Category: Cooperative Design

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 Be Like Mike

Mike Dickersonby Jim Blaine

Mike Dickerson recently retired, after 41 years, as the CEO of Oxford Credit Union. Under Mike’s leadership, the Credit Union has grown year over year – every year for 40 years! During Mike’s tenure the Credit Union increased in assets ten-fold to over $20 million; but funny, no member ever asked Mike “how big” the CU was. Oxford Credit Union was not about size; it was far more valuable than that. Oxford CU focused on service.  Mike Dickerson was one of the finest leaders in our community. In case you didn’t know that, I wanted to let you know why.

Folks usually have an opinion about CEOs – mostly not that favorable. CEO-types often appear a bit too self-important, are not known for humility, and seem to have spent way too much time in front of a mirror. Mike Dickerson was not that kind of leader. He thought common sense was better than an executive coach; he never tried to buy a bank; and he didn’t need a corporate jet to prove he was a leader – because he was the real thing. Mike never took himself too seriously as a CEO, but he was deadly serious about his responsibility to serve the best interests of his members, his staff, and his community. As with all strong leaders, Mike was also called upon to lead in his church, in our electric co-op, and in business and civic organizations.  Mike Dickerson believed life was about serving others. He spent a lifetime doing just that. It was as simple as that.

As leader of the Oxford Credit Union, Mike Dickerson worked hard to help local folks succeed – staff and members alike. He felt that every position at the Credit Union was important; he pushed his staff to discover who they were; he expected everyone to lead. Mike knew that fine folks come from all backgrounds and in all shapes, sizes and colors. The package really didn’t matter; it was what was inside your heart that counted. People knew Mike cared about them. And best of all, he would listen to them! It was as simple as that.   

Small, community-focused credit unions are home grown financial cooperatives – owned by the members who use their services. Access to credit is important to most folks in a small town, because “making ends meet” can be a struggle, there is never enough money to go around, and rich uncles are few and far between. As opposed to other financial institutions, credit unions operate on a non-profit basis and try hard to find ways to leave money in local folks’ pockets. Oxford Credit Union did just that; it practiced what it preached. So did Mike Dickerson – “frugal” was Mike’s middle name. Mike Dickerson took good care of “his stuff” – who else waxes their lawnmower? – and took even better care of his members.  Great leaders always seem to “take it personally”. It was as simple as that.

Mike Dickerson has spent his entire life in Granville County, N.C. and knew his members well. They were his friends, his neighbors, his family. In fact, Mike Dickerson was kin to over a third of his members, over half of them if you counted “by marriage”  – and all of them if you counted their second marriages! That’s the way it is in a small town.  Mike well-understood that when applying for a loan some folks “don’t always look good on paper”, because life can be messy, people make mistakes, things sometimes get out of control. Mike knew how to say “No”, but always sought for a way to say, “Yes”. In lending, “They’ve always done right by us “, was better than a credit score and character was more important than collateral. Mike Dickerson always kept his promises and he expected you to keep yours. If you broke your promise, there were consequences. When funds were short, folks always paid “Mr. Mike”. It was as simple as that.

Mike Dickerson was committed to the folks in our community for over 40 years and worked hard to make our lives better. Mike Dickerson went about his work in a quiet, humble manner. He was faithful in his stewardship as a leader. Mike Dickerson charted a sound path for the Oxford Credit Union; he never lost his way.He probably thought we didn’t notice, – but we did.  Mike Dickerson trusted his members and we trusted him. It was as simple as that.

Credit unions: It should be as simple as that.

 

 

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Tongass FCU: Microsites and Relevance

A long-time financial consultant wrote me last week:

I will share what I know for a fact: market relevance trumps scale every day of the week. I will concede that part of maintaining market relevance requires continuous investment in your business and scale can help pay for that investment. But scale is not economy of scale. You can be big, inefficient, and fail spectacularly. You can be small, focused, and efficient and blunt competitors all day long.

I have multi-generational clients that are not massive in terms of scale, but they serve their communities better than anyone else. It’s a relationship business. People tend to forget that. Banking is not a transactional business, although people try to make it that way. If you are going to be in the transactional business, then you better have scale and be efficient.

An example of this observation is Tongass FCU ($131 million in assets) founded in 1963 by teachers unable to receive loans from banks because of their seasonal income. Today the credit union headquartered in Ketchikan establishes “microsites” partnering with local sponsors to bring financial services to Southeast Alaska’s coastal villages and towns.

Its motto is offering a credit union where no bank will go. The following are stories by the CEO, Helen Mickel carrying out this financial services mission.

Our First Microsite, then Branch at Metlakatla

Metlakatla is the only Native Indian Reserve in Alaska. It is located on Annette Island, a 12 minute float plane ride from Ketchikan.

Metlakatla was suffering from an economic downturn back in the early 2000’s which caused the only bank, Wells Fargo to shut their Metlakatla “store” in May of 2005. Wells Fargo Regional President, Richard Strutz, explained that, “With the economic decline in the area since 2000, it was difficult to maintain and staff a store.” Wells Fargo has a minimum asset requirement for their stores and the $4 million branch was well below that minimum.

Because Metlakatla is on an island, accessible only by boat or float plane, cash was received only once or twice a week. Following Well Fargo’s closure, the community employees struggled to cash payroll checks through their tribal government office typically running out of cash well before the last person was served. This was in a town that primarily used cash for their purchases. One enterprising resident tried to run an ATM machine, but had difficulties keeping cash in the machine which ran out within hours of being reloaded.

The transportation of cash to the community was a constant problem. The community struggled and asked various financial institutions to come in, but found no takers. Then some community leaders visited Tongass’ then CEO, Susan Fisher, to ask about the possibility of a branch in Metlakatla.

The Credit Union’s officers and staff met with Metlakatla residents in June of 2005. Susan explained the difference between banks and credit unions and described the importance of their involvement for a credit union to be viable in their community. We needed affordable space for the credit union and residents willing to become members who would borrow and save at the credit union.

The credit union began offering services once a week at the Metlakatla Indian Community council chambers in the summer of 2005. Staff members flew to the island, opened accounts and transacted business with new members.

The residents gave us a warm welcome. One member waited for over an hour so he could show us his artwork and his small gift store at the artist’s village. Another member took staff to his house so we could take pictures for a home equity loan. We met his wife who was baking pies that day. She sold them once or twice a week as a small in-home business. Their daughter ran a take-out pizza restaurant out of their converted lower level.

Another member gave a tour showing us Purple Mountain – which brought new meaning to “purple mountain’s majesty, above the fruited plain” from “America the Beautiful.” We saw Yellow Hill – which would look more at home in the Arizona desert.

I fell in love with Metlakatla that day. It reminded me a little of Ketchikan when I was a kid and working at Steamboat Bay on southeast Alaska’s west coast. I felt welcomed and honored.

A New Office

Within months we opened a small office in the old Wells Fargo building doing all our transactions without the aid of computers. A staff of three part-time employees worked just two hours a day during the week. The ATM at the office was re-fitted and fired up right away. Two more ATMs were purchased over time and placed in the mini-mart and bingo hall. In the fall of 2006 computers were installed in the tiny office and our staff began doing real time posting.

In 2010 TFCU was approved for a secondary capital loan that allowed us to invest in a new building in Metlakatla. The new branch was completed in 2012.

Early in our outreach to Metlakatla we established a local advisory board. This board helped TFCU work toward providing services in their unique community. Listening to the community members has been a foundation for our progress on Annette Island.

A sign was requested by the local advisory board for the branch’s exterior. They wanted something that would reflect their culture and their “house of money” which is the Smalgyax translation for bank. In 2017 TFCU was able to connect that request with reality in the form of David R. Boxley’s “Spirit of the Tongass” logo, shown below in Smalgyax .

As of 8/31/21 Metlakatla Office’s numbers:
Members: 1,272
Shares:       $8,037,007
Loans:         $9,574,664

THORNE BAY – THE BLUEPRINT

In 2006, we began offering financial services in Thorne Bay.

Our first space was located inside a sporting goods store that was in the lower level of the store owner’s home. The cash was kept in a gun safe and transactions were noted on paper.

Since that time, we have created a more sustainable model, hiring employees, using computers and eventually finding a home in the City of Thorne Bay building.

Thorne Bay became the blueprint for future sites.

NEW COMMUNITY MICROSITES

In September 2019 TFCU opened our Hydaburg site in their local school with an offer to use an office in the common area. Then in December of 2019 we opened in Kake, sponsored by the Kake Tribal Corporation and located in their office building.

Our most recent community microsite is in Hoonah, opened during the pandemic in June 2020! Our TFCU promise and Hoonah’s commitment made it happen. Before, these communities were “banking deserts” with no available financial services.

We brought financial services to Hoonah in partnership with the Hoonah Indian Association – serving the community from their beautiful canoe shed.

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What Can $1,000 Buy in Credit Union Intelligence?

On September 2, 2021, I received an invoice for 40 hours of work at $25 per, for a total of $1,000.

The service included consultation, designing, programing, testing and updating an Excel spreadsheet that allows any user to project the NCUSIF’s year-end equity using the latest data and forecasts.

It was not a simple task.  There are four variables each using different math concepts:

  1. The % rate of insured share growth.
  2. Operating expenses in $ charged via the OTR.
  3. Anticipated loss in basis points of year end insured shares.
  4. Yield on NCUSIF investments expressed as an APR.

With beginning numbers from the NCUSIF 2020 audit, these four variables must be programmed in a dynamic way so that the outcomes in dollars and basis points versus a year-end NOL target (1.3%) can be instantly updated.

Later numbers can be inserted as the year goes forward.  This is the only management model needed for the NCUSIF. The fund’s basic 1% underwriting design, its unique loss reserve accounting practice, and the almost 40 years of experience have validated its long-term resilience no matter the event or economic circumstances.

Completed in 40 Hours

The student who did this work is a college senior majoring in “leadership.”  I explained the goal, and the input parameters.   We talked by Zoom, sharing our screens  using Google Docs, and working together to test the functioning.

Here is a link to the finished spreadsheet.  It uses a year-end NOL “target” of 1.3%, share growth of 10%, and the latest data on operating expense and loss experience: https://docs.google.com/spreadsheets/d/1eAZN2CjyNkgu9bfuUXIF1xmFPBwLvAio/edit#gid=2118513014

The spreadsheet can be copied for use by anyone.  The user can fill in more recent data or other assumptions believed to be more accurate.   With the current input, the year-end equity NOL outcome would be 1.2876 or just shy of the 1.3% goal.

Is This Modeling Tool Sufficient?

The spreadsheet includes all the major variables.   The NCUSIF sometimes has accounting entries that are not related to current events creating deus ex machina  financial interventions as in a theatrical performance.

One example is recovery from prior year’s AME loss estimates which turned out to be too high.  For the past 7 years these have totaled $313 million added back to NCUSIF equity.  A second is the expense for additions to the loss allowance reserve, which often have no relation to actual experience.

Even with these minor exceptions, the tool used in conjunction with NCUSIF’s historical performance, is about as close to perfect as one could hope.  Take a look, give it a spin.

The Student  Programmer

The designer of this spreadsheet is a college liberal arts senior who also works full time for NVIDIA to help market their new Omniverse platform.

At the moment, NCUA has spent close to $40 million and over five years trying to install the MERIT data management program.   I wonder how much a bunch of smart, college kids might accomplish outside the beltway contracting environment at a fraction of this sunk expense.

The invoice ended with these words: Thanks for the opportunity to serve you (the student’s name) and the programmer’s tagline:   When you can’t, she can. 

Now that’s the coop spirit.

 

 

 

 

 

 

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A Credit Union Team’s Office Reunion

Michael F. Abernathy, Jr. became CEO of Buckeye State Credit union in 2018 following several years of losses and decline.  The credit turned a profit in 2017 and has not had a losing month since. Before COVID hit, capital peaked above 11%.  Even after the pandemic shutdown, capital remained at 10% and is building every month.

His report below is an example of a CEO’s leadership efforts after months of shut down and remote administration.  His account follows.

The First In-Person All-Staff Meeting Since Shutdown

“We felt it was important for everyone to get back together in person, but with the blessing of the staff. The previous year, we held a hybrid model meeting where branches and back office met at their individual locations while members of senior leadership were divided up and led the meeting from different locations. The meeting last year was pre-recorded, but each senior leader had the ability to bring a “live” perspective from where he or she was located.

For last year, the response was good for the event, but there was a craving to get back together. During the 2021 planning process, we anonymously polled the entire  staff to determine if the team was ready to come back in-person, or preferred another hybrid model. The polling was unanimous…they wanted to come back together for an in-person event.

It was important because we have several new employees who had never attended an in-person  with the Credit Union. We wanted to deliver an experience that felt big and bold. We wanted our team to feel like they were part of something important. Our 70 attendees were able to interact and learn from incredible guest speakers:

    1. John-Mark Young: Whitaker Myers Wealth Management.  He talked about the “Never Again” moments in people’s lives when a person makes the decision to start the journey toward financial freedom by creating a plan to save and grow their money
    2. Jamie Strayer: Credit Union Strategic Planning. She talked about how our CDFI grant affected not only Buckeye State Credit Union, but also changed lives (thru credit unions) across the country by providing resources to create innovative programs that improve low/moderate income communities.
    3. Carol Middaugh: Frost Financial Services.    She talked about how Buckeye State has saved its members over $265,000 over the last four years through gap claims. She also spoke to the hundreds of thousands we have saved members in extended warranty claims for mechanical breakdowns that were covered. Gap and warranties often have bad reputation, but we are proof that these services have consistently saved our members money and protected their credit scores.
    4. David Kettlehake: American Share Insurance. David made insurance talk fun. He talked about ASI’s history and how they stack up against NCUA and FDIC. Because ASI is owned by its member credit unions, the credit unions have a voice and a seat at the table. ASI knows what the day to day activity of a credit union is like, where federal insurance funds overlap as both regulator and insurer. This bureaucratic perspective removes them from the normal operations of a credit union. He demonstrated how ASI’s coverage stacks up against the federal insurance and how ASI actually provides broader coverage than NCUA.
  1. I wrapped up the meeting with a town hall format where I shared stories from my life and career that shape me into the leader I am today helping to guide the credit union.

The CEO’s Message

The message I wanted to relay is that our credit union is different from many others out there. We are developing products that meet the needs of everyone in the community. While banks focus on people with wealth and strong credit scores and the predatory lenders focus on the poor and weaker credit, we are creating an atmosphere where everyone is welcome. We will lend and do business with all income and credit levels. While the banks and predators are content to run down the sidelines of the football field, we seek to utilize the entire playing field and work with everyone.

With that, the messaging to our members and the community at large is that we want to empower them regardless of income or credit level. We have already rolled out our First Time Auto Buyer Loan (no co-signer needed), Youth Empowerment Account (designed for children starting at 8 years old) and our Empowerment Account (Second Chance Checking Alternative).  Moreover, we intend to roll out the following by Mid-October (Around International Credit Union Day):

    1. Credit Builder Loan- Build or Rebuild credit
    2. Advance Line- Payday loan alternative…lower rate, lower payment, longer repayment cycle
    3. Empowerment Loan- Consolidate your debt and take back control of your finances
    4. Furnish or Fix Loan- Own or Rent a Home? Does not matter, this loan will provide funding for smaller needs and projects around the home
    5. Anything Loan- Self Described, use it as you want!
    6. Youth Empowerment Card- First credit card with no co-signer needed
    7. Empowerment Card- A secured card used to build or rebuild credit

The Partnership with ASI

ASI spoke at the meeting so everyone could learn first-hand about their relationship with credit unions.

ASI covers $250,000 per account, so the member can have more coverage than provided by the NCUSIF.  The firm is cooperatively owned and governed by its member credit unions.  It understands what credit unions are doing right at ground level.  They are not government acting in the dual role of insurer and regulator.

Reversing losses of $3MM going back years was due to the approach of ASI.  The insurer worked with us to correct adverse trends by giving latitude not harsh restrictions or deadlines.

ASI does monitor capital ratios and financial performance. But because they understand what is happening at the local level, this gives them a close-in perspective to be patient and an ability to work together with struggling credit unions.”

 

 

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Are Credit Unions Being Treated Like Bananas?

What does the fate of bananas have to do with credit unions?

In 2016 BBC news reported on the potential death of the world’s favorite fruit:

For decades the most-exported and therefore most important banana in the world was the Gros Michel, but in the 1950s it was practically wiped out by the fungus known as Panama disease or banana wilt.

Banana growers turned to another breed that was immune to the fungus – the Cavendish, a smaller and by all accounts less tasty fruit but one capable of surviving global travel and, most importantly, able to grow in infected soils.

Do we need to worry about banana blight?

The story was updated in 2019 when the Cavendish itself became subject to blight:

While there are more than 1,000 varieties of bananas, which come in different colours, shapes and sizes, just under half of global production is the Cavendish type. While the fungus is not harmful to humans, it has the potential to eventually wipe out Cavendish bananas, according to experts.

Millions of people around the world rely on bananas and plantains as a staple food and as a cash crop.”The potential for devastation if it does reach them is almost total.”

“The world would carry on if we lost bananas but it would be devastating for those who rely on it economically and very sad for those of us who enjoy eating them.”

The Fungus Problem

The disease is “a serious threat to banana production” because once it is established, it can’t be eradicated, the UN says. And fusarium fungus can remain in the soil for 30 years.

It has been spreading for decades through Asia, Australia and Africa. It has now been detected in Latin America, which supplies the bulk of the world’s bananas grown for export. No other types of banana are yet ready for cultivation on a commercial scale.

If one plant is susceptible to a disease, all of its offspring will also be susceptible.

Monocultural crop

The Cavendish was brought in as a monoculture crop after “banana wilt” all but wiped out the world’s previous favourite dessert banana, the Gros Michel, in the 1950s.

According to Prof Kema, the main problem stems from the over reliance on Cavendish varieties for export, which he describes as a “monoculture”.

“We have to diversify banana production,” he said. If there is only one type of banana plant being grown, resistance to infection is lower.

There are trade-offs between the costs of containing it and the profits from growing bananas, he said.

Small producers may not be able to afford the mitigation measures, he added.

People in the UK eat 10 kilos of bananas per year, on average, or about 100 bananas.

So the market is there, but will Cavendish bananas be in the future?

The Credit Union Lesson

The critical issues in the potential extinction of this popular banana product include:

  • The need to diversify the varieties of bananas grown;
  • The tradeoffs between costs and benefits when fighting the fungus;
  • The disadvantage of smaller producers when using mitigation efforts;
  • The monocultural approach to new varieties;
  • The time needed to cultivate new strains;
  • The consumer need remains, but will there be an option?

In just 120 days NCUA’s oft-deferred RBC rule takes effect, unless the board acts.

The agency’s Risk Based Capital rule has every issue associated with the banana example. A single risk assessment applies to all firms; the lack of cost- benefit analysis; new approaches are discouraged; and credit union are encouraged to follow a “monocultural approach” to business practice.  Buy a bank here, merge a credit union there, and embrace the isomorphic actions of one’s peers to hide in the crowd.

If you question the banana parallel, the Financial Times printed the following assessment about how the US banking problems had been “resolved” during the Great Recession:

Will credit unions following NCUA’s RBC rule become another example of a banana plan?  Or will common sense prevail before the January 1, 2022 deadline?

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Words for the Beginning of School

I received a copy of an email sent to the parents of their son just entering college.  He hopes to compete in rowing at a high level.  The “coach” sent all team members’ parents  a message about his philosophy.

The college experience is more than sports and academics.  It is preparation for life. As implied in the  comment below, there will be ups and downs; mistakes and consequences.

Credit unions often offer financial “coaching.”  How is this interaction presented?   Conditionally-do this and we will give you a loan? Programmatically-follow these rules and you will be financially better off?

Or, we’re in this together.  We both want to succeed at a high level.  And when we don’t achieve what we aspire to, let’s pull ourselves up by our bootstraps and try again.

Academics and sports.  Motivations for life, not just college. Here’s the message.

Coach and Life Philosophy:  Though it is not explicitly written in a coach’s job description, we’ve been tasked to make fast boats and to develop the future gutsy citizens of our world. To this end, the coaches will challenge your sons and daughters to grow and evolve as young people at a top educational institution. We will pull/push them towards success in everything they do – motivating and inspiring them to accomplish well beyond their own scripted potential.  We do this both on and off the water and we are committed to providing the tools to succeed in all aspects of this unique student-athlete experience.  And yes, even top student-athletes with character can and will make poor choices every now and again with respects to academics and behavior. I can assure you, we will be there for them and they, in turn, are expected to pull up their boots straps, make changes and embrace any consequences.

If you are curious which college sent this, it is the first land-grant college in New York State.

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Why Latino Credit Union Matters Today

In2003, just three years after being chartered, Latino Credit Union won the Herb Wegner award for outstanding organization.

The credit union today is one of the most successful coop startups ever.  But the communities it serves and its ongoing financial performance are not its most important lesson.

Latino’s Example as a Coop

When banks are organized, it is the wealthy who put up the capital to secure the charter.   This has always been the practice and always will be.

At its founding the employees of Latino Credit Union spoke five languages and came from 16 countries. This paradigm of recent immigrants and low-income workers forming their own financial coop is a stark contrast to the for-profit banking model.

Credit unions demonstrate how individuals who are the most vulnerable and threatened in society can join together for opportunity.   Hope and trust replace fear and exploitation.

Credit unions are a different way, a unique self-help option in a capitalist system dominated by large financial firms and private wealth.

Presence-More than a Place, a Home

Latino and other credit unions offer more than branches, virtual delivery and personal service.

In America today, there are those who profit from individuals who have the least or know the least.

The coop model is about presence, a place to turn when a person is in need.  A financial home where people know their interests are paramount, like the family home.

It is about more than a place.  The credit union replaces uncertainty with freedom from fear, the fear of being vulnerable or afraid.

When the credit union option is at its finest, people can begin to realize who they want to be.  They have a rusted partner as they strive to live out their hopes and dreams.

Latino Credit Union shows why coops matter, a path for those without advantages but willing to work together for everyone’s sake.

 

 

 

 

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A Much Needed Message for today—From 2003

John Herrera’s Wegner award acceptance speech as Chair of the Latino Community Credit Union is as moving and thoughtful today as it was that evening.

In 2003 Latino Community was only $11 million in assets, relying on credit union deposits and just ramping up its loan operations.   But its initial success and impact were already noteworthy.

Herrera’s speech touches a number of important themes:

  • The “family” of supporters-over 20 on stage with him;
  • The Movement has developed an “accent”-an accent on people and community;
  • His staff: they speak five languages, are from 16 countries and routinely work beyond closing hours until everyone is served.

But his two most vital messages, more relevant than ever, start at:

5:00- “Our story is your story”- a shared vision for all persons to have access to affordable financial services;

8:45- “Immigration and the treatment of immigrants”- There are “no illegal human beings.” Immigrants are a critical aspect of America’s democratic enterprise.  The first credit union was created by and for immigrants, who couldn’t speak English.

Here is the full speech, just over 10 minutes with the family of supporters on stage beside him.

https://youtu.be/T9UfOhtljws

Questions for Today

When was the last time you heard a credit union leader speak this movingly about their credit union’s addressing critical economic issues for its members?

When have you witnessed a more concrete example of the movement gathered around a common vision?

Which credit union leader has spoken recently or more eloquently about the role of the immigrant community for America?

Can you identify another time such as this evening, when you were proud to be a part of the credit union movement?

Hopefully this speech reminds us of who credit unions can be at their best;  and whether we are building on the legacy we have been given.

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The Latino Community Credit Union-A Timeless Example of Cooperative Action

The 2003 Herb Wegner award for outstanding organization is perhaps even more significant today than when granted almost two decades ago.

Here is co-MC Annaloro’s description of the special nature of this award which had been given only 14 times before.

https://youtu.be/nqJORMMiFto

In 2003, Latino credit union was three years old, held $11 million in assets and had just 8,000 members.  Even then the credit unions was know for “punching far beyond its weight class.”

As Chair Chuck Purvis stated in his opening remarks, it is an example of the movement coming together to “effectively serve the needs” of the Hispanic market.  And those needs were clear and unmistakable as documented by the introductory 10 minute video from that evening. Why a credit union for the Hispanic community:

https://youtu.be/Hbjgz81jU5s

Latino Credit Union Today

This is a powerful example of credit union’s ability to respond to some of the most vulnerable persons in our society.  Few could foresee what the long-term results of this initial organizing effort would be.

Today Latino Community Credit Union has $663 million in assets and continues it focus on lending with a loan-to-share ratio of over 100%.  It has a below peer operating expense ratio even though it manages 13 branches with 157 employees serving in excess of 101,000 members.

Every aspect of its performance is exceptional with recent annual growth in shares (24%)  and loans (28%) at the very top of the industry.  It reported net worth of 11.2% at June 30 even with this high level of balance sheet growth.

Latino’s Meaning for Today

When passion and commitment meet human need, the opportunity for success is great.  This is the circumstances in which credit unions were begun in 1909.  Inequalities and vulnerable populations have not disappeared from American society.   The continued growth of payday lenders and check cashiers is an ongoing example of persons living paycheck to paycheck

Latino also shows the power  of new startups.  Some today disparage the efforts to form new credit unions.  They point out their small size forgetting that every credit union that exists today started small. Some point out the capacity of existing credit unions to serve more-and yet many parts of the their current FOM’s remained unserved or underserved.

Succeeding from scratch is not an easy thing to do.  Latino maximized its chances of success by getting inspiration from those who had already achieved what they want to accomplish.

We will learn in tomorrow’s acceptance speech, how these people became mentors-”family”-helping along the way.  Mentors increase the chance of success because they will have already confronted many of the questions that determine whether or not a start up will succeed.

We will see these people stand on stage with the Chair of Latino Community as he reminds us of a message-especially relevant today-why America needs more credit unions.

 

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The Community Investment Fund: A $1 billion Challenge and a Lesson for Today

The 2003 Herb Wegner award dinner was both celebration and challenge. While almost two decades ago, there are important lessons from that evening for today’s cooperative industry.

In his opening remarks, Foundation Chair Chuck Purvis described the mission of the Community Investment Fund (CIF) which was designed to be a stable revenue source for the National Credit Union Foundation (NCUF.)

In his welcome message, Purvis mentioned the CIF’s current size of $155 million and recounted two projects which embody the spirit of creating financial independence for low- income consumers.  This video is 2.30 minutes.

https://youtu.be/RiGn7AMZLAc

The $1 Billion Challenge

The current CIF balance of $155 million was just a beginning.  Purvis issued a challenge to raise the CIF to $1 billion in the next two years.  This would create a revenue stream of $10 million for annual Foundation grants at the current level of interest rates.

He noted that this goal is just .5% of the industry’s total investments of $200 billion.  By contrast at June 2021 credit unions hold $700 billion investments.  He described the importance of the goal in this excerpt.

https://youtu.be/jBMCYDYaqwo

What happened to the CIF and the Billion Dollar Goal?

CIF investments were managed by US Central which was closed by NCUA in 2010.  Other excerpts from this 2003 dinner will show how donations honoring credit union leaders were a critical part of the effort.  In that year this campaign was called the “Ed Fund,” both honoring Ed Callahan and the Foundation’s educational role.   That campaign will be the subject of blog later this week.

The history of the CIF following this dinner is unclear. One participant from this period recalls the CIF situation as follows:

The ED Fund, the Larry Johnson fund in NC and others pushed committed funds to over $300 million. Interest rates had been in a sweet spot around 6% in earlier years, so that after splitting the earnings with the Foundation, credit unions still received a decent return. After the 2003 $1 billion challenge, the CIF investments peaked in the $450-$475 million range.

 Overnight federal fund rates were quite low in 2003, but reached 5.25% in June 2006. That was probably the fund’s highest point. When rates fell to zero during the financial crisis, the CIF was no longer an effective option. With rates since, the 50/50 sharing of interest revenue with the Foundation could never reach an attractive level.

 Several corporates such as CorporateOne still offer these shared-interest CIF certificates.  But unless rates on term CD’s rise to 1.5% or so, credit unions find it easier to donate directly to the Foundation.   When CorporateOne held some CIF investments after the Great Recession, it added .30% to the CD rate as its contribution.

One participant estimates the CIF generated over $100 million in donations to NCUF and the state foundations during this decade.

The CIF’s Lesson for Today’s Cooperative System

The CIF with its fund-raising tributes like the Ed Fund are a premier example of the 3-tiered cooperative system working for common purpose.  The Wegner dinner was a collective celebration of a charitable process that was simple, coordinated and easy for all credit unions to join.

Today this collaborative effort has been replaced by Charitable Donation Accounts (CDA) approved as an incidental power by NCUA in 2013. Multiple credit union organizations including CUNA Mutual, CUES, and Members Trust Company offer programs for managing these accounts.  While limited to 5% of net worth, their advantage is they can invest in securities outside those permitted for credit unions themselves by rule 703. Their only requirement is that 51% of the total return must be donated to 501C3 organizations over a five-year period.

As of June 30, 2021 there were 187 credit unions which have established CDA’s with a total value of $1.084 billion.

There is no total for the charitable contributions made from these accounts.  The CDA option is disaggregated in both fund raising and donations versus the CIF process.  Individual accounts range in size from Pentagon FCU’s $136.4 million to Temple-Inland’s $1,000 balance.

The total in these accounts equals Purvis’s original 2003 goal of $1.0 billion. However today that coordinated system approach has been muted or even lost.  Individual credit unions organize and disburse grants to various 501C3 as they each decide.

Chuck Purvis’ framed his request for support as part of credit union’s “inherent social mission.”  He stated it would send a collective message to Capitol Hill with grants funding low income credit unions with revenue from this $1 billion challenge.  That public benefit is missing in the CDA alternative.

The Wegner Dinners are about more than awards or fund raising.  They are an expression of the collective capabilities of a cooperative system.   Understanding how this vital activity functioned in prior decades can hopefully reaffirm the importance of these common endeavors today.