Chip Filson
The Seated Boxer, an iconic ancient Greek work of art, shows a grizzled veteran of the ring, equal parts resigned and ready to spring into action.
What I like is a sense of respite from competition, the powerful athletic physique and the tiredness that surrounds his humanity. Is he a winner this day? Are there more fights to go? How will his efforts be remembered?
These are questions that all of us encounter, in literal or figurative ways, in our daily efforts.
Ravalli County FCU is a $75 million credit union with its main office in Hamilton, Mt.
It is an organization led by three women who believe and daily implement the credit union spirit. It is the same commitment memorialized in the Christmas classic movie, It’s a Wonderful Life.
With 17 employees and 5,924 members out of a county population of 48,000, its focus is lifting up the entire community. Their mission statement:
We Believe in Our Community!
At Ravalli County Credit Union, we believe in “People Helping People”, we believe in better banking, and we believe in creating beneficial, life-long, financial relationships for our members and community. As a credit union member, you can take pride in knowing you are part of something bigger. Throughout the year, Ravalli County Credit Union volunteers, sponsors, and donates to local non-profits and schools to enrich the lives of those in our community.
Examples of this commitment on its website are the Thanksgiving meals provided, scholarships awarded, completed VITA tax returns and the volunteer hours by employees and the organizations they support.
It’s $53 million loan portfolio is growing over 8% this year. The delinquency rate is just .06% with net recoveries of $117,710. Capital is 12.8%.
What caught my attention was a December 2, 2024 article in Next City by Connie Aitcheson, In One Montana Town, Women in Need Get New Financial Support.
The article describes the credit union’s initiative helping single mothers and working women in poverty to improve their opportunities.
The need: “There are so many women in our area living at the poverty level,” says Darci Parsons, the president and CEO of a local credit union called Ravalli County Credit Union (RCCU). Some of the reasons for the large amount of women living at the poverty level are the death of a spouse, divorce, unplanned children, domestic violence and the high cost of housing in the area.
For single mothers in the area, poverty rates jump to 49%, also according to the American Community Survey 2019. In Hamilton, the largest city in Ravalli County, a staggering 83% of single mothers are in poverty and earn 75% less than married couples with children — an average of $18,074 vs. $71,429. About 30% of RCCU’s clients are female-headed households, and their median earnings are 20% less than men.
The article summarizes the recent demographic changes occurring in the county:
Their community of Ravalli County is experiencing a tension familiar to many metro areas across the country. A new wave of retirees and remote workers — in part sparked by COVID-19 — have moved into Montana, increasing both housing costs and the general cost of living. The median price for a home in the county, according to Realtor.com, has risen to nearly $770,000.
The good news is that the credit union has received a $560,000 grant from the US Treasury’s CDFI fund to underwrite this effort.
“There are a lot of people who move to our area with means,” Parsons says. “And, unfortunately, there’s a lot of people in our area who are underserved, who are struggling to make ends meet. Our job is to have that balancing act of where we’re serving new members who move into our area who have funds as well as the large population of people in our area who do not — primarily women.”
How the CDFI grant will be used: “We can write loans for people who are maybe more credit challenged … or who might have collections.”
The credit union also offers an account that protects against overdraft fees and offers a $500 line of credit — regardless of someone’s credit score. They also do not perform background checks on any applicants. “If they’ve had problems at other financial institutions, they can still open a checking account with us,” Parsons says. “We can write loans for people who are maybe more credit challenged … or who might have collections.”
According to Parsons, many women “don’t have that confidence in themselves.”
“As a credit union, our mission is helping people, and that’s what we do every day,” Parsons says. “I have an amazing staff who embody that and make a difference in the lives of our community.”
The angels from George Bailey’s story can now be found, collectively leading a Montana cooperative.
Darci Parsons, Ravalli County FCU – CEO
Why Ravalli County FCU? The better question is WHY NOT Ravalli County FCU? Our philosophy is all about people helping people and our promise to you is to: simplify your financial life, work in your best interest and partner with you to achieve financial success. We get it.
Sirikit Vieyra, Ravalli County FCU – COO
Ravalli County FCU has served this amazing community for 66+ years and is going strong! We even added another branch in Florence, MT. It is a privilege working for you and with you and as we update and increase our services, I’ll always strive to meet your financial needs and goals. We get it.
Laci Rose, Ravalli County FCU – CFO
At Ravalli County FCU we ARE people helping people. I love that we are constantly working to improve technology and increase services to better serve our members with all their financial needs. We get it.
Yesterday I compared credit union’s public personas to the tragedy-comedy masks of ancient Greek theater.
The face I discussed was that of credit union’s institutional achievements: the growing sponsorship of stadiums and sports teams, the continuing mergers of long standing organizations with no member benefit, and the rebranding from legacy origins to aspirational names (Bethpage FCU to FOURLEAF FCU).
Today’s alternate face is member focused. They celebrate the many ways credit unions are sharing and enhancing their value for members and communities.
It is for the reader to decide which credit union expression may be tragic or life affirming.
The most frequent member-centric announcements this time of year are the numerous bonus dividends credit unions pay members. This is a pattern of member value sharing that goes back decades. Some examples.
The largest yearend bonus in credit union history. That is how the Ogden, Utah Goldenwest Credit Union described its recent $3.5 million bonus dividend. It added, “During the last 21 years, Goldenwest has returned more than $30 million to its members.”
These distribtutions are is not new or unusual. If one types “bonus dividends” into the search box on CU Today’s home page, 2,482 matches are listed. Some stories go back decades of coops sharing success their with member-owners.
These payments can be structured in many creative ways. On December 2, 2024 CEFCU (Peoria, Il) announced a $55 million Extraordinary Dividend: $52.25 million shared equally between borrowers and savers, and $2.75 million going to CEFCU Debit Mastercard users. The video announcement states the credit union has distributed over $500 million in bonus dividends since 2000. Listen to CEO Matt Mamer’s explanation for why and how this bonus was paid. You may view one of many member’s stories featured on the site, that of a single women buying her first home.
The $1.9 billion Tyndall CU paid $1.6 million using the following formula: To get their holiday cash, members had to participate in everyday banking activities, such as online banking, bill pay, direct deposit, card usage, e-statements, and loans. Each member had the opportunity to receive up to $700.
Being part of a community is more than sharing financial success. It is leaders’ personal participation in special events as described in these LinkIn posts:
From the CEO of Desert Financial: My family and I had the opportunity to volunteer with the Desert Financial team at a special Hometown Heroes event last night at the Phoenix Zoo. The highlight of the night was seeing the kids’ faces light up as they picked out gifts and met Santa. This initiative is a small gesture of gratitude for the sacrifices these veteran and first responder families make for our community and country.
From San Francisco Fire’s CEO: This is my favorite time of year when SF Fire Credit Union staff volunteer alongside members of the San Francisco Fire Department and others to give out toys to children in our local community as part of the annual SFFirefightersToyProgram. Thanks to all who joined us and everyone who supports this amazing program.
From the December 11, 2024 Youngstown Business Journal:
YOUNGSTOWN, Ohio – The city has selected 717 Credit Union to administer $13 million in American Rescue Plan Act funds across three programs to improve housing.
As part of the Youngstown Affordable Loan Program, the city allocated $8 million for the construction and/or rehabilitation of quality affordable housing. The credit union proposed to parlay the $8 million into not only funding for housing development, but also $35 million worth of discounted mortgage financing.
To begin development, 717 will create a $5 million revolving commercial development fund to be used for developers to rehabilitate vacant downtown buildings into residential condos, to build homes on vacant lots and to develop neighborhoods. After renovation or construction, the units will be sold to individual buyers and the funds recuperated to be invested in additional projects.
A press release yesterday from SECU North Carolina:
| SECU Foundation Initiates Phase Two Disaster Relief Package of $1.75 Million for Western North Carolina |
RALEIGH, N.C. – SECU Foundation’s Board of Directors approved a phase two disaster relief package with an additional $1.75 million in grants to three organizations, providing intermediate assistance to the hardest hit residents and communities impacted by Hurricane Helene. Funds awarded will help address temporary housing needs, financial crises, and food insecurity. Grantees include:
Phase two funding builds upon the Foundation’s $3.75 million relief package announced in October to help expedite provisions of water, food, supplies, shelter, and other emergency services to Western North Carolina. |
The annual polar plunge with purpose video from Affinity Plus FCU (St. Paul, MN) for the Special Olympics program.
(https://creditunions.com/features/polar-plunge-with-a-purpose/)
Every day in numerous communities, credit unions put their members’ well being first in all they do. They are the current expression of George Bailey’s mutual savings and loan in Frank Capra’s memorable film .
Here is one real life example from Wright-Patt Credit Union in Dayton, Ohio:
(https://www.youtube.com/watch?v=yMJT0nneRaM&t=18s)
Which mask, the corporate or the member facing one, will the American public see in credit unions today?
Will it be the continuing acquisitions fueled by payments to senior leaders, the public branding campaigns and naming rights on buildings, suplemented with continued efforts to purchase banks? Or, wlll member-owners recount stories of goodwill, shared financial success and innovative projects with partners to advance their communities?
If institutional success dominates public discussion and headline events, the results could be tragic for a separate, member-owned cooperative system. Does American really need more growth maximizing financial firms fueled by internal and external acquisitions?
If special member value delivered results are the lead story, America could certainly benefit from these modern day George Bailey-like coops. Ones where purpose for member and community progress are the priority.
I believe it is clear which expression members prefer; but will their leaders meet this moment for their institution’s choice? And the movement’s future?
In theater comedy and tragedy are a pair of masks, one crying and one laughing. Originating in the theatre of ancient Greece, the masks were said to help audience members far from the stage to understand what emotions the characters were feeling.[1]
Today these two masks are a metaphor for two contrasting public faces of the credit union movement. One is the corporate face. The other the member one. I will present one persona today of the corporate face; tomorrow the member one.
The reader can decide which of the Greek interpretations might apply to their credit union face.
Here is an excerpt from an October 2024 article by Aaron Klein a senior fellow and financial regulatory commentator with the Brookings Institute. The full article is called Why Are Non-profit Employee Credit Unions Spending Members’ Money on Stadium Naming Rights? An excerpt of one example in his analysis:
Northwest Federal is quite small, America’s 91st largest credit union. Two years ago it spent a total of $2 million on advertising. But in August, it secured naming rights to the Commander’s home stadium – now Northwest Stadium. According to news reports, the deal runs eight years at a higher cost than the roughly $7.5 million a year that previous rights-holder FedEx paid.
How is this a safe and sound decision in the best interest of Northwest Federal’s members? Why would CIA employees want their credit union’s name on a football stadium? How can one argue that money is better spent on the side of a building than on serving the needs of Northwest’s members, particularly those living paycheck to paycheck?
I asked the nation’s top credit union regulator, NCUA Chairman Todd Harper, about credit unions buying stadium naming rights. His response was spot on: “If I were on a credit union board, I would be advocating that rather than spending that money necessarily on naming rights, I’d be pointing in the direction of what can we do to lower the prices of our loans and increase the service to our members”.
But Klein could have chosen many other examples of this growing marketing practice. In October Dort Financial Credit Union announced a ten year extension of naming rights to the Dort Financial Center Flint Firebirds hockey team through the 1934-35 season. The first sponsorship agreement was signed in 2015.
Two months later, Credit Union Times on December 17 reported that Flagler CU Signs Major Naming Rights Deal With Florida Atlantic Athletics.
The article points out that the $2.3 billion Dort Financial’s head office is in Grand Blanc, MI. In 2023 the credit union purchased the $513 million Flagler Bank in West Palm Beach. CEO Brian Waldron in the purchase announcement noted. “This is a big step in Dort Financial’s strategy, allowing us to better serve our members who spend winters in Florida.”
When completed the bank was renamed Flagler Credit Union, a Division of Dort Financial. Dort also shows over $68 million of goodwill in its latest call report, presumably the premium paid the bank’s owners in excess of its net book value.
Dort gave no data to support the number of members who visited this part of Florida. However it follows a pattern of two other Michigan credit unions, Dearborn and Lake Michigan, who purchased banks with a similar rationale. It makes one wonder what Michigan members who vacation in Arizona think of these justifications.
Subsequently, CBS News reported in a December 16 article that: Florida Atlantic’s board of trustees is expected to approve a $22.5 million, 15-year deal that would give Flagler Credit Union the naming rights to the school’s football stadium.
The deal — both in terms of total and average value — would be the biggest publicly known naming rights agreement for any school in the American Athletic Conference currently with an on-campus stadium.
The Flagler bank purchase and naming rights with FAU means that the Michigan based Dort will have invested almost $100 million of members’ money in their Florida expansion.
The most memorable movie replayed again and again this time of year is the story of George Baily’s savings and loan. It is the story of a local financial institution which served its community faithfully, only to face a takeover by Potter, a financial predator to whom George owed money.
Credit unions are increasingly reversing this whole story line. It shows Potter’s fundamental negotiating error. Instead of just paying off George in a private deal, he tried to take the mutual direct from its local owners who turned up to support George when he most needed their cash.
Here’s how the reversal plays out in credit union land now. Two days ago the $2.6 billion Addition Financial Credit Union in Lake Mary, Fla., and the $871 million Envision Credit Union in Tallahassee, Fl announced their intent to merge by the end of 2025.
As reported in the Credit Union Times article the reasons for this $3.5 billion combination according to each CEO include:
“This merger will significantly increase the ability of Addition Financial to serve more members, and support both communities,” Addition Financial President/CEO Kevin Miller said in a prepared statement. “By joining forces with Envision Credit Union and the people-first culture they have cultivated for 70 years, we can provide even greater value to our collective members and team members and continue our shared mission of supporting our communities.”
And, “This merger enables us to provide more access to services, broaden offerings of innovative products, and deliver personalized support to every member and future member.”
The final paragraph of the article may best describe the motivation behind the rhetorical flourishes in the announcement:
If the consolidation is approved, Worrell is expected to continue on in a strategic role with Addition Financial through his planned retirement in 2027, according to an Envision spokesperson.
Just another example of a CEO who reached the peak of credit union leadership, and then pulled up the ladder so no one else will have the same opportunity.
It should be noted that in this as in most mergers, members are promised nothing that they don’t already have the capacity to receive from their own independent cooperative.
An even larger merger announcement of two successful credit unions was announced earlier in this Christmas, Wonderful Life, season.
On December 5, the members of LA Financial Federal CU were sent a formal letter by the Board chairman announcing the credit union’s intent to merge into the Credit Union of Southern California, creating a $3.9 billion combination. LA Financial’s official Member Notice can be read here.
Members will receive nothing from the merger that they do not already have. However, the CEO Carol Galizia, who has worked at the credit union for just 11 years will receive a 7-year contract for giving up her leadership role. Her new title: Chief of Strategic Initiatives. Four other senior executives will receive various bonus amounts for helping complete the merger, but the member letter makes clear they are “at-will” employees. A term that undoubtedly extends to all other employees of the credit union.
Chartered in 1937 the member-owners will receive nothing for their 87 years of loyalty, their collective shavings of $483 million, $409 million of performing loans and accumulated net worth of over $ 47 million.
If this privately negotiated deal had been a public transaction at true market value as in the Flagler Bank purchase by Dort credit union, the owners would have been paid upwards of two times their net worth in cash. Or one can compare this to the member-owners of Thrivent FCU which received their entire collective reserve plus a premium at 12% of each members total savings in selling to Thrivent Bank.
Instead, the CEO gets a 7 year contract, at an undisclosed amount, for turning over the entire credit union’s resources and members to a credit union they know nothing about and had no role in their success. This change of control is the exact opposite of the Wonderful Life outcome. Potter’s approach was all wrong—all he had to do was to payoff George and he could have controlled the mutual for free.
Except in this case Credit union of Southern California is getting paid almost $50 million for merging this very stable, long serving and successful credit union. The member-owners get nothing.
Both tragedy and comedy are present in Greek theater. But which face will the public see in these corporate announcements? Is Aaron Klein’s critique fair?
Tomorrow I will describe some of the member facing announcements by credit unions. Then the reader can decide which mask best expresses their credit union’s circumstances.
For the stories that resonate with the public, professional analysts and ultimately political leaders are the ones that will shape the future of the cooperative option for America.
In a beautifully composed family Christmas letter, the final paragraph is the closing stanza of a poem Walls and Bridges. It was written by the husband to his wife in celebration of their 53 years of marriage. The poem recounts his thoughts listening to a priest’s sermon in Hamilton, Montana during the peak of the 2024 election season.
You asked me why I go to church,
When so many that we know no longer do.
And I replied,
I don’t know where to find
A better explanation of the world
The way it is and the way
We want it to be.
The opening paragraphs of this December 11 article by Cinnamon Janzer of Next City:
In 2022, Etsy’s earnings topped $109 million in consolidated net income. “Despite significant macroeconomic headwinds, we maintained the vast majority of our pandemic gains and delivered double digit revenue growth and excellent profitability for the year,” Etsy CEO Josh Silverman said in a press release.
Days later, Silverman announced that the marketplace platform would raise the transaction fee Etsy takes from each sale from 5% to 6.5%. In response, some 14,000 Etsy sellers closed their shops and went on strike for eight days.
The article presents details of the initiative to build a better digital marketplace where members would own the platform.
The goal was to create an organization with a direct stake in the livelihood of its user artisans.
The Artisans Cooperative was launched in the fall of 2023.
The funding model is described on the website and includes both members and owners. Outside assistance from groups like Start a Coop, Operation Buffalo and Seed Commons was also important.
The effort is still a work in progress. No credit unions have apparently been involved yet. But it would seem a natural affiliation and potential further benefit of membership for the coops users.
The most important message is the artisan-organizer’s belief that people have the option to organize and manage their economic efforts with a cooperative design. Certainly a spirit much in need of rekindling in the much older and larger credit union system.
Read and ask if your credit union has this belief in its mission for its members.
I had the opportunity to listen to a very small slice of NCUA’s Board’s public budget process for 2025-26 by watching the video of the November 21 discussion of the CLF’s spending requests for the next two years.
Although extremely small in the agency’s overall spending totals, I fear we see clearly in this simple example, the board’s inability to substantively assess spending requests.
Several items from the CLF’s board action memorandum for November 21 provide some background for the hearing including these two points:
The purpose of the CLF is to improve the general financial stability by providing member credit unions with a source of loans to meet their liquidity needs and thereby encourage savings, support consumer and mortgage lending, and provide basic financial resources to all segments of the economy. and,
“(CLF) is owned by its member credit unions and managed by the NCUA Board”
CLF’s budget proposals were for $2,307,863 for 2025 and $2,448,263 for 2026. Salaries and benefits are 96% each year’s requests.
Several facts put this credit union owned public-private effort in perspective.
Total membership is 430, an increase of 32 in 2024, and 9.4 % of all credit unions. CLF’s balance sheet is $966 million and includes $44 million of net worth/retained earnings.
Each board member remarked on some aspect or other of the financials. Otsuka had no questions. She made an unexplained reference to “protecting the insurance fund.” Hauptman called the CLF a “buffer for the American taxpayer” and cited a vague reference to $18 billion of loans sometime in the past.
He reverted to his standard routine of demonstrating how to improve the “user experience” when contacting the CLF. He showed how staff had “made it easier to access” the CLF by removing the on-hold music replaced by an automated telephone routing message. He confirmed that a credit union inquiry would ultimately end at the CLF President’s desk, if no one else picked up the call before then.
He also pointed out that 3,300 credit unions (95% of those under $250 million in assets) had lost access when the special CLF-Corporate membership authority expired. Hauptman opined that credit unions should have multiple liquid cash sources which is how he arranged his personal financial management: “a credit card, home equity line and a margin loan established with a broker.”
As Chair Harper led off the discussion, one would have hoped for a focus on CLF policy and whether its purpose above was being carried out. Instead, he supported the budget in full and noted the 31 increase of members. He did ask about the cost of membership. The 4.46% third quarter member dividend was the only recognition that the CLF’s return to the owners was below market rates including the overnight Fed Funds yield. He again complained about Congress not renewing the special CLF authority for corporates to join by funding only a subset of their members.
A critical capability of any NCUA board member is discernment. What is their understanding of the key issues in a staff presentation, especially when focused primarily on budgets? Is It really about numbers? Or should it be about whether the CLF is serving its owners?
All three board members stated that the CLF existed for the benefit of NCUA and the NCUSIF, not for the credit union funding owners. What are credit unions getting for their direct support of the CLF? In the presentation the number one productivity indicator and primary 2025 Planned Activity goal is to Provide CLF Advances as needed.
However, the CLF has not issued a loan to credit unions since 2009. Almost all of those advances, 15 years earlier, were to two corporates via the NCUSIF. They were very short term and not part of any overall recovery plan. I am ignoring a token $1.0 million mini-advance made to a small credit union in December 2023 and paid off early in 2024.
The lack of credit union support and CLF membership is not a statutory shortcoming. It is a management one, an NCUA responsibility as stated in the staff memo above. During the 2022 and 2023 rising Fed rate cycle, liquidity pressures increased throughout the system. This concern peaked when the Silicon Valley and other bank failures occurred. However the CLF was totally missing in action this entire cycle.
Instead, credit unions borrowed in record amounts from the Federal Reserve’s Bank Term Funding Program (BTFP) and the FHLB’s. For example, the September 2023 call reports show 307 credit unions with Federal Reserve borrowings of $34.9 billion, an average of $114 million. For these credit unions, the Federal Reserve represents 66% of their total borrowings. For 112 of this group, the Federal Reserve is their only source.
Credit union total assets of $2.25 trillion at 3Q 2023 were just 9.7% of total banking assets. However, their participation in the special emergency Federal Reserve lending program equaled 27% of the BTFP’s loans at yearend or three times cooperative’s share of total industry assets. And this Federal Reserve borrowing was only a quarter of all credit union borrowings at the quarter end of $130.3 billion.
During this entire liquidity crisis, the CLF was nowhere to be found, or even heard. No programs, no outreach, no public discussion. And it was not due to a poorly designed website or failure to target market. Rather the CLF’s credit union owners were completely left out and shut out of any role except sending in capital—for a below market return. The agency made no effort to assist credit unions because the board and staff view the CLF as a liquidity partner for the NCUSIF, not the industry.
Why the CLF Has No Interest is a post from May 2024 which shows that the credit union owners have been subsidizing the CLF due to its below market dividends. The CLF’s return is much less that paid by the FHLBs and corporates on their capital accounts. Even though the CLF has investment authority similar to FCU’s, its own portfolio was underwater at 2023 yearend and its yield trailed the overnight FF rate the entire year. But the board ignored those facts.
Credit unions do not view the CLF as a reliable partner in times of balance sheet stress. They have plenty of tested alternatives. Ones that don’t impose supervisory judgments on top of collateral security. The Board’s view of the CLF to serve the NCUSIF has made it a “vestigial organ” within the NCUA body serving no credit union owner-members.
Following are some questions that board members might have asked if they had really focused on the CLF’s policy failures in this most recent period of liquidity need.
Total Credit Union System Borrowings (June ’22 to June ’23)
The failure of NCUA board members to ask the most basic questions about CLF’s non-activity while routinely continuing to increase its spending is disappointing. It undermines the NCUA’s capacity to serve the owners of the fund.
The board has failed in its policy oversight role. With zero lending productivity, why is there any reason for a staff of six to keep lights on? The entire system shows increased liquidity demand and draws but relied entirely on every other contingency funding source while its own funded resource was moot.
If credit unions are to get their money’s worth from the CLF, the agency must show leadership by working with the owners. Contrary to one board member’s assertion, CLF effectiveness does not depend on its members; rather it depends on the management by NCUA. Otherwise, just merge the shop back into the bureaucracy from which it came. Save the credit unions money.
Editor’s footnote: If you want to see how another cooperative designed liquidity lender communicates with its owners, read this latest update from the FHLB’s newsletter.
Wednesday the Federal Reserve will announce its latest overnight Federal Funds target range. After it began its 2022 upward interest rate cycle to reduce inflation, the impact on share growth and credit union liquidity was significant.
Actual share growth in 2023 was just over 2%. This year the third quarter results indicate a n increase of only 3%. The long term average share growth since 2000 is 6.5%.
Whatever the Fed’s says about its future rate intentions. trends suggest that liquidity will continue to be a top priority for credit unions next year. This means slow share growth, longer term investments still underwater, and continued competition for consumer deposits from money market mutual funds and other consumer financial options.
One economic variable that all market participants debate is what will be the “neutral” rate of interest for the US economy once the inflation rate cycle tightening is ended.
The neutral setting is the range which doesn’t stimulate or slow economic growth. The market got used to very low Fed Funds interest rates during period following the 2008 financial crisis through the 2021 Covid response.
However these ultra low short term rates were contrary to the history of the Fed Fund level, and related market rates, prior to that post-crisis era.
There is no consensus on what this “new” neutral rate might be. Bond traders’ and economists’ forecasts range from under 2% to the current 4% plus.
In this chart and comment below, Bloomberg’s December 15 Forecast shows the Federal Reserve governors wide divergence of outlook.
Fed policymakers’ estimates of the long-run interest rate — a proxy for the neutral rate — are divided, too. They’re as low as 2.375% and as high as 3.75% — the widest range since the Fed began publishing the figures over a decade ago. Next week FOMC members will update their estimates of the long-run rate. Keep an eye on whether the median estimate increases — and whether the range of opinion is narrowing or expanding. (Bloomberg)
Credit union funding is almost all from short term savings. A flat or inverted yield curve if the FF rate stays above 3% can squeeze the net interest margin and/or make growing deposits very difficult.
A second unknown is how the growing interest payments on federal budget will affect rates. Could government financing “crowd out” private market debt, that is make it more expensive for corporations to borrow versus relying on internally generated cash flows?
With other aspects of the new administration’s fiscal policy uncertain–taxation, spending, tariffs, etc–the rate environment going forward looks anything but certain.
Credit unions which rely on external new member share gowth versus relationship share strategies, may find it necessary to continue to pay up to attract these funds.
The Fed’s rate announcement this week will be well reported. The difficulty will be interpreting any future direction from it.
No one knows what’s next for market rates and forecasts. However, liquidity and slower growth are likely to be an ongoing challenge for the cooperative system in 2025.
This post presents ways the spirit of the season is incorporated in commerce. Some of the most memorable ads are by the John Lewis stores in England. In recent years they have become more unique and less nostalgic in their storytelling approach.
Here is an example from 2023:
(https://www.youtube.com/watch?v=Cyuqy4Eb_I4)
Sainsbury’s approach to selling food for the holidays.
(https://www.youtube.com/watch?v=I8dczAGg-Qg)
AShelter’s Christmas campaign, is a poignant film that sheds light on the harsh realities of homelessness affecting over 150,000 children in England. The story follows a young girl named Mia and her father as they journey through a whimsical, imagined world – a temporary escape from their grim living situation in temporary accommodation.
(https://www.youtube.com/watch?v=PNZd-O-O_6s)
This Christmas story from Germany ends with a family tradition familiar to all.
This video is a moment when the spirit of the season stops all shopping in a large Philadelphia Department store.
(https://www.youtube.com/watch?v=wp_RHnQ-jgU)
Which exresses the spirit of this season for you?
Biennially, the FDIC conducts a consumer banking survey and releases the results to the public. The report produced since 2009 traditionally measures the unbanked portion of the population. The 2023 data released on November 12 added several questions about two new financial services that have attracted much credit union interest.
The Report’s headline finding is that “96 Percent of U.S. households had credit union or bank checking accounts in 2023.” A record low 5.6 million households (4.2%) remain unbanked
Further data breaks down the unbanked by race and those that were “underbanked,” 14.2% of households. These consumers rely instead on payday loans, cash and other non-bank products.
For traditional relationships, 48.3% of banked households use mobile banking and 76.4% of all households had a credit card.
Between the surveys in 2021 and 2023, the data on new payment application shows “use of nonbank online payment services such as PayPal, Venmo, or Cash App increased, while the use of general-purpose reloadable prepaid cards decreased.”
So much for traditional product tracking. The 2023 survey asked about household use of two newer financial services: Buy Now Pay Later (BNPL) usage and crypto purchases. Both products have raised much interest in credit union land.
For example, this December 2 article in Credit Union Times reports on the first credit union in Georgia to offer a BNPL product. The article quotes the credit unions fintech/CUSO partner providing the service: “Buy Now, Pay Later is a financial service that consumers want and are increasingly expecting from their primary financial institutions.”
The FDIC survey however reports that “only 3.9% of all households used BNPL in the past 12 months.” For many consumers, this option is just an extension of an existing credit card relationship, not a separate product.
As bitcoin passes $100,000 in value and then fell back, crypto is again on some consumers financial product short list. But how big is the market?
The FDIC data showed that “In 2023, 4.8 percent of U.S. households owned or used crypto or digital assets in the previous 12 months. A significant majority of these households held crypto or digital assets as an investment (92.6 percent) while only 4.4 percent of these households used digital assets as a form of payment.”
Again the urgency to offer purchases or other transactions involving bitcoin or other crypto “currency” would seem to be tempered by both the uncertain nature of the product and its relatively low penetration of households.
The good news is that traditional financial products are used by almost all households and mobile convenience continues to expand.
(This is the second of two posts on the first and only National Examiner and Credit Union Conference in December 1984 organized by NCUA. Part one is here.)
In March 1984 when NCUA announced its organization of the first ever National Examiners’ Conference in December in Las Vegas, much skepticism was heard.
The first concern was “You will need professional planners or you’ll never pull it off.” But NCUA central, regional and field staff put the conference together piece by piece without hiring a single consultant.
To get the lowest possible hotel room rate, NCUA booked the MGM Grand Hotel for early December. The critics were not optimistic. “Credit union people will never come to Los Vegas two weeks before Christmas.”
And the ultimate quip, “You think credit unions are going to pay to meet with their regulator?”
Once the marketing started, a limit of two per credit union had to be imposed. As one credit union explained, “I knew it would be a sellout so I reserved 12 slots up front so I could take all my volunteers. We’ve never been to a credit union conference and a lot of things are coming down the line. I thought it was extremely important for them to see what was going on.”
By October the conference limit of 2,500 had sold out. No new registrations were possible. A wait list was set up.
More than 900 federal and state examiners and regulators met from Monday through close of business on Tuesday. The goal was sharing experience and expertise. One theme of the conference was the changing economy. America was moving into a new era transitioning from an industrial economy to an information one.
Financial transactions were about moving information for members. Credit unions were at the center of this change. According to the most recent American Banker consumer survey, they had become America’s favorite financial institution.
Chairman Callahan opened these initial sessions saying, “Better trained examiners and better communication between federal and state regulators and credit union officials are essential in a deregulated financial environment. This national conference is a chance to discuss current concerns and share problem solving techniques.”
Some examiners had been on the job for years; others for just months. One commented about this joint effort: “We’ve always been first cousins but never knew each other. I was surpirsed to learn how much we have in common.”
One professional challenge was the increase in examiner responsibility. NCUA had been delegating to the regions and their field staffs greater responsibility for safety and soundness. The need as one NCUA executive stated was “to get close and stay close” to credit unions.
Case studies were presented in breakout sessions to practice analysis and problem solving approaches. The Early Warning system of 1 to 5 ratings was reviewed. NCUA was the first federal regulator to share its individual ratings with the institutions it supervised. Not all agreed this was a good idea. One regional director said some credit union managers used the ratings as a measure of personal performance and for negotiating higher salaries.
Dual chartering came up at several panels. Private coop insurance representatives sat alongside NCUSIF examiners. The focus on choice of charter was critical to the evolution of the credit union system. Share insurance options were an essential component of a meaningful dual charter choice which provided a check and balance on each system’s responsiveness. It was pointed out that deregulation of savings accounts, field of membership options, and broader investment choices had occurred first in individual states before these were adopted in the federal system.
On Wednesday 1,500 volunteers and professionals joined for panels, workshops, and informal conversations. There were over 300 speakers and 60 different breakout sessions. While some of the sessions were repeated, the plenary sessions and many of the panel discussions were filmed, edited and then rebroadcast on the conference’s 24-hour video magazine. These excerpts were shown over the MGM Grand’s in-house television giving attendees a chance to watch sessions they couldn’t make. The broadcasts also included live interviews and comments from attendees.
Major topics included the future of the common bond with a panel of both state and federal regulators; how to monitor investments and find useful information; whether deregulation was beneficial for consumers and financial institutions. Breakouts covered mergers, the role and future of CUSO’s, and changing examiner skills and new analytical data base resources.
Richard Breeden, the Vice President’s Deputy counsel for Financial Institutions, moderated the panel Is the Regulator Obsolete? Will technology and the speed of money transfers make it impossible to track critical changes in a timely way?
Federal Reserve Governor Martha Seeger described how deregulation had changed the role of regulators: “We must think of ourselves as business advisors, not as policemen. To me, examiners and credit union mangers are partners in fostering depositor trust and we have just got to work together in this.”
Popular sessions at both parts of the conference were led by Rex Johnson, the president of a newly charter credit union in Illinois. He had been deputy supervisor for the Chicago office of the DFI before taking over the cu startup. His had provided training for NCUA examiners using actual examples of credit underwriting prior to this conference. Rex’s unique collections of case studies generated a lot of interaction. He noted, “We had a lot of fun in the breakouts, but more important we learned a lot from each other”
One of the guest speakers was former Marquette basketball coach Al McGuire. He remarked: “You’re a family; you’re a team and there’s no “I” in team. Credit unions are on a fast break and have unlimited potential. You must make the maximum effort and you must be together.”
The conference was a gathering where people could translate a belief in themselves and their credit union into practical terms. Comments included: I’d give it four stars , , , because of the enthusiasm of the people and the direct involvement of NCUA Chairman Callahan himself. Usually people at that level don’t become involved. He lit one hell of a fire in Las Vegas.”
That fire was because this first National Conference of examiners, supervisors and credit unions showed that their efforts were all part of a bigger story. Everyone contributes, no matter their credit union’s size or time on the job. What each does individually adds to the greater purpose of the cooperative system in America.
Dick Ensweiler, President of the Illinois League, Callahan and Board Member Mack. The League presented Ed with a framed motto on his departing for NCUA, that read We Don’t Run Credit Unions. It was in the Chairman’s office at NCUA.
Larry Blanchard then editor or Report on Credit Unions. He worked for Austin Montgomery at NCUA, ran a credit union and has been involved with multiple credit union firms from TruStage to Callahans–still to this day.
Federal Reserve Governor Martha Seeger speaks to the full conference.
NCUA Executive Director Bucky Sebastian with regional directors Carver, Riley and Skyles. 
Texas credit union Commissioner Pete Parsons and NASCUS Chair on a panel on dual chartering.
Carmen Hyland, credit union attorney, mother of Gigi. (corrected from first description) Her daughter became counsel for a corporate credit union, NCUA board member and President of the National Credit Union Foundation.
At a reception: Ted Bacino, NCUA Director of the Office of Administration, Laura Rossman, Senior Advisor to PA Mack, and Callahan.
There are two NCUA videos of the conference plus more than 300 more photos if someone wants to use in a more detailed report on the event.
Yesterday the Kiev National Orchestra and Chorus presented an hour and half performance of Handel’s Messiah.
While a common event in the West, in the early 1990’s following Ukraine’s independence, this group was the first to perform this “religious” work in this former state under the control of the Soviet Union.
The orchestra and chorus were founded in 1993 by Roger McMurrin, a Presbyterian Choir Director and his wife as Music Mission Kiev. Joan and I met them during the orchestra’s initial tour of the US. Its purpose was to employ out-of-work professional artists so they could earn a living in their newly independent country.
Roger and Diane eventually moved to live in Ukraine full time. The mission was expanded to serve widows and orphans with bible study and social services. It is now under local Ukrainian leadership.
This YouTube recording of yesterday’s concert is a different experience than what you might enjoy in your local community.
The performance is in Ukrainian. As we listen, we know the music, but the words are not familiar. This causes us to listen with new intensity providing a fresh experience. The music is gorgeous.
The camera work also communicates with its many views the full visual efforts of individual artists and the chorus as a whole.
Seeing this live performance in Kiev in the middle of an intense war for their freedom, now 1,021 days long, can be very moving. People singing of joy, hope and faith in an era in which over 400,000 of their citizens have been killed or wounded.
This performance is dedicated to Roger who died in 2023. There is a brief opening video from Diane. Watch and listen for a singular and moving experience.
(https://www.youtube.com/live/SuALTmDE1I8)