WALNUT CREEK, Calif. – The credit union industry is losing a CEO who has helped create one of the strongest, most efficient credit unions in the nation. Pacific Service CU CEO Tom Smigielski has announced his retirement, opening up yet another billion-dollar credit union CEO job. Smigielski plans to retire in December of 2007. Yes, that’s right 2007, giving the CU plenty of time to find a new CEO. “The board knows that I have two years left on my contract. They were very antsy about how this would progress,” said Smigielski. He said the board also wants the new CEO to spend some time working side by side with Smigielski. In fact the board’s goal is to have the new CEO on board by July 2006. Smigielski will still be in charge, but will gradually hand over the reins to his successor. “I’ve been in the job for 15 years. We’ve been very successful. We have a very high satisfaction rate from our members. The board wants to continue that,” he said. Pacific Service CU boasts some impressive numbers, especially when looking at efficiency. It has over a $1 billion in assets, yet less than 100 employees. Its expense ratio is 1.6%. “That gives us a tremendous advantage on pricing products. We basically offer two things, great pricing and great service. We limit ourselves to what we do well,” said Smigielski. He said the CU has purposely stayed away from insurance, mutual funds, and other products that many credit unions offer. It is strong in auto lending, home equity loans, first mortgages, checking and money market accounts. It charges very few fees and thus has little fee income to counter the margin squeeze. “We’re a credit union that makes most of its money on the margins. It’s much more difficult when your (loan) rates are so low and you’re having to pay these high savings rates,” said Smigielski. To counter this, his CU stays away from “irrational” pricing. He knows of credit unions offering 2.99% auto financing through dealers, and in his eyes that’s just irrational given the cost of money today. Smigielski’s CEO career started in a way that isn’t common today. He came over from the CU’s primary sponsor, PG&E. “In the old days, PG&E and the credit union were very, very close. I was in charge of a financial project at PG&E. The person who was in charge of the credit union at that time went on a leave of absence and never came back.” The board selected Smigielski from a pool of candidates. Today, credit unions rarely pull their new CEO from a sponsor company. When Smigielski took over, the CU had somewhere between $200 to $300 million in assets and 50 employees. Pacific Service only served PG&E employees and retired employees; not even family members could join. The board eventually changed that to allow family members to join and instituted “once a member always a member.” In 1999, its field of membership opened up dramatically with a community charter. It can now serve anyone who lives, works or worships in 12 Bay Area counties. Pacific Service has been working on finding ways to attract new members from the community. It has three branches, and plans on opening two more in strategic locations such as near major highways where many people would have access. “We’re trying to build what I call regional branches that can serve large areas. We’re trying to do a lot of things to get us known in the community,” he said. For example, its new branches will have community rooms. One use will be offering the space for nonprofits to use for meetings. They can make use of the facility and get to know the credit union at the same time, said Smigielski. The credit union is also active in charity events. It has set aside $150,000 to be donated within the community. It is also trying to do more to support low-income credit unions in its area, and at press time it announced it was joining CUNA’s Home Loan Payment Relief program designed to help low-income borrowers purchase their first home. Getting Younger Pacific Service CU is very progressive when it comes to governance. The credit union has actively sought out younger board members. It is bringing on two 30-year old advisory board members, with the expectation that they can eventually become directors. “Our board members are getting older. In the process we are trying to keep a diverse board. It’s a huge challenge,” he said. Bringing some youth to the board is also a strategic move, said Smigielski. “The biggest challenge we face is this huge transfer of wealth. Our membership is like a lot of credit unions, made up of older members. At some credit unions you hear 20% of the members have 80% of the assets. For us, 13% have 80% of assets. Wealth is moving to their kids and grand kids. If they don’t become credit union members, they’re going to go elsewhere,” he said. Finding ways to attract younger members is a high priority for Pacific Service. It surveyed younger members and found that while electronic services are important, they do like to visit branches. The credit union already has a full menu of online services, so now it will focus on branch access. Pacific Service is in the process of finding a search firm to help it seek out a new CEO. At over $1 billion, the CU will surely have a lot of interest. Of late, a number of open CEO positions have gone to bankers. Smigielski doesn’t know if that’s necessarily the best thing for Pacific Service. He said over the years when he sought out people to fill out his upper management team, a number of bankers applied. “I generally found they had a different philosophy and perspective on things. Some were with banks that were so huge they didn’t have a broad perspective on what it takes to run a financial institution. They were very specialized,” he said. He expects the majority of his direct reports to apply for the job and he welcomes that. He also hopes fellow CEOs apply. “There are a lot of CEOs that I have a lot of respect for. I hope they’re interested.” As for retirement, Smigielski said he has had some health problems and wants to use the time to get healthy, and he plans to do more world traveling with his wife. They’ve already been on cruises to the Mediterranean and other areas of the world. And of course he doesn’t want to rule out working with credit unions. “I’d like to get to a point where I can mix in some credit union consulting assignments.” [email protected]

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