Category: NCUA

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Balancing the Old With the New in 2026

When implementing NCUA’s practice of turning around problem credit unions versus liquidations or paying to  merge, the key success factor was finding experienced capable turnaround managers. One name was frequently mentioned as an example by  NCUA Regional Directors (RD) in this talent quest.   Only after leaving NCUA did I meet him.

Jeff Farver was the CEO of San Antonio Federal Credit Union (SACU), now  Credit Human, for almost 22 years–July 1990 to retirement January 2012.

In early 1990 Farver was asked by  NCUA RD John Ruffin to take over NCUA’s largest problem conserved  credit union.  By 1995 this insolvent  $650 million coop had achieved a 6% net worth.

Becoming a Problem Solver

SACU was not Jeff’s first rodeo.  In the 1970’s, he had joined a small Florida bank as comptroller just as interest rate turmoil upended traditional assumptions about investment management.  At Eglin FCU in Florida, he resolved a deeply flawed investment strategy as investment manager.

Based on this success he was hired as CEO of Chattanooga TVA FCU.  Upon arrival, total assets were earning 8% and the cost of funds was  8.25%.  The investment portfolio in 1981 was $5 million underwater due to Fed Chair Volcker’s rapid double digit increase in short term interest rates.

His success in these three previous problem situations caused NCUA’s new Region 5 RD John Ruffin to again reach out to takeover San Antonio Credit Union, the industry’s largest problem case. The credit union was $25 million insolvent with troubled business loans, fixed rate real estate loans underwater and no proactive recovery strategy.  He took 90 days to assess the situation and then negotiated a partnership with NCUA to inject a NCUSIF capital note, incentive targets and forbearance for time to implement product and business changes to restore solvency.  By yearend 1995 he had achieved his 6% net worth objective set in his workout goals with NCUA.

Recently Jeff shared thoughts from a decade of post-retirement  mentoring college business students.

I describe his advice from five decades as balancing the tried and true with the new.  A timely quest  at the beginning of the year.

A Turnaround CEO’s Learned Wisdom

The reason I bring the balanced scorecard concept  is that I do believe in balance!   If an organization and its leadership “over-plays” diversification of its customer base and takes away resources and  “pricing values” from its existing customers,  it is putting at risk the customer base that brought its current success.  

Further, the question must be answered how  diversification impacts existing customers in the short term and more importantly in the long run.    Leadership must articulate the pros and cons of growth for growth’s sake.

In 2000, SACU’s  indirect auto lending was 60% of our earning assets and 70% of gross income.   I recognized that gas price hikes or recessions could adversely impact our delinquencies, charge offs and financial workout.   Also real estate lending was a commoditized market with narrow interest spreads and Interest rate risks causing surges in demand or declines of loan volume. 

Entering a New Market

By luck I interacted with several manufactured home lenders  in trouble financially. With GNMA’s help,  SACU took over the servicing of their GNMA  loans, hired their staff and entered this new line of lending. 

Months later Jamie Dimon in the Bank One merger chose not to continue the Manufactured Home lending business. I went to Seattle and convinced 34 Western region mobile home lenders to become credit union employees.  They generated $200 million in new mobile home loans the next year.

These new business lines generated improved Interest rate spreads, allowing us to pay our existing members better savings & CD interest rates.  Moreover, our manufactured home loans averaged 200 basis points less than bank or other lenders’ interest rates.   

When I retired in 2011,  SACU had $1 billion in indirect auto loans and $1 billion in manufactured home loans.   SACU’s diversification  was a win for our member savers and  our new  MH Loan borrowers.  It is the cooperative model at its best.

Don’t Forget the Core

The key issue still today is how do mergers, expanded market  reach, bank or third party loan acquisitions, and new services provide value to existing members whose loyalty created the basis for further expansion? Without balance, credit unions could lose the relationship advantage that is the basis for their continued success. 

 

 

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Two Contradictory Approaches to Credit Union Growth Capabilities

Credit union growth has multiple factors, but two are critical in the movement’s current state.

One strategy is building on the power of local advantage.  This is the ability to interweave common purpose with a community of members. It does  not imply being small or require a limited market area.

This critical commonality is  illustrated by  the home market of city or town.  “Local” is often represened by where the credit union’s historical roots were set down.  Where there is a long term record of its essential role supporting the community economically and in civic roles.  It is where present issues and needs are addressed openly.

This effort is a shared ambition with other “local” organizations seeking  a better future together. The credit union is engaged in services that matter for young and old alike because everyone wants to move forward.

 That is how most credit unions began, supported by a sponsor-employer  which had an important role in the community.   The  shared goal to  enhance a community’s well-being with and for its residents is fundamental in  credit union design whether large or small in operations.

The outcome  can be  large firms serving multiple areas like the $10 billion Wright-Patt Credit Union or small ones such as the $70 million Levittown’s Spirit Financial.  This historical positioning provides a competitive high ground.

At SECU North Carolina, Jim Blaine when CEO said the rationale for building at least one branch in every country was to create a network across  the state that no outside institution could hope tp match.   This  network’s visibility and  service reach are an advantage which  Warren Buffett called a strategic moat.

One of a Kind

Thus advantage isn’t from size or even the number of branches, but the market’s perception of the credit union’s integration and affiliation with the population it serves.

In a new charter roll out, this relationship is gained from the sponsor’s embrace.  This often came with on-site office space, employee volunteers and even payroll deduction, advantages initially unavailable to other financial institutions.

Credit unions with deep community relationship do not survive  by chance or luck. They succeed because their leaders believe in their role as a one-of-a kind option built with generations of local support. These deep community anchors become the foundation for greater coverage as opportunities and needs are sought further out.

The Merger Strategy–How the Big Try to Get Bigger 

When credit unions with these strong, long time local roots are merged, the charter’s ending will also extinguish many of their long standing competitive  advantages.

The historical identity is gone.  Instead a brighter future is promised by becoming a node of a much larger network.  One whose scale and diversity will  enable  greater efficiency and broader service capabilities—all intended to improve member value.

However economic theory predicts that as firms get bigger, it will be difficult for them to grow ever larger.  In credit unions this means the skills for growing organically are often superseded by geater acquisition efforts.  An outcome that results in the atrophy of  internal  growth capablities.  New merged  members are often forced into a more easily scalable digital-first service model.

In a November 2025 article in Kellogg Insight, the authors identify The Growth Factors Propelling Industry Behemoths.  Or how the big get bigger.   It is not by mergers.

Following are some excerpts in which they identify the critical corporate competencies to continue growing.

How have the Golden Arches of McDonald’s and other industry giants like Starbucks, Procter & Gamble, and Coca-Cola grown so much more quickly than competitors and stayed on top for so long?

Kellogg’s Sara Moreira investigated how these companies came to be so huge compared with other firms in the same product category. Through mathematical modeling and an analysis of the consumer-packaged-goods industry, she found that a key factor propelling firms’ growth is standardization: the degree to which a company reuses components, knowledge, and relationships across different product lines and locations.

Take IKEA, which became famous for using similar parts and materials for various types of furniture. Similarly, Starbucks has relied on tried-and-true formulas for floor plans, menus, and barista training to efficiently open more locations.

As a result, standardization practices like these have become a kind of superpower, allowing fast growth and higher responsiveness to increased demand. 

“When knowledge, investments, and inputs are potentially scalable, that can allow the firms to become bigger.” By reusing components and previously successful strategies, “it’s less costly to you,” Moreira says.

How Mergers Inhibit Organic Growh

The author’s examples are of firms that learned how to scale their existing advantages, not by buying firms operating in their industry.

Applying their analysis  suggests that newly merged credit union must quickly dispose of their previous local advantages. They must standardize branch activity, operating and product features while creating a common culture across previously autonomous institutions.

Each of these standardization requirements will erase much of the merged credit union’s foundation for local success.   The new branding often signals to the public just another out of area firm  trying to buy its way into the market.

Despite merger rhetoric about “equals”, enhanced  value from scale, additional expertise and expanded member services, these  promises made to secure member’s voting approval,  lack any unique local character.

Time and again the continuing credit union will assure continuity:  merged members will see familiar employees, branches remain open and the service culture continues. The reality is that as operational integration and back office  conversions take places, the promised continuity ends. Forced change, digital access and new faces are the reality.

Mergers eliminate local leadership including decisions about business prioties and even pricing.  Independent operations end in a flurry of standardization, rebranding and new  leadership.  Corporate assimilation replaces organic growth.  The ability to present a local marketing identity is lost.  The goodwill from generations of member relations is gone.

The issue of whether mergers of independent local credit unions into ever larger organizations will leads to real credit union market growth is an open question.  Today PenFed FCU after over two dozen mergers has fallen over $5 billon from its peak assets.  With core market visibility declining  because of local office closures, it is struggling to recapture organic growth.

In the example of Credit Union 1 and its acquistions of over 20 credit unions in the last three years, it has yet to show an operating net from its existing assets.  Rather the equity level is retained by one time additons of merged credit union’s capital, sales of assets and loans, and gains from undervalued assets acquired in mergers.

Heading to a Cliff?

The credit union system has a vital need for  an analysis of major mergers completed and fully integrated, say over the past five years.  All credit union leaders would benefit from examples of performance comparisons before and after large combinations are done. The outcome of most of these transactions  is a significant unknown.

Such a study should be a priority for anyone who is facilitating these combinations,  The evidence that there are significant member value benefits or enhanced institutional performance is sorely lacking.  It is especially necessary as an aid to public policy and supervision by credit union regulators who now routinely approve these transactions.

The consequences of mega credit union mergers have not been documented.  In the meantime the loss of hundreds of strong  and long serving local institutions is clear.   The critical question is, are these combinations leading the movement on a walk to a cliff edge?

 

 

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Tomorrow’s NCUA Board Meeting-A Special Opportunity

There are two agenda item’s for Thursday’s meeting:  approval of the 2026/7 NCUA budget and a report on the financial status of the NCUSIF.

This will be the first board meeting since September 18.  Chairman Hauptman has implemented a practice of holding meetings only when needed versus. a fixed monthly event.

The Critical Decisions for the NCUSIF

This year end financial estimate for credit union’s unique cooperative fund is more than a financial update. In the past, this meeting has set the upper cap on the Normal Operating Level (NOL)which determines when the surplus from fund  earnings must be returned to credit unions as a dividend.

A dividend from NCUSIF operations has not been paid since 2008.  The dividend demonstrates  stable performance by the industry.  It also acknowledges credit union’s evergreen commitment to main 1% of insured shares as the principal earning asset for the fund. In contrast the FDIC relies primarily on open-ended premiums assessments for its revenue.

The Latest NCUSIF Financials

As of the October 2025 financials posted yesterday, the fund’s full year outlook is very positive after the first ten months.

Net income of $222 million is $10 million greater than the same period last year with operating expenses near the same level at $204 million.  The provision for future losses is funded to $240 million up  $10 million from a year earlier.

The fund’s yearend external audit is underway.   Assuming no surprises, it is straight forward to forecast the probable yearend outcome and the ratio of fund equity to insured shares.

This dynamic spread sheet model using actual data for the first ten months, estimates a yearend ratio of .3101 of retained earnings to insured shares.  The historical upper cap from 1984 initial implementation to 2017 in the NCUSIF was .30.   This cap was only raised in 2017 to accommodate temporarily an influx of funds from merging the TCCUSF surplus. This current projected earnings would result in a dividend of $200-$250 million with a30 NOL cap.

A Unique Leadership Opportunity

After the year end true-up of insured shares, the total ratio of 1.3% means the NCUSIF is fully funded.  In addition, there is more than $240 million in reserves, already expensed, to cover insured losses.

Chairman Hauptman is in a unique position to re-establish he NCUSIF’s historical cap of 1.3%.  Until the 2017 short term incease in the 1.3% cap, the  upper limit was unchagned even in the 2008/9  financial crisis, Dividends were a regular outcome in the first thirty years following the 1984 redesign.

The federal credit union act authorizes three board members.  As the lone member currently, Hauptman has a chance to restore the fund’s historical cap.  Sooner or later via court action or administration appointments, additional board members will be in place. It is now possible to reaffirm the original legal compact with credit union for supporting the 1% open-ended funding model in return for a stable upper NOL limit.

Restoring the 1.3% NOL cap authorizes  returning  credit union funds to credit members.  It demonstrate the administration’s intent tp limit the inherent tendency of government to always seek greater amounts of money to spend.

Most importantly it reinforces the unique cooperative model of the NCUSIF for credit union members and the public.  Credit union’s collective fund is different-by design.

Finally such action would implement Hauptman’s intention to return to the fund to its 1.3 NOL as stated in December 15, 2022 NCUA board discussion of this issue.  From his statement on the issue that meeting:

I appreciate the additional information on how the Normal Operating Level is calculated. We need more of this kind of transparency. In the spirit of more transparency, I ask that we acknowledge our responsibility to show why 1.30 is not adequate — as I said, every basis point over 1.30 is money credit unions could be investing in their members.  (link)

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Live Video of the Largest Credt Union Conference

In my December 9th post I included a preview from NCUA’s Video Network of the largest credit union conference ever held to that point in time.

That short 20 minute overview gave NCUA staff’s instructions for the meeting plus an introduction to the content for examiners and credit union attendees.

After the event was over,  video highlights were edited and shared in NCUA’s Edition 18:  The December 1984 National Examiners Conference in Las Vegas. 

The 55 minute of outtakes focuses on three topics: common bond, the role of the regulator and the future of credit unions. Speakers include  state regulators, CU CEOs, NCUA staff and other federal supervisors such as  Richard Breeden, Martha Seeger, Ricard Pratt. NCUA Chair Ed Callahan provides opening and closing remarks, plus comments on what makes credit union’s truly unique. 

The conference is also covered in depth in NCUA’s 1984 Annual Report.  However the video captures the events live  including reactions from among the 3,000 attendees.

Why This Event Is Relevant Today

Although this special gathering concluded 41 years ago, the event still speaks to credit unions today in that:

* It demonstrates the multiple participants within the movement working  in shared purpose.
* Speakers showcase  leaders of the coop system– regulators, credit union professionals and experts in financial services.
* Critical issues in this era overlap those today: mergers, taxation, competition, innovation and the fundamental  advantage of cooperative design.

History Matters

From the truism “there is nothing new under the sun, to history never repeats, but does rhyme” there are multiple ways to learn from past events.

This video shows cooperative leaders in their most articulate and thoughtful approaches to the future. NCUA’s conference agenda of over 300 sessions of breakouts and general panels captured the movement’s advantage of sharing expertise and experience for everyone’s benefit.

Comments were sometimes controversial and often in disagreement, for example the need for a common bond.  Or, “Trust in a financial institution is like virginity; once you lose it, it’s hard to get back.”

The conference was also a celebration.  Just two months earlier  the NCUA board approved regulations implementing a completly different approach to the NCUSIF’s financial structure.  Instead of copying the other federal insuers annual premium approach, the new design used  cooperative experience to create a new m;odel built centered upon  an “evergreen” 1% deposit.
Most critically it showed how a credit union regulator and the movement can work together for enhancing the future for tens of million member-owners.

What  Attendees Remember Today

Clifford Rosenthal: A personal memory of the big conference in Las Vegas. It was a big deal for me; I was new to my role serving as head of the National Federation. I still have the little lucite piece that was given to attendees.

Paul Horgan: (credit union  CEO) Two recollections: NCUA and the Vegas meeting.

The meeting was innovation at its best.  Communication was the key feature.  Goodness, that was 41 years ago.

On Ed Callahan: Don’t remember the exact month and year but recall having the privilege of driving Ed from the Brainerd, MN airport to the league meeting…on the long drive I criticized the capitalization plan, he really listen then replied “Okay tell me your better idea.”  

I guess today’s takeaway is “enjoy your friends before it’s too late.”

Mark Wolff (former NCUA  employee):

Thank you for your post about the National Examiners Conference and for sharing the promotional video. Wow, watching it (and me in it!) was like going back in a time machine!

Being in the NCUA public affairs office at the time, I remember the sustained promotional effort to generate awareness and attendance. Along with the video I seem to recall regularly highlighting the conference in our newsletters and press releases  that NCUA sent to credit unions at the time and in board members’ speeches to CU groups.

During the conference I remember being struck by how many people had attended and how crowded the hallways were between breakout sessions. At the time I’d never seen anything like it. We all had a nice feeling of accomplishment afterward.

The CODA

Three months later at the 1985 CUNA GAC conference, Chairman Callahan announced that he, Bucky and I would leave the agency.  His term as Chair still had two and one half years remaining.  His explanation was, “We’ve done what we came here to accomplish.”
He said his future goal was to work with credit unions to develop the opportunities presented by deregulation.  One of those outcomes was the founding of Callahan & Associates.
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December 9, 1984 – A Grand Credit Union Opening Day & An Early Departure

The largest credit union conference ever held to this point in time began gathering on Sunday, December 9, 1984 at the MGM Grand Hotel in Las Vegas.

One of the most amazing aspects was that the entire effort was organized and led by NCUA.   It was an event unique then, and still today, in credit unon history.

The conference had two phases.  In the first two and one half days over 800 state and federal examiners and regulators held meetings to share their learning and expertise.  On Wednesday afernoon they were joined by over 1,500 CEO’s/seniorexecutives, board members and leaders of multiple  league and trade organizations.

An NCUA Led Effort

Two months prior in October, NCUA released a Video Network Edition XI for state and federal examiners  to describe conference logistics: timing, travel arrangments, financial reimbusements and per diem.  And most importantly, a preview of the speakers and conference agenda.

The National Examiners Conference preparation video is 20 minutes and can be viewed here or in the link below. The eight speakers are all NCUA DC staff members responsible for specific areas of the conference.

The details may seem pedestrian by today’s conference attendee.  The room rates were only $35  per night for single or double.   These critical instructions show NCUA staff at its hard working best.

The Agency’s Washington team organized a national industry wide meeting led by only existing personnel.  At the time the Agency employed approximately 600 people.  This special event was in addition to the entire staff’s  day jobs.

According to the NCUA’ 1984 Annual Report  there were 10,547 active federal charthers and 4,657 insured state charters, plus another 1,500 whose share insurance was from a state authorized cooperative fund.  Moreover, all FCU’s were being examined annually, a process implemented in 1982.

The Agenda

Following six short briefs on conference logistics, at minute 14.21 a presentation of the “most important part of any conference” begins.  Joan Pinkerton, NCUA’s Public Information Officer, gives an overview of the conference speakers and over 50 breakout sessions.

Topics include: Is the Regulator Obsolete?, How the Early Warning System (EWS) Rating is Assigned, Recent Industry Scams et. al.  At minute 17 Mark Wolff describes  real case studies that will be discussed in joint examiner-attendee sessions.  The case details of up to 25 pages will be available to read in advance.

What Happened

The conference succeeded beyond all expectations.  It was both a learning and bonding event.  Next Monday I will publish Edition 18 of the NCUA’s Video Network, 55 minutes of live excerpts of the conference highlights.

Even today, some 41 years later, the event is still remembered as a special moment enabled by the collaborative character of the credit union system.

If you would like to share your memory, please send a short post to chipfilson@gmail.com.   I will include these along with the video and photos of the conference.

(https://youtu.be/Tw_JKnheoSk)

Another December 9, 1984 Event

On Saturday October 8 NCUA colleagues Bucky Sebastian and Mary Beth Doyle stopped by the house to drive me  to Dulles where we would fly to Vegas for the conference.

Mary Ann and I had been married for 17 years.  Our first date was my senior year in college at the Harvard-Princeton football game.  I had been expecting to go with her younger sister whose flight from Midland, MI was canceled due to snow  Mary Ann took her place.

We married 18 months later in a service at Merton College Chapel, Oxford, where I was a student and she worked in London for Dow Chemical’s UK office.

We traveled the world together, first courtesy of Uncle Sam who said I owed him some time.  Our first daughter, Lara, was born in Athens, GA while I was at Supply Corps School.  Our second, Alix, was born in Yokosuka, Japan where I served as Supply Officer on the USS Windham Cty (LST-1170) and later at the Supply Depot on shore duty.

After four plus years in the Navy, in December 1973 I joined the International Division of the First National Bank of Chicago expecting a two year rotational training period.  Six months later our family was in Sydney, Australia.  I was in the bank’s rep office and assisted with their wholly-owned finance company FCAL.  It was a time of critical economic turmoil, short term rates were over 20%.  They wanted help working through the crisis in FCAL’s loan portfolio.

After three years, we returned to Chicago.  I left the bank to work with Bucky Sebastian and Ed Callahan in the Illinois Department of Financial Institutions (DFI) where I was credit union supervisor.  Five years later we moved to Bethesda as the three of us  joined NCUA.

In these 17 years Mary Ann was critical to everything that life brings to a family.  She not only had the primary care roles with our two girls, but also worked a full time job where possible.

Her talents for  maintaining home life while I was traveling, expanding her interests in photography, design and working with her hands in the kitchen or the sewing room are habits both girls adopted.  She was disciplined, but in a very soft way, always sensitive to others’ needs.

I am grateful our two children inherited all the good she gave them which they express every day.

She had an adventurous streak as well.  Once we pulled into Hong Kong harbor on R&R. Mary Ann and several other wives flew from Japan to see us.  Our LST anchored in the harbor.  The city was still under British rule. The Navy purchasing office would first send out local supply boats  to refill our fresh water tanks and order fresh food supplies.

As I stood on the deck  waiting to give our purchase order to the local vendor, I saw the small harbor craft had an extra passenger.  Mary Ann didn’t wait for us to come ashore via the harbor’s water taxis. She came out, on her own, in the middle of the harbor to welcome the whole ship.  It was just plain joy as she came on deck. The Captain was a little uneasy with this protocol breach, but never said a thing.

In the picture below, Mary Ann with Lara and Alix are on on the beach in Hayama, Japan.  Fuji is faint in the distance. It is the fall of 1971.

Mary Ann’s mother had flown in to help while I spent the week at NCUA’s Examiner Conference. Early Sunday morning I got a call from her mother that Mary Ann had gone to the hospital that night and died.  Her five year fight with breast cancer was over.   I flew home that morning.  Our 17 year journey together was over.

Now go back to the 14th minute of the video above and see Joan Pinkerton.  For in 1987 we were married.  She knew Mary Ann and had even babysat our girls when we traveled together.  Life is full of possibilities even when some hopes end.  Joy can still be found.

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Animal Farm Becomes the Credit Union Jungle

From Aesop’s fables to the present day, writers have used animals to portray the failings of human society.

Animal Farm by George Orwell in 1945 used the  metaphor of animals living together in a farmyard to illustrate a political point.  HIs thesis is that power inevitably corrupts.

This inescapable temptation leads to the betrayal of democratic ideals and the re-establishment of totalitarian rule. An outcome enabled by a naive and accepting working class.

Orwell’s story is an allegory of the 1917 Russian Revolution and the rise of Stalinism.  Putting his dialogue in the mouths of animals was an inventive way to show how authoritarians manipulate language to justify their ends.

Ten years ago a credit union observer/CEO used this political satire to describe  deeply troubling trends in the coperatie system.

The blog’s title: Down on the Farm.(Be sure to click read more for the writer’s ending challenge, Who Let the Pigs In?)

An Updated Animal Story–On Film

In these prior stories the pigs are the bad guys.  The credit union commentator and Orwell hoped their literary skills would motivate readers to address  threats both foresaw to democratic societies.

But human nature doesn’t always respond to  danger until it arrives on their doorsteps.

Today’s retelling is not on the farm, but in the jungle. Here the wild animals have no fences or guardrails. They can only be viewed at a safe distance by safari tours.  It is nature in its most natural state.

In this film metaphor, those who feast on other living kindred are the lions.  Their prey are large herds of water buffaloes living on grass plains, at peace with their kin. They do not kill to live.  The game wardens and tourists who witnessed these scenes are observers or, in this parable, clear stand ins for regulators and the public.

The Attack

Part one is just over four minutes. The stealth approach, the pack attacks and captures a small defenseless youngster.  The helpless calf is thrown into a river, where two crocodiles decide the prey should be theirs, not this land bound pride’s.

The action is quick. The situation dire.  The calf’s fate seems sealed.  All the onlookers agree this is a hopeless situation.  Another successful kill.  Moral outrage, anger and even sympathy provide no recourse. This is the law of the jungle in full view.

(https://youtu.be/WXJmvlIckfI)

The Outcome

The calve’s life is over.   The lions lay down to savor their feast.  No help can come now.  It is far too late and certainly life-dangerous to interfere. The end has come. . . or has it?

Here is part two.  Also just four minues.

(https://youtu.be/u1Rt17QglXY)

The adults in the herd, those who cared about their offspring and know the ways of the jungle acted-on the spot

After initially running away, they regrouped, collectively, and attacked. They first circle and then  go after the  herd’s predators one at a time. Angry bulls leading the charge.  They then  cleared the killing field of any stragglers.

The onlookers are amazed.   Even the safari wardens say they have only seen this on film. While unusual the response is not unknown.  It’s instinctive when one’s entire future is at stake.

The Moral or Just an Animal Act?

The response of the water buffalo herd, is what Orwell and Jim Blaine hoped to arouse with their Animal Farm prose imagery.

In this film allegory, these animals understand  how to deal with their stronger predatory jungle inhabitants. If they can work to protect each other, it would seem credit union leaders should be able to turn back their avaricious members feasting on their coop peers via mergers.

In most credit unions, mergers are a matter of life and death of the organization.   If you don’t think so, just ask any of the 41 credit union leaders merged in the third quarter of 2025.  Oh, you can’t because they are now under someone else’s control.

It’s time for the cooperative herd to act.  If not, only the pigs and lions will be the future of the movement.

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Government Protecting Us From… Government

by Will Rogers, Jr.

It takes a special kind of Washington brilliance for a regulator to decide the greatest threat to the republic is its own discretion and then propose a rule to rescue us from itself. But here we are.

The NCUA has unveiled a proposal that essentially says:  “We hereby forbid ourselves from misbehaving. We don’t trust ourselves either.”

In a normal world, regulators create guardrails for the people they regulate. Only in our nation’s capital does an agency build guardrails to keep itself from driving off the road.

The Rule’s Premise: Reputation Risk Isn’t Real

This proposal seems to assume that reputation risk is some imaginary creature—like Bigfoot, or a cheerful airline fee.

One wonders whether the drafters have heard of a quaint little story called Wells Fargo, where an institution spent years rebuilding trust after opening millions of fake accounts.  But perhaps NCUA thinks that was all just a marketing misunderstanding.

If the agency truly believes reputation risk is fictional, one hopes they never Google “NCUA failures” or, heaven forbid, read their own Inspector General reports.

Who Exactly Is Being Protected Here?

The proposed rule claims to stop NCUA from pressuring a credit union to decline accounts for certain businesses: liquor stores, cannabis operations, burlesque venues, adult-film producers, and so forth.

One might ask:  Has this ever happened? Even once? Anywhere?

No.
This is Washington’s favorite sport: solving imaginary problems so it can avoid the real ones.

Meanwhile, the real harm that does exist: merger-driven CEO enrichment, member disenfranchisement, sham elections, and sending member savings to buy bank shareholders’ at premiums, goes unaddressed because someone must ensure the men’s club dancers of America are free to open checking accounts. The republic is safe.

The Greatest Burden: Fixing What Isn’t Broken

Fixing real problems is difficult. Fixing imaginary ones is far easier, and far more wasteful.

Rules like this drain time, staff attention, and credibility. Worst of all, they distract the agency from the issues actually hurting members:

  • selling strong, local credit unions to distant ones,
  • conducting board elections with all the transparency of a papal conclave,
  • and using member capital to fund bank-acquisition premiums.

But at least NCUA has now protected the nation from the nonexistent threat of ideological debanking.

Reputation Risk: It Exists (Even if NCUA Pretends Otherwise)

Reputation isn’t a theoretical construct. It is the currency of leadership.
It evaporates when leaders substitute ideology for competence.
It collapses when institutions forget who they serve.
It disappears when regulators look the other way, or worse, when they look inward and pass rules to restrain what they themselves might do.

If NCUA doubts that reputation risk is real, a previous post about NCUA’s morally incompetent General Counsel and Chief Ethics Officer has already written the case study for them: A Culture of Impunity, a chapter the agency should revisit with a box of tissues handy.

The Real Absurdity

This proposal doesn’t make the agency strong. It makes it look frightened. afraid of its own staff, its own judgment, and its own shadow.   It solves a problem that does not exist, while ignoring several that are eating the system alive.

Proposing this in order to curry favor with ideological overseers does not enhance NCUA’s standing. It diminishes it. It invites laughter in all the wrong places.

A Modest Suggestion

If NCUA wants to improve its reputation, there is a simpler way than pretending reputation risk doesn’t exist: Let this rule die quietly.  Slip it into a drawer. Close the drawer. Lose the key.

As Will Rogers, senior advised: “Never miss a good chance to shut up.” 

 

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A Merger Explained Simply

Yesterday I posted a 3,000 word analysis of the proposed merger of Spirit Financial in Levittown, PA with Credit Union 1 headquartered in Lombard, IL.

Included in the analysis are the reactions of two Spirit members from NCUA’s website:

Member Brian Stuart comment:   I am voting against the proposed merger of Spirit Financial Credit Union with Credit Union 1. Credit Union 1 is based in Lombard, Illinois. All of its branches are in Illinois. There is no advantage to the Spirit Credit Union member to merge with Credit Union 1. Merging with Credit Union 1 would take away the local Bucks County focus of Spirit Financial Credit Union, which should be its mission. . .

Member Joann Glasson:  As a long-time member of Spirit Financial Credit Union, I am sad to see this merger occur when the CD rates are so much lower at Credit Union 1 and the loan rates are so much higher at Credit Union 1.

We are retirees with large deposits at Spirit that we will be forced to move if the merger is approved. This merger is not a service to the members of Spirit Financial Credit Union

Due to the article’s length,  I sent the following summary  to  the press:

$9 MILLION IN LEVITTOWN COMMUNITY WEALTH TO BE GIVEN AWAY – CREDIT UNION CEO WOULD RECEIVE $4.4 MILLION

Spirit Financial Credit Union, a strong and profitable 72-year-old community institution, is being absorbed by Credit Union 1 of Illinois (pending a member vote) and in the process, Levittown’s families will lose nearly $9 million in community-built capital, while Spirit’s CEO personally will walk away with more than $4.4 million in payouts and benefits. Member balloting on this proposal ends Dec. 22.

Spirit Financial isn’t struggling — it is thriving:

  • highly capitalized,
  • financially stable,
  • outperforming peers,
  • and the only locally headquartered depository institution serving Levittown.

Yet in a quiet, opaque merger, every dollar of the members’ accumulated equity of approximately $9 million will be transferred to an out-of-state institution for free:

  • No payouts to Spirit Financial member-owners
  • No equity retention
  • No bonus dividend
  • No local control
  • No sole ownership

Levittown’s families built this wealth, and now it’s about to go away.

Meanwhile, the Spirit CEO who championed the merger receives:

  • A massive cash bonus at closing
  • A guaranteed five-year employment contract
  • Incentive packages to solicit more mergers
  • A fully vested multimillion-dollar retirement package, all totaling more than $4.4 million in personal enrichment.

Community wealth will be removed, assimilated, and relocated, while ordinary member-owners will be left with nothing.

Control of Levittown’s financial legacy will shift to a board in Illinois that is unreachable, unelected, and governed by mechanisms that dramatically limit member democracy.

This is not an isolated incident. Credit Union 1 has initiated over 20 such mergers in just 3½ years, importing hundreds of millions in community assets and capital and using merger accounting to mask weak operating earnings while expanding its asset base by taking over independent, strong local credit unions.

This development raises urgent public questions:

  • How can a member-owned institution be sold without any benefit to its owners?
  • Should executives be allowed to personally profit from the liquidation of community capital?
  • Where is regulatory oversight when cooperative ownership is silently dissolved?
  • Which Pennsylvania credit union will be targeted next?

If this were a stock corporation or public company, shareholders would be compensated, and regulators would not tolerate uncompensated transfer of equity. But cooperative members will receive no payout, no recourse, and diminished legal standing.

 

 

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A Cooperative System Vision Gap & Learning from our Past

Whether one calls the current period a time of transitions, transformation or just multiple uncertainties, there is a sense that national and credit union futures seem to be nearing a precipice.

Washington’s political divisions are heightened by increasing consumer anxiety.  Economic uncertainty is created  by the federal government’s policy shifts and attacks on opponents, ending key social programs and assaults on leading private institutions.

Trump 2.0 is not the same as the first term.  He is turning the entire executive branch into his personal fiefdom installing loyalists in every department and  agency of the federal  bureaucracy.  That is, when their functions are not being downsized to feebleness.

NCUA is no exception to Trump’s government onslaught. The lone republican board member became Chair on January 20th.   His two democratic colleagues were subsequently fired so the White House could directly control NCUA actions.  This ending of an independent agency’s leadership is now in the hands of the Trump dominated Supreme Court.

Chairman Hauptman’s term expired in August.  At the same time the agency initiated a reduction in force that led to at least 20% of staff leaving.   The agency now holds no regular board meetings.   Regulation is by rote or reptition rather than design or intent. The role of NCUA is at best cloudy and at worst, irrelevant to credit unions’ future.

The largest trade association ACU  has a new CEO, Scott Simpson, a veteran of the league system.  He is introducing himself to credit unions speaking of unity, advocacy and defending the status quo.   The credit union Defense Council (DCUC) is trying to position itself as a new national voice for the industry with daily press release postings.

With the economy and consumers both showing contradictory signals, the momentum for America’s economic outlook seems fuzzy even with record stock market highs.

In this period of transition in both public policy and AI generated business disruptions, credit unions third quarter results showed stability and resilience.  However there are multiple concerns rippling across cooperative waters as the industry’s new national leaders take over.

Symptoms of Growing Coop Fissures

  • The absence of a vision for credit unions’ unique capacity and purpose to address urgent member needs:
  • The merger frenzy based on a faulty premise, which is that  mergers are growing the movement’s  market share. Rather it is simply consolidation largely fueled by CEO ambition and in a number of instances personal greed.
  • The absence of new coop startups and the steady decline in credit union charters and local presence;
  • The exclusion of member-owners from any meaningful governance role or even awareness of democratic coop design.
  • The use of member funds to purchase whole banks often at premiums to prior market valuations.
  • The lack of credit union initiated and controlled innovations and instead relying on third party vendors for both operational orginations and enhanced member value creation.

Hope For  a Cooperative Future Vision

Those in leadership  can wait and watch.  Try to keep pace by doing more of the same.

And, hold tight until market forces or political challenges force a change of direction.

Or, create a new cooperative vision that becomes a rallying point for those concerned about current trends,

 A Lesson From the Past

Credit unions have been mired in uncertainty before.  Sometimes the confluence of external events; other times by internal shortcomings marked by grasping for false advantage.  For example the effort to convert to mutual bank charters in the first decade of this century—an option taken by over 30 credit union CEO’s, of which only one survives today.

History suggests the gift of cooperative hope is more likely to come from the passion of insiders rather than the hired experience of other industries.  These Insiders should  know cooperative history, its multiple strengths, proclaimed values and commitment to member and community wellbeing.

Moreover any “updated” vision must be fought for, not just proclaimed.   It wil require repeated articulation and conversation to define a better direction than following the status quo crowd.

Last week I posted the final video, Edition XX from NCUA’s Video Network created during the Callahan era from Oct 1981 through May 1985.   The 30 minutes is a summing up of the major internal changes that took lace during this initial period of deregulation.  Three themes stand out:  change requires will, teamwork and documented results.

But the real foundation for the successes in this final video was laid in the first film the network distributed  in cooperation with the Illinois Credit Union League: Deregulation-What Does it Really Mean?

This initial communication presented a new regulatory policy and the approach for how it would be pursued—cooperatively and in dialogue.   The panel includes the NCUA Chair and General Counsel, three credit union CEO’s and Jim Barr who was CUNA’s Washington spokesperson.

This video portrays what is required to state and implement a path of hope and progress in an era marked by uncertainty, rapid change and new leadership.

The video is an example of leadership in a cooperative system.  It is as relevant today, as when it was created over forty years ago.

Here is the link.

https://youtu.be/S09QkeNYgBU

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An NCUA Camelot Era

Everyone has highs and lows in their personal and professional endeavors.

Some  of my most fulfilling moments were the ten years Ed, Bucky and I worked together in credit union regulation.  First in Illinois, and then at NCUA for three and a half years (October 1981-May 1985).

One of the educational communication efforts we launched was the NCUA Video Network.  The initial film was in partnership with the Illinois Credit Union League, What is Deregulation?, periodic productions chronicle NCUA’s priorities and information vital for credit unions to be aware of.

The final Edition XX was called The Callahan Years.  It is a live, unscripted interview by a moderator with Ed, Bucky and me.  It responds to criticisms, some voiced about our leaving two plus years before Ed’s term expired.  More importantly, it is a discussion of the many ways the agency changed to meet the new era of open competition versus government assigned charter franchises.

This 30-minute review captures the joy and learning that happens when people work well together.  I was fortunate to be a part of a team that stayed together even as we went our separate ways after founding Callahan & Associates in 1985.

The ten years we spent learning from each other  and from movement leaders was a Credit Union Camelot experience for me.

Listen to this summary of this pivotal period in NCUA and credit union history.  It is a moment of remembrance and thanks for this special professional interlude.

(https://www.youtube.com/watch?v=DrfG5PiObB0)