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Each month I receive 3 to 5 CEO staff briefings.  While many share similar financial performance versus plan updates and emplyee recognitions, I find their specific topics \paraticularly interesting.  These often convey the special role of credit unions.  Here are  edited selections from recent, multiple CEO communications.

Joining Veterans Benefits Banking

We became affiliated with the Veterans Benefits Banking Program (VBBP). The VBBP is a partnership between the Veterans Administration (VA) and banks and credit unions which understand the financial needs of the Veteran community and who deliver excellent customer service.

Based on all our credit union  does for and with the local VA Medical Center, it was clear that the we more than qualifies for the designation. VBBP connects VA benefit recipients with financial institutions who offer low or no cost accounts, provide financial education, and assist VA benefit recipients with various financial matters

AI Powered Text & Chat

We introduced an AI associate within our Podium text and chat platform on April 3 that answers general questions of members. The platform’s conversational AI employee, named Jerry, interacted with 240 members in its first week.

Contact center associates are monitoring the interactions, have encountered no AI hallucinations and report that Jerry is appropriately responsive to a member’s tone and is learning at a rapid pace.

Regulatory Exam Update

Examiners from both the state’s Division of Financial Institutions and the National Credit Union Administration (NCUA) were both on-site and remote the past four weeks to perform a safety and soundness exam. As a state-chartered credit union, DFI is our prudential regulator while NCUA is our deposit insurer. Both agencies work closely together in order to share work product and reduce examination costs.

We expect to receive only one examination report jointly written by both agencies, likely to be in the next month or two. We also expect to be given our usual clean bill of health with only some minor findings in the exam report. Thank you everyone who dealt with the various questions of the examiners.

(my reaction: a month or two?)

Member Comments

Monica helped me get a new account set up, information I needed to be able to transfer money from my old bank account, and direct deposit information together for my employer. She was great to work with. I’m really excited to be changing to this credit union from my bank! Thank you for a great first experience!

I appreciate the small grace period as this economy is extremely difficult to just get by in. I got a great interest rate and if it weren’t for y’all, I would not have been able to graduate from NP school. 

On Balance Sheet Growth

We had a pretty solid first quarter of the year.  Our net income was slightly better than last month. We have had really strong deposit growth-growing 13% on an annualized basis.  We have had loan growth but certainly not at that pace!

DELINQUENCY AND CHARGE-OFFS

After presenting delinquency trends in each loan segment, the CEO continued:

Considering all the economic uncertainty we remain diligent and concerned about our members’ ability to make loan payments and are offering individual solutions when appropriate.  Our delinquency and chargep-offs are the reason that we have tightened our underwriting criteria over the past year.  This means we are saying “Yes” less often to members.

Member Growth  Slowdown

You may have noticed that our membership growth is slowing-though still positive. The slowdown started in October of last year and has continued.  . . we are bringing in about 250 fewer new members per month from indirect lending.

If we look just at core members, those who choose to join the credit union, we are bringing in about 350 fewer new members per month than last year.

We have a team analyzing the trends and trying to better understand where the changes are occurring. . . the question we should be thinking about is what is causing fewer people to make the decision to join. . .I would love to hear what ideas or thoughts others have.

 

 

Yesterday I wrote about the need for disruptive leaders to regain the unique advantage of cooperative memer-owner design.

Ancin Cooley is a former OCC bank examiner and long-time credit union consultant.  He has a working knowledge of almost all areas of credit union operations and regulatory issues.

He is creating a new collaborative initiative for credit union professionals who want to focus their leadersip on enhancing the member-owner elationship.

Ancin’s initiative is outlined below. It is a combination of teaching and mentoring for only $8 per month.  He describes several unusual design featues in the resources he has assembled.

His contact information for his newsletter is at the end of this outlne.

From Ancin Cooley:

CU Communities: What We’re Building and Why It Matters

In July 2025, we’re launching CUCommunities.org — a subscription-based online learning and mentoring platform created for credit union professionals and volunteers. But more than a platform, this is a response to a real need in our movement.

My own background is in regulatory examination, governance, enterprise risk management, internal audit, and strategic planning. And after working with hundreds of credit unions across the country, I kept seeing the same gap, not in the talent, but in  support.

Credit union professionals — especially those at smaller institutions — are often under-resourced and over-expected. They’re tasked with solving complex, high-stakes challenges with limited tools and limited time. And too often, their development is tied to someone else’s permission, budget, or bias.

People ask:

“Where can I privately and on my own time get step-by-step guidance?”

“Where can I get mentorship?”

“Where can I ask questions without being judged for what I don’t know?”

“Where can I learn how to actually execute my strategy?”

CU Communities is designed to answer all of that — with practical, consistent, and role-specific learning delivered at a price an individual can afford and an institution can support.

What CU Communities Offers

This isn’t just a content library. It’s a community of practice.

Subscribers will have access to:

• Tools, policies, job aids, and micro-videos
• Guided learning experiences that empower, not overwhelm
• Conversations with people who’ve actually done the work — not just studied it

What makes us different is how deep we’re willing to go. Without the overhead of a traditional association or vendor model, we can focus on the real work: BSA risk assessments, ALM modeling, look-to-book ratios, member business lending concentration thresholds — the things professionals actually need to understand.

Districts and Neighborhoods

We’re organizing CU Communities into two layers:

• Districts — Topical learning areas like Credit, ALM, Compliance, Lending, and Collections. Every member gets access.
• Neighborhoods — Curated forums and micro-communities organized by role and region, like “Louisiana CEOs” or “Small CU Lending Teams.”

Over time, more districts and neighborhoods will be added based on demand and input from the community.

A Pricing Model That Empowers

The first phase of our rollout gives individual subscribers access to every district for just $8/month. That price point is personal. It reflects a core belief:

Graduate-level insight shouldn’t be gatekept.

This subscription allows anyone — even those further down the org chart — to access the kind of content, coaching, and perspective usually reserved for senior staff or conference attendees.

It’s for the teller who wants to understand ALM.

For the collector who dreams of becoming a CLO.

For the new lending manager who needs to build confidence before speaking in front of the board.

If they’re willing to invest in themselves — even quietly — they can grow.

No permission slip required. No budget approval needed.

Just initiative, access, and a community that sees their potential.

Additional subscription tiers ($15/month) will unlock neighborhood-level access, including peer mentoring and facilitated conversations.

For credit unions, teams of up to 10 employees can join for $80/month, with additional seats available upon request.

More Value. Less Cost.

We’ve set a bold three-year strategic goal:

To create and distribute more courses, policies, tools, and mentorship hours than all the leagues combined — at a fraction of the cost.

Why? Because education in our space should be:

• Practical
• Affordable
• Always available

Whether you’re a volunteer trying to understand ALM or a VP preparing for the CEO seat, we want you to feel something rare:

That you’re finally getting more for less.

Built by Practitioners — For Practitioners

CUCommunities.com isn’t driven by theorists, consultants, or vendors. It’s built by people who’ve lived the work — and who want to pass that wisdom forward.

That includes:

• Retired CEOs, CLOs, and CFOs
• Current practitioners solving today’s problems
• Underrated experts within our industry — the operations lead, the branch supervisor, the marketing director quietly driving 8% organic membership growth

And here’s where we’re doing something revolutionary:

Everyone who contributes content — from workshop instructors to mini-course creators — retains ownership and receives revenue in perpetuity.

Most webinar houses pay $500 and own your content forever.

Not here.

We’re building a cooperative economy inside a cooperative industry.

Guardrails That Protect the Mission

To remain independent and principled, CU Communities has codified a structural safeguard:

No single revenue source — sponsor, vendor, or institution — will exceed 25% of total funding.

This isn’t just financial policy.

It’s governance by design.

It’s how we protect our integrity — and yours.

The Bottom Line

CU Communities is for people who want to get better. Who want to lead better. Who want to build better.

This isn’t a one-time launch. It’s a growing, breathing, member-driven network.

And it’s here for you.

Join the newsletter here: CUcommunities.org

Questions or media inquiries: acooley@syncuc.com

 

The phrase “dark night of the soul” portrays  personal, and sometimes communal, feelings of no way out of present  trials.  The loss of hopefulness.

Frost’s meditation reminds us that  these dark valleys  reflect neither wrong nor right. They are part of our humanity.

Acquainted with the Night

by Robert Frost

I have been one acquainted with the night.
I have walked out in rain – and back in rain.
I have outwalked the furthest city light.
I have looked down the saddest city lane.
I have passed by the watchman on his beat
And dropped my eyes, unwilling to explain.

I have stood still and stopped the sound of feet
When far away an interrupted cry
Came over houses from another street,

But not to call me back or say good-bye;
And further still at an unearthly height,
One luminary clock against the sky

Proclaimed the time was neither wrong nor right.
I have been one acquainted with the night.

This is the season for annual meetings in credit unions and stockholder owned companies of all sizes.

Make Your Voice Heard

Because I inest In Vanguard  mutual funds I sometimes receive the above email subject line followed by this message;

Be the vote that counts

Dear Vanguard Investor, As an investor in these securities, you have the right to vote on important matters. This is your opportunity to make a direct impact on your investments. Your vote counts!

A Credit Union Example

For over three decades I have had a CD in a credit union of approximately $20,000.   It is paying  .25% interest.

The credit union recently sent all members this email announcing their annual meeting for member-owners:

Dear Member First Name,

We are conducting the 2025 Annual Meeting by Electronic Transmission as provided in Section 411 of the Amended and Restated Bylaws . . . effective April 28, 2017 (the “Bylaws”). The Annual Meeting will be hosted by video conference on April 25, 2025, at 5pm PT.

Registration is required to attend

We welcome you to join us and take this opportunity to submit questions in advance. To register, please send an email to X no later than 11:59pm PT on Monday, April 21, 2025. If you would like to submit a question, please do so in advance via email (to the same address above). We will answer as many questions as possible during the virtual meeting.

How to receive Annual Meeting materials

The Annual Meeting materials will be available for download at . . . on April 14, 2025. The materials will include the following:

Notice of Annual Meeting Meeting Agenda Minutes of 2024 Annual Meeting 2024 State of the Credit Union 2024 Annual Report

Matters requiring a vote

Please note that there is no new business to discuss. The only matter requiring a vote of the members in attendance is approval of the 2024 Annual Meeting minutes.

Credit Union 2025 list of candidates nominated

Board of Directors – Four (4) positions to be filled by acclamation of the Board of Directors as provided in the Bylaws:

Incumbant # 1 3-year term Incumbant # 2 3-year term Inxumbant #3 3-year term Incumbant #4 and CEO 3-year term

Section 501(D) of the Credit Union Bylaws provides “If no more nominations for vacant positions are received than the number of vacant positions, the credit union may, without further action, declare that those nominated and qualified to be elected are elected.” Four candidates have been nominated to fill the four open Director seats. Therefore, the Directors nominated will be approved by acclamation of the Board of Directors as provided by the Bylaws. As we move into 2025 with some economic volatility on the horizon, we remain focused on our mission to build our members’ financial health and wellbeing and to work diligently to ensure our members have the strong service and support they’re accustomed to. In 2024, we successfully rebuilt after a security incident, and we experienced what it was like to come together with strength and resilience to stay focused on our members. That focus is what drives us to provide ongoing value to members in the forms of fewer fees and better rates, plus all our financial wellbeing benefits and services – from personalized advice and a dedicated anti-fraud team to webinars and partner discounts. We continue to have the financial strength to make a difference for our members today and for the generations to come. Sincerely, CEO signature and the following personal note: Thank you for being a valued member since March 2007.

Upon sending in my interest in attending, I received this response:

Thank you for your interest in the 2025 Annual Meeting. We have received your request for registration and will be sending out a confirmation with the meeting access information prior to the meeting on April 25, 2025.

Democracy In Practice ?

The required annual meeting and election of board members is the single most important element of member-owner governance.   In many credit unions today converting the meeting into an administrative formality with no actual member involvement is par for the course.

Let’s be clear.  This is not democracy in any sense of the word.  Instead of seeking member participation and celebrating the cooperative model, it is an exercise in perpetuating power, or  the using current term oligarchy.

While I assume these volunteers are experienced and committed, they are missing the most critical element of leadership:  acknowledging their accountability to the member-owners.   That is the foundation of trust that undergirds every financial institution.

According to NCUA data, between 95% to 97% of all credit unions are rated camel codes 1 and 2.  This is not about financial oversight, but rather responding to the needs of members and communities with presence and engagement.

The future of credit unions may depend on members seeing their involvement as something more than a customer. To achieve that, they must be respected as owners.

Right now our votes do not count because there is no voting.  Credit unions lacking this member participation are missing their most important advantage versus all other options.

 

The annual Credit Union sponsored  Cherry Blossom 10 mile run on Sunday April 6  in DC had a last minute adjustment.

Runners Learning about a Course Change

On the day before the race, Saturday, April 5, President Trump’s 10% tariff on all imports to the US took effect.  The tariff covers all products, services and intellectual property from any country, regardless of that country’s tariffs on the US exports to them.

Race organizers were told by the US International Trade Commission that the mile, as a concept for measuring distance, was an English “intellectual property” import.

Therefore the race must be expanded to 11 miles, or 10% further, or face a last minute cancellation for the over 20,000 registered runners.  The race committee agreed to the request and moved the finish line by an additional mile.

Credit Union Runners React

While some participants felt that politics should not be a part of this effort to support the  Children’s Miracle Nework, most were stoic about the additional distance added right as the runners were assembling.

One runner, Alix,  who has competed for many years, commented that the added length was no worry.  That’s “because credit unions are always willing to go the extra mile for their members,” she said.

 

During this week’s GAC meetings the three NCUA board members discussed their view on potential Trump administration’s efforts to limit the NCUA’s independent agency status.

Board member Otsuka’s full speech is  online.  The two other board members’ comments are from interviews reported in the press.

All three took the same Oath of office to  “well and faithfully discharge the duties of the office” which each now holds.

Here are their remarks on their obligation to the agency’s Independence.

Board Member Otsuka (Excerpts)

Congress has entrusted the NCUA with the responsibility to protect credit union members and the credit union system, and our ability to do so depends on a strong, independent agency, . .

Our independence is critical to maintaining confidence and stability in the credit union system. . .

NCUA understands the unique characteristics of credit unions and their members. Our independence from politics and distinction from other financial regulators allows us to focus on what matters to the credit union system.

. .  .credit unions must continue to show the American people what the credit union difference means and live up to the mantra of “people helping people.” . . Too much is at stake to be seen as no different than a bank or a tech company or any other financial institution. The credit union difference is the ultimate competitive advantage.

Board Member Harper’s Comment

Harper told the DCUC’s Defense Matters meeting that the “NCUA board is going through some reconsiderations of how we are going to change the agency and what we are going to do. That’s what a new administration is and does. I’m confident we will get through this as a different NCUA but a strong NCUA.”  

Chairman Kyle Hauptman’s Position

From CUSO Magazine coverage: “Hauptman sat down with Nussle to discuss not only the regulatory concerns of credit unions and his priorities as Board Chairman, but also the uncertain future of the NCUA itself, as executive orders threaten its ability to operate as an independent regulator and as speculation of consolidation calls the fate of the organization into question.

“On the topic of the NCUA’s future, Hauptman declined to speculate or advocate for one outcome or another, noting that while he does not shy away from controversial topics, he keeps himself from getting into debates when he has no authority over the outcome. The fate of the NCUA, he argues, is outside his control and lies in the hands of Congress and the White House:

“Congress created the NCUA in 1970, and there were 27,000 credit unions operating before then…my only view on it is that it is important for people to understand that credit unions are different. So whoever in the future is going to be regulating needs to be aware of this.”

From another news report: Hauptman also briefly addressed rumors that financial regulators could be consolidated, emphasizing that although he has “zero authority over this,” he’s not in favor of it.

What Next for Credit Unions and NCUA

There is much difference in the role that NCUA board members see for themselves to ensure the agency’s future independence.

Otsuka is the most clear and determined in her view. She aligns this position as essential for credit union’s to maintain their “difference” which she calls their “competitive advantage.”

Board Chair Hauptman is also clear.  It’s not my issue. It’s up to Congress.

Harper takes no overt position except to predict a stronger NCUA,  Once again displaying his adept use  of the intentionally imprecise comment.

There were  many topics raised at GAC clamoring for credit union’s attention and backing-from taxation to overdraft fee disclosures.

In almost all the most consequential topics, the outcome for credit unions will be decided by their political influence as manifested by their members’ actions not lobbying capacity.

Sooner or later some element of NCUA’s independent authority will arise.  Who can the credit union system count on to support their point of view of NCUA’s status?

 

 

 

Telling stories is a leadership art.  They stick in our minds much longer than financial performance numbers or rhetorical marketing phrases.

They present authentic moments from real life situations with which all can relate.

Stories honor individual actions and illustrate the special  service culture of a credit union.

One would also hope these are part of the messages shared with congressional staffs during Hill visits this week.

Here are two examples from WEOKIE CU’s CEO’s monthly staff update.

The 599 FICO Score

“David, a non-member, applied for a loan with 599 credit score. This app would have been easy to decline and move on due to his poor and limited credit. Wanda and Kyla worked together to figure out why he had such challenging credit.

“He has a great career with plenty of income. Long story short he had to spend some time in the hospital which caused a lot of medial debt and insurance was not cooperating. We were able to help him get an auto loan and hopefully, we created a member for life.”

To Whom It May Concern-“She’s a Keeper”

(a member’s note)

“To whom it may concern: I have had the pleasure of working with Shirley for several days now. I just want to tell you that she is a breath of fresh air to customers!

Shirley went way out of her way to help me, while the other bank did everything they could do to cause problems.  She initiated a 3-way call that helped solve the problems the other bank was trying to create. You rarely see this type of customer service anymore, Shirley is one of the best problem solvers I have ever seen. Just a note to whom it concern: she is a keeper!”

 Changemakers in a  Service Culture

The CEO describes these efforts to take great care of  members  as follows:

Changemakers are individuals dedicated to positively impacting the people and places around them. They are often seen as visionary, collaborative, purposeful, and empathetic. They possess critical thinking and problem solving skills as a prerequisite.

No challenge is too big, every story is relevant, and every person has a purpose. Changemakers live the mission of changing the lives in our communities, one person at a time by being the best place our employees ever worked, and the best place our members have ever banked.

 

 

Often events for good or otherwise are quickly forgotten.  Deeds are overwhelmed by subsequent activity.  We want to live in the present, project hope into the future, and allow the past to stay there.

The following is a situation of self-dealing where all the principals are doing their best to help us forget.

The circumstances of the $634 million Finance Center (FCCU) merger with Valley Strong was analyzed in A theft of $10 million or Just Spreading Goodwill, You be the Judge.  (January 26, 2022)

The two credit unions’ main offices were 240 miles apart.  Prior to the merger, FCCU had reported member capital of over $100 million (17% net worth), a falling loan to asset ratio which at points were below its net worth ratio.  The two primary executives, the CEO Michael Duffy and the COO Nora Stroh were brother and sister.  They had been in these leadership role since the early 1990’s, They had paid themselves over $1.0 million in compensation in several years prior to the merger. CEO Duffy also served on FCCU’s five-person board.

The member’s Merger Notice contained all the rhetorical promises (consolidation of energy and resources) for a future of better products and expanded services. Bonuses for FCCU’s five senior executives and future employment prospects were presented.

A complicated formula for a member dividend from the credit union’s $100 million net worth was outlined.  And, the diversion of $10 million to a non-profit newly organized by CEO Michael Duffy and FCCU’s board Chair Morales, with a ten-year Valley Strong funding commitment of $2.5 million, was presented as a merger benefit.

Post Merger Events

Two years later in January 2024 I wrote a follow up story: The  Pied Piper of Area Code 209 or What Happened to the FCCU Members $10 Million?

Part II of the analysis detailed the immediate fall in  Valley Strong’s financial performance, the $800,000 in merger bonus payments to four FCCU’s  senior executives with their continued “employment” at Valley strong.  Their salaries ranged from $353,000 to $1.088 million.

The blog also  presented the financial filng of the newly created FCCU2 charity from its initial IRS 990 report. Part II The Pied Piper of Stockton.  (February 1, 2024)

In a Game with No Rules (February 2, 2024) two FCCU member’s comments critiquing the merger’s premise and  “giving away the member’s $10 million”  showed the reality from the owners’ perspective.

California and NCUA regulatory approvals were critiqued.  Their combined inaction was more harmful than mere benign neglect. The cooperative system’s fundamental soundness was being compromised.  I asserted that credit union mergers have become a game without rules. Longtime, sound credit unions were being transferred out of existence where the only concrete benefits  were for the CEO and senior staff who initiated the transaction.

The Continued Self Dealing

The CEO, senior executives and board of FCCU negotiated the merger of their overcapitalized institution in return for $800,000 of immediate bonuses and continued employment in vacuous  responsibilities (Chief advocacy Officer, Legacy Ambassador). The undisclosed terms  of their future employment compensation and benefits resulted in  their receiving $2.5 million in 2022, per the IRS 990 form filed by Valley Strong.

These five senior executives gave up all leadership roles and accountabilities. They no longer report to a board and their performance is not subject to external examination or audits.  The team which they supposedly joined is 240 miles distant (Stockton to Bakersfield). But their full pay and more continued.

This continuing compensation was in addition to receiving the benefits from retirement plans they previously awarded themselves in FCCU and reported in the IRS 990 filings.

The FCCU2 Foundation Becomes The 54 Fund

Old habits are hard to change. The continued self-dealing, clothed in philanthropic disguise as evidenced in FCCU’s final years, continues with the diverted $10 million (sic) in members’ equity.

In 2022, the first full year of activity by the newly created 501C3, we learned the following as described in The Pied Piper, Part III:

• Almost $12 million, not the Member Notice amount $10 million, was diverted to the Fund;
• The Fund’s name was changed from FCCU2 to The 54 Fund, distancing itself from its credit union origins;
• The address is no longer at the former credit union’s main office, but 2616 Pacific Avenue #4081. It is a box at the local post office.
• The fund received a $250,00 grant from Valley Strong CU and dividends and interest income of $118.7K (a return of .99% on its $12 million in assets)
• Total charitable donations were $272.5K to 86 local 501 (C) 3’s. That total was much less than the  salary that each of the five FCCU executives received individually from Valley Strong.
• For each $1.00 donated, The 54 Fund reported $.38 cents in expenses.
• The 54 Fund’s nine directors were all from the merged credit union: Three former senior FCCU employees, five former directors and Mary Webb, no previous connection noted.
• A former FCCU director Ed Figeroa was paid a salary of $46,667 and is listed working 40 hours per week. He had recently retired as CEO of St. Mary’s Dining Room.

The2023 IRS Filings for The 54 Fund and Valley Strong

In the continuing credit union Valley Strong’s 2023 IRS return, three former FCCU senior executives were still on the payroll earning the following:  Nora Stroh $1.662 million; Steve Liega $1.311 million; and Michael Duffy $1.021 million. The two senior “at will” FCCU employees in 2022 were no longer listed.

Stroh’s total compensation was the highest of any credit union employee, and Liega’s the third highest just behind Valley Strong’s CEO.  Both former FCCU executives had unusual compensation \structures.  Each received salaries less than the prior year 2022. In Valley’s 990 Schedule O listing,  Stroh received other reportable compensation of $ 1.332 million and Liega, $971.537.

No other of the 39 Valley Strong employees listed any amount close tp these numbers. This unusual compensation suggests a transfer of some asset other than normal salary/benefits and bonus  cash payments.

Even with the two “at will” FCCU employees gone, the three remaining at Valley Strong received  total compensation of $3.994 million . That amount was $1.473 million greater than all five together earned in 2022.  None of this post merger largess was disclosed in the Member notice as is required by NCUA rules.

Charitable Data Just Once per Year

The effort to transform the FCCU 2 foundation into a non-public, inaccessible entity continued in 2023.  IRS filings are required only once per year, often filed late into the next reporting period.

Here are summary totals from The 54 Fund’s first three years filings. 2023’s is the  most recent we have.

Year	Assets Y/E	Income	Expenses	Grants
2021	$11.974 M	$19.7 K	$5.2 K	$0
2022	$12.058 M	$368.7 K	$106 K	$272.5 K
2023	$13.302 M	$592.1 K(1)	$222 K	$438.5 K

(1) Revenue before deducting a $157.5K loss on sale of investments.

As part of its “going dark” operations, the Fund affirms in IRS Part XIV 2 that “the foundation only makes contributions to preselected charitable organizations and does not accept unsolicited requests for funds.”   

The Fund has no office or web site. When calling the the telephone listed a recording says an answering machine has not been connected.  All directors and the books and records are reportedly held at the single post office box address.  It must be a very big box!

I could find no public information about ithe Fund’s activities other than the listing of donations in the IRS filings.   I would surmise that many Stockton recipients would be grateful for these annual tokens  of manna from this minimalist financial resurrection by FCCU’s former leadership team.

Despite this ongoing lack of pubic information, an analysis of 2023’s filing shows:

• The fund spent 50 cents in administrative costs for every $1 donated to a charity, up from 38 cents in 2022.
• The Fund’s full time employee, Ed Figeroa received total compensation of $110K or two times his  earnings in 2022.
• The fund reported cash interest and dividends  on its average investment monthly balance of $12,6 million  of 2.7%. After subtracting an investment sale loss of  $157.5K, the cash return is 1.8%,
• However, the Fund reports its portfolio’s market valuation increased by $1.5 million, This gain accounts for almost all the growth in Fund assets.
• Because the Fund uses cash accounting, the minimum 5% IRS distribution calculation includes only cash received, not the total portfolio valuation. The Fund’s contribution requirement  was $625K in 2023. It used only $24K of this amount along with the unused  balance of $584K from  2022 to comply with the 2023 distribution test.  It carried pver to 2024 the balance of $600K left undonated from 2023.
• The Fund’s $115k increase in operating expenses includes, besides doubling its one salary, expenses including events of $28.3K and office and software expense of $5.6K although no physical office address is listed.

In summary, the Fund distributes only the bare minimum required by the  5% IRS test. It grew total assets by over $1.3 million from increases in the market value of investments. Operating expenses rose at a faster pace than contributions.

The Ten Year Plan

The Fund has received two $250,000 initial payments from Valley Strong as part of a ten-year $2.5 million pledge reported in the Member Notice.   This planning suggests he Fund never intended to distribute all of its assets.  Instead it has become a personal petty cash account for a rump group of former FCCU leaders to further an impression of public philanthropy-with members money.

The 54 Fund’s financial giving meets only the minimum IRS contribution requirements.  This charity is a closely held, unelected, private entity with no public accountability. The former CEO of FCCU keep the books. His self selected previos directors make all decisions.  The purpose continues their pevious public performance as Stockton philanthropists.  But it is not their money they use but the former member owners of Finance Center Credit Union which they closed down.

Similar to the final five years of the credit union’s operations,  the Fund has became a personal platform for promoting Michael Duffy.  It is not resolving the needs of the former member-owners of the credit union or the Stockton community with its multiple, tiny token grants.

FCCU’s senior executives and board negotiated a merger that rewarded their own self interest, not the members’ well being. The 2023 extraordinary compensation Valley Srong paid to two of the former FCCU senior executives was not disclosed in the Member Notice.   This failure was on top of the additional $2.0 million sent to the new Fund versus the $10 million listed in the Notice.

A Continuing Failure of Fiduciary Responsibility

This continuing saga of self-dealing was designed by the CEO of FCCU, but was enabled by the Valley Strong Board and CEO.  They only had eyes on the prize of free capital and a $630 million asset transfer.  The inaction of NCUA and California state regulators who approved this deeply cynical transaction is a critical failure of supervisory responsibility.

Cooperative mergers, for a number of CEO’s, have become a Game with No Rules.  It is whatever one can get away with in private deal making.  There is no added value for members. just future promises. Board members  approve these transactions and payments oblivious to their fiduciary obligations.  The process of members voting is nothing more than a sham. Regulators routinely approve communications that lack any meaningful substantive disclosures.  Those who benefit from the event control the entire member manipulated voting approval.

When is Enough, Enough?

This continuing blight on the cooperative system undermines the  basic foundation for the soundness of any financial system: the trust of the users.

This is however an opportunity for cooperative leaders to demonstrate both moral and common sense clarity. Who wlll stand up and say “enough is enough”?

Without leaders’ voices, this  rampage will continue. The  future of an alternative cooperative system is at stake.  But not from political change from DC, but rather from internal decay.

Some credit unions act out the belief that their future is the same as that of the for profit, self-interested commercial competitors. But this internal corruption is only succeeds until members see the reality behind these tortured transaction. Their response may be either fire (anger) or ice (apathy).  Both are equally fatal to the member-owned model.

 

 

 

 

 

 

 

Knowing history helps us navigate current uncertainties, even severe problems. This is a story of a credit union that was mismanaged.  There was front page publicity about the problems, NCUA’s role, and direct quotes from NCUA, including Chairman Callahan.

The year was 1983.  The credit union was charter number 435 which opened on January 1, 1935.  State Department FCU also served NCUA employees.

Here are the opening paragraphs of an August 16, 1983 Washington Post article investigation of the situation:

The State Department Federal Credit Union has operated at a loss since last year and has been placed on a “problem list” by federal regulators, according to credit union officials.

The federal action is based on the credit union’s overall financial condition, but it comes at a time when the credit union’s administration is under attack from some of its members for the amount of money it spends on receptions and trips for employes and board members to conferences in places such as Las Vegas, Munich and Paris. 

The credit union, which has $166 million in assets and 36,000 member accounts, reported a loss of $346,095 on total income of $8 million for the first half of this year. Last year the credit union, with a total income of $15.7 million, lost $224,200.

Examiners from the National Credit Union Administration (NCUA), which regulates federally chartered credit unions, told the board of the credit union in a meeting July 27 that the member-owned institution has been placed under special surveillance, according to Edward N. Gulli, general manager of the credit union.

Here are further detals from this lengthy report:

NCUA examiners said the credit union “would have no problem” if board members “took the steps to turn it around and become very profitable again.”  . . 

Some 7 percent of the 11,200 federally regulated credit unions in the United States are on the NCUA’s “problem” or “watch” list, according to Layne L. Bumgardner, director of supervision and examinations at the NCUA. . . 

In an effort to conserve the credit union’s cash, Gulli said the board has voted to stop traveling first class, which was previously allowed on any trips of more than three hours’ duration, and to suspend any travel until the end of the year. However, he said travel to conferences is a necessary part of credit union activities and will be resume .. . 

During 1982, the credit union spent $51,628 to send board members–who are State Department employes performing the credit union work as volunteers, receiving no extra salary–to conferences in places including Paris and Munich. . . 

They spend money like water on trips, and they say they don’t have the money to hire additional tellers or pay better interest. They think we’re dumb,” said Mary Drakoulis, an employe in State’s Freedom of Information office who was one of the original organizers of protest against the credit union management. . . .

The article included five paragraphs listing individual board and senior executive travel expenses.  Here is one example:

A June 26 to July 1, 1982, trip to a credit union industry conference in Las Vegas by six board members and three of their spouses costing $3,099 in hotel expenses at the Las Vegas Hilton and $9,520 in first class airfare. Five board members and a credit union employe traveled to Las Vegas again for a similar conference in May of this year. . .

NCUA’s chairman, Callahan, said the question of what is or is not a proper level of expenses is up to the members to decide. “We do not usually get down to splitting hairs as to which expense is appropriate. If it is a problem institution, I’m sure their expenses are being scrutinized,” said Callahan, who is a member of the credit union.

Even Larry Connell, the former NCUA Chair and now CEO of Washington Mutual Savings Bank was asked for comment.  He stated: “To me,” he said, “the best enforcement is for the membership to vote on whether to continue the management. I would think the members should have reasonable access to the records of the credit union.” 

Finally, the President’s compensation was published. Federal charter salaries are not required to be disclosed as is the case with state charters.

Because Gulli’s salary increases are based on the (board) recommendations, not the (U.S.) president’s decision, he got a raise last year of 18.47 percent, while federal workers got a raise of 4 percent.

Gulli currently makes $89,000 a year, about $9,000 more than Secretary of State George P. Shultz. He said that since he is not a federal worker, his salary should not be compared with the secretary of state’s. He pointed to a recent industry study showing the median salary of executives employed by the top quarter of government credit unions with assets of $80 million or more is $84,502. 

“I don’t have a chauffeur-driven car or a plane at my disposal,” he said, referring to Shultz. He said he got a 15 percent increase in lieu of health insurance and a pension plan. 

Lessons from This Case Study

First, the credit union survived this very public airing of its leadership’s perks and excesses, its poor performance and being added to NCUA’s watch list.

Today State Department FCU is a $2.9 billion institution with 88,000 members, 6 branches and over 200 employees.   It’s 2024 performance mirrors the industry’s overall trends: delinquency 1.14%, ROA of .34%, net worth 10.5% and loan and share growth around 6%.

Secondly, the transparency on these issues was an important catalyst for change.  Members were provided the information on senior management compensation, board and staff travel and their stewardship of the members’ funds.

These details should be standard operating disclosures for all credit unions today.  Special events and  major business initiatives such as a bank purchase financing should be routinely provided.  Such transparency not only provides essential owner information for the annual election of directors; it also induces accountability.

Thirdly, senior NCUA officials from the examiners, the RD, the DC head office and even the Chairman spoke directly to the press.  If one reads between the lines, the reporter was questioning whether the regulator should be more forceful in stopping these activities.  The response was that this was the responsibility of the owners, unless the excesses undermine the operations.  But members must  have access to all relevant facts whatever the circumstances.

Every Credit Union Is An Example

Finally, the article several times refers to the entire credit union system and their role in the economy.

Credit unions are nonprofit organizations originally formed to help employes get loans when banks did not make consumer loans. The industry now has $93 billion in assets nationally and 48 million members. The State Department credit union is 46th largest among 19,630 credit unions in the country. 

Each credit union today is a representative for the entire cooperative model, for good or otherwise.

Actions from the Article

My colleague Bucky Sebastian’s rule as a public employee was to never say or write anything that you wouldn’t want to read on the front page of tomorrow’s newspaper-or the lead in a blog post.   However the solution is not to avoid the topic or say you can’t comment.   That will just make the press more interested.

Every credit union will have performance problems. Economic cycles are just that, cycles, not straight line performance.  Managers are not perfect and board oversight will vary.

The best way to prepare for these inevitable ups and downs is to be transparent with pro-active disclosure habits in all seasons. This creates a pattern that  demonstrates responsibility to the owners, even in times of performance shortcomings.  State Department survived this very public thrashing by the Post.  NCUA was upfront about its role.

Without this practiced accountability any credit union can risk becoming the next poster child for a cooperative system that seems to have lost its way. And added to the lists of examples kept by those seeking to undo the special role of credit unions in the American economy.

 

 

A life of meaning and purpose

This 1980 official portrait by Robert Templeton is in the National Portrait Gallery.