WASHINGTON – Callahan & Associates President/CEO Chip Filson is a numbers guy through and through, and that has served him well in his 20 years at credit union consulting firm Callahan & Associates, best known for its credit union statistical products. But while Filson’s career has revolved around statistics and data of all kind credit union, he says the numbers really don’t mean much unless they’re put into perspective. Gaining a big picture perspective of credit unions is how Callahan & Associates got its start. Filson was one of three co-founders of Callahan’s. The other two being current GTE FCU President/CEO Bucky Sebastian and former NCUA Chairman and recently retired Patelco CU President/CEO Ed Callahan. This trio has a long regulatory history, first in Illinois at the Department of Financial Institutions where Callahan was director, Sebastian was general counsel and Filson was credit union supervisor. They then moved to NCUA and were responsible for putting into place some of the key data collection methods still used today at NCUA. Callahan was appointed NCUA Chairman in 1981 by President Ronald Reagan. Sebastian was the agency’s general counsel and executive director and Filson was director of the Office of Programs, and president of the NCUSIF and the Central Liquidity Facility. In their eight years in Illinois and with NCUA, data was king. “We felt having accurate and complete data for credit unions could help us as regulators direct where examiners go. We really made data the cornerstone of our regulatory philosophy,” said Filson. He said many people think rulemaking is the most important thing NCUA does, but without good data analysis rulemaking doesn’t mean much. “Rulemaking is after the fact. You have a problem, you pass a rule,” said Filson. Finding the problems is where good data comes in. So when Filson, Sebastian and Callahan were at NCUA they looked for ways to get data. There’s really only two sources: the credit union themselves and the regulator. “We were getting data and hand totaling it. It was just god awful.” Back in 1977 Callahan hired a consultant by the name of Stan Hollen (today CEO of Liberty Enterprises), to help NCUA build its first Financial Performance Report, which is still used today. “It was five years of balance sheet and income data. Stan showed us how to present it and produce it. But it wasn’t just for our use as a regulator. It was helping credit unions in a deregulated environment. You have no idea how you’re doing without access to data,” said Filson. He said back in 1985 share growth was 25%; this year it’s about 5.5%. If a credit union doesn’t know what its peers are doing, it can’t gauge whether its performance is good, bad or average, says Filson. After leaving NCUA, the trio started up Callahan and Associates on April 1, 1985. “When we formed the firm our purpose was to help credit unions take advantage of the new opportunities that deregulation brought. We knew that many credit unions were rapidly taking the opinion that they wouldn’t be able to survive if they did not change their dependence on a single sponsor. They were looking at different types of loan programs, at branching. We thought one of the first things that would be critical would be to create a reference of the entire credit union system” said Filson. They thought this was needed to kick-start networking among credit unions. Enter the Callahan Directory, which has just released its 20th edition. Filson said back then there were various directories, but none looked at the entire industry. He recalled one directory that highlighted the top 4,000 credit unions (there were over 20,000 CUs at the time). Leagues also had directories, but were reluctant to share them with unaffiliated CUs. “There was no practical resource, no where you could get all the data on credit unions. If you were going to have a movement, we thought it was critical that you have the means to contact and work with each other. CUNA published totals, but there was no single source you could use to find out who the manager was and how you could get a hold of them.” Filson said they considered what they were doing to be like taking a census of the industry. He said CUs were cooperating in the early `80s, but they were doing it locally. It was rare for a CEO on the East Coast to work with a CEO on the West Coast. Of course today geography means very little for networking, in an industry known for sharing ideas. One of the most important developments for Callahan’s goal to get a complete picture of the industry was getting the National Association of Share Insurance Corporations to release its data on private insured CUs. This was key because in the `80s there were many more privately-insured CUs than there are today. There were some disagreements on how the directory should be formatted. Filson considered it a reference book, similar to a thesaurus or dictionary, so he was opposed to having any paid advertising. On that argument, Sebastian and Callahan won and Filson said he’s glad they did as advertising has become important for the directory. In the first few years, Callahan’s sold the directory without taking subscriptions. “So when the next year rolled around, the stone was at the bottom of the hill again. You had to roll it back up,” he said. In the third year, they started taking subscriptions and that gave them a base for repeat customers. Still today, they don’t automatically ship to their subscriber base. The base is notified of subscription renewal and offered a 10% discount to renew online. The directory has a distribution of about 4,000 and costs $150. The directory has changed from its early days. It’s now not just about contact information and the latest stats, but about analysis. For example this year’s directory features stories and charts on credit union branching. Filson feels this is one of the more fascinating areas in the industry as credit unions have expanded into grocery stores, kiosks, and other retail-like branching outlets. There’s also a section on CPA firms. It lists the top 35 credit union auditing firms, which is more important now as credit unions above $500 million must have CPA audits, and Filson thinks smaller ones should as well. It also has two major sections on CUSOs and corporates, two of the most evolutionary segments of the industry in Filson’s mind. But the problem with the directory is it can’t change. “When you print something in a book, it becomes static. It’s wonderful when it first comes out. But it gets older and older,” said Filson. To combat that Callahan’s now offers all its directory subscribers online access. The online directory is continually updated. If a new CEO comes on, the directory is changed. Today’s Callahan & Associates is a lot different from the one the trio formed 20 years ago. For one, Filson has been the sole owner since Callahan sold back his ownership stake in 1987 and Sebastian his in 1989. The company is also more financially-stable with approximately $5 million in revenues a year. It employs about 30 people. The products have also evolved. Its most widely-used product is its peer-to-peer software which allows a CU to compare itself statistically with up to 25 CUs. It is also a major player in the consulting business, offering strategic planning sessions and other services. Filson of course has been on the credit union speaking circuit for years. At 60, Filson says he’s not ready to retire just yet, but he’s not sure how much longer he can keep up this torrid pace of traveling. He wants to start positioning the company for the future. One major step was the company’s recent conversion to an Employee Stock Ownership Plan. Filson said this is vital to attracting and retaining employees because it gives them a stake in the company’s success. It also shows employees, he’s intent on keeping the company going even when he departs. One area of Callahan’s that may not be as recognizable to the industry is its mutual fund business. Callahan Financial Services, Inc. is a wholly-owned subsidiary of Callahan’s and the General Partner of the Callahan Credit Union Financial Services Limited Partnership (a registered broker/dealer), which oversees the Trust for Credit Unions, a portfolio of mutual funds. The Trust for Credit Unions is the largest (with about $2.6 billion in assets), and first mutual fund family designed by and for credit unions. As the credit union industry has grown, so have competitors to Callahan’s, but Filson thinks the firm still has a niche. “Everything we do, somebody else does. Consulting, financial analysis, Webinars. What we do is present performance options and benchmarking to lay a foundation looking forward. If you’re going to work with us, you will take a look at all the information and data as part of the process,” said Filson. [email protected]

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