Conserved Credit Unions Reclaim Freedom
Conservatorship is a scary word, and only a lucky few credit unions have lived to talk about it.
For the tiny handful that have convinced regulators in recent years to give them a second chance and release them from conservatorship, Independence Day takes on a whole new meaning. The leaders who beat those long odds shared a few war stories with CU Times.
One of the newest members of that tiny survivors’ club, the Richardson, Texas-based Texans Credit Union, won back its freedom on June 17. Back in April 2011, the NCUA put the $1.5 billion credit union into conservatorship. The agency and the credit union's leaders then went to work tackling troubled assets, improving lending controls, revitalizing operations and improving operating efficiencies. According to the regulator, the 111,000-member credit union gained more than $100 million in net worth during that time.
That's a rare outcome. Most of the time, liquidating or merging with another credit union are a credit union's only options once it goes into conservatorship. And from a leadership perspective, those might appear to be the sanest options anyway, because returning from conservatorship usually requires a herculean effort.
But it's a path A.E.A. Federal Credit Union President/CEO Brian Mendivil knows well. After about five years in conservatorship, the NCUA returned control of his Yuma, Ariz.-based credit union to its members on Dec. 18, 2015. It currently has $263 million in assets and 34,000 members. Keys Federal Credit Union President/CEO Scott Duszynski has also been there – his Key West, Fla.-based credit union emerged from about six years of conservatorship on Sept. 23, 2015. That credit union now has $128 million in assets and 11,000 members. Both shared their insights about what conservatorship is really like and what it took to survive.
Everything on the Table
One of the tough but crucial leadership tasks during conservatorship is to question the contribution of every product, process and person. Mendivil, who first joined A.E.A. as an EVP in January 2011, said his credit union made big changes in product offerings and rates, among other things, in order to streamline operations.
“It all boils down to, are you sustainable long term?” he explained. “You might be a little too late … if you are at that point and you haven't invited [the regulators] in, you’ve really got to put a plan together – a plan of action – whether that's expense cutting or trimming employees. But at the end, you have to really find out if it's financially sustainable, and ultimately if this in the best interest of the membership. The merger could be a better alternative.”
Like many credit unions that enter conservatorship, Keys expected to merge with another credit union. And that led to layoffs.
“There were certain positions that were either duplicates or positions that wouldn't be needed after a merger,” Duszynski explained.
Just before an anticipated second round of layoffs was about to take place, the merger plans fell through and those people were able to keep their jobs. A few employees couldn't handle the turmoil and quit anyway.
That highlights another thing credit union leaders must do during conservatorship: Keep morale up. When stress levels were high, Duszynski made a point of bouncing around the office, being happy and checking in with people.
“When you’re in front of them, just know they’re watching,” he warned. “Your attitude will definitely determine their attitude and the overall altitude of the credit union ultimately.”
Mendivil said it's also important to remind employees that the mission hasn't changed: Serve members, open the doors every day and do the job.
“You have to roll up your sleeves, remain member-focused, have fun and really look at it as a learning experience,” he said.
Leaders of conserved credit unions should also expect to share the C-suite. At Keys FCU, for example, someone from the regulator's office was onsite every day at one point.
“It was to get us through the process of setting up to merge,” Duszynski said.
After the merger fell through and the decision was made to see if Keys could survive on its own, a different person from the regulator's office appeared, ready to focus on operations. Duszynski was CFO at the time; soon he was offered the CEO position.
“After that point they came to visit, but there was no more onsite every day,” he said.
Although conservatorship often brings management changes, credit union executives don't become regulators’ puppets – leaders often still have a voice.
“There were topics that came up that we didn't agree on,” Duszynski said. “There were ideas that I had that I wanted to implement that they initially said no, or they said, ‘You know what? I just don't see it.’ Then we would talk about it and we’d work through it. They would ask questions; I would answer. Sometimes the answer was no, and they were our board.”
The most important thing, he said, is to get on the same page.
“The last thing I’ll say is, just remember your relationship with them is important, even if you aren't headed for conservatorship,” he said. “We’re all, in theory, here trying to accomplish the same thing in a safe way, so get along with them. The only other thing is, don't ever go into conservatorship. It's not a fun experience.”