From Vermont
Creches and Menorahs from around the world.
Friday Thoughts
Two comments on yesterday’s blog NCUA’s transition in 1981:
- Ed Callahan was a leader who made you feel we were part of something big.
- from a George Will column: “Musk was ten years old in 1982 when Ronald Reagan appointed entrepreneur Peter Grace to purge government of waste and mismanagement. . .Grace’s commission produced 2,478 recommendations including this: Electricity produced by the Hoover Dam was being sold to parts of three Western states at Depression era rates that were one-fourth to one fourteenth of the rates paid by unsubsidized Americans. Congress responded to Grace’s proposal-stop this-by stampeding to extend for thirty more years this way below market price for a federal resource.”
- From Canada-an example of accountability:The Alberta government fired the entire board of its pension manager, saying the $116 billion Aimco increased compensation and staff, but not its returns. (an example for Coop Boards?)
- Why CEO’s who offer their credit union in merger to enhance their retirement benefits: “People love unjust gain because money is their highest trust.”
- On the challenge for informed public discourse: Reducing complex issues and any public policy into one sentence is not conducive to the civility, magnanimity, and intellectual processes needed for a free society to flourish. Doing so performs a double disservice, in that even while it redirects one from issues to personalities it also kills the search for truth by ignoring the need for real arguments, even ones made with magnanimity. The human mind was created to seek and know the truth. . . Democracy requires compromise, and compromise requires the two virtues lacking most in American society–prudence and humility.
- What hope is there, then, now that technology and social media have only deepened the virtue deficit? To paraphrase the great orator, Cicero, who lived at the time of the Roman Republic’s decline into instability, impiety, and autocracy, “silent prudence” is always better than “loquacious folly.”
- We may live in an age of succinct folly but the first part of Cicero’s dictum still applies.Silence involves listening, for one cannot argue without first listening to one’s opponent. As the writer of Ecclesiastes reminds us, “The words of the wise are heard in silence, more than the cry of a prince among fools.” Thankfully, Solomon has not yet called and asked for his wisdom back.
Post Election Back to Work: The Change in Employment Patterns in Communities
As consumer focused financial providers, changes in local employment patterns can have a profound impact on members’ and their credit union’s financial outlook.
Credit unions have always walked toward members and communities in difficulty, not away. The importance of a local credit union option is especially critical for those living in areas of slower growth and/or lower paying job opportunities. Now a study has tried to identify those cities whose economies trail national averages.
In the FDIC’s Second Quarter report, there is an article U.S. Industrial Transition and Its Effect on Metro Areas and Community Banks (pgs 45-74).
The study covers fifty years from 1970-2019 in the shifting employment patterns from higher paying industrial occupations, such as manufacturing, to an economy based on service industry and technology.
The study uses Metropolitan Statistical areas (MSA’s) and developed a “transition score” for ranking the areas showing those most impacted by the decline in higher-paying to lower-paying employment.
Of the country’s 387 MSA’s (cities over 50,000) those with higher transition scores had slower economic growth, were mostly smaller in population, and located in the Northeast and Upper Midwest. The two study tables below show the MSA’s with the highest employment transition scores along with the change in total employment over the past fifty years.
Of the 54 MSA’s in states with the highest number transition scores, Pennsylvania led the states with ten.
(note: for highlighted MSA’s above the study presents analysis of each showing why they reported high population growth)
Additional tables and graphs illustrate both the distribution of the highest scores and the lower impact scores among the largest MSA’s which tend to have a more diversified industrial employment base (table 3 page 55).
As one would surmise, MSA’s with high employment transition scores had slower income growth than the nation as a whole. (chart 4, pg 57)
In the four metro areas with the highest scores above, there were a number of other negative economic factors in addition to the erosion of manufacturing. These included total employment and population declines, slower per capital and GDP growth versus national averages, natural disasters and a lack of amenities such as universities and favorable weather.
Impact on Community Bank Performance
The report’s final pages analyze the performance of banks whose headquarters were in one of the 54 MSA’s with the highest transition scores, that is communities impacted by the greatest change in employment patterns. Following are some of their conclusions.
While overall performance is generally lower, these banks performed better than other community institutions in periods of high economic stress. In terms of structure, consolidation occurred as in the industry at large, such that only 31% of high transition communities were left with a local institution by 2019. New charters were less frequent in these MSA’s. But bank failure rates were lower.
In the highest transition scored MSA’s, banks had weaker branch and deposit growth, slower overall financial activity including pretax ROA.
The reason for these banks better performance during the two periods of economic crisis, was that their balance sheets contained more single family residential loans and lower exposure to commercial and industrial loans than institutions located in a less impacted MSA’s.
The Takeaways for Credit Unions
Credit unions are no strangers to changing employment patterns in their market areas. Many were originally chartered with employer based FOM’s. The deregulation of the early 1980’s allowed both state and federal charters to diversify their member base and seek other growth options.
The banks that were most resilient during these employment transitions focused more on first mortgage lending and less on commercial. Credit unions are almost exclusively consumer and real estate focused lenders. Even when an industry or local employer closes, the members tend to stay local. And need their credit union more than ever.
The study shows the external context matters in overall performance. It shows the obvious–that slower economic growth tends to correlate with lower financial performance. It also reinforces the critical and crucial role locally-focused financial firms have in these community transitions.
There is a cyclical pattern in much economic change. A high growth area becomes crowded, expensive, and loses appeal versus communities with lower home prices and more stable institutions. The role of credit unions as local economic actors is vital in both communities.
Many commentators suggest the latest election outcomes were driven by voters’ dissatisfaction with their economic situation, especially inflation.
Credit unions have the chance to take the lead in giving these members a hand up.
As other firms may rush to the high growth market attractions, the study shows that sustainability in times of deep transition is not only possible, but critical to the bringing the time closer when good fortunes return.
Veterans Day: Thank You for Your Service
Many times on national holidays, Veterans Day or other civic events, I have heard these words of thanks. But the people who should also be recognized are those whose duty was on the home front. They too served, often out of immediate contact, coping with life in a foreign county and very much reliant on their own initiative.
When we arrived in Japan in April of 1970 the Navy put us up in local Japanese hotel, outside the Yokosuka Navy Base. I was the new Supply officer on the USS Windham County (LST 1170) homeported there.
Three days later, after restocking the ship, I was gone for a four month deployment. Our initial role was a joint U.S. Navy-South Korean amphibious exercise off the coast of Korea, called Operation Golden Dragon. Then on to transporting marines from Okinawa to their firing-training range near Mount Fuji and back. And then further south to the Philippines and Vietnam. With a cruising speed of about 7 knots, we spent a lot of time on the water.
My life was structured on the ship. My wife, Mary Ann, had to find housing, buy a car, learn to shop in local Japanese stores and take care of Lara, and then Alix. We would exchange letters often arriving days or weeks after being written-sometimes in stacks of five or more at a time.
Mail call was the only contact we had when deployed. No telephone, no Internet, no live connections. The wives were not supposed to know where we were, what we were doing or when we would be back to home port.
Mary Ann took our two girls to play on the beach in Hayama. The seaside town is where the Emperor’s summer palace is located. For the first 15 months we lived there “on the economy” in a Japanese family’s compound. Even after we moved into base housing, Mary Ann would take our two girls back to the beach and meet with our Japanese friends.
That’s Mt Fuji in the background hovering like a cloud.
So when people express appreciation today to those who wore a uniform, it is vital that we honor those who also served on active duty by their side for just as long and with equal devotion.
Two Messages On Election Day 2024
Dear CHARLES FILSON,
Congratulations! Your ballot has been counted by your local board of elections.
You can see this information at vote.md.gov/search.
Thank you for voting!
A Prophecy from an Earlier Era
The wolf shall live with the lamb,
The leopard shall lie down with the kid,
The calf and the lion and the fatling together,
and a little child shall lead them.
Isaiah 11:6
Presidential Election Eve Perspectives
On the eve of the final voting in our quadrennial Presidential election, many feel anxious, nervous and even contentious.
Leaders, whether elected, appointed or rising to the top through performance, can be temped to sustain their positions by highlighting external threats.
Political contests especially bring out this tendency to identify internal or external “enemies” that should frighten us. These dangers might be foreign countries, economic uncertainties, governmental overreach, climate change, and sometimes even the character of one’s opponents. These risks become our “enemies” to be overcome and defeated.
Political campaigns are especially prone to this form of hyper rhetoric. Here are several observations, old and new, to help put this tendency in perspective. Because objectifying our worries may instead be revealing something about the inner voices we are paying attention to.
Do Enemies Make Us Whole?
Aspiring leaders efforts to persuade us to see external “enemies” has a purpose: to unite us behind someone or an entity which will protect our well-being and security.
However, what if these appeals just reflect internal confusions about shared values and purpose. Are these appeals more a reflection of an “enemy within,” an “uncertain soul,” as much as an external danger?
Decrying enemies is a common tactic to seek public support for a candidate or public action. The chorus lyrics of Andrew Bird’s Indie song Archipelago describes this as an attempt to “make us whole.”
Chorus
Whoa
We’re locked in a death grip and it’s taking its toll
When our enemies are what make us whole
Listen to me
No more excuses, no more apathy
This ain’t no archipelago, no remote atoll
Wisdom to Know the Difference
Leaders who p;oint out different social groups or “the other” in our midst to divide is a tactic as old as the country. It can be a short-term gambit to gain power. But It can damage future aspirations.
Here is a long-term perspective on the American democratic experiment by theologian Reinhold Niebuhr, a Reformed pastor, ethicist, commentator on politics and public affairs:
Nothing that is worth doing can be achieved in our lifetime; therefore, we must be saved by hope. Nothing which is true or beautiful or good makes complete sense in any immediate context of history; therefore, we must be saved by faith.
Nothing we do, however virtuous, can be accomplished alone; therefore, we are saved by love. No virtuous act is quite as virtuous from the standpoint of our friend or foe as it is from our standpoint. Therefore, we must be saved by the final form of love which is forgiveness.
Niebuhr’s most often quoted phrase or closing blessing is: Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.
Those words may be his challenge to us as we head to vote tomorrow.
No Man An Island
In most of life’s remembered moments, cooperation builds success, not domination whether personal or institutional.
All Souls Day (yesterday) is one of the times when a bell is rung as the names of those who have died are read aloud. This can occur in a religious service, reunion or other communal remembrance event. On these occasions the words of English poet John Donne are a reminder of our shared destiny:
For Whom the Bell Tolls by poet John Donne (1572-1631)
No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main. . .
Each man’s death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.
Winners and Losers Will Need Shared Purpose
After the voting results are counted, the imperative will be to revive the common individual and institutional journeys on which we are all joined. America faces very real challenges. Overcoming our own internal feelings of deep uncertainty or dread may be the most important first step. Hope must win.
Buffet on What Makes a Good Manager
in this brief video from the Buffett’s 1996 Annual Shareholders meeting archive, he answers a question on what makes a good manager.
The questions for credit unions from his comments might be:
- Are credit unions a “great business” or do they need “great managers” to succeed?
- Does Buffett’s description of a good manager apply to credit union CEO’s?
- What are the implications that the leaders of the Fortune 500 are not uniformly top quality and that there are a lot of mediocre ones, suggest about credit union CEO’s?
Here’s the brief video where he responds to the question of what good management is. You will need to click on the link and then again on the video.
A Fall Neighborhood Walk on Halloween Eve
Friday Thoughts and Weekend Reads
On October 15, Callahans offered a free webinar that analyzed the macro trends of all credit unions with less than $500 million in total assets.
The link to the recording and the slides can be found here. The significance of this macro-micro analysis is two-fold.
As shown below, this segment makes up over 84% of active charters. Secondly, as you listen to the analysis and comparisons with all credit union trends, the differences are not as dramatic as one might assume. On a number of indicators, this segment outperforms all credit unions since 2019 (eg. delinquency and charge offs).
The all-industry five-year trends reflect the performance of credit unions over $500 millions as these account for 85% of industry assets. However the differences are small (eg. ROA). In some cases the differences have nothing to do with scale, but rather business strategy. An example in the webinar was the higher apparent member increase in larger cu’s; however, the analyst attributed this to third party loan originations, not organic growth.
Listen to the presentation. If one were to view these 84% of charters as the movement’s seed corn, the opportunities for the future would seem promising. Especially in the 4,000 or more groups and communities they serve. What will be critical is that existing institutions and approaches support the feeding and tending of these institutions. And not their acquisition by performance-challenged larger institutions.
This is the webinar’s initial data slide showing the segments by percentage of institutions and asset size as of June 2024.
(Note: See current article in CU Today, Small Credit Unions Beating Big Credit Unions in Key Performance Area for latest confirmation of the webinar’s thesis)
The top 100 US-based Coops by 2023 Annual Revenue
From the Report’s Introduction: Since 1991, the National Cooperative Bank (NCB) has published its annual NCB Co-op 100®, highlighting America’s top 100 cooperatives. In 2023, these member-owned, member-controlled businesses generated revenues of $325 billion, a slight increase from 2022. Many of these cooperatives that appear on the list are household names and are known throughout the world.
The full listing begins on page 10. Credit unions hold 4 of the top 50 positions as follows: Navy FCU # 9; State Employees NC # 28; PenFed # 33; and BECU # 44.
Nine credit unions are in the second 50. I will let you look them up here.
I found interesting that while credit unions account for 13 of the 18 institutions in the finance category, there are five other financial cooperative charters serving specific sectors of the economy such as agriculture.
The NCB Report provides an overview of the role of major coops, many familiar to consumers: REI, Ocean Spray, Land ‘O Lakes and ACE Hardware. This summary is a quick and useful introduction to areas of the US economy which have coop options.
A Brief History of Women and Credit in the US
Fifty years ago, it was legal to deny credit to a woman without a male co-signer.
Read how this situation was changed by Congressional legislation. Since women such as Louise Herring played a vital role in the creation of the cooperative alternative, one might assume that “free market” innovation or competition can be relied upon to rectify prior shortcomings. That is not always the case. Until finally corrected by rule, generations can be denied lifetimes of equal opportunity.
Sometimes the market is only “free” for those who already occupy positions of power and advantage.
What is your “Plan B” If Your Presidential Preference Finishes Second?
This question was asked at a recent conference in which the current campaign was a primary topic. The one answer I heard was by a person who would invest his time and effort into local organizations and issues. He believed this provided a better opportunity for compromise and creating shared solutions versus the ideological divides at the national level. He also believed that this is where democratic practice is learned and becomes a foundation for change at higher levels of political leadership.
Supporting this thesis is a movie just released on Netflix called Join or Die. The film chronicles what it calls the “unraveling” of the country’s social fabric and seeks to answer the question: “What makes a democracy work and what can I do to help?”
David Brancaccio interviews the film’s co-producers in this brief article. I will be seeing the movie this Sunday at a local church. One of the film’s messages is on the importance of community connections. I will be looking to see if credit unions are one of those local organizations mentioned.
Enough reading for one weekend! Get ready for Halloween.
Two Thoughts on Leadership
Credit Union Visionaries: Do we have so few credit union visionaries because we’re a non-prophet movement? (Jim Blaine, February 2011)
From the cadet prayer at West Point:
Encourage us in our endeavor to live above the common level of life. Make us to choose the harder right instead of the easier wrong. . .