Category: Local Effect

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What to Do When Credit Unions Go Rogue?

Synopsis:  This detailed analysis of Credit Union 1 (Illinois) presents a pattern of declining financial performance covered up by multiple merger acquisitions, one-time sale events and rented capital.  The future fortunes of eleven local sound credit unions have been destroyed in just two years.  I believe this kind of predatory activity, left unexamined by all those in positions of responsibility, will lead to a reassessment of the advantages of the credit union charter by external legislators. 

The article’s length is to present as much of the facts from these events so readers can make their own assessments. The situation summarized is I believe an example of internal industry reckless actions which present a false perception of success. The question for readers is: Does something need to change?

When there are no guardrails for a financial institution, anything goes.  It is the law of the jungle; or what some describe as free market capitalism.

The dictionary definition of rogue is “an elephant or other large wild animal driven away or living apart from the herd and having savage or destructive tendencies.”  Another reference is to unprincipled behavior by a person or persons.

This word rogue came to mind as I reviewed the activities and results  of Credit Union 1 in Lombard, Illinois, since its conversion from ASI share insurance to NCUSIF in February 2022.  A summary of the credit union’s merger tempo since this insurer changeover is shown in the following table for the ten already completed or scheduled to be by the 4th quarter of 2024.

In addition, the $12 million Synergy Partners CU, Chicago announced on October 17 a members’ vote for January 2025 to merge with Credit Union 1.  That would increase to 11 mergers in only two- and one-half years.  These will transfer over $650 million in total assets and over 62,000 members’ financial futures to Credit Union 1’s control.

In its October 2024 Member Notice, Synergy listed 23 Credit Union 1 branch  operations in six states including the head office in Lombard, Illinois.  The two furthest branches are in Bradenton, FL (1,230 miles) and Henderson, NV (1,750 miles apart).

Other new or ongoing initiatives along with this accelerating merger expansion activity include:

  • The credit union’s continuing and new sponsorship and marketing promotions with four outside organizations:

Official Banking Partner of Notre Dame Athletics

Naming rights to the UIC Pavilion, Chicago, for 15 years and $750,000 in  scholarships for a total of $10 million

Credit Union 1Amphitheater, Tinley Park  naming rights

The Western Conference tie-in:  On October 3, 2024 the Big West Athletic conference announced Credit Union  1 had become its official financial and literacy partner and the entitlement partner for the Mountain West Basketball Championships and all Olympic Sports Championships.

  • On June 3, 2022 Credit Union  1 announced agreement to purchase  the $311 million NorthSide Community Bank, located an hour north from Lombard  in Gurnee, IL.  Both boards approved the transaction subject to regulatory and bank shareholder approval.   The deal was not completed.  There was no public explanation.
  • In May 2023 Credit Union 1 announced it would serve New York cannabis entrepreneurs who plan to open marijuana businesses as part of the state’s CUARD coalition. The same CUTimes article reports, “Credit Union 1 has been selected to participate in the Illinois Department of Commerce’s Cannabis Social Equity Loan Program and is also the preferred banking partner of the Chamber of Cannabis in Las Vegas..”

The Merger Frenzy

Even with these multiple marketing and business initiatives, the core of Credit Union 1’s growth efforts are mergers. The operational intensity of acquiring and converting 11 credit unions (six outside Illinois) and all associated member and vendor relationships in just over two years would be a major operational challenge for any organization.

The immediate question is how will the members of the merged credit unions benefit?

In the Member Notices posted on NCUA’s website for these combinations, the wording used under Reasons for Merger, Net Worth and Share Adjustment or distribution are identical. Members’ collective reserves are never distributed to owners even when the merged ratio is higher than Credit Union 1’s.

But zero is not what several of the merging CEO’s and senior staff are gaining.

Rewards for the Enabling CEOs

In the case of the $34.4 million Enterprise CU in Brookfield, WI, the  24-year tenured CEO, Jeff Bashaw, will receive a minimum ten-year contract with a base salary increase of $38,000 on top of his current compensation. I estimated (absent the required 990 IRS filing) that to be a minimum of $125,000 per year plus a $100,000 bonus upon closing. Total minimum amount $$1,350,000.

The credit union is in sound shape at 10.6% net worth, a profitable, single branch with low delinquency.  After turning over his CEO responsibility, Bashaw’s role if any will be a branch manager or other honorary title.  This ten-year contract with a pay raise seems merely a lengthy sinecure.  The 8 employees and 2,815 members receive nothing-except the retiring CFO who will receive a bonus and severance of $110,000.

A Minority Depository Institution Leader?

At the $34 million Financial Access FCU in Bradenton, FL, the situation is more complicated.  The credit union prior to merging, reported a 1Q ’24 loss of $517, 310.  However, its net worth was still high at 18.4% ($6.4 million) and delinquency of only .39%. Was this a temporary loss or other problem?

In this merger CEO Sherod Halliburton is receiving a total of $3.2 million composed of a bonus of $125,000, an eight-year employment contract at $200,000 per year, and 100% immediate vesting of a $1.5 million split life benefit plan.  He no longer has any CEO responsibility as the credit union will become merely a branch operation. The 15 employees and 2,577 members of Financial Access received nothing for their loyalty.

In a CEO Profile published by Inclusiv in February 2022, prior the merger efforts, Halliburton is lauded for his leadership.  The article remarks on “his strong community ties and business acumen and how he decided to “bet on me” when offered the CEO position” eight years earlier.  Further he points out that he is “one of a limited number of African American men running a financial institution and he accepts the great responsibility accompanying that honor.”

The profile lists his efforts “toward racial equity and responsibility.”  He states, “We’ve gone from a somewhat negative perception . . . to now being viewed as a vital part of the economic infrastructure.”  The credit union received two technical assistance grants to upgrade technology to meet his goal to double membership in three years. He closes with this affirmation: “We’re here to change lives. I want that to be the enduring message even when I’m gone.” 

This Bradenton community credit union which he described as “a vital part of the economic infrastructure” no longer exists. Halliburton is now a Market VP for Credit Union 1 for the next eight years.

An October 2024 Approved Merger

The most recent example of CEOs cashing in is the $116 million Illinois Community CU with over 11% net worth and delinquency of .5%.  In this acquisition, CEO Thor Dolan will receive a minimum in immediate total benefits of $1,904,494.

This total is  described in the Member Notice as follows: a retention bonus of $150,000; deferred compensation of $50,000; a salary increase of $33,724 added to his 2023 reported 990 compensation of $245,770  or $279,494 per year (no employment length given}; and immediate 100% vesting of a $1,425,000 split dollar 20-year life insurance benefit plan.

This salary increase is despite the fact he is no longer CEO, either managing branches or a regional rep, both with no CEO operating responsibilities. Every additional year he remains employed will add another $280,000 to the package. There is no indication the 38 employees (except the CEO and CFO) gain any assurances of employment; and the 10,482 members receive nothing.

The Fates of the Merged Employees and Members

Each Member merger Notice posted by NCUA which I reviewed includes two standard assertions:

  1. The credit union’s branch location(s) will remain open and become a part of Credit Union 1’s nationwide branch locations.
  2. Employee Representation: Employees of the credit union will be offered employment with Credit Union 1.

However intended, neither of these statements have proved lasting in practice.  Comparing the branch listing in the August 2023 Kankakee Valley Notice with the latest listing in the Synergy’s October 2024  Notice, six of the branches in the earlier Notice no longer exist, including three for Emory CU in Georgia and three for Illinois credit unions with single branch operations.

As for employees’ fate, for the twelve months ending June 2024, Credit Union 1 reported a reduction of 67 FTE from 418 to 351.

As a result of Credit Union 1’s merger strategy, there will be eleven fewer local charters which were operating well, a reduction of 70-80 volunteer directors and member committees, and loss of all local relationships and legacy brands.

All member savings and loans, collective capital, liquidity and fixed assets are now in the full control of an institution for which the members have no connection or first-hand knowledge.  And in some cases thousands of miles distant. Ironically, Credit Union 1 states in all its promotions that anyone can join, so if members really thought this was a better deal, they could join anytime.  But that would be a much harder marketing task than just purchasing the business by paying the CEO—and getting the members’ accounts and accumulated reserves for free.

Members also have a totally new financial institution relationship to navigate. The Credit Uniion 1 material sent to each member post-voting is a 15 page pdf system conversion process and timeline.  Member instructions include setting up new payment and loan options, establishing digital accounts and using online financial tools.

Depending on the version usent, the membership agreement for each merged credit union is a minimum and 20 pages. It contains essential information about fees, rates, funds availability, mandatory arbitration and multiple other disclosures which few will be able to read through.  The members will learn through experience how everything has changed.

An important difference in Illinois state versus federal charters is the use of proxy voting in all member required elections, including mergers.  For Illinois credit unions, proxies are controlled by the board.  I did not see this fact disclosed in the FCU mergers, where proxies are not permitted.  In essence, FCU members turn their voting governance power over to a new board.  These directorst can routinely reappoint themselves without any member vote. More about this later.

Implementing a Capital Markets Strategy-Without the Risk

Credit Union 1’s merger campaign is an adaptation of a traditional capital market strategy of hedge funds and investment firms.  Except these buyouts of numerous, smaller independent firms in an industry (think hospitals, barber shops, rental housing, or local HVAC firms) require putting their own capital at risk.  These new hedge fund owners then burden their acquired firms with the debt used to finance the buyouts, strip and sell the highest value assets, reduce costs and services to pay for the debt coverage, and ultimately resell the merged business back to the market for a capital gain.

Credit unions reverse this model in mergers—they use the acquired assets, not their own members’ capital, to finance these acquisition sprees.  Except when buying banks. The equity in these “mergers” is often transferred in full with no payout to the owner-members.  The only necessary sales pitch required is to convince the CEO to bring the board along.  There is zero risk to the continuing credit union. The “acquisition” is free. The members lose all their financial and institutional legacy and become subject to the control of a board and CEO that will be completely new to them.

We learn in the Notices that no staff or board due diligence or alternatives is presented. There is rhetoric about “technology and systems that align with members needs.” And, how “internal core values align with our own and .  . . confident (that) members will experience a much needed upgrade in the quality of service.”  No facts, just vague promises.

These same words were used in the eleven Notices showing the abdication of any director or CEO independent assessment.  The words are merely a formula from previous transactions to pass regulatory approval.   The members are given no objective measures or specifics that would identify better rates, fees or specific services.  Just indefinite promises.

As for core values, institutions don’t have values, people do.  So the acquirer’s goal is to find CEOs willing to cash out of their leadership role, rather than evaluate what is in the members’ best interest.

The Numbers Show the Urgency in Credit Union 1’s Merger Efforts

Some readers may believe this is just another example of self-dealing in mergers.  It is.  But there is a major financial imperative driving this effort.

Credit Union 1 is desperate for mergers not simply for growth, but because its financial performance is a house of cards.  For the past five years it has been unable to generate a normal operating net income from its own balance sheet assets.  As a result, it has turned to non-operating gains, acquired and borrowed capital (sub debt) and other financial options that disguise its very poor or sometimes non-existent internal rate of return. Here are some of the numbers.

At December 2021, Credit Union 1 had $106.8 million net worth ($98.9 Undivided Earnings -UDE- and $8 m other reserves). The net worth ratio was 8.7%.  Net income of $13.8 million that year was largely driven by a $7.5 million non-operating gain on sale of fixed assets.

At June 2024, the credit union reports just $88.6 million in undivided earnings, $8 million in other reserves for a total $96.6 million, that is $10 million lower than at December 2021 total.

To report an acceptable net worth ratio the credit union now includes $20.5 million in subordinated debt (borrowed capital), $45.1 million in equity acquired from credit union mergers, and a $7.1 CECL transition reserve.  Without these non-operating additions to reserves, Credit Union 1’s net worth ratio would be only 5.8% versus the reported 10.2%.

But even the $88.6 million in UDE at June 2024 is misleading.  At yearend 2020 the credit union reported $16.9 million in land and buildings. Three and a half years later, June 2024, the total is just $2.9 million. In the same period the credit union reported $15.1 million gains on sale of fixed assets.  In the 18 months ending June 2024, the credit union also had non-operating gains on loan sales of $4.6 million.

It is not possible to determine how much of these sales are from Credit Union 1’s own assets or from the loans and fixed assets acquired via mergers.  These sales amount to almost $20 million of the $88.6 reported UDE in June 2024. These are one-time events that are reported in net income thereby adding to retained earnings, but in fact are non-operating, one-off gains.

Safety and Soundness Questions

If these one-time gains are subtracted to show actual operating net worth generated from continuing operations, the net worth ratio from internal operations would be only 4.6%. Hence the credit union’s drive to raise external capital (sub debt) and acquire other credit unions’ reserves.  Its dependence on external capital and one-time sales raises significant safety and soundness questions.

Internal operations are not generating sufficient capital to maintain required net worth minimums.  For example, in the full year 2023, the credit union would have reported an operating loss of $429,000 except for the one-time gains on sale of fixed assets and loans.  Through the first six months of 2024, the credit union’s ROA is only .39% or just .23% without extraordinary gains.  (all data from NCUA tables)

The financial results are in even steeper decline than what is presented.  If one considers the impact of adding merged shares and loans from the preceding four quarters prior to June 2024, there are critical balance sheet trends.  These five mergers added approximately $210 million in loans and $346 million in shares to Credit Union 1’s balance sheet.  Without these external gains, the credit union’s decline in outstanding loans for the 12 months ending June 2024 would have been $288 million or 24%.  For shares, the falloff would be $73.3 million or a negative 5.5%, not the 4.6% increase reported.  The credit union also relies on $35 million in external borrowings for funding.

Since converting to NCUSIF, the credit union has reported growth and acceptable ratios only through the acquisition and then sale of fixed assets and loans, and using the free transferred capital to maintain its required net worth.

What to Do About a Runaway Credit Union?

 

Once NCUSIF-insured in 2022, Credit Union 1 has been on a merger and marketing binge which is hiding serious financial performance shortcomings.

In all credit unions the Board, as a group, holds the direct, legal fiduciary responsibility for the performance of the credit union. The Board members approve all policies and hire the leadership. The buck stops with the Board members – all of them.

This is especially true in Illinois which has an unusual provision in the state act that allows the board to collect proxies from all its members, thus giving the board full decision-making authority in all areas, including mergers.

This is the reason for the extended proxy explanation in the Notices of Merger of the five Illinois chartered credit unions which reads in part:

Illinois permits voting on merger proposals only at the meeting or by proxy.  If you do have a proxy. . . you may do nothing, and the board will vote in favor of the merger in your sted. . . If you have a proxy on file, to vote NO you must revoke that proxy by giving written notice to the board secretary. . . and then assign a new proxy to an attending member. 

This is why all mergers of Illinois’ state-charters are reported as virtually unanimous.  The process also puts a higher standard for due diligence and fiduciary responsibility on board members as they are now acting directly for the member.

There have been several recent class actions against credit unions around improperly disclosed overdraft fees and cyber breaches.  When merged Credit Union  1 members confront the reality of losing their independent cooperative some may be deeply upset. With their board’s unilateral actions and failures to document their duties of care and loyalty, these transactions could become fertile ground for such actions.

Where Are the Regulators?

Except for the several federal charters merged, initial approval is by the state as Credit Union 1 is Illinois chartered.  Most of the credit unions merged in MI, WI, GA, IN and IL are state chartered.   All the data cited above is in public call reports and in multiple year analysis formats on NCUA’s website.

The trends for Credit Union 1 are clear, the extraordinary payments to CEOs presented in the Notices, the copy-book wording in the Notices all the same, and the vigorous public marketing communications easily reviewed for this nationally aspiring credit union.

NCUA routinely signs off on all mergers even those characterized by extraordinary self-dealing (eg. CEO contracts with change of control clauses), no clear business logic or member benefit, and Notices with misinformation, disinformation and missing critical facts for any member to make an informed vote on the issue.

There are indications that this hands-off response is the NCUA staff and board’s preferred laissez faire policy. The outcome is fewer credit unions by encouraging smaller credit unions to merge with larger ones driven by monetary payouts  to achieve their policy of industry consolidation.  But of course there are no asset limits as recent merger announcements have demonstrated.

The explanations for this dual chartering supervisory failure are wanting.  In some instances, it may be a repeated failure by staff to do any elemental analysis. To my knowledge, there has never been a regulator “look back” to see if any of the merger commitments were followed up—even in a situation involving $12 million in members’ capital diverted to the merging CEO and Chair’s newly organized non-profit.

Regulators appear to lack a common sense understanding of events, not wanting to see or address the obvious conflicts of interest and board fiduciary failures.  They thereby become part of the problem, abetting the worst aspects of cooperative leadership.

The result is no regulatory guidance or even backbone to stand up for members‘ interests or rights.  There is no director-board check and balance on CEO’s ambitions or performance.  And no regulatory effort to hold accountable those credit union CEOs who use their positions of power and institutional wealth to take advantage of the member-owners of acquired credit unions.

A System Circling the Political Drain?

Instead of expanding member economic opportunity, credit unions are imitating the tried and profitable capital market efforts to roll up their smaller locally focused brethren though payoffs and the rhetorical promises of better service through—even if only virtual.

Credit Union 1’s “purchased members” have lost the heritage and identity their cooperative predecessors passed on to them.  Trust and loyalty earned over generations is gone.  Members will vote with their feet when they learn there is no more advantage to being with Credit Union 1 versus dozens of other online financial offerings just as easily accessed.

Credit Union 1 has maintained its regulatory financial requirements only by acquiring other credit unions’ capital reserves, one-time sales of fixed assets and loans, closing local branches and letting employees go, and borrowing sub debt capital.  These are efforts to buttress its balance sheet and cover its inability to earn an acceptable return on its own assets for its member-owners.

This practice will eventually be found out, the mergers will end. and the credit union’s safety and soundness will be much more closely scrutinized.

However, in the meantime, eleven local credit union charters are destroyed, their professional and community leadership roles ended, members’ long-time relationships to their credit union dissolved and the industry’s reputation put at political risk.

As Credit Union 1’s financial short comings become increasingly apparent, their external relations with Notre Dame athletics, the U of  I Chicago campus, the new WCC partnership and Tinley Park Amphitheater will be in jeopardy.  So too the industry’s public image.

I believe Credit Union 1’s actions are a threat to the future of the cooperative model.  Every system has “bad actors.”  That is why there are regulators. When directors fail in their fiduciary roles, and supervisors abdicate their appointed oversight responsibilities, the system’s integrity is at stake.

When other credit unions remain silent, state regulators default in their oversight, and NCUA  appears unconcerned about the consequences of these events, it is only a matter of time until cooperatives forfeit their  unique role in the American economy.

And should that day of reckoning come, thousands of credit unions  trying to do the right thing will be end up in the same reduced status as their rogue colleagues.

 

 

 

 

 

 

 

 

 

 

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An Example of Resilience from Bethesda’s Tastee Diner

What lesson does the oldest continually operating restaurant in Bethesda have for credit unions?  Especially those who believe they need size and scale to succeed?

In 1935 in the middle of the Depression,  the Tastee Diner began operations serving twenty-four hours a day.  (Note: the Federal Credit Union Act was passed the year before) The diner would close only  42 hours  a year from noon on Christmas eve until 6:00 AM the day after Christmas. However,  it reduced its hours from 5:00 AM to 10:00 PM after reopening from the covid epidemic.

Its long narrow layout is just like the typical  diner:  wooden booths or single seats at the counter where you can watch as the cooks prepare your meal at the open grill.

The menu specializes in “comfort food” such as a full  breakfast anytime.  Daily specials are offered– spaghetti or fish on Fridays, meatloaf and mashed potatoes , with two sides; and every familiar  sandwich option including grilled cheese and  hot dogs.  The menu has daily specials and senior selections at reduced prices.  Its real milkshakes are served in the metal mixer can which contains at least two full soda glasses of my favorite food.

The owner sits on a counter stool opposite the cash register to welcome you.  Sit anywhere.  Waitresses welcome you back.  You know their names.  Montgomery County  police on duty stop by for takeouts. High school students gather after football games. Families have birthday celebrations with young kids and floating balloons;.  “Seniors” like my wife and I, go to have an outing in a familiar setting.   The tunes on the jukebox at each table still cost just a quarter to hear Johnny Cash Walk the Line or other 1960’s Rock and Roll favorites.

A New Neighbor

In September 2022 a new neighbor opened its doors.   Marriott International cut the ribbon on its new headquarters, a 21 story building built using all the vacant land around the diner.

Screenshot

The chairman of this Fortune 500 firm (ranking at # 173) is David Marriott.  In the September 21, 2022 Washington Post article celebrating the opening, he presented the company’s history and how it chose DC as the base for this Utah raised family.

In short, David’s grandfather opened a root beer business in Washington after completing his two year Mormon mission assignment on the East Coast.  Ice ooid root beer from his first stand was not in great demand in winter cold, so the business expanded to hot food such as  the Teen Twist Ham Sandwiches, Mighty Mo  Burgers.  The business’ new name: Hot Shoppes.

Today, there are no Hot Shoppes. Marriott long ago diversified  into the airline catering and then lodging businesses. Now it operates 8,100 hotels with brands from Aloft to the Ritz -Carlton.

The New Building’s Notch

But what does this international food  and  hospitality conglomerate have to do with   Bethesda’s Tastee Diner?

In the 2022 interview with Chairman David Marriott the oldest, longest operating Bethesda restaurant came up this way:

The views are great from atop the glassy new headquarters, designed by the firm Glensler.  David pointed out the Sugarloaf Mountain in the distance. We were standing near a notch in the Building.  Twenty floors below was the reason for the notch:  the Tastee Diner building ,whose owners had declined to sell.

“When my parents were away, the woman who watched used take me there” he said. 

Not to Hot Shoppes?   “She liked “Tastee Diner,” David said.

The Priceless Moral of the Story

Want to know how to counter the threat and buyout temptations of even the most aggressive credit unions?

Have loyal customers who seek your product, especially those who care for the children of the founder of a restaurant chain or even a credit union executive.  Such loyalty is a variation of SECU’s mission statement: Send us your Moma! And also, keep local ownership of the business.

Following the Post story, the next time we went to Tastee I asked the owner sitting at the counter why he didn’t just sell out.   He said he owned the land and they “wouldn’t offer me what I though it was worth.”

In the recent decade all of the chains and restaurants our family visited growing up have closed:  Roy Rogers, McDonalds, Dominos and Pizza Hut plus other locally managed eateries.  Today I know of no restaurant in Bethesda that has been in business for over ten years. Most new entrants create new concepts to appeal to a well to do clientele.  These primary locations seem to change business brands about every 3-5 years. Their “newness” gets old fast.

Local matters, especially when you “own the land.”   So the next time some glib acquisition broker or salesman comes calling to buy your credit union, just remember a child’s babysitter who brought the future leader of Marriott International to the Tastee Diner because  “She liked the place.”

A loyalty so special that the “child” recalls  the experience four decades later.  Local loyalty is priceless.

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Friday Thoughts and Weekend Reads

On October 15, Callahans offered a free webinar that analyzed the macro trends of all credit unions with less than $500 million in total assets.

The link to the recording and the slides can be found here.  The significance of this macro-micro analysis is two-fold.

As shown below, this segment makes up over 84% of active charters.   Secondly, as you listen to the analysis and comparisons with all credit union trends, the differences are not as dramatic as one might assume. On a number of indicators, this segment outperforms all credit unions since 2019 (eg. delinquency and charge offs).

The all-industry five-year trends reflect the performance of credit unions over $500 millions as these account for 85% of industry assets. However the differences are small (eg. ROA).   In some cases the differences have nothing to do with scale, but rather business strategy.  An example in the webinar was the higher apparent member increase in larger cu’s; however, the analyst attributed this to third party loan originations, not organic growth.

Listen to the presentation. If one were to view these 84% of charters as the movement’s seed corn,  the opportunities for the future would seem promising.  Especially in the 4,000 or more groups and communities they serve.  What will be critical is that existing institutions and approaches support the feeding and tending of these institutions.  And not their acquisition by performance-challenged larger institutions.

This is the webinar’s initial data slide showing the segments by percentage of institutions  and asset size as of June 2024.

(Note:  See current article in CU Today, Small Credit Unions Beating Big Credit Unions in Key Performance Area for latest confirmation of the webinar’s thesis)

The top 100 US-based Coops by 2023 Annual Revenue

From the Report’s Introduction:  Since 1991, the National Cooperative Bank (NCB) has published its annual NCB Co-op 100®, highlighting America’s top 100 cooperatives. In 2023, these member-owned, member-controlled businesses generated revenues of $325 billion, a slight increase from 2022. Many of these cooperatives that appear on the list are household names and are known throughout the world.

The full listing begins on page 10.   Credit unions hold 4 of the top 50 positions as follows:  Navy FCU  # 9; State Employees NC  # 28; PenFed # 33; and BECU # 44.

Nine credit unions are in the second 50. I will let you look them up here.

I found interesting that while credit unions account for 13 of the 18 institutions in the finance category, there are five other financial cooperative charters  serving specific sectors of the economy such as agriculture.

The NCB Report provides an overview of the role of major coops, many familiar to consumers: REI, Ocean Spray, Land ‘O Lakes and ACE Hardware.   This summary is a quick and useful introduction to  areas of the US economy which have coop options.

A Brief History of Women and Credit in the US

Fifty years ago, it was legal to deny credit to a woman without a male co-signer.

Read how this situation was changed by Congressional legislation.  Since women such as Louise Herring played a vital role in the creation of the cooperative alternative, one might assume that  “free market” innovation or competition can be relied upon to rectify prior shortcomings.  That is not always the case. Until finally corrected by rule, generations can be denied lifetimes of equal opportunity.

Sometimes the market is only “free” for those who already occupy positions of power and advantage.

What is your “Plan B” If Your Presidential Preference Finishes Second?

This question was asked at a recent conference in which the current campaign was a primary topic. The one answer I heard was by a person who would invest his time and effort into local organizations and issues.   He believed this provided a better opportunity for compromise and creating shared solutions versus the ideological divides at the national level.  He also believed that this is where democratic practice is learned and  becomes a foundation for change at higher levels of political leadership.

Supporting  this thesis is a movie just released on Netflix called Join or Die.  The film chronicles what it calls the “unraveling” of the country’s social fabric and seeks to answer the question: “What makes a democracy work and what can I do to help?”

David Brancaccio interviews the film’s co-producers in this brief article.   I  will be seeing the movie this Sunday at a local church. One of the film’s messages is on the importance of community connections. I will be looking to see if credit unions are one of those local organizations mentioned.

Enough reading for one weekend!  Get ready for Halloween.

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The Power of Community

The strategic advantage that is the foundation of every credit union is its local roots.   Local does is not just a geographic focus.   It includes connections,  relationships, reputation and knowledge that extends back years, or even generations.

This advantage allows members to see the coop as part of their community.  It is a financial and physical presence that helps define the character and economic opportunities for their neighbors.

Unfortunately some actions can compromise this long standing presence, especially mergers which often eliminate any vestiges of a credit union’s roots.  No more local employment, direction, or participation in community life and leadership remains.   Only a virtual connection is left, which may serve some well, but others not at all.

An Example of Why Community Matters

Sometimes it is easier to see this critical role from another industry’s perspective.  The following is the story of both the demise and the resilience of local newspapers.   This editorial is from the October 23, 2024 Falls Church News Press.

This week is an especially sad one in the hometown of our editor.   Following the termination last year of the publication of the Santa Barbara News Press, after over 100 years, this week its remains were being sold off in an online auction, bit by bit, pennies for the dollar.

Meanwhile, the old Spanish Days-styled News-Press building downtown is gutted, like mugged stabbed and left for dead behind a dumpster where so much activity and discourse on the direction of the community took place daily for so many years.

A supporter of this News-Press for which this Falls Church one was named, and where our editor began writing while in high school, made the point last week talking about the importance of community newspapers:

It’s not just about news, per se, but about the dialogue on the interests and future of the community that is a local newspaper’s essential component. It isn’t about whether or not a newspaper’s slant or editorial content is agreed to or not, but it is the way in which the newspaper enters the homes of residents, by way of being gathered off the roof or out of a rose bush as tossed by a wayward delivery boy, and read and discussed for its contents in the  midst of the daily life  of the community which makes it so essential. 

It is the entry point for a community-wide dialogue involving everyone. It is a proxy for the community itself, as it were, its agora, or public meeting space as per the ancient Greek city-states, delivered ito every home where matters are fleshed out and elevated to everyone’s common interest and concern. 

This is what a newspaper is, and to be its best, it has to be in print form in full physical, sensual and tactile presence, to function most adequately and widely where no element of an entire community can be neglected or dismissed.  Also, at best it is the product of a member of that wider community, a citizen exercising a calling to provide the service in question according to the highest of principles, and not the government, to most effectively trigger that community engagement.

The Credit Union Parallels “When At Their Best”

While the functions of a local newspaper and financial institution are very different their contribution to a sense of community is similar.

The daily role and public need for local community financial institutions mirror many of the same contributions of a local newspaper.   The credit union’s presence is seen, it is locally directed by those who view their roles as volunteers or employees as a “calling.”  It is the collective for borrowing and savings by individuals and organizations to better their futures. Finance, like news, is an essential service.

Decisions made locally for the welfare of all give cooperatives a special function alongside the many other institutions vital for living and working together in common purpose.  By design they pay their success forward to benefit future generations.

(Note:  For a current example see press release, 717 Credit Union Launches “Forever Youngstown” Initiative)

These coop business virtues sustain both large and small credit unions.  They contribute to a sense of shared identity that is more than just geographic boundaries.  Financial services is a critical part of the fabric of any  community in which individuals choose to establish their identify and live their lives.

When credit unions make this contribution they are showing their”best selves.” Unfortunately other motivations and temptations can come along that  negate these cooperative advantages. That situation will be the subject of a future case study.

 

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Celebrating a CEO’s 48 Years at the Credit Union

On October 1 CEO Catherine Tierney  entered her 49th year with Community First Credit Union.  The Appleton, WI based coop is today  $5.8 billion in assets  serving 158,000 members with 29 branches and over 580 employees.

She posted this thank you on her LinkedIn page upon beginning her new year. I describe her post using her own words as, the gift of doing what you love:

“October 1st is a special day to me.

“Today marks a milestone of 48 incredible years at Community First Credit Union. It’s been a journey filled with growth, challenges, and countless memories that have shaped not only my professional life but my personal one too.

“From the early days of learning the business to now being part of this amazing organization’s transformation, I’m grateful for the opportunity to have worked alongside so many talented people who share the same dedication and passion for our members, our industry and our communities.

“Thank you to my colleagues, past and present, and to our loyal members for being part of this remarkable journey. Here’s to the gift of doing what you love and the joy that comes from making a difference together!”

From the archives I thought it would be helpful for people who may not met her to see how she and the credit union present their work.  Following are two examples of the joy making a difference together.

The first is a short excerpt of a Catherine interview from several decades ago about how the credit union employees are the first responders for identifying members in need:

(https://youtu.be/lzAN0HXXQBo)

This second video is a story how Community First helped a young couple get started in life when they didn’t think there was any way to adopt their son and then buy a home.

(https://www.youtube.com/watch?v=d6AQbDYSmpg)

Catherine’s long service of leadership with her team is an example of what credit unions do best for their members and communities.   All who believe in the difference credit unions can deliver, should be grateful for her two generations of professional member-centric commitment.

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A Farming Town’s Fall Market

Fall, the time for harvest from the land.  Future Farmers of America’s (FFA) greenhouse in Rensselaer Central High School, Indiana.

“Growers for Life.” Fall mums for sale,  $10 each at the local Saturday farm market.

Pumpkins, the uniquely American fruit. Anything that starts from a flower is botanically a fruit.

Corn, all colors.

Gourds, technically fruits, but realistically fall table decoration.

An enormous sunflower head-a seed bank.

To Autumn by John Keats (1795-1821)

Season of mists and mellow fruitfulness,
  Close bosom-friend of the maturing sun;
Conspiring with him how to load and bless
  With fruit the vines that round the thatch-eves run;
To bend with apples the moss’d cottage-trees,
  And fill all fruit with ripeness to the core;
    To swell the gourd, and plump the hazel shells
  With a sweet kernel; to set budding more,
And still more, later flowers for the bees,
Until they think warm days will never cease,
    For summer has o’er-brimm’d their clammy cells.

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From the Field: Credit Unions Empowering Members and Communities

A critical distinction of the cooperative model is its local advantage.  News commentators assert “all politics is local.”  Military leaders call this capacity “boots on the ground.”  Credit unions described this organizing concept as their field of membership.

When events and institutions affect where and how one lives, that makes their impact personal for individuals.  The capability of credit unions to be seen as a long standing participant of the community they serve, creates generations of loyalty. And in the examples below, superior performance.

Member Feedback at Day Air Credit Union, Dayton Ohio

As part of the net promoter score process, the credit union invites member comments on their experience.  Here are two member notes the CEO recently shared with his team:

Reenetry

1.Day Air Credit Union met me where I was in my walk after being a returning citizen through the Montgomery County reentry community. I was full of fear and didn’t know anything about handling finances or money or getting to where I needed to be in order to be able to get loans and start a business.

Day Air Credit Union along with several individuals from the Montgomery County reentry community helped me succeed in my walk and in my business. Thank you so very much.

Don’t Sell Out

2.You guys help me through a situation, that even though you knew how I got there, you knew it wasn’t my fault (100% my fault) … You guys knew it was technically fraud against me. You did not have to help me, but you did, so that deserves a 10 in my book.

It shows the character of the people in your organization. You guys really are there for your members, it’s kind of like what families and friends are supposed to be, no judgment just being there when someone needs them to be and just doing the right thing. even if that right thing is to just be there to listen about someone’s life that has turned into a freaking dumpster fire… really you guys have been great. You’ve got a customer for life. Unless you sellout; other than that, a 10 in my book.

Through August 2024, the $847 million Day Air reports an ROA of 1.47%, share growth of 7.54%, net worth of 13% and an operating expense/asset ratio of 2.43%.

Creating a Statewide Collection Effort for Food Banks

The following is a release from First Harvest  describing a New Jersey wide effort in which  credit unions will collect canned food donations for local food banks.  This ad hoc network effort relies on the dozens of local branches as drop off and collection centers.   Another example of the advantage of a local presence and personal interaction with members.

First Harvest Credit Union, Affinity Federal Credit Union, and EdiFi Credit Union have come together to launch the New Jersey Credit Unions Food Cooperative and have engaged 27 New Jersey credit unions to participate in the initiative and help address the growing hunger crisis in New Jersey.

All participating credit unions and their select branches will serve as collection locations, allowing for broader geographic coverage across New Jersey, which will support dozens of food pantries and organizations throughout the state.

The program runs from October 1 through November

To donate, credit union members and residents throughout New Jersey can find a participating credit union listed below, and its nearest branch to drop off non-perishable food items. Each credit union branch will directly support a food pantry or organization within the community it serves. 

First Harvest President & CEO Mike Dinneen notes: “As credit unions, we are always stronger when we partner together. New Jersey has over 130 credit unions, serving a wide variety of rural, urban and suburban communities. One thing that is consistent is the food and affordability crisis that is impacting all of our residents.

Credit unions have an inherent mission and proven ability to take the reins when there is a need to help those who are underserved or in need, and I am proud to stand with these amazing New Jersey credit union leaders and implement this important member-driven mission.”

 The twenty-seven participating credit unions are then listed.  Local matters. That is how most of us ground our lives and cooperate with others in community.

 

 

 

 

 

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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.