Big Q and A with Managers of Small Credit Unions
At the invitation of The Credit Union Journal, managers of small credit unions from across the U.S. have offered their thoughts on a variety of issues, from the future of small CUs to management strategies.
In this, the second part of a two-part Q&A series, the following credit union leaders share their insights: Hank Hubbard, president of Communicating Arts CU, Detroit; Susan Fisher, CEO of Tongass FCU, Ketchikan, Alaska; Connie Risher, Brewster CU, Brewster, Ohio; Katherine Hoeper, president of KONE Employees Credit Union, Moline, Ill.; Lynn Marie Hopfensperger, manager of Wisconsin's Media Credit Union; Nancy Warren, president of Davies County Teachers FCU, Owensboro, Ky.; Sharon Marich, president of Pahranagat Valley FCU, Nevada; Loretta Moesta, manager of OUR FCU, Eugene, Ore.; Richard Randall, operations manager of Carolina FCU, and Jack Jenkins, CEO of Carolina FCU, Cherryville, N.C.
CUJ: Can Small Credit Unions
Prosper And Survive?
Hubbard: "Well, that's a pretty subjective question depending on how you define things. Our CU's position is that in the long term, there really isn't going to be a place for a credit union our size. So growth is imperative. If we want to compete, we have to continually be innovative and that's expensive. We've been feeling that squeeze for decades. We see growth. We need to reach economy of scale through growth."
Fisher: "Yes. We have to be flexible, willing to adapt and have to know and serve our members. By members I mean personal communication is important. I try to come downstairs several times a day to meet and talk. Formal surveys are good but the staff can ask informal questions. I ask the staff what they see going on and what the members are asking about. Knowing the community at large is part of it. You have to get out into the community because you need to know what's going on in the economic downturn. You need to know which members are in danger of losing their jobs, what will they be needing. Smaller credit unions need to partner up with some of these great vendors who can bring them these services and they can expand services by CUs sharing services."
Jenkins: "I do think small credit unions have a tough road to travel ven with technology, you can say you offer the same services no matter where you're located, but the reality is, the large keeps getting larger and the small business person is having a tough time surviving in this market. The large credit unions have so many more resources. I think a credit union who can continue to be hands on with their members and serve them well with a more personal attitude, those are the ones that will survive."
Hopfensperger: "I think they better survive or our trade is in for a huge drop. We're the backbone of what Filene said years ago. We probably send more people to consumer credit counseling than our larger counter parts. It's important in order for them to continue on, we're going to need help from our state-chartered group and trade associations As a CU CEO we can''t sit on our laurels and wait. If somebody else is giving you a check card to make you life more convenient, you need to give check cards to your members for the same reason."
Warren: "Some will, but as a whole, so many times, it's really difficult to get the expertise needed. I've been here 24 years and I've seen managers come and go and problems that never get resolved because of a lack of understanding. It will be a struggle. I am certainly a proponent of keeping them."
She said that help from state and national organizations would help some."CUNA has really stepped forward in helping small CUs," she said. "Even processors and vendors seem to be finding ways to be competitive. Several years ago, I never dreamed that we could have an Internet or an audio-teller."
Marich: "Definitely there is more of a need for small and people are looking for small credit unions for the values and the services. We're able to compete because we have everything the large (CUs) have. Small credit unions must really upgrade and stay abreast of technology or they'll be swallowed up by the bigger CUs or by bank competition."
Moesta: "I think they can. They need to find unique ways to continue operations. They have FOM issues and need to gain community support through political allies.
They need to educate the larger CUs that we need to exist. They need to obtain technical assistance from bigger CUs, and they need to celebrate our smallness.
Randall: "I think (small CUs) very well can (survive). They have to determine their niche and focus on doing what you're good at. You don't have to do everything, just do what your members want and need. You also have to use technology wisely. For example, we have no automated phone system, and there's a point to that.
We have had the same woman answering the phone for the last 18 years,m and that means something to our members.
On the other hand, we don't even half of our members because we serve them remotely. We have a website, but most of our remote service is still done over the phone.
CUJ: How Would Define
'Small' Credit Union?
Fisher: "I would say anything under $25 million."
Hoeper: "Small is a state of mind."
Hopfensperger: "I don't measure it by asset size, I measure it by services. If somebody looks at my web page, they wouldn't know the difference."
Warren: "$15 million and under is considered small in our state."
Marich: "$10 million."
CUJ: Are You Now Or Would You Consider A Merger?
Hubbard: "Part of our strategic plan is to search for a compatible partner that we could merge with. That doesn't mean be absorbed into. And that doesn't necessarily mean absorbing another CU."
He said the most important thing is that the two credit unions consider each other equals instead of judging one another based on size. Hubbard said his board has been looking for a partner for several years.
Offers have come in but none that suits CACU''s needs, thus far.
Its main goal is to find a CU that considers it an equal. Meaning, in part, that they don't want to have only one board seat, for example. "Boards aren't that important in and of themselves," he said. "What's important to us is that the philosophies and cultures are similar."
Fisher: At this time no, we're not interested.
Hopfensperger: "No, but I think other larger CUs could be a merger for us. Why would you wreck a really good thing. You would never be who you are now."
Warren: "Never. My board wouldn't even consider it. We would consider taking one in." Warren said she recalls being approached about merging in 1978.
Marich: "No. We've tried to approach our board and membership and they want their own CU. They want to be able to administer the programs themselves without anyone saying no."
Moesta: I can't answer because nobody wants to merge with us. If we wanted to merge we'd have a hard time finding someone to merge with because we could make a healthy CU less healthy."
CUJ: Is It Accurate That Large CUs Only Want To Merge?
Hubbard: "I would not say that is true, in general. I have wonderful relationships with many CEOs of much larger CUs. But, there are exceptions to that rule."
Hubbard said Detroit Edison CU, directly across the street, is always ready to help. "One of my first experiences in the CU industry had to be with Bob Houston (of Coop Services) lending me one of his employees for a period of time."
Randall: "I'd say we get more help than merger offers, but we have had some merger offers. But no one has pushed or pressed us. We have a number of friendly overlaps."
Fisher: "I would say neither in terms of people coming to me. When the last CEO left we borrowed a CEO who worked from a distance and we used outside accounting also. During that time there were formal offers to merge. Once I was hired they stopped offering."
Hoeper said she's received nothing but help from larger credit unions. "I don't know of any larger credit union that I've called that has told me to jump in a creek."
Hopfensperger: "My best friend is at the largest CU in the area. I know it's not true."
Warren: "Yes and no. I have seen that in the attitude in the philosophy of some, but on the other hand, I have seen some larger credit unions go overboard to help smaller CUs."
Marich: "I don't agree. Lots of credit unions have gone the extra mile to help out. We're isolated and it's hard to get to meetings. We have gone to the larger CUs just to see how they operate and to learn, and they show us the utmost courtesy. I talk to their boards and they will help if we need money or equipment.We get lots of help and offerings of anything we need. Nevada FCU showed us all around and how their system worked."
CUJ: Is Being The Manager Of A Small CU A Good Career?
Hubbard: "I've been here 11 years, I have always worked here. Yeah, I have a great job. The challenge is that there is no place to go. If I want to make significantly more money, staying at this CU is not going to do it."
Jenkins: "There is some satisfaction (with being the CEO of a small credit union). You have more interaction with member that you wouldn't have at bigger credit unions. I know a lot of our local members and enjoy talking with them. The challenge is having to wear so many different hats. I got this job because I was working (for the sponsor company) and they came to me and said they were starting a credit union and would I manage it? Well, I wanted to be in management, I wanted to manage something. So I said "yes." They gave me a cardboard box of books, and I had to learn about it while we started it. Regrets? We should have jumped on the SEG bandwagon earlier. You get a comfort level thinking that everything's fine, that the company will always be there so the credit union will always be there, but that's just a false sense of security.
Fisher: "Yes, it's a good career. I have an advantage, I have an MBA. I think most CUs probably don't have that education. I learned so many things-law, finances, accounting, many, many things. Most people who come up through the ranks don't have that advantage. I don't feel overwhelmed all the time, just sometimes. Finding time to really get into the financial and investment end of things. I rely on a broker but I need to do more formal work in that area."
Hoeper: "I feel it's a great career. It is still exciting to me. You know I get excited when we have one of our goals achieved. My staff does too, and we have a great staff. And every little step we make is celebrated by the board and the staff and me. It is an exciting career."
Hoeper said she is not a hands-on manager, but she does handle everything from marketing and board reports to asset liability management and overall planning. She also writes all the copy for the website. "I make sure I'm available for members and my staff at all times. But a manager cannot help the credit union grow by being involved in the day-to-day business."
Hopfensperger: She said one of her big challenges is trying to find time to do all the "real" CEO stuff. "It's hard when you're out there balancing everybody's budget because they only want to work with you. I wish I would have hired more employees a long time ago. Not that I wasn't willing. I was just always concerned about the bottom line and didn't see where we were going." Hopfensperger said she has no desire to work at a large asset size CU. "I don't want to do just numbers," she said. "I want to do the people thing, too."
Marich: "It is. I can't say it's not stressful but it's worth it because at the end of the day you've really accomplished something; you've helped people and become part of their lives. It's a good feeling."
Moesta: "It depends on the day you ask the question. Today it's getting better." Is it a good career? "If you asked my husband he'd say no, it's a great volunteer position. I've done some of my most gratifying things and had my lowest lows here. Something must be good or I wouldn't be here."
CUJ: Do You Have Support At The State, National Levels?
Hubbard: "Yes, I do. I think your level of support depends on how much you want to put into those organizations. I volunteer for things at the league. They know I will do things."
In fact, he said, he was about to teach a weekend course for the league on Strategic CU Leadership.
"The more you know them the more you can expect to get out of them. Those organizations offer so much more than I can take advantage of. If you don't take advantage of it, it's your own stinking fault."
Fisher: "In the (Alaska) league, there are only 13 CUs, so it is often the person who steps forward and opens their mouth who is chosen to do something. The small CUs are very adequately represented."
Hoeper said that as someone who is involved quite a bit, she believes the answer is yes. She is on the foundation board and is a chapter legislative representative.
Hopfensperger believes small CUs are not adequately represented, in part, because the staff can't afford to take the time away from their institution. "There is a price to pay for the services we offer." That said, she thinks small CUs still have a voice, recalling a meeting she and other larger CUs had with some state senators. He kept asking them why they didn't think they should participate in CRA requirements. After all these explanations that were hard to understand, Hopfensperger spoke up: "We had somebody come in because their hot water heater busted and they have no money," she said. "We gave them the $250 they needed, which they paid back $5 a week. Did we not make their quality of life better?"
Warren: "Oh yes. All we have to do is make a call. Our league is small and not heavily staffed, but they do a good job." She said both the NCUA and CUNA have also stepped up to the plate to assist small CUs and make sure they have adequate representation on committees. She said she has served on several of them herself.
Randall: "Our state league here has been very helpful, very supportive. Of course (CEO Jack Jenkins) has been very involved at the state league, and that makes a difference, too."
CUJ: Are You Able To Get To
Conferences & Meetings?
Hubbard: "I would say that in the course of the year, my directors might participate in three trips for directors to go to-league annual conventions . . .
"I am able to do some but not many," he said. "I am as sensitive as they (the board members) are to stay current."
Fisher: "Yes, I went to (CUNA Mutual's) Discovery Conference, which was wonderful. An IRA trainer came to Ketchikan and three CU's came. We also use Internet training and college classes."
Hoeper: "Yes, I have always done it," she said, adding that yearly training is a prerequisite of being a board member. And, part of her staff's salary increases are tied to their continued education. As an incentive, the CU picks up tab for college courses related to the industry.
Marich: We go to data processing conventions to learn more about our own program or bankruptcy training, or ACH rules. We go to four or five a year.
Randall: "As far as training and sending people to conferences, we have problems with both time and resources. We would like to do more than what we do. Our state league tries to make it affordable."
CUJ: What Kind of Support Do You Get From Examiners?
Randall: "We have had great support from our examiners. When (our sponsor company was sold off) they worked with us quite a bit. They were a little more thorough and looked at us a lot more carefully. They were hands-on when they needed to be."
Hubbard: "They're not really there to support you and I don't always agree with their interpretations but I have a good relationship with them. Probably everybody must disagree with some of their exams and I tend to get a little heated about it. Their challenge it to make sure your institution is run in a safe and sound manner."
Hubbard said he thinks the CAMEL ratings are "clearly an indication of how closely they are going to watch you."
His biggest frustration with examiners, he said, is trying to make them understand that earnings are low and expenses are high because the CU is trying to grow and cannot grow without providing products and services, which cost money. That's no indication of the CU's safety and soundness, he said.
Fisher: "I think our examiner wants to provide us information and keep us pointed in the right direction."
Hoeper: "I don't think that's their role. They are there to do an examination and give us the results. That's it. We, then take those results and find solutions."
CUJ: What About Your Board & Attracting New People?
Hubbard: "I would say we are able to get new faces on the board. It's a challenge, It's not easy. We do a certain amount of recruiting. We consider the supervisory committees as the farm team. We try to recruit there so they get a sense of the institution." Hubbazd said his particular board is "great."
"We get consultants in and they are amazed that all of my board members are self-possessed enough that they are comfortable speaking their mind, but they are not all antagonistic toward each other. They respect each other and they respect me."
Randall: "We changed the size of our board down to seven directors; it had been at 11. We had a stable board with people who had been on it for years. We have had discussions of getting new blood in there, but in our situation, it was good to have that stability on the board."
Fisher: "The board has not been a problem, but we hit a bad patch with keeping the supervisory committee alive and going. We've had to rebuild that group."
Hoeper said her board-a mix of young and old, male and female, experienced and inexperienced-are very open to new ideas and do not micro manage. "I'm lucky I've got the board I do."
Warren: "My board is all retired school teachers. The board chairman has been the only chairman the CU has ever had since 1971." She said they do enjoy the perks of traveling to such places as Alaska, Las Vegas, New Orleans and Nashville for training. Her only concern is that she expects to retire in the next several years, and doesn't think many of them will stick around much longer, either. She would like them to prepare a succession plan. "Right now, they just talk about it."
Marich: "It's really hard to get volunteers. Many are already so busy. This board is really good, they take it seriously. They want to see the credit union stay abreast of the times."
Moesta: "Our board doesn't need turnover right now, it needs stabilization. We have expanded with a fresh outlook-a Latino advisory board-brought in Latinos so they would be represented."