Category: NCUA

Posted on

Democracy Takes Work-At Every Level of Society

As I went downtown during rush hour yesterday, a gray haired, older lady appoached me with a small handout at the escalator.  It was a snall flyer for where to stand locally in the No Kings rally  this Saturday around the country at over 3,000 locations.

But democratic duties are not limited to national and local politics.  Virtually all volunteer, non-profit and community organizations have some form of member oversight.  This can be the elections of representatives or to changes in bylaws and/or structure.

If one  owns any publicly traded stocks, it is likely there will be reminders of the annual meeting with proxy solicitation calls. In this case the voting is based on share holdings, but voting none the less.

Credit unions can learn from these other exercises in organizational governance.  Especially what can happen when democracy is usurped by those in control at the moment.

The Tools of Democratic Oversight

Jim Blaine the former CEO, observed that an organized minority in authority will always defeat a disorganized majority.  And democratic majorities are, by definition, rarely in unanimous agreement.  Not everyone in Virginia thought the idea of Give Me Liberty or Give Me Death, was a great choice.

One of the most important monitors of our various democratic processes is the press.  This can be public press and broadcasts, industry publications, bloggers and those using social media to raise concerns, and even individual actors writin opinions for their local outlets. Here is how the press is covering a story of usurpation of democractic control in a major local powerful institution.

Democratic Control Removed-A Press Investigation

Recently the Houstan Chronical completed a five-part investigative series of a takeover of one of the largest Baptist Churches in the city by its pastor.  (link)

While the details are behind a paywall, here is a summary of events.

Houston’s Second Baptist Church, with about 90,000 members, is a church at legal war with itself, since a group of influential congregants calling themselves the Jeremiah Counsel sued church leadership in 2025.

They’re challenging revised bylaws established in 2023 that deny lay members a vote in important church decisions, including the selection of senior pastor Ben Young, son of the church’s popular long-time leader, Ed Young.

The bylaw change was in a single sentence that seemingly slipped by most people and put the church at odds with its own faith: “Members are not entitled to vote in person, by proxy or otherwise.”

With those 12 words, the congregation at the now 98-year-old church lost more than its vote. It parted ways with a core tenet of Baptist doctrine: democratic rule. 

The revolt started when a group of members realized they had given away their authority to vote on church business after an election in which hardly any congregants participated.

It didn’t take long for several influential church members — who are now suing to reverse changes made in that crucial vote — to realize where the new bylaws came from. They bear a striking resemblance to the bylaws of Fellowship Church in Grapevine.

Fellowship Church in Dallas, is another megachurch with family ties to Second Baptist. Second Baptist quietly copied Fellowship Church’s bylaws — and silenced its members.

One article in the series is headlined:  How Second Baptist Church sacrificed its Democratic Principles: ‘You can’t fire the king’

 Democracy vs. No Kings

The human tendency to rule by authority versus the more complicated exercise of democratic leadership is present in all organizations.  But especially in credit unions.  Because money amd, its use, is combined with power.

The result is that boards and senior management strive to limit any meaningful say in their oversightand leadership roles.  Nominations for board seats are controlled by existing directors and limited to the exact number of vacancies.  No voting needed, just ask members to approve by acclamation.

But when there is the prospect of members rising up, the next step is to copy the practice of Second Baptist.  Specifically change the bylaws to make it impossible for members to self-nominate or to challenge the board’s control of the election process.

In the traditional FCU bylaws, members can submit a petition with 500 names for board nomination or to call special member meetings.  The top three credit unions by assets,Navy FCU, SECU  (NC) amd  PenFed all took steps to make this member option impossible.  Instead of a fixed number, the bylaws were changed to require a percentage of total members to sign the petition.

PenFed’s change came after a self-nominated candidate qualified for  election.  SECU’s board changed its bylaws after members challenged the closed board process in an open election. The board changed the bylaws and election procedures to make the process very difficult for member-nominated candidates to qualify.

All three bylaw changes to the long standing democratic process were approved by the reglators with members having no say or even knowledge.

Democratic oversight takes integrity, character and continuous vigilance. It requires a free press in all forms to cover uncomfortable truths and lapses in duty by those in power. Power  in terms of community and local influence and those charged with responsibility for public oversight.

Firing a Credit Union Leader

One of the landmark events in credit union land was when CUNA fired its presient.  The story in brief:

Herb Wegner was an avid pilot and owned his own plane. He had an agreement with (CUNA) to be reimbursed the equivalent of a first-class ticket whenever he flew his own plane for work. However, disputes over these expenses became a major point of friction with the CUNA Treasurer, Fred Krause.

At a board meeting in 1979, Krause reportedly announced he was “tired of fighting Herb about airplane expenses” and unexpectedly moved to fire him on the spot. The motion passed, stunning most of those in attendance.

While there were other factors at play, today the highest honor credit unions bestow on their leaders is called the Herb Wegner award.  An irony which shows the cooperative system’s ambivalence in managing its own shortcomings.

What Everyone Must  Do.

Democracy takes practice which is the root of the word participation.   Here is my sign for Saturday.

 

 

Posted on

To BEE or Not to Be: The Most Vital Question for the 2026 Credit Union Governmental Affairs Conference in DC

This week is the annual credit union political Woodstock festival in the Nation’s Capital.  There will be vendor halls filled with new and old names; speeches from industry leaders promoting unity and forecasting threats; praise from both sides of the congressional aisles; and non-stop breakfasts, lunches and receptions/dinners to catch up with peers.

Is it possible in this choreographed cacophony that the most important voice and movement issue may not addressed? The concern comes from 2,700 miles away, written by a longtime member-owner and printed  in the local newspaper, the Sacramento BEE.

In this week of celebration I believe this person is raising the most important existential issue facing the movement-will anyone pay attention.

https://www.sacbee.com/opinion/op-ed/article314780377.html

The Movement’s  Critical Issue

The Bee opinion is a current example of the increasing frenzy of secretly initiated intra-industry  acquisitions reshaping the unique structure and role of cooperatives.

The proposed SAFE-BECU  combination takes the future away from their member-owners.  It now rests in the control of self-appointed boards and management’s personal ambitions.  Regulatory oversight is entirely absent.

The Context for this 2026 Endgame

Existential moments in credit union history are not new. In February of 1982 Chairman Ed Callahan, in his first speech to GAC, asked CUNA President Jim Williams the most critical issues facing credit unions.  Jim used one word: “survival.”

At that time, the movement counted 20,784 credit unions with $72.3 billion in assets serving over 45 million members.  Growth had stalled.  Inflation with double digit interest rates and money market funds were taking away shares.  Credit union expansion a forgotten  dream,  investments (GNMA 8’s) were way underwater, and losses were looming high.

Drawing on his five years overseeing the largest state charted system in Illinois, Callahan proposed a new policy following credit union principles of collaboration, self-help, local advantage and ever enhanced member-owner value.  The resulting changes in NCUA institutional oversight and industry initiatives created a movement that not only survived but thrived,. The movement transformed to the market driven realities of open competition from the era of government issued licensing for protected financial franchises.

Today’s Threat Is  Internal

Today the nation’s 4,200 credit unions manage $2.5 trillion in assets for over 140 million members with retained earnings approaching $285 billion. The NCUSIF is overfunded.

Unlike 1982, the system’s present danger is neither financial nor the various external warnings  about fintech, stable coin options or other competitive innovation.

Today the existential end arises from two simultaneous practices. One is expanding efforts of self-destructive acquisitions of long-term large sound coops by their fellow credit unions. These efforts mimic the  old fashioned capitalistic efforts to gain market dominance by takeovers, not competition.

As described in the BEE opinion editorial, the deals are done in secret with payouts and new roles negotiated by the principals, their advisors and then signed off routinely by regulators. No one represents or protects the member-owner’s rights and financial interests in these deals rife with conflicts of interest.

There is a second social and political factor at work. Today’s  political ethos is the example of the strong, ambitious and single-minded pursuit of wealth and dominance, not democratic collaboration.  Traditional credit union virtues of cooperation and sharing seem naïve.  So leaders will bow their knees, compromise legacies of trust, to those in authority who in turn will stand aside as they pursue their goals of  industry superiority.

The movement’s future has been steadily removed from member-owners’ hands through self-perpetuating boards and CEO turnover whose successors have no obligation to the legacy they now control. These changes of control  transactions are now greased with payments in the millions of dollars from members’ common wealth.

Standing Up to  Self Destruction

Can this increasing  cooperative  cannibalistic destruction be challenged.? As more and more leaders are caught up in what one observer calls the emotional urgency of FOMO risk,  can credit unions’ unique purpose be revitalized?

Two sources of hope and example.

The first is a renewed vision and embrace of  what success looks like as a coop.  Here is a classic, timeless statement by a longtime, very successful CEO, now retired.  The Ultimate Vision:

(https://www.youtube.com/watch?v=tE_3-ipOiPE)

Will The Grassroots Rise Up?

The second factor must be the old fashioned calling that all Americans believe in democratic governance.  It is not the rich, those in positions of power or the inheritors of wealth that control our future.  But We the People.

Scott Rose, in his BEE opinion, is the example Doug Fecher said would be the test of credit unions’ ultimate success.  Scott is sounding an  alarm for his community’s future.  His effort is the same that has  animated the best of American patriots for 250 years.  On behalf of his 245,000 fellow owners, the greater Sacramento community and the missing regulatory oversight, he is alerting all of us to this takeover of not just his credit union but the entire  cooperative model.

His willingness to take a stand will create public awareness, debate and an uprising from  the grassroots.  For as he says, “member-owners, local leaders and potentially impacted community organizations must speak out.   What is lost is not simply and accounting abstraction—it is real control of wealth. . . Once approved, a merger cannot be undone.”

Will someone at tonight’s Herb Wegner award festival dare to honor the voice of this member-owner who is calling all of us to remember who we are and what we stand for?

The challenge is both present and ageless.  In words of the Bard’s most famous character:

To be, or not to be, that is the question:

Whether ’tis nobler in the mind to suffer

The slings and arrows of outrageous fortune,

Or to take arms against a sea of troubles

And by opposing end them.

 

 

Posted on

Will NCUA’s Journey Be From Chartering a COOP Movement to a Regulatory Dead End?

What kind of financial regulator would be most effective to carry on the purpose of the credit union system stated in the FCU ACT? (see note on Congressional purpose at end)

Should the credit union system be overseen by a regulator of cooperatives or of financial institutions?

The arc of federal regulation from 1934 to today is simple.  The federal regulator evolved from the role of chartering, promoting and supervising cooperatives to just another financial supervisor safeguarding an insurance fund.

The coop design is unique in American financial options. The users are the sole owners of the service.  The intent was to create shared community resources not private wealth.  The structure was to be perpetual with the common equity always “paid forward” to benefit future generations.

Moreover, financial soundness was underwritten by  this shared purpose of borrowers and savers.  Governance was democratic–each member-owners had one vote. No proxies.

The Impact of NCUSIF On Coop Regulation

The  turning point in cooperative regulation was the 1970 passage of a federal deposit insurance (NCUSIF) option modeled after the FDIC and FSLIC.  The banking funds were created in the early 1930’s in response to the  “banking holiday” failures in the depression.   The nascent state chartered credit union movement had no such system failures.  Deposit insurance was not  part of  the FCU act passed in 1934. It wasn’t needed.

The need for the NCUSIF was much debated by credit unions in the lated 1960’s.  CUNA opposed the option arguing such an institution would eventually dominate the system’s functioning.  A new trade association, NAFCU, was formed to lobby for and pass this federal option for cooperatives.

The NCUSIF was not created because of system failures.  Rather it was a recognition that cooperatives, while different in design, were just as safe as any for-profit banking option.

As NCUSIF insurance spread, so did federal regulation mimicking other banking regulations.

From Cooperative Partner to Financial Overseer

When implementing deregulation from 1981-1985, NCUA Chairman Callahan asserted credit unions were unique.  The so-called level playing field arguments, he believed, would undermine the cooperative advantages of member-ownership.

Callahan believed regulations should promote cooperative purpose and collaborative actions.  Both tenets were key tp the financial restructure of the NCUSIF and achieving 100% credit union participation in the unique CLF’s-coop system liquidity partnership.

But the bureaucratic pull of Washington prompted later NCUA leaders to emulate the example and practices of banking regulators.  Safety and soundness, not member service, became the regulator’s mantra.

Both NCUA and credit unions sought Congressional hearing seats at the tables with the titans of America’s financial services.

Today NCUA has copied banking regulators with rules such as risk-based capital and, expanding market sources of capital.  New charters are non-existent.  Cooperative purpose is never mentioned in supervisory priorities.

NCUA oversight has fluctuated between laissez faire (let the free market decide) to embracing the administration’s political ideology from DEI to government downsizing.

The absence of any reference to coop design is that there is no protection for for member-owner rights or their collective savings.  NCUA like the banking regulators has reduced their oversight to merely offering a $250,000 payout in the event of institutional failure.

This neglect of member-owners’ rights has resulted in boards staying in power perpetually.  Owners are kept out of any governance or voting role.  Bylaws are modified with NCUA approval to prevent member initiatives.  Boards and CEO’s feel free to take a credit union’s business model and its billions in legacy assets in any direction they choose.

Transparency for cu leaders’ conduct is non-existent.  Director fiduciary duties flouted. Accountability for outcomes occurs only after a financial crisis. Then the system’s leadership shortcomings are quickly swept under the rug via mergers.

When new CEO’s arrive from outside the coop system, often former for-profit financial professionals, they bring their prior experiences with them. They act like teenagers given a new high-powered formula 1 car.  With board assent, they jump into the driver’s seat and try to see how fast they can make their new institution grow.

The NCUA’s Future

Today NCUA acts and sounds like the other banking regulators.   Credit unions applaud the Trump adminisration policy of government tear down and relaxed o exam oversight.    NCUA appears  alongside the other financial overseers in Congressional hearings, states all is well, and makes no effort to describe how the tax exempt coop system is fulfilling any public duty.

The consequence is that credit unions no longer see their organization as part of an interdependent financial system. Institutional success is celebrated versus cooperative’s  ability to create better financial solutions for those who have the least or know the least about personal finances.

Individual credit union priorities look more and more like capitalist business plans.  They attempt to acquire, not support their peers, via merger takeovers.  If that fails, just buy a bank.

With self-perpetuating board oversight, regulatory withdrawal, no transparency about transfers using tens of millions of member-owners’ capital, the cooperative system may lack the capacity for self-correction.  Industry hegemony, not cooperative purpose, becomes the institution’s endgame.

How much longer will Congress or public policy think tanks not pose the existential questions: Why does America need a financial system that emulates its competitors, but with a tax exemption?  Will NCUA become part of Treasury’s financial oversight, just like the OCC?  Why have two federally managed deposit insurance funds that provide the same function?

“It Makes No Sense:” One Analyst’s Assessment

Yesterday’s post gave a brief history of federal regulatory evolution, It  tracked the various federal governmental departments that shepard credit union’s evolution.  And subsequent events under NCUA as an independent agency. This is that author, Ancin Coolley’s  concern, about where the coop movement stands today.

 When you read credit union regulatory  history and go back to the arguments, it keeps bringing me to this point: the FDIC and other agencies did not want credit unions. And it calls to mind the question, why did they not want them? 

They did not want them because credit unions were not treated the same way as other financial institutions. They were viewed as something that drifted into a social-services posture.   

And honestly, the more I dig into the history and the legal history, the more it feels like I’m finding out Santa Claus isn’t real. The more I learn about the lack of standing for members in court, and the reality that there’s often no remedy for members against directors who effectively give away capital, the more disorienting it feels.  

It’s like there’s the reality I want to believe in, and then there’s the legal reality of what a credit union actually does.  

And what I can’t even begin to reconcile conceptually is this: credit unions want to maintain their tax exemption while also purchasing banks. In good conscience, I can’t even argue against someone who says, “How are you going to maintain your tax exemption if you’re buying a bank, when you were originally given a tax exemption for not being a bank?”   

It makes absolutely no sense.  

Editor’s Note on Cooperative Purpose:

Congress added the following language to the Federal Credit Union Act on August 7, 1998.

The text was included as part of the Congressional Findings in Section 2 of Public Law 105–219, also known as the Credit Union Membership Access Act.

This specific language was crafted to affirm the Mission and reassert that credit unions serve people of “modest means.”

The Congress finds the following:

  1. The American Credit Union movement began as a cooperative effort to serve the productive and provident credit needs of individuals of modest means.
  2. Credit unions continue to fulfill this public purpose, and current members and membership groups should not face divestiture from the financial services institution of their choice as result of recent court action.
  3. To promote thrift and credit extension, a meaningful affinity and bond among members, manifested by a commonality of routine interaction, shared and related work experiences, interests, or activities, or of an otherwise well understood sense of cohesion or identity is essential to the fulfillment of the public mission of credit unions.
  4. Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most state taxes, because they are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means.
  5. Improved credit union safety and soundness provisions will enhance the public benefit that citizens receive from these cooperative financial services institutions.
Posted on

The Power of a Single Person

Most of us bristle a little bit when we feel our agency is really limited and there’s nothing we can do about it,

One of the potential advantages of credit union democratic governance is that each person has an equal vote on the annual election of directors and mergers which end a charter’s life.

In both cases this potential for a single member to make a difference often creates anxiety and pushback by those in power.   A current example of this fear is the reaction  by the board of SECU (NC) to former CEO Jim Blaine’s repeated critiques of the credit union’s direction and lack of transparency.

After two years of contested board elections in 2023 and 2024, SECU’s Board made sure in 2025 there would be only the number of candidates as there were vacancies, thus ending a brief span of democratic member choice.

SECU’s conduct is not alone. It is the SOP for most large credit unions.   And in mergers, the process is even more controlling as there are billions of dollars up for “change of control.”

So can one person make a dfference when all the traditional forces are aligned against democratic practice, when regulators are AWOL and the members seduced by their unrequited loyalty to their coop?

One Person’s Effort to Challenge Exploitaton

History shows again and again that one person can change the world, one event at a time.  Here is the story of Bernard Devoto as told in Garrison Keiller’sThe Writer’s Almanac from Sunday, January 11, 2015.

It’s the birthday of historian Bernard DeVoto, born in Ogden, Utah (1897). He loved the wide spaces and big skies of the West, but he felt like an outsider in his hometown — he was raised Catholic in a Mormon town, and he was too bookish and unathletic to feel comfortable there.

He studied English at Harvard. After graduation, he taught at Northwestern and then at Harvard, although he never succeeded in his goal of becoming a full professor there. He wrote a novel, The Crooked Mile (1924), and dreamed of writing the Great American Novel. Then he wrote a book on one of his literary heroes, Mark Twain, a book called Mark Twain’s America (1932). It blended literary criticism and history, and DeVoto found he had a knack for nonfiction, and especially for history.

In 1935, he began a monthly column for Harper’s, “The Easy Chair,” which he wrote until his death. He covered a huge range of topics: the evils of McCarthyism, detective novels, the Civil War, railroads, the Western landscape, the best way to make a martini, and international politics. . .

In the summer of 1946, DeVoto took a three-month road trip through theWest. He had been writing about the West on and off for years, and had just finished two books set there — a novel and a history of fur trading. He wanted to revisit the place in preparation for a book on the Lewis and Clark expedition, and he thought he would write some essays during his trip.

He was horrified by the land abuse that he discovered there. The novelist Wallace Stegner, who wrote DeVoto’s biography, said: “DeVoto went West in 1946 a historian and tourist. He came back an embattled conservationist.” Commercial interests — especially cattle grazers and big timber — were attempting to take back huge amounts of public land, and DeVoto coined a phrase to describe it: a “land grab.”

Instead of the lighter travel pieces that he intended to write, he wrote a series of essays for Harper’s criticizing the assault on natural resources and the exploitation of wilderness. He described how politicians and businesspeople were conspiring with cattle ranchers to open public lands for grazing, and how timber companies were trying to clear-cut national parks.

In one of these essays, “The West Against Itself,” DeVoto wrote: “So, at the very moment when the West is blueprinting an economy which must be based on the sustained, permanent use of its natural resources, it is also conducting an assault on those resources with the simple objective of liquidating them. The dissociation of intelligence could go no farther but there it is — and there is the West yesterday, today, and forever.”

The preservation of Western land and resources became his life’s work. DeVoto lived for just nine more years after his summer road trip, but in that time he published more than 30 essays about Western conservation. . .

The Liquidation of Public Property

I chose this eample of one person’s influence because of the many parallels with today’s credit union’s practice of exploitive mergers.

In almost all these transactions now, members are showered with promises of future benefits while their legacy heritage is taken away and given without compensation to unknown third party control.

Credit unions like the natural wildness on public lands, grow organically from the ground up.  They must start with a core group of common interest to be chartered.  Afterwards it will take a generation or two of member loyalty to become self-sufficient.

Today these merged firms with millions and billons of dollars of asset growth funded with public purpose and tax exemption. are routinely chopped down  after generations of growth and prosperity.

These naturally created dynamic organizations are broken apart for their individual pieces of market value. The member-owners who supported these “forever” institutions are left with nothing except the rhetoric of marketing and PR phrases never defined and quickly forgotten. And the financial spoils are dispersed among the arrangers.

The question remains.  In a democratic institution can one person make a difference, sound the alarm and mobilize others to oppose this predatory behavior?

I’ll give an example of one who had the tenacity to throw back the covers on mergers.  Then see who else might be willing to come forward.

 

 

 

 

 

 

Posted on

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. 

 

 

Posted on

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?

 

 

Posted on

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)

Posted on

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.
Posted on

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.

Posted on

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.