Category: Cooperative Design

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What Does America Mean to You?

The 4th of July is every person’s chance to celebrate the nation’s birthday.  The occasion is a fun day for most, often marked with words about the special country which we share together.  And once again to honor our collective vision.

The Declaration of Independence is the focus of many speeches. Its opening words remind us of our founding ideals: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Since 1776 we must acknowledge that the words are still aspirational, never fully realized.  America’s freedom is an unfinished project.  The fundamental challenge is ever present:  Are ordinary people capable of governing themselves?

The Commercial Appropriation

This spirit of the pursuit of happiness has also become entwined with  America’s commerce. In the post WWII federal highway infrastructure project, the car became a symbol of this open ended personal possibility.

In 1976, Chevrolet was the most popular car in the USA. General Motors crafted a slogan with video declaring that Chevy and the USA were one and the same: “Baseball, hot dogs, apple pie, and Chevrolet.”  The company even tried to appropriate baseball’s 7th inning stretch to celebrate its brand leadership.

Today, crowds stand to sing God Bless America. Perhaps a triumph of ideals over markets?

The Declaration and Credit Unions

I believe credit unions are themselves an expression of America’s founding document.  They also represent what makes American enterprise so powerful.

Credit unions embody more than the Declaration’s opening words about life and liberty.  Cooperatives exemplify how the document’s intent is to be realized.  The very last sentence reads:

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

This mutual pledge of lives, fortune and sacred honor is every credit union’s founding ethos. Moreover, like America’s political democracy, the cooperative system depends on individuals committed to the principle of citizen self-rule.

The first generation of credit union pioneers. like the founding fathers. understood both the ideals and challenges of self-government.   Credit unions are started and sustained by volunteers.   They shared funds and a commitment to address common needs.

The initial dimes and quarters may have been small, but their impact on lives was real.   Like the political colonies, these economic revolutionaries knew each other.  They joined to spread their vision of financial self-help across America.

The Challenge

While the Declaration’s truths may seem self-evident, the democratic process is an ongoing experiment.  Today almost all credit union founders have passed on—will their basic principles be sustained?

The phrase of people helping people is repeated. But the practice of cooperative democracy is often missing.   Voting is the most important lever of a free people.

As Americans progress through each life’s varied experiences, we add to our understanding of what American means-individually and collectively.

In my mind, credit unions show how the Declaration became a reality.    While America’s political and economic justice are ever-present challenges, America would be much the poorer without the power of the cooperative example.

Have a fun and grateful 4th with family, friends, and colleagues to honor America, the greatest cooperative enterprise on earth.

 

 

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The Source for Credit Unions’ Greatest Peril

When concerns are raised about risks to credit unions’ future, the most common threats  are perceived to be “out there.”   The potential for recession,  a continuing rise in rates, cyber threats, technology innovations, or other external marketplace disruptions.

However the greatest challenges may not be external, but closer to home.   In a speech to a major credit union conference, a former NCUA Chairman described his five greatest concerns as:

  1. The combining of the deposit insurance funds;
  2. The possibility of merging the federal regulatory agencies;
  3. Doing away with credit union’s tax exemption;
  4. Abolishing the CLF and having credit unions go into the Federal Reserve bank;
  5. The FFIEC requiring expanding its regulatory disclosures for credit unions comparable to banks.

The concerns are from a speech by Chairman Ed Callahan to the 49th Annual Meeting of CUNA in 1983.  (Source Credit Union Magazine, June 1983, pg 10)

Two lessons.   What Ed describes is exactly the sequence of events that led to the demise of the S&L industry as an independent  financial system.  While the tax exemption was ended in the early 1950’s, the later changes occurred in just ten years beginning in the mid 1980’s due to the system’s inability to transform when facing deregulation.

Secondly,  the five  concerns were being considered  by  entities in Washington D.C.   These included commissions on governmental efficiency and reform,  congressional proposals following deregulation, and both Treasury and opponent’s questioning cooperative’s tax exemption.

These winds are still blowing in DC.   They blow harder every time  terms such as “level playing field” and “parity” are used.

Credit unions can continue to excel in members’ eyes. However, they could  lose in the  political marketplace if their primary goal is to have the same regulatory options as their banking competitors.

Why some in Washington will ask, do we need a separate agency to oversee the same activities?

 

 

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The Top 100 Banks and Credit Unions: Risk, Opportunity, and Future Evolution

What do numbers mean?  We often interpret data to support what we believe the future will look like.  This is especially true when the debate is around scale, asset size and sustainability.  What do the largest 100 banks and credit unions suggest about the evolution of both systems?

At December 30, 2022, the largest 100 banks in the U.S. hold a combined $18.8 trillion in consolidated assets with the largest five having half that value.  The industry’s total assets were $23.6 trillion in 4,706 banks.  The top 100 are 80% of total assets. Here are the top five.

Rank Bank / Holding Co Name Consolidated Assets ($ Millions)
#1 JP Morgan Chase Bank $3,267,963
#2 Bank of America $2,518,290
#3 Citibank $1,721,547
#4 Wells Fargo $1,687,507
#5 US Bancorp $590,460

 

Typically, big banks are have more access to liquidity, greater asset diversity and in many cases are viewed as “too big to fail.” Smaller or  regional banks have narrower margins for error.

Recent bank failures have reinforced both the regulatory and public perception that larger institutions are more secure.

I believe it is important to note that all of the top ten banks were the result  of significant mergers, not organic growth.  These institutions are creations of financial markets and ambitious leaders who are driven to be a dominant force in their markets.   This is not an aspiration limited to financial firms in capitalist markets.

A Forty Year History of the Top 100 Credit Unions

A perspective on today’s largest credit unions is helpful when forecasting how the ongoing consolidation might evolve.  Will the same market forces shape the credit union system similar to banking?

At yearend December 1982 there were 5,036 state and 11,631 federal credit unions in operation.  The top 100 (.5% of the 19,788 total) had total assets of $17.01 billion, or 18.9% of all credit unions.  Only Navy Federal was over $1 billion.

Public employment dominated the fields of membership.  Defense credit unions totaled 28, other federal government were 7, and three served state and three municipal employees.  Educational employees (teachers) were the primary focus of 15 charters.  The total of FOM’s serving public employees was 56.

The complete list of the largest  100 with additional financial data and growth rates is from the June 1983 Credit Union Magazine and can be found here.

Four decades later the largest 100 credit unions (2% of the 4,863) held $1.0 trillion in total assets, or 46% of the industry’s total $2.190 trillion.  The listing can be found in Callahans’ State of the Credit Union Industry report for 2022.

Concentration: The opportunities and the Risks

Does this four decade increase of asset concentration  from 19% to 46% in the top 100  mean  the cooperative system is going the way of banking with its 80% concentration in the top 100?

Most data show that larger credit unions tend to grow faster, have broader service and product profiles, and develop larger average member relationships.  In some instances, their size supports a market profile that results in naming rights or public partnerships with local sports teams.  To the extent that size also enlarges community roles and political impact, this can be a plus.

In banking, the drive for market dominance through scale is a constant ambition.  Growth increases earnings and a bank’s stock price.  While the FDIC- labelled community banks ($4.3 trillion in 4,258 firms or 90%) dominate by number, their share of total banking assets hovers between 15-20%. Their role focuses on commercial clients that align in financial size with the banks.

A Cooperative Difference

A significant difference  with banking’s top 100 is that  except for First Tech ($16.7 billion) almost all of the other credit unions have relied primarily on organic growth.  Many larger credit unions have had mergers, albeit small.   PenFed has completed over two dozen in the past decade.  But in most instances these have not been a significant factor in recent growth.  A number of the largest credit unions-SECU, Alliant. BECU, Navy, Vystar have had no mergers—all growth has come through internal expansion.

Comparing the two credit union top 100 lists forty years apart, the evolution in fields of membership is clear. Marketplace identity with a local sponsor has disappeared.  Most credit unions today have community (open) charters. Many have moved away from their legacy affiliation name to a generic identity, eg from Teachers to Everwise, or Telephone Employees to Wescom.

The Member Impact

What does this transition to larger firms with expanding market goals mean for the credit union member-owner?

The major downside is the distancing from local knowledge, identity and personal-member affiliation. The goodwill and community support in times of uncertainty becomes attenuated.

As credit unions expand their market footprints, the transition to open membership puts them increasingly on  a par, in members’ eyes, with other financial options.  Credit unions position themselves as full alternatives to their banking competitors.

This transition from member to customer is often accelerated via indirect lending models where credit unions compete for loan via third party originators.

Cooperative Destiny or Fate? Forensic Analysis Helps

Are cooperatives  destined to follow the banking  system’s increased concentration?

The value of the two credit union listings can perhaps shed some insights about this future evolution.

As I review the 1982 listing I find only seven that have merged and no longer exist, and one IBM Mid America, that converted to a mutual savings bank in the 2007.  Most have changed their names reflecting their expanding market reach.  Some have dropped out of the top 100 but are still operating.

A 93% success factor for individual institutions after 40 years of deregulation is a significant achievement. Especially as almost three quarters of the charters active in 1982 no longer exist.

A detail that readers may wish to pursue is how a credit union’s standing has changed within in this top flight. For example Patelco ranked 98th in 1982 and is 28th in size forty years later.  Identifying major changes within the top 100 can lead to examples of superior leadership or a loss of momentum.

A second analysis that may contribute to understanding the cooperative design’s dynamics is who is new to the top 100 in 2022 from decades earlier?  And how did they get there?  For example Apple FCU,  Canvas CU, NASA FCU or American Heritage.

How did these newcomers rise to the top of the industry?   What do their business models suggest for other credit unions?

I would encourage detailed analysis of the two listings and the changes that have taken place as a first step in thinking about how financial cooperatives succeed.

What strikes me is the stability of the largest credit unions especially compared with the banking system over these four decades.  When management’s loyalty is primarily to stockholders return and/or their own personal rewards, these priorities tend to drive one set of outcomes.   When the focus is on the member-owner’s well-being, there seems to be greater continuity in strategy.

The listings also show a wider diversity of business models. For example, Alliant’s one branch, all digital model has evolved into a financial intermediary for credit unions.  While Wright-Patt’s  traditional focus serving members living paycheck to paycheck has led to sustained growth.

This diversity can offer case studies for credit unions seeking options or even just sticking close to their knitting.

One other observation.  If a consumer were to choose from the top 100 credit unions or top 100 banks, which listing would seem more relevant?

 

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Asking Questions

According to Credit Union Magazine the top 1982 news story was the Penn Square Bank failure that involved more than 130 credit unions. (March 1983, pg 19)

The FDIC closing was over the 4th of July weekend.  NCUA had planned its second on-the-road board meeting for Chicago the following week.  The open board meeting was to coincide with NAFCU’s Annual convention.  For Ed, Bucky and me it was also a homecoming as Illinois was where we had been responsible for regulation of state credit union activity from 1977 until going to NCUA in late 1981.

As NCUA Chair, Ed had always held a post board meeting news conference.

This time the three of us were at the table.  The first question from a reporter was to me,  I think from Larry Blanchard. “With  all the CD exposure from investments over the $100,000 FDIC insurance, would NCUA now propose a rule limiting investments to the insured  amount?”

I had prepared for lots of “what-are-you-doing now?” kinds of questions, but not his one.  I instinctively said no.  Bucky and Ed were quick to describe how the agency would respond with both examiner on site reviews plus the CLF’s lending capacity.

Questions and Democracy

For anyone in authority, whether public or private positions, answering unscripted questions is part of the job.   It is how shareholders, the press, and interested stakeholders hold leaders accountable.

Questions are not always comfortable for the recipient.  They often challenge current happenings.  But the give and take is necessary.  They are part of a leader’s responsibility to a constituency. They help make democracy possible.

Many leaders, not in a public setting (press conference), will ignore these voices, hoping they will go away or grow tired.  Meanwhile the organization’s PR machine fills the airwaves with success stories, announcements and social media posts of positive activity.  Leaders will seek a friendly setting to put out their point of view rather than engage in a public dialogue.

Just Asking

Since February of this year, Jim Blaine the former CEO of State Employees NC has published a daily website challenging the leadership and direction of country’s second largest credit union.

Six initial questions about the credit union’s direction were posed at the 2022 Annual Meeting under new business.   The three motions requesting action  were passed by voice vote of all members.  Jim started his blog when the responses became increasingly different from the reality he was hearing from current and former employees, directors and members.

The Monday, June 26th  post describes his slow conversion to action after six years of retirement growing daffodils and chickens.  He describes his awakening as a matter of trust.

I know of no current CEO or credit union professional who openly supports Jim’s return to the fray.  Their criticisms come down to one principle:  he had his turn, now it is other’s responsibility.  Or specific defenses for the changes underway.

But this is not the Navy where when the officer of the deck takes the con, he alone is in control, unless relieved by the Captain.

Democracy is not just the careful selection of new leadership until they fill out their term and move on.  It is also a system of checks and balances on the exercise of power.   In credit unions, these checks and balances supposedly reside primarily in the board, elected by the members at every annual meeting.

However today most boards are in practice unelected.  The nomination process is controlled by incumbents.   So if a Chairman, as Jim asserts, is trying to implant a new strategic direction for the credit union, how is this plan to be presented to members for their support?

Credit union boards are not places comfortable for minority points of view.   I recall when the chair of the supervisory committee opposed the board’s vote to merge their $350 million firm, she resigned rather than make her position public. When the Chair of Cornerstone FCU overseeing the CEO selection committee nominated himself, no one objected.  Within the year this former chair, now CEO, was seeking a merger of this iconic credit union.

Credit union boards are more and more like country club elections-directors choose their friends and acquaintances to what should be a position of accountability. Marketplace competition while present, is not limiting as it is for a stock traded financial firms where performance affects price.

So when the democratic process is lacking, the one option is revolt, the public raising of questions that challenge both individual actions and direction.  For example Jim in his June 19th post asked about a $6,568,261 payment to Andrews FCU when their former CEO Jim Hayes was selected to run SECU.

The Almost 200 Credit Union Failures

NCUA’s first quarter 2023 data shows 191 fewer charters than one year earlier.   These are charter failures.  But not from the safety and soundness events most frequently believed to be the cause.  These are failures of morale.  Leaders are putting their comfort and well being ahead of responsibility to members.   One need only look at the list of mergers of sound well run credit unions with capital in double digits.

SECU’s situation is an example of leadership shortcomings, not yet a financial problem. It is a situation where democratic accountability was set aside and is now being resurrected in response.

Cooperative democracy is both a process for accountability and respect for member-owners. This public challenge  isn’t the first time this has occurred; it won’t be the last.

 

 

 

 

 

 

 

 

 

 

 

 

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A Baby’s Cry

The following is a lightly edited story from the Imaginative Conservative on June 15, by John Horvat.

This is a shared  experience of hearing a baby’s non stop crying during the frantic period while boarding an airplane.   It shows how one person’s voice can change the outcome of an unsettling event.

Bringing out the Humanity in US

“Air travel today might be considered the triumph of individualism. It involves people in their own bubbles rushing to destinations with little human contact. . .

“This inward self-absorption turns airports and planes into sensitive places where delays can cause outbursts. The slightest disruption can give rise to nasty incidents that add to the stress of air travel.

Rare Moments of Relief

“However, something extraordinary occasionally breaks the isolation, and people come out of their worlds and communicate with others. Such rare moments give a glimpse into how interesting people can be.

“The particular incident related here is hardly extraordinary. It involved a normal boarding process with its mad rush to secure seats and overhead bin space. Each person was absorbed in finding a bubble inside the crowded economy section of the plane.

“During this routine process, something human happened that lifted everyone out of their self-concern.

A Desperate Situation

“The main character in this drama was an unassuming baby at the back of the plane. For a full ten minutes during the boarding process, the poor terrified infant could not stop crying at the top of his lungs despite the mother’s desperate attempts to calm him.

“As the time came to close the cabin door, the flight attendant in charge was worried. He had seen situations like this degenerate into unruly incidents with loud, complaining passengers. He had to make a call quickly. If the crying did not stop, the mother and child would have to leave the aircraft.

“He discussed this option openly with another flight attendant. She tried to convince him that perhaps the baby would eventually stop and asked for some time to try to calm him down. Her motherly efforts failed miserably; the baby only cried louder.

“As the two flight attendants discussed the matter, those in the section front heard the dramatic debate unfold. The passengers were silent in their isolation, wondering what would happen. Yet none dared intervene. Meanwhile, tension mounted inside the cabin as the crying and schedule clashed.

An Unlikely Rescue

“It seemed all but certain that the mother and child would be expelled as the minutes ticked by when something unexpected happened.

“About a dozen rows from the front, a voice rang out.

“Miss, give the poor baby a break! We can take it! It’s no problem.”

“That first lone voice unleashed a chorus of support from all over the plane. The cabin erupted in cries to let the baby stay. Everyone offered to put up with the crying. There was a certain joy in their offers of sacrifice.

“We can take it, don’t expel them,” said one. “If there are those in the back with problems, let them come up here where there are empty seats.”

Humanity Triumphs

“Even the most introverted person seemed to awaken and get involved in the rescue mission. . . For five short minutes, the plane was abuzz with interaction. It became interesting.

“The outpouring of support for the small child ended all vacillation. The flight attendant perceived he had the backing of the passengers. If anyone caused an incident, the unruly traveler, not the baby, would be the target of hostility.

“The cabin door was closed, and the plane pushed away from the terminal. As the aircraft positioned itself on the runway, the baby stopped crying. Peace returned to the cabin, and all returned to the isolation of their bubbles. Humanity had triumphed over the rigid mechanical rules.

Self-Interest Destroys Human Solutions

“There is a lesson in all this. The disappearance of the human element in daily interactions makes life sterile. Everything is designed to minimize human contact and lock people into mechanical processes. No one is disposed to sacrifice.

“The self-service mania ensures that people stay in their self-imposed bubbles. This isolation creates a mentality that tends to disregard and resent anyone who interferes with one’s life. It does not allow the human element to act . .” (End)

My take: A baby’s cry.  One voice spoke up.  The community’s goodwill is awakened.  That is how I understand the credit union spirit–offering “human solutions” to everyday needs.  “We can take it! It’s no problem.”

 

 

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Powerful Member Stories Show a Credit Union’s Heart and Soul

Translating the credit union difference into an effective message is hard.  When done with stories of members serving their communities, the messages can be inspiring.

Whitefish Credit Union in Whitefish, MT has created a series of imaginative, colorful, “hometown” videos of their members’ special efforts.

These personal examples would cause almost any viewer to consider  1. moving to Montana and 2. joining the credit union.

The first example features skateboarding enthusiasts in Whitefish and the people who use and support it.  A story for younger members and those forever young.

https://www.whitefishcu.com/Members-like-Whitefish-Skatepark-Association

(https://www.whitefishcu.com/Members-like-Whitefish-Skatepark-Association)

This second video is how a veteran with a military injury found his meaning in life in Plains, MT. “Life doesn’t always go in the direction we think it will go.”

(https://www.whitefishcu.com/Members-Like-David)

https://www.whitefishcu.com/Members-Like-David

This is the cooperative difference portrayed as a form of art.  The theme: What we do, pays dividends. 

Enjoy.

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The Fruits of the Spirit: A Credit Union’s 74th Anniversary Celebration

The cooperative spirit is a financial super-power.  It is a passion that enables even small firms to have enormous impact.  Affinity Credit Union in Des Moines, IA is example of this capability  in action.

Chartered in 1949, its annual meeting is a celebration with members even as the required business items are covered.

This year’s meeting highlighted three vital Affinity success factors enabled by this spirit:

  • Respect for the member-owner;
  • Pride in the Affinity’s legacy and mission;
  • Exceptional leadership in the board and senior management.

All Are Invited

The credit union made special efforts to draw members to their annual meeting:

  • A reminder email was sent to all on the day of the meeting: “The 2023 Affinity annual meeting is tonight. We look forward to seeing you there!”
  • The announcement in the Members’ May Newsletter by the CEO: “Thank you to all who registered to attend our Annual Membership Meeting on May 9th at the Top of the Tower Ballroom. . .you can still register to attend.”
  • The sign taped to the front door of the main office when members came to be served:

When members arrived at the meeting they were given a 10-page Annual Report that included a 14 item agenda; the board’s “promises” and biographies; committee reports; financials for 2022: and pictures describing Affinity’s role in the community.

Each Report included two raffle tickets for the post- meeting drawing for cash prizes.  To kick off the event there was a free, full buffet meal for attendees before the speeches and business began.

I talked with members who had joined as far back as 1963 and an older couple, retired from state government, who joined just two years ago.   Several families brought their children.  One member brought a date, even though she was not yet a member.

The Speakers’ Messages

Outside speakers offered different aspects of Affinity’s impact.  Michelle Bock, President of the Food Bank of Iowa, presented the challenge of food insecurity that  10% of Iowans face each year.  Affinity’s CEO Jim Dean sits on the Bank’s board.

Katie Averill, Superintendent of Iowa Credit Unions, affirmed  the strength of the Iowa system in the wake of recent, large bank failures.  Of the 80 Iowa credit unions and $33 billion in assets, 72 are state charters holding 97% of the state’s total.  The system has grown by double digits over the past five years.

Five Iowa charters are over a billion dollars in assets.  Affinity at $145 million ranks number 22.  Averill summarized Affinity’s evolution since its 1949 chartering as  USW Local 301. Her listing of regulatory actions including FOM expansions, name changes, and mergers was a tribute to the credit union’s longterm standing in the community.

The respect for owners was shown when the Chair opened the meeting, under new business, for comments from members.  Multiple questions were raised from the floor.  Some were minor–will free movie tickets be restarted?  A number were substantive about the financials–unrealized losses on investments and loss reserves for loans shown in the  Report each attendee received.  All were answered openly.

Pride in the Cooperative’s Contributions

At the check-in desk for the meeting, the credit union’s founding story was shown in a display case. A lunch pail used in the early years to collect funds and make loans during shifts at the Firestone tire plant was included with the founding story:  “Here is a resource created by workers for workers that feeds families, futures and trust.”

A brief  video testimonial of long-time member James Reasoner was shown. His financial journey recovering from near bankruptcy two decades earlier was highlighted. He was also one of four  members elected to the board that evening.

Pride  is evident in the credit union’s physical presence.  The main office is still less than a half mile from the Firestone plant.  Photos of the Firestone facility are mounted throughout offices that have been remodeled surrounded by careful landscaping.

The board’s “promises” start with employee education. Wednesday mornings are late openings to accommodate training.  Three employees who had worked over 25 years for the credit union were recognized at the meeting.  Misty is the person who helped new board member James Reasoner in the video twenty years ago.

“Enrich our communities” is another board promise. Six seniors from different high schools were awarded  scholarships to further their eduction. Here’s one.

The program included multiple examples of Affinity volunteers in action.

Leadership by the Board and CEO

Few organizations can thrive, let alone survive, without dedicated leadership.

The four board members elected this meeting have  leadership responsibilities in their professional lives.  James Reasoner’s story is told in the video link above.  Bridget Neely is the CEO of Big Brothers, Big Sisters of Central Iowa.  Cara Harris is the Administrative Coordinator of Cortiva Agriscience in Johnston, Iowa.

Webster Kranto is a small business owner who was born in Liberia. It took three years as a refugee to gain immigration to the US where he graduated from Iowa State University.  In 2019 he was appointed by the governor to a 4-year term on the Iowa Board of Corrections.

Two continuing board members have worked at the Firestone plant for 22 and 23 years.  Both are members of USW Local 301L.  The board chair Cindi Summers is the Chief HR Officer at Baker Group. She earned  a Master’s Degree in Business Leadership, as well as a B.A. in Management and A.S. for Paralegal Studies.

Christian Quijano, Vice Chair, works  in Environmental Risk Management and was board President for the Environmental Professionals of Iowa from 2012-2018.

Their leadership terms begin with an oath administered to all directors at the annual meeting.  Standing and facing the members, they commit  to “faithfully, honestly and impartially perform the duties imposed upon me. . .”

The board’s most critical role is selecting the CEO.   Jim Dean came to the credit union after a long career in multiple leadership responsibilities in Illinois.   He has implemented the credit union’s vision of “building better lives” by demonstrating that small can have a big impact: “small but mighty.” He initiated a suit against Apple Pay’s  restrictions and joined in a program to lend $10 billion to facilitate  home ownership for  minorities in Iowa.

He asked that I come to the meeting to learn about the credit union.  I saw a genuine dedication to resolving  members’ financial challenges from those still in high school to retirees.  Over 50% of the 13,786 members live in low income areas. The credit union teaches the basics of savings and borrowing so members have skills to manage in any economy.

Jim’s view of success is more than increasing the volume of financial transactions. He  united the credit union’s financial capabilities with partners to support the  community’s overall health and well being. The Iowa Food Bank is just one example of this outreach.

With the board he has instilled a timeless evolution of values and principles.  This special coop spirit can extend success forever, beyond generations lived and to be lived.  He honors the traditions that created the credit union.  He gave renewed meaning to the founders’ goal of an organization that “feeds families, futures and trust.”

Jim believes that the strongest credit union advantage is member loyalty.   This is not contingent on size, but service.  The only size criteria is to be big enough to care about members.

When a decision was made to end Saturday branch hours  because of low transaction volume, Jim called each of the members who used this service the most, to let them know of the change and other transaction options.

My Message

When speaking  to the annual meeting, I said the most precious gift each  has is our time.  This evening members gave several hours to learn about the credit union and participate in another anniversary.

My hope was that every member-attendee would expand their involvement to become owner-volunteers, sharing in the promotion, service and financial support of their credit union’s mission.

Affinity’s stability  is rooted in and led by community leaders.  These volunteers and professional staff demonstrate the potential from democratic  member ownership.  The Coop spirit enables members to serve the financial needs of others, not just one’s own.

The Importance of Leadership

Affinity is an example of what numerous other credit union leaders do to help members become who they aspire to be. Their coops invest time, energy, and resources supporting members’ ambitions and enabling personal opportunities.

Leaders take risks with decisions when they make members’ needs and dreams their own. The impact of their support and dedication is immeasurable.  For it is the members’ who are the foundation of every credit union’s resilience.

Affinity’s leaders love what they do, who they do it with and who they do it for.   Is there any higher standard for a life or a profession?

 

 

 

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How a Black Barber in Little Rock, AR Started a Credit Union

The first new charter in Arkansas in over a quarter of a century is the focus of a new podcast.

Arlo Washington is a barber, a self-made man who turned his entrepreneurial instincts into helping his community.

The story of People Trust Community FCU, chartered in September 2022 is told in this 30 minute podcast by the reporter Oscar Abello from Next City and Arlo Washington the credit union’s founder.

Hearing the story in their own voices, brings to life the challenges and promise of a new credit union.

The context matters.  Payday lenders were shut down by Arkansas in 2010.  Arlo had started a barber college and by necessity and local tradition became a lender to his customers.

The reporter states there have been just 25 new charters in the last ten years. He points out in the 1970’s there were hundreds of new charters  granted per year.

Today Arlo describes the chartering effort as “intimidating, scary and tedious.”  The endgame was to have “local ownership in the banking system.”

“If we’re ever going to close the racial wealth gap, we need financial institutions that understand neighborhoods and can meet their community members where they are in the process of building their financial well-being,” says Washington.

This example of a small lending enterprise adding a credit union is a model that could be replicated many times in other underserved communities across the country.

 Seeds of Hope at the Grassroots

Planting seeds  whether in a garden or in our communities’ choices is the practice of hope.   Seeds that will grow and flourish to make lives more colorful and abundant.

There are more Arlo Washingtons throughout America who want to become gardeners for their community.  How do we reach out to them?  And grow our grassroots?

 

 

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Credit Union CEO Joins Iowa Bank Board

Iowa is home to a very  rambunctious  credit union system.  A total of 80 credit unions manage over $33 billion in assets growing at double digit rates.

Several larger Iowa coops have bought banks to expand their franchises faster.  63 are suing NCUA over the agency’s failure to honor the plain language on its Corporate Claims Certificates.

Then there is a relatively small credit union who is currently suing Apple for restrictions in its Apple Pay product.  This same CEO has joined the board of a local bank.

The bank has two major centers in Des Moines and Ottumwa from which it serves affiliates in 55 counties throughout the state.

The board director is Jim Dean. CEO of Affinity Credit Union.  The bank is Food Bank of Iowa, a 501 C 3.  It reaches over 300,000 children, seniors, veterans and persons who experience food insecurity during the year.  In 2022 it distributed over 1.2 million pounds of food per month through 700 frontline partners.

The administrative offices, warehouse, and distribution-delivery capabilities are supported by volunteers who come daily to prepare boxes for local delivery.  To carry out its mission, the Food Bank relies on almost 10,000 persons who freely give their time and labor.

A Common Cause

On factor in food insecurity is the inability of many to earn a living wage. The issue “comes and goes” for individuals as economic circumstances affect individuals’ opportunities.

When asked why the Food Bank  partnered with Affinity Credit Union, Vice President  Bergetta Beardsley, who is responsible for fund raising, replied simply, “There is a natural relationship with those we both serve.”

Why Is Affinity Involved?

Food banks have been an important part of Jim’s volunteer work during his credit union career. In addition to the overlaps of those facing financial and/or food insecurity, these two organizations share the same values.

Volunteer activity is part of Affinity’s culture. The credit union provides employees with two days paid leave per year to serve their community. The CEO’s participation raises awareness with staff about the Food Bank’s multiple roles.

The credit union promotes the Food Bank with special 30 second radio spots and ads on their delivery  trucks.  In some instances, the credit union has assisted with food pantries for schools in their communities.

Even more strategic isAffinity’s example.  It connects the financial reach and capacity of the coop system to this critical organization serving over 10% (300,000) of Iowa residents with food.

An Ever-Expanding Effort

Credit unions, like individuals, are known by the company they keep.  Two nonprofits, Affinity and Food Bank of Iowa, are joined in a common purpose of service and personal well being.

Across the country today, many families help their local communities with food drives.  Schools arrange canned food collections for holidays; there are special hunger offerings and food drop-offs at churches and community centers.

But experiencing the scale and scope of this central wholesale operation  (55,000 square feet) is an eye opener.  It provides food to schools, day care centers, senior and community commons, church pantries and other institutions.  The operating budget is approximately $30 million.

A Visit in Photos

Here are some of the pictures from my visit to the Food Bank’s Des Moines’ office, volunteer center and warehouse.  Our guide was Bergetta.

The volunteer reception area with mission, vision and values:

A wholesale delivery of potatoes to be repackaged.

Converted to individual sized quantities..

Just one of several volunteer groups for the day who helped pack boxes for delivery.

Pallet being loaded for delivery to a Day Care.

Bergetta showing pasta provided in bulk from a corporate donor.

Another pallet ready for delivery.

Part of the massive warehouse.  Storage racks with supplies and  shrink-wrapped deliveries.

Food delivery trucks backed into loading dock.

Affinity Credit Unions adds its support on the back of the delivery trucks.

Even if an individual stops by the head office needing  food, a box is always ready.

Organizations write thanking Affinity volunteers.

Isn’t this a Bank we all might like to join?

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Why an Oath for Credit Union Directors and Officers is Desirable

Boy Scouts have a pledge.  Couples exchange wedding vows.  Deacons, elders and lay ministers all affirm belief before the laying on of hands and becoming church officers. Naturalized American citizens take an oath-even agreeing to bear arms.

These ceremonies signify individual commitment in a public setting for the people they serve or community they join.  There are responsibilities in an oath, whether occasioned by election, by appointment or by personal choice.

Faithfully Discharge the Duties:NCUA’s Oath for Employees

All NCUA employees are required to take an oath upon accepting their positions.

This oath is administered by an NCUA employee, usually in the HR division, during new employee orientation on an employee’s first official day. Here is the text:

I, [state your name] do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same;  that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.  (emphasis added)

Duties, faithfully carried out.  Faithful performance is itself one aspect of the standard liability bond for credit union coverage.

A State Example:  OATH OF A CREDIT UNION DIRECTOR

Pursuant to Revised Code 1733.10, I, the undersigned director of NAME Credit Union, located in City, Ohio, do solemnly swear/affirm that I will diligently and honestly administer the duties of the office of director and that I will not knowingly violate, or permit to be violated, any law applicable to the Credit Union.

As a director, I have a legal responsibility and a fiduciary duty to credit union members to administer the Credit Union’s affairs faithfully and to oversee its management.  In carrying out my duties and responsibilities, I shall exercise reasonable care and place the interests of the Credit Union before my own interests.  I shall fulfill my duties of loyalty and care to the above named Credit Union.

I shall ensure that I learn of changes in statutes, regulations and policies of the Division of Financial Institutions and other applicable regulatory agencies affecting the Credit Union which affect my duties, responsibilities or obligations as a director and regulated person of the Credit Union.

I understand it is my responsibility to attend meetings of the Board of Directors and participate fully on all committees of the Board to which I am appointed.  I understand it is my responsibility to review the examination reports of the supervisory authorities at the next succeeding board meeting after the receipt of the reports.

Signed and notarized by each director.

The Current Status of an FCU Oath

The following was the response when I asked NCUA if FCU directors were required to have an oath:

The answer is no. There isn’t a required oath of office for federal credit union boards of directors in the Federal Credit Union Act or Federal Credit Union Bylaws.

Our legal team reviewed the current bylaws, the previous version (Timeframe of the mid to late 1990s, with amendments), and even earlier versions of the Bylaws from the 1930s to 1940s. None of these documents require an oath of office.

Also, an oath of office is not something we track in regulatory reporting like the Call Report or Profiles. As such, I don’t have any information on which federal credit unions, if any, administer an oath of office.

While we don’t have specific rules on this topic, the NCUA has received and considered the question of an oath of office before. The attached 1985 NCUA legal opinion says an oath of office is allowed because it would not conflict with the Federal Credit Union Act or Bylaws for a federal credit union to require directors to take an oath of office. 

Why An Oath is Desirable

Leadership of a credit union is a responsibility to  members, the community and those who in generations past created the cooperative as an enduring organization to pass forward its legacy of wealth and service.

Sometimes the concept of a “volunteer” has connotations of a position that can be taken or left at will.   Duty is voluntary.  Anyone can step up.  The responsibility is institutional and collective, not individual.   Except for a number of state charters, directors are not paid, which is sometimes interpreted as an absence of individual accountability.

Cooperative board leadership now involves oversight of trillions of dollars member-owned assets.  The directors’ roles are becoming more consequential for members and communities.

Moreover there are unique aspects in cooperative leadership:

  • Awareness and implementation of cooperative principles;
  • Recognition and respect for democratic member governance;
  • Adherence to bylaws and numerous regulations specific to credit unions;
  • The absence of any federal tax liability.

Moreover, the traditional director duties also still pertain including the standards of loyalty, care and the fiduciary obligation to act in good faith.

An Oath as Promise

An oath ideally in public at the annual meeting would be an act of honor and commitment.  It signifies both responsibility and accountability even as volunteers.

Credit unions are a part of a society that at times has differences about the priorities of their leaders.   Oaths remind all of our common obligations.

An oath is a promise.  In the NCUA’s example it comes with a sacred commitment-so help me God.  It would elevate the moral and communal character of cooperatives.

A person when taking an oath acknowledges the responsibility, not merely the public honor,  of their role.  The commitment is elevated beyond the routine director tasks of attendance and oversight.

All oaths remind us of who we are and what we want to be.

They show a solemn undertaking with commitments to the past and future, not just today’s agenda.  It is another way to show how the cooperative model stands apart from for-profits.