The credit union is communicating through podcasts and social media posts. It's training its staff how to answer difficult questions. And it's making sure that communication extends to explaining when things go wrong: "Outside the box items like when an ATM goes down or when our online app is being updated and it's down for a couple of hours."

"We don't want any action to be misinterpreted as some type of financial instability," he said.

That said, Leaders is preparing to weather a financial storm.

Leaders is located in a rural area between Memphis and Nashville. Its assets have grown about 20% per year over the last five years.

"We've been able to sustain this growth trajectory in a small market by focusing on loan demand," Rudd said.

NCUA data showed Leaders' loan production for all of 2022 rose 17% to $506.1 million, but by the fourth quarter it had fallen 28% to $79.1 million. Leaders' loan-to-share ratio was 104% at Dec. 31, the 168th highest in the nation and up from 98% at the end of 2021.

While other credit unions operate with loan-to-share ratios of 75% to 85%, Leaders' goal is 100% to 105%.

Leaders has tried to squeeze its net operating expenses as "close to zero as possible" by focusing on generating non-interest income. About a third of that has been from mortgage lending, but that source has been shrinking. In the first quarter, its residential loan production fell 58%.

Seth Rudd

Leaders' ROA has soared above most credit unions, averaging 1.63% over the past five years. For all of 2022, its ROA was 1.73%, compared with 0.89% for all credit unions.

Rudd said he does not expect conditions to improve over the next 18 months. He said Leaders' top three concerns are:

1. "We don't think the liquidity risk is over."
2. "We think credit risk hasn't started."
3. "With that in mind, we want to make sure that we know that capital is not king."

Confidence is king, Rudd said. One response is that Leaders has instructed employees and vendors to increase monitoring of transactions.

"When we have a large withdrawal, they need to contact me," he said. "I need to be aware of when we have a large wire that goes out."

The credit union is also reevaluating its borrowing capacity from the Federal Home Loan Bank and other sources to see if it can increase lines of credit. "We want to increase our borrowing capacity as much as we possibly can so that if we do get into a squeeze we have a lever to pull," he said.

The credit union views a low cost of funds as a liquidity risk, so it has accepted that it will pay its members more for their deposits.

"We have seen recently Apple throw out a high yield savings account of 4.15%. What happens when Starbucks or Target or some other large company does the same thing?" he asked.

Leaders will be increasing its cost of funds to a net interest margin target that gives it some "liquidity risk comfort, but also gives us a lever to pull if rates were to drop again."

The credit union has also toned down its growth expectations. "We want to grow pretty aggressively, but instead of that 20% range, we're looking in that 10% to 12% range," he said.

And it has bid farewell to the odd past few years of historically high loan quality.

Last year, Leaders' net charge-off rate was 0.31%, compared with 0.34% for all credit unions.

Callahan reported Wednesday that the net charge-off rate for all credit unions was 0.51% for the first quarter. NCUA data showed the charge-off rate was 0.43% for all credit unions in last year's fourth quarter, up from 0.26% a year earlier.

Rudd said net charge-off rates are likely to approach 1.00% over the next year, and Leader is preparing to handle a rate at least that high.

"In response to that, we are slowing our loan growth," he said. "We're not stopping it. We're going to try to be more selective by adjusting our underwriting parameters, also getting paid for taking on that risk by pushing our rates higher."

"We've also gone ahead and increased our staffing in our collections department and improved their reporting collections tool," he said.

The credit union is also ramping up provisions to fund its loan loss allowance, even though CECL standards would probably justify a lower amount.

"We're going to continue to lend — that's what we do," Rudd said. "Consumer loans are not a bad asset class considering the alternatives."