TUCSON, Ariz. — It might be called trial by fire or on-the-job media training, but it’s something Raymond Lancaster, president/CEO of the $65 million Pyramid Credit Union, might now include in his job resume after witnessing the public’s anxiety over deposit insurance and failing banks.
It was a first for the Tucson CEO who, with “exactly 10 minutes of advance warning,” found himself in front of a TV camera conducting interviews with reporters on a comparison of FDIC and NCUA deposit insurance. That was days after the July 11 IndyMac Bank collapse in California.
Lancaster’s CU last week received several hundred calls in two days from worried members and individuals alarmed about the failure of a $3 billion Scottsdale-based bank holding company that regulators seized on July 25 and sold to Mutual Bank of Omaha.
First National Holding Co. and its subsidiary, First National Bank of Arizona with two branches here along with two Nevada and California banks, were closed because of faulty alt-A mortgages and loans to bankrupt home builders.
Lancaster, who now numbers in a legion of executives from CUs and leagues across the U.S. coping with public angst over the security of financial institutions, maintained that “NCUA should probably be more proactive than it has in educating on safety and soundness, so the public realizes that credit unions are covered by deposit insurance,” a fact that seems to have been lost in the turmoil.
Lancaster was hardly alone last week in safety and soundness duties as scores of CUs joined by CUNA and state leagues used a plethora of outreach devices, including Web sites, talking points, public forums, ads and media interviews to help educate the public on NCUA insurance.
Many CUs, as it turned out, were benefiting from the attention on CUs by gaining new deposit business.
That was the case both in Ohio and Pennsylvania, where both large and small CUs witnessed ex-bank customers making modest switches.
“The fact is we didn’t engage in those super risky subprime loans that are now biting the banks, and so, while this is coming at their expense, I see nothing wrong with going out and telling our story. And we have a great story to tell,” declared William Burke, president/CEO of the $157 million Day Air CU in Kettering, Ohio, which recorded $500,000 in new deposit business in the last three weeks.
Similarly, the $168 million Erie General Electric FCU in Pennsylvania has experienced total shares and deposit growth of 13% during the first half of this year. Shares and deposits jumped to $148.3 million at June 30, 2008 from $130.8 million at year end 2007. The CU also booked asset growth of more than $2.3 million this July. Officials at the CU attributed this growth to consumer wariness about banks as well as offering $250,000 in private insurance. Erie CU’s assets have grown by more than $20 million so far this year.
The CU said the recent growth was caused by the mix of the news on IndyMac, rumors of other institutions having difficulties and its community branding. It has seen an increase in both member account openings and deposits, as nonmembers are opening accounts and existing members are moving their funds from other institutions to Erie.
Erie provides $250,000 of private insurance on top to the $100,000 provided by NCUSIF on accounts that exceed the maximum federal insurance level.
“In the wake of the IndyMac fiasco, we are very happy that we have the extra protection for our members, not because we are concerned about our financial soundness, but because it shows the credit union difference, in that we are willing to go the extra step to protect our members,” said Jason Dietz, chief financial officer.
Meanwhile, KEMBA Financial CU in Ohio said it too has received deposits and dozens of phone calls and e-mails from members and the pubic after it ran a two-page safety and soundness letter from Gerald Guy, its president/CEO, following the IndyMac failure and a front page story in The Columbus Dispatch headlined, “Is National City Safe?” in a reference to the Ohio-based bank.
Guy’s online letter was titled “Is Your Money Safe at KEMBA?” and, like others appearing across the U.S., stressed that CUs had no part in subprime loans and were now offering ways to help members get out of financial difficulty.
Like Lancaster of Pyramid, CU staffers from California to Wisconsin were frequent guests on radio talk shows.
“Both myself and my compliance officer were able to get on the air to discuss deposit insurance and assure listeners their money was safe,” said Frank Beres, marketing director of Blackhawk Community CU in Janesville, Wis. Beres was joined on the air by Lynn Hiller, director of compliance appearing on WCLO, a local radio show.
Even Danny Mazza, public affairs director for the $1.9 billion Arizona Federal CU in Phoenix, which was undergoing its own set of troubles by reporting a $42.5 million first-half loss, called in from his car to get on the air on an afternoon talk show after the host started telling listeners that without FDIC insurance they were out of luck.
“I was glad I was able to get through and set the record straight,” said Mazza, who knew days later his CU would be divulging some rather negative news.
Meanwhile, CUNA President/CEO Dan Mica sent out new updates last week with information on how it is spreading the word on credit unions’ safety and soundness. CUNA contacted various national media outlets, such as CNN, USA Today and Fox Business Network and sent letters to members of Congress. It also sent out talking points and resources for credit unions to use when reassuring.
“When something like this occurs, credit unions and leagues act instinctively,” concluded a CUNA spokesman.