SAN FRANCISCO — Ken Burns is taking over as the new CEO at Patelco CU in the middle of a financial crisis that has rocked the entire movement, and, in particular, Patelco itself, which reported a $40-million loss for 2008 and a $7-million loss for the first quarter of 2009.
Burns will be greeted with a tough charge, in fact charges of more than $60 million Patelco will have to report for its share of the corporate credit union bailout and the failure of WesCorp FCU. He will also be faced with the integration of two failed Bay Area credit unions acquired by Patelco last year, Sterlent CU and Cal State 9 CU. And taking the reins at $4.1-billion Patelco CU, means he is walking in the footsteps of well-known former CEOs Ed Callahan and Andy Hunter. CU Journal caught up with the former Technology CU CEO just after he moved over to Patelco.
Credit Union Journal: You've been on the job for weeks now, how does it feel being CEO at Patelco CU?
Burns: It is going extremely well. I'm very excited to be on board here at Patelco. I have watched Patelco for many years as CEO of Technology Credit Union. I knew Ed Callahan and Andy Hunter, and I have a lot of respect for the organization.
I am a fortunate guy, and this is a great opportunity. I enjoy getting up and coming to work each day. It is a pressure cooker sometimes, but it is a great industry.
CUJ: Obviously you did not come from a small shop, as Technology CU has $1.3 billion in assets, but Patelco is very large. What are the differences between the two?
Burns: The numbers on the balance sheet are different, as you point out, but when you talk about the quality of the board of directors, the executive team, the staff and commitment to members at both credit unions, there is a lot more similarity than difference. Patelco has an excellent board and a sound executive team. The team is feeling the pain of the times, with many members being out of a job and that has found its way onto the balance sheet in the form of delinquencies. I have told the staff here, Patelco's brightest days are ahead of it. There are opportunities for products and services that can offer members greater convenience, and we'll see those as we move forward out of this economic downturn.
CUJ: You mentioned Ed Callahan and Andy Hunter — how do you keep those big shoes to fill from being intimidating and make them into an inspiration?
Burns: I knew Ed, and had the opportunity through CEO roundtables to work with him over the years. And I've known Andy for years. There is no intimidation about filling shoes. The challenge is, I don't want to let the organization down. I want to keep up Patelco's tradition. One enormous benefit is Andy is staying here through the end of May to ensure a good transition. This is very nice of him. Andy announced his retirement about a year ago, and my perspective would be: I'd be chomping at the bit to start my retirement. But instead, he worked with the board to make sure things went smoothly. Things have been very smooth these first weeks with Andy on board.
CUJ: Please describe the process of your hiring. Is this a job you applied for or did Patelco contact you?
Burns: I read the announcement that Andy had decided to retire, so that was public knowledge. It was clear the credit union was performing a search. I was contacted by Patelco's search firm, and thus began a fairly thorough process on the part of the Patelco board, which I commend them for.
There was some consideration on my part about leaving a great organization at Technology Credit Union. What made it easier was I was leaving an organization that was operating very well and would continue to do well despite the current economic conditions. I don't know if I could have done it if Technology was struggling.
In the end, Patelco represented a tremendous personal opportunity for me, given its size and reputation.
CUJ: What are the biggest problems to fix you've noticed so far?
Burns: The No. 1 biggest challenge is Patelco has done well in serving its 300,000 members, but now many of those members are facing a challenge of paying their loans. We are helping members through loan modifications and through financial literacy. I am trying to improve on what already is a tradition of operational efficiency. Finally, we just have to accept the fact Patelco is going to grow a lot more slowly than it is used to. Patelco has had tremendous growth over the past 15 years, which is a testament to Ed and Andy. Given the current economic conditions, the strategic objective really is just to sustain assets in the range in which they are sitting.
Other than a merger opportunity that makes sense strategically, we probably won't be aggressively pursuing deposit or asset growth.
CUJ: Is Patelco involved in the types of loans that have hurt many credit unions in California, such as real estate or construction loans?
Burns: Not construction loans, but certainly home equity lines, first mortgages and second mortgages, to some extent. I think we are near the bottom [of the decline in the real estate market], I'm just not sure if the bottom is a little deeper or if we've come off the bottom. It is too early to tell.
Because of the current foreclosure rate that exists in California, the Bay Area and Sacramento, it will be some time before we see a recovery in that area, and it remains problematic. It is certainly one of our biggest challenges, as some homes in the Sacramento area have lost 60% of their value.
CUJ: Any other thoughts on your new job?
Burns: Again, it is exciting to be here and I very much look forward to what the future brings. I think it will be much brighter than what we are seeing now, and not because of me, it will be because of the opportunities that will come Patelco's way.
