Category: Local Effect

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Learning about Duty- The Example of “Grandpa” George Morgan

In my 62nd Rensselaer high school reunion last week,  I saw again some of the benefits of living in a small, rural community.

The concept of duty to others. one’s community and the country is often experienced early in life.  While there are many organizational and institutional practices that present this concept, I believe personal example is often the most powerful teacher.

Duty to country in times of war is one of our most hallowed civic commitments.  Growing up, the draft made this a potential obligation for all.  Military service was widely recognized.  In the Jasper County historical record from 1900-1985 there is a brief description of the First Presbyterian Church. The article points out that the first post WW II minister called was a former Navy Chaplain.  One of his initial acts was to make a  list of the forty-three members who had served in WW II.

That seemed like a large number.  However the local library found the Jasper County Veteran’s office had a list of 1,295  men for WWII that had the DD214 (discharge from active duty) form on file. The Service Record Book of Men and Women of Rensselaer, Indiana and Community maintained by the local American Legion Auxiliary Dewey Biggs Unit, shows a total of 1,814 who were on active duty.

Jasper County’s last Survivor of the Civil War

I believe that personal example whether a family member, mentor or public individual has a great influence for how one considers duty to country especially in times of conflict.

An example of this service calling is the life of George Morgan, who died on April 16, 1945.  His obituary called him the Last Survivor of the Civil War.  According to records 935 men from Jasper County enlisted for the Union, from a population of 5,000.

And when comparing the proportions of men able to fight, Indiana contributed more soldiers than any other state to the Union.[14]

Following are excerpts from Morgan’s obituary by Lefty Clark the editor of the local daily, the Rensselaer Republican and republished in Vintage Views.

George Morgan, who left Rensselaer that sunny August 11, 1862, as a lad of 14 and one half years to lend his bit toward the preservation of a nation torn by internal strife died at the home of his daughter at an early hour Sunday April 15. . .

One day little George, not yet possessed of the beard that distinguishes the man, made his way to a recruiting office  and by a little hedging and evasion of questions, and self-admitted fibbing managed to make the recruiting officer believe that he was ready and well able to assume the burdens of a soldier.  George Morgan at the skimpy age of 14  and one half years was now a man and a soldier at that.  He had a uniform to prove it to his parents when he returned from hi stealthy visit to the “recruiting man.” It is not chronicled that any gret storm of disapproval came from the parents. . . 

Time’s haze prevents a complete description of his military career, but the unit was not too long in Laporte.  It was sent into the Tennessee Campaign wafter some duty in Kentucky.  “Grandpa” was a participant in the Battle of Chickamauga where the Union toll was heavy but its ranks victorious.  Following that there came many minor skirmishes for Little George Morgan and his comrades nd weeks of guerilla warfare with the sniping breaking out sporadically. 

And so it went through the years of 862, 1863 and 1864 andinto the final months of the war.  The kid of fourteen and one half years not approaching 17 was keeping right up with the rest of the veteran trooper as the triumphant 87th regiment joined Sherman’s March to the sea.  It was at a military center near Washington D.C. that Mr. Morgan received his discharge papers on June 10 following the cessation of hostilities. . .”Grandpa legged it for home via a box car assigned for the transportation of troops.  He finallyed arrived in Indianapolis after a laborious journey and from there rode the “covered cars” to Bradford after which he staged-coached to Rensselaer. 

The first thing he did after reaching Rensselaer he would say, “I struck right out for home across the fields, at a dog trot, and did not stop till I reached the house.”  He said he started shouting when within range of the house, but his booming call brought no answer.  The house was empty so he started for the field.  He discovered his mother picking strawberries.  “I got me a great big bowl of freshly picked berries, stopped at the milk house and got a pitcher of cream, helped myself out of one of the containers of the sugar bag and went to work.”

The county’s last Civil War Veteran now came to town to find himself a job of work.  In those formative industrial years, he was a blacksmith’s apprentice and then a full-fledged blacksmith.  However, his is bet known fas an artisan who worked at wood working, carriage making and carpentry.  And there was a long period that he was a millwright at what ws the Babcock Hopkins elevator in Rensselaer. . .

Mr. Morgan married Mary J. Morris of Rensselaer on July 27, 1870. . .

It is interesting to note that Mr. Morgan once saw the immortal Abraham Lincoln wen the troops were reviewed by President Lincoln near Washington D.C.  it is also interesting to note that Mr. Morgan died on the day that Franklin D. Roosevelt was being buried.    He participated in all presidential elections from 1872 on.  He cast his first such ballotin 1872 for Ulysses S. Grant, his commander during the Civil War.

Mr. Morgan was the sort of the personal property of every RensselaerIan.  He became known as “Grandpa.”  All loved him.  . . A kind man, a courageous man, s msn colored with the romantic days of the wilderness and with the present day.  He was idolized and cherished as the last representative of the treasured race of man-the Civil War soldiery. . .

One Person’s Life of Duty

So honored was “Grandpa” Morgan that the local newspaper would publish periodic updates on events in his life.  A July 1, 1890 a front page article reported that he had been granted a pension.   The story noted that he was the youngest of the three Morgan brothers to volunteer and concludes with this statement: “Although so young he was a thoroughly good soldier and never shirked his full sized share of the hardships and fighting.  He well deserves the pension he gets, and a good deal more.”

On February 14, 1945, the Rensselaer Republican’s  front page story was headlined, Time Marches On, So Does Grandpa.   It was Morgan’s 97th birthday.

Morgan’s life of duty: A person of 14 who volunteered for war, raised a family. worked in the community and voted in every presidential election from Grant to FDR.

In Rensselaer we saw and experienced first hand, daily, persons who lived responsively for their families, community and country.  It is these examples we all knew and helped shape who we would become—with our own personal sense of duty.

 

 

 

 

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Jesse Owens’ Two Visits to Rensselaer

The first visit was on Friday December 17, 1937 at the National Guard Armory where he brought the professional basketball team, the Cleveland Olympians to play the Peerless Athletics from Lafayette.

The second was on April 16, 1959 to address the annual Hi-Y (high school YMCA) banquet in the Fellowship Hall at the Methodist Church.  My dad had invited Owens to speak.  I attended the event along with many of my high school sophomore classmates.

Owens’ Brief Biography

There are two extraordinary athletic achievements by Owens that are still celebrated today.

On May 25, 1935, he set three world records and tied a fourth in a span of 45 minutes during the Big Ten meet at Ferry Field in Ann Arbor, Michigan.

At the 1936 Olympic games he won four gold medals in three individual events and as a member of the 4 by 100 relay team.  This triumph has been memorialized in numerous films which celebrate a black American’s triumph in front of Hitler and his belief in the superiority of the Aryan race.

After the games, the entire Olympic team was invited to compete in Sweden. Owens decided to capitalize on his success by returning to the United States to take up some of the more lucrative endorsement offers. United States athletic officials were furious and withdrew his amateur status, which immediately ended his career.

Owens was angry and stated that “A fellow desires something for himself.” He argued that the racial discrimination he had faced throughout his athletic career, such as not being eligible for scholarships in college and therefore being unable to take classes between training and working to pay his way, meant he had to give up on amateur athletics in pursuit of financial gain elsewhere.

Owens struggled to find work and took on menial jobs as a gas station attendant, playground janitor, and manager of a dry cleaning firm and at times resorted to racing against motorbikes, cars, trucks and horses for a cash prize.

He was prohibited from making appearances at amateur sporting events to bolster his profile, and found  commercial offers had all but disappeared. In 1937, he briefly toured with a twelve-piece jazz band and made appearances at baseball games and other events.  Hence his trip to Rensselaer.

While in town he gave free autographs at the Rensselaer Republican’s news office.   During halftime at the basketball game he put on a running exhibition.  One youngster recalling the event years later said, “it was absolutely amazing, the speed Owens possessed.”

The Second Visit

Owens tried to make a living as a sports promoter, essentially an entertainer. “There was no television, no big advertising, no endorsements then. Not for a black man, anyway.”

Owens ran a dry cleaning business and worked as a gas station attendant to earn a living, but he eventually filed for bankruptcy. In 1966, he was successfully prosecuted for tax evasion.

At rock bottom, Republican President Dwight D. Eisenhower enlisted Owens as a goodwill ambassador in 1955 and sent him to India, the Philippines, and Malaya to promote physical exercise.  He also promoted American freedom and economic opportunity in the developing world.

Rensselaer’s 1959 Hi-Y banquet celebrated the service club’s students’ role in the community.  There were two groups, the seniors with dates and the junior Hi-Y members with their dads.  The Rensselaer Republican’s account of Owens’ remarks is brief.

“Mr. Owens told many of his experiences then made a dramatic appeal to the young men of the Hi-Y organizations to assume positions of leadership in the community for which their Hi-Y work prepares them.” 

Two Appearances, 22 Years Apart-Did They Matter?

Owens’ first appearance was as an entertainer trying to make a living in a segregated world cut off from the traditional sources of support for other Olympic athletes.  A local family of three generations, the Bausmans, connects these two events.

Slim Bausman, the grandfather, was a successful high school coach who took his son “Dode” to see Owens run at a meet in Soldier Field in Chicago.  Dode was an exceptional athlete who set the Rensselaer high school record in the 100 yard dash at 10.2 seconds that still stands today.  And just one second slower than Owen’s world record of 9.2 seconds.

Dode and his son, Gordon, attended the 1959 banquet at which Owens spoke.  Not as an entertainer, but as a representative of core American values and leadership.  Rensselaer had no black families.  The idea of civil rights and school de-segregation had no immediate resonance for this rural farming community.   Rather he was there expressing the best of what America could be.

Did Owens’ visit in 1959 make a difference?  Two years ago after another reunion,  a classmate, Dale Garriott, sent an email asking if I recalled when Owens came to Rensselaer—and how my Dad had taken all of us to the dinner.  Did I remember anything about the event?

At last week’s reunion I found the Republican news article and an earlier description of Owens’ first visit in Vintage Views, the publication of the Jasper County Historical Society.   At our Saturday evening dinner I sat with Gordy Bausman who still lives in Rensselaer and confirmed his father’s track record—but admitted the time had been equaled by three later runners. He also recalled the Hi-Y banquet.

Examples of sports excellence and more broadly leadership success, can leave a lasting impression on upcoming generations, especially when the speaker comes from a big city, like Chicago, to a small town.  It’s a special deal.

Another name stands out from the news article.   He was a senior, who gave the invocation as the Chaplain for Hi-Y. and sung in the boys quartet that evening. Richard Scharf lettered in all three high school sports-football, basketball, and track.  He was admitted to West Point, retired as a US Army colonel, completing 27 years of commissioned service. He earned a Master’s Degree in Civil Engineering and Economic Planning from Stanford University and was involved in architectural engineering and construction for 15 years.

In the an article on his later career, he announces his candidacy for a seat on the Dawson County Board of Commissioners, Georgia with this statement:

Scharf is also interested in the welfare of our next generation. “We need to ensure that we make provisions for the young people in the county,” he says, and asks, “How do we give them some options for the future?” 

A native of Indiana, Scharf says that he grew up in a small rural community, the son of a college coach and athletic director and, while he’s not a farmer, he “understands the rigors of those who provide for the rest of us.” 

As a board member, I will be an active and focused team player, able to add an experienced rational outlook on the infrastructure challenges we are facing and help the board remain focused on the community’s future. My goal is to do the right things to achieve long-term community viability.

An example of a leader’s ongoing contributions that Owens had spoken to, formed by his Rensselaer experiences.

 

 

 

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Rensselaer’s  Welcoming Wagon

What makes a community for most is finding groups and activities  to which one can belong.  From the initial days as a Brownie or cub scout, to the morning coffee conversations at a local café in retirement, finding social connection makes life worth living.

In my recent high school reunion, some classmates meet for coffee every morning around the old St Joe College fountain on the edge of town.  Others volunteer at the library, the Historical Society or still attend church on Sundays.   Being with others after raising families or a lifetime of work is vital to one’s well-being.

The Founding of the Welcome Wagon

In November 1957 the town of Rensselaer formalized the process of welcoming new residents in an inaugural meeting forming a Welcome Wagon Club.   The monthly meetings were to greet the newest members in town and introduce them to some “pioneer” residents who could brief them on getting to know the city in a minimum of time.

The meeting was led by the club’s Hostess, Marietta Henry, a community leader who presented the newly formed organization’s  purpose.  Then several representatives described different aspects of the town.  George Long (owner of Long’s Drug store) gave a history of the city’s past.  Then Mayor Hanley talked about present-day Rensselaer.   Rev. Charles W. Filson (my dad) welcomed the group on behalf of the city’s churches.

The sixty-three attendees, most wearing their Sunday best, were then photographed with all the names listed below the picture.  In the foreground are welcome baskets filled with items from the town’s local merchants.

The Importance of  Being Welcoming

In many ways Rensselaer was and is a stable community.  Change does occur; however the economic farming base and land ownership does not lead to dramatic population turnover either in or out.  Bringing in new residents is still key to maintaining a viable economic and diverse demographic social base.

The Welcome Wagon is a concept inspired by the Conestoga “welcome wagons” that provided food and water to travelers moving west.  The concept was the basis for the organization founded in Memphis, Tennessee in 1928 by Thomas Briggs, Think of the Welcome (Wells Fargo) Wagon song from the Music Man which greeted Harold Hill’s band instrument delivery into town.

Small towns are more intimate than cities and suburbs.  Everybody knows most everyone else, or if necessary, someone who does know them.   Family history and connections will go back for three, even four generations.  One of the organizers of our reunion, where we are all at or near 80, still visits her mother daily who is 102.

Local  community groups and activities provide a grounding that can prepare one for life and importantly, opportunities beyond a small town.  For it is the values,  commitments, mentors and work ethic that will settle in and carry one into the bigger world beyond.

The learnings essential for life and a worldly welcome wherever one settles down are an enduring foundation for the graduates of small town America.

 

 

 

 

 

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You Can’t Go Home Again

Or so said Thomas Wolf, the novelist.   But you can visit with the perspective of years and see what makes small towns in the Midwest a special place in many people’s lives

I just returned from my 62nd high school reunion in Rensselaer, IN.  A journey of nostalgia but also discovery and learning.  While I only lived there for five years, from middle school through the first 21/2 years of high school, they were formative in ways one can only see later.

At the moment two Vice Presidential candidates talk about their small-town roots.  One does so with joyful remembrances of people knowing and looking after each other.  An experience of community that orients one to what matters in life.  The second is a somewhat darker story of the problems and poverty in rural America.

My return visit was filled with multiple conversations with people continuing to make this farming town of around 5,000 a place for understanding how community matters and its role in instilling the  special American spirit of enterprise and duty.

I will share events such as the Friday Night Lights Senior recognition during half time at the Bomber’s football game vs. West Lafayette; the two visits Jesse Owens made to Rensselaer ; the grave of the first woman ordained in any part of the Methodist church in 1866; and Brigadier General Millroy who criticized the Union’s West Point Generals at the battle of Bull Run apparently in the presence of the President and the Secretary of War, Stanton.

The Worldly Education of Small-Town Life

Rich Kupke is not a name that readily comes to mind unless one recalls he was one of over 100 American hostages held for 444 days in Iran.   He came back home to a hero’s welcome in Indiana.  After retiring from the State Department he settled in Rensselaer where he had grown up and graduated from high school.

His return to Rensselaer is explained in this article about his post hostage  life:  Former Iranian Hostage Relishes Quieter Life Today

Even after his Iranian captors finally released the hostages in early 1981, Kupke continued working overseas in Thailand, the Philippines, Costa Rica, Jamaica and Mexico. “I was one of the first who went back overseas. The type of people I worked with, being an ex-hostage wasn’t a big topic that came up all the time,” he said. “It helped not to make it bigger than it was. I always disagreed with the psychiatrist who talked about post-traumatic stress happening five to 10 years later. I told him he was planting that in people’s minds. He got mad at me for disagreeing with him.”

If there is one lingering effect for Kupke, it’s in the way he’s often presented to new acquaintances in Rensselaer. “I’m often introduced as, ‘The former hostage in Iran.’ But most people go out of their way not to have me rehash the whole story. That’s a nice part of being in a small town.” 

Divorced in 1991, Kupke has been a single father ever since to his two sons. The three of them lived together in Jamaica and Mexico, but when the boys neared high-school age, their father figured there was only one place to continue their worldly education. “I was born here and went to high school here, and I thought it would be an excellent place for my boys to go to school. Back home in Indiana,” he said.

In addition to watching over 15-year-old James and 14-year-old Bill, Kupke keeps busy as a volunteer driver for Meals on Wheels. He also works part-time six days a week at the Jasper County Animal Shelter while waiting to hear about the possibility of returning to a stockbroker position. The only connection to his State Department days is the book he started writing a few months ago — a fictionalized account of a foreign service officer who faces one dramatic situation after another while traveling from country to country, based on his own experiences.

“Rensselaer is just an outstanding place to live. I couldn’t have made a better decision,” he said. “My life is a little slower these days. I don’t need to rush. I’m taking time to smell the daisies. Or is it the roses?” 

Life and Truth in It

Maybe quieter in some respects but life is no less purposeful.   Rensselaer epitomizes being in a community.   For it is in living with others that we find meaning and self-worth.

Thomas Wolf wrote:  Telling the truth is a pretty hard thing. And in a young man’s first attempt, with the distortions of his vanity, egotism, hot passion, and lacerated pride, it is almost impossible. “Home to Our Mountains” was marred by all these faults and imperfections…[Webber] did know that it was not altogether a true book. Still, there was truth in it.

I will share some stories of individuals shaped by this small town experience. One is about the Rensselaer High School Senior in 1937 who set the school record for the 100 yard dash, which still stands at 10.2 seconds. He met with Jesse Owens in 1937.  His grandson attended a Hi-Y banquet in 1959 at the First Methodist Church where Owens was the featured speaker, 22 years later.   Or the obituary of the last surviving Rensselaer soldier from the civil war who volunteered at 14 in 1861 and died in 1945-a sense of duty that carries on still today.

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Credit Union Mergers: The Final Solution?

A post by Jim Blaine from his blog of May 15, 2024, used with permission.

      Credit unions are changing…

     … and disappearing.  

Badin Employees Federal Credit Union used to be tucked up against the Uwharrie Mountains on the banks of the Yadkin River, about 40 miles east of Charlotte – the hometown of banking giants Bank of America,Wells Fargo and Truist.

The Uwharries are thought to be the oldest mountains in the U.S. These mountains are well-worn and rounded; the Rockies they ain’t! Uwharrie is an old Indian word. It’s a bit tricky to pronounce, much like La Jolla, Yakima, Albuquerque, and Butte. “Yew-whar-eee” is correct;  “you’re hairy” is not.

https://asset---north-carolina.bldg15.net/img/4/f/4fc74af4-b323-4065-ab53-b09cd8dcf5dc/Stanly%20County%20-%20Morrow%20Mountain%20State%20Park%20Overlook-crop(1,0.636,0.000,0.334,r4).4e964e48.jpg Been searching for years for the original Indian meaning of that name. Recently, a friend told me he knew the origin. He said, it’s in the dictionary: “Uwharrie” means “unknown”. Really?

Asked him for a copy of that reference for my files. Sure enough, the following week, in came a copy of the dictionary definition. It said: “Uwharrie – adj., probably from an ancient tribal name; meaning unknown.” Perhaps I just need to pick better friends….

Badin is a company town. In 1917, Alcoa dammed the Yadkin River to generate hydroelectric power for a new aluminum ingot plant. The lake and town which sprang from those efforts are quietly picturesque – but, all things revolved around the plant. Driving into town, down Falls Road, under an unwashed denim sky, is a journey home, a journey back in time The town is just two blocks long, but makes the most of it.
 

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJW7_EMEcjRpmN0ZOPoAThGYDe3adg0LwJUC1ovwporaTB_k2MZsBzxtXA_Fhc0QdNT0WQcC78VQJzIyOO2hA88MSEEb_WnDoyD1s6e4cXq_wwL2wRK6-urANV7w4k2713cqHXm67R_a8/w1200-h630-p-k-no-nu/IMG_3451.jpg “Downtown” the candy-striped awnings and improvised handicap ramp of Badin Town Hall and Police Department adjoin the Masonic Lodge #637. Then comes the post office with its single window, fleet of post office boxes, and well-used community bulletin board.  Shading the post office is Memorial Park, flanked by a cedar tree honor guard for the seven Badin soldiers who died in World War II. And, out of sight up a short dirt road, is the best named roadhouse on the planet: The Bottom of the Barrel Disco and Cafe; now vacant, having recently burned to the ground.  Bet that last party was a great one. Sorry to have missed it!

But, the center of attraction in town was the Badin Employees Federal Credit Union. The Credit Union was housed in a one story, red brick building with blue shuttered windows and a bright, “no-way-to-miss-it”, burgundy door. The Credit Union always closed for lunch from 12:30 to 1:30 pm, but you could sneak a look into the office through the partially drawn, real-wood Venetian blinds. It was a comfortable, inviting looking place. The kind of place you could sit a while, have a cup of coffee, talk to the manager, y’know think it through a bit.

Badin Employees Federal Credit Union was prosperous with assets reaching $4 million, capital 18%, loans available to all, delinquency negligible. Everyone in town was a member; no local banks remained. Badin Employees FCU had achieved “market dominance” without ever spending a penny on “engagement, member experience, or passions of self-importance”. The “word around town” took care of all that. Yep, folks in Badin had a strong opinion about their Credit Union. They were the kind of folks – as you might suspect – who didn’t need “thought leaders”, “X”, or talk radio in order to form an opinion!

https://i.pinimg.com/736x/41/5b/88/415b88882030af28aaba824deda36369.jpg The beauty of Credit Unions used to be something you couldn’t easily wrap, bottle, or “spin”.   Badin FCU is no longer there to make a difference – gone the way of merger. There are no longer any banks or credit unions in Badin. The aluminum plant, too, is gone.

… are we getting close to the Bottom of the Barrel on a lot of important things in our Country, including credit unions?

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The Cooperative Way to Manage an Isolated Branch

Last week I described the abrupt closing of the Madison WI branch of PenFed FCU  which it acquired via  the merger of Post Office Credit Union (POCU) in 2020.

There was no public announcement.  Some members were alerted, but many weren’t.  The employees lost their jobs.  The members no longer had a physical presence for this coop operation begun in 1935.

I described this as an example of “asset stripping” in which the continuing credit union takes the most valuable parts of a organization and then disposes of the rest.  While this approach is not unique to PenFed, it is routine in many of their  post-merger operations.

Other credit unions sometimes acquire new branches via mergers outside their home state, often hundreds of miles away.  There is no synergy or “network effects” with the continuing credit union’s primary market. Closing these “under performing” locations is seen as an acceptable management decision.

But is this the best option for members?  As credit unions point out bank branch closures to defend their FOM expansion requests, are some coops guilty of the same activity?

A Better Way: The Branch Transfer

As PenFed’s August shutdown of its Madison location was finished, two credit unions demonstrated a better way. First Harvest in New Jersey and Members 1st in Pennsylvania, announced the  completion of a cooperative approach to the challenge of an isolated member service location.

This past month, the spin off of the Williamsport, PA branch of First Harvest, acquired in a merger in 2016, was finalized. The transfer of First Harvest’s local branch members, employees and  resources to Members 1st, which operates over 60 branches, in Pennsylvania became official.

Mike Wilson, CEO of Members 1st and Mike Dinneen, CEO of First Harvest had both begun their leadership roles at the same time in mid 2023.  They knew each other from working together in different Pennsylvania credit unions.  They discussed their joint efforts in an interview ten days ago.

Upon taking over at First Harvest, Mike began evaluating his business and strategic priorities.  The Williamsport PA branch  was over three hours away from the Deptford, N.J. head office.   The distance from his primary South Jersey market focus made it difficult to support fully the employees and over 1,000 members using this location.

Closing the branch was not an option.  What solution could be  in the best interests of the members, staff and community?

In discussions with his counterpart at Members 1st in late 2023 the two CEO’s agreed to a joint  project to assess whether  a transfer of the entire operation would make sense for everyone.

Members 1st had 7,000 members in the greater Williamsport area but no location in the county. This branch with its experienced staff offered an opportunity to build out this new market area with  an in place local presence.

The two CEOs established a process to involve the local employees and members in the evaluation.  NCUA required that  a transfer of branch be done following steps similar to a merger:  the members would be given notice, vote on the option, and a third party monitor  results. The final decision  would be by the members.

Following NCUA approval in February of 2024 both credit unions held meetings with employees and  in multiple member open forums.  Both credit unions’ leaders attended, including evening sessions so all could ask questions.

The voting took place in April.   The transfer was overwhelmingly supported  with between 20-25 % voting  participation, a much higher rate than for a traditional merger.

Mike Wilson stressed that the key  success factor was staff retention and their support.  Mike Dinneen noted that the “spin off” was not a performance  issue but a proximity one.   In his view the critical factor was finding the best cultural fit for staff and members.

An Example of Cooperative Values and Collaboration

These two credit union CEOs were guided by values that put their members’ and employees’ well-being foremost.  There were also institutional advantages for both firms if the transfer was thoughtfully conducted.

The members were deeply involved in the process.   The two credit unions took almost a year to evaluate how the spinoff might best work and to develop and communicate the advantages of this change.

By this effort they maintained the goodwill and reputation of not only their individual  institutions, but also for the member-centric public reputation  of credit unions.

PenFed cut and ran when closing their Madison branch.  This operational presence  had  been in the community for over 89 years.  Consider what a different impression these 3,000 or so members would have if there had been an effort to transfer the operations to a local  cooperative willing to continue  service for the community.

But that choice would have required PenFed to put members’ interests first.  Instead they took all the “free” capital and other valuable resources from this previously independent credit union.  The members were forced into a remote, digital-first service model.  The local commitment and presence of nine decades was over.

This contrasting approach is a  reminder to credit unions enraptured by a credit union’s rhetorical promises during courtship, that the marriage rarely lives up to the hype.  Especially for the member offspring.

 

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A CEO’s Lived and Led Business Strategy

“Empathy emancipates making us greater than hate or vanity;

That is the American promise powerful and pure.”

(A phrase from poet Amanda Gorman’s, The Sacred Scene, read on August 21, 2024, Chicago)

I reached out to Great Basin FCU’s CEO Jennifer Denoo to discuss three topics:

  1. To learn about the credit union’s announcement of an affordable housing project with the FHLB San Francisco. How would this help and what was their role?
  2. Why a 2010 video of an interview of the  first President and his wife about the credit union’s founding in 1951 was linked to their website.
  3. The reasons why that website presents a very different “vibe” than most.

The Financials

At June 30, 2024 Great Basin reported strong financials, partly due to a recent small merger with another Reno, NV credit union.

Total assets:  $313 million; Loans $215.5 million; Net worth 11%; Delinquency .47%; and ROA of 1.93% and share growth in double digits, results helped by the merger.  It serves 25,000 member-owners.

The Affordable Housing Initiative and Goodwill

The credit union had joined the San Francisco FHLB in 2023 to have a liquidity backup.  Jennifer asked questions about other FHLB services offered. As a member-owner, she wanted to learn if services could be more than a transaction.  Was it a relationship opportunity?  She learned that few other Nevada financial firms were taking advantage of recent federal government funding and FHLB grants to support affordable housing projects (AFP) in the state.

One such program was undertaken by a non-profit developer, Sunwood Housing. It approached the credit union to partner in a new development in Lovelock (pop. 2,000), the only incorporated town in a very rural county.

The credit union’s role was to monitor the disbursement of the $663,000 FHLB’s AHP grant.  The oversight required their expertise and time; there was no interest or fee income.  The grant then freed up other federally authorized funding for this 24-unit development for low income residents.

Jennifer said the credit union’s support for this affordable housing project could open further possibilities with the developer, the county commissioners and residents, and the FHLB.  The expertise, market awareness and goodwill could lead to future AHP partnership opportunities; but the immediate gain is the positive impact on a small community she serves.

 The Founding Video-History Never Gets Old

The credit union created a video interview of its first President Jack Dunn and his wife Laura in 2010.  It tells the story of the beginning in 1951 as the Reno-Bell Phone Company Employees FCU.

NCUA required the credit union raise $25 in shares to receive a charter.  The eight organizers were $12.50 short.  So, Jack put up the rest and became the first President.  At the end of the first year there were several hundred members. Records were kept in a founding member’s garage. The credit union was offering loans to members that banks would not, because the volunteer leaders knew their members as “family.”

Jennifer said the video was created so every employee understands “who we are.”  She explained, “As we grow the FOM, now covering 12 counties, it would be easy to be seen like a bank.  We never forget how we were started.  We show it to every new employee so they can feel the passion and mission of the credit union. History never gets old.”

Bank Like a Boss: Members Are the Owners

Jennifer became CEO in 2018.   She began as a teller thirty years earlier but had trouble balancing out her cash drawer. The CEO at the time saw something in Jennifer and suggested she apply for another position–being a collector.  The result: “Best job I ever had.  My goal was to recover payments and assets through empathy and understanding of the member’s situation.  To make them feel like their current financial situation did not define who they were.”

When she was 30, that same CEO and her cherished mentor in the credit union died unexpectedly. She thought about going back to school to become a hospice nurse while raising her three children.  Jennifer saw a parallel between what a hospice nurse does and what a credit union leader does – they teach, they hold hands, they give dignity and grace.  Once she realized she was doing what she was already passionate about– leading with empathy – she chose to stay at the credit union as it evolved its member-centric focus.

Making Member Love a Reality

The credit union’s website feels different.  Here are two prominent statements:

We give a DAMN about every member.

Let us show you why we’re not just member-owned, but member-loved, too.

As CEO she continued the mission and vision of member love.  She admitted the site may feel quirky, but it was based on communicating a fundamental business competitive advantage: employee empathy.  It drives everything the credit union does.  It is the number one skill every employee develops.

Her personal commitment to this effort is shown in her first video as CEO, Just Ask Jennifer.

The skill is practiced in training sessions.   Scenarios with the words to use that first acknowledge how the member feels, in a non-patronizing way–“Say it, to live it.”—before resolving a problem or opening a new service.

Even when the member is not always right, empathy is the first action when taking responsibility for a solution. For example, an older member came into the credit union angry that the credit union would not give him his tracking number for an insurance payment.  He insisted the credit union had it; but he was using the wrong word. He needed the routing number.

The employee put themselves in the shoes of the member, imagined how overwhelming it must be to set up a new insurance deduction and led with an understanding heart before fixing the problem.

Or the 11:00 PM Just Ask Jennifer member query about how to change a password.  Jennifer takes pride in answering each of these inquiries, even at night or on a weekend because she feels how unsettling it is to not access your account online.

The service promises and values stated on the web site are specific.  Take ownership of the situation, show appreciation, step in the other’s shoes, etc. All are important for making these employee skills an essential part of the credit union’s brand.

The overall strategy is to build relationships not merely transactions. For she asserts “It is relationships that will carry the organization over the next bump in the road.” 

Jennifer’s leadership skills have resulted in positions on four other credit union and financial collaborative organization’s boards.   Her bottom line is “You just have to believe in people-and give a damn.”

A sound strategy not just for leading a credit union, but for life.

 

 

 

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Ugly Truths: Mergers, Kickbacks and Apostates

“The Ongoing Corruption of the Cooperative Credit Union System’s Ideals in America”  (with edit updates on August 9)

I have previously observed that  it doesn’t take an illegal activity to destroy a firm, an industry, or even bring harm to the broader economy.

I believe the credit union system is at a turning point.   Since the passing of NCUA’s merger rule in 2017/18, the amount of asset takeovers (AKA voluntary mergers) has only accelerated.  Some think this is a good thing.  I believe numerous examples prove otherwise.

According to Credit Union Times the numbers are increasing. The majority of second quarter 2024 merged assets in this latest update have nothing to do with safety and soundness issues:  The NCUA approved 46 mergers during the second quarter of 2024, up from the 26 consolidations that received the green light to consolidate during the first quarter and the 36 approved mergers during last year’s second quarter.

As discussed below some credit union CEO’s are “gaming” regulatory disclosure requirements to hide their significant personal benefits. Credit unions acquire sound, longstanding healthy credit unions through private deals which benefit and enrich the selling executive team.  The members are given nothing but future promises and empty rhetoric, most frequently, “bigger is better.”

The transactions increasingly contradict  any common sense understanding of financial equity or fairness for members.  The information provided members and approved by NCUA is meaningless for any considered owner decision.

The cooperative system’s unique purpose and public reputation are at risk.  These deals will be  seen as just more of the same wheeling and dealing as for-profit banks.   At some point these ongoing patterns of self-dealing will become the object of a business media story, a congressional inquiry or even consumer group action.

The good will and good works of the truly credit union spirited will be overwhelmed by the depredations of an ambitious few. The system may never recover from the consequences of these blatant examples of betrayal of the trust members placed in their “elected” board leaders and regulatory oversight.

In previous posts I have detailed cases from Exceed, Infinity, 121 Financial, Finance Center, and Vermont State Employees in which my analysis of the transactions made little or no economic or business sense-except for insiders. Members, who must vote any merger, have little or no power to object or even inquire. The process gives all the resources and media power to the incumbents initiating the deals.  Member participation is presented as a purely administrative step because the regulators have “already approved the merger subject to the member vote.”

A current Example: Member One FCU transferred to Virginia Credit Union

In last week’s post, I describe the members’ “rebellion” against management’s proposal to transfer all the assets of the $1.7 billion Member One FCU to VCU.  The opposition’s blog site was filled with multiple member voices against the change.

On July 30 after the vote closed,  Member One announced the result: 3,479 voted to approve and 1,404 against.  In the same release, the credit union stated it had become a division of VCU on August 1, or 24 hours after the vote.

Case closed or not?  Certainly, the two credit unions want to give that impression. However It is important to seek the truth apart from these two “facts.”  What other context is available about this event?  Were the members’ best interests truly served?

My first observation: the voting participation seems extremely low for this controversial action.  The  number in favor of the merger, 3,479 is just 2.3% of the credit union’s 155,000 members.   The total voters, 4,883, are only  3.2% of all eligible to participate.

This result means each Yes vote supported the transferred $474,000 of total assets and $44,560 of net worth to VCU.  That outcome would itself suggest the need for greater scrutiny.

Why was the turnout so low?   Were ballots sent to every member?  How was the process managed? By whom? How does this member participation compare with other similar sized or contested mergers?

The Opponents’ Efforts

There was spirited public opposition including a news radio interview.   The website Member One Vote No recorded over 80 member comments before being taken down.   These concerns  universally questioned the merger proposal.  A  Reddit link Member One Merger Cookies, is still active and provides a sample of the  many comments in opposition.

Members posed multiple questions about the $570,000 bonuses being paid to the the credit union’s five senior executives.  The members received nothing from their collective $155 million net worth and eight decades of loyalty.

The opponent’s Vote No site also included links to nine different VCU social media with postings by VCU members sharing multiple complaints about the acquiring credit union’s service, mobile banking, culture etc.  Did Member One’s Board do any due diligence prior to announcing the merger in January 2024?   If so, why was there no information about VCU’s business model or priorities, for example the reason for its recent decision to convert to a federal charter.

Twenty-Four Hours to End Member One’s Independence

My second question: why the rush to complete the merger in 24 hours after the vote ended, that is, by August 1?  The Notice and FAQs clearly state “There are no anticipated changes to core services and member benefits.  And, it will be 2026 before there will be operational integration.  In the meantime, there will be two operational centers.  No branches will be closed .

There are least two forms that must be sent to NCUA (6308A and 6309) both of which would take more than 24 hours, especially the combined financial statements, before a merger is finalized.

Why the speed to make this a done deal? The only effect is to remove Member One’s board and to give VCU immediate access to and full control of the credit union’s financial resources.  Is VCU that much in need?

The very low vote participation and the rush to close the deal points to the need for more information about what is really going on.

The Responsibility of Credit Union Directors

There are two sets of board members who oversee each merger event.  Member One’s board is very accomplished per their public resumes.   From the June 2022 announcement of new board officers, the leadership team presents extensive professional and Roanoke community experience.

The Chair, Joseph Hopkins, signed the Member Notice of the merger’s required meeting. He retired from a long career at Norfolk and Southern, has been on the Member One board for over 30 years and is a 50-year credit union member.

Penny Hodge, Vice Chair, retired in December 2018 as Assistant Superintendent of Roanoke Country schools after 31 years.  She is a CPA and became a Member One director in 2019.

A  new board member in 2022 was Tyler Caveness who graduated from Harvard in 2014  with an economics degree.   He is “founder and principal advisor at Caveness Investment Advisory, LLC, a boutique wealth management practice providing investment, income-tax minimization, and alternative financing strategies for the self-employed.”

Member One also appoints associate Board members. On May 23, 2023 the board announced three new associate members, all with excellent professional  and local credentials. These are brief biographical excerpts in the announcement:

Armistead Lemon has an 18 year career in leading independent  school education.

Mary Beth Nash is a local government attorney with 28 years experience representing private and public sector entities.

Rebecca Owens is Roanoke County Deputy Administrator, responsible for county’s financial administration and has 30 years in local government.

Why did these three experienced, Roanoke-based professionals support the ending of their local charter in a few short months after taking office?  The merger announcement was on January  11, 2024.  One presumes there was some preliminary discussion and due diligence by the board before this public decision.

It seems highly unusual these three experienced professionals would join an organization and then quickly turn around and support an end to their leadership role within just a few short months.  What role did they play?  What information were they given?

NCUA is very clear in its statements on the fiduciary role of directors.  From two 2011 letters by NCUA’s General Counsel:

“we (NCUA)also believe that fiduciary duties are properly owed to people, and not to entities. FCU directors must understand the people who are affected by the directors’ decisions and identify which people the directors are serving.

“The danger is that, if the directors are allowed to focus only on the credit union when making a decision – without regard to how the members are affected – the directors can justify making self- serving decisions, or decisions that serve primarily the FCU’s insiders, under the guise that the directors are simply doing what is best for the credit union.”  (emphasis added)

Failing the Members

There are no factual details or future commitments in the Member Notice that would meet this fiduciary standard for this merger.  Let alone Directors’ duties of care and of loyalty.  The only specific financial details are the bonus payments totaling $570,000 to five senior executives.  Of this amount, $250,000 is due the CEO, Frank Carter,  as of the effective merger date—which we now know was 24 hours after the vote closed.

Why did members receive nothing from their $155 million collective savings?  In any other institutional sale in the open market, owners would have received 125% to 200% of their book value net worth.  We know this because these are the routine multiples credit unions pay when buying banks.  Should not credit union owners be treated as well as bank owners?

From the very general information in the four-page Member Notice, the widespread member opposition published in social media, and the explicit, immediate benefits going to the CEO and senior team, this merger seems contrary to any reasonable understanding of fiduciary responsibility by the board and executives of Member One.

They not only failed the 155,000 member owners but also the greater Roanoke community and the eighty-four year legacy of prior generations that contributed to creating this $1.7 billion local institution.

The Other Board of Directors: NCUA

NCUA’s rule 708b provides the process for the Agency’s monitoring and approval of  every step of the merger process.  The agency’s merger checklist has 21 areas for potential submission and seven required forms.

The update of the rule was announced during the GAC conference in February of 2017 in response to published examples of merger self dealing and outright solicitations.  Chairman McWatters’ intent is quoted in this report of the merger landscape by Frank Diekmann in his CUToday analysis, Time to Talk About an Ugly Truth in Mergers:

McWatters: “The agency should diligently work to preserve small credit unions, as well as minority- and women-operated credit unions.  

“In addition, the agency should require all merger solicitation documents to provide, without limitation, a discussion of any change-in-control payments and other management compensation awards and agreements, and that such disclosures are written in plain language and delivered to voting members in a reasonable time prior to the scheduled merger vote.”

Since that speech, and the passage of the rule  Diekmann’s Ugly Truths have only gotten worse and disclosures minimized.

Member One’s merger is just the most recent example. No member owner, let alone an NCUA examiner,  RD or board member could make an informed judgment about this merger proposal with the information in the four-page Member Notice.

If any credit union had provided this level of detail to purchase a bank or by organizers to start a credit union, the request would have been summarily rejected.  Yet that is all the information credit union owners were given.

NCUA’s In Loco Parentis Merger Oversight

The impact of NCUA’s rule has been to put the agency’s judgement and fact review in the place of the members’ ability to make an informed decision.  Most of the information required by NCUA in its 21 point checklist is not shared with members.  For example, its review of the prior 24 months of board minutes are not disclosed along with multiple other filings.

NCUA then sends its approval of the Member Notice with its limited information which includes the date of the special meeting and ballots to vote.  Absent are any of the details NCUA used to approve the application and Notice.

Moreover, the Agency has provided an easy work-around spreadsheet to help determine what must be disclosed, if anything, about compensation commitments.  This is completely contrary to former Chairman McWatters’ statement of “without limitation” disclosures.  In essence, NCUA shows credit unions how to “game” its own disclosure rule.

Self-dealing by those who lead the organization, oversee the entire process and control all resources to communicate with members was the number one priority addressed in the 2018 rule.  Unlike state charters which must file IRS form 990 detailing board and executive compensation annually, FCU’s are not required to file or disclose any compensation data to anyone at any time.

The agency’s excel spreadsheet with sample entries helps to determine what portion, if any, of future compensation must be disclosed. Here is the form that credit unions can submit to show compliance or not, along with a required certification of No Non-Disclosed Merger-Related Financial Arrangements.

Future compensation is what the whole rule was intended to address, including conversions of previously funded SERPS and other benefit plans.

Why should NCUA be able to review this form, but not members?   In the Member One Notice only merger related bonuses of $570,000 were revealed.  However the credit union reported over $32 million in SERP and Employee Insurance Benefits in its June 2024 call report balance sheet that will either vest or be distributed under change of control clauses—but there was no disclosure of where those funds now go.

Reporting only merger related bonuses does not begin to reveal the compensation related commitments to senior employees in the merging credit union.  Most will enter into new employment contracts with the continuing credit union that are guaranteed years into the future versus being at-will positions.

To illustrate this under reporting, NCUA recently approved a merger that disclosed to members only $900,000 of bonus or salary increases for the five senior employees.  However, because the credit union was a state charter and the lengths of the new contracts were disclosed, the actual guaranteed payments were closer to $9.4 million for the  highest compensated employees.

This is how the disclosures of self-dealing are “gamed.”  NCUA has inserted its review in place of providing  essential information to the members for their decision making.  Members receive no facts, only rhetorical promises or future assurances.  In Member One’s case, this motto was “Bigger is Better” an assertion easily  contradicted by the diverse loan growth and ROA performances as of June 2024 reported by the top ten credit unions.

The Shortcomings Of the Merger Rule and an Easy Solution

There are two other serious information shortcomings in the merger disclosures.  Nothing is required to be shown about the continuing credit union’s business model, priorities, plans or culture.  In this case VCU’s social media posts suggest some potential cultural and operational issues.

If members are transferring the future management of all their assets to another organization, shouldn’t that organization’s plans and leadership intentions be part of the disclosures, even including the compensation of the continuing executives.

Voting by members in a merger is not about protecting their individual savings and loans.  If members don’t like the outcome, they can withdraw and go to another institutions.

Rather the voting is about the transfer and full control of all the assets, tangible and intangible created in a credit union’s long history, to a third party.   Now there is nothing required to be disclosed about the new organization’s taking over these accumulated resources except a summary balance sheet and income statement that is already available from call reports.

A second problem is that the voting process is deeply flawed.  It has the appearance of democracy and one person one vote.  In this case 97% of members did not vote on the future of their own credit union?  Why?

Moreover, the entire voting process and institutional resources are in the hands of one party which has a vested interest in the outcome.  Members who oppose have no way to easily contact other members, there are no resources for marketing or outreach. The credit union executives control all the messaging with its FAQ’s and in this case, free Oreo cookies.

This is not a democratic election process.  It is a monopoly managed by those in power who control all the variables in the very short time frame in which the messaging and balloting is done.  To end a charter should require a minimum number of members to vote, at least 20%, and provide a process for opponents to have access to members.

And the easy solution:  Require every voluntary merger where the dissolving credit union has 7% net worth, to issue a public RFP for bidders and that there be a minimum of two proposals received.

RFP’s are a routine process in virtually every consequential credit union decision including technology choices and even the hiring of consultants who submit proposals in response.

NCUA should lay out the minimum RFP contents and then review the numerous responses.  The credit union board has the data for why one option was chosen over another to recommend to members.  Here is how the process works in a good merger.

The Apostates

The word apostates refers to someone whose actions or inactions, suggest they have totally abandoned or rejected their core beliefs or principles.  Or maybe have no settled ones at all.

In this example of Member One’s executive suite and board’s professional credentials, the public record of merger disclosures versus  the aspirations presented on the credit union’s website, all combine to give the impression these leaders abandoned whatever belief they had in their 84-year old credit union. Rather it was the members whose voices spoke up for the credit union while those in leadership sold out. (See one example at end.)

The role of NCUA’s three person board is also critical.  What is their understanding of the  cooperative charter?  How is it different from banks, other than the tax exemption?  What are the role and rights of member-owners?   What does democratic governance, one person one vote entail, when board elections are rarely held?  When only 3% to 4% of owners vote on the continuance of their independent charter, how meaningful is this process for mergers?

If the board believes the proper policy is letting the free market work its will versus setting regulatory boundaries, why is there no support for actual transparent market solutions?   Why do bank owners reap rewards when bought by credit unions, but credit union owners receive nothing when control is transferred to a credit union third party?

Chair Harper, Vice Chair Hauptman and newcomer Otsuka have either turned a blind eye or have no problem with senior executives capitalizing on their positions for self-enrichment-and the members left holding an empty bag.

NCUA’s current board has taken no action on the growing number of examples where the fiduciary duties of all decision makers to protect members’ best interests have clearly fallen short of the clear standard presented by its General Counsel.

In the end this benign neglect will erode the financial and reputational foundations of the cooperative model.

Creating An Unsound Cooperative System

Ultimately this intentional or unintentional fiduciary  abandonment by all parties will only spawn greater and greater incidents of insider sell outs in the pursuit of growth and greed.  The result is  more and more risk put into fewer and fewer baskets.

This increasing concentration decreases the traditional advantages of local relationships and stability and reduces overall financial and business diversity within the credit union system.  The soundness of the system is narrowed; the variety of business models is reduced; and the traditional credit union advantages of local knowledge, control and earned loyalty are lost.

The unique design of democratic member-owned financial alternatives serving their communities faithfully over generations is sacrificed on the altar of bigness.

The cooperative model has been turned upside down.  It no longer serves members interests first, but rather the personal ambitions of the institution’s leaders.

One Member’s Voice

When those in governmental or private positions of authority forget where their accountability is owed, the prospect of member rebellion grows.  Who can forget the taxi drivers attending NCUA board meetings to lobby for member-focused solutions?

In the case of Member One, a person who served the credit union in leadership posted his logic for why this merger was not in the members’ interest on NCUA’s website.  When posting comments NCUA “will review, redact and post submitted comments” and “also reserve(s) the right not to post a comment that we believe is false, egregious, or unrelated to the proposed merger.”

Sometimes we call these critics prophetic.  When current leaders forget to whom their duties of care and loyalty are due, this comment presents a well reasoned, informed appeal for a return to core credit union principles.

The following is what this member “sees” versus what those in positions of authority  choose to ignore:

I, Dwight Holland, MD, PhD STRONGLY OPPOSE THIS MERGER AT THIS TIME as a former 7 year Supervisory Committee Member of M1FCU, and 2 years as a successful Chair of that Committee. My background:

I was on the Supervisory Committee of M1FCU from 1996 to 2003, with the last 2 years as the Chair. So, I know what I am talking about regarding Credit Union matters.

I was also the guy that pushed hard in 1996 to get on-line banking into the Credit Union when some of our Board Members weren’t sure what a domain name was, or why we should do this. So, I AM NOT opposed to change and adapting when necessary or it makes sense for our members.

The reasons I am opposed:

1. We lose LOCAL CONTROL and influence in the governance of the Credit Union because we are being swallowed by a bigger fish. The smaller fish in the pond of merger always loses its identity, culture and influence with time, despite promises by the Board and CEO of both Credit Unions.

2. We are a HEALTHY, overall well-managed credit union that has grown to around 1.6 Billion dollars. Why surrender this LOCAL achievement and control to a financial entity in Richmond?

3. MemberOne started out as the N&W Credit Union, and grew with our own economy, mergers and healthy acquisitions of struggling credit unions in a non-predatory way. That rich history and legacy will disappear with this merger into the mists. As member number 4404 that started as a 6 year old, I personally don’t like that notion. I can see people in leadership, and talk to them directly, and they will listen. Having control going to Richmond will dilute that “personal touch” dramatically.

4. I am the Treasurer of a state-wide Military Organization that uses a national credit union (over 10 Billion in size) for its banking purposes. Trying to get help with such a large organization is just like dealing with a large bank. It is tedious to get anything done, when something doesn’t go well, it took me and national level leaders in our organization over 1.5 years to get a very simple, but critical thing settled. The larger an organization is, the harder it is to get through the layers of bureaucracy. Staff sometimes in large orgs just doesn’t “need” to care about you for their performance reviews. That’s not true for more locally controlled orgs.

5. As M1FCU member, we often give forbearance to our friends and neighbors regarding loans and the like if they as for it, and work with them to help. Larger, more distant Credit Unions, cannot, and generally will not do this to the extent that a well-run locally controlled one will.

6. There are more reasons not to merge that relate to insurances, benefits, control of wages locally, etc, but I’ll let others deal with those.

The “incentives (for executives) to stay” at the end of the meeting notice seem extraordinary – why is such an incentive needed? There would certainly be others available to hire who are well qualified should these people choose not to stay.

Well more than a half million dollars is being promised to these five individuals! That amount would best serve members in so many other ways: beefing up certificate and savings rates or assisting those who need loans, for example, would certainly serve the members better than this huge amount flowing into individual pockets.

I do not see numbers that benefit members of the credit union except those receiving incentives to stay. Respectfully, there is no way those employees are worth that much to stay. How much would the rest of the members receive to stay rather than to take our business elsewhere? I see no way this merger benefits the members except the 3 or 4 mentioned in the letter we received.

 

 

 

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A Merger Made For Members

(This is a story by Marc Rapport published on creditunions.com on April 24, 2017.  Reprinted with permission)

Gas & Electric Credit Union in Rock Island, IL, has set the standard for transparent transactions that ensure any movement on a merger is for the members’ sake.
RID Federal Credit Union had 600 members, $4 million in assets, and a dim future when it sought a suitable merger partner in the Quad Cities.

CU QUICK FACTS

Gas Electric Credit Union
Data as of 12.31.16

HQ: Rock Island, IL
ASSETS: $71.3M
MEMBERS: 5,169
BRANCHES: 2
12-MO SHARE GROWTH: 0.02%
12-MO LOAN GROWTH: 3.1%
ROA: 0.60%

That was in 2013. In 2015, the credit union, which served the local Army Corps of Engineers, merged into Gas Electric Credit Union($71.3M, Rock Island, IL), culminating a process that could serve as a template for how to merge a credit union in a way that benefits both organizations and their members.

The Challenge

After years of considering a merger, loan defaults and investment returns that couldn’t keep up with operational costs forced the board’s hand at RIDFCU.

Karen Hagerty, a biologist and project manager with the Corps who was an RIDFCU board member at the time, says the board delayed merging mainly because it didn’t want members to lose an institution that had been around for a long time, and it didn’t want the credit union to lose its identity.

But independence was not in the future.

After serious strategizing and belt-tightening, it became obvious our credit union was not sustainable, Hagerty says. We began looking at merger options.

RIDFCU had experienced staff but could not offer internet banking, debit cards, or other basics members expected. The credit union had just stopped growing.

(photo: Karen Hagerty is a project manager with the Rock Island District of the U.S. Army Corps of Engineers and a board member of the former RID Federal Credit Union)

It had been losing money for several years and its net worth had declined as a result, says Daryl Empen, president and CEO of Gas Electric. It also had an engaged board of directors and experienced staff. I think they truly tried to turn things around, but they were simply unable.

The Process

The RIDFCU embarked on the merger process with some specific goals.

We wanted to keep our local office open and were looking for a well-developed network of locations as well as online banking, credit and debit cards, and ATMs, Hagerty says. We originally thought a credit union with many locations would be a better fit for our dispersed workforce. Technology allows remote access but nothing takes the place of someone who cares enough to know your name.

The board sent eight requests for proposals (RFPs) and interviewed five credit unions. That original group did not include Gas Electric. It was an RIDFCU board member, who was also a member of Gas Electric, who suggested the credit union talk with Empen about his credit union and its two mergers more than a decade ago.

The board was so impressed with Daryl’s leadership and philosophy that we also extended an RFP to Gas Electric Credit Union, Hagerty says.

Insights From Vetting

The RFP and interview process was eye-opening.

We learned everyone wanted to merge with us and most of them were interested in using our locations to expand their operations, Hagerty says.

RIDFCU’s assets were in decent shape because it had started the merger process relatively early, Hagerty says. And all but one of the credit unions were responsive and eager to share information.


(photo: Gas Electric Credit Union President and CEO Daryl Empen poses for a holiday party photo with his staff behind him.)

We were shocked by the lackadaisical attitude of one credit union that had been pursuing us for many years, she says. I guess it took for granted we would want to merge with it.

Darron Niles, an RIDFCU board member who now fills the board seat Gas Electric reserved for the merged credit union, attended meetings with prospective merger partners and says he learned some were just looking to gobble up RIDFCU. That wasn’t the case with Gas Electric.

Gas Electric, with its closed charter, looked at us like an additional member group, he says. The numbers worked financially, but our members became part of something bigger and better without losing RIDFCU’s identity completely.

The Decision

RIDFCU members agreed to merge with Gas Electric by a vote of 145-6 on Dec. 16, 2014.

The completed merger in 2015 was the culmination of a process that began with that initial meeting with RIDFCU’s board where Empen says he answered questions such as: What questions should RIDFCU be asking? Could it make it on its own? If so, how?

The board members engaged in a deliberative, thoughtful process to make the best decision for their members, Empen says. That’s what impressed me the most. It was clear this was what was best for the members, not just the board of directors.

“There is nothing wrong with growth. We all need to grow, but it should be based on member benefit.” Daryl Empen, President/CEO, Gas Electric Credit Union

For its part, Gas Electric tried to be transparent.

We were required to have a membership meeting to approve the merger, Empen says. We could have done the bare minimum for notifications, but we advertised it heavily. We wrote a detailed article in our newsletter about the proposed merger and the reasons behind it. We invited members to the meeting to vote.

That transparency also helped ease the fears of RIDFCU’s membership, Hagerty says.

We struggled to keep the rumor mill under control, she says. Members appreciated the clear communication of why we were pursuing the merger and what would happen if we didn’t.

The Aftermath

Gas Electric kept the RIDFCU office open and its longtime manager, Bev Rice, stayed on, providing a sense of familiarity and a cheerleader.

When you have the support of the staff, it makes the process smoother, Empen says. She’s (Bev Rice) has been a fantastic promoter of the credit union and the new services.

The main office of Gas Electric Credit Union, one of two branches, is also located in Rock Island, IL.

Those new services include debit cards, a checking option that returns 2.25% in rewards, internet and mobile banking, bill pay, and mobile deposits. Gas Electric also offers better rates on saving and loan rates than RIDFCU did, and a $250,000 bonus dividend paid out in 2015 didn’t hurt relationships.

That was a nice feeling to be able to reward all our members, including the new members from RIDFCU, Empen says.

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Credit Union Member-Owners Rebel Against Proposed Merger of their $1.7 Billion Credit Union    

Synopsis:  Due to the length of this post, the following is a quick summary of this merger proposal.  The five highest paid executives of Member One FCU will receive $570,000 in bonuses; the continuing, Virginia Credit Union, takes over a very sound $1.7 billion balance sheet and adds $155 million new capital to its net worth, and the members receive only free cookies for their 84 year old successful credit union.

Tomorrow, July 30, 2024, member voting will end on the proposed merger of Member One FCU in Roanoke, VA with Virginia Credit Union (VACU), in Richmond.

Member One was founded 84 years earlier to serve the employees of the  N&W railway headquartered in Roanoke.  Today it is a multi-seg charter with $1.65 billion in assets, $1.5 billion in loans, 159,000 members served by 335 FTE’s in fifteen branches.  (data as of June 30, 2024)

The members will receive nothing from their $155 million of collective capital (9.57% net worth) and four generations of loyal support.

The Member Notice dated June 13, 2024 confirms that this merger is not about change but rather continuation of the business status quo:

“Same knowledgeable, Friendly Employees”

“ the credit union’s main office and branches will remain open, subject to good practices and safety and soundness.”

“Changes to services and benefits:  There are no anticipated changes to core services and member benefits.”

The only advantages referenced in the Notice are general assertions about potential future capabilities which are completely undefined either in time or factually.  An example: “we would ultimately gain economies of scale.”

This decision facing members is simply stated by member Carrie Adams on the opposition members’ website:

“Saying “no” to a merger is saying “yes” to the future you believe in.”

The Opposition’s Campaign and Web Site

The member-owners opposing this sale have established a website VoteNoMemberone.org that documents the reasons for their opposition.  It includes a countdown clock clicking to the voting deadline tomorrow, Tuesday.  It urges members to vote No.

The basis for their opposition is summarized in six points:

  • There is No Real Benefit for Members
  • This is Bad for the Roanoke Valley
  • VACU is only after the numbers
  • Different Culture, Different Fees
  • You will become a number, not a Member
  • You are NOT being communicated with

In the Your Voice Heard portion of the site, members’ comments document these statements. In the almost 100 posts one quickly senses there is nothing to be gained and much to be lost in this betrayal of members’ trust.  Here are some examples of members and the community “being left in the dark:”

I had no idea! Thanks for the information about the credit union, brings a light to us members being left out in the dark.

I sent Member One some feedback through their website and had asked some questions, expecting to hopefully get a response. I did. I got a canned response asking for my information to contact me rather than just answering my questions through their email response. . .

We can say goodbye to the hometown feeling of being a valued member to becoming just a number.  

Yet another local business being bought out by a BIG City Business. The only notice we got about the merger was a tv news report, so if you didn’t see the news or a friend tell you about it, you would never have known. They did not even send out an email notification or a notification with our statement. What the hell are you hiding Member One???

The proposed transaction announced in January 2024 is already hurting Member One’s local business reputation:

Just recently I was looking to move and purchase a home. When I talked to my realtor about financing the mortgage; I had planned on using Member One since I had loans with them in the past. My realtor told me they were not using Member One for any mortgage financing since they had announced the merger because of the uncertainty of they stability at this time. They also said they knew of other realtors not using Member One for the same reasons.

Freedom First is now charging for checking, I started to look at Member One, but seeing they are getting eaten by a larger credit union, I went in a different direction

I work for a local car dealership and found out that VACU doesn’t operate loans on Saturdays, thats going to hurt a lot of local business if we can’t get autoloans approved like they currently are at Member One.

Members’ Voices Amplified

The posts in the Member Voices portion of the website also contains comments from insiders, current and former employees:

I am currently an employee at MO at a branch and wish to remain nameless for fear of retaliation. VACU’s goal is to be a $10b CU within the next 5-6 years. MO is just a ‘cog’ in the wheel and there is no true benefit to merging for MO members. . .

Truthfully, there will be people let go at some point b/c of redundancy, while nothing will change at first, by Operational Day 1 in late 2025 or 2026, you will likely see fees change, call center moved to the one in Richmond.

And: As a former employee of MO, I recall discussions about a $10 billion deal some time ago. Initially promoted as ‘better together,’ the attitude shifted within weeks to a rush mentality focused on pushing through the merger, resembling more of a takeover than a mutually agreed merger. After getting ‘bad vibes’ from that, I left the company.

The opposition has been reported in a story on the local news radio WFIR July 24. The  report opens with  concern about Roanoke losing another local company through this “sell off.”  The credit union spokesperson replies that this is a merger of “two very healthy organizations” and that “bigger will be better” in responing to members’ criticisms.

Researching Virginia Credit Union’s Online Reputation

The opponents’ site provides links to multiple social media and other posts in a section called VACU Reviews And Information.  These 12 links include VACU’s own mobile app with 177 reviews and a rating of 2.6 out of 5. Other sites such as  Facebook, Yelp (2.2 score from 17 reviews) and Grassroots (3.5 score and 18% approve of CEO) all have similar low evaluations or scores of VACU’s services.

Needless to say, none of this rating information was provided to Member One voters being asked to transfer their future and all their collective resources to this new institution.  One wonders if there was any due diligence by the executives and board of the credit union.

So Why is This Merger Happening?

One member posed this question in a comment:  Why would our local credit union allow an outside credit union buy them out?

Two members posted their conclusions referring to  the Member Special MeetingNotice:

I read the top brass gets a big payout if the merger goes through. . .

Wow, looks like the c-suite gets a nice ‘bonus’, I bet other employees won’t see anything in the way of retention or bonus pay.

These comments refer to the $575,000 in bonuses ($250,000 to Frank Carter, CEO) listed for the five most highly compensated employees in the credit union in the Notice.

One member noted: The “incentives to stay” at the end of the meeting Notice seem extraordinary – why is such an incentive needed? There would certainly be others available to hire who are well qualified should these people choose not to stay. Well more than a half million dollars is being promised to these five individuals! That amount would best serve members in so many other ways. . .

Incomplete Information

But even this disclosure is incomplete and therefore misleading.   NCUA rules require that members be provided a “detailed description of all merger related financial arrangements.  This description must include recipient’s name and title as well as at a minimum, the amount of value of the merger-related financial arrangement expressed, where possible, as a dollar figure.” CFR $ 708b.106(b)(4)(v).

There is no disclosure of any contractual employment terms suggesting that these five are “at will” employees even though the Notice clearly states a bonus commitment and conditions.  It would be highly unusual for senior executives not to have a written contract from their new employer,  with their bonus benefits and future employment after the merger.  Those facts must be disclosed under the rule.

Secondly, Member One’s call reports list a Select Employee Retirement Plan (SERP) valued at $15.5 million and an employee life insurance fund valued at $16.5 million-a total of $32 million in benefits.  These plans’ vesting and/or payout terms will activate when Member One ceases to exist or under “change of control” clauses.  These changes in payment terms due to the merger were not disclosed.

This total compensation information is critical. CEO and executive pay  is readily available from the IRS 990 Form filed by Virginia Credit Union (VACU), as a state charter.  While an excerpt is printed in the website’s VACU Information section from CAUSE IQ, those totals are incomplete when the full VACU 990 for 2022 is analyzed.

That report’s 2022 Schedule J shows VACU’s CEOs total compensation as $2.216 million.  The top eight employees received $7.4 million in total or an average of $917,265 each (the top two received almost 50% of the amount).  VACU’s compensation approach from IRS 990 schedule O clearly states the credit union “has a compensation philosophy of paying salaries and benefits that are competitive with . . .peers in the credit union and financial industries (banks).”

As stated in the Notice, VACU CEO Chris Shockley will be President/CEO of the combined credit union.  Certainly his more recent compensation is relevant to Member One’s member-owner’s vote.

Transparency is critical for informed decisions as well as preventing self-dealing.   Member One owners should know what their leaders who made these decisions are paid now and promised in the future.  In addition to disclosing all self-interest there is another critical factor from this information.  Such data points to the character of the arrangers for this transaction.

The Values Questions

Is 2022  CEO Shockley’s total compensation of $2.2 million is almost double the amount of the total of all 18 community grants and donations made by his credit union in the same year of $1.22 million.  The phrase that “charity begins at home” would seem apt when it comes to how the leadership of VACU distributes net revenue between executives and the members in the community.

This example provides insight into one of  the benefits asserted in the Member Notice that “this merger will combine two established entities that share similar values and commitments to their members, people and culture.”  It raises the question  of what due diligence Member One Board chair Joesph Hopkins reviewed when signing this member Notice.   Or do these two boards’  understanding of fiduciary duty to members and the community only arise after their executives ambitions have been fully satisfied?

VACU has received publicity before about its implementation of coop democratic values.   In two posts The Fix is In and We Own VACU  members’ frustration in being totally ignored when submitting nominations for four board seats is described.  Member voting for directors is not the the standard VACU election process; rather the nomination committee only selects the number of their preferred candidates equal to the open seats, no outside nominations considered.  All chosen then confirmed by acclamation.

A Perpetual Coop Model?

One other perspective on the credit union model which is designed to be perpetual by paying members collective wealth forward to benefit future generations.

Member One is 84 years young in 2024.   The two senior executives, CEO Frank Carter mad EVP Jean Hopstetter  joined in 2008, or 16 years ago.  These two leaders have had their roles for less than 20% of the credit union’s history.

However their legacy is to end the credit union’s charter and turn its future over to a third party.  This is not succession planning failure.  Rather it is pulling up the ladder of opportunity so no one else will have the professional leadership and financial chances they have enjoyed.

The Consequences for the Cooperative System

As in other manipulated, self-serving mergers powered by self-interest, what happens in Roanoke will not stay in Roanoke.  VACU’s minuscule $575,000 personal payments to five Member One executives to acquire $155 million in equity and a $1.7 billion sound balance sheet will not go unnoticed.

This equity capital addition is vital to VACU as it reports a loss on the market value of its own investments of $153 million at March 2024.  The same FASB 115 adjustment for Member One  is zero.

The absence of any pretense of due diligence by Member One’s board and senior executives, the alienation of the members and Roanoke business community and the compromise of the values credit unions are supposed to reflect will resonate throughout the coop system and in political capitals locally and nationally.

Instead of credit union members being paid the full value of their ownership, a small number of executives will see the chance to cash out, to sell out the members, their community and the coop system.  VACU executives know the market value of what they are being gifted as they compare their performance with banks.  No other financial firm would ever propose such a deal to their owners-only a misguided credit union board. This backroom deal is the stuff of cutthroat capitalism, not cooperative purpose.

Where is NCUA?

The agency is fully aware of these events but have neither the courage or convictions to  implement their own merger rules.

All three board members love to debate diversity, equity and inclusion.  Only equity has no real application in practice.  Equity’s traditional understanding of fairness, transparency and equal opportunity has just become another form of virtue signaling.

When board members have have no vision for either cooperatives or for principled leadership, a certain segment in credit unions quickly learns that they can game the system for personal advantage.

If this seems like a harsh judgement, I challenge each board member and their senior staff to read the four page member notice in this case.  Then ask if they truly believe that the information presented is sufficient for any member, let alone an engaged analyst, to determine if this is a fair deal for the owners.

The basic regulatory approved disclosure document provided members  is nothing more than marketing rhetorical phrases filling out NCUA approved forms. There is no relevant information or facts to make an informed decision.  No other state or federal financial regulator would ever accept this superficial disclosure as adequate for owners’ deliberations.

I give the final assessment of this ongoing credit union system failing to a member.  This person sees clearly what any concerned credit union leader would recognize instantly about  this so-called merger proposal.  This common sense wisdom puts to shame the actions and inactions of the movers and approvers of this event:

I’m advocating for a “no” vote on the credit union merger because it’s crucial to preserve our community’s values and personalized service. Our credit union has thrived on being member-focused, providing tailored financial solutions and fostering a strong sense of community involvement.

A merger could jeopardize these qualities by potentially changing fees, terms, and services in ways that might not align with our original values. Maintaining our independence also ensures we retain decision-making power and governance autonomy, which are vital for keeping our institution accountable and responsive to our members’ needs.

Voting against the merger is about safeguarding what makes our credit union special and ensuring it continues to serve our community with integrity and dedication.

Amen

A note from IRS 990 Schedule O for 2022 stating VACU’s compensation philosophy:

PERIODICALLY, THE BOARD OF DIRECTORS ENGAGES AN OUTSIDE CONSULTANT TO CONDUCT AN INDEPENDENT REVIEW OF EXECUTIVE COMPENSATION AND BENEFITS TO ENSURE THE APPROPRIATENESS OF TOTAL COMPENSATION LEVELS.

THIS EVALUATION LOOKS AT THE AVERAGE COMPENSATION AND BENEFITS OF EXECUTIVES AT FINANCIAL INSTITUTIONS OF COMPARABLE SIZE, INCLUDING BANKS AND CREDIT UNIONS. THIS PHILOSOPHY RECOGNIZES THAT THE EXTENT TO WHICH WE ACHIEVE AND MAINTAIN THIS GOAL MUST BE BALANCED WITH THE OVERALL FINANCIAL HEALTH OF THE ORGANIZATION.

THE CREDIT UNION HAS A COMPENSATION PHILOSOPHY OF PAYING SALARIES AND BENEFITS THAT ARE COMPETITIVE WITH EMPLOYERS IN THE SURROUNDING METROPOLITAN AREAS AND WITH PEERS IN THE CREDIT UNION AND FINANCIAL INDUSTRIES.

ANNUALLY, EMPLOYEES RECEIVE PERFORMANCE REVIEWS WHICH DETERMINE MERIT INCREASES. THE PRESIDENT/CEO COMPENSATION IS APPROVED BY THE BOARD EVERY YEAR.