On Sunday June 14, 2002, Rev. William Barber III gave a 43-minute sermon to an empty Washington National Cathedral. He integrated events from American history to provide a context for his message: “America, accepting death is not an option anymore.”

(https://www.youtube.com/watch?v=eviTAayTGT4)

One example of his literalness: In America you can find unleaded gas anywhere, but also cities where there is no unleaded water.

His use of historical facts provides a picture of America that was not part of any course I took. Be inspired.

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The following are notes from the CEO’s comments and Chairman’s close at a credit unions” members’ virtual annual business meeting a week ago. The CEO summarized covid’s lessons to date:

1. Interrupted what we were doing, gave us time to rethink priorities, reengineer the financials, and focus on strategy after coronavirus;
2. Stay at home orders for our staff and members meant the virtual future anticipated in 2025 is here now;
3. Our experience has given us renewed confidence we can endure in the future. Many of our younger leaders have not had to manage a crisis. This event makes them “battle-tried.”
4. Crisis confirmed the advantages of being local. We are part of the community. We lead recovery with our example.

He concluded: This is the first national public health crisis for over a century We will document our plans to tell a winning story afterwards. More importantly, we are more prepared and empowered to confront the next unforeseen challenge .

Better Than Before

The Chairman closed the meeting by giving his future vision: Better Than Before. The pandemic required an immediate response of continuous innovation and improvement. He promised to sustain that momentum even when “we are standing on the other side” of this event.

What are your your credit union’s learnings at this phase of the crisis? Are you documenting actions to have a road map for the next disruption?

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A credit union CEO during the current pandemic:

I continue to be amazed at how our employees prove to be the best and brightest financial experts in the industry. Our 800-plus employees have been diligent while standing ready to serve and offer smart solutions. I can’t thank them enough and appreciate everything they are doing.

From a Data Processor Executive:

It’s far easier for a community bank to catch up on five years of technical innovation than it is for a neobank (fintech) to catch up on 50 years of hard earned customer loyalty.

The summer job market for students out of high school and college is more uncertain than usual. Employment in traditional roles in day camps, athletic leagues, and even retail stores are much fewer.

But remote capabilities, developed to serve members, may also be a way to employ interns in value enhancing projects. Many of these students have spent not just the last semester, but much of their educational experience living in the virtual world.

An Example: The Library of Congress

The Library of Congress is employing 40 undergraduate and graduate students in its 29-year Junior Fellows summer intern program.

The program’s goal is to “enable expanded access to and promote broader awareness of Library resources among members of Congress and researchers, including scholars, students, teachers and the general public.”

All work will be virtual. The ten-week program includes 27 projects across all divisions of the Library.

These range from archiving assets from 20 years of past National Book Festivals, exploring the history of African American business and entrepreneurship, visualizing and mapping collections of literary artists from the Caribbean, Latin America, Iberia and Hispanic or Lusophone cultures, and measuring how different light sources affect the visual aging of inks and papers.

The Junior Fellows also participate in virtual professional-development opportunities including assessments, tours, courses and special events intended to increase engagement with the Library.

In the final week each intern will present their most significant discoveries in a virtual display day.

Virtual Interns

This past Sunday a high school student talked about her frustration when she was unable to join the demonstrations in DC due to a summer rainstorm. The next day, Saturday, she decided to organize her own protest for three days later. Working long days and nights with friends she identified the site an empty municipal library parking lot, notified officials, arranged speakers and asked people to come. She thought several hundred might show up. Nearly one thousand did.

Over the past several weeks, many young people have participated in calls for change. Can we provide this generation opportunities to explore credit unions as one option for their energy, creativity, engagement and commitment? Ten weeks only? And perhaps enable change leaders?

 Keeping an Eye Out for Our Members

 In a recent post I suggested that data analytics could be a powerful tool to identify members going through an economic transition in the pandemic. https://chipfilson.com/2020/05/a-critical-new-data-tracking-need/

Today’s 13.3% unemployment rate for May highlights the importance of tracking this trend at the member level.

Following is a series of graphs with commentary,  showing one credit union’s real time data. With total assets of $150 million, these graphs demonstrate both their ability to focus on the most urgent member situations, and to show regulators  competency to manage the risks, if any, from their special programs.

Credit Union’s Member Unemployment Curve

While we are tracking # of members receiving UE each week – this shows the # of unique members receiving Unemployment on a weekly & monthly trend.

The # of member numbers receiving weekly UE benefits continues to rise with a decline the last week of the May. Definitely something we will continue to monitor.

Monthly View:

Quick math showing # Members that received an Unemployment ACH vs Overall Members w/ a Direct Deposit in a month.

Mbrs w/ UE Deposit Overall Unique Depositors UE Rate Jan 22 7281 0.30% Feb 23 7357 0.31% Mar 71 7391 0.96% Apr 337 7500 4.49% May 471 6894* 6.83%

*May is showing fewer depositors due to at time of pulling data – Soc Security had not deposited yet (we have been posting early in prev. months)

Keeping an Eye Out for our Members

We recently compiled some data to reach out to members that have made or requested loan adjustments – here is some data:

	# Mbrs w/ UE Deposit	UE Mbrs w/ Loan	UE Mbrs w/ Loan that Skipped Payment
Apr	337	171 (50.7%)	32 (18.7%)
May	471	218 (46.3%)	41 (18.8%)

April and May were consistent. Approx. 50% of the members that received an Unemployment Benefit have a loan with us.

Further – of the 50% that have a loan, 18% of those members performed a Skip-A-Pay. (Lower than expected). This is something we will continue to monitor to see if a trend appears.

Reshaping the ACH Deposits:

We divided our ACH Deposits into 5 categories:

Tax Refunds, Govt Benefits, Unemployment, P2P Transactions, and Payroll/Other

Here is a March vs May comparison of Incoming ACH Deposits by Category

March 2020:

May 2020

Takeaway:

Unemployment ACH has gone from nearly non-existent in March ($60,000) to 8% ($1,620,000) of our ACH deposits in May.

Average Deposit Amounts

As we know, the Government has provided additional assistance to the Unemployment Benefits. That can be reflected in the data here:

And for the Payroll category the average deposit has decreased as expected.

Plenty more where this came from:

We can use Tool 232 – Common Bonds to analyze this group further. This will give us a complete breakdown of the 471 members that received Unemployment during the month of May – it’s an excellent resource.

Where this dataset is now built we can update this information pretty easily going forward as well.

Recently NCUA released the December 30, 2019 financial updates for the five corporate AMEs liquidated in September 2010.

The projected repayments to the shareholders of the five corporates are as follows:

• US Central Shareholders: $1.667 B or 100% of membership capital shares
• Members United Shareholders: $588 M or 100% of membership and paid in capital shares plus a liquidating dividend
• Southwest Shareholders: $703 M or 100% of membership shares plus a $300 million liquidating dividend
• Constitution Shareholders: $36 M or 54% of member share balances
• WesCorp Shareholders: $0

Avoiding Regulatory Double Jeopardy

The above amounts are a $90 million gain since the September 2019 numbers were released. With interest rates at all-time lows, the securities used to underwrite the NGN program, have undoubtedly gained additional value since December.

The NGN program ends in 2021, one year away. But the ability to return these funds now could significantly help both the 11 corporates and the thousands of credit union shareholders of the three corporates right now. Knowing that these repayments would be added immediately to capital would empower receiving credit unions to make more informed decisions about current member assistance programs. Every corporate and natural person credit union was sent a receiver’s certificate for their share balance. Now is the time to cash these out.

Three years ago NCUA figured out how to end the TCCUSF early and then subsequently closed several NGN trusts before maturity. These almost $3.0 billion  credit union repayments are sitting idle.

The coincidence that these surplus funds from the Great Recession over ten years ago could help in this latest economic crisis is at best ironical. But what would be worse is if the funds accumulated due to serious misjudgments about the actual condition of four of the corporates in the earlier crisis, should once again be unavailable when most needed.

That would indeed be an act of “double jeopardy” by NCUA.

The CEO’s message for the virtual annual meeting in this COVID time opened with a mission statement:

“Our mission is to look for solutions that will take us all to the other side and be better for the changes we’ve made along the way.”

The word that jumped out is ALL. Not mostly everyone, or just the fortunate ones. ALL will make it to the other side of this dual health and economic disruption.

And we’ll be better for it.

A Visual Expression: In this Together

Sometimes a picture captures meaning more powerful than words. I believe a wonderful example of this CEO’s mission is expressed in this 50 second news report . It shows over 250 Amish men, dressed in black, lifting together, and then walking a barn by hand to a new site. All in less than five minutes.

The Cooperative Mission

Might the credit union outcome from this pandemic be nothing less than to become America’s Premier Public Financial-Health System?Isn’t this the mission we were created for? Will we lift all our members so that everyone makes it to the other side?

In Flanders Field is a battlefield poem composed during WWI by Canadian doctor Lieutenant-Colonel John McCrae. He was inspired to write after the funeral of a friend and fellow soldier who died in the second battle of Ypres. McCrae died of pneumonia in January 1918 near the end of the war.

His image of poppies growing (between the crosses, row on row) in the fields of graves of fallen soldiers resulted in the flower becoming the world-wide symbol in commemorations honoring those killed in combat, including Memorial Day in the US.

The third verse of his poem reads:

Take up our quarrel with the foe:
To you from falling hands we throw,
…The torch; be yours to hold it high
…If ye break faith with us who die
We shall not sleep, though poppies grow
……In Flanders fields.

The memories being honored are not only the casualties of war, but also the causes for which they fought. The poem challenges us to catch the torch and keep the faith for all who’ve died.

An American professor and humanitarian, Moina Michael, in the spirit of Flanders Fields elevates the poppy’s symbolism in her poem We Shall Keep the Faith (1918). She first proposed that the poppy become the enduring symbol of remembrance.

We cherish, too, the poppy red
That grows on fields where valor led;
It seems to signal to the skies
That blood of heroes never dies,

May the personal sacrifices and the duties answered, be a blessing that will again inspire you on this day.

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While this graduation address was written for a specific set of students, I believe his points are especially relevant for credit unions. The times require risk-taking, but the human instinct is to hunker down. Excerpts follow.

Nurturing — and Celebrating — Next-Generation Innovators in Uncertain Times

(Jim Chung, the Associate Vice President for Research, Innovation & Entrepreneurship at George Washington University-May 5, 2020-excerpts)

The coronavirus pandemic has upended the educational and career prospects for the most senior members of Generation Z. Millions of college students are finishing the academic year through online classes, and soon-to-be graduates face the daunting challenge of finding a job in the midst of a global economy in turmoil. While the outlook is intimidating, the students most prepared and able to succeed in these uncertain times maybe those who have embraced entrepreneurship during their college careers.

Innovation and entrepreneurship training programs at the George Washington University (GW) and other institutions across the U.S. provide students with a methodology and mindset critical to operating in resource-constrained and challenging environments. These environments are often defined by high stakes problems with highly uncertain outcomes.

Problem Solving Approach

Our approach to solving problems through innovation is to treat it like a scientific experiment: Identify the problem, break it down into component parts that are solvable, test your hypotheses and assumptions, ask the right questions and understand the outcomes. Often, students run into inconvenient or unexpected answers that force them to change course entirely. If anything, the current pandemic encapsulates the type of environment we are working to prepare our student entrepreneurs for.

Virtual Competition

It’s against this backdrop that we decided to forge ahead with a virtual version of our GW New Venture Competition even as much of the university’s co- and extra-curricular activities have been canceled or postponed. Going virtual enabled us to still honor all the hard work and fascinating ideas of our student and faculty participants. But perhaps even more importantly, our decision to pivot amidst the sudden onset of COVID-19 has also served as an invaluable object lesson: Being forced to adapt quickly is something innovators must do.

This year, our competition venture winners and runners up sought to confront a diverse set of challenges, everything from a lack of innovation in the global supply of blood to nocturnal asthma attacks in children. They developed educational platforms to help adults with autism spectrum disorder achieve career and other goals and devised inspired ways of capturing and harnessing the kinetic energy produced by opening and closing doors. One of our runners up even devised an app that consolidates the tools needed for songwriting.

Innovation in Hardship

. . .history has shown that periods of economic downturn and hardship can ignite the most ingenious companies. Walt Disney started his company in 1929 at the start of the Great Depression, as well as aerospace pioneer United Technologies, now merged with Raytheon earlier this month. Closer to our times, WhatsApp, Instagram, and Uber all started during the Great Recession.

Yet, even before this pandemic and looming economic crisis, the U.S. has been losing ground in the global innovation race with the number of startups declining domestically and capital investments moving to entrepreneurs in other countries.

The All-Purpose Antidote

In order to promote innovation post-pandemic, universities will have to redouble their efforts to teach and encourage entrepreneurship among their students. Innovation training has value for everyone, not just students studying business or engineering. Those of us who lead innovation offices and programs have a responsibility to recruit students across disciplines, backgrounds, and life experiences.

. . .Indeed, many of challenges of the current pandemic and looming, complicated issues like climate change, the future of work and, yes, another global public health disaster, ensure that uncertainty and high stakes will be undeniable features for much of this generation’s — and successive generation’s — lives.

Our students need to be ready to think on their feet, to analyze, adapt and ultimately act with confidence. Spurring the next generation of entrepreneurs may be just the antidote we need.

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