee turnover and specific examples of questionable practices that have been shared.

Hanscom Loyal has acted as member-owners should.  They collected facts and brought these documented issues to the appropriate parties. Despite NCUA’s onsite annual supervisory exam and the Board’s awareness of the group’s forwarded operational issues for over a year, Hanscom FCU’s leadership nevertheless proceeded with the Peoples Bank purchase announcement in December 2024, approving it unanimously.

It should be clear to even a casual observer that Hanscom FCU’s member-owners would be best served if the credit union first put its own house in order. Spending $50 million now sends a message to concerned members that the cooperative system is not working for them. Annual meetings appear, at best, closed in-house affairs with no transparency for the owners to become involved.

NCUA’s cursory advice to members to hire legal counsel if they receive no response from the credit union is an abdication of their responsibility to ensure the safe and sound operation of the credit unions they examine.

The NCUA’s August 21, 2024, email acknowledgement to Hanscom Loyal’s list of concerns included this:

We will certainly consider any matters violating areas we are charged with overseeing, as well as evidence of fraud.  All examination results are confidential and cannot be shared.  

I encourage you to submit the matters below to the Supervisory Committee and the Board of Directors of the credit union, if you haven’t already.  The Supervisory Committee is the “watchdog” of the credit union and is responsible for independently investigating such complaints.

What are credit union member-owners to do when there is no Supervisory Committee watchdog responding to their concerns, no Board elections that are open to all members, and no meaningful evidence that NCUA exams address  either specific operational issues or an institution’s leadership shortcomings?

Instead the opposite message  is sent to member-owners when the credit announces it is investing $50 million to buy banking assets in a rural market 400 miles distant.

If anyone with  internal responsibility for the credit union or NCUA in its external examination findings had given any credibility to the group’s many messages, this bank purchase offer should not have seen the light of day.

Credit union leaders’ failures to respond  and impotent regulatory oversight is, unfortunately, not uncommon in the credit union system.  In previous blogs I have provided examples such as yesterday’s Space City merger with TDECU.  Individual members spoke up, wrote their credit union and regulators with deep concerns, but were treated as “nobodies.”

The difference in this case is Hanscom Loyal’s organized effort, the volume of factual examples and a commitment going on two years to make things right.  They are doing this in the right way not in public outbursts.

As uncomfortable as this example may be for some, every credit union would benefit from member-owners who believe in their credit union so deeply that they are giving time, effort and energy to make their coop better.

Hanscom FCU’s  entire operating context suggests that this proposed bank purchase should be dropped immediately.  The leadership issues would benefit from having persons with the expertise and commitment of Hanscom Loyal added to internal oversight roles.

Everyone’s overarching goal should be to restore the credit union as a true cooperative whose priorities serve member-owners best interests, first and always.

Note: In writing this follow-up, I have reached out to both Hanscom FCU and The Peoples Bank but have not had a response. Should I receive responses, I will update this post. The Hanscom Loyal group’s email is: hanscomloyal@proton.me

The Rest of the Story:  How State and Federal Regulators Failed to Protect Space City Members in the TDECU Merger

This past weekend a Houston Business Journal article noted a 30-day gap in TDECU’s disclosure of its failure to receive regulatory approval for its  Sabine Bank purchase versus the date of the Bank’s online post.  During this period TDECU finalized the merger of Space City CU.  During the public controversy, regulators feigned impotence to do anything about this deeply flawed transaction.

To understand the significance of this regulatory inaction,  it is helpful to recall some circumstances of this merger travesty.

On May 25th, I posted a two part analysis of the proposed merger of the $147 million Space City Credit Union with the $4.8 billion TEDCU.

The Member Notice was mailed on March 28th, providing the public for the first time the details of payments to senior staff. All member voting ended May 14th.   The result was 862 of the 12,000 eligible members voted with 82% for and 18% against.   End of story?

A Cooperative Merger Tragedy

I summarized this sleazy event as follows:  This self-dealing transaction marked by conflicts of interest, lax board oversight and member manipulation is the latest example of internal corruption in the $2.3 trillion cooperative system. . . State and federal regulators seem oblivious or powerless to stop this internal pillaging.

Here were some of the merger specifics. In distributing the surplus from Space City’s 14.6% net worth, the top three employees received $6.750 million of which $4.0 million went to the CEO. He already had a cu paid retirement plan and a $3.250 split dollar life insurance plan.  This $4.0 million total was equal to 53% of the entire retained earnings of the credit union in its 60-year history!

Two components of the total payments to the CEO and COO came directly from TDECU, not Space City’s reserves.  This total of $850,000, approved byTDECU’s CEO and board, was an  outright “gratuity.”  What was the fiduciary responsibility of these two  persons with direct responsibility for arranging the merger and its approval by members when receiving direct payments by both parties?

To top off these senior staff incentives, members were given a “bonus” dividend from their collective savings.  However, it was designed so that members with the least amounts of shares  received the greatest percent return.  Those who had the most to lose received the lowest percentage.  Specifically all members with $289 in savings or less, would receive $100 bonus.  If the vote were NO, you get nothing.

In addition to this blatant self-dealing, the basic concern with this merger was that the financial performance of TDECU, the continuing credit union.  For the prior  15 months its financial performance had deteriorated.  It reported a loss in the first quarter of 2025, and a troubled loan portfolio with 2.01% delinquency (up from 1.13% prior year) and an allowance coverage ratio one third of the peer average.  Its balance sheet loan and share  growth had flatlined under the new CEO.

Most importantly to TDECU’s future ambitions, it had announced in April 2024  the purchase of the Many, LA based $1.2 billion Sabine Bank.  A  “definitive acquisition agreement” was in place with the transaction to be completed in early 2025.

“TDECU is on a growth journey to expand across the state of Texas and beyond,” the credit union’s CEO, Isaac Johnson stated.

The Outcome and Regulatory Silence

When askng the state and federal credit union regulators, when and who had approved the merger, these were the replies:

From the Texas Commissionpreliminary approval was given by Department (Commissioner) on February 6, 2025. . .

From the NCUA:  The merger was approved by Southern Regional Director Keith Morton on March 6. . .

So long before the Space City members knew any details of the merger (Member Notice dated March 28), both credit union CEO’s knew their two regulators had approved their self-serving actions. The financial statements with the Notice were also six months old, September 2024, not even for the full 2024 yearend.

The members knew nothing until receiving the March 28 Notice, but the credit union leaders who privately put it together,  knew they had the deal approved.

All the controversy after the members and public learned of these details went for naught.  The regulators had said OK. It was all over but the shouting, which occurred in June when the merger was completed.

So at this point the merger  just seemed another example of regulatory ineptitude, indifference or perhaps other factors such as legal or poltical intimidation preventing any relook. The members were unprotected, fleeced and alone.  Those charged with protecting members’ best interests feigned impotence, or would assert, It’s just up to the members.

The Regulators’ Double Speak

But on July 3rd an article appeared in the Houston Business Journal:  TDECU delays rebrand as it closes Space City Credit Union merger, terminates bank acquisition 

The article’s main points are that the Sabine Bank acquisition is off, the Space City merger is done, and that the rebrand using Space City is on hold.

The most interesting line however is the reporter’s final comment when reacting  to this post on the Sabine Bank website about the failed purchase which reads in part: 

“On June 4, TDECU and Sabine State Bank and Trust Company (Sabine) announced their mutual decision to not move forward with the planned acquisition and to terminate their agreement . . . to which the reporter added:

The termination was also not disclosed directly by TDECU via a press release or to the HBJ until July 2.

This is the example of regulatory double speak. This “definitive acquisition agreement” of Sabine needed only regulatory approval.  This means NCUA and the Texas Commission would make the decision because  this is where the oversight of the outcome would reside.

The deal got stopped, but was not disclosed by TDECU until July 2,  Sabine’s post is dated June 4.  Why?

The obvious answer is so the Space City merger can proceed unimpeded.  The  credit union regulators refused approval of the bank acquisition because they didn’t believe TDECU was up to the task.  But go ahead and take over these 12,000 members and their future for this is an event too minor to concern us.

The TDECU regulatory hold up did not begin on June 4.  The potential problems with this purchase and TDECU’s declining performance were obvious for at least six months from call reports. But proceed with the credit union takeover.

This regulatory double speak, two TDECU transaction and two opposite outcomes, is the most concerning aspect of regulatory oversight. The Texas Commission and NCUA did not respond to the deeply concerned members who spoke out only after they first learned how disgusting  this deal would be.   They were “nobodies.”

Besides the regulators already told the credit unions it was OK.  They couldn’t  go back now and change their decisions made in private because of members’ concerns.

By all the standards most members care about, the Space City merger heist was abundantly clear.  The regulators ignored their own words such as the members’ best interest and fiduciary responsibility. The members are sheep left to the care of wolves.  In this case both state and federal regulators aided and abetted their exploitation.

The Sabine Bank purchase was stopped by credit union regulators while they stood still during the acquisition of Space City at the very same time. TDECU’s capabilities were fine for credit union members but not a bank’s customers.  TDECU is now backing away from even converting to the Space City brand—a selling point in the merger.

Today we live in a political debate  where regulatory oversight is presented as one of two extremes:  laissez-faire, that is let the market decide or, regulation protecting those powerless against market exploitation.

But there is a third possibility,  worse than these two political extremes.  This is fake regulation deceiving  the public that regulators really are on the job and have rules and processes in place to ensure compliance.  But the regulators do not enforce their own rules.

The credit union market sees this regulatory GAP clearly and the zealous and ambitions are rushing to take advantage.  The result will be that the credit union members may lose their cooperative system because of regulatory neglect.

Board Meetings and the Responsibility of Leadership 

The public facing role of leaders is especially vital during two important circumstances–when there is a transition at the top and during a crisis or moments of great uncertainty.

NCUA’s current situation meets both tests.  There is the unprecented removal of two  of the three board members by  President Trump.  This was followed by the immediate departure of up to 250 agency personnel as a cost savings ploy.  And as noted below, there has been a sudden increase in credit union regulatory closings.

NCUA’s public responsibility includes timely and informed transparency about events under  the agency’s control.  There is uncertainty about who is on the leadership team. Who is making critical decisions? How can we trust that NCUA’s actions or inactions are being properly considered or just carried on by rote?

Four FCU Closures in 60 Days

Since April 30, NCUA has taken possession of four FCU credit unions. Two were liquidated outright, one conserved and the other merged. This is a very high number in just two months in a relatively stable operational environment.

The four with summary data from the March 30 call reports are:

Name          Date NCUA  Action       1Q ‘25 Assets          1Q Net Worth

 

Unilever       April 30 liquidated       $ 47 million         9%

Aldersgate  June 18 conserved      $ 10.6 million             10.2%

Soul Community June 20 liquidated   $308K      100%

Butler Heritage  June 30 merged   $9.6 million               4.92%

Some notes on each case.

For Unilever this immediate liquidation without a conservatorship, suggests a major financial loss similar to the Creighton FCU $13 million shortage in June 2024.  NCUA has provided no explanation for the sudden insolvencies in either case.

Aldersgate with 10% capital, was chartered in 1956 to serve the Methodist church employees. It was conserved without explanation or even notice of who is now running the operations. NOTE: this morning NCUA stated it liquidated the credit union.

Soul Community was chartered on December 9, 2024.  At March, it reported 21 members with $308K in assets, but no loans or expenses.   All capital.   How can a new charter which naviagates NCUA’s arduous charter steps including both credit union mentors and examiner oversight, end up stillborn?

Butler Heritage is the one example of financial underperformance, but still with 5% net worth.   An ironical message on the credit union’s website assures members they are in good hands with NCUA oversight:

BHFCU is charted and supervised by the National Credit Union Administration.  NCUA performs annual examinations of the credit union’s records, policies, and procedures.  This ensures the credit union’s financial soundness and verifies operations are conducted in compliance with applicable laws and regulations.

This number of regulatory closings in two months is highly unusual.  The lack of any factual information about these FCU’s circumstances is unsettling.

This failure to inform the public undermines trust in NCUA’s supervision, not to mention a credit union’s reputation with sponsors like Unilever.  These are, or should be, unusual events.  No one is explaining them.

The silence raises the question whether NCUA is using their authority to coverup supervisory or examination shortcomings with NCUSIF funding. Were there annual exams? Supervisory contacts?Especially troubling are the similarities between Creigton and Unilever’s sudden dramatic losses of published net worth.

The Importance of NCUA Board Meetings

In this time of leadership transition and growing uncertainty, public board meetings are critical to understand what the agency’s leadership is focused on.

For the past 18 months,  NCUA’s board meeting schedule has been at best erratic.  In 2024 Chairman Harper was on medical leave for several months and Ostka on maternity leave.

Even when a full board was present, the substance was limited and hard topics or discussions avoided.

In the first six months of 2025  only two public meetings have occurred.  One was with the full board in February and Hauptman’s solo meeting in May.

The NCUA has said the schedule of future board meetings is “tentative.”   In a June 6th press announcement the Agency stated:  dates of NCUA Board meetings should be considered tentative until the issuance of a formal meeting notice. All future meetings’ agendas and schedules are subject to change at any time. 

Some have gone further to assert there is no requirement to hold a monthly meeting period. Rather board meetings need occur only when the need arises.

Public NCUA board meetings are both a responsibility and a recognition that the Agency’s leadership is accountable to credit unions and the public.

Some credit unions  have asked to end their mandatory monthly board meeting.  At this point I yield my pen to Ancin Cooley.

His response to the suggestion that  board meetings should be optional applies to both credit unions and NCUA.  They are an inherent responsibility of what it means to be a board member as he explains below:

Monthly Board meetings are not the problem.

They serve one critical purpose: cadence.

That cadence builds a culture of reporting, transparency, and member-focused accountability. It keeps the board engaged—not just symbolically but structurally. It’s a space to learn, ask, challenge, and listen. It’s where the member’s voice is supposed to show up. 

And if your board meetings are dragging or bloated? There are better ways to fix that than eliminating the meeting altogether. . .

There is a free-market capitalism running its playbook inside the cooperative movement.  . . 

We are watching it unfold in full view: 

  • Opposition to mandatory succession planning.
  • “Fiduciary duties of Credit Union Directors” 12 C.F.R. § 701.4? Routinely unenforced—more decorative than functional.
  • Supervisory committees? Once a critical layer of oversight, now neutered and marginalized—weakened to the point of impotence 

Each move—on its own—can be rationalized.

But taken together? It’s a pattern. A roadmap. Its “open season” on credit unions. . .

Let me get ahead of the most common rebuttal:

“It’s just removing the requirement to meet monthly. A credit union can still choose to meet every month if it wants to.” 

Yes, technically, they could.

But that’s not the point.

This isn’t about convenience or choice. This is about institutional welfare. 

There are some safeguards you don’t leave to chance, because they protect the collective health of the system. 

That’s why we don’t suggest seatbelt use. We don’t recommend elder abuse protections. We mandate them—because of the public trust at stake. . . 

This is the cooperative movement. And with that comes a higher standard of care—because the people advocating for these changes did not build these institutions with their own money. They inherited them. And now they’re chipping away at the very frameworks that make them trustworthy. 

I would hope all NCUA staff would read his words. Public duty is a public trust.  Regular public board meetings are an essential  aspect  of an NCUA board member’s obligation to well and faithfully discharge the duties of the office.

 

 

 

Transforming the Unicorn-Members Fight for a Say in the Future of SECU-NC

For four decades (1979-2017) the State Employees Credit Union was led )by Jim Blaine. He believed in the power of cooperative design, principles and purpose to provide members a better financial option.

His approach was so successful that SECU soared in his tenure to become the second largest credit union in America.  At March 30, 2025 the credit union reported assets of $55.3 billion, members of 2.8 million with 275 branches (one in every county) employing 8,100 FTE positions.

Growing a Unicorn

Blaine’s studied belief in the power of cooperatives infused dozens of operational and strategic decisions.  He eschewed mergers preferring to partner with other credit unions such as Latino Community and Local Government FCU to support a strong state eco-system of credit unions.

His focus was strictly within North Carolina, not seeking to invest outside the members’ home state.  Within the FOM the focus was on those who were unlikely through economic circumstance or financial understanding to get a fair deal from traditional for-profit consumer financial options.

Creative Product Designs

His implementation of these beliefs resulted in some unusual product decisions.  The lending focus  was on home loans as the best way to build long term member wealth.  Products such as credit cards and checking were simple, low cost and without flair.  He created the only 529 on balance sheet college savings option by a credit union in America.

He provided  off balance sheet investment options in a partnership with the Vanguard Mutual Fund family of low-cost index funds. The credit union founded its own life insurance company for inexpensive term life insurance.  Through a $1 a month checking account debit he funded the largest credit union directed 501 C 3 foundation.  Annually it donates tens of millions to organizations serving the needs of citizens and communities throughout the state.  These grants were the credit union’s primary marketing effort-an example of earned versus bought media.

As the credit union system adopted risk-based lending, where a member’s loan rate was determined by their  credit score, Jim fiercely resisted this almost universal pricing practice.  He believed the model was discriminatory and perpetuated some of the consumer lending practices coops were meant to counter such as, those who have the least, pay the most for their loans.

Likewise, he did not believe in indirect auto lending in which the dealer set the member’s loan price based on the credit union’s buydown rate of the loan paper.

Internally the credit union grew large by staying small.  The 275 branches were given authority to make and collect loans for their communities.  They were aided with local advisory councils of members for decisions on scholarships, grants and even denied loan appeals. Vacancies were first filled from promotions within.  No commissions or bonuses were paid to staff-just follow the principle of doing the right thing for the member.

Most importantly the credit union’s capital investments were always on behalf of  members or the local community.  From a surcharge free ATM network for all users, not just SECU members,  to housing a museum in its main office building, to the Foundation’s investments in low cost teacher housing options, the money was to benefit owners and their communities, not for the institutional prestige of SECU.

Many organizations including  large credit unions use their home market as a resource to open up into areas outside their core.  Members’ resources do not go back into the local economy that funded their initial success, but into new markets.

Jim’s “old-fashioned” approach was not one emulated by others. He battled NCUA time and again over capital adequacy.  “Anything over 7% is stealing from the members” was one of his truisms.  At March 30, 2025 the net worth ratio was 10%.  In short, while reporting superior market impact and financial performance, his approach was seen by most peers as archaic, impractical and not with the times.

The Two CEO Succession Rule

One observer has asserted every successful credit union coop is only two CEO successions from losing their strategic heritage and advantage.   When he retired in 2017 Jim’s successor was his CFO Mike Lord.  A good description of Jim’s ten operational priorities and the succession evet is in this creditunion.com report.  The torch was passed to a believer who had worked at SECU for 41 years, or as one headline read, “Only the Lord could succeed Blaine.”

But when Mike Lord retired the board went outside the credit union apparently seeking a change agent with a different vision for the future.  Jim Hayes took charge in September 2021 leaving the $2.2 billion Andrews FCU as CEO.  He had previous positions at  WesCorp and NCUA.

Members Challenge the New Direction

The October 2022 SEU Annual meeting was going according to the agenda until the other business item.  At that point former CEO Blaine, now just a member, rose with a prepared statement.

He asked how recent credit union actions  were in the best interests of SECU members.  The event and issues are described in this blog, SECU Members’  Spirits Awaken.  The members approved Blaine’s two motions. one asking for a response to the six areas of concern.  The second read:  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.  

Six months after credit union fireside chats and other communications responding to the motions, Jim launched a public blog SECU-Just Asking! He re-presented the issues that energized members and employees had asked him raise at the Annual Meeting.The blog became the platform for members nominating their own candidates for board openings at the 2023 Annual Meeting.

Members Electing Directors

In 2023 the concerned members nominated three candidates who supported their views for the open board seats.  Around 14,000 members voted in the contested election in which all three board nominated incumbents were ousted.  The members had succeeded in challenging the changes via the election process.

In 2024 the election was again contested and almost 100,000 members voted. This time the  incumbents were  reelected, but the top alternative candidates received almost 30,000 votes. SECU spent substantially to promote incumbent s in this second  contested election.

The 2024 meeting was broadcast live on YouTube.  My closing blog observation was:  One cannot help but come away with the feeling that this year’s event was a reaction to the two prior meetings where the board must have felt things moved out of their control.  This time the outcome which had some excellent content, especially the member questions, was an exercise in the power of incumbency.

The Public Debate Continues

Since the launch in March 2023, the Just Asking blog has cumulative views of 2.53 million  and 14k posted comments, according to Blaine.  He says interest peaks as the board election cycle gets under way in July/August. Currently views average around 2,500 per day.

By any measure it is a blog followed by a significant number of SECU members and one presumes employees.  The blog is a unique member-owner effort in its longevity and substance trying to influence the credit union’s direction .

Jim Hayes, the new CEO implementing the changes challenged in the October 2022 Annual Meeting, left in June of 2023.   The board promoted the long- time COO Leigh Brady who has continued most of the internal and member-facing changes.

The controversy has somewhat slowed  the credit union’s momentum. When Mike Lord left in August  2021, the credit union was $50 billion in assets versus today’s $55 billion (a 2.5% cagr)

A New Unicorn for Coop Believers

Today as SECU evolves into a traditional credit union provider, it remains a Unicorn  for another reason.  It is the only large credit union to have contested board elections for the past two years.  This member-owner involvement is unique and yet what the coop design was intended to ensure.  The members’ role using the democratic principle of one person, one vote, is the critical governance function.

Member choice in contested elections is essential to active owner accountability versus the habit of internal succession controlled by sitting board members.

Democratic organizations (or countries) rarely fail because of external market competition.  Rather most failures come from within.  They are leadership and commitment shortcomings.

The two CEO successions from failure observation is a critical issue for credit unions.  Financial failure is very rare, but failure to grasp and enhance the unique business design and principles that are the foundation of every credit union can be quickly lost.  New visions and corporate aspirations can take credit unions away from their special strenths.

Credit unions were founded with no capital, just human passion, When that initial belief is not sustained, the accumulated net worth can just become the CEO and board’s treasure chest, not a member-enhancing resource.

Controlling Member Involvement

SECU’s policy and financial performance continue debated in daily posts,  The credit union’s  primary response has been to limit or eliminate  the members’ role in the annual meeting activity.

In the last two years SECU’s board has changed its bylaws to better control  the annual meeting and election processes.  The agenda has been closed to open member discussion.  The timing and procedure for member nominated candidates in elections have been shortened making it more difficult for non-incumbents to get on the ballot.

In short, the board has tried to shut down the effort that raised the original concerns in 2022.   The unique coop member governance check and balance on credit union priorities is being stifled to the point of elimination.   And following recent blogs, the NC state regulator is trying to avoid any oversight of the board ‘s  efforts to eliminate all member governance rights.

Why this Members’  Unicorn Effort Matters

This issues profiled by Blaine are not an isolated concern.  Other credit union members are facing similar challenges in being heard. Rarely does a merger go by without some members asking why?  Bank purchases using members’ accumulated capital rewards bank owners, not the credit union’s owners.

The  future of the country’s second largest credit union has implications for the cooperative system as member-centric financial alternatives. Members are seeing investments  disconnected from their well being or traditional purpose.

When owner involvement is silenced at required annual  meetings, a credit union’s future is in the control of self-selected, perpetual unelected volunteers.  That is a dangerous separation of responsibility from accountability when owners are left out.

There is now over $250 billion in collective reserves under credit union boards’  control.  Keeping the 100 million  coop member-owners from  influencing how these funds are used will bring temptations from all corners of the capital markets, brokers and hedge fund investors.

Boards will feel free to do whatever they choose, initiatives unhindered by either principle or purpose.  Dramatic visions of power and influence financed with billions  of members’ collective wealth willl be in play.

With members seen as only customers, just a means to greater ends, the cooperative alternative will have lost its way.

Speaking Truth to Power

From Socrates and throughout Old  Testament stories, the prophet’s voice has been a source of wisdom and discomfort for those in authority.

The idiom “a prophet is without honor” comes from the New Testament.  It refers to someone whose message is not appreciated by their own community.

It takes unusual courage to make a public stand against those in authority.  When done by someone with expertise and experience, they will be accused of failing to give others their turn at the wheel.

Blaine is blunt even caustic at times in his writing. He does not believe in nuance.  When others are not direct, he will call out lies.

He believes coops were designed and have the responsibility to correct a fundamental flaw in consumer financial services.  In his words, “those that have the least or know the least, pay the most for financial services in America.”  The problem has only gotten worse as income inequality continues to grow.

Credit, that is consumer borrowing, is the most important way  for almost all to succeed in a free market economy.  There are no scholarships for life’s essential purchases.

Yet when CEO’s and Boards’ tenures grow to oversee hundreds of millions or billions in assets, it is tempting to gravitate towards those well-off in life.  Making Tesla or Lexis auto loans is a better opportunity than members needing to buy a car at an Enterprise used car sale.

Events will influence how Blaine’s initial six concerns will resolve.  Local Government FCU, now Civic, has ended their partnership with SECU at great cost to both sides.  Risk-based pricing may or may not increase SECU’s consumer loan share.  The question is whether real estate lending continues to be a priority or whether it will convert to just another “conforming” service.

Blaine’s most recent effort to request the North Carolina regulator to preserve the rights of members in overseeing their coop may seem ironical given his history of battling NCUA when CEO.

But that issue is the bottom line now, not differing judgments about products or services. SECU is at a turning point, already taken by most. Will the rights of member-owners to be heard with their elected leadership be upheld?  Without that check and balance, there will be billions of dollars of members’ collective resources without any accountability.

I  will give Blaine the last word from this brief statement on the role of regulation in 2010.

(https://www.youtube.com/watch?v=E1tnDcE6Xjo)

 

 

46 Credit Unions Close their Doors in Q 1 2025

Forty-six credit unions managing over $3.7 billion in assets cancelled their charters in the first quarter.   The credit union’s data is from December 2024 call reports.  Because they closed their doors, the credit unions filed no data for March 2025.

This total of closings is much higher than the 35 mergers NCUA reported in the first quarter.

The 256,000 members with with $2.4 billion in loans, have now lost their own institution some with  histories serving generations.  List with loan totals.

These credit unions ranged in size from the $560 million LA Financial to as small as $3,000  Asbury FCU in DC. This pdf with ROA and net worth is shown from largest to smallest by assets.

Not Financial Failures

On this listing, the weighted average net worth of the group was 10.7% at December.  Many had equity ratios much higher than this.  Two had net worth exceeding 30% including Gibbs Aluminum (KY) at 33% and Telco Roswell New Mexico at 34%.

Only 7 had a net worth ration below the 7% well- capitalized benchmark with the lowest two at 4.9% and 4.2% of assets. Six of these had negative ROA’s in 2024 but all were still solvent.

If these are not financial failures, why were the charters ended, largely by not entirely, via mergers?

Some would explaine that this is just the “creative destruction” that economists describe as an essential outcome from competition in a capitalist market system.  Underperformers are forced out of business and replaced with better options.  This is a necessary and healthy culling that makes capitalism strong, innovative  and prosperous for the greater community.

While there is an element of truth in this dynamic, cooperatives are supposed to be an alternative to the winner takes all mentality of market competition.  These coops are long standing with charters that go back over 100 years in some cases.

Two Internal System Weaknesses

I would suggest that these charter failures, and they are just that, of financially sound firms results more from cooperatives’ internal shortcomings, not external competition.

One critical deficiency is the lack of system support for some of these smaller credit unions who have decided to give up.  Surrendering charters versus adapting to new opportunities costs the industry between $100,000 to $500,000 each time a charter is lost.

Those amounts are the range of donated capital NCUA now requires for chartering a new credit union.  These 46 charters have a total “market” value as much as $23 million at the higher required capital level.  For example, Arise Community CU opened its doors on Juneteenth 2025 with over $1.0 million in capital donations.

New charters are extremely difficult to achieve with NCUA approving only 2-4 per year.  It would seem in everyone’s best interest, but especially leagues, CUSO’s, vendors and others supporting coop options  to find ways to preserve or transform existing charters to those willing to take the reins of leadership.  Press reports have said NCUA has over 90 new charter requests in various stages at this time. This suggests public interest in coops is still widespread.

Benign Neglect?

A tiny example of this system weakness, or neglect, is the smallest credit union on the list, Asbury at $3k and 100% capital.   The 100% net worth suggests that the credit union  has been self-liquidating for some time.  The credit union still has a web presence via a third party.  It was not invisible.

More tragically when one looks up Asbury’s history, the credit union was chartered in 1945–it is over 110 years old and insured by NCUA in 1972.  Virtually invisible and surviving, but  ignored by the system that created it.

The More Common Deficiency: Leadership Failings

The second largest credit union failure is NextMark FCU (VA) with $550 million in assets and 16.3% net worth.  The CEO and board requested members approve a merger with Apple FCU, which took place in the first quarter.

The failure of this long-time, financially well-off and large institution illustrates a second aspect of the industry’s self-inflicted errors.  There was no compelling financial, business or other shortcoming motivating this charter closure.  The CEO Joseph Thomas had served as President/CEO since October 1994 a period of 30years and 4 months before becoming Executive Vice President at Apple via the merger he orchestrated.

During his thirty years as CEO Thomas also served on many industry organizations. These positions include: a CUNA board member for 8 years; a board member of CUMA a DC mortgage CUSO for 22 years; Board member and immediate past chairman of the Virginia Credit Union League for 12 years; board member Worldwide Foundation for Credit Unions 7 years to the present; and board member for the World Council of Credit Unions, 5 years. also continuing.

NextMark gave Thomas a platform and standing to aspire to these positions  of wide spread credit union national and worldwide  responsibility. But now this opportunity and potential service paths are closed.  There is no successor CEO asThomas pulled up the ladder he climbed to participate in these other opportunities.  The independent charter ceased operations.

Mergers such as this destroy cooperative professional and volunteer leadership roles in communities, within the credit union system, across the country and, in this case, worldwide.  Fewer coop leader positions mean fewer voices and examples of professional excellence representing credit unions.

It is at best ironic that those who seemed to have benefited significantly from their CEO leadership role, would close this path that was opened for them.  What kind of leadership perspective did he bring to these other system responsibilities?

But this tragedy goes further than the  opportunities for credit union volunteers and professionals in their communities and beyond.  The following public comment is one member’s response to the merger proposal. It clearly shows that members know this kind of ending is not why credit unions were founded.

Her description is one of betrayal, not just of the cooperative principles, but moral failings by those with fiduciary responsibility to the member-owners.  Here is her perceptive  description of why this merger is so tragic and wrong not only for these members, but also for America’s coop system (subheads added).

I recognize that the merger is likely a foregone conclusion, and the number of votes cast by members will be minimal.

My experience with the NextMark Federal Credit Union dates back to 1977 when it was known as the “Fairfax County Employees Credit Union.” Over the following 20 years of membership in the Credit Union and employment with the Fairfax County Government, I served several years as a member of the Credit Committee and the Supervisory Committee.

The general concept of a credit union, combined with a defined field of membership, the value of working toward the common good of the members, and loans based on character, were central to the success and satisfaction of the credit union members. The credit union grew, as did the Fairfax County employee base.

A Change of Focus

At some point in the late 90’s or early 2000’s, the field of membership expanded in scope, the name changed to the commercial generic “NextMark” and our credit union began to resemble a commercial bank, with limited on-line offerings and variable customer service. Nothing terrible, just a move far from the underlying values of the credit union movement.

The specific observations that I believe should merit regulatory review, are the substantial financial incentives offered to several key staff members, contingent on completion of the merger. The amounts seem very high, but of greater significance is that these payments are contingent on the merger, which these key staff members are urging members to approve. I am aware of nothing that casts any doubt on these key staff members’ sound character or integrity.

Gross Conflicts

The issue is a gross conflict of interest created through this incentive process. These senior staff and volunteer members have a fiduciary responsibility to the credit union members, including advising on significant business decisions and implementing structural changes, such as mergers. The existence of contingent incentive payments for completion of the merger would seem to conflict with the fiduciary responsibility to the members. It would seem that a more sound approach might be to delay the negotiation of pay and benefit incentives until after the membership vote.  

Old Fashioned Thinking

Maybe everything is fine just as it is, and such incentives are likely commonly accepted in the commercial banking and business arena. Credit Unions are supposed to be a little different – although that may just be old-fashioned thinking.  

End comment.

A final note on this merger:  Senior staff and the CEO received according to the Member Notice “pay adjustment distributions to meet the continuing credit union’s salary bands, long term retention bonus, incentives already established, deferred compensation benefits, or severance opportunities” totaling almost $900,000.

The members received a $12 million bonus dividend for approving this combination and free transfer of their $409 million in loans and remaining equity to another firm.  How might these resources been re-invested in the credit union for members’ future or even seeding a dozen or more new coops?

The credit union cancelled its future and distributed a token portion of its value that members created  to be paid forward to benefit future generations.

Can a coop system with such behaviors routinely approved at all levels, ever hope to survive in the future?  Should it?

The Loss of Member-Owner Coop Rights

This latest SECU Just-Asking! blog illustrates a growing tactic  by credit union boards to limit or end member-owner involvement in governance.  As explained below, the method is to unilaterally change the credit union’s bylaws to effectively stifle any member initiated election or annual meeting involvement.

Tomorrow I will show how this effort now in its third year has evolved at SECU.

The Full Blog (shading added)

Ms. Katrina Ray, N.C. Administrator of Credit Unions

June 20, 2025
Re:  NC Credit Union Division Failure To Protect Credit Union Member Governance Rights
Dear Administrator Ray,
North Carolinians, who are member-owners of state-chartered credit unions under your supervision, are at risk of losing their legal and statutory governance rights. This has become a safety and soundness issue for the 3+ million credit union members who hold over $60 billion in North Carolina credit unions.
As Administrator, you are not unaware of this situation given the extended controversy within our State. I would like, however, to give you a summary of what has occurred, using State Employees’ Credit Union, of which I am a member, as the example.
Lets focus on the SECU Annual Meeting: 1) In 2022 (and in all prior years back to 1937) SECU members could speak, offer resolutions and make motions at this business meeting, 2) in 2023 speaking rights by SECU members were restricted and the meeting agenda was altered to eliminate member participation in “new business/old business” discussions, 3) in 2024 the ability of members to speak was eliminated, only non-substantive resolutions were permitted, and the standard business meeting agenda was again curtailed.
In looking to the 2025 SECU Annual Meeting, a written request was submitted for a copy of procedures for SECU members to submit substantive governance resolutions in advance of the meeting for publication and consideration by the SECU membership. No procedures exist. SECU noted that advance resolutions would not be accepted at the Annual Meeting and that such resolutions could be submitted only via a separately called “special meeting” of the membership. This further restriction on SECU member governance rights was a novel invention and of course no policies or procedures for such a “special meeting” exist.
As Administrator, you are given credit for authorizing these eliminations of SECU member governance rights via the bylaw amendments approved by NCCUD on 6/30/2023. The specific amendment you approved was: “… (iii) authorize the Board to establish upon notice to the membership policies and procedures governing the order of business, format and conduct of the annual meeting.” 
 
It would appear that the SECU Board has used your general amendment authority as cover to purposefully curtail the legal, statutory governance and ownership rights of SECU members in their credit union. This has created an explicit safety and soundness risk for the future of all North Carolina credit union members.
 
If as Administrator, you did intend to authorize this abridgement and curtailment of credit union member governance rights; you have created a business entity unique among all insured financial institutions in the U.S. and have authorized governance practices which would be illegal among most public U.S. businesses.
This unparalleled and growing impairment of basic shareholder-rights is being followed carefully by the credit union and banking communities in North Carolina and on the national level.
Would hope you would use your statutory authority to address these issues on behalf of all 3+ million North Carolina credit union members.
Sincerely,
Jim Blaine, SECU
cc: SECU Board of Directors

A Member’s Letter to the Board Chair

In the next week I will present three active situations where members are deeply unhappy with their Board leadership.  In every case the board has tried to ignore, at best, or at worst, silence, these efforts at  member engagment.

These cases are unusual but not in the board’s hunkering down and ignoring the owners. Rather it is in the members’ efforts to share publicly their frustration trying to engage as owners.

There are similar member attempts that have yet to rise to public visibility.  These cases are just a few of the concerns that members and even employees have shared with me.

Today’s example is from a member-owner and long time credit union professional who started his career with this credit union.  He then moved to manage a national CUSO of leading credit unions and became a consultant for several more credit union organizations.  In other words, he is a true believer.

This is his letter to the Board Chair.  I have added the subheads and deleted specific names or identifiers in the letter.

April, 2025

Mr. Chairman:

Since I first began to discuss the matter of board governance almost 10 years ago with (names omitted) and in my further discussions with you, I have stood on the position that it is one of the primary responsibilities of the Board to continuously improve, enhance and encourage member/owner participation.

Our credit union should represent the best principles of the co-operative business model, and my board should be acting in a manner that builds on those principles that make us different from for-profit financial institutions.  As we have discussed in the past, the continuation of the current practices surrounding the board nomination and election process and the annual meeting fly in the face of such principles and practices.

The Annual Meeting

Let’s address the issue of the Annual meeting first.  How exactly can you defend having a 9:00 am meeting on a Wednesday as having anything but a negative impact on encouraging member participation?  How can you defend the restrictive rules that control and limit the agenda and discourage any member interaction with the board at the meeting?  How can you defend the minimalist attempt to notify and promote the meeting to the owner members?  Where is the big banner proclaiming the date, time and location of the meeting on the credit union’s website? How about some signs or interactive messages in the branches? How about a social media campaign to your members using email and text messaging to encourage their participation?

I dare you to ask a teller or even a branch manager about when the annual meeting is being held, I have, and I was embarrassed for them.  How about the search function on the website?  Try entering, “Annual Meeting” and see what you get.

What are you afraid of?

What are you afraid of?  Give me one good reason why any member- owner should not be able to come to your meeting next week and ask you or XXX a question about anything they want concerning credit union governance, operations or products and services.  Why shouldn’t one of your owners be able to ask you what a board member actually does to earn around $40,000 per year, why the 2023 Form 990 reflects a Split dollar benefit loan to the former fired CEO in excess of$10 M, or what a subsidiary LLC does to earn $8.5 M per year?

Solutions Rejected

What really upsets me is that we have talked about actual solutions to these issues more than once.  I have even written and submitted sample by-laws which would require the nomination of at least two qualified members for every open board position so that there is an actual election that could be easily accommodated using electronic voting.

We have also talked about the need for term limits to make for a healthier board turnover and broader owner participation.  I have no complaint about the qualifications of the current board, but with several hundred thousand owners you can certainly identify enough other highly qualified options to have a real election for board positions.

Incumbents should be required to supply some modicum of justification for their re-election to a very important, difficult and highly compensated position.

An Oligarchy

The word “oligarchy” gets tossed around a lot today.  I would suggest that the current nomination process and pursuant “Non” election process along with the seemingly secretive and hidden nature of the Annual meeting is signal to any half-way informed owner that the credit union  is in fact a practicing oligarchy.  A governance model in which power rests in a small group.

The second of the Rochdale 7 Cooperative Principles is democratic control and the third is member economic control.  I ask that you and your fellow board members make an effort to make sure my credit union is the best representation of those principles.  I am hopeful that my suggestions will finally get the attention and action they deserve

S. A Lifelong Member