An Homage:  Report on Credit Unions

An independent press is essential for democratic governance, whatever the scope or responsibility of an organization or political entity.

Report on Credit Unions was in its twenty-fifth year in 1982.  The editors and contributors to the monthly printed publication were a who’s who within credit unions.

The publication’s founder was Rudolph Modley who “was born in Austria and earned a Doctor of Law degree at the University of Vienna. He came to this country in 1930 and in 1937 published the first of several hooks, “How to Use Pictorial Statistics.” In 1940 he was the coauthor of a study of the American system, with Thomas R. Carskadon, entitled “U.S.A.: Measure of a Nation.”

As described in his New York Times obituary: “Mr. Modley was also interested in the credit‐union movement and in 1957 founded the monthly publication “Report on Credit Unions.”

The staff and contributors listed on the January 1982 masthead (vol. XXI no. 1) were Larry Blanchard, editor; Frank Wielga and Jo Ann Ewalt, assistant editors.  The contributors J. Deane Gannon (former Administrator, Bureau of Credit Unions), Mandy Hellie, League President,  Kenneth Marin (former CUNA Chair) and Harold Black, one of the first three members of the NCUA board.  All had senior positions in the movement.

The News In January 1982

The lead story was the departure of Larry Connell from the NCUA board to become president and ceo of Washington Mutual Savings Bank, a $2.3 billion thrift based in Seattle.  The story quotes Connell’s farewell comments, “I’ll be back” and Ed Callahan who said, “Larry had done great things with this agency during his tenure.  . . he will be sorely missed.”

The six-page newsletter announced the appointment of former NCUA Board member Harold Black as an associate editor.   In his first “commentary” he wrote why he opposed Senator Garn’s bill (S. 1721)  which would have combined the FDIC, FSLIC and NCUSIF into a single fund.  Many of his points are still relevant today as the current NCUA chair seeks to convert the NCUSIF to be more FDIC-like.

This first edition of 1982 included articles on the upcoming speakers for the CUNA and NAFCU governmental affairs conferences, updates on insurance for IRA accounts, NCUA’s “dramatic deregulation concept,”  CUNA’s capitalization study, the accounting practice of ICU’s two common trust investments, how credit union owned data processor USERS “outranked the competition,” and a full page of individual credit union updates, From the Grass Roots.

The Report’s Purpose

As stated in the Harold Black appointment, “the Report has adhered to a strict policy of independent coverage, focusing on operational, legal, economic and general news for credit union volunteers and professionals. Its editors, assistant and associate editors are all drawn from the credit union community.”

The editorial standard in the Report helped to spawn an era of industry focused newsletters included CUIS (Credit Union Information Service) weekly mailed updates from the trade associations and leagues and the occasional private newsletter.

The quality of writing influenced these other publications including the monthly Credit Union Magazine and later iterations such as Callahan’s Credit Union Report.

The Report stands out for its comprehensiveness, longevity and singular focus on the industry.   NCUA upgraded its own publications creating NCUA News as a monthly.

The NCUA Chair and senior staff would hold public press conferences after each board meeting to talk with reporters.  Topics were open ended.  For example in July 1982: how would the Agency respond to the closing of Penn Square Bank and the losses credit unions might have on CD’s over the $100,000 insurance coverage?

The Impact of Quality

The Report set the standard for relevant, in depth factual analysis and commentary for the credit union community.  Its writers knew their subject matter.  They had access to senior leadership when reporting on sensitive topics such as the accounting for ICU funds.

The Report is an excellent, high level chronology of key events and personalities on the credit union stage in each edition.  Its success was due to the quality of its staff. It is a tribute to Larry Blanchard who maintained this approach during his tenure.

Ultimately more colorful, more timely (weekly) and ad-supported entrants, Credit Union Times and Credit Union News, pushed the monthly subscription model off center stage.

But this example of dedicated focused journalism and independent reporting is still the standard even in today’s digital era.   The Report raised all credit union coverage to a higher level of excellence while becoming  the “go to” source for capturing the first draft of the movement’s history.

Alternatives to the Credit Union System

The traditional view of market competition is that it is a zero-sum game.  There are winners and losers.  Acquirers and the acquired.  A credit union gains member deposits, or they go somewhere else.

But endgames do not always happen with clear winners and losers going out of business.  Sometimes the losers just limp off the field in irrelevance.

Substitutes slowly absorb earlier organizational efforts with new ones.  In credit unions this evolution is already occurring.  Two updates from these alternatives were recently announced.

The Federal Home Loan Bank System

This week, the members of the Board of Directors and Executive teams from the Federal Home Loan Banks and the Office of Finance are in Washington DC for their annual conference.

For some time, they have been the primary source of liquidity for the credit union system.  Their self-description:

The FHLBanks are 11 regionally based, wholesale suppliers of lendable funds to financial institutions of all sizes and many types, including community banks, credit unions, commercial and savings banks, insurance companies, and community development financial institutions. The FHLBanks are cooperatively owned by member financial institutions in all 50 states and U.S. territories.

The Banks’ regulator the FHFA issued a report last year on their mission and is following up with a request for comments.  The primary issue is how well the Banks are fulfilling their mission of increasing affordable housing options in America.

At the conference, the Council announced the Banks anticipate “a record-breaking $1 billion in support for affordable housing and community development initiatives in 2024. This significant commitment reflects our unwavering dedication to our mission and promoting access to safe, affordable housing.”

The chart below shows the membership of the banks by state at December 31, 2023.  The system serves roughly 6,500 members nationwide with a regional, custom approach from FHLBanks in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, and Topeka.

Since the 2008/2009 financial crisis, the FHLB cooperatives have effectively replaced the lending functions the CLF and corporates were designed to provide the credit union system.  Corporates still serve critical payment and short-term liquidity roles. However, the FHLBs have taken over almost all term lending.  They do this using a cooperative design.

New Public Banking Legislation

The digital web site Next City has reported on multiple efforts to create publicly owned banks following the model of the North Dakota State Bank.  Here is their latest update:

At Next City, we’ve covered efforts to create city-owned banks in PhiladelphiaNew YorkLos AngelesSan Francisco and the East Bay. We’ve also covered efforts to create state-owned banks in CaliforniaMassachusetts and New Mexico. Sometimes, as in the case of New York or California, state legislation has been proposed (and passed in California) to authorize local governments to create their own banks — but none of those efforts have yet reached the point of obtaining a bank charter, accepting deposits and making loans as envisioned.

This month in New York, there’s a new iteration: state legislation that, if passed, would create the Bank of Rochester, a bank that would be controlled by the local governments of Rochester and the encompassing Monroe County. 

Technically, the bank would still need to apply successfully for a bank charter from the state’s Department of Financial Services, just like a private-sector bank, before it could accept deposits. Per the legislation, the bank would serve “the public purposes of achieving cost savings, strengthening local economies, supporting community economic development, and addressing infrastructure and housing needs for localities.”

It would not be a bank that accepts deposits directly from members of the public. As laid out in the bill, the Bank of Rochester would be modeled largely after the century-old state-owned Bank of North Dakota. Nearly 90% of the Bank of North Dakota’s deposits come from the state government, which is required by law to use the Bank of North Dakota as its primary bank.

Similarly, the Bank of Rochester would only be authorized to take deposits from government bodies, including local or state government as well as federal offices. It would be restricted from retail banking and raising deposits from individuals and businesses.  

Change is the Lifeblood of a Market Economy

These evolutions of financial service providers may seem to nibble only at the margins of the credit union system.   However, the relatively recent CDFI option (September 1994) is both a wholesale and consumer response to unmet local borrowing needs for communities throughout the country. Its creation was inspired by Cliff Rosenthal, a credit union and cooperative advocate.  Today some CDFI’s are established financial charters; others are stand-alone lending organizations.

The strategic implications for credit unions remains constant: to differentiate their business and service models by focusing on the members they seek to serve.  When credit unions  look and sound like all other options in a market, members and customers will just look for the best deal, not an owner relationship.

Credit unions have learned the art of tapping member and organizational funds to create large balance sheets.  That same skill and funding attracts fintech startups and encourages multiple efforts at public banking.

Raising funds is just the beginning-how those resources are used thereafter is what matters.  Is it to make a profit or to serve a community? When community needs are not being met, newcomers will find a way to create options for those underserved. That is what the FHLB and the public banking models are trying to do-serve where others have failed to do so.

Deciding on a Merger Partner Shouldn’t Be Like a Blind Date

Edited excerpts from this Second Quarter 2017 column in The NCUA Report provide a perspective on current merger discussions.

Scientific brainteaser of the month: “This man-made creation is defying the normal rules of science by both expanding and contracting at the same time.”   The final Jeopardy answer is: The U.S. credit union system.

In a streak now extending for decades, the number of credit unions in American continues to shrink while credit union membership and assets continue to expand.  . . no other issue is as perennial as the discussion of consolidation within the credit union system.  Many bemoan the erosion of the small credit union fraternity, while others cite the ever- increasing tide of financial services competition for making the erosion inevitable.

Protecting Member Interests

Whatever your perspective, climate change in the credit unions system is real. . . our focus is on ensuring member interests are protected, through the regulatory process and that the merged entlty meets safety and sourndess requirements.

The value proposition of mergers is, as it properly should be, left to the members of those institutions to weigh and then decide. . .

Really Acquisitions

But, while the term “merger” has a distinctively collaborative ring to it, make no mistake many mergers are really acquisitions.  For some credit unions, their growth strategy is defined by pursing acquisitions.  On the surface there is nothing inherently wrong with such an approach by either the acquirer or the acquired as long as sunlight permeates the pathway from boardroom to membership. 

Transparency: a Cornerstone Principle

Throughout my tenure, transparency in governance has been a cornerstone principle my colleagues and I have committed to build upon.  As we are constantly reminded, “every dollar is ultimately a credit union member dollar.”  . . .it is equally valid and important to remember that the same responsibility falls upon boards to be open and forthright with their member-owners when it comes to the merger process.

While many mergers germinate from the ability of the acquired credit union, generally a smaller institution, to adequately serve its members, some voluntary mergers have involved medium to very larger credit unions with relatively strong balance sheets.  In such instances, boards of director should be comprehensive in their disclosures to their members.

If an acquiring institution is tapping the net worth of an acquired credit union to pay for the acquirer’s’ cost of the merger, that reduction in net worth should be transparently, completely and fully disclosed to the members of the acquired institution before they vote on the proposed merger.

Certain disclosures of executive compensation and boards of directors’ benefits are already required under some circumstances, but the threshold for disclosure many not be adequate to provide true transparency to members.

Many board directors initiate the marriage dance long before the merger nuptials are finalized.  Pay and benefit enhancements for the acquired credit union’s leadership are sometimes finalized prior to triggering the current window of disclosures. Members also may not be given adequate opportunity to digest the information before the final merger vote. . .

Merger Windows and Frosted Glass

In the final analysis, it will, and should be, the members who will rightly make the ultimate decision, not the NCUA.  But, as members peer through the merger window, it is imperative their view not be obscured by frosted glass. 

By Rick Metsger, NCUA Board Member



Chairman Harper’s Medical Leave and Agency Leadership

In Monday’s public letter to the NCUA staff, Chairman Harper announced he was “stepping away from daily duties” for back surgery.   He expects to return to “my full duties in July.”

His only reference to how the Agency would be led was that “I know the NCUA team will not miss a beat” and “will continue executing the Agency’s mission.”

The extended withdrawal by a Chair from his daily duties for an open-ended period is unprecedented. The statement left unclear what, if any role, Harper will play while on leave.

The Critical Questions

The uncertainty about this unusual self-managed absence raises many questions about the Agency’s leadership.

The demands on any senior executive are tough.  Some organizations build in predetermined sabbaticals for top officials to recharge and reflect.  It Is critical that senior, public officials be proactive as Harper states in “addressing their physical and mental health needs.”

It is important however that the Agency has ongoing decision making and clear responsibility assigned for critical roles, such as:

Who will determine the board schedule and meeting agendas?

Who will represent the Agency in testimony before Congress? On the FSOC and other interagency roles?

How will programs, projects and priorities be overseen in the absence of the Chair?

What is the process for taking supervisory actions that require board approval? 

NCUA has had a two-person board several times in the past.  Chair McWaters and board member Metzger is the most recent example.  They made several momentous decisions including the merger of the TCCUSF with the NCUSIF.  This resulted in raising the NCUSIF’s NOL above 1.3% for the first time in its history to accommodate the new surplus funds.

The question is not about function, but how important internal decisions (personnel, spending, organizational alignment) and external responsibilities are being carried out.

An Opportunity for “Team” Members

For some time, the role of the NCUA board has been downplayed.  In February, the board for the first time since 2017 ignored past policy and practice to set an NOL above 1.30% without any supporting documentation or modeling.  This was a commitment that Chairman McWaters said future NCUA boards should follow after the 2017 merger of the TCCUSF when raising the NOL.

The 2024 March board meeting was cancelled.  The 30-minute April public meeting had only one item, a proposed rule, which Chair Harper attended virtually.

When the CEO is absent in any organization, there should be a continuing chain of command and authority.   This role initially falls to Vice Chair Hauptman and member Otsuka. May’s Board will be the first demonstration of their response and how they see their expanded responsibilities.

One approach would be to have more public reports on the many areas that fulfill the Agency’s core safety and soundness functions. They could request staff to present timely reports on the financial status of the NCUSIF and the Operating Fund (March data is still not available on the web).

There could be updates on the state of the examination program, the single most important Agency function monitoring credit union performance.  Will an annual exam be completed for all  FCU’s over $1.0 billion?  How do onsite results compare with quarterly filings?

There could be a discussion of the effect on culture and performance of the Agency’s policy requiring in-office attendance only two days per pay period.

In short, the two board members could take the lead in showing how they are “watching the store” and that staff continues to complete essential responsibilities in a timely manner.  Moreover, it would give both board members a platform to state their views and request input from credit unions on other issues.

A Vacuum of Power and Accountability

Harper’s  absence leaves a vacuum at NCUA.  The Chair is the primary spokesperson for the multiple constituencies to which NCUA is accountable.  The Senate banking committee approves all board members and, with the House, provides periodic oversight hearings.  The Administration nominates all NCUA board members and establishes policy priorities.

Most importantly over 100 million member-owners through their 4,600 credit union organizations depend on clear rules of the road and assurance the money they send to the agency is used wisely.  Credit union professionals are constantly reacting to market changes.  Is NCUA paying attention to their concerns about meeting member needs?

Harper’s communication to NCUA staff addressed none of these accountabilities.  A leadership vacuum may  tempt some to exercise long sought ambitions.   For others, it will be an excuse to do nothing, to just get by, while waiting for the boss to come back.

Others will see an opportunity “for the next man up.” That is the phrase used when a teammate is injured and unable to play; or in conflict when the assigned leaders go down.  This challenge happens for many in everyday life. When a spouse (breadwinner or homemaker) leaves or dies-the family must learn new responsibilities.

Harper’s statement left all options open for stepped up Agency leadership.  Who will take on new roles?   How do credit unions monitor and to whom do they communicate their concerns during this time of NCUA uncertainty?

The essence of cooperatives, is that we are all in this together.  How will this unique credit union capacity for cooperation show up in this new circumstance?

The Strategic Opportunity of a Shred Day

The post card came to us although we are not a members of the credit union.  It announced a “community shred day” at the main office parking lot last Saturday.

From time to time we receive these notices from realtors or sometimes a local government office.  But not a credit union.  It arrived as we were doing some spring house clearing and wanted to dispose of older financial records.  So we dropped a box off, and learned why this may be a simple solution to a perennial business problem.

The Last Mile

The term last mile summarizes the constant business challenge of closing a sale, usually from a distribution or supply chain point of view.  This last leg of the process is often least efficient, comprising up to 53% of the total cost to move goods.  It is the critical final step in retail for a customer to buy goods.

A similar challenge in service industries, such as credit unions, is how do I find my next new customer/member?

The short brief Ten Ways to Get New Customers is summarizes every method used by credit unions.  Todays most likely tactic is for  a strong social media presence with  a defined brand voice across platforms like Instagram, LinkedIn, Facebook and Twitter.

This makes perfect sense. Digital marketing is the preferred way to find digital members. No local presence needed. But why a shred day?  The effort seems so retro?

The Experience

So we pulled into the parking lot of the credit union’s head office.  The branch was closed and the parking area marked by tents with credit union personnel serving breakfast of donuts, coffee along with  credit union literature and tchotchke.  Staff took the boxes, checked for anything other than paper such as plastic binders and filled up big 40-50 gallon containers to wheel over to the shredding truck.

Even though we were late in the three hour period, there was a steady flow of people and boxes so much so, the coffee had ran out.  The following shows the setting.

Why This Makes Sense

How does a community shred day help find the next best customer? Several thoughts.

A person bringing records to be shredded suggests an individual or household conscious about proper management of financial accounts.

Driving to the location where there is a branch, introduces the non-member  to where one of the credit union’s offices is located.  The public made the journey on their own initiative. Local is an advantage almost every credit union can build on versus larger institutions.

The people dropping off records experienced instant hospitality and service.  No charges, no sales pitch. Staff offered  food, gave away branded desk pens and entered person’s names and email into a drawing for four $100 cash giveaways.

And that drawing is the hook.  Here was the message waiting for me when I returned home later on Saturday:

Hi there Chip,

Thanks for chatting with us at our Shred Day! We wanted to follow up and send over some additional information about our organization.

At Lafayette Federal, we offer nationwide membership eligibility with a mission to serve, support and empower you by understanding your financial needs, delivering products and services to achieve your financial goals and offering solutions to assure your financial well-being.

Below are a few offerings that we believe you may benefit from. Please feel free to contact us should you have any questions!

The email cited their 2.02% checking account and a 5.09% certificate for savers as well as other services.

I have no idea how many leads the credit union received.  But I did go to the website. It presents a special focus on members and the community.  I was told the credit union does this once a quarter at different branches as a “community” service.

For me it was the most intriguing introduction to a local credit union in the many years we have lived in Bethesda.  It made many traditional marketing emails from our existing credit unions seem like all the other marketing emails that fill an inbox every day.

This shred day service broke through this communication clutter and got my attention.  Maybe it is not so retro after all.  In its simplicity the effort showcased the traditional credit union advantages of service, local and community.  Hard to do in an email.








Work, Trade, or Finance?

From an unknown source:

An observer of modern social movements has said: “Some men wrest a living from Nature and it is called work. Some men wrest a living from those who wrest a living from Nature and it is called trade. Some men wrest a living from those who wrest a living from those who wrest a living from Nature, and it is called finance.”

And cooperatives?

The Need for a Level Playing Field

At December 31, 2023, there were 2,280 federal credit unions and 1,724 chartered by 45 different state authorities.

The broad operating authorities are similar.  However, there is one major difference in the transparency of the two systems.  This difference was noted in a NASCUS comment to NCUA on August 15, 2022 on bank conversions and mergers:

All FISCUs must complete annual Internal Revenue Service Form 990 filings. Part VII of those filings is public and requires FISCUs to disclose any compensation paid to directors and officers; the compensation paid to “key employees” (employees earning more than $150,000.00 in reportable compensation; and “highly paid” employees (the top 5 employees earning more than $100,000.00 in reportable compensation).

Transparency and Accountability are Inseparable

Without timely information member-owners cannot make reasonable decisions about the board’s role overseeing CEO and senior staff compensation.

Disclosure is required for all state charters as part of their special status as tax exempt organizations.  Quarterly 5300 call reports provide only general corporate trends and broad dollar totals of some compensation programs.

Transparency of leader’s pay is an essential aspect of the member-owners’ governance role in cooperative design, via the election of directors.  Full disclosure is standard operating practice in the public sector.

The value of reporting is not just the current level of compensation.  Tracking trends over several years can show how pay correlates with the credit union’s financial performance.  Unlike their competitors, there is no daily stock price passing judgement on management’s responsiveness to members or shareholders.

Moreover, the uniform reporting standard of the 990 is specific, by name and position.  It is more useful than generic salary surveys in which asset classifications or by position and other criteria provide only general ranges.

“A Leadership Requirement”

When individuals aspire to positions of senior leadership in the management of other person’s financial resources, their own disclosures demonstrate their responsibility for the trust members have in their credit union.

The time to make this change is now, voluntarily  showing proactive leadership, not after a law or regulation requires this level playing field.

Otherwise, the absence of comparable data may give an impression that senior leaders of federal credit unions are unwilling to be as accountable as their state counterparts.  Which will just beg the question, why?

Change before you have to is a maxim FCU CEO’s  should follow in this basic issue of transparency.  It  communicates basic respect for the member-owners’ role.

Frank Diekmann, CUToday Cooperator-in-Chief,  described the benefits of transparency in a different context this way:

“Not only would disclosure be the right and ethical thing to do, it would make for an effective response to critics. . . that claim credit unions are just “profit-seeking enterprises masquerading as tax-exempt non-profits.

Transparency is a leadership requirement.  It creates trust and confidence even when things go wrong.  Doing the right thing should not require a rule or reg.   It is a character trait. “



The Ultimate Co-op Strategy to Overcome All Challenges

Worried about new fintech competitors?  Liquidity tight and interest margins narrowing? Hard to find competent, affordable staff?  Growth too slow?  Delinquency rising? CFPB and NCUA about to cap fees-reducing ROA?

There is one surefire solution to all these ill winds every credit union faces.  It is touted and practiced by CEO’s of all  credit union sizes.  Consultants are marketing their multiple processes for implementing this universal solution.

The magic formula is Merger.   And incidentally, if you are not the surviving credit union, the payoff can be even greater than keeping your regular “day job.”

As this siren song travels across the cooperative waves, two skeptics have written critiques.  One humorous and one listing what member-owners should know when asked to vote on this event.  Here are their thoughts on this all encompassing panacea being touted by credit union saviors today.

An Elder Learning Fable

A  story-metaphor  by Ancin Cooley, Principal , Synergy Credit Union Consulting and former OCC examiner.

Grandson Hey, grandma. How are you doing?

Grandma: I’m good, baby. How are you doing?

Grandson: Grandma, I was wondering… I heard you did something with the house?

Grandma: Yeah, baby, I went ahead and let the next-door neighbor merge with my house. Now we are all together in one big house.

Grandson: When did you decide to make that decision?

Grandma: Oh, baby, we decided a couple of days ago.

Grandson: The house had $500,000 in equity, Grandma. You just gave that away?

Grandma: Yup, they didn’t give me any money.

Grandson: What!?!?

Grandma: I got better cable and better air conditioning.

Grandson: Services?!?! Grandmother, with your equity, you could’ve bought cable and air conditioning. You didn’t have to give it all away.

Grandma: I know, but this nice person came over and said we’d just be better together.

Grandma: I’m happy. I can watch Judge Judy as many times as I want now.

Grandson: Who presented you with this idea?

Grandma: It was our property manager. He said the cost of keeping the house maintained was going up.

Grandson: Let me see the contract…. Grandma, the manager got $50k of your equity when you merged. That’s why he brought up the idea.

Grandma: Baby, you are blocking the TV.

What Member-Owners Should Know before Voting in a Merger

CEO  Daryl Empen of Gas and Electric Credit Union (GECU)  in Rock Island, Illinois sent comments motived by multiple merger announcements in the state.

In addition to his CEO longevity, Daryl’s entire leadership team posts their pictures and direct phone numbers on the credit union’s home page under the heading: Meet Your Credit Union.  His thoughts.

I cannot recall a merger in any industry that has led to better member service.  That’s not to say that mergers can’t bring benefits.  But more often than not, it means that consumers lose a voice and a say in things. 

Credit Unions are one of the last 100% member-owned industries.  As a member-owner, you should have a voice in your credit union, and certainly be fully informed about all of the areas below when asked to vote in a merger transaction.

The Minimum Disclosures Member-Owners Should Receive

Credit union mergers have been happening for decades.  Some forced by regulators, some  voluntary. There are a multitude of legitimate reasons.  But as I celebrate 32 years in this industry, it is still sad to see the pace of mergers pick up every year. 

When we lose our small credit unions, we are losing the heart and soul of our movement and the multiple earned legacies that make credit unions special.  No matter the size, credit unions are still member-owned, not-for-profit financial institutions.  But as we grow larger, whether organically or through mergers, members have less of a voice than at most smaller institution.  I fear that we are becoming just another industry, instead of a movement.

Eleven Areas for Disclosure

If I was a member of a credit union being merged into a larger credit union, what questions should I be asking? Merger announcements tend to use generic statements like “economies of scale, synergies, shared philosophy of member service”.  These all may be true, but are  incredibly generic and tell you nothing about specific benefits. 

Based on my experience, as both the President of a credit union, and a member-owner, here are some of those areas I would ask about.

1.Additional services.  Some credit unions cannot afford today’s technology and electronic services.  So this is a legitimate issue.  What makes the surviving credit union’s  version of your products better?

2.Operating expense ratio.  If the larger CU has a higher expense to assets ratio, that’s not a sign of economies of scale.  If the argument is the larger you are, the more efficient you are, then your operating expenses should be lower.   This is not always the case – size doesn’t always equal efficiency. 

3.Personnel. Will employees from the merging credit union be offered employment with the surviving credit union?  What will their new positions and salary be after the merger is completed?

A list of all post-merger promotions with new position and salary should be provided.

Describe the details of any retirements or severance packages because of the merger.

 4.Average Salary Expense.  This is directly tied to average operating expense, as salaries and benefits are usually the largest component of our expenses.  What are the wages of the top management?  Are they reasonable?  All state-chartered credit unions file IRS Form 990 tax return which are public and contains the salaries of the CEO and highest paid employees.  This information is should be included in the merger information, whether state or federal charter.

5.Net Worth.  It  is common that a smaller credit union will have a higher net worth or capital. If  your net worth is significantly higher than the surviving credit union, will a bonus dividend occur before the merger?  If not, why? 

6.Cost of Funds/average dividend per member.  A larger credit union should be able to pay better rates on savings products, especially if they are touting “economies of scale.”   If the larger credit union’s rates are not better, what is the benefit to you as a member?

7.Average Loan Rates.  Again, the surviving credit union should be able to charge lower  rates on their loans with better economies of scale.  If their average loan rates are higher, ask why.   

8.Member Service.  To some members, personal service is not important To others, it is THE most important item.  Does the surviving credit union have a call center?  Use ITMs not personal tellers?  How easy is it to talk with a live person?

9.Costs of the merger.  There are costs involved with any merger – paying out of the remaining terms of vendor contracts can be huge.  Communications and advertising is another cost.    Are there any bonuses or incentives being paid?  How much will the merger cost?

10.Repesentation.  Will you be represented on the new Board of Directors.  Will your credit union have a seat ?

11.The Process.  Who reached out to start the merger discussion?  Did someone research other credit unions to make sure they were finding the best fit?  If they didn’t, why not 

We find it is often the larger credit union that makes an unsolicited proposal, or uses a third party to seek merger partners.  In my 30+ years at GECU, we have never approached another credit union about merging.  They have all approached us first. I always encouraged them to research other credit unions, as they have an obligation to their membership to find the best fit and best value. 


When asked to give up their long serving credit union charter with its multiple legacies of goodwill and accumulated collective wealth, members-owners should be provided specific details as to why they should approve ending their independence.   This is not happening today.  Transparency is critical for trust in a member-owned institution.

Why the CLF Has No Interest

For over 15 years, the public-private credit union designed liquidity lender, the CLF, has had no activity.  The last major loans were to the NCUSIF for $10 million to pass through to US Central and WesCorp as part of the stabilization efforts when they were conserved by NCUA in 2009.

Liquidity Options

In April 2024 an $800 million credit union reported to the board their return on its two primary liquidity lender relationships as follows:

The FHLB declared and paid a 9.0% quarterly dividend last month.  Our capital stock value there is $1,884,000.

Corporate One FCU declared and paid a 5.75% dividend on all Perpetual Contributed Capital last month.  Our PCC there is $1,283,000. 

In contrast, the CLF reported its first quarter dividend as 4.54% which was down from 4.62% from the prior quarter.  That return is approximately 1% below the overnight rate credit unions are earning on risk free investments.

The CLF’s First Quarter Financials

At March 31, 2024 the CLF’s $895 million balance sheet was composed of $859 million in member shares and deposits and $41 million of retained earnings.  There were no loans.

The CLF’s primary assets are investments in Treasury notes ($819 million) and cash ($95 million).  At yearend the portfolio was $9.0 million underwater.  Why would a liquidity facility  ever invest longer than one year, let alone the $45 million extended beyond five years?

Moreover, the CLF has investment authority similar to FCU’s.  Why is it limiting its portfolio to just Treasury securities-generally the lowest return option in the market?  Does NCUA lack the investment expertise from staff who routinely evaluate the soundness of credit union portfolios?

The below market quarterly dividend means every credit union member is subsidizing the CLF.   The dividend decline is even more puzzling when the CLF reports adding $869,000 to retained earnings which now total over $41.1 million.

The CLF has no risk and no loans so why shouldn’t all net income be paid to its shareholders?  In the same quarter of 2023, for example, the CLF added only $3,000 electing to send all net income to shareholders.

A Vestigial Organ

The numbers show that the CLF has played no role in a year which saw record credit union borrowings and liquidity pressures from rising rates and banking failures.  CLF investments report below market returns. The dividends paid are not competitive.  That fact alone shows how detached CLF and NCUA leaders are from managing a facility that would actually serve the members who loyally fund it.

Contrary to NCUA board members’ entreaties for new Congressional legislation, the lack of credit union support for the CLF is not a statutory shortcoming. It is a management one.

Over decades the CLF has evolved to become a regulatory vestigial organ serving no purpose. As shown above, credit unions have liquidity options which they also own and which provide real value.

Isn’t it time the CLF decided to do the same?  Or at a minimum pay a competitive dividend before shareholders decide there is no reason to continue “bankrolling” a moribund facility.

Standing on the Shoulders of Others

Recently a CEO reported on a new event for his credit union:

Earlier this month the Executive Leadership Team and the Chairman hosted the First Annual Credit Union  Alumni Breakfast with 17 retired employees and volunteers. Special thanks to key staff for their work in putting on this special event.

Today we stand on the shoulders of these employees who have come before us as they laid the solid financial, operational, and philosophical foundation upon which we are building today.

We asked each attendee to share their favorite credit union memory.  They  can be summarized simply – the PEOPLE. To a person they shared that it was the members and/or colleagues that made this the best place they have ever worked.

They shared story after story about the changes in members’ and employees’ lives, and in many cases, how these interactions changed their own lives. We know that for so many of these retirees this was not just a job, but part of who you are.  So we will continue to cultivate that community, even after you have retired. These Alumni are some of the best Ambassadors in our community.

Celebrations Create and Honor a Shared Past

Yesterday was May Day, an informal, country-wide celebratory event in England.  My daughter sent several pictures of how the Day begins with the ringing of the bells and singing by the boy’s choir from the tower of Magdalen College. Oxford.

The event commemorates not only the beginning of spring, but the common destiny we all share with nature.

Merry Makers on the way to the Tower:

Bells ringing and boy’s choir singing to bring in Spring-with 14,000 early risers.

A Visit by Louise Herring to NCUA

In Ed Callahan, Bucky Sebastian and my first year at NCUA, Sam Rizzo who was the CEO of ASI (then NDGC) made a special  effort to bring to D.C. the last living attendee from CUNA’s founding at Estes Park, Colorado in 1934.  Louise Herring spent her entire life promoting, leading and founding numerous credit unions and supporting firms (such as ASI).  She had to travel attached to an  oxygen breathing cylinder.

Her mind and commitment were as sharp as ever.  Field of membership for FCU’s was a hot button issue. Her belief was that all Americans should have credit union access.  In her memorable phrase, “Poverty is not a common bond.”

The incredible chartering and organizational efforts of her era and the passion for the movement were apparent to everyone.

Louise is just one example of the pioneers who devoted their lives to lay the foundation for credit unions today.  Her commitment was a memorable experience for everyone she saw.

Recognizing past credit union regulatory leaders was an integral aspect of Chairman Callahan’s role.  Just one example. He honored his predecessors at NCUA and in the HEW’s  Credit Union Bureau by asking them to come to D.C. to celebrate the 50th anniversary of the Federal Credit Union Act in 1984.

Earlier that year Ed presented the Agency’s highest honor, a gold medal, to recognize many whose tenures were only recorded in official reports. (see Dean Gannon’s medal award)

Current and prior federal credit union regulators, General Counsels, and Executive Directors reunite  at NCUA’s headquarters, 1776 “G” Street, Washington D. C. on the 50th anniversary of the Federal Credit union Act.

The Past Makes the Present Possible

It is always tempting to believe when one achieves a position of great responsibility, that the future begins with their arrival.  The past is gone.  Those are the achievements of others.  Now it is our turn to pivot with new beginnings.  After all who wants to just carry forward the success of others when every impulse is to put one’s own imprimatur on events?

However, without a knowledge of the past it is difficult to sustain a sense of common purpose or community with others.  Each leaders turn at the wheel becomes a unique episode.  The lessons of prior efforts are overlooked.  The successes are taken for granted, because they seem just to endure naturally.

But that is not how lives or even organizations are remembered.  When individuals are at their best, their work and example transform the moment.   There is a moral component that recognizes the worth of each person, and a commitment to common good, not merely individual or organizational momentary success.

Every society has its May Day celebrations.  They create a shared heritage that goes back generations in England.

Current leaders and CEO’s of organizations may not know or even be interested in their predecessor’s  success or viewpoints.  The past leadership is gone and I am now in charge.  Some CEO’s are uncomfortable even talking with their forebears.

Knowing the history of any organization is vital to continued relevance. That is why I believe this credit union’s inaugural Alumni breakfast matters.  Honoring leaders from different eras and circumstances, gives meaning and context to current events and decisions. How a leader remembers their predecessors is a good indicator of how one’s own tenure is likely to be recalled.