Small credit unions aren't making the most of available resources that will ensure their survival in the next five years, according to Chris Kerecman, VP-federal Government Affairs with the California league.
The self-described lobbyist and supporter of small credit unions spoke to a crowd of about 75 CEOs and board members from smaller credit unions during the league's Big Valley Conference here.
Designated "Shapiro Group" credit unions because they hold fewer than $20 million in assets each, small CUs make up about half of California's nearly 700 CUs. Ubiquitous mergers and liquidations are but two of the reasons for the decline in the number of small CUs and the concurrent drop in membership and assets in those remaining.
"Very quickly it's going to be hard to be a $3-million credit union," claimed Kerecman in his session, Survivor-It's Not Just a TV Show. "Here's what you need to be doing five years from now."
Kerecman urged small CUs to take stock and take action, and to use him and the league to do so.
'Getting Angry'
"The thing I get angry about is that small CUs don't do what they could do to take advantage of resources available to them," Kerecman said. He mentioned the NCUA's plan to offer used laptops with updated software to smaller credit unions. "They're not the greatest of computers, but you would not believe the number of people who said 'No'," he observed.
Kerecman said the league would work with any small credit union to secure funding to help the CU survive and thrive.
Among the funding sources he said are available to smaller credit unions:
* NCUA Low Income Designation. "Are you low income; have you checked?" asked Kerecman. If so, the NCUA offers the Community Development Revolving Loan Program (CDRLP), technical assistance, FOM expansion and the expertise to research these programs. More information is available at: www.ncua.gov/org/orgchart/region3/DOI/low_income_des.html)
* Community Development Financial Institution (CDFI) Fund, which provides up to $25,000 in Small and Emerging CDFI Assistance (SECA) equity grants. More information can be found at (www.treas.gov/cdfi/seca.html.
* Shapiro Group Technology Grants and Donated Equipment. Up to $4,000, provided by the league and California's Golden 1 CU, is available to league members for anything related to technology, from hardware to e-bill payment. For more info: www.ccul.org/league/shapiro.htm.
And Kerecman wants small CUs to employ additional survival strategies, including:
* Loan participations, in which a CU can increase its underwriting capacity by up to 90% by partnering with another CU.
* Non-member deposits, which increase the CU's asset base and reduce the cost of funds.
* Neighborhood communication, where credit unions interact with their local peers, strengthening loan participation, non-member deposits efforts and shared resources, potentially managed by forming CUSOs. "All too often, a small CU tends to be an island until something disrupts it," Kerecman warned.
Finally, Kerecman emphasized the positive effects of political action. "I like credit unions to stand up and say they're unique, but I like to hear them say it in Washington."
Advocacy trips to D.C. have made an "immeasurable impact" in illustrating just how CUs are different and necessary. "If policymakers don't understand you, it's because they're not hearing from you," said Kerecman.
Kerecman, who belongs to five small CUs and who was once saved by a small CU from cashless desperation on a business trip, said there are two unique small CU qualities that are closely tied to a credit union's survival.
First, a small CU fills a niche, which "allows you to serve core group of people better than anyone else," he said. Kerecman cited a Florida migrant farm worker CU and a Utah polygamist CU as examples. "Your ability to reach out and touch the people you serve will make the difference for your survival."
Kerecman agrees with those who stress that management will make or break a small CU. "You have a very big problem if you have a manager who is about to retire or if you don't have a good manager. At a small credit union, the board needs to help the manager."
He added that whether the management is green or experienced, it needs to constantly tune in to member expectations. "Do the management and board reflect the people they're trying to serve?"
Taking Advice To Heart
Participant Loretta Hudelson, chair of the Shapiro Group and CEO of Antioch Schools FCU, echoed Kerecman's concerns. "My previous manager had been there 26 years," she said, "and for more than 20 years, no one went to a chapter meeting."
But Hudelson has taken much of Kerecman's advice and assistance. "Now we're the seventh fastest growing credit union in California, going from $4 million to $16 million in eight years," she said.
Kerecman's discussion was spiced with pinches of NCUA derision. Kerecman said NCUA regulations and practices often hinder small CUs and he is pressing for regulatory changes.
The NCUA defines small CUs as holding $1million or fewer in assets. "That's ridiculous," he said, and the NCUA has repeatedly refused requests to raise the bar.
If the NCUA does raise the asset designation, Kerecman sees many possibilities, such as regulations that allow delayed implementation dates, extra targeted assistance and less frequent call reporting, all of which could bolster small credit unions.
