Bargain for a Better Bottom Line, CEOs Advise

ANAHEIM, Calif. — For some credit union executives, creative financing and frugality have become a way of life, not just something they've turned to in tough times

Fast Company Editor Pushes CUs to Re-Imagine

ANAHEIM, Calif. — Fast Company, an edgy leading business magazine, re-imagined what a magazine could be and credit unions can do the same thing, according to William Taylor, founding editor of Fast Company.

Credit Union Bill of Rights in Process

ANAHEIM, Calif. — Addressing the California and Nevada Credit Union Leagues' Annual Conference, CUNA President/CEO Bill Cheney said that CUNA is working with the NCUA Board to establish a credit unions' Bill of Rights in supervisory actions.

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Dave Gunderson, Jane Walters and Adam Denbo

Merger Strategies No Longer Taboo

ANAHEIM, Calif. — In a session at the California and Nevada Credit Union Leagues Annual Conference, a panel of credit union professionals addressed an issue that would have been a nonstarter in the credit union industry five years ago: merger strategies.

Cutting through the noise and getting to the heart of the matter, Dave Gunderson, CEO of the $595 million Credit Union of Southern California, said that credit union management and volunteers must do two things: 1) ensure the long-term safety and soundness of the credit union and 2) continue to seek ways to provide benefits to the membership and employees.

Credit unions need to look at whether a partnership with another credit union would be a plus to those affected; for many, it will not, Gunderson said. But, he added, for those who face succession management issues or compliance challenges and want to offer new services to their members, a merger can be a relatively quick way of accomplishing that.

At the time of its merger with WestWorks CU, CU of SoCal representatives said the two made a nice pairing. Gunderson said at last week's California confab that deposits increased at the WestWorks branches after the partnership.

Adam Denbo

Shapiro Partners Senior Managing Consultant Adam Denbo, who until recently served as the CEO of California Agribusiness CU, recommended using the term "partnership" rather than merger, because if the process is going to go smoothly it truly needs to be a partnership. When he came on board at the credit union in 2005, it had been sending out blind letters asking CUs to merge while it was only $20 million in assets and had some unfavorable financials and little to offer a merger partner.

So for a couple of years, Denbo had focused on strengthening the credit union and now has a value proposition for potential merger partners. California Agribusiness looked to mergers for membership and asset growth. "Quite simply, you can make more money with more money," he remarked.

After a series of mergers, including one with Yamaha CU that is still marketed under that distinctive brand, California Agribusiness is now $30 million in assets and grew from 5,000 to 7,000 members. The credit union is up from one to five branches and is up to 13 employees.

The two shared some lessons learned the hard way too.

Responding to an audience question on dealing with the merging boards, Gunderson said, "Virtually every board member walked in the door and put their egos aside." Denbo suggested allowing flexibility in the board's size, in the seven- to 13-member range, to take in some from the merging institution.

Additionally, the surviving institutions need to consider all existing contracts the merging institution has entered into from vendors to employees, Denbo said. And if you don't have the expertise, Gunderson added, buy it.

Regulatory View

NCUA Region II Director Jane Walters, whose region took California under its wing after the financial meltdown hit, also served on the panel. She explained that the vast majority of mergers are voluntary, which the agency isn't involved in. "Often we're as surprised as you," she joked.

And when the NCUA is involved in an involuntary or emergency merger, Walters added, "Believe it or not, we try to look locally first."

California Department of Financial Institutions Commissioner Bill Haraf

This issue came up during a discussion earlier that day when Bill Haraf, California Department of Financial Institutions commissioner, took the stage. Attendee Henry Wirz, CEO of SAFE CU, during a Q&A session asked Haraf about his thoughts on the NCUA's recent out of state mergers. Haraf responded that when working with the federal regulators, they always look to merge a credit union with healthy credit unions in that state first, but in California in particular, the opportunities are limited.

Walters pointed out that the NCUA just opened the registry for primary consideration on taking over troubled credit unions, and so far 643 credit unions had signed up but only 45 California credit unions. She explained that only the NCUA and the state regulators would ever see the list.

Honda FCU CEO Jim Updike

Bargain for a Better Bottom Line, CEOs Advise

ANAHEIM, Calif. — For some credit union executives, creative financing and frugality have become a way of life, not just something they've turned to in tough times.

Honda FCU CEO Jim Updike admitted his credit union has a uniquely tight relationship with its single sponsor company, but that hasn't been without strategic planning. When the now $540 million credit union was much smaller it put in place a card for Honda employees, similar to student ID cards, that allows employees to use the card to pay for food in the cafeteria; Honda mandated that all employees join the credit union.

And back in the early 1990s, Honda used American Express for its American corporate travel and entertainment cards, but by 1994 Honda FCU stole that business away from one of the biggest lenders in the business. The program was a win-win: Honda FCU made $1 million on the interchange but Honda saved more than $1.5 million between not having to pay AmEx's annual fee and reports that Honda FCU produced (that AmEx reportedly couldn't) showing where Honda executives spent their money so it could negotiate deals where it spent the most. Honda FCU, then a $30 million-$40 million institution, got creative and was more than able to compete with the big boys.

Honda FCU took over payroll for Honda and saved itself the "on us" transaction fees plus saved Honda more than $100,000 last year. The credit union also provides reloadable Visa debit cards the company uses to pay bonuses; the net income for Honda FCU was $281,000 while Honda saved nearly $500,000.

All of its hard work seems to have paid off as Updike pointed to the credit union's 50 basis point ROA after the NCUA assessments.

Financial Partners Credit Union President/CEO Nader Moghaddam

Nader Moghaddam, president/CEO of the $710 million Financial Partners Credit Union, took a different tack to maintaining income at his credit union. He said over the last two years Financial Partners has gone through expenses with an even finer tooth comb than previously. The credit union was ranked fourth in California for return to member by Callahan and Associates and 35th in the nation in first quarter 2008. Despite "rationalizing" staff by 14% and increasing fees, Financial Partners has countered these cuts with extreme service and achieved its highest net promoter scores ever.

Cal Poly CU CEO Barbara Bean

Barbara Bean, CEO of the $11 million Cal Poly CU, advised that making smart hiring decisions and moving members to e-statements have been great efficiencies for her.

Bean also recommended re-negotiating all contracts and touted collaboration to tap into existing resources. In particular, look at online training or sharing training with other area credit unions. Cal Poly CU was also able to make efficient use of its sponsor's resources by using the school's bulk paper supply. At a small credit union like Bean's, she said every bit helps, including buying used versus new office equipment.

Fast Company Founding Editor William Taylor

Fast Company Editor Pushes CUs to Re-Imagine

ANAHEIM, Calif. — Fast Company, an edgy leading business magazine, re-imagined what a magazine could be and credit unions can do the same thing, according to William Taylor, founding editor of Fast Company.

"You can't let what you know limit what you can imagine," Taylor said, playing off the California/Nevada Credit Union League Annual Conference's theme, Re-Imagine.

He explained how Toyota executives decided to out-luxury the luxury car dealers with Lexus; the cars are nice cars but the difference is more about the buying experience. Taylor remarked that Toyota has evolved R&D from research and development to "rip-off and duplicate." Instead of looking at other upscale automakers, executives from Toyota stayed at Four Seasons hotels up and down the U.S. coasts. From that, they took away special touches such as marble in the restrooms and chocolates on the seats to create a unique experience in luxury auto buying.

Taylor also emphasized that the best ideas don't need to all come from the very top–the CEO–but it should be everyone's job to ensure the best ideas surface by "giving lots of people little opportunities."

In the end, for their companies to stay on top executives have to ask themselves: "Are you learning as fast as the world is changing?" Taylor said.

Credit Union Bill of Rights in Process

ANAHEIM, Calif. — Addressing the California and Nevada Credit Union Leagues' Annual Conference, CUNA President/CEO Bill Cheney said that CUNA is working with the NCUA Board to establish a credit unions' Bill of Rights in supervisory actions.

Following reports of some unspecified behavior by examiners that raised eyebrows during credit union exams, CUNA began work on a Bill of Rights that purports to help credit unions understand their rights while facing a Document of Resolution or other supervisory action. "If they're taking supervisory action, you need to know what it means…It seems if you're going to sign a Letter of Understanding and Agreement, you should understand it and agree to it," Cheney said.

The effort is being headed up by a taskforce regarding issues involving the NCUA.

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Bang's Stilettos

California/Nevada CU Leage CEO Diana Dykstra

Dykstra

Intro band at the conference

Opening singers at the conference