Francis Lee: Southwest Corporate's Quiet Leader Had an Interesting Journey to the Corporate Network

DALLAS – As a young man finishing high school in Malaysia, Southwest Corporate FCU President/CEO Francis Lee never thought about coming to the United States for higher education, it just wasn’t an option. Lee, 55, who has led the $8.5 billion Southwest Corporate since 1995, grew up in Kota Kinabalu, Malaysia, which is very close to the island of Pulau Tiga. Pulau Tiga may not mean much to Americans until you point out that it was the site of the first edition of the Survivor reality show. Lee, who used to picnic on the island, said it’s a bit strange they held Survivor there given the island’s inviting characteristics – a nice breeze to keep the mosquitoes away, sand warm enough to sleep on, and of course its warm waters. In his day, most Malaysian students sought higher education in Australia or New Zealand, not the U.S. “If you had money, you would go to England,” said Lee. Malaysia is a former British colony. After graduating high school, Lee became a teacher in his home state of Sabah. He went to work for the YMCA and was sent to Hong Kong for training. That’s where he met a visiting professor from the United States who was doing some social studies on young people in Hong Kong. Lee became his assistant. “Half way through that he said `why don’t you come over to the U.S. and study.’ I said `I don’t have any money. I can’t afford it, my family can’t afford it.’ ” About three months later, that same professor wrote Lee and told him to apply to colleges in America. Lee eventually landed a scholarship and came to this country in the early `60s. After earning a degree in behavioral science and management from George Williams College in Illinois, he returned to Malaysia to work for the Sabah Foundation, a state foundation designed to benefit Sabah’s citizens. He was the foundation’s planning and finance officer. In 1972 Lee decided to go back to the U.S. where his American financial career began. He started as a loan officer at Security Pacific National Bank, which was eventually bought out by what is now Bank of America. He was then recruited by WesCorp in 1981 and his corporate credit union career started to take shape. Lee described his WesCorp experience as the equivalent of about five or six careers in one given all the different areas he worked in. When he left WesCorp he was SVP of Operations. He’s proud to say he learned a lot working under former WesCorp CEO Dick Johnson. “ He was my mentor. He brought me along. I knew nothing about credit unions at that time. He let me make some mistakes, and then I grew from there.” Lee earned some tough CEO experience while still at WesCorp. He served as interim CEO at Constitution Corporate and also at the failing CapCorp. It was a unique situation in that WesCorp allowed him to help other corporates out as interim CEO, a scenario that probably wouldn’t fly today. Lee was brought in to the CapCorp mess by NCUA, who requested his help in cleaning up and liquidating the corporate. Lee described the CapCorp situation as “stressful”, saying it taught him that corporates had to learn to work with NCUA better and be extremely due diligent in the risks they assumed. Lee is not one to seek the spotlight, but as CEO of the nation’s second largest corporate, he knows today’s corporates can’t be shy in looking for new business. As he sees it, the most dramatic change from when he started with corporates to today is the FOMs are no longer rigid and regionalized. Now anyone can serve anyone and location isn’t a factor. This cross-territory environment wasn’t created by corporates, said Lee, but by credit unions exploring all the options to best meet their needs. “When we first went into Florida (for item processing), we were invited by the credit unions of Florida. They recognized our expertise in item processing and at that time there were not many options. It was a market dominated by the Fed,” said Lee. Now Southwest Corporate finds itself in the Florida item processing arena with up and coming Southeast Corporate, who up until Bill Birdwell became CEO a few years ago, did not offer item processing. Lee says that competition is OK because the CUs benefit. But the competition also highlights the need for corporates to be flexible. “The corporates really have to be nimble to meet those changes as they come along.” Showing its flexibility, about 15 years ago Southwest became the first corporate to offer investment advisory services and it later added a broker/dealer service. While individual corporates are known best for all sorts of different things, ranging from item processing to business services, Southwest’s reputation is clearly about investments. It is known for having one of the more sophisticated investment shops in the network. Lee considers on-balance sheet products one of Southwest’s defining characteristics. “Because of the expertise we have in-house and the expanded authorities (from NCUA) we are able to structure investments to meet the needs of our members.” Southwest Corporate has more than $8 billion on balance sheet and manages and/or advises another $6.5 billion in credit union investment portfolios through off-balance sheet services. The corporate has 15 investment professionals with a six-person on-balance sheet investment team. Lee has watched the industry consolidate dramatically just in his nine years as CEO of the corporate. Southwest hasn’t done any mergers to date during his tenure, but it has been close. A few years ago it reached an agreement to merge with Georgia Central CU. That deal eventually failed due to capital and account restructuring issues. Lee doesn’t count out mergers, and says even for a corporate the size of Southwest, more assets would help. “The more assets you have, the more you can generate on the bottomline, the more you can do from a balance sheet standpoint. You could facilitate the liquidity a lot better, you could lend more money off your balance sheet,” said Lee. While Lee doesn’t seek the limelight, he does like to be involved in the industry on all sorts of levels. He is an advisory board member of the Texas CU Foundation, and serves on the boards of the Southwest Automated Clearing House Association, the National Automated Clearing House Association and the National Clearing House Association. He is also a member of U.S. Central’s credit committee and serves on the executive committee of the Association of Corporate Credit Unions. Looking at that resume, one area clearing stands out – payment processing, where the big news these days is Check 21. “It may take a few years to materialize. In the mean time credit unions really have to prepare themselves for the legislation in October. Generally there is still a lot of misinformation out there about what they can and can’t do. Check 21 doesn’t necessitate that you present images, you can still use paper documents. But what the industry is pushing for is images to be exchanged. It all depends on what the pricing strategy is. If paper items are going to be more and more expensive than it will drive the institutions to present images,” said Lee. Like most corporates Southwest has been holding Check 21 seminars, but Lee said Southwest took it a step further. It created a piece of software credit unions can use to see what they will need to do to be in compliance with Check 21. The software makes decisions based on each CU’s specific information. As for management style, you won’t find Lee micromanaging. “I am a very hands-off manager. I depend very much on the people at Southwest Corporate. I have a great team with me. I’m the least tenured person in the management team, so that speaks to the stability and longevity of the staff here. That gives me a bit of time to be out with our membership and also involved with various payment system types of organizations,” he said. Lee has only visited Malaysia a few times since leaving over 20 years ago. At the time of this interview however he was getting prepared to return to his home country for a high school reunion. He was excited to learn that one of his former classmates is now governor of his home state of Sabah. Lee has been married for 28 years and has two daughters. One has just started at Baylor University in Waco and the other studies at the Texas Academy of Math and Science. “I’m just becoming an empty nester,” he said. As for hobbies, golf rules the day. Lee’s learned that golf is also part of doing business. “I use that hobby to build relationships with credit unions.” Lee said golf wasn’t a major sport in Malaysia growing up. “At that time if you were young and you played golf that was a no no. It was a game for old men-rich and old folks played golf.” [email protected]