News From The Over-Hyped To The Underwhelming
If you're a credit union CEO, it's not really been a good year to spend a lot of time on Facebook. Long-time comrades have disappeared due to mergers. Every day there is a new "like" request for the latest group someone has formed, such as "I'm mad as hell at my corporate," or "I Came. I Saw. I Surrendered to Compliance."
And most of all, I've been told by a number of CEOs, it seems all their Friend requests lately have been coming from the charter conversion consultants. Some friends.
Few have found much in the way of good news in the economic downturn, the Kansas-flat lending numbers, or especially the penalty-even-if-you-never-committed-a-foul assessments. But one group has: those selling a Promised Land just over the charter horizon.
American Banker, an affiliate of Credit Union Journal, recently reported that "several experts on charter conversions (are) predicting a wave" of pending announcements that it's time to CU later. The reason, the newspaper quoted attorney Robert Freedman as saying, is "Two words: insurance fund."
Freedman noted that in 2010, credit unions paid 35 basis points on their insured deposits, while banks paid nine. There is also the matter that credit unions must carry considerably higher capital (which isn't easy to build) than comparably sized banks.
Freeman's firm, Silver, Freeman & Taff, in Washington is among those that specialize in advising credit unions on becoming banks. It is currently doing so with HAR-CO Federal Credit Union in Maryland, the only credit union in the country that has announced it is seeking to convert. (It has publicly stated it is doing so in order to serve an expanded market; it's been mum on why it hasn't simply sought a community charter.)
No credit union has converted in the past year, and just one did so in each of 2008 and 2009. But proponents of conversion say the strain on the NCUSIF from corporate and natural-person CU failures has many CUs exploring other "options."
Alan Theriault, a Maine-based consultant on conversions, told American Banker he has been surprised there haven't been more charter conversions, and added, "If you factor in the higher capital requirements and the higher deposit insurance costs, your tax advantage has gone away."
Funny, but that last observation sure doesn't seem to jibe with the rhetoric from the American Bankers Association and the never-ending refrain about the "playing field not being even."
There's something else that's equally inconsistent. When the conversion profiteers and the banking analysts look at credit unions, most seem to simply not understand the business model or reason for being. They view credit unions as little banks that aren't fully taking advantage of their ability to "generate income" and "create profits." Putting profits in one pocket means taking it from another, and in this case that would be the members who formed the co-op in the first place, as if a group of founders got together one day and said, '"Hey, let's form a little financial co-op and then gouge ourselves."
It's the most basic of all premises, and like so many basics, it's often forgotten when people start to worry or even panic. And yet it's those same basics that are exactly what gets you through the tough times.
• Speaking of tough times and basics, Gordon Bethune, the former CEO of Continental Airlines who took an airline that was rated 10th out of 10 for customer service in the mid-1990s and made it No. 1, observed during NAFCU's annual conference recently that for all the changes he oversaw and the policies and practices put in place, really, it all came down to one thing. "The difference between winners and losers," said Bethune, "is people who care."
• And speaking of the NAFCU meeting, overheard one group of directors sitting around a table essentially lamenting how long they had served on their respective boards, as if they had been drafted or were trying to work off some sort of indentured servitude. Gentlemen, you are volunteers. Perhaps you have forgotten the meaning of the word. If that's how you feel, step aside; both you and your credit union will be all the better for it.
Not sure if you caught the quote, but Dana Rawlings, CEO of the $134-million Pioneer West Virginia FCU in Charleston, W.Va., no doubt summed up in a recent story in Credit Union Journal what many are thinking: "I wish that I could go to work for just one day and not have to think about what's coming down from Washington that will have a negative impact on our credit union and our members."
• Most CUs talk branding, but few do it very well. The "brand" gets a lot of attention and some marketing bucks at launch, before fading away and becoming little more than a slogan in small print beneath the logo. That's not been the case, however, at Connex Credit Union in North Haven, Conn., which for years has branded itself as the "unbank."
How far does Connex extend its brand? Like many credit unions, Connex underwrites college scholarships. But unlike most CUs, it extends its brand even to the small things, including its "Unbank Scholarships." Even the photos it unveiled of the winners showed them holding signs noting they were "Unbank Scholarship" winners.
For most credit unions, that's un-usual, which is why so many brand efforts are also un-derwhelming.
Frank J. Diekmann can be reached at email@example.com.