Fake News Abounds in CU Land

 By Bo McDonald

I recently read an article in American Banker titled, “Merge or die: Small credit unions struggle to stay afloat.” What a click bait headline and a patently false blanket statement!

One of my biggest rules when I facilitate a credit union strategic planning session is: NO blanket statements. I’ll ask for data to back what’s being said in order to prove a statement.  I would ask the same of American Banker on this headline.

Not all small, or as I prefer to refer to them, boutique credit unions, are struggling to stay afloat. Those that choose to merge are typically doing so for one of a few reasons:

• “No succession planning.” Shame on the leadership and board for not exhausting all options. In many cases I’ve seen this excuse used without even attempting to fill open CEO or board positions. The NCUA has recently issued a proposal on this issue, which saddens me greatly that we are not doing our best to serve our members.
• “No opportunity.” I would ask any credit union that is not growing to take a look around their community before signing those merger documents. If you can demonstrate no poverty, no unbanked or underbanked population, and everyone is financially empowered in that community, then carry on with the euthanasia of your credit union. 
• No one speaks publicly about this, but certain billion-dollar credit unions toss out sweet retirement deals for the CEOs of some small credit unions. Only the CEO taking the bribe, sorry, payout and the ego of the other credit union win in that deal.

It Comes Down to Fear

The merging of boutique credit unions comes down to fear. Some refuse to make succession planning a priority because it involves going outside of our comfort bubble and bringing new people who might have new ideas for “our” credit union. We say there is no opportunity because we’re fearful of taking a risk and making necessary change.

What about Maple Federal Credit Union? Pamela Stelly has led the $60 million, 8,300- member boutique credit union to unprecedented growth over the last few years. Maple achieved 20% membership growth and 24% loan growth in 2021 – well above peer.

Or perhaps, the example, of $67 million, 7,200-member Columbine Federal Credit Union. Within a 12-month span first-time CEO Arick Williams has shown an incredible turnaround by making some tough decisions and investing the time. The credit union reached 8% loan growth last year.

Then there is Members Credit Union, which has completely re-invented itself after identifying a huge unbanked population in its normally very wealthy community. This $41 million credit union experienced nearly 5% membership growth and 11% loan growth.

The Common Theme

I could go on, but the common theme among the three credit unions is the tenacity of the leadership. The CEOs and board members at these credit unions have faced their fears head-on in their decision-making process. Boutique credit unions’ success is not about the absence of fear but taking calculated risks that are well supported and executed despite fear. They continue to show passion and commitment to their credit union and creating opportunities within their communities and fields of membership.

In this article mentioned above, one consultant advised: “To survive, struggling credit unions could defer rate increases paid on deposits.”

To survive? Is that good enough? Is surviving the goal? I would hope not. You can’t grow by cutting expenses. You need a strong mission and vision; you need a committed leadership team that manages risk – not avoids it – and continues to make bold decisions that will build a credit union for the next generation.

Drawing a Line

I applaud Kathy Hilligas, manager at Central Nebraska FCU in Grand Island, Neb., quoted in the article, for drawing a line in the sand that merger is a last resort. Hilligas acknowledged that there are very few options in town aside from one out of town bank branch. Significant opportunities exist for her boutique credit union. 

I chair the board of a credit union that recently opened up its field of membership in a rural Texas town in a similar situation to Central Nebraska. Our membership skyrocketed 30% in one quarter with new members who finally had a responsible financial services option.

“Whether you think you can, or you can’t, you’re right.” With misleading headlines trashing our boutique credit unions, it’s no wonder many CEOs think they can’t.

Bo McDonald is President/CEO of Your Marketing Co. He can be reached at bo@yourmarketingco.com

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