MONTVALE, N.J. — As Paragon FCU CEO Richard Rays prepares to retire at the end of this year, Credit Union Journal caught up with the 16-year credit union veteran to get his thoughts on his career, what's ahead, and more.
Credit Union Journal: How did you first get into the credit union industry?
Rays: In the late 1970s, early 80s the oil industry in Texas faced a catastrophic collapse. While working in Houston as vice president finance for a subsidiary of Hughes Tool Company, I decided to seek a new financial opportunity in a different industry. Due to the fact that I had recently received my CPA certification in that state and had significant years of business experience, I was introduced to the chairman of the board of Sandia Laboratory FCU by the chairman of the board of my subsidiary. He also happened to be president of the United Bank of New Mexico. I was interviewed by the board of Sandia Labs and offered a position as president.
CUJ: Describe your career prior to Paragon.
Rays: Since receiving my BS in Accounting from Rutgers University, I have been serving in various financial positions for public corporations. I first entered the credit union industry in 1985 with Sandia Labs. In 1991 I was recruited as EVP at Eastern Financial but within a very short period of time it became evident that the former president, who originally indicated his departure was imminent, had changed his mind and decided to stay. At that time I decided I would seek a presidency at a different credit union. In 1993 I was offered the presidency at Paragon FCU.
CUJ: Paragon has seen strong growth, including launching several CUSOs, during your term. Why?
Rays: At the time of joining then East Bergen Teachers FCU, its occupational field of charter was strictly identified with its core base, i.e. educators in Bergen County, New Jersey. By expanding the opportunity for multiple-group opportunities, and by virtue of the fact that we were located in an area that housed headquarters offices of many large corporations, such as Sony Electronics, Mercedes Benz, BMW, A&P Foods, Jaguar Cars and many other large corporations, offering membership to their employees allowed Paragon to grow fairly rapidly in the late 1990s.
With the credit union industry, in general, growing very rapidly and with no other credit union competitors in our area, we were fortunate to secure a new "blue ocean" of employees. In early 2000 due to this significant growth, we acquired new facilities and designed one of the finest headquarters and main branch locations in Northern New Jersey. Paragon then converted to a community charter and increased its branch locations to serve this potential new field of membership.
CUJ: How has the industry changed since you first broke into it?
Rays: During the mid '90s the primary challenge to our industry was the Supreme Court decision to disallow multiple group charters. That could have dealt the industry a significant blow. Fortunately, HR 1151 was passed and for several years thereafter we grew at an accelerated pace. In my view, the significant changes to the industry began on 9/11/2001 and continue to this day. In the years leading up to 9/11, the Internet was born and introduced a new world of member access to their accounts and financial education. Unfortunately, it also opened the door for new threats and risks such as identity theft, ease of money laundering, and exponential need for greater compliance and regulatory controls. Terrorism, money laundering, and fraud became rampant. New regulatory controls meant higher administrative costs, new compliance departments, and increased auditing of electronic means of access. Computer systems were now fair game to hackers throughout the world. Increased risks meant increased heightened internal controls and external access to computer systems. Increased fraud, credit cards, debit cards and electronic access meant higher insurance premiums. Additional resources were required to protect the assets of the credit union. Once the dominos began to fall in 2007, it caused an irreversible contraction within the industry. Only the larger, well-capitalized will survive. Geographic economies may cause as much as a 30% reduction in the number of credit unions in the next 10 years.
CUJ: What would you tell a young professional in this business or looking to join the credit union world?
Rays: Today's financial environment does not leave much room to cover all of the administrative compliance and regulatory costs now forced upon us. I would suggest that a new paradigm for services, a new strategy for efficient and low-cost delivery of services be a primary focus in order to contain costs.
CUJ: What are your plans now?
Rays: My career began in 1956 as a Wall Street runner. Therefore, after some 53 years in the workplace, I plan not to have any plans at this time. I sold my home in New Jersey and purchased a new home in the Austin, Texas area to be close to my son. After a period of time, I may look to assist other credit unions, perhaps teach, perhaps get back to flying, or perhaps do nothing.
CUJ: What's ahead for credit unions and the cooperative movement?
Rays: For many credit unions with substantial resources, stable fields of membership, or many federal/military credit unions, the future will continue to be bright and profitable. On the other hand, however, many credit unions, that through no fault of their own, are victims of geographic, financial disasters will unfortunately, fall under conservatorship, be liquidated, or be forced to merge in order to maintain cost efficiencies. For the next few years, as the shake out of unemployment, industrial collapse and economic disaster continues, my prediction is that within the next ten years we might continue to compress the number of credit unions in this country by perhaps 30%. It may make sense for many credit unions to seek a merger partner now rather than wait until they are forced to do so, further weakening their capital structure.
