EL SEGUNDO, Calif. – So you think running a credit union is a tough, time-consuming and demanding job? Then meet Jon Hernandez. He runs three of them. “Yes, it’s difficult,” confesses Hernandez during an interview at Mattel Federal Credit Union where he serves as president and chief executive officer. “Obviously it’s going to be difficult.” Had he been interviewed on any other day, he might have been found sitting in the president/CEO’s chair at South Bay Health Services FCU in Torrance or in a similar seat at the City of Downey FCU in Downey. Not bad for someone who admits that when he took his first credit union job, “I didn’t even know what a credit union was.” Hernandez says he never imagined he would one day be the president and chief executive officer of a credit union – let alone three credit unions at the same time. Hernandez started his career in credit unions in 1990 as a teller at Mattel Federal Credit Union in El Segundo. He was appointed supervisor in 1991 and remained at Mattel until 1996. He left to become CEO of Little Company of Mary in Torrance (LICOMTO), which today is South Bay Health Services FCU. In 2002, Hernandez was asked to also manage the nearby Copley Los Angeles FCU. In his first week there, the credit union was robbed at gunpoint which prompted one of two tellers to quit; the other teller was accused of embezzling funds and was let go. “That left me with no employees,” Hernandez recalls. “Because I had a credit union a mile away, it was easy for me to bring someone over temporarily to help me out.” That eventually developed into the concept of shared resources. “If we can do this, we can do a lot of other things,” Hernandez says. Copley merged with South Bay Health Services, but opted to remain a division and maintain its own identity. A year later, in 2003, Hernandez was approached by Downey officials to temporarily help the credit union with its financials after the departure of its CEO. The job expanded with Hernandez helping officials select a new CEO and deciding whether to merge with another institution. He suggested a person for the CEO’s position and recommended against the merger (although another merger is now in the works). The board then asked if he would be willing to take the job and he suggested the shared resources approach, to which it agreed. In April 2004, Hernandez was asked to become CEO at Mattel FCU. He approached the board, which he had served on after leaving the institution, with the shared resources concept and it agreed to a 90-day trial. The results speak for themselves. Mattel, which was generating $160,000 in consumer loans each month – “For a $26 million credit union that’s not a lot,” Hernandez notes – recently posted $1 million in consumer loans for a single month. South Bay Health Services went from $4 million in assets in 1996 to nearly $19 million today. Downey’s assets have grown from $9 million to $11 million and new products and services have been added and a new branch is set to open in December. South Bay has plans to open a new branch in April. “I’m very fortunate to deal with the boards I’m dealing with,” Hernandez says. “I feel they’re results oriented. If I can provide them with results, whether I’m here three days, five days, two days or one day, and I can give them what they’re looking for and the members are happy, the staff and employees are happy, then that’s how I work with my board.” These days, Hernandez is heavily involved in the credit union movement and in promoting what he calls “resource sharing” among small credit unions. “It’s expensive [for a small credit union] to offer a lot of products and services,” Hernandez says. “That’s why you want to try to do shared resources. A lot of small credit unions think they can’t afford to offer a lot of products, but they really don’t try. “If you try to find a way, it’s possible to make it happen,” he says. He points to Mattel, Downey and South Bay as examples of what can be achieved by sharing resources. For example, while none of the credit unions alone could afford to employ someone to manage information technology, the three CUs together can afford a single person to maintain their different systems. The same applies to personnel. When a new Downey branch opens in December, it will be staffed on Saturday by an employee “borrowed” from South Bay. That won’t have any affect on South Bay, since it is not open weekends. Hernandez also points to training and education seminars which can be cost-effectively shared between the three credit unions that he manages. Such was the case when he had the California Credit Union League present seminars on fraud, robbery and cross-selling. “By having them come to us, not only was it less costly for me, but I was able to send all of my staff between all three credit unions,” he says. “I even invited other small credit unions in the neighborhood to come at no cost to them.” Having the staffs of all three of his credit unions at the program gave them a chance to meet. It also provided the ideal forum for a staff meeting, something he tries to do every month at each of the credit unions he oversees. Marketing is another area where Hernandez sees real value in sharing resources. A loan promotion for one credit union can, with just slight modifications, be used equally effectively at the other credit unions, he explains. He is looking at having a staff member handle marketing, developing promotions that can be used by Mattel, South Bay and Downey with just a few tweaks. “Shared resources gives you an option to do these things at lower cost,” he notes. Hernandez splits his time between all three credit unions, typically spending two days a week at Mattel (3,400 members, $27 million in assets), two days at South Bay Health Services , formerly LICOMTO, (3,300 members, $19 million in assets) and one day at Downey, formerly Downey City Employees FCU (1,300 members, $11 million in assets). South Bay Health Services also encompasses Copley Los Angeles FCU in Los Angeles, which was merged into the credit union in 2002 but which operates as a separate division. Hernandez credits much of the success for managing the three credit unions to the shared management approach he uses as well as the team approach in each institution. In terms of management, in addition to Hernandez, Johnny Lee, who started as a part-time teller, serves as vice president of all three credit unions. Beverly Ledford is collection manager for all three CUs, and is also currently on loan to a small credit union in Long Beach. Jay Lee, who is Johnny Lee’s brother, handles IT at all three credit unions. “I create the business plan with the board,” Hernandez says. “Johnny implements the plan. Beverly conducts internal audits. Jay Lee is shared as the IT coordinator.” Their compensation is split among the three credit unions. Employees at the credit unions are set up in teams, focusing on member service and lending. Mattel and South Bay also have an accounting team; Downey is too small for that team, Hernandez says. “What we do is have team supervisors,” he says. “Johnny and I try to meet twice a month and try to meet with the supervisors once a month if not more. Then we meet with the entire staff once a month.” Hernandez says juggling the needs of three credit unions can be a challenge. Some of the issues, such as Check 21 and privacy, are common to all three, he notes, “but of course you have individual issues that you run into.” To deal with those problems, “that’s why you set up these teams to handle the daily issues,” he explains. “On the bigger picture, when you have things that will involve management is when I step in.” Hernandez sees the shared resources approach as a way for small credit unions to survive in an increasingly hostile environment. He has already been approached by other CEOs asking for information about his approach to managing multiple credit unions. He also points to the dwindling number of credit unions due to mergers (202 mergers nationwide from January and August 2004, he notes) and says he hopes that by sharing resources many small credit unions who might merge could survive and maintain their own identity. “Is this going to continue?” he asks of shared resources. “I don’t know. I’m doing whatever I can as my way of trying to help out small credit unions not just survive but to thrive.” At the California Credit Union League annual conference this week, Hernandez plans to sit down to dinner with the board chairmen from all three of his credit unions. “I honestly believe that if we’re going to be successful in this, we’re going to have to work together,” he says. “If people are thinking of doing this, as long as you can prove to them this will work and they’ll benefit from it . . . so be it. Why not?” -

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