America's Small CUs Holding Ground: CUTimes25

CUTimes25: From the Sept. 24, 1990 issue of CU Times.

Are there two credit union movements in the United States?

CU Times came away with that question after interviewing mangers and volunteers at credit unions of less than $10 million in all parts of the country. That group may comprise more than 75% of the 15,000 CUs nationally, yet they stand in the shadow of $100 million-plus CUs in terms of publicity, career opportunities, representation on national trade association boards, budgets and many other areas.

The question we originally posed was, “what is it like to run a small credit union in 1990, and what about the future?” Several issues became clear: Many small CUs believer their much larger counterparts are playing right into the hands of bankers' taxation arguments of having lost touch with their members, and most importantly have strayed fro credit union philosophy.

True to form, many of those managers interviewed said they had little time to talk as they had to wait on a member, make a collection call or answer another line.

“The smaller the credit union, the more you stick to the philosophy,” said Vincent Juodvalkis, president of the $5.2 million Lithuanian CU. “I don't think it's right to get into credit cards and all kinds of business loans, for example. Large credit unions are asking for taxation by being just like banks.”

Still, Juodvalkis, who said that any well-run small CU can compete with a larger CU, concedes that should the tax exemption be lost, “Small credit unions and large credit unions would be in the same boat…but we could survive.”

But not every small CU agrees.

“Should taxation come, I think competing with other financial s will be tougher,” said Deborah M. Whittaker, president of the $6 million Gardiner FCU, Maine. “My bottom line is already being squeezed. If taxation comes, I think that a merger (into a larger CU) is inevitable.”

That view was echoed by Rose Marie Valdez, manager of the $2.2 million Sun Country FCU, Farmington, N.M. “I'm very afraid for small credit unions in terms of taxation and the merger of insurance funds. Large credit unions could afford to pay taxes, but small credit unions couldn't. If credit unions should be taxed it should be community-chartered credit unions. They're no different than community banks in the way they compete for the public.

Over the next few pages you'll see the industry through the 1990 lens of small credit union executives:

Find a Niche

“I hear this all the time, that 'They're so big'”, noted Craig Savell, president/CEO of the $5.6 million Corroon & Black CU in Nashville. “But we can be just as creative and we can be even better because we know our members better than larger credit unions. As a small credit union, we need to find our own niche and grow within that, instead of dying in the quagmire of mediocrity.”

Savell acknowledged he does it all at the CU, from being president to handling marketing and even collections. The CU is online with EDS, he said, which saves time. “We compete every day,” he said. “That's one of the reasons we've grown. We all started small even the $500 million credit unions. What we have to do is look to the larger credit unions to see how they succeeded. You have to look at making all of your assets work for you. Your services should at least be priced at the break-even level. A lot of people say, 'I'm small.' I can't compete.' But that's limiting yourself. You have to work harder. If you're a small credit union you must be there for service and full service. Chances are if you're not full service in the next 10 years, you won't make it.”

Added Bill Roth, manger of the $5.8 million, 2,500-member Hale County Teachers FCU in Plainview, Texas, “I'm for large CUs adding SEGs. If we were community chartered, we would probably be a large credit union. But we have a restricted field of membership. We are looking at a growth cap of $10 million because of our limited field of membership.”

Examiners and the NCUA were both the subject of much comment from the small CUs.

Tougher NCUA Exams

“All credit unions are being examined more closely than before,” said Joel Kanuck, manager of the $9 million New Haven Postal Employees FCU, Connecticut, which primarily competes with local banks. “In part, it's justified. But NCUA may be overreacting to the GAO study because it marks the first time NCUA itself has really been examined. I have seen more small credit unions being merged, but I think it's good. As long as NCUA doesn't force the merger, it's up to the acquiring credit union to do its homework. If it doesn't work out, who can you blame?”

Keeping up with new regulations means, “I have to spend more time today doing things I don't like,” according to Conni Torturino, president/CEO of the $4.9 million Stamford Telephone Employees FCU, Conn. “We are so bottom line conscious. I think NCUA is tougher on small credit unions. It's tough for me because I wear so many hats. We don't have one person for marketing or one person for loans like a large credit union does. A lot of my own time is tied up with non-management projects, like waiting on members. Reading about regulations is something I have to do on my own time. But eh NCUA doesn't want to hear any excuses. They just wan to make sure we are complying.”

And for the first time, Torturino said the CU has an in-house DP system. “Now I'm a data processor, and I don't have any data processing experience. But I go to classes.

Execs See Members React

“I deal with members every day. If I tell them there is a new policy or regulation that we must follow, I see their reaction in their faces. It's more difficult. The differences with CEOs at large credit unions is that they don't deal with members and they don't see their reactions.” But she's also not conceding anything to those large CUs. “Personal service will make the difference in the nineties. We have the service edge over the large credit unions.” Sun Country's Valdez praised the regulator in Santa Fe, but claimed NCUA's CAMEL rating should include an “S” for Services since the CU offers more services than many of its peers.

“They're comparing apples to oranges. If we're offering more services how can NCUA expect our expenses to be in line with our peer group?

Size Limits Service

Limited services is one aspect of being a small CU that the $5 million Health Employees FCU, Albany, N.Y. has had to explain to members said David Miller, treasure and general manager.

HEFCU offers no ATM access but what used to be a drawback is now explained in terms of the true cost of “having that piece of plastic.”

One function of the CUNA-affiliated state CU leagues is to act as the co-op's co-op; that is, to provide the small CU strength though numbers. Many of the CUs interviewed spoke favorably of the league-provided support, especially synopses of regulations. But for many of those same CUs cost remains an issue.

“If I wasn't a league director, I wouldn't be able to go to the CUNA meetings,” Valdez said.  “Even a lot of New Mexico league meetings are out of our price range. Education is often difficult to obtain at small credit unions, because it's often very expensive. CUNA's educational videos are very expensive for a credit union our size but they're valuable.

Associations Too Expensive

The league and the associations charge tremendous fees,” said Lithuanian CU's Juodvalkis. “We don't need the services they provide. It's just another layer of bureaucrats.”

Bureaucracy is not a problem for the $1.5 million Ohio Casualty Employee Credit Union, Hamilton, which has two clerical employees but no full time manager-yet. Currently, it's biggest concerns are putting together a management policy and dealing with the sponsor company's downsizing, according to Bill Corley, board president and underwriting supervisor for Ohio Casualty Group. “This year, we have really taken a lot of charge-offs. I expect examiners to come in and give us what and wherefore.”

Those same examiners will also be enforcing tougher regulations, he admitted, and a full-time manger may have to be added. “If nothing else, you have to have someone to figure out what the federal regulation gobbledygook is saying. A lot of the time, you just don't have the time. I know that when I leave here my brain isn't always up to coping with topics concerning the credit union.”

When that full=time manage is hired it is likely he or she will find themselves facing many of the challenges and the frustrations of managing a small credit union.

Small Can Be Rewarding

But there are rewards, claim many of those persons currently holding the manger job at a small CU. Even for Conni Torturino, president/CEO of Stamford Telephone Employees FCU, who is dealing with sponsor Southern New England Telephone's transfer of many employees out of town, and its refusal to allow non-employees on the company's premises so as to have access to the CU so no SEGs can be added.

Summed up Toturino, “I like sitting down with members. It makes coming in here every day worth it. Sometimes I get letters from members that just say 'thank you.' I know I could go somewhere else and make more money. But money doesn't mean everything.