As the financial services industry has become more competitive, credit unions have been caught up in it. At times the cooperative spirit seems to be dying on the vine. Then something comes along and sparks your internal feel-good receptors for the cooperative, not-for-profit credit union spirit.
Members come to credit unions for financial services, period. Some credit unions can afford to go beyond the basics. My credit union, at $335 million in assets, for example, has a children's play area. Essential? No. But a nice touch for those of us who need to go in to the branch to make a 90-second transaction, which kids in the single-digit age range find interminably long.
Still, other credit unions cannot afford proper training or leadership and that can present incredibly scary scenarios. As in Tom Glatt Jr.'s recent blog post, if the CEO is too busy rowing the boat, the CEO isn't steering the ship. And that same CEO is sitting on a cushion of 15% or higher member capital that is doing nothing for the credit union. The irony is that credit unions were intended to teach people thrift and prudent financial management. Sure, sock some away for a rainy day, but you also have to motor forward.
A piece of that surplus capital could be invested in expanding staff so the CEO doesn't have to row every day and has the time to provide strategic direction and leadership. Rolling your sleeves up and getting down in the trenches to serve members is a great way to stay in touch with the products and services they want, but needing to do it every day means you're just bailing out water with a thimble. Bigger problems exist.
Or that money could be devoted to supplying members with new products and services to members and result in solid organic growth. At many (typically smaller) credit unions this doesn't mean anything exotic. It could be as simple as offering a credit card or debit card or even a website. If a credit union isn't growing, it's not serving their members. You may be sitting on a pillow-top cushion of capital, but if your membership is aging and shrinking and the credit union is not bolstering its future for members and future members, there's no point.
Smaller credit unions don't have to go away. If the credit union is struggling for resources, there are other credit unions out there willing to help. That's the beauty of the cooperative, not-for-profit model.
Gregg Stockdale, CEO of 1st Valley FCU in California, is a perfect example. He has offered assistance to smaller credit unions at planning meetings and spoken at credit union conferences.
I have heard of some board members ask "What is ALM?" or "What's a basis point?" These questions seem so incredibly basic, it's assumed the board members of a financial institution would know that. Many don't. But at least they're asking and trying to learn! Those that often need it the most aren't asking for help.
Stockdale said he has tried to get credit unions with excessive capital to make it work for them, but the executives and boards see capital as merely a safety net. That's what they're doing because that's what they've always done. Just as today's households don't even pretend to mirror "Ozzie and Harriet," their financial services needs have evolved. And competition for those ever changing needs has become fiercer than ever.
In a further effort to help educate credit union board members and executives, Stockdale started the School of CU Financials blog. He has also reached out to a handful of local area credit unions offering them back office and staffing support. Notably, his letter opens: "This is NOT a MERGER letter!" He noted that 1st Valley FCU has been assisting a CU in Washington while it has staffers out on maternity leave. Stockdale's letter explained, "We can now use the collaborative capacities of our data processing system to open across-credit-union channels to address [the capacity and personnel] need."
Stockdale invited these credit unions to an informational meeting on this effort to collaborate. So far he has no takers. He lamented that those credit unions that are adamant about doing everything on their own will become tomorrow's merger statistic.
Stockdale's efforts impressed me. but I was much more impressed when I discovered 1st Valley FCU has just $33.4 million in assets.
Along the way, 1st Valley FCU proactively sought help through grants from the state league. and he said he's not afraid of asking a larger credit union for help. The credit union has contacted larger credit unions and gotten equipment for pennies on the dollar. Through collaboration with all sized credit unions, 1st Valley FCU has been able to offer new products and services. Stockdale has attended training meetings and conferences on other credit unions' dime.
This type of collaboration is how the sophisticated credit unions–small or large–are going to survive and thrive.
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