ROCKLAND, Mass. – For many credit unions plagued by poor lending practices, management problems and weak capital, being placed into conservatorship is the final step towards getting back on track before liquidation or a merger. Of the 35 credit unions placed in conservatorship since 1993, 12 were returned to members, according to NCUA data. While it took six of those credit unions between two and four years to make the turnaround, the other half managed to right the ship in a year's time. The rest were either merged into other credit unions, liquidated or are still under a conservator's care. Nonetheless, the process can be a complete upheaval of management, the board and frail programs leading to the chipping away of employee morale and the destruction of member confidence. Significant delinquencies, eroded capital and a lack of leadership brought Rockland Federal Credit Union here to its knees in 1993, said Thomas White, president/CEO. White was the permanent hire after three conservatorship managers were brought in by NCUA to keep the credit union from being liquidated or merged. Rockland has a historical past. A rousing speech by Edward Filene himself to citizens here called together by Rockland's first “president” Abraham Lelyveld helped to form the credit union's first shareholders' meeting at Lelyveld Shoe Store in 1921. In 1985, Rockland became a community-chartered credit union. White, who has built a reputation for bringing credit unions back from the brink, worked at another credit union placed in conservatorship prior to Rockland FCU. When he heard about Rockland's troubles, he could see a silver lining through its solid savings account base and was tapped the credit union's president/CEO in 1994. The first step on the road to recovery came through the hiring of new management, a process that took nearly three months followed quickly with bringing back a renewed faith among Rockland's 95 employees at the time, many who had worked here for years, White said. “The employees had been through so much, they were going through the motions because there was no real leadership,” White said. Since Rockland's troubles were deeply rooted in its commercial lending program, getting rid of the weak loans helped to clean up the erosion, White said. Instead, the board saw fit to steer resources to the start up of an indirect lending program, which launched in February 1995. That year, Rockland did $7 million and in 2003 the program had grown to $194 million in indirect loans. “We tried indirect lending at (the other conserved CU) but couldn't get it off the ground,” White recalled. “Rockland was heavily steeped in mortgage and commercial lending” so the transition made the effort take off quicker. Another boost came through Rockland's auto lending programs, White said. The credit union has nearly 65% of its assets in auto loans bolstered by the strong alliances it has with local car dealerships here. A free checking program was launched in 1999 and went from 11,000 accounts and $15 million in deposits to 27,000 accounts and $75 million in deposits today, White said. With 35% of its assets in IRA certificates, Rockland “needed to spread its risk out” and the free checking accounts proved to be the impetus. Rockland also opened two branches in supermarkets and one in a Wal-Mart store increasing its total to 10, which included two high school branches. The credit union also moved into a new main office. Under White's tenure, two smaller credit unions also merged into Rockland. “We still manage to operate pretty lean by keeping tight control on our operating expenses,” White said. Other changes came through the installation of coin counters at five of Rockland's branches, the opening of its first call center, adding drive-up ATMs and offering home banking including free bill payments. Its Visa credit card program is an in-house operation. Rockland is also scheduled to join a shared branch network by the summer. Still, “we're by no means a leader in technology,” White said. “We might be considered late adopters.” Given the number of members that run their own businesses, many with assets ranging between $1 and $5 million, Rockland is poised to launch its small business lending program in April. The credit union has watched its membership grow, particularly among small business owners, thanks to the fallout of the bank mergers that have occurred here. “A lot of bank customers were fed up with the fees, many banks started surcharging ATMs and customer service went downhill,” White said. “We've found that the mergers have made it easier for us to compete. Lots of credit unions stand to benefit from the Fleet Boston/Bank of America merger.” White said the credit union is proud that none of its 150 employees have ever been laid off. Nearly a year after White came aboard, Rockland emerged from conservatorship in 1995 and was returned to its members. Today, the credit union is the fourth largest in Massachusetts with 104,000 members and $610 million in assets. At one time during conservatorship, assets went as low as $189 million, White said, but through it all, Rockland's “loyal members” helped to stabilize assets. “Many of them literally stuck with Rockland through thick and thin,” he said. Rockland's employees are also seeing a rosier picture. Each year, White hosts a dinner at a five-star restaurant for 20 employees to get honest feedback on what areas need improvement. Employees have also received notable increases to their pension plans each year. “Another big piece was getting the employees to buy into the changes we were making,” White said. “The board of directors have (also) been both a critical resource and a supporter of management in the turnaround” by helping to set policy and strategy and “not attempting to manage the credit union.” As the number of credit unions with less than $25 million in assets continues to dwindle, $1.9 million Portsmouth Public Schools Federal Credit Union (PPSFCU) is encouraged that it took critical steps to avoid liquidation. Founded in 1942 by teachers, the credit union changed its charter in 2001 to include all employees of Portsmouth, Va.'s public school system. A non-existent lending policy resulting in millions of chargeoffs, embezzlement and the purchase of a building without board or regulator approval, prompted NCUA examiners to place the credit union in conservatorship in 1997, said Diane Woodruff, president/CEO. Woodruff, who was working at another credit union at the time, came in 1998, after the damage had been done. “There were no lending policies in place,” Woodruff said. “Rather than make loans based on standard criteria, loans were made as favors to friends. It was very clique-ish.” Woodruff credits NCUA Officer Susan Robbins with helping to steer PPSFCU on course. Initially, that meant laying off three of the credit union's five employees. “This is a small credit union, we have one branch, there was really no need for that many employees,” said Woodruff, who is one of two employees. The credit union has five directors on its board. A clear set of lending policies were established and put in place by NCUA opening the door to a more sound loan program, Woodruff said. More importantly, the policies have been followed to the letter under Woodruff's five-year tenure. Today, the credit union offers auto, educational and signature loans with the bulk of its balance sheet in new and used car lending, Woodruff said. By far, PPSFCU's boon was the March 2003 launch of its ATM/debit card program, though Woodruff admits many of the 1,600 members still don't know they are available. Of the 310 share draft accounts, roughly 150 have the cards. “We have flyers everywhere, but we still hear from members that are surprised we even offer the cards,” Woodruff said. PPSFCU is looking into offering second mortgages and online banking, Woodruff said in response to members who have told her that if they offer more services, they would move all their accounts over. Still, many of the members left the credit union during its troubled times aware of the mismanagement going on, Woodruff said. But just as many have come back. “We are on a mission to increase our membership through more types of marketing,” Woodruff said, adding that PPSFCU currently recruits new members at new teacher convocations, health and wellness fairs and principal conferences. “The hardest thing has been getting the members' confidence back but we're starting to see progress,” she said. [email protected]