Category: Local Effect

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Students: Enrolling the Next Generation of Members

In 1974, Peggy Holliday, CEO of Burbank Schools FCU, started student run branches at two Burbank High Schools. Each campus had a Student Credit Union Treasurer, who would “work” the student credit union during lunch, opening accounts and performing basic deposit/withdrawal transactions.

After school, the Student Treasurer would come to Burbank Schools FCU and reconcile the deposits/withdrawals of the day and process the membership forms to open the accounts.

The experience taught students the real-life skills of money management, budgeting, balancing cash drawers, and basic financial transactions. Students learned the concept of compound interest and making loan payments. Some went on to build careers in the credit union industry.

In 2011, the student credit union branches were disbanded. As account access became available online, the need for in-person transactions diminished. Promoting loan products became challenging, due to regulations. Checking accounts required parental authorization, difficult during school hours. Additionally, as school security increased, hallways became locked down during lunch, and access to the dedicated student credit union room became an issue. Finding student volunteers also became challenging.

But the focus on offering great service to students continued with UMe Credit Union (formerly named Burbank Schools FCU). UMe has an ATM on the quad at Burroughs High School, offers scholarships to Burbank grads, provides a student intern program and offers financial workshops and “Bite of Reality” financial simulation experiences. Additionally, UMe has some student-centric savings products created to help the younger generation get a head start on saving money.

Growing loyal student members by helping teach smart money management is a continued business effort for UMe. They think of themselves more as “helpers” than bankers, which is why they believe in promoting the cooperative spirit to their next generation of members.

From High Schools to Universities

Credit unions, especially those with educational FOMs, continue to sponsor student run credit unions or branches in high schools throughout the country. Students gained financial skills and become part of a new generation of co-op members.

In 1982 to address a falloff in the number of new federal charters (only 114 in 1982), the NCUA launched a renewal program called Credit Union Expansion or CUE-84. The goal was to make credit unions available to many new members ahead of the 50th anniversary of the Federal Credit Union Act in 1984, The committee’s members were a who’s who of credit union CEOs, league and trade association leaders, and state regulators. The one surviving attendee of the 1934 founding of CUNA at Estes Park Colorado, Louise Herring, was on the committee along with Joe Scoggins, CEO of Navy Federal, the country’s largest credit union.

The three-pronged growth effort included chartering new credit unions, expanding FOMs and adding groups such as retirees to credit unions.

The College-University Initiative: Solving a Real National Problem

One important focus was organizing new charters at universities around the country. One example profiled by NCUA was New York University FCU for faculty, all university employees, trustees, alumni and students. Potential membership was 20,000.

The local poster child for this effort was Georgetown University Alumni and Students FCU (GUASFCU) in Washington D.C. Sponsored by the student government, it was open to students and alumni and managed by undergraduates who wanted the experience of running their own co-op.

NCUA changed policy to designate student credit unions as low income, enabling them to accept non-member deposits to fund low cost loans for books and tuition. As explained by NCUA Chairman Callahan:

“This opens the door to alumni through the corporations they work for to make contributions in the form of federally insured deposits which can be earmarked for student loans. Here is a vehicle that could provide a private enterprise approach to something that is a real national problem-the need for student loan funds.”

Of the 107 new charters approved in 1983, NCUA’s Annual Report included a picture of the GUASFCU’s first annual meeting. Also highlighted were charters for the University Student FCU (University of Chicago) and Skidmore Students FCU in Saratoga Springs, NY.

Recently GUASFCU’s Hoya Banking model with $17 million in assets announced a grant from the University to underwrite a secured loan for all incoming students so each could establish a credit score of 685 or greater by graduation.

Current Chartering Environment

From military recruiters, to political parties to businesses seeking the loyalty of new consumers for their products, high school and colleges are target markets for every institution that wants to remain relevant in society. Most major college campuses now have a bank branch on the grounds, or nearby, to serve students.

Gen Z and millennials embrace activism, engagement and technology to create new ways of participating in economic and social change. Starting new enterprises is one hallmark of this creative impulse.

Responding to this student interest, over 220 colleges and universities across the country provide innovation and entrepreneurship programs to encourage this activity. (https://www.acceleratorinfo.com/see-all.html)

These academic business accelerators respond to students wanting change, promote the traditional American spirit of innovation and, if successful, provide a financial return to the school. Many academic institutions now sponsor “shark tank” contests to incent new venture ideas offering dollars as well as in-kind support for winners.

One winner in the spring 2018 George Washington University’s new venture competition was a group of freshmen. They proposed a student managed credit union for their university community. They had three primary goals: provide better value services for the students; offer practical management opportunities for volunteer leaders; and create a prototype that could be easily replicated at other colleges around the country.

These students are business, finance, technical and liberal arts majors. They are volunteers in this multi-year effort receiving no pay or course credit. Now in their fourth year of trying to obtain a charter, they may earn their bachelor’s degree before NCUA approves their application.

The Problem for Credit Unions

If students are not part of credit unions’ recruiting efforts, the industry is losing the battle for the next generation of leaders and members. Unlike many areas of civic endeavor or business enterprise, cooperative solutions are best understood when experienced first-hand. They are not a dominant form of organizational design in America’s capitalist economy.

Earlier NCUA efforts, recognized the need to encourage the use and formation of credit unions for all groups. Especially students. Now less so. But the needs of Americans in 2020 and forward are not that much different from 1980.

A Cooperative Opportunity: HBCUs and NCUA

Chairman Hood has announced his ACCESS initiative (https://www.ncua.gov/access) to promote financial inclusion. To put real work, not just talk behind this concept, NCUA should reinvigorate the student credit union charter effort.

For example, there are 107 historically black colleges and universities (HBCUs) in the country. Fifty-six are private and fifty-one public. The democratic Vice-Presidential candidate is a graduate of Howard University whose credit union has charter # 648 (1935) but apparently does not include students.

Can here be a program with local credit union mentors (the Burbank Schools model) to launch credit unions at HBCUs around the country? It would bring a new generation into the cooperative experience as members and managers. Successful examples like GUSAFCU are operating. The benefits are known.

There is nothing more inclusive than the empowering persons through self-help. That is how all credit unions began.

The need is leaders willing to move forward. The ball lies in NCUA’s court. No one wants to wait four years to receive a license to start an enterprise. Especially a cooperative where community progress, not individual enrichment, is the motivation.

If NCUA were to initiate such an effort it would stop working its way out of business and start seeding the economy with a new generation of cooperators. It would also:

  • Turn the industry to a new vision for itself.
  • Extend the NCUAs role in the expansion and success of cooperative solutions.
  • Point credit unions to new heights for mutual benefit, versus consolidation.
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The Top 100 Coops at Year-end 2019

For 30 years, the National Cooperative Bank (NCB) has published the annual NCB Co-op 100, America’s top 100 Cooperatives by total revenue. In 2019, these member-owned and controlled businesses had total revenues of $228 billion.

https://impact.ncb.coop/hubfs/assets/resources/NCB-Co-op-100-2020-final.pdf

Who is on the list?

Five credit unions are in the top 100. Navy is #7; State Employees (NC) #22; PenFed #30; BECU #57; and SchoolsFirst #78.

There are several well known consumer brand names of firms such as SunKist Growers, Land O’Lakes, Ocean Spray, Welch Foods and ACE hardware. In addition to finance, larger co-ops also serve the farming, energy, health care, grocery and hardware sectors.

The total assets of these leaders are $733 billion.

The compiler of the list, NCB, was created to address the financial needs of an underserved market niche: people who join together cooperatively to meet personal, social or business needs especially in low income communities. Chartered by Congress in 1978, NCB was privatized in 1981. Owned by its more than 3,100 customer-owners, it has $7.9 billion in assets under management. As part of its enabling legislation, NCB was tasked with ensuring that 35% of the capital it deploys will benefit low income communities.

A Credit Union Opportunity?

The question for the $1.7 trillion cooperative credit union community’s 5,200 institutions: What are we doing to enhance cooperative solutions for the American economy beyond consumer finance?

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Is This Who We Are? Part II: Specious Merger Reasons

Yesterday, in Part I of this series, I introduced the merger of Sperry Associations FCU’s ($278.4 million) with Pentagon FCU ($25.9 billion). The merger terms in the member Notice includes this sentence: “The services currently offered by Sperry will cease to be provided and replaced by the (virtual) branch services listed in the attachment to this Notice.”

Part I described how this locally-focused, high-preforming credit union was ideally positioned in the market according to the CEO’s public testimonials. It is now to be closed in the middle of a pandemic when most needed by members. Why?

What Members Were Told About Why They Should Merge

The reasons from the FAQ on Sperry’s web site:

Q: Why did Sperry have to merge in the first place?

“In recent years, the financial services marketplace on Long Island has changed. Thanks to the entrance of more big banks and global Fin-Tech companies, it’s become more challenging for mid-sized institutions like Sperry to thrive. While Sperry is currently financially healthy and well-capitalized, our Board of Directors felt that partnering with PenFed is the best option to ensure that our membership gets the service they both expect and deserve – all while continuing the credit union mission of people helping people.”

In the required Notice of Special Meeting to Members, dated July 28, 2020,  the two paragraph explanation is:

“The directors of the participating credit unions have concluded that the proposed merger is desirable for the following reasons: In today’s landscape of digital transformation coupled with evolving technology, regulatory compliance, and increasing cybercriminal threats, our Board of Directors evaluated strategic possibilities to assure that you, our member, will continue to receive the full range of products and services you deserve.

“To ensure continuity of operations while seeking to expand product offerings and improve services, we have been diligently searching to find alternatives. We have explored a range of options, including collaborating with like institutions to consolidate key support functions, maintaining the current course alone, or merging with a strong and proven performer. While there are some benefits with each option, only one meets the full range of our objectives: growth of membership, expansion of product offerings, infusion of investment in IT cybersecurity, improved training and enhanced community service. After considering alternatives, we determined that a merger with PenFed is in the best interest of our members.”

This is the only reason in the required special meeting notice signed by Chairman, Gary Barrello. There are no facts supporting the reasons—no comparison of savings rates, loan programs/rates, service fees and delivery system options that any member would need to consider in making an informed choice to give up Sperry’s charter.

Along with these short, generalized assertions, the letter provides the required disclosures of merger related financial arrangements for the top five management employees. These payments potentially total $2.2 million. There is an “agreement” to donate $100,000 per year to local causes on the recommendation of Sperry’s board acting as advisors. All donations are, however, subject to PenFed approval.

A Special Member Bonus Dividend If Members Vote to Approve

Most relevant to the members’ voting decision is the proposal to pay each “eligible” Sperry member a one time “bonus share dividend” of $350, estimated to total $5.7 million. This amount is 25% of the credit union’s reserves. The remaining 75%, over $15 million, goes directly to PenFed’s pocket, as described below.

With this rhetorical logic and member incentive, is it any wonder that following the member meeting, held in the credit union’s parking lot, a 63% approval tally was announced? No information was provided about how many of the 16,000 members voted or attended the meeting; just the final approval rate.

This was undoubtedly the only time members had been asked to vote on any issue or election at the credit union. If they trust the credit union to properly manager their money, how could they be skeptical of this recommendation to merge and end the charter?

The Ending of an 84-year Community Charter

One might ask what’s untoward or possibly worse with this transaction? The members voted. They approved the recommendation of their elected leaders and long serving management. This happens every day in credit union land!

Furthermore, NCUA, the regulator, has approved all this, including the member notice wording that “a merger with PenFed is in the best interest of our members.” NCUA’s routine is for the Office of National Examination and Supervision (ONES) and the Regional Director to automatically sign off when the final documents are submitted.

This regulatory approval will occur even though the credit union’s web capabilities and the CEO’s public statements, as described in Part I, completely contradict the minimal logic in the merger letter.

But more important, the circumstances outlined below suggest the members have been duped by their leaders entrusted with the fiduciary responsibility to protect their interests.

PenFed and Sperry’s management team jointly designed this deception. They are the recipients with big paydays. The members and rest of the employees are being hung out to dry when this local operation is closed permanently.

What the Members Were Not Told

I believe the facts surrounding this transaction show the members were misled and that management-board merger communications intentionally hoodwinked them. The reality is that Sperry’s members are being sold to an organization that has no interest in their individual or community well-being.

The five managers will receive “optional” severance payments of up to $2.2 million; members get $350 each. PenFed will book a $15.1 million windfall as other income (negative good will). Sperry’s members are paying PenFed a bounty in addition to receiving all the future income from the relationships transferred.

In a normal arm’s length “free market” transaction, the buyer would pay a premium for this future income and the owners would receive their equity surplus in full and more. Instead, management negotiated for its own benefit, not the members.

This transaction, as described, will close Sperry’s only office. That means there is no location for the 39 employees to work or for members to go for what is now 6-day in person service. PenFed’s head office in McLean, VA is 257 miles away and 4-hour drive from Sperry’s headquarters. The nearest branch is a nearly 1-hour drive to Manhattan.

The entire membership is being forced to use remote access for all transactions. Sperry’s 16,000 Nassau County members will now be competing for service with 2,049,700 current PenFed members. That number is 125 times larger than Sperry’s current operations. These remote service employees will have none of the member relationship experiences of the current Sperry staff.

Contrary to the meager merger rationale, the CEO lauded Sperry’s responsiveness in the current environment versus those in “a larger firm who would have had to schedule meetings, create committees and navigate the rough waves of corporate politics…”

This is a merger only on paper, not of operations. It merely combines the financial statements and adds new accounts to PenFed’s books. Local services are shut down. The familiar faces, loyalty, knowledge and community spirit Sperry is built upon will be gone.

Apart from the two paragraphs in the merger notice, every Sperry communication demonstrates that it is serving members and the community in an exemplary manner. It is a classic example of what a member-owned coop can do for its community. The effort to justify the merger as better for members is a farce.

The Timeline Reveals the Charade

The Member Meeting Notice, dated July 28, 2020, opens with the statement “On January 15, 2020, the Board of Directors of your credit union approved a proposition to merge Sperry FCU with Pentagon.”

This means discussions occurred sometime before then. Yet the first that members or the public knew of this secret plan was in the Chair’s member notice dated July 28, just 60 days before the voting deadline and member meeting.

The summer member newsletter, The Sperry Herald, makes no mention of this decision. There is also no reference to the board’s intent to close the credit union in the notice of the annual meeting in the same newsletter. Instead, the board nominated two current directors to fill two expired terms, with members left completely in the dark about the decision nine months earlier to close operations.

Such a disclosure might have initiated member questions or even a revolt.

In the first Newsday article on September 3, after the merger intent becomes public, CEO Kevin Healy is quoted: “The financial landscape across Long Island is rapidly changing. As large institutions continue to grow. . .it is tougher for midsized institutions like Sperry to aggressively gain market share.” This statement from the July 28 member notice completely contradicts the editorial published eleven days before extolling Sherry’s distinct advantages and COVID performance in the July 17 CU Times.

Healy’s quote defending the merger is also refuted by his own words in his March 29, 2019 CU Times “expert opinion:”

 . . .credit unions of all sizes still can thrive and grow with the right mix of strategic forethought. In the end, a thriving credit union always serves the needs of its membership.

When Healy published his July 17, 2020 article praising Sperry’s response, he knew and approved of the intent to merge, a decision made at least seven months earlier. He proclaims Sperry’s business prowess at the same time he is secretly planning to end the charter.

We know this is the case because CEO Healy is a member of the five-person Sperry board. But the problem is more serious than corporate hypocrisy.

In Part III tomorrow: Sperry’s conflicts of interest, self-dealing, PenFed’s complicity, and NCUA’s abdication.

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Manufacturing’s Future in the US

Sometimes (or often) political rhetoric is divorced from fact. One issue in the Presidential campaign is increasing American manufacturing. And hopefully jobs for tasks that cannot be automated.

The chart below shows that US auto production has declined 41% between 2014 and 2019. America’s share of global car production is 3.7%.

In auto production, manufacturing is a global factory system. Following the government bailout of the industry after the Great Recession, the peak of direct employment has ranged between 900,000 to 1 million jobs.

Given the underlying market trends, it is hard to see significant job growth in this sector.

The takeaway for credit unions and members dependent on this sector is to know your options and develop them. Market forces are impersonal and uncaring. That is why cooperative alternatives were created.

(Note: chart reflects total number of cars manufactured, not their market value)

International Organization of Motor Vehicle Manufacturers, founded 1919 in Paris, is an international trade association whose members are 39 national automotive industry trade associations.

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Nine Years to Make Their First Loan

In 2011 several Maine residents began to explore a credit union charter to serve the small farms of the state. In 2019 they received a federal charter. This year they made their first loan described below.

The following story is from the credit union’s website. Do you remember what your credit union’s first loan was for?

Celebrating our First Loan

We closed on our first loan in March, financing a delivery truck that will connect a network of Maine farmers with critical distribution services.

Misty Brook Farm is a diversified, grass-fed livestock and raw milk dairy farm in Albion. Katia and Brendan Holmes started Misty Brook in 2005 and moved to Albion in 2013. The couple markets their dairy products, meat, grains, livestock and eggs to local community members through their farm store and distributes to more than 50 wholesale customers, including health food stores, restaurants, and aggregated CSA’s. In addition to delivering their own goods, Misty Brook provides critical distribution services to a network of farmers throughout Maine.

When Katia and Brendan wanted to add another delivery truck to their fleet, the couple struggled to secure financing. Despite the business’s history of successfully paying back loans, their bank could not meet their request. The couple explored dealer financing, but the interest rate did not meet the mark. When the couple approached Maine Harvest with their loan request, the conversation changed. With more than 25 years of experience in Agricultural lending, our Chief Lending Officer, Patty Duffy, understands farm businesses and the way back-to-back droughts impacted Mistybrook’s bottom line. Patty recognized Katia and Brendan as strong financial managers, with well-established sales channels and strong brand recognition. Because Katia and Brendan came prepared with a complete set of financials, we were able to provide a fast turnaround on the loan request. Closing took place just as Maine and the country shut down in response to COVID-19, quite a feat.

We know that traditional financing is not always available for small farmers and food producers. At a time when COVID-19 threatens the wholesale market for local food, financing this delivery truck will keep a network of Maine Farms connected to critical distribution services.

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STOP THE PRESSES: MEMBERS VOTE DOWN MERGER 66% TO 34%

Yesterday the Credit Union Journal broke a unique story. The members of N.W. Iowa CU ($58 million) voted against a merger with Siouxland FCU ($206 million) by an overwhelming margin of over 2 to 1.

Unprecedented Event

Every year, several hundred voluntary mergers of sound, well-run credit unions occur. Under the cooperative democratic structure, these mergers must be approved by a majority of members voting on the request to end the charter.

However, the voting can hardly be described as democratic in any traditional understanding of the term. For the process is akin to a “one party state.” All of the narrative, timing, ballot and ongoing messaging are controlled by the credit union’s board and management, backed by all of its resources and marketing capabilities. There is no “opposition party.” No contrary information or alternatives are ever mentioned.

The majority of ballots are submitted by mail. The “campaign period” is 45 days or less. Anyone opposed has neither resources, time, or expert knowledge to counter the party line. The decision is a simple yes or no vote on the merger. The option to remain independent is not even present on the ballot.

Members overwhelmingly mail in ballots, as requested, approving the board’s recommended action. After all, if members didn’t believe in the board leaders they elected at some point, why would you trust them with your money to begin with?

Since becoming involved with credit unions in 1977, there have been over ten thousand such voluntary mergers. I am unaware of any time that members turned down this board/CEO recommendation to end a credit union charter.

Information Provided to Members

The public information from N.W. Iowa follows this traditional process. The required Notice of Balloting dated April 20, 2020 was sent to the 5,000+ members outlining the reasons for merger.

These included the convenience of five Siouxland branches and “advanced products and services with competitive rates.”

Other details noted the credit union would continue to operate under its own name (as a division of); the current CEO would retire but continue to work as an advisor; employment would be offered to current staff; two directors would join Siouxland’s board; and a charitable account would be set up to receive “at least 51% of earnings” to build engagement with the Iowa community.

The four-page document lists the new main office in South Sioux City, Nebraska, and its five branches.

The required merger related financial disclosures included bonuses for all merged employees plus severance if terminated without cause in the next two years. Four senior loan managers would be entitled to additional benefits totaling over $330,000.

The credit union’s Facebook page (https://www.facebook.com/NWIACU/) still shows the video of the two CEOs promoting the merger as well as an announcement from the chairman: Thank you for being engaged. Your credit union will remain independent.

Why the No Vote?

We don’t yet have information why opposition developed their point of view and how they organized to overwhelmingly reject this merger event.

N.W. Iowa is a very strong credit union. Its growth of shares (8.4%) and loans (7.9%), operating expense ratio (0.53% of revenue) , ROA (0.94%) and delinquency (0.35%) are all better than Siouxland’s March 2020 numbers. By any standard, this charter granted January 1, 1966, is a strong performer.

Was it some information in the notice? A perceived lack of any relevant benefits from the merger? The payment of employee bonuses in a time of economic uncertainty?

Outsiders generally know two things about Iowa: It is the first state to hold a presidential primary every four years, and it grows lots of corn and hogs. The state is middle west conservative with a legacy of rural small towns and farming communities–not the likely source of a populist uprising.

Le Mars, the home of the credit union, is called the Ice Cream Capital of the World. Were residents upset at the loss of a community pillar with its local focus, relationships, reputation and over 50 years of service?

Reemergence of the “Grass Roots”

In this time of crisis, is this event another example of popular protest emerging in other areas of society. The traditional obedience to authority and status quo behavior is being challenged as COVID concerns and economic uncertainty grow. The people want to be heard, not taken for granted. They want the institutions to serve them not the parochial interests and rationales of their leaders.

The no vote was announced on July 1, just in time for Independence Day. Can this be the spark for a revolution to return the focus of credit unions to serving their members? And challenge the unprincipled pursuit of mergers when members need their credit union relationships more than ever?

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Issues Bigger Than Regulator’s Rules

In 1978, Sangamo Electric Company announced the closing of its Springfield, IL manufacturing plant and head office to move to Georgia.

The company had its own credit union. I had been Illinois Credit Union Division Supervisor for one year. My dad had worked at the company in the 1950s, so I felt an interest in the situation. The issue: what should happen now to Sangamo Employees Credit Union?

For me, the answer was simple. The sponsor and all its direct support, plus the members’ jobs, no longer existed. The employer-based “common bond” was gone. Therefore, it no longer complied with the state’s chartering requirements . It should be closed.

That was not the view of my boss, Ed Callahan, the Director of the Department of Financial Institutions. His logic was that with the company’s closing, the members needed their credit union more than ever. Their jobs were gone. The credit union would be more vital to their future than before.

He suggested we find a way to modify the charter so that the members, not the company or the regulator, could determine their credit union’s future. And that is what we did ­.

Regulators and the Current Pandemic

This incident came to mind when a CEO sent me NCUA’s interagency joint announcement: “Examiner Guidance for Assessing Safety and Soundness Considering the Effect of COVID-19 Pandemic on Institutions.”

The purpose of its eleven pages: “to promote consistency and transparency across the agencies, examiners will continue to assign supervisory ratings in accordance with the applicable rating system. . . CAMELS.”

“. . .it is essential that examiners maintain a clear understanding of the financial condition of each institution.” And “. . .examiners will distinguish between problems caused by the institution’s management and those caused by external factors beyond management’s control.”

Why is NCUA Sending this “Guidance”?

The paper appears self-serving, citing circumstances familiar to everyone. It reads more like a warning notice, than “guidance.”

Its bottom line is “we are telling you, be careful.” Is this a prelude to circumventing normal supervisory due process, using the pandemic’s uncertainty as an excuse?

There are three concerns with NCUA’s forwarding this directive to “promote consistency and transparency across agencies.”

  1. Why did NCUA believe this bank-drafted warning message was even appropriate for credit unions?

Credit unions are different from banks in fundamental ways. Their cooperative design, tax exemption, “common wealth” and reserve/capital options are intentionally unlike privately owned firms created to profit shareholders.

Credit unions fulfill a different purpose, one of which is to be an antidote to the shortcomings of for-profit financial options. The CLF and NCUSIF’s designs incorporate these cooperative differences.

  1. At this time every other arm of government including Congress, Treasury, the IRS, SBA and even the FED are crossing all their traditional “red lines.” Why is NCUA joining bank regulators to announce “business as usual” contrary to the activities of every other government entity?
  2. This “examiner guidance” makes no mention of the special credit union role in times of economic distress. Every day credit unions are waiving fees, lowering rates, providing forbearance and other special accommodations for members. These actions reduce a credit union’s “normal camel ratio ” outcomes. That is what coops are supposed to do with their members’ collective savings.

A current example is how 15 Vermont credit unions have provided $385 million in member relief, so far. Isn’t this the special “guidance” NCUA should be highlighting?

Rising Above Rules

While hitching NCUA’s wagon to other regulators may seem to enhance NCUA’s image, it diminishes credit unions’.

Credit unions were well positioned financially entering this crisis. The cooperative regulator is most effective when knowing how to see beyond the letter of the law and support the spirit of the movement. That is the Sangamo lesson Ed Callahan helped me to see.

This instinct to put members first lives in most credit unions. In this time, shouldn’t NCUA’s “examiner guidance” be to promote this essential mission? And even co-develop special programs with the industry to help members recover financially?

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Credit Union CEOs Speak Up

America is confronting three difficult problems: a health pandemic, economic downturn and systemic racism.

After George Floyd’s death many felt the call of conscience to state clearly our values–personal and institutional.

Two veteran CEOs have provided thoughtful perspectives. The first message reinforces the vital role credit unions have to ameliorate systemic inequalities and provide hope. The second is a call to action by the CEO to his partner teammates.

These have been edited with permission of the writers. Their full statements can be read at the link following each excerpt.

What Protests Teach Us –Local Government FCU/CIVIC FCU CEO Maurice Smith:

The recent protests taking place around the country over the death of George Floyd is an opportunity to learn important lessons.

Protesting is an American right.

Protests awaken in all of us a reaction that should be addressed. First, we observe and learn about the underlying issues that brought about the protests in the first place. Second, we are forced to look at our world and develop an opinion on sides, morality and messages. Finally, we must decide what action we should take. Even if we choose to not react, inaction is a decision.

What is clear about protests, nobody is happy. Everyone has a motivation to find solutions.

Credit unions were invented to address a social problem. Let’s not be dismissive to the real mission of credit unions. To reduce the role of credit unions to mere commodity peddlers is missing the point. The reason we offer financial services is to remedy social conditions.

There is a connection between social determinants of poverty and the protests we see around the nations.

Financial wellness, literacy and education empowers households to be good consumers. Community wealth draws stable neighborhoods, retail outlets, access to healthcare and better schools. These opportunities build hope and a positive outlook for the future.

Now imagine a community that lacks the basic ingredients for financial enablement. Credit unions came along to fill this gap.

Credit unions use their cooperative principles of member empowerment to supercharge community involvement. We offer viable solutions. We give members choices. The most important benefit we give a community is a sense of hope.

Social unrest is an opportunity for us to meet a real need for productive change. Let’s show the world what credit unions really stand for.

https://www.cuinsight.com/what-protests-teach-us.html

Taking Action -Wright-Patt Credit Union CEO Doug Fecher

Partners, 

I want to acknowledge on behalf of myself and our credit union the pain that many in our community are feeling. And I want us to do something about it. America is better than this. America must be better than this. I know America can be better than this.

To make WPCU’s position clear, earlier this week I authorized the release of a statement via social media:

Wright-Patt Credit Union was built on the fabric of people helping people. This means all people. We are committed to an inclusive environment and respect people of all backgrounds and experiences. We acknowledge the impact of racism and unequal treatment of African Americans which has gone on for far too long in our country.

We condemn all acts of racism, injustice, hatred and violence. More importantly, we recognize that it is not enough to just voice these words – we must back them with positive actions that seek to understand, heal, and grow towards an inclusive society for all. The undeniable truth is that all people are created equal and deserve to be treated with dignity and respect, in a world free from injustice and hate.

We recognize that there is a long way to go in the quest for justice for all people of our community. The first step is to stand up and be counted: Injustice in all its forms must end today. Wright-Patt Credit Union is committed to promoting equity and inclusion throughout the communities we serve.

People are the strength of Wright-Patt Credit Union. We embrace the diversity of the world around us and seek justice for all. This is our promise to all.

We take very seriously the idea that “without action, words are just words.”

The only way meaningful change will happen is for good people to stand up and say “enough”.

There is a lot we can do. we have been working on a broad plan to address diversity & inclusion at WPCU. Our work in that area now takes on even greater meaning and urgency.

America is a great country, but not a perfect one. It is up to us to make it a place that serves everybody on the same terms.

We are all in this together, and together we can all make a difference. We are nothing if we are not a force for good … we help people through life.

 https://www.facebook.com/WrightPattCreditUnion

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Local Loyalty: A Meaningful Cooperative Advantage

From Farm to Table

The words community, communication, communion and the phrase common good share similar linguistic roots. Our community, literally common unity, depends on the relationships with those around us.

This shared experience was, and still is, the foundation of a cooperative. Knowing our neighbors, learning their stories, and supporting individual ambitions.

Crises enhance how these “normal” interactions expand to reinforce connections and shared purpose.

Summoning Local Spirit

This cooperative spirit was again called forth in this message from Patelco Credit Union:

Support your local businesses and non-profits

If you’ve already paid your bills, have an emergency fund, and taken care of your immediate needs, consider how you can use the rest of your stimulus payment to benefit your local community.

Non-profits are being called on to do more than ever before, so consider donating to them. We continue to partner with food banks throughout the Bay Area and Sacramento area, many of whom need extra donations right now.

Anchor Institutions

In economies dominated by large national firms who source from global supply chains, the importance of local anchor institutions is magnified in this crisis. Cooperatives along with hospitals, colleges, churches and myriad local businesses create self-supporting “eco-systems.” These institutions can leverage their assets and revenues to promote local development by:

  • Directing their purchasing power toward local vendors.
  • Hiring their workforce locally.
  • Providing skills training for people in the community.
  • Incubating the development of new businesses.
  • Serving as community leaders and network builders.
  • Financing development to promote local retail, employer-assisted housing, and community land usage.

Credit unions are an essential anchor for long term community sustainability.

The 100% Local Pledge

When the sweeping small business closures were ordered throughout California in March, the publication Inside Sacramento was concerned about the many small business owners who serve the area’s neighborhoods who were featured in their publications.

The COVID crisis heightened the many challenges small businesses face every day. So as a community champion, the publication began a city-wide effort to urgently support local firms with The 100% Local Pledge. This campaign included yard signs, social media messages, filmed TV spots and the support of local elected officials.

The first business partner to sign on was Safe Credit Union providing funds and marketing support. (https://www.cutoday.info/Fresh-Today/SAFE-News-California-CU-Signs-On-With-100-Local-Pledge-Campaign) CEO Dave Roughtan explained his credit union’s action: “. . . we can make a difference – but we have to work together. Things may have felt a little out of control. But we – together – can take back the future of our region. . .”

Relearning in a Crisis

The COVID crisis reinforces basic facts about the American economy.

One lesson is that consumers have figured out that food does not come from grocery stores. As farmers destroyed crops, livestock and dumped milk due to disrupted supply chains, local farmer’s markets show us the importance of a direct farm-to-table option.

While the pandemic crisis is national, even global in scope, the health care response must be local.

Another recognition of the vital role of “local” is the bipartisan Payment Protection Program (PPP). The purpose was to support local enterprise. One estimate is that 80% of credit union PPP advances went to firms with fewer than 10 employees.

In good times and crises, cooperatives are anchors.

Our actions around inequality, wealth, and power create alternatives in society which empower individuals via collective efforts. These cooperative, group-centered solutions help underwrite local choices necessary for meaningful lives.

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Directing Traffic For Essential Service

Access to cash is members’ top financial worry in a crisis. Some are fortunate to have savings, steady income or retirement to draw upon. Others, living paycheck to paycheck, must rely on credit. These two options are illustrated from actual events. In person lobbies are closed. The CEO directs members to one of two “drive-throughs” serving everyone, regardless of circumstance.

Born in a Crisis

In 1932 during the national depression, workers at Wright Field in Dayton, Ohio decided to chip in 25¢ a week to help an ailing co-worker and his struggling family. Recognizing a great idea, they later took a quarter each payday to create a fund for fellow workers who might one day also need help. It was called “The Sunshine Fund.”

That shoebox of money became Wright-Patt Credit Union, Ohio’s largest, with over $5 billion in assets.

Those seeds planted 90 years ago now serve 400,000 members in central and southwestern Ohio during an economic shut down some are comparing to the Great Depression.

Managing a crisis like COVID-19, without any playbook or past experiences to draw from is challenging. The issues that come up are things most wouldn’t have imagined a few short months ago. For CEO Doug Fecher, there are only two rules: “Try to do the right thing as best you see it; and, do those things the very best you can. If we do those two things, we’ll be okay.”

The following excerpts from Fecher’s April 15 board crisis update documents the intensity of added activities undertaken in this “essential service.”

From CEO Fecher’s WPCU Weekly Board Update (with permission)

The big news this week is the government’s release of stimulus funds.

  • WPCU today received and posted about 81,000 ACH deposits for $147MM of government stimulus funds

Lending

  • We’ve processed 10,700 skip-a-pays for about $3.6 million in payment relief.
  • We’ve made 211 disaster relief loans totaling $260K.
  • First mortgage activity, especially refinancings due to lower rates, continues brisk with 240 closed mortgages so far this month.
  • We release full government payment proceeds to members even when members may have a balancing owing or negative deposit account balance with WPCU.
  • As of Friday, April 10th, we’ve processed 128 forbearances on 1st mortgage loans in the WPCU portfolio.

Commercial Lending

  • We have obtained SBA approval on 180 PPP applications for a total of $37MM in funding.
  • The PPP loans approved so far support nearly 4,600 jobs. Loan amounts range from approximately $300K to $2.8MM.
  • An additional fifty PPP applications are in process raising our total to $40MM.
  • About 300 commercial applications are in queue as of April 14th.

Partner Update

  • We have no employees confirmed with COVID-19.
  • Thirteen employees are in physician-directed self-quarantine.
  • We pay COVID-19 medical expenses for employees and family members on the WPCU health plan.
  • Absenteeism has decreased as more Partners have been moved to work from home. For example, member help center absenteeism fell to 1% this week, from 14% on March 30th.

Operating Updates

  • Transaction volume is much higher this week across the board. We received 7,376 calls into the member help center on April 14th, compared to 5,780 calls as of March 30th.
  • Member center and member help center activity jumped this week with the release of government stimulus checks. This is resulting in longer than usual lines in drive-thru lanes and on telephones.
  • We are seeing increased attempts at fraud.
  • Marketing communicates on everything from encouraging use of remote services, to fraud avoidance, to helping members with their government stimulus checks.

Liquidity as of April 13th

Our liquidity coverage ratio is 3.46.

This means we have almost three-and-a-half times the maximum cash draw down in the last thirty days in available liquidity.