Category: Cooperative Design

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“Good People All”

Today’s carol and credit union story is captured in the opening line of the music below. First, the credit union’s account.

Every Touchpoint Matters

This is the story of a member contacting  the President of his Credit Union  after reading the monthly Newsletter.  And what happened next.  (used with permission)

From: Daniel H. <dh@xxx.com>
Sent: Wednesday, November 15, 2023 11:32 AM
To: Jeff Carpenter <jeffc@weokie.org>
Subject: Thank you

I received your news letters In Regards of thanksgiving and all the delightful things Weokie does for their members.  my wife and I are thankful for you and the company for providing good deeds to the community.  we ourselves have been struggling and I’m not going to lie. our account has been at struggles with overdrafting every month to make ends meet. but we work every day to try to improve ourselves to be better. one day our account will stay on the positive side and look forward to all the new adventures to come.

I loved this message because our member, who is going through some health and financial challenges, was simply thanking WEOKIE for being such a great community citizen.

Thanks to Diane we were able to learn more about his account.  We agreed that I should reach out to see if a meeting would be of interest.  I engaged in an email exchange with Daniel and coordinated a meeting with Daniel and his wife Jessica to meet with Patrick  and myself at South.

Setting up a Meeting

Patrick did some great work preparingfor the meeting. Together we probed to learn their story and understand how they got to this situation. Much was from their trying to help so many others in their family.

Patrick talked  through lots of options. I might have added some too, but in the end, Patrick was able to convince everyone (yes, including me) that taking “one step” not sixty, was the best path forward.

We extended a significant signature loan to get them out of the mountain of high-risk debt that was pushing them to the brink of financial collapse.  Patrick was empathetic, yet firm, in his conversations. He was able to gain agreement to eliminate Courtesy Pay, for WEOKIE to handle the pay-offs, and to set up automatic loan payments on the day their monthly income is credited to their WEOKIE account – all of these help mitigate our risk.

We met with them, took the loan application, approved it, and paid off their high-interest loans in 48 hours.  That led to the following email from Daniel:

From: Daniel H. <dh@xxx.com>
Sent: Tuesday, November 28, 2023 3:47 PM
To: Jeff Carpenter <jeffc@weokie.org>
Subject: thank you

Jeff

My wife and I would like to thank you for the help you and your team for the opportunity to help us succeed in our goals and for giving us Patrick to work with. he was an awesome gentleman. he worked hard to help us out and succeeded in getting what we needed done for a good approval. I’m looking forward to a good start in bettering ourself. we will keep in contact and keep you updated on our success. 

thanks again 

Dan and Jessica

Special thanks to Melissa, Diane, and Patrick for letting me participate in living our vision of making a difference, one person at a time.  And affirming that “every touchpoint matters” is a good strategy.

Today’s Music of the Season

The Wexford Carol  is a traditional religious Irish Christmas carol originating from the town Enniscorthy in County Wexford. The subject of the song is the nativity of Jesus Christ.  This recording is from Clare College, Cambridge in composer John Rutter’s arrangement, which begins with Good people all.

(https://www.youtube.com/watch?v=E4sC1mDPWao)

 

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A Surprising Listing on LinkedIn

Jason Lindstrom, CEO at the $535 million Evergreen Credit Union in Portland, Maine posted the following yesterday:

We’ve got a great Board of Directors and are looking for great people to join our Board. Please let me know if you are interested.

Are you a passionate Maine business owner, community leader, or senior manager looking to collaborate with professionals like you? We’re looking for hardworking Mainers to serve on Evergreen’s Board of Directors. 🌲

On our Board, you’ll be sharing your knowledge and collaborating with Evergreen’s leadership team to create change in our credit union for our members and positively impact your community.

Evergreen Credit Union is the 5th largest credit union in Maine with over $535 million in assets to date. We’re proud to serve over 28,000 members throughout 6 counties in southern Maine. We’re excited for Evergreen Credit Union to grow as we continue to bring award-winning member service and products that help our members every day.

Ready to start? To submit your application or inquire, email ceo@egcu.org by December 15.

An All Hands Effort

I called Jason to find out more about this unique approach recruiting new board volunteers, all unpaid.

The credit union has nine voting members and three non-voting directors. As a community charter, it is vital for the credit union to expand relations with  local organizations.   Jason is on three 501C3 volunteer boards and a Maine League director.

In prior years and again this year, the credit union had placed ads for board openings in local papers, but received no response.  Finding volunteers has become more difficult effort for all his associations.  A different approach was necessary to attract persons whose might feel they had little spare time to give.

The board decided to go all out in its search for three openings in 2024 by using social media. An ad was placed on Facebook.  Directors and staff were asked to repost the announcement on their social media accounts, hoping to expand the audience reached.

Building Deeper Community Ties

In most credit unions, board recruitment is a private affair.   Candidates are incumbents, self-nominated, or sought from directors’ existing relationships.  The process is characterized  by political considerations versus a public invitation for leadership talent.

Evergreen’s strategy is to be more and more “community connected.”   Membership has been growing at almost 7% per year.   In a largely rural state, people value their local relationships and organizations.  Informing the community in this messaging effort is another illustration of their commitment to Portland and surrounding towns.

Reinforcing their community ties is integral to Evergreen’s business model.  Tapping into the Maine spirit that values relationships is vital to attracting motivated talent. And as Ed Callahan would say, “When you run with good people, good things will happen.”

 

 

 

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Next City’s Take on Credit Unions

Often outsiders offer fresh insight about what makes credit unions special then found in the industry’s own internal coverage.

Next City is a digital journalism site that provides innovative examples of individuals and organizations confronting the challenges of urban life.   Its focus is on solutions that improve the conditions of those  most disadvantaged in large cities.

Credit unions are frequent go-to examples.  The following are two recent reports that highlight their special roles.

Juntos Avanzamos: “together we advance”

The first story is: This is what a Credit Union Designed for the Hispanic Community Looks Like.

The article describes the efforts of Granite Credit Union in Salt Lake County, Utah to receive the Juntos Avanzamos designation.This designation certifies that the credit union is committed to serving Hispanic and immigrant communities by being accessible to Spanish speakers, conducting research on the local Hispanic community, offering accessible and relevant affordable housing programs, and more.

The story reports that the Hispanic/Latino population continues to rise in pockets across the U.S.  including by 37.6% in Utah from 2010 to 2020.

The article presents the history and process for the Juntos Avanzamos designation which now spans over 27 states.   The credit union model is an ideal fit for many of these new Americans because: “When you give someone an opportunity and take a chance with them when all other doors are closed, it builds incredible loyalty, sometimes for life.”

“The Fabric that Makes America”

A November 21, 2023 article, The Outsized Impact of Small Credit Unions, interviews Sue Cuevas, the CEO of the $4.8 Nueva Esperanza Community Credit Union in Toledo, Ohio.  The second credit union leader is Sheilah Montgomery CEO of the $24 million Florida A&M University Federal Credit Union in Tallahassee, Florida.

The CEO’s comments are candid and illustrate the realities of small credit unions with a deep commitment to serving their communities.  Here are short excerpts from the Q&A portion of the story:

Our overhead is much lower than some of your billion-dollar financial institutions. We have one branch, an ATM and eight staff team members. But we have a full-service financial institution. Because of our lower overhead, we’re keeping our interest rates lower than our competitors. . .For instance, we did loans with no credit checks.

On the Latino community in Ohio:  The pandemic really hit hard. A lot of (our members) lost their jobs. They were in restaurants, housekeeping, places that shut down. . . Where I’m located people don’t even know what a 401K is. Right now, we don’t offer checking accounts. Most of our credit union members speak Spanish. They don’t know how to write in English. So, checking accounts to them are very foreign. . .

Currently we’re located in the basement of a health clinic. You have to come down some very big steps. It’s not an advantage to my members. The parking area is also very limited. So, our initiative is to get into a much larger location above ground, which allows our members the ability to come in safely and park safely.

FAMU: Since we are a full-service financial organization, we offer a plethora of products and services and most recently we’ve expanded our business loan services to help small businesses, who we like to call the fabric that makes up America. We processed approximately $2 million in small business loans over the last 18 months.

These stories show credit union relevance is not based on asset size, but the power of serving others.  Their example should make us all proud of a system that attracts leaders living these commitments for their communities.

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Belief and Understanding: A Lesson on Cooperatives

This past weekend I learned about leadership at a rehearsal for the Messiah.  No, this not a blog about harmony.

In Washington D.C. the National Presbyterian Church organizes an annual community choir to sing the Messiah’s Christmas story during the holiday.

The chorus has no auditions, entails five three-hour rehearsals and a full weekend of dress rehearsals and the public performance.   This ambitious, one time assembly is led by the Church’s  long time musical director  Michael Denham.

This year’s chorus will number about 120.  It includes people of all backgrounds, from different faith traditions and no church connection.  They join together for the joy of singing Handel’s oratorio in this season.

In addition to the disciplines of the music, stresses on notes, cut offs for phrases, tempi and dynamic level Denham will explain the importance of the text.   This past Saturday his description of what he was seeking musically has relevance to all of life.

The tenor soloist opens the Messiah with two arias.  The words are from Isiah:  Comfort Ye My People and Every Valley Shall be Exalted.  The chorus then enters to affirm the prophet’s message singing: And the Glory of the Lord.

The chorus’s words, from Isiah, assert the truth of the Isiah’s prophecy:   The glory of the Lord shall be revealed, and all flesh shall see it together.

Denham focused on the words we were singing.  They are affirming the message of the tenor’s arias.  The words say why this prophecy is true.     The chorus sings because, The mouth of the Lord hath spoken it.

Denham acknowledges the many spiritual and secular backgrounds of chorus members.  In singing these words his expectation was clear: “ I’m not asking you to believe the message, but I am asking you to understand what is being said.  The words have meaning.”

Belief and Understanding In Cooperative Leadership

The most important competency for a cooperative leader is their understanding of cooperative design and its advantages.   Without this “grasp” one will rely on habits learned in other professional roles:   banking, government service,  lobbying or perhaps non-profit experiences.

Ideally one hopes that understanding brings, in due course, belief in the purpose and roles enabled by cooperatives.

If a leader has only a superficial understanding based on generalities such as “people helping people” or “protecting the insurance fund,” then other management priorities, learned elsewhere, will dominate one’s goals:  power,  personal ambition, institutional growth.  Effectiveness is measured by criteria other than how members’ and community well-being is  advanced.

For example in NCUA’s public board meetings last week I listened for reference to cooperative differences when discussing the budget, the NCUSIF’s financials and the state of the industry.

I recall no comments referencing the advantages of cooperative differences and design.

The Cooperative Journey

Credit unions were meant to be apart from the  market driven, capitalist culture which dominates American society.  And many individual’s personal goals.

Coops are about a community or group’s collective efforts working together.

The results are intended to be paid forward for the benefit of future generations, not cashed out for  momentary personal profit.  This inherited legacy is often taken for granted.  New leaders forget how their institutional roots were planted.    They honor themselves for what they have accomplished rather than acknowledging the inheritance of others’ labors.

Understanding cooperative operations is about much more than the mechanics of a financial institution.  It takes time and experience to learn  the history and how an institution’s success is intimately intertwined with the relationships with the people who own it.

The primary goal of a credit union is not institutional achievement or market dominance but a place  where people can thrive and fulfill their dreams. That is not the ethos of capitalism where competition is about winning and losing, taking over one’s competitors, maximizing profit and outperforming the market.

Credit unions are about life lived in community.   The design facilitates self-help and awareness of shared purpose.

They are also institutions that facilitate gratitude and at special moments, celebrate the joys of life together.  Especially in this season.

This understanding is a journey.   It is not learned from books  or from courses and certainly not gained when one achieves a  leadership responsibility.   Familiarity with the credit union story is certainly helpful.  Skills with the mechanics of management are essential.

But belief in the power of cooperatives, like other beliefs, is an awareness that occurs over time.   It is sharing experiences with others and seeing their stewardship and in some cases, the impact of their life’s work.

When cooperative belief joins with understanding, the result can change the world.  For that capability we should be grateful. For in much of the world purpose is equated with individual success.  Whereas for cooperative credit unions meaning arises in community.  That is something for which we should all be thankful.

 

 

 

 

 

 

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Timeless Wisdom: Reverting Back and a State Contrast

After listening to yesterday’s NCUA board meeting, I recall this observation from a credit union leader who was a keen observer and co-op philosopher:

“The relationship between credit unions and the regulatory agency is one founded on mutual self-respect and the realization that both sides share equally in the responsibility for the survival and future development  of credit unions.

“It seemed as though we would never escape the attitude that the regulator knows best.  But a dramatic change has taken place in the last few years.  We now have a federal regulatory agency which openly concedes that credit union people know more about running credit unions than the agency does.

“The nature of the federal bureaucracy, being what it is, there will be a great amount of inertia to cause it to revert to a less creative and less cooperative approach to regulating credit unions.  I would not like to see this happen.”

Source: Frank Wielga, CEO Pennsylvania State Employees Credit Union, NCUA 1984 Annual Report, page 14.

An Alternative to NCUA

A state charter option is  an alternative to the ever increasing federal burden.

This is the description and public leadership of the Texas Credit Union Commission (CUD).  It supervises 160 state charters and $57 billion of assets:

The Credit Union Department (CUD) is the state agency that regulates and supervises credit unions chartered by the State of Texas. The Department is professionally accredited by the National Association of State Credit Union Supervisors (NASCUS) certifying that CUD maintains the highest standards and practices in state credit union supervision.

Our Mission is to safeguard the public interest, protect the interests of credit union members and promote public confidence in credit unions.

Credit Union Commission

The Commission is the policy making body for CUD. The Commission is a board of private citizens appointed by and responsible to the Governor of Texas. Members: Jim Minge, Chair Elizabeth L. “Liz” Bayless David Bleazard Karyn C. Brownlee Beckie Stockstill Cobb David F. Shurtz Kay Rankin-Swan.

Following is the Commission’s November 2023 guidance on consumer compliance.  It is a very different tone and approach from the debate of this topic at NCUA’s budget hearing yesterday.

Cultivating a Culture of Compliance and Service

As consumer-focused financial institutions, compliance with consumer protection laws sets minimum standards for member service. Developing a culture of compliance means paying attention to compliance and member service at all levels, from the front-line teller to the C-suites of your credit union.

At the Credit Union Department, one of our functions is to process member complaints related to their credit unions. Many of these complaints could have been avoided with a culture of compliance and member service.

Last year we processed 515 complaints, and of those, 156 (over 25%), involved disputes related to fraud or billing errors, by far our largest segment. A robust, member focused, dispute resolution process as required by Regulation E (debit cards, ACH) and Z (credit cards) would have prevented many of these complaints.

Another area of common member complaints surrounds vehicle loans. Many disputes involve the member being pressured by the car dealer to purchase a more expensive vehicle or add-ons such as warranties and insurance without adequate time to consider the costs and need for the products.

Credit Unions should be aware of implications of consumer protection holder rules, where loans originated by a dealer, subsequently assigned to credit unions, are subject to being offset by claims of the borrower against the dealer. See Holder in Due Course Rule | Federal Trade Commission (ftc.gov).

Understanding the requirements of consumer protection rules related to serving credit union members goes a long way, not only in preventing complaints, but limiting losses.

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A Reader Writes on Mergers and Group Think

I  have written several  posts critical of merger rhetoric and the lack of any shared or concrete member value.

A senior executive who  participated in one of these events sent his reaction, which he asked remain anonymous:

My current belief (call it a strong opinion, loosely held ala Jeff Bezos) is that credit unions need to progress while returning to basics. Progress with less traditional banking/teller line activity, prioritize financial wellness and remote banking experiences. Return to basics with more transparency, increased collaboration and innovation.

It seems to me that in the pursuit of progress, the trend is to become tight-lipped. The other undeniable trend is the belief that scale is absolutely necessary and that the only viable method to scale is to merge/acquire. I don’t agree with the trends, but I don’t have anyone around me who seems capable of an open debate on the matters. 

Our greatest threat today, IMO, is group think.  Well…At least I hope you don’t mind me keeping the conversation going with you.  Currently, I have to stay off the record here.  I want you to know that I’m reading…and learning.  

Group Think & Credit Union’s Future

When internal staff are uncomfortable with the direction of their credit union, this is a sign those closest to the action see  problems.  But it is hard to speak up against a leaders who do not encourage dialogue, let alone dissent.

CUToday publishes periodic updates on proposed mergers with the details sent NCUA. Most are well-capitalized, many are small, but focused. Below is one data point that especially stuck out from each merger summary:

Name                                                Charter Date

Freedom Community CU, Fargo, ND:    1954

Mt. Carmel Church FCU, Houston, TX:   1954

Virginia Trailways FCU, Charlottesville, VA: 1949

Airco FCU, Pasadena, CA:      1957

Mt. Lebanon FCU, Pittsburgh, PA:  1936

Parkside CU, Westland, MI:   1953

United Methodist of MS FCU, Booneville, MS 1961

Elevator FCU, Olive Branch, MS:  1967

G.P.M. FCU, San Antonio, TX:  1970

Our Sunday Visitor Employees FCU, Huntington, IN: 1968

Lubbock Telco FCU, Lubbock, TX:  1940

The list goes on.  These credit unions have navigated  multiple economic crisis, technology evolutions, deregulation and regulatory backlash.

Yet their leaders have given up, even with strong balance sheets and decades of member participation.

These are not financial failures.  They are failures of morale.  The greatest threat to the coop system is not external, but internal.  The belief that the legacy of multiple generations of human investment they inherited, no longer matters.

Like any behavior, the more the pattern of giving up occurs,  the more acceptable the option appears.   Ed Callahan described this challenge as the danger of self-fulfilling prophecies.  If you think your team can’t win, you will probably lose.

The concern above was from a career professional about his credit union and group think.  To address his worry, he is looking for leaders who believe in the advantages of cooperative design.  And who realize it every day to further the legacy their predecessors handed to them.

FDR observed,  “Humans are not prisoners of fate, but only prisoners of their own minds.”  What better time for leadership that believes in creating the future, rather than surrendering to  “tight-lipped group think.”

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The Onboarding Process of a Credit Union Leader

Credit Union Times has been publishing  multipart interviews with Tru Stage’s new CEO, Terrance Williams.  He has a long resume, but is from outside the credit union industry.

He is not the only recent external CEO arrival.  Another newcomer in a major credit union role is Beverly Anderson who became BECU’s new CEO in December 2022. Her professional resume is almost all in banking.

For “outsiders” onboarding is a critical  leadership process for someone new to the cooperative system.  Currently a major transition is underway at NCUA as  new board member Tanya Otsuka will shortly succeed Rodney Hood’s whose term expired in August.

Similar to these new CEO’s, she has no direct experience with credit unions.  Rather her background is mostly as an FDIC employee.  While not CEO, she will have a significant responsibility in overseeing and managing NCUA’s priorities.

What Makes an Effective Executive Onboarding?

Both new credit union leaders above have been quite open with the press discussing their backgrounds and how they are making the transition to their new responsibilities.

Here is an excerpt from Tru Stage’sTerrence Williams on his leadership approach:

“I often talk about the fact that leaders who push change for change’s sake are likely to meet with doom or demise. Because I guess change for change’s sake is not something that’s worthwhile. But change to ensure that you are evolving to maintain relevance, to ensure that you are continuing to adapt to the ever-changing needs of members is really what’s paramount for us …

We have a lot of work ahead of us collectively to figure out how we ensure we create a level of relevance with the next generation of future members, and ensuring that we are designing processes and solutions and tools that align with their needs and how they wish to interact.”

Similarly BECU’s Beverly Anderson gave an extended CU Times interview describing her transition to becoming a first time coop CEO:

“What’s exciting about this role is, one I’m a first-time CEO, two I’m in the credit union movement for the first time, and three it’s my first time at BECU and here in the Pacific Northwest.  . .

“The first six, seven months or so have really been about listening and learning. I did 30-plus deep dives with the organization, used that time to get to know the team and have them get to know me, and learned a lot about the business.

“The second thing I did was begin to understand the movement. It was very clear when I started using language like ‘profitability’ and ‘ROA,’ and people very quickly suggested I use some different language. It’s helped me to understand that the movement is in fact very, very different. Our return is around return to member, not necessarily return on assets, and that was a very big shift and pivot, but one that I quite relished.

“The third thing was getting to know my board – I have a new kind of boss and leader, a board. . .they are encouraging, engaging, experienced in their own right, and they have a lot of support and commitment for this organization.”

Important Steps in an NCUA Board Member’s Onboarding

Following are a number events that could mark NCUA board member Otsuka’s approach to her responsibilities. These cues will come from the statements and actions she takes in the initial days of her tenure. They include:

What is her understanding of the role of the credit union cooperative system?  How does its purpose as a non-profit, tax-exempt, member-owned system fit  with other financial options?

Who is on her team as advisors?  What is their knowledge and experience with credit unions?

How does she learn about the credit union constituencies she is serving?  Who does she see or visit on her first forays into the system?

What points of view does she bring to credit union issues?   Does she ask for data, seek options, and/or reference experiences from prior responsibilities?

What is her view of an NCUA board member’s role?   Is it a part-time or full-time job?  An in-the-office or show-up-for-Board meetings responsibility?  Is her focus on high level policy generalities or demonstrated interest in concrete operating outcomes and results?

Also, how transparent is she about the learning process that goes with any newly installed senior executive?  Does she give unscripted interviews?   Is she candid about her approach and areas for learning?  Is she available or kept in situ by the agency? 

The bottom line is whether Otsuka will become the Chairman’s doppelgänger in her board role? Or, as an outsider with a new generation’s vision, bring fresh hope and enthusiasm  to the credit union system?

When one reads the interviews of Terrance Williams of Tru Stage and Beverly Anderson at BECU there is a sense of confidence, commitment, and positive leadership energy.

That is what one would hope for in any NCUA board member, but especially at this juncture of credit union opportunity and challenges and NCUA’s peripherality.

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The Latest Cooperative Score:  3 Wins and 107 Losses

The credit union system continues its losing ways.   As of September 2023  there had been a total of three new charters and 107 failures that is, charters given up by boards.

The trend is the same pattern as 2022’s full results.  Last year there were four new charters and 146 cancellations.

While some characterize the closings as mergers (rarely liquidations) they are operating failures of organizations that have existed for generations.

When a previously independently led, local credit union becomes a branch or, in some cases completely closes its physical presence, and transfers members accounts to a new entity with whom members have no relationship, this is a business failure.

The dollar value of a credit union charter is $500,000 to $1 million or more.  That is the order of magnitude NCUA requires of organizers of new credit unions to raise.   Instead of repurposing long standing charters, most of whom from NCUA’s own characterization are financially solvent, this value and legacy is lost.

Is Anyone Accountable?

Why is this failing trend continuing?    Three years ago NCUA announced a new chartering approach consisting of three phases:  proof of concept, charter application, and final approval.  There is no evidence this has made the chartering steps any easier.

In February 2023 , Vice Chair Hauptmann in a speech to the GAC announced the implementation of a new “provisional charter,” an approval that would facilitate organizer’s raising NCUA’s required capital.  Eight months later, it is just an idea.

NCUA’s Prior History of Charter Support

New charter numbers began to show decline from an average of one per week in the 1980’s to only single digits (fewer than ten) for an entire year in 1998, again in 2008 and every year since 2011.   One might surmise that expanded fields of membership met some of the interest in new charters.  But a more likely reason is that there is no constituency promoting and supporting new charters.

In the past NCUA has advocated and promoted  chartering as an integral part of its supervisory responsibility.

In its May 1984 NCUA News, the agency reported on “Student CU Conference a Success,” a meeting of 70 students from 15 colleges with student credit unions or in the process of organization.

In an October 1984 article the News reported that “McDonalds has something new, and not fast food.  It is a credit union.  A New York City based franchise recently became the first in New York state to sponsor a credit union for its employees.”

These examples were part of NCUA’s efforts to increase credit union membership.   In its December 15, 1982 Letter to Credit Unions these were outlined as follows:

“In an effort to preserve and expand credit union membership, the Board has delegated to the Regional Directors the authority to approve and disapprove most new charters . . .

A major credit union expansion effort called CUR-84 was launched late in 1982.  It is a two-year national program involving the cooperative efforts of NCUA, state regulators, national trade associations, state leagues and others interested in strengthening the credit union system. . .  CUE has as its minimum goal 50 million credit union members by 1984, the 50th anniversary of the Federal Credit Union Act. This will be accomplished by chartering new credit unions where feasible. . .”  (page 5)

These efforts are profiled in the full 1982 NCUA Annual Report (pages 10-11).   It also highlighted the Regional Directors’ role.   “Region I grabbed the chartering and expansion ball and ran with it.  Thirty nine new Federal credit union charters were approved by the region during the year, 34 percent of all Federal credit union charters granted in 1982. 

This was followed by a list of significant new charters including New York University Employees FCU and Fidelity Employees FCU.  (page 15)

The NCUA’s 1983 Annual Report singled out new student charters as well as ones for employees of Dow Jones & Company and Channel, Inc the cosmetic company.  ((page 8).

Here are the total new charters granted for the years 1981 through 1985:   119, 114, 107, 135, and 55.

NCUA set the tone, promised support and organizers stepped forth.   When the board meetings were held on the road, it was a common practice to present a new charter in the region where the event took place as part of the agenda.

That regulatory inspired, system-wide effort is missing today.  The result is an industry with slowing growth more and more dependent on mergers, bank acquisitions and wholesale financial markets for expansion.  Without new entrants, any industry becomes mature, lacking entrepreneurial drive and increasingly dependent on external versus internal organic growth options.

Are we the Future?

In the December 1984 largest ever credit union conference of all regulators and credit unions in Las Vegas, Chairman Ed Callahan gave the closing charge.  He said:

We are the future.  But If credit unions are lumped together with banks and S&L’s, that will be a challenge.  The future depends on how you look at yourselves. Credit unions are different, and you must go public with that attitude. 

You must hammer away at the differences (with banks) with deeds as well as words.   For 75 years credit unions have been doing one thing.   To have an identity crisis now makes no sense at all.  Seventy-five years of success should tell you what the future is-it’s been people in the beginning, it’s people now and it will be people in the future.”

What does the first two decades of charter decline in this century portend for the future?  Where are the innovators who will promote and expand this unique system?

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The Lack of Public Confidence in America’s Institutions

Polling routinely tracks the decline in trust Americans have in their institutions, both public and private.  From a September 2023 Pew Research Report: “Fewer than two-in-ten Americans say they trust the government in Washington to do what is right “just about always” (1%) or “most of the time” (15%)

In the private sector, this distrust can accelerate business uncertainty, or lead to failure.  When economic challenges combine with  the ever present potential for market disruption, continued  success can seem more tenuous.

One area where these negative forces have all combined is in America’s newspaper industry.  One of the survivors is  Arkansas Democrat-Gazette, owned by the Walter Hussman family,

I recently heard him speak about how his paper has continued to succeed in this “dying industry.” Today the daily edition publishes the third or fourth largest amount of news stories after the national editions of the NY Times, Washington Post and Wall Street Journal.

The challenges and Response

In his remarks Hussman said the peak in newspaper ad revenue was $60 billion in 2006. Now it is less than $10 billion.  Many local papers and national chains such as Gannett have been purchased by hedge funds or outside investors.  Their business model is to provide “less and less” and ask customers to pay “more and more” to maximize their financial return, not the newspapers’ role for the public.

The separate Democrat newspaper bought out its Gannet-owned competitor the Gazette in 1991,  becoming the dominant  statewide publication.  Hussman’s view is that national news and sports are available everywhere.  What matters to his readers is local reporting.

To meet the disruption of both advertising and readership by social media, several years ago Hussman converted the six daily editions to an online format only, with just the Sunday paper still in distributed in print.  He provided free iPads to all subscribers. Teams of employees travelled  throughout the state to show customers how to use the online format.

That digital offering is continuously upgraded to include videos and other editorial material and links that would not be feasible in a print edition. Another factor in the conversion: “Today’s younger readers want the news to find them.”  The cost is $39 per month.  The savings in both newsprint and distribution costs has allowed the paper to remain profitable.

But what about the public’s general mistrust of all news media, both print and broadcast.   He cited that only 16% of the public trusts the media.   Everyone can choose the source today that most closely aligns with their views reinforcing existing “confirmation bias.”

Publishing Operating Core Values

Hussman described his firm’s response to this pervasive mistrust.  Every edition contains a brief Statement of Core Values, summarizing the organization’s approach to reporting.  Here are excerpts:

Credibility is the greatest asset of any news medium and impartiality is the greatest source of credibility.

. . . a news organization must not just cover the news, but uncover it.  It must follow the story wherever it leads regardless of any preconceived ideas. . .

The pursuit of truth is a noble goal of journalism.  But the truth is not always apparent or known immediately.   The journalist’s role . . .is to report as completely and impartially as possible all verifiable facts so that the reader can . . . determine what they believe to be the truth.

. . . as much as possible, there needs to be a sharp and clear distinction between news and opinion.

A newspaper has five constituencies. . . readers, then advertisers, then employees, then creditors, then shareholders.  As long as the newspaper keeps its constituencies in that order, especially its readers first, all constituencies will be well served.”

The Core Value Imperative

Hussman told the story about stating his core values when asked by a major television news network executive how to move his channel to a more neutral political public perception.

Most organizations, even credit unions, talk about and publish lists of value.  In many instances they affirm common sense principles such as integrity, openness, impartiality, etc.

There is a difference between virtue signaling efforts and core operating  principles as described by Hussman.

For the past week I have published brief excerpts from the Coach’s Playbook, a series of core operating statements by Ed Callahan.  Note that none of these was a list of personal values; rather they were the operating priorities he followed in multiple leadership roles with credit unions.

The difference between the two approaches is revealed when persons in authority fly from their responsibility to do “the right thing.”  Some will fall back on legal distinctions, some on tradition and others assert their positions of power or control of resources.

Banking on Values

Today is a celebration of Banking on Values, a global movement to change how finance can make change.

Their founding purpose:  “Banking is a powerful force.  From social equity to climate emergency the banking sector has a choirce; either ignore and exacerbate these issues or work together to overcome them.  . . banks must think bolder.”

Do credit unions today think bolder?   Are their values expressed in actual operating priorities?  How would they “square” their oft stated goals of growth and scale with the purpose to be a member-first design?

No one can question credit union financial success, the system’s stability and the avoidance of significant operational failures.   But is that what members and the country need at this time?

Can operating core values reignite credibility in purpose, or will we continue to float along with the rest of the financial sector?

Lip service to what credit unions should be will provide neither cooperative advantage nor market differentiation and success.  That is not the path of how we got to where we are today.

 

 

 

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Merger Exuberance:  Preparing for the Future or Signaling a “Mature” Industry

CUNA and NAFCU are now joined.  Coming right behind is the announcement of COOP and PSCU’s combination by yearend.

What are the implications of these large scale mergers? According to the participants, they are preparing for a more ambitious future.   However some  analysts  see mergers  as a sign of declining opportunities and creativity as an industry enters a  maturing, slower growth  phase.

One Observer’s Take: A Wake Up call

“First NAFCU merges with CUNA, now PSCU and COOP.  This should wake up the rogues amongst us – opportunity calls.

“Once sold as the titans of hope, they are now seen as one trick ponies riding old ideas and copied solutions.  No longer is their faith in ownerships’ will, unique competitive differences nurtured, and innovation cast from confidence  in their  community.  These players rode their vehicles into the ditch.

“There is no sincerity leveraging others, margins guaranteed without value shared, or room left for the creativity of leaders whose credit unions these firms were designed to serve.”

How Should Credit Union  Owners Evaluate the Latest Proposal?

In both mergers the details of the combinations are at best scarce.  Most of the justifications  are rhetorical: “ speak with one voice”;  “ we are stronger together than we are separately”;  “a transformative opportunity to bring broader opportunities and products.“  And, “the merger brings together teams with a similar mission/vison and comparable values and cultures. “

There is also future hope: “The combination offers credit unions increased scalability, access to best-of-breed technology, unparalleled services and differentiated value, fostering long- term success and sustainability for the credit union movement.”

This is the language of marketers and PR, not operations. It is a script one can find in almost every significant coop merger. There are no facts or data, except to clarify  who will be running the show:  CUNA in one case; and PSCU  in the second.

How are the credit union owners who built these organizations with loyal patronage, capital support and volunteer leadership resulting in financially independent organizations, to evaluate these future promises?

Some thoughts:

  • Ask for the latest financial statements and the 2-3 year trends. How will the combination affect the member-owners’ financial stakes?
  • What will the key financial indicators look like in the first year including operating expenses, revenue goals, and net income?
  • What gains and losses (write downs) will the two organizations incur from the merger that would otherwise not have occurred?
  • How will existing third party relationships be evaluated?
  • What are the projects and investments that will be post-merger priorities?

These operational questions are critical. The political decisions to combine are the easy steps; implementing a merger is difficult especially if there are no concrete goals, measures or key success factors identified up front.

Owners are asked to transfer the results of their cumulative years’ relationships into a new entity without any stated outcomes.

Concrete objectives should be part of the dialogue.   Organizational alignments and who will lead the new firm are important. But leadership will change. Some specific benchmarks and benefits should be an important part of the dialogue to come.

Why the PSCU-Coop Combination?

A former CEO of a credit union owned technology provider had the following assessment motivating this event.

This is a transaction born years ago in the mind of executives trusting in the destiny tied to the path of “scale” – this is the only route for aggregators and deal makers.

Neither firm had the heart of a manufacturer of technology. The primary asset they sold their clients was affiliation.  In their minds the concept of clients as the owners of unique solutions was not an advantage. Rather it was viewed as more of a disadvantage with CUs limited by the very model of cooperatives, non-profit roots, and their virtual ownership aspects.

They were and are simply re-marketers, sales firms leaning on the value propositions of other firms. They will merge and take smaller and smaller returns as the owners of design, manufacturing, and their true competitors take a piece of negotiated solutions. 

As aggregators, they never owned the right to price, the right to equity, or the will to create.

Both were valuable players in credit union history, but not creative forces or protectors of what it means to focus on the power of ownership underwritten and  guaranteed through cooperative design. 

There are new days and new architects ahead with models which rely on the uniqueness of cooperative themes reborn to new needs. These firms drank the wrong Kool-Aid.

The Opportunity for Credit Union Innovators

It is important that credit union leaders not assume merged organizations will power the future or be the primary source of improved solutions.

Instead they signal opportunity for new marketplace entrants.  Now is  a time for new value propositions, new energy around execution, and old ideas  presented differently and considered again.

Merged businesses do not naturally create a strengthened survivor. These large mergers create artificial Goliaths repositioning from intra-industry challenge.

The result is not marketplace gained organic success.  Rather the events point to business assumptions requiring substantive review.

In the end, over-confidence on scale may actually hinder innovation and system resilience.  Until new coop disrupters emerge.