PORTLAND, Ore. – For Portland Teachers CU CEO Cliff Dias it's not exactly the retiring at 55 dream he always had, but it's pretty darn close. Dias, 56, said he will retire in May 2006 from the $2 billion PTCU, the state's largest. At that time he will be 57 and enjoying an early retirement, one of his life goals. "There are other things I want to do in my life other than business success. I want to work with kids. I don't have kids, and I think there's a real need for adults to be involved with kids' lives, particularly in sports. There's so much emphasis and pressure on winning today, but it's also about learning," said Dias. Dias said he is a product of many different people taking an interest in him, both when he was just a kid playing sports and later in the business world. He played sports throughout his high school days, lettering in basketball, volleyball and track, and he believes it helped him in his career. These days, he joked, he can't play as many sports as he once did. "I used to train in martial arts, played a lot of volleyball, racquetball, squash. I'm down to just golf," he said, noting that he picked up the not so rigorous game of golf at the age of 45. "I see a lot of parents who both work. They have lots of stress in their lives, and sometimes the kids suffer. If as an adult I can make a difference, that would be great," he said. Dias was born in raised in Hilo, Hawaii, located on the Big Island. He didn't come to the United States until 1967 when he enrolled in the University of Portland. His college career was interrupted by the Vietnam War. It was the days of the draft lottery, and he decided to join the Army Reserves. He stopped school for basic training and advanced training, returning to school later. "Fortunately at that time the war was winding down," he said. Moving from the island life of Hawaii to the mainland was a major change of gears. "Getting on a plane all by yourself, going somewhere you don't know much about was pretty spooky. The first time I saw all the city lights I almost threw up. I never saw a freeway in my life. The influence in Hawaii is strongly Oriental, you take off your shoes when you walk in someone's house. It was a huge adjustment," he said. He graduated with a Bachelor of Business Administration with a focus on marketing and his financial career began in earnest on the banking side. He worked for US National Bank of Oregon, First National Bank of Oregon, and Security Pacific, which was eventually acquired by Bank of America. On the banking side, Dias dealt with both commercial and retail banking. He became sort of a CEO on a smaller scale, running Security Pacific's retail bank, overseeing branch operations. Then credit unions came knocking. "A headhunter called me about an opening at Portland Teachers. I came here basically as the No. 2 in 1995," said Dias. "I brought 20-plus years of banking experience. I think I brought a different view of managing a retail organization, had lots of experience in a multi-branch strategy." The first thing he noticed was that PTCU was plain vanilla. "They had no interest in cross-selling. They were very happy to be a second, third or fourth relationship to the members. They were very happy if a member only got one car loan and never came back, which I found astounding," said Dias. So Dias' focus, a focus which he still practices today, was to get more from existing members. Dias believes one serious mistake many credit unions make is their marketing dollars are aimed at getting new members, and not at mining the members they already have. "Why go out and advertise on billboards and buses for new members, when they're going to give you a limited number of accounts before they're even comfortable with you. Instead, bring that second car loan your members have financed at a dealer in-house. Take money away from the bankers your members are doing business with." PTCU named Dias CEO in 1997. The credit union wasn't in the best of shape. Dias said "loans were tanking", net income was dropping, and the CU had a delinquency problem. He started making changes that helped the CU go from a net loss of $4.2 million in 1998 to a record $22 million net gain last year. Right off the bat Dias looked at the loan operations. He found that loan officers were lending with their hearts and not their heads. "Our loan officers wouldn't even get a credit report, or get a credit report and ignore what it said. We didn't have anyone monitoring or supervising, there were not enough controls in place," he said. Dias said the loan officers were good people who were just lacking guidance. Dias tripled the staff of the collections department by bringing in well-seasoned collectors who understood the game and were able to bring back money that was written off. He also created positions to monitor lending at branches. Cross-selling became a focus and becoming the members' primary financial was the goal. PTCU hones in on auto loans and equity loans. Dias believes those are two loans that mean a lot to any member's financial life, so if you get them more business will follow. Interestingly, Dias thinks it's harder to pull business from the banks now than it was years ago. "Back then members were coming in with high dissatisfaction with banks. Banks used to be so focused on the commercial side, until they learned consumer banking can be very profitable. Bank dissatisfaction is tapering off. They have gotten their act together," said Dias. He believes banks have not only become more customer focused but they have closed the gap on the credit union price advantage. "They have become so efficient in how they deliver products and services," said Dias. Dias believes credit unions can not win the competitive battle on service alone. The service level must be high, but if the pricing isn't there, today's consumer won't stay. While Dias has commercial experience from his days on the banking side, PTCU has no desire to get into MBLs yet. "If somebody wants a $50,000 line of credit for a business, we can accommodate that. But I don't see a lot of existing members with the need to buy a million dollar building. If you're going to chase million dollar buildings, you're going to have a different need for capital, that's not in our strategy." PTCU's capital is closing in on $200 million, an achievement Dias said shows that members have made PTCU their primary financial institution. Dias has been involved in some major news stories in the past few years. He became a lightning rod when his 2003 $1.6 million salary went public. Bankers were pointing to it as another indicator that credit unions were becoming more like banks and should be taxed. The compensation issue also played a role in the second major story involving PTCU and Dias – the planned merger with Oregon Community CU. It would have been the largest merger in credit union history. The state regulator requested that the compensation of Dias and Oregon Community CU CEO Gordon Hoerauf be disclosed to members of both CUs before any merger deal was done. It was an interesting request by the regulator because it was not required by law. "Our board said we are not required by law to do that and we're not going to do that," said Dias. The merger deal eventually fell apart and many people pointed to the compensation issue as a reason. Dias maintains it played no role in the failed merger, which disintegrated for reasons he would not discuss. Disclosing of Dias' compensation brought up a bigger issue of how much CU CEOs should make. Dias said what some people didn't understand about his 2003 compensation is the majority of it was tied to performance goals set almost five years prior by the board. He could have made substantially less if the CU did not meet the goals. Dias said the industry also started to learn that many credit union CEOs out there have million dollar salaries, and much higher salaries than his. "I think the fact that mine went public surprised a lot of people, but there were other people already making it, and not just CEOs, but other management officials," said Dias. During the salary hysteria, Ava Milosevich, CEO of another Oregon CU, SELCO, took the bold step of voluntarily disclosing to members that she made $1.4 million. Dias still believes the merger with Oregon Community CU makes sense and he hopes the boards revisit the possibility in the future. "I thought the merger was a brilliant strategy for the membership of both credit unions. It would have pulled together a quarter of a million Oregonians. We were both marketing to each other's memberships. We had a lot of crossover. A lot of people who attended the University of Oregon live in Portland. We're constantly picking at each other's members," said Dias. Dias said the merger would have saved the new CU money by consolidating the back office. It also would have been good for employees because they are suddenly part of a bigger CU with more career opportunities. One of the achievements Dias is most proud of is PTCU being named one of the top 100 employers in Oregon for five years straight. Dias said being a good employer is about knowing what employees need. "Everybody likes to cast everyone in one light, but you can't do that. You have to create an atmosphere where people who want to put their head down, do a good job and get home to their family can thrive, as well as the people who want to work extra to get ahead." "You also have to have the right sorts of incentive plans in place. We have incentives to reward people who are service oriented. Traditional incentive plans revolve around sales," he said. On leadership, Dias said getting people to do the difficult things well is the challenge. "People like to say Jack Welch led his board where they wanted to go. That's easy. Try to lead people where they don't' want to go, that's the real test of success." Looking at the credit union landscape, Dias maintains credit union mergers must continue if credit unions are to thrive. "There has to be a lot more mergers. Even our state regulator said it. Credit unions can't afford the costs of technology, the cost of new products and services without having some mass. Your size can help you compete more efficiently. There's always a place for the smaller credit unions to serve a particular market, but that's not the norm. People these days are interested in consolidating their business, not having five or six accounts with other credit unions," said Dias. He believes a billion dollars in assets is when credit unions really get the economies of scale benefit. He said larger CUs also get other indirect benefits. "I think you get more attention from vendors and a lot better pricing when you're a billion dollar credit union versus a $10 million dollar credit union," he said. Dias said there's too much focus on net income in the industry. "Everything is net income, net income, net income. What we do here is focus on how we make our money. Are we making it from car loans, mortgages, investments, and is it a healthy revenue stream and long term can that continue. You have to focus on how you make your money versus how much you made at the end of the month," Next in Command People who have followed PTCU closely may think they have an anointed CEO already in-house. Tom Glatt joined PTCU last year as EVP/Chief Operating Officer. He is responsible for the day-to-day operations of the credit union. Is Glatt next in line? "Tom was hired as EVP/Chief Operating Officer, the second in command. He was not hired as the CEO in waiting. He's a great guy, doing a great job and yes he has expressed an interest in the position. The board has accepted that, but he will go through the process," said Dias. The board will conduct an extensive national search said Dias, and Glatt is not guaranteed anything. Glatt said he agrees with what the board is doing. "When I was a consultant and board members used to tell me they have the perfect inside candidate, I always told them you owe it to your membership to do a complete search. It's what I would have advised them to do whether I was here or not," said Glatt who used to consult with PTCU's board. For years Glatt worked along side his wife Diane Johnson running the credit union consulting firm Counterintelligence Associates based out of San Juan Capistrano, California. Most of Glatt's time was spent on the road either speaking or working on planning sessions. The years of traveling started to wear on Glatt physically and the PTCU opportunity was a way to settle down a bit. "I'm having a great time, I really am. I joked that for 17 years, three days was the most time I spent with people, including my wife. It's been a nice change," said Glatt. Glatt and his wife moved to Oregon for his job. "I never thought grey would be my favorite color," said Glatt of Portland's weather. PTCU has hired Korn Ferry International to assist in the CEO search. [email protected]