May 12, 2025 • 40 mins
No one has a richer background in credit union journalism than Frank Diekmann. Over the past 35 years he has been co-founder and editor at Credit Union Times, publisher at Credit Union Journal, co-founder at CUToday, and now he is the founder of The CU Daily, a new publication that is the liveliest credit union pub in my opinion.
Nobody has written more published words about credit unions than Diekmann.
Diekmann has opinions.
Longtime listeners probably think I’m opinionated.
I am.
But Direkmann can and does go toe-to-toe with me on a range of topics - credit union mergers, the future of small credit unions, the credit union federal tax exemption, the future of NCUA and lots more. There are even glimpses into the very future of credit unions - if there is one.
This is a lively show and, remember, Diekmann has years of reporting experience that back up the opinions you’ll hear.
Listen up.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_02 (00:00):
Welcome to the CU2.0 podcast.
SPEAKER_00 (00:05):
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(00:27):
Robert McGarvey.
And now...
The CU 2.0 podcast with RobertMcGarvey.
SPEAKER_02 (00:33):
No one has a richer background in credit union
journalism than Frank Diekmann.
Over the past 35 years, he hasbeen co-founder and editor at
Credit Union Times, publisher atCredit Union Journal, co-founder
at CU Today, and now is thefounder of the CU Daily, a new
publication that, in my opinion,is the liveliest credit union
(00:53):
publication.
Nobody has written morepublished words about credit
unions than Diekmann.
Nobody.
Diekmann has opinions.
Long-time listeners probablythink I'm opinionated.
I am.
But Diekmann can and does gotoe-to-toe with me on a range of
topics.
Credit union mergers, future ofsmall credit unions, the credit
(01:14):
union federal tax exemption, thefuture of NCUA, and lots more.
There are glimpses into the veryfuture of credit unions, if
there is a future.
This is a lively show, andremember, Diekmann has years of
reporting experience that backup the opinions you'll hear.
Years of experience, years ofhearing facts.
(01:35):
Listen up.
You know, you have the mostdistinguished credit union
journalism resume of anybody onthe planet, I think, don't you?
SPEAKER_01 (01:49):
Well, I appreciate that, but let's keep in mind
that the bar is pretty low.
SPEAKER_02 (01:53):
But that's about what we're going to get into
next.
SPEAKER_01 (01:57):
I've probably written, it was actually Terry
Young, who used to be in creditunions, who said something to me
once.
He said, you've probably writtenmore words about credit unions
than anyone in history.
And that's probably true.
Only technology and time haveallowed me to do that.
SPEAKER_02 (02:15):
Yeah, it's interesting, though.
You've really developedsignificant journalistic
expertise in a field that Veryfew people, very few journalists
have any expertise in.
SPEAKER_01 (02:27):
Yeah, well, I appreciate it.
It's the old riches and nichesphilosophy.
SPEAKER_02 (02:31):
No, cool.
Glad it's working for you.
SPEAKER_01 (02:33):
Yeah, fell into accidentally like so many
things.
SPEAKER_02 (02:36):
Tell me what your sense of the state of credit
union journalism today is.
SPEAKER_01 (02:41):
The state of credit union journalism?
Yep.
I mean, I would say that that'sa pretty mixed bag, which is
reflective of journalism ingeneral.
I don't think it's terrific.
I think one of the reasons itstarted the CU Daily is that
obviously we didn't see the voidthere, would not have launched
it.
There wouldn't be any marketopportunity, but it's been
(03:04):
embraced pretty darn quickly.
I think that the one thing thatis missing in, let's broadly
say, journalism and creditunions is a willingness to be
skeptical and to question thingsand Because you have a belief
that there is a better pictureavailable, a better future
available, which is what anyjournalist is doing.
(03:27):
That sometimes journalism getssuch a bad rap as being about
negativity when it's really,most journalists are pretty
positive.
It's just that they believe inthe three steps forward, but
they're reporting on the twosteps back.
And I think that that's whatI've tried to do.
Certainly, I'm a believer in thepotential of credit unions, but
(03:51):
that doesn't mean that you can'tbe skeptical of what's taking
place.
SPEAKER_02 (03:57):
Yeah, and I think this is widely true of trade
publications.
There's a serious reluctance tobe critical of the entities and
people that you're writingabout.
SPEAKER_01 (04:13):
Right.
And having worked...
Having worked for companies I'veowned and for publications I
have sold and then ended upworking for larger
organizations, the bottom linedrives an awful lot of the
decision making.
SPEAKER_02 (04:27):
But yeah, there is a reluctance.
I mean, so if I were writingabout that recent America's
Credit Union webinar, I wouldhave said you would have more
fun taking a few sleeping pillsand maybe having a little sip of
scotch than watching thiswebinar.
So don't waste your time.
Wouldn't have made a lot offriends.
SPEAKER_01 (04:49):
I would certainly refrain from doing that myself
because you do need to work withAmerica's credit unions again.
Yeah, yeah, yeah,
SPEAKER_02 (04:56):
yeah.
Now, are you doing most of thewriting for CU Daily?
SPEAKER_01 (05:00):
I do all the writing for CU Daily.
SPEAKER_02 (05:02):
I didn't see any of the bylines, but
SPEAKER_01 (05:05):
I was just wondering.
Well, that is a reflection ofour back-end system.
It only reflects who posts theitem.
So even if you wrote somethingfor us, if I posted it, it would
show my name on it, which is onmy to-do list to address.
SPEAKER_02 (05:20):
But you do have a distinct voice, I think.
And it's somewhat skeptical andvery slightly cranky, just
slightly.
I'm more obviously cranky.
SPEAKER_01 (05:32):
I have no objection to being labeled a curmudgeon.
That's fine.
SPEAKER_02 (05:38):
What do you think is going to happen with NCUA?
SPEAKER_01 (05:40):
I wish I could offer a more solid forecast there.
It certainly appears.
The fear is that the trend lineconsolidation.
But given what would be requiredlegally with the Federal Credit
Union Act and given Treasurysupport so far and the fact that
credit unions do havesubstantial capital in
(06:00):
Washington, I'm inclined to leantoward it remains an independent
agency.
There's a good argument thatI've heard made that the bankers
really don't want NCUA foldedunderneath the FDIC either.
So, you know, that is a darngood question, but I lean 60-40
that it remains independent.
(06:23):
Watch that come back to hauntme, but that's my thought right
now.
SPEAKER_02 (06:27):
I think that, and credit union people often muddle
this, The independent bankersare obsessed about credit
unions.
If you ask Jamie Dimon, what doyou think about credit unions?
He'd probably say, what?
SPEAKER_01 (06:43):
Well, given that JPMorgan Chase is bigger than
the credit union community inthe United States combined.
Exactly.
I
SPEAKER_02 (06:52):
actually at one point added up the assets of all
credit unions.
This was some years ago.
And JPMorgan Chase was biggerthan all of them combined.
JPMorgan Chase has grown at amore brisk rate in recent years
in credit unions.
So the gap, I'm sure, is evenbigger.
Jamie Dimon does not wake up inthe morning saying, what's Navy
Federal doing today?
(07:13):
He does say, what's Bank ofAmerica doing today?
So does Jamie Dimon want creditunions in his regulatory agency?
I seriously doubt that he does.
But again, he might say it's sosmall, who cares?
SPEAKER_01 (07:28):
I seriously doubt he pays any attention to it at all.
SPEAKER_02 (07:30):
That's pretty much how I would assess it too.
Tax exemption.
What do you think about that?
I
SPEAKER_01 (07:37):
think the tax exemption, to me, the critical
issue with the tax exemption hasalways been that it is not a
financial issue.
that more importantly, it forcescredit unions to think of
themselves as being different.
And whether you're doing itconsciously or unconsciously, it
(07:57):
forces you to think of themember benefit and are we
driving that value back?
And I think that that's aquestion credit unions should be
forced to ask themselves all thetime.
And it should be a constantpresence in the thinking of
every member of management.
But the real value of the taxexemption lies in forcing that
(08:22):
differentiation and thinkingthat we're not like a bank.
And it's not something thatappears on the balance sheet,
but it is the most importantasset I believe credit unions
have.
SPEAKER_02 (08:34):
I'm having a conversation tomorrow with Jim
Blaine.
On that very topic, have creditunions lost their way?
Is there still a credit uniondifference?
What do you think on that topic?
SPEAKER_01 (08:49):
When I'm asked this question about credit unions, my
response, when I'm asked broadquestions, what do you think
about credit unions?
My response increasingly is, Ithink it often depends on which
movement you're talking about.
We've seen a little bifurcationin credit unions.
And it's not just asset sizesbecause certainly state
employees is the second largestcredit union in the world and is
(09:12):
strongly philosophically drivenin large part because of the
seeds planted by Jim Blaine.
But the issue with credit unionsis To me, there's the asset
issue.
You'll have any credit unionover a billion dollars is almost
a completely different entitythan a credit union under 100
million, which is the majorityof credit unions.
(09:34):
But there's also thisbifurcation of dedication to
being a credit union rather thanbeing a bank and thinking like a
credit union.
And I do have some concerns overcredit unions that are credit
union in name only.
But I think this is a terrificdebate.
I think it's healthy and it'sgood for credit unions to have
(09:56):
it.
In any cause, you shouldconstantly be going through a
process of self-examination.
I don't think it happens enoughin credit unions.
It most certainly does not comefrom the trade associations.
So it's forced, credit unionsare really forced to look in the
mirror themselves.
But I think it's a good debateand it's one that should be had.
SPEAKER_02 (10:18):
Hey, I agree with you totally in regard to, this
is very bifurcated where, yes,there still is something that
looks like a credit unionmovement, a big credit union
difference among most of themembers of, say, Inclusive.
Most CDFIs reflect that.
And some very big credit unionsare very good about that stuff.
(10:42):
I often admire what Navy Federalhas done because Navy Federal is
aware that quite a few of theirenlisted people who are Navy
federal members aren't terriblyaffluent at all.
And they're cognizant of thatand try to create programs to
assist.
And that's the biggest of all.
(11:04):
So you can't say all creditunions over a billion or all
credit unions over 10 billionare just banks.
That's not fair.
Some are banks.
in practice, but quite a few ofthem aren't.
But I do think Blaine's rightthat there's reasons to be
concerned.
(11:24):
Is there really a future ofthis?
And probably there is, but it'shard to be super optimistic.
SPEAKER_01 (11:35):
What makes me optimistic is the fact is you
ask whether or not there's afuture.
There's never, and I speak a lotto credit union audiences, and,
you know, I know they're allquestioning their futures.
Do we have a future?
Do I have a career?
One of the points I frequentlymake is there's never, never
been greater need for what theconcept of a credit union is
(11:58):
than right now.
There have never been moreAmericans struggling
financially.
So the idea that, you know,credit unions were...
were made for the times in 1909when these employees at a mill
in Manchester, New Hampshire,who didn't speak English, they
needed some access to retailfinancial services.
(12:22):
But some people suggest, well,that's back in the day.
That's over.
Those times have passed.
Those times have not passed.
There's never, never beengreater need for what credit
unions represent than right now.
And all you have to do is lookat on what thin ice a huge
number of Americans are skatingfinancially, and that is if they
(12:43):
haven't fallen through.
And so when I hear people getpessimistic, and it's easy to be
pessimistic, and as ajournalist, certainly, you know,
it's in my blood to bepessimistic, I assume, but I
remain optimistic and a firmbeliever that that the future is
there if credit unions seize it.
When I see credit unions runningaway from the name credit union
(13:06):
or running away from thebusiness model, nobody's looking
for more banks.
You never hear that.
You've never been at a partywhen anyone's ever said, I'm
really disappointed there aren'tmore banks in the world.
But there is this huge need,whether it's waste or not, for
someone to help.
Who can help me up?
You know, you mentioned NavyFederal.
(13:26):
Yes, they're such a statisticaloutlier in credit unions when it
comes to their assets.
Yet I recall speaking to themyears ago when they were sharing
with me that they still didloans to young enlisted for
under$100 just so someone couldturn on, they get their
utilities turned on.
You know, a bank's not going todo that.
I've talked to numerous CEOswho've shared with me members
(13:50):
who've come in their branchesand into their facilities who
are just deeply in debt becausethey got such bad deals on
credit cars and car loans.
So, you know, Robert, the To me,the market has never been more
ripe for credit unions.
And, you know, there's thisexercise you often hear at
events and conferences where youhear people say, well, if you
(14:12):
were inventing the credit unionright now, you know, what would
it be?
If credit unions didn't existright now, it would be the ideal
thing to invent.
They might be a fintech, and youdon't need to look any further
than SoFi, which uses all themessaging of credit unions, this
person-to-person finance, andThey talk about members, et
(14:33):
cetera.
So I'm pretty optimistic thatthe future is there and has
never been more robustlyevident, but it is discouraging
to see people just completelymiss that.
SPEAKER_02 (14:46):
Yeah, I live in a reasonably affluent part of
Phoenix.
I could take you on a walk oftwo miles and we would go buy
multiple pawn shops, a couple oftitle loan shops, things that,
are providing financial servicesat, generally speaking, usurious
(15:06):
rates.
Is there a place for a creditunion that wants to help some of
these people that are going inthose places?
You betcha.
SPEAKER_01 (15:16):
And there's credit unions who have filled that
niche, have been very aggressiveabout responding to those kind
of pawn shops and paydaylenders.
You see them outside militarybases.
So you see military creditunions trying to attack that
issue.
You know, you can't you can leada horse to water, as it's said,
and still people will get a badloan and credit unions can only
(15:38):
work to help refi those.
But the demand is clearly there.
Well, years ago at a creditunion publication, I had an
employee and I learned that hewould go and cash his check at a
payday lender at a prettyridiculous rate.
He was carrying cash on him.
And we finally was this was thisWashington, D.C.?
UNKNOWN (00:00):
?
SPEAKER_01 (15:59):
this person was based in West Palm Beach at the
time.
SPEAKER_02 (16:02):
Oh, all right.
I was going to say, walkingaround with cash years ago in
Washington, D.C.
was an interesting
SPEAKER_01 (16:07):
thing.
Well, walking around anywherewith cash.
But You know, he just, it wasconvenient and it was just easy.
And the payday lenders reallytake advantage of that.
They're very quick andconvenient.
And, you know, I went throughcredit union development
education training.
I think I'm the only journalistwho ever did.
(16:27):
And I recall that some of theother students, one of their
projects was they went to apayday lender in Madison,
Wisconsin, and came back andsaid, boy, it's really easy to
do.
And that's part of the, that's abig part of the attraction.
SPEAKER_02 (16:42):
Yeah, if I remember correctly, how QCash was birthed
was that Washington StateEmployees Credit Union noticed
they were processing a lot oftransactions involving payday
lenders.
That is correct.
And somebody said, hey, let'srun some numbers.
Why don't we offer a much betteralternative to that, which they
(17:03):
did.
That
SPEAKER_01 (17:05):
is correct.
You know, the biggest reasonpeople don't go into financial
institutions, you're probablyaware, is they're embarrassed by
their finances.
They don't want to go into aformal financial institution and
feel like they were judged.
It's just easier to go into apayday loan store where probably
everyone's in the samesituation, not feel judged, get
your cash and get out.
SPEAKER_02 (17:26):
Well, that's why kids, i.e.
people under 30, are usingthings like SoFi.
I've talked to them and theysay, well, you know, I'll bounce
checks and I'm not really goodat really keeping track of my
money.
And no, I don't want to go inand talk to a teller.
They'll just scold me.
And I say, probably the tellerwouldn't do that, but they don't
(17:47):
listen.
You know, they'd rather justdeal with an anonymous computer.
SPEAKER_01 (17:51):
Which brings us back to the point of that demand is
there.
It just takes a little extraeffort and it takes that
constant education.
SPEAKER_02 (18:02):
Now, And CU Daily, you've been bashing the Entwings
merger.
SPEAKER_01 (18:09):
Why?
I would not say that we havebashed the Entwings.
I would actually challenge thatstatement.
I've not bashed it in any way,as far as I know.
We've tried to be prettybalanced in our reporting on the
merger.
What we did share were commentsthat were made by other people
in response to our reporting.
SPEAKER_02 (18:28):
You're absolutely right.
I misspoke.
You're framing this moreproperly.
SPEAKER_01 (18:33):
Yeah, so we did cover the response to that, but
we tried to be prettynon-judgmental on those sorts of
mergers.
And I mean, challenging them orquestioning them is not being
judgmental.
But in this case, that was justresponse from throughout the
credit union community.
SPEAKER_02 (18:52):
What do you think of the First Tech-DCU merger, which
makes the The end merger seemedlike pocket change.
SPEAKER_01 (18:59):
It does.
You know, I think in all thesemergers, the question, every one
of these, and I could write thepress releases myself, they all
talk about returning more membervalue.
I hear that constantly.
We're returning more membervalue.
I would like to see some ofthese credit unions talking
about member value, say here ina dollar and cents way, here are
(19:20):
the numbers.
Here's where we returned greatervalue to our members as a result
of this merger.
Because when you talk to peoplewho really drive down into the
spreadsheets of theseorganizations, typically, you
see they're really notgenerating the efficiencies they
thought they were.
But if they do, then they needto return that to the members.
(19:42):
And I'd like to see themdemonstrate that and say, look,
as a result of this merger,we've returned X number of
dollars back to our membershipthat we otherwise would not
have.
If you can't do that, then youshouldn't be merging.
SPEAKER_02 (19:55):
The most successful credit union in the time that
I've been writing about creditunions, say 15 or 20 years, no
argument whatsoever is NavyFederal, which has grown through
internal growth.
Did they do an odd small mergerhere or there to satisfy the
regulator?
(20:15):
Maybe.
I don't know.
But it was trivial, whereasPentagon Federal was hoovering
up any credit union they could.
But Navy Federal has grownriskily.
And apparently profitably, too.
So there are ways to grow thatdon't involve merging.
And I think you're right.
Statistically, a lot of mergersjust don't produce the benefits
(20:38):
that folks think they're goingto produce.
SPEAKER_01 (20:41):
I would say that in many cases that the folks who
are involved in a lot of mergersthat occur don't think they know
they're not going to produce thebenefits they are claiming.
that there are other reasonsdriving some of those mergers.
What
SPEAKER_02 (20:56):
other reasons?
SPEAKER_01 (20:57):
Well, other reasons.
We've reported theseextensively, and it is something
that I have taken a position on.
We see mergers really driven anawful lot by insiders cashing
out.
It used to be just members ofmanagement, but now you see
members of the board cashing inon these, on credit unions that
have a lot of net worth.
And that's, you know, it's moneythat belongs to the members.
(21:19):
The members just aren't aware ofit.
And I think it's sinful in manycases what occurs, even though
it's disclosed to members.
Yeah, let's face it.
They're not going to go into theNCUA website and drive down into
a member disclosure form and gosix pages into it and find out
what people are getting on theinside.
But, you know, many of thesesmaller credit unions where you
(21:42):
have CEOs who had no, theybasically didn't.
And I get it.
They're a small credit union.
They never had a lot ofresources, but they do have a
lot of capital.
They never put together any sortof really retirement plan.
Long comes a big credit unionand says, listen, we'll give you
a slice of that capital on theway out the door.
And they take it.
Those aren't mergers that weredriven because they are in the
(22:02):
best interest of the members.
Those are mergers that weredriven because they were the
best interests of certaininsiders.
So that does bother me.
That's no secret.
I've written about itextensively, certainly more than
anyone else.
I can't imagine any other poorsoul has read more disclosure
forms than I have.
And sometimes you just nevercease to be surprised when you
(22:23):
think you've seen it all andthen you see– We had a credit
union where all the members ofthe board took$9,999.
So they, I assume, so they wouldstay under the$10,000 limit for
some reason, a couple ofreasons.
When you see that sort of thing,that is discouraging to see.
That's like a Rockets thing.
(22:44):
It is.
It is.
And, you know, there arecertainly consultants out there
who are feasting on this sort ofthing and willing to eat as many
carcasses as they can beforethey're gone.
So there are certainly negativesthere and it requires, it's much
like democracy.
You've got to constantly bevigilant about it.
(23:05):
And of course, with creditunions, a lot of members aren't
aware of the member ownershipmodel and they're kind of
apathetic and that apathy istaken advantage of.
And that's unfortunate.
SPEAKER_02 (23:17):
Now, can money legally go to a board member in
a federally chartered creditunion?
SPEAKER_01 (23:23):
Well, there's two things going on here.
One is, can a federallychartered credit union pay its
board?
No, it cannot.
But in a merger, can they get apayout on the way out the door?
They can if nobody stops it.
Yeah, they can take it.
It wasn't– we weren't paid forbeing– we were just paid for
years of service or something,or we– give it some other name.
(23:43):
That happens quite often.
SPEAKER_02 (23:45):
That's disturbing, really.
SPEAKER_01 (23:46):
It used to happen even more often.
And I did a lot– and I don'tmean this to sound wrong– did a
lot of reporting on it.
And, I mean, there were creditunion boards– giving themselves
season tickets to sportingevents for X number of years,
signing up for consulting for Xnumber of years.
And, you know, the consultinggig was a, you know, we'll call
you, don't call us sort ofarrangement.
(24:07):
Wrote about that a lot.
And to their credit, I think theboard members at the time were
Mark McWaters and Rick Metzger.
They enacted the rule that atleast requires a credit union to
disclose what events anyinsiders are getting, the top
five people being paid, and thenany members of the board.
So to their credit, that rulewas put in place.
(24:31):
But we haven't, again, it comesback to does the member know to
go look for that?
Probably not.
SPEAKER_02 (24:39):
No.
I mean, one of the ironies ofcredit unions is that
technically I'm an owner, but,you know, I've never voted in a
credit union election.
Every year I get ballots frompublicly held companies asking
me to vote in their boardelections.
(24:59):
I've never gotten anything likethat from a credit
SPEAKER_01 (25:02):
union.
It's probably in an electronicdisclosure somewhere, but some
credit unions are, let's faceit, for a lot of years, many
credit unions sort of had theCuban election model in place,
where it was just the same slateof directors.
They nominated each other, theyvoted for each other, and they
didn't exactly publicize theelections.
(25:22):
And that has certainly happenedquite a bit.
And when I read through all themerger forms, and it's like I've
told other people, it's likereading a thousand sad short
stories very often.
If you read between the lines,you see a lot of different
things when a credit union hascome to the end of its life.
(25:44):
But the one commonality, I wouldsay most of them, is a board
that has failed and a board thatMaybe it was the one that
they've never had any new blood.
There's nobody new there sincethe Eisenhower administration.
They never got outside theoffice.
I met a board member once at aGAC.
He was with a post office creditunion.
(26:06):
Told me that he wasn't unawarethat there was even a credit
union larger than$35 million.
He had no idea.
So they exist in sort of a silothat way.
But when you read thesedisclosure forms, it is
troubling to see I think reallyyou can read between the lines
and see this lack of new bloodand this lack of new vision and
(26:29):
just kind of a lack of effort.
Things got stale.
The board got tired.
They grabbed some money on theway out the door.
Probably think they did a decentjob.
And in many cases, they did not.
And in many cases, look, I givethem credit for all the hours of
time they put in.
But if you're merging becauseyou have no CEO succession plan,
(26:51):
And you've had the same CEO forthe last 35 years.
How does a light bulb not go offfor somebody?
Yeah, at some point, Elmer'sgoing to retire.
And so you see those sorts ofthings.
And that's also kind ofbothersome.
So, you know, I know it's kindof a far-ranging answer to your
point and to the question.
(27:12):
But one thing that is true aboutcredit unions, it is true about
democracy.
You know, you get out what youput into it.
And this is true, very much trueof credit unions, where you see
some that are really vibrant,where members are really
involved.
You know, you see this in SummitCredit Union in Madison,
Wisconsin.
They draw 4,000 or 5,000 peopleto their annual meeting.
(27:33):
They publicize it.
But, you know, you get out of itwhat you put into it, and
tragically, some don't put muchinto it.
SPEAKER_02 (27:41):
Well, and some SEGs are very active, like Disney is
active with partners, of course,but
SPEAKER_01 (27:48):
Well, some credit unions have grown.
If you look back, I've beenaround since credit unions were
deregulated and since FOMs wereallowed to be expanded.
And certainly, certain fields ofmembership have advantages.
Navy Federal has a great fieldof membership.
It's steady.
And combined with goodmanagement, they've grown.
(28:10):
It used to be, government SEGswere pretty strong.
Now with the federal government,things are a little bit more
challenging.
If you have a high-paidworkforce or you're a
pharmaceutical company orsomething, you can be a pretty
successful credit union withthat single SEG.
And then, of course, as youmentioned, you know how partners
or someone happens to have kindof a vibrant field of membership
(28:32):
that is reflected in the creditunion.
You know, those are allpositives for the credit union.
But there's no reason,regardless of who your field of
membership is, you cannot everblame a lack of growth that
maybe, hey, our field ofmembership's too dull.
That's on you.
SPEAKER_02 (28:48):
What do you think about credit unions merging with
banks?
Is that anathema?
Is that evil?
Is that right?
Is that
SPEAKER_01 (28:55):
who cares?
Yeah, it's really credit unionacquisitions of banks.
It's a very difficult merge.
But the...
To me, this comes back to thepoint I made earlier.
Can you show me the value?
If this person was a customer ofa bank, a year later after
merging with the credit union,how are they better off?
Are their loan rates lower?
(29:15):
Are the fees lower?
Are the rates on depositshigher?
Then yes, it's worth it.
If you did it, For any otherreason than that, maybe you just
wanted to branch into Floridafor some reason so your board
could fly to Florida once a yearand have it be a company expense
or something like that.
I don't think that that's reallya reason to drive a merger.
(29:38):
But if you're driving value backand you have more credit union
members, then that, at least inand of itself, ideally should be
a positive.
SPEAKER_02 (29:47):
Do you have any...
a sense of how many mergers havebeen rejected by members.
SPEAKER_01 (29:53):
Oh,
SPEAKER_02 (29:53):
relatively few.
Yeah.
There was that one in Virginia acouple of years ago.
And that was written about likeJesus has crossed the Potomac.
We saw him walking down.
SPEAKER_01 (30:03):
And I was probably one of the Jesus reporters.
SPEAKER_02 (30:06):
Yeah.
Yeah.
This was widespread reporting.
It's like,
SPEAKER_01 (30:09):
yeah.
Yeah.
Yes.
When you see that happen, it'spretty rare.
And it's because it's so darnhard to oppose a merger anymore
and to reach out to your fellowmembers.
The NCUA does have a componentin their disclosure forms and
online where you can registeryour objection.
(30:30):
But again, how many people seethat?
And who is going to...
In these rare occasions, you dosee typically...
It's former management atAccredianian that may lead the
objection to the merger.
But yeah, it's relatively rarebecause it's so darn hard to
(30:50):
pull off.
SPEAKER_02 (30:53):
Yeah, although you just kind of suggested state
employees, which is in some sortof uproar with its membership
because some former managementis opposing policy changes.
SPEAKER_01 (31:08):
Yeah, that's been well documented.
I've reported on that prettyextensively.
State employees has always,certainly under Jim Blaine and
then under Lord, who followedhim, always opposed any tiered
pricing.
It was one price for everyone onloans.
State employees' currentmanagement argument is that the
(31:31):
world has changed.
And they are missing out on alot of A-grade loans because
those members get better rateselsewhere.
So those members, and they saytheir data shows that they've
gone elsewhere.
So you did have a slate ofcandidates who ran for that
board.
But what's important to note isthese candidates ran and they
(31:52):
won their seats because theywere of the position that the
credit union should not go totiered pricing.
And yet, once they were aboard,perhaps, and I wasn't privy to
the meetings, but once they wereaboard and on that board, state
employees still went to tieredpricing and they have not backed
away from it.
SPEAKER_02 (32:11):
What I find interesting there is the power
of the retired executives tohave influence on the
organization.
SPEAKER_01 (32:19):
Yeah, Jim Blaine, and I really like Jim, known him
for a long time, I've alwaysadmired his writing, and again,
I've had a good relationshipwith him for a good long time.
He's an outlier, and he's a verypowerful personality at a credit
union.
And you don't see a lot of JimBlaines.
(32:39):
And, you know, he certainly,gosh, his record of overseeing
growth there is as incredible asit's one of a kind while he was
CEO.
But he's a powerful personality.
He's passionate and good forhim.
But he didn't go quietly intothe night.
He has his blog and he haspeople who really follow him and
respect him and believe in him.
(33:01):
But he's an outlier.
Frankly, it may be uncomfortablethat the world could use more
Jim Blaines, more people who arededicated to this concept of
philosophy and don't think of itas some antiquated notion.
He's good for credit.
So
SPEAKER_02 (33:16):
do you think we're going to just see more and more
mergers?
Yes.
Are we at peak merger?
I mean, what's happening here?
SPEAKER_01 (33:23):
I think the pace of mergers is going to continue.
To some degree, mergers begetmergers.
And, you know, you see othercredit unions merging and you
begin to think maybe that'ssomething we better do.
And you get a little bitnervous, you know, whether you'd
like to admit it or not.
Again, you're thinking aboutthis from your own personal
employment point of view.
(33:44):
in your own future.
So we're certainly seeing a lotof the sub$10 million credit
unions being sopped up.
And in many cases, look, they'renot viable.
When I look at these creditunions and report on them, I
mean, some of them, it's hard tobelieve it's 2025.
Some of them don't even have awebsite.
So they're not reallycompetitive.
(34:05):
I've long felt that what we'lleventually see, and I could be
completely wrong, When I'm oftenasked, people say, well, the
small credit unions are going todisappear.
I think what's going todisappear is the middle class.
I think we're going to have kindof a donut-shaped credit union
community.
Or you've got large creditunions and you have small credit
unions.
I used to hear them described asoperating between the toes of
(34:26):
the elephant or riches andniches, just filling a lot of
niches.
And then you have your largercredit unions that are emerging
in this almost constant pursuitof efficiency.
And We know why, we know whatthe expenses they face are, but
that efficiency nut is a hardone.
So yeah, I think we'll continueto see it for a lot of different
(34:48):
reasons.
SPEAKER_02 (34:50):
I pretty much agree with you.
I would say that with the smallcredit unions, what I envision
is it's kind of a variation onthe Jim Blaine model where there
is a big computer farm that doesall the back office processing
for all credit unions or mostcredit unions under$100 million.
(35:11):
Then the credit union can go doits front end on its own.
You can have people, faces, reallife, human beings.
But the technology is beyond thebudgets and the skills of most
small credit unions today.
And it's just getting harder andharder.
And that's not the essence of acredit union.
The essence of a credit union isnot computer coding.
(35:33):
It's member interaction.
So is anything lost in that?
I don't think so.
SPEAKER_01 (35:40):
Well, that model...
That idea of a common backoffice has been the holy grail
for credit unions for a longtime.
SPEAKER_02 (35:46):
Well, Maine has been doing that,
SPEAKER_01 (35:48):
though.
Yeah, Maine does it, and you seeit elsewhere with CUSOs trying
to provide.
And then there's been somesuccess stories.
Mitchell Stankovic is doing somereally great work with their
credit union shared servicesthey call CUS initiative.
They're trying to get off theground and operating there.
you see this effort that, yeah,exactly as you say, Gradient
should be focused on servingmembers, not in the back office
(36:12):
wondering what the heck'shappening with our core.
So that's been something that'sbeen chased for a long time as a
model that's been tried in othercountries.
You saw a big effort in Irelandfor a while, too, everyone to
operate off the same coresystem.
And in Africa, I've seen somesimilar efforts there.
So that is a...
(36:34):
an objective that we've seen inplace for some time and with
varying levels of success.
SPEAKER_02 (36:42):
Well, I think one thing that's changed is that
there's greater acceptance ofdoing computing in the sky.
It doesn't have to be in yourgarage.
20 years ago, credit union CEOswere nervous about a core system
that they couldn't hug at night,whereas now very few people care
about that.
SPEAKER_01 (37:02):
That's correct.
Right.
There's an embrace of the cloudand you can buy FinTech
technology cheaper in manycases, but then you don't know
what you're buying.
And then that can be challengingas well.
And who's going to support it?
And, you know, is there somealignment issues with your,
perhaps with your core?
So, yeah, the options that,again, that's another challenge
(37:22):
to the leader of a small credit.
You need so much on your plate.
Where do you start?
SPEAKER_02 (37:29):
Yeah.
Well, yeah, you mentioned that.
a few minutes ago about theretirement of a CEO and say a 50
or a hundred million dollarcredit union.
And I agree with what you'resaying, but I also think that's
a hard job to fill becauseoftentimes the person's not paid
that much money.
They're putting in a lot ofhours.
(37:51):
If the teller is sick, you go dothe teller shift on Saturday.
Even if you were playing golfthat day, you go do the teller
shift because no one else isavailable to do it.
SPEAKER_01 (38:00):
Robert, you're absolutely right.
It is a very difficult job.
It does not pay great.
There have been some efforts bysome large credit unions to
place maybe an up-and-comingexecutive into a smaller credit
union and have him or her kindof really learn on the job
there.
We've seen some limited attemptsat doing that so that that
(38:22):
smaller credit union remainsviable.
The person leading theorganization gains really
valuable skills and probablysomething that would be terrific
if we saw more of.
SPEAKER_02 (38:32):
Yeah, yeah.
I'm certainly not sitting heresaying, geez, I hope all small
credit unions die.
I'm quite the contrary.
I'm not super optimistic abouttheir future.
And if I were on the board and Ihad to fill out a succession
plan at a small credit union,NCUA now wants succession plans
for the CEO, I'd write in thatlittle box, I'd probably write,
(38:53):
going to merge.
SPEAKER_01 (38:55):
Yeah.
Well, unfortunately, as we know,that is the trend.
But you should have a successionplan, not just for the
retirement of your CEO, but whatif something happens to him or
her?
Yeah.
So you should have a plan inplace for that anyway.
SPEAKER_02 (39:11):
Yep.
There's no bench strength insmall credit unions
SPEAKER_01 (39:14):
usually,
SPEAKER_02 (39:15):
and that's what's really troublesome, but how they
don't have the money.
SPEAKER_01 (39:20):
That's a commonality with any small organization, any
small company, any smallbusiness.
Your bench is, you've got yourstarters and you have no bench.
SPEAKER_02 (39:33):
Before we go, think hard.
about how you can help supportthis podcast so we can do more
interviews with more thoughtfulleaders in the credit union
world.
What we're trying to figure outhere in these podcasts is what's
next for credit unions.
What can they do to really,really, really make a difference
in the financial scene?
Can't all be mega banks, can it?
(39:54):
It's my hope it won't all bemedical banks.
It'll always be a place forcredit unions.
That's what we're discussinghere.
So figure out how you can help.
Get in touch with me.
This is rjmcgarvey at gmail.com.
Robert McGarvey again.
That's rjmcgarvey at gmail.com.
Get in touch.
We'll figure out a way that youcan help.
We need your support.
(40:15):
We want your support.
We thank you for your support.
The CU 2.0 Podcast.
Welcome to the CU2.0 podcast.
SPEAKER_00 (00:05):
Hi, and welcome to the CU2.0 podcast with big new
ideas about credit unions andconversations about innovative
technology with credit union andfintech leaders.
This podcast is brought to youby Quillo, the real-time loan
syndication network for creditunions, and by your host,
longtime credit union andfinancial technology journalist,
(00:27):
Robert McGarvey.
And now...
The CU 2.0 podcast with RobertMcGarvey.
SPEAKER_02 (00:33):
No one has a richer background in credit union
journalism than Frank Diekmann.
Over the past 35 years, he hasbeen co-founder and editor at
Credit Union Times, publisher atCredit Union Journal, co-founder
at CU Today, and now is thefounder of the CU Daily, a new
publication that, in my opinion,is the liveliest credit union
(00:53):
publication.
Nobody has written morepublished words about credit
unions than Diekmann.
Nobody.
Diekmann has opinions.
Long-time listeners probablythink I'm opinionated.
I am.
But Diekmann can and does gotoe-to-toe with me on a range of
topics.
Credit union mergers, future ofsmall credit unions, the credit
(01:14):
union federal tax exemption, thefuture of NCUA, and lots more.
There are glimpses into the veryfuture of credit unions, if
there is a future.
This is a lively show, andremember, Diekmann has years of
reporting experience that backup the opinions you'll hear.
Years of experience, years ofhearing facts.
(01:35):
Listen up.
You know, you have the mostdistinguished credit union
journalism resume of anybody onthe planet, I think, don't you?
SPEAKER_01 (01:49):
Well, I appreciate that, but let's keep in mind
that the bar is pretty low.
SPEAKER_02 (01:53):
But that's about what we're going to get into
next.
SPEAKER_01 (01:57):
I've probably written, it was actually Terry
Young, who used to be in creditunions, who said something to me
once.
He said, you've probably writtenmore words about credit unions
than anyone in history.
And that's probably true.
Only technology and time haveallowed me to do that.
SPEAKER_02 (02:15):
Yeah, it's interesting, though.
You've really developedsignificant journalistic
expertise in a field that Veryfew people, very few journalists
have any expertise in.
SPEAKER_01 (02:27):
Yeah, well, I appreciate it.
It's the old riches and nichesphilosophy.
SPEAKER_02 (02:31):
No, cool.
Glad it's working for you.
SPEAKER_01 (02:33):
Yeah, fell into accidentally like so many
things.
SPEAKER_02 (02:36):
Tell me what your sense of the state of credit
union journalism today is.
SPEAKER_01 (02:41):
The state of credit union journalism?
Yep.
I mean, I would say that that'sa pretty mixed bag, which is
reflective of journalism ingeneral.
I don't think it's terrific.
I think one of the reasons itstarted the CU Daily is that
obviously we didn't see the voidthere, would not have launched
it.
There wouldn't be any marketopportunity, but it's been
(03:04):
embraced pretty darn quickly.
I think that the one thing thatis missing in, let's broadly
say, journalism and creditunions is a willingness to be
skeptical and to question thingsand Because you have a belief
that there is a better pictureavailable, a better future
available, which is what anyjournalist is doing.
(03:27):
That sometimes journalism getssuch a bad rap as being about
negativity when it's really,most journalists are pretty
positive.
It's just that they believe inthe three steps forward, but
they're reporting on the twosteps back.
And I think that that's whatI've tried to do.
Certainly, I'm a believer in thepotential of credit unions, but
(03:51):
that doesn't mean that you can'tbe skeptical of what's taking
place.
SPEAKER_02 (03:57):
Yeah, and I think this is widely true of trade
publications.
There's a serious reluctance tobe critical of the entities and
people that you're writingabout.
SPEAKER_01 (04:13):
Right.
And having worked...
Having worked for companies I'veowned and for publications I
have sold and then ended upworking for larger
organizations, the bottom linedrives an awful lot of the
decision making.
SPEAKER_02 (04:27):
But yeah, there is a reluctance.
I mean, so if I were writingabout that recent America's
Credit Union webinar, I wouldhave said you would have more
fun taking a few sleeping pillsand maybe having a little sip of
scotch than watching thiswebinar.
So don't waste your time.
Wouldn't have made a lot offriends.
SPEAKER_01 (04:49):
I would certainly refrain from doing that myself
because you do need to work withAmerica's credit unions again.
Yeah, yeah, yeah,
SPEAKER_02 (04:56):
yeah.
Now, are you doing most of thewriting for CU Daily?
SPEAKER_01 (05:00):
I do all the writing for CU Daily.
SPEAKER_02 (05:02):
I didn't see any of the bylines, but
SPEAKER_01 (05:05):
I was just wondering.
Well, that is a reflection ofour back-end system.
It only reflects who posts theitem.
So even if you wrote somethingfor us, if I posted it, it would
show my name on it, which is onmy to-do list to address.
SPEAKER_02 (05:20):
But you do have a distinct voice, I think.
And it's somewhat skeptical andvery slightly cranky, just
slightly.
I'm more obviously cranky.
SPEAKER_01 (05:32):
I have no objection to being labeled a curmudgeon.
That's fine.
SPEAKER_02 (05:38):
What do you think is going to happen with NCUA?
SPEAKER_01 (05:40):
I wish I could offer a more solid forecast there.
It certainly appears.
The fear is that the trend lineconsolidation.
But given what would be requiredlegally with the Federal Credit
Union Act and given Treasurysupport so far and the fact that
credit unions do havesubstantial capital in
(06:00):
Washington, I'm inclined to leantoward it remains an independent
agency.
There's a good argument thatI've heard made that the bankers
really don't want NCUA foldedunderneath the FDIC either.
So, you know, that is a darngood question, but I lean 60-40
that it remains independent.
(06:23):
Watch that come back to hauntme, but that's my thought right
now.
SPEAKER_02 (06:27):
I think that, and credit union people often muddle
this, The independent bankersare obsessed about credit
unions.
If you ask Jamie Dimon, what doyou think about credit unions?
He'd probably say, what?
SPEAKER_01 (06:43):
Well, given that JPMorgan Chase is bigger than
the credit union community inthe United States combined.
Exactly.
I
SPEAKER_02 (06:52):
actually at one point added up the assets of all
credit unions.
This was some years ago.
And JPMorgan Chase was biggerthan all of them combined.
JPMorgan Chase has grown at amore brisk rate in recent years
in credit unions.
So the gap, I'm sure, is evenbigger.
Jamie Dimon does not wake up inthe morning saying, what's Navy
Federal doing today?
(07:13):
He does say, what's Bank ofAmerica doing today?
So does Jamie Dimon want creditunions in his regulatory agency?
I seriously doubt that he does.
But again, he might say it's sosmall, who cares?
SPEAKER_01 (07:28):
I seriously doubt he pays any attention to it at all.
SPEAKER_02 (07:30):
That's pretty much how I would assess it too.
Tax exemption.
What do you think about that?
I
SPEAKER_01 (07:37):
think the tax exemption, to me, the critical
issue with the tax exemption hasalways been that it is not a
financial issue.
that more importantly, it forcescredit unions to think of
themselves as being different.
And whether you're doing itconsciously or unconsciously, it
(07:57):
forces you to think of themember benefit and are we
driving that value back?
And I think that that's aquestion credit unions should be
forced to ask themselves all thetime.
And it should be a constantpresence in the thinking of
every member of management.
But the real value of the taxexemption lies in forcing that
(08:22):
differentiation and thinkingthat we're not like a bank.
And it's not something thatappears on the balance sheet,
but it is the most importantasset I believe credit unions
have.
SPEAKER_02 (08:34):
I'm having a conversation tomorrow with Jim
Blaine.
On that very topic, have creditunions lost their way?
Is there still a credit uniondifference?
What do you think on that topic?
SPEAKER_01 (08:49):
When I'm asked this question about credit unions, my
response, when I'm asked broadquestions, what do you think
about credit unions?
My response increasingly is, Ithink it often depends on which
movement you're talking about.
We've seen a little bifurcationin credit unions.
And it's not just asset sizesbecause certainly state
employees is the second largestcredit union in the world and is
(09:12):
strongly philosophically drivenin large part because of the
seeds planted by Jim Blaine.
But the issue with credit unionsis To me, there's the asset
issue.
You'll have any credit unionover a billion dollars is almost
a completely different entitythan a credit union under 100
million, which is the majorityof credit unions.
(09:34):
But there's also thisbifurcation of dedication to
being a credit union rather thanbeing a bank and thinking like a
credit union.
And I do have some concerns overcredit unions that are credit
union in name only.
But I think this is a terrificdebate.
I think it's healthy and it'sgood for credit unions to have
(09:56):
it.
In any cause, you shouldconstantly be going through a
process of self-examination.
I don't think it happens enoughin credit unions.
It most certainly does not comefrom the trade associations.
So it's forced, credit unionsare really forced to look in the
mirror themselves.
But I think it's a good debateand it's one that should be had.
SPEAKER_02 (10:18):
Hey, I agree with you totally in regard to, this
is very bifurcated where, yes,there still is something that
looks like a credit unionmovement, a big credit union
difference among most of themembers of, say, Inclusive.
Most CDFIs reflect that.
And some very big credit unionsare very good about that stuff.
(10:42):
I often admire what Navy Federalhas done because Navy Federal is
aware that quite a few of theirenlisted people who are Navy
federal members aren't terriblyaffluent at all.
And they're cognizant of thatand try to create programs to
assist.
And that's the biggest of all.
(11:04):
So you can't say all creditunions over a billion or all
credit unions over 10 billionare just banks.
That's not fair.
Some are banks.
in practice, but quite a few ofthem aren't.
But I do think Blaine's rightthat there's reasons to be
concerned.
(11:24):
Is there really a future ofthis?
And probably there is, but it'shard to be super optimistic.
SPEAKER_01 (11:35):
What makes me optimistic is the fact is you
ask whether or not there's afuture.
There's never, and I speak a lotto credit union audiences, and,
you know, I know they're allquestioning their futures.
Do we have a future?
Do I have a career?
One of the points I frequentlymake is there's never, never
been greater need for what theconcept of a credit union is
(11:58):
than right now.
There have never been moreAmericans struggling
financially.
So the idea that, you know,credit unions were...
were made for the times in 1909when these employees at a mill
in Manchester, New Hampshire,who didn't speak English, they
needed some access to retailfinancial services.
(12:22):
But some people suggest, well,that's back in the day.
That's over.
Those times have passed.
Those times have not passed.
There's never, never beengreater need for what credit
unions represent than right now.
And all you have to do is lookat on what thin ice a huge
number of Americans are skatingfinancially, and that is if they
(12:43):
haven't fallen through.
And so when I hear people getpessimistic, and it's easy to be
pessimistic, and as ajournalist, certainly, you know,
it's in my blood to bepessimistic, I assume, but I
remain optimistic and a firmbeliever that that the future is
there if credit unions seize it.
When I see credit unions runningaway from the name credit union
(13:06):
or running away from thebusiness model, nobody's looking
for more banks.
You never hear that.
You've never been at a partywhen anyone's ever said, I'm
really disappointed there aren'tmore banks in the world.
But there is this huge need,whether it's waste or not, for
someone to help.
Who can help me up?
You know, you mentioned NavyFederal.
(13:26):
Yes, they're such a statisticaloutlier in credit unions when it
comes to their assets.
Yet I recall speaking to themyears ago when they were sharing
with me that they still didloans to young enlisted for
under$100 just so someone couldturn on, they get their
utilities turned on.
You know, a bank's not going todo that.
I've talked to numerous CEOswho've shared with me members
(13:50):
who've come in their branchesand into their facilities who
are just deeply in debt becausethey got such bad deals on
credit cars and car loans.
So, you know, Robert, the To me,the market has never been more
ripe for credit unions.
And, you know, there's thisexercise you often hear at
events and conferences where youhear people say, well, if you
(14:12):
were inventing the credit unionright now, you know, what would
it be?
If credit unions didn't existright now, it would be the ideal
thing to invent.
They might be a fintech, and youdon't need to look any further
than SoFi, which uses all themessaging of credit unions, this
person-to-person finance, andThey talk about members, et
(14:33):
cetera.
So I'm pretty optimistic thatthe future is there and has
never been more robustlyevident, but it is discouraging
to see people just completelymiss that.
SPEAKER_02 (14:46):
Yeah, I live in a reasonably affluent part of
Phoenix.
I could take you on a walk oftwo miles and we would go buy
multiple pawn shops, a couple oftitle loan shops, things that,
are providing financial servicesat, generally speaking, usurious
(15:06):
rates.
Is there a place for a creditunion that wants to help some of
these people that are going inthose places?
You betcha.
SPEAKER_01 (15:16):
And there's credit unions who have filled that
niche, have been very aggressiveabout responding to those kind
of pawn shops and paydaylenders.
You see them outside militarybases.
So you see military creditunions trying to attack that
issue.
You know, you can't you can leada horse to water, as it's said,
and still people will get a badloan and credit unions can only
(15:38):
work to help refi those.
But the demand is clearly there.
Well, years ago at a creditunion publication, I had an
employee and I learned that hewould go and cash his check at a
payday lender at a prettyridiculous rate.
He was carrying cash on him.
And we finally was this was thisWashington, D.C.?
UNKNOWN (00:00):
?
SPEAKER_01 (15:59):
this person was based in West Palm Beach at the
time.
SPEAKER_02 (16:02):
Oh, all right.
I was going to say, walkingaround with cash years ago in
Washington, D.C.
was an interesting
SPEAKER_01 (16:07):
thing.
Well, walking around anywherewith cash.
But You know, he just, it wasconvenient and it was just easy.
And the payday lenders reallytake advantage of that.
They're very quick andconvenient.
And, you know, I went throughcredit union development
education training.
I think I'm the only journalistwho ever did.
(16:27):
And I recall that some of theother students, one of their
projects was they went to apayday lender in Madison,
Wisconsin, and came back andsaid, boy, it's really easy to
do.
And that's part of the, that's abig part of the attraction.
SPEAKER_02 (16:42):
Yeah, if I remember correctly, how QCash was birthed
was that Washington StateEmployees Credit Union noticed
they were processing a lot oftransactions involving payday
lenders.
That is correct.
And somebody said, hey, let'srun some numbers.
Why don't we offer a much betteralternative to that, which they
(17:03):
did.
That
SPEAKER_01 (17:05):
is correct.
You know, the biggest reasonpeople don't go into financial
institutions, you're probablyaware, is they're embarrassed by
their finances.
They don't want to go into aformal financial institution and
feel like they were judged.
It's just easier to go into apayday loan store where probably
everyone's in the samesituation, not feel judged, get
your cash and get out.
SPEAKER_02 (17:26):
Well, that's why kids, i.e.
people under 30, are usingthings like SoFi.
I've talked to them and theysay, well, you know, I'll bounce
checks and I'm not really goodat really keeping track of my
money.
And no, I don't want to go inand talk to a teller.
They'll just scold me.
And I say, probably the tellerwouldn't do that, but they don't
(17:47):
listen.
You know, they'd rather justdeal with an anonymous computer.
SPEAKER_01 (17:51):
Which brings us back to the point of that demand is
there.
It just takes a little extraeffort and it takes that
constant education.
SPEAKER_02 (18:02):
Now, And CU Daily, you've been bashing the Entwings
merger.
SPEAKER_01 (18:09):
Why?
I would not say that we havebashed the Entwings.
I would actually challenge thatstatement.
I've not bashed it in any way,as far as I know.
We've tried to be prettybalanced in our reporting on the
merger.
What we did share were commentsthat were made by other people
in response to our reporting.
SPEAKER_02 (18:28):
You're absolutely right.
I misspoke.
You're framing this moreproperly.
SPEAKER_01 (18:33):
Yeah, so we did cover the response to that, but
we tried to be prettynon-judgmental on those sorts of
mergers.
And I mean, challenging them orquestioning them is not being
judgmental.
But in this case, that was justresponse from throughout the
credit union community.
SPEAKER_02 (18:52):
What do you think of the First Tech-DCU merger, which
makes the The end merger seemedlike pocket change.
SPEAKER_01 (18:59):
It does.
You know, I think in all thesemergers, the question, every one
of these, and I could write thepress releases myself, they all
talk about returning more membervalue.
I hear that constantly.
We're returning more membervalue.
I would like to see some ofthese credit unions talking
about member value, say here ina dollar and cents way, here are
(19:20):
the numbers.
Here's where we returned greatervalue to our members as a result
of this merger.
Because when you talk to peoplewho really drive down into the
spreadsheets of theseorganizations, typically, you
see they're really notgenerating the efficiencies they
thought they were.
But if they do, then they needto return that to the members.
(19:42):
And I'd like to see themdemonstrate that and say, look,
as a result of this merger,we've returned X number of
dollars back to our membershipthat we otherwise would not
have.
If you can't do that, then youshouldn't be merging.
SPEAKER_02 (19:55):
The most successful credit union in the time that
I've been writing about creditunions, say 15 or 20 years, no
argument whatsoever is NavyFederal, which has grown through
internal growth.
Did they do an odd small mergerhere or there to satisfy the
regulator?
(20:15):
Maybe.
I don't know.
But it was trivial, whereasPentagon Federal was hoovering
up any credit union they could.
But Navy Federal has grownriskily.
And apparently profitably, too.
So there are ways to grow thatdon't involve merging.
And I think you're right.
Statistically, a lot of mergersjust don't produce the benefits
(20:38):
that folks think they're goingto produce.
SPEAKER_01 (20:41):
I would say that in many cases that the folks who
are involved in a lot of mergersthat occur don't think they know
they're not going to produce thebenefits they are claiming.
that there are other reasonsdriving some of those mergers.
What
SPEAKER_02 (20:56):
other reasons?
SPEAKER_01 (20:57):
Well, other reasons.
We've reported theseextensively, and it is something
that I have taken a position on.
We see mergers really driven anawful lot by insiders cashing
out.
It used to be just members ofmanagement, but now you see
members of the board cashing inon these, on credit unions that
have a lot of net worth.
And that's, you know, it's moneythat belongs to the members.
(21:19):
The members just aren't aware ofit.
And I think it's sinful in manycases what occurs, even though
it's disclosed to members.
Yeah, let's face it.
They're not going to go into theNCUA website and drive down into
a member disclosure form and gosix pages into it and find out
what people are getting on theinside.
But, you know, many of thesesmaller credit unions where you
(21:42):
have CEOs who had no, theybasically didn't.
And I get it.
They're a small credit union.
They never had a lot ofresources, but they do have a
lot of capital.
They never put together any sortof really retirement plan.
Long comes a big credit unionand says, listen, we'll give you
a slice of that capital on theway out the door.
And they take it.
Those aren't mergers that weredriven because they are in the
(22:02):
best interest of the members.
Those are mergers that weredriven because they were the
best interests of certaininsiders.
So that does bother me.
That's no secret.
I've written about itextensively, certainly more than
anyone else.
I can't imagine any other poorsoul has read more disclosure
forms than I have.
And sometimes you just nevercease to be surprised when you
(22:23):
think you've seen it all andthen you see– We had a credit
union where all the members ofthe board took$9,999.
So they, I assume, so they wouldstay under the$10,000 limit for
some reason, a couple ofreasons.
When you see that sort of thing,that is discouraging to see.
That's like a Rockets thing.
(22:44):
It is.
It is.
And, you know, there arecertainly consultants out there
who are feasting on this sort ofthing and willing to eat as many
carcasses as they can beforethey're gone.
So there are certainly negativesthere and it requires, it's much
like democracy.
You've got to constantly bevigilant about it.
(23:05):
And of course, with creditunions, a lot of members aren't
aware of the member ownershipmodel and they're kind of
apathetic and that apathy istaken advantage of.
And that's unfortunate.
SPEAKER_02 (23:17):
Now, can money legally go to a board member in
a federally chartered creditunion?
SPEAKER_01 (23:23):
Well, there's two things going on here.
One is, can a federallychartered credit union pay its
board?
No, it cannot.
But in a merger, can they get apayout on the way out the door?
They can if nobody stops it.
Yeah, they can take it.
It wasn't– we weren't paid forbeing– we were just paid for
years of service or something,or we– give it some other name.
(23:43):
That happens quite often.
SPEAKER_02 (23:45):
That's disturbing, really.
SPEAKER_01 (23:46):
It used to happen even more often.
And I did a lot– and I don'tmean this to sound wrong– did a
lot of reporting on it.
And, I mean, there were creditunion boards– giving themselves
season tickets to sportingevents for X number of years,
signing up for consulting for Xnumber of years.
And, you know, the consultinggig was a, you know, we'll call
you, don't call us sort ofarrangement.
(24:07):
Wrote about that a lot.
And to their credit, I think theboard members at the time were
Mark McWaters and Rick Metzger.
They enacted the rule that atleast requires a credit union to
disclose what events anyinsiders are getting, the top
five people being paid, and thenany members of the board.
So to their credit, that rulewas put in place.
(24:31):
But we haven't, again, it comesback to does the member know to
go look for that?
Probably not.
SPEAKER_02 (24:39):
No.
I mean, one of the ironies ofcredit unions is that
technically I'm an owner, but,you know, I've never voted in a
credit union election.
Every year I get ballots frompublicly held companies asking
me to vote in their boardelections.
(24:59):
I've never gotten anything likethat from a credit
SPEAKER_01 (25:02):
union.
It's probably in an electronicdisclosure somewhere, but some
credit unions are, let's faceit, for a lot of years, many
credit unions sort of had theCuban election model in place,
where it was just the same slateof directors.
They nominated each other, theyvoted for each other, and they
didn't exactly publicize theelections.
(25:22):
And that has certainly happenedquite a bit.
And when I read through all themerger forms, and it's like I've
told other people, it's likereading a thousand sad short
stories very often.
If you read between the lines,you see a lot of different
things when a credit union hascome to the end of its life.
(25:44):
But the one commonality, I wouldsay most of them, is a board
that has failed and a board thatMaybe it was the one that
they've never had any new blood.
There's nobody new there sincethe Eisenhower administration.
They never got outside theoffice.
I met a board member once at aGAC.
He was with a post office creditunion.
(26:06):
Told me that he wasn't unawarethat there was even a credit
union larger than$35 million.
He had no idea.
So they exist in sort of a silothat way.
But when you read thesedisclosure forms, it is
troubling to see I think reallyyou can read between the lines
and see this lack of new bloodand this lack of new vision and
(26:29):
just kind of a lack of effort.
Things got stale.
The board got tired.
They grabbed some money on theway out the door.
Probably think they did a decentjob.
And in many cases, they did not.
And in many cases, look, I givethem credit for all the hours of
time they put in.
But if you're merging becauseyou have no CEO succession plan,
(26:51):
And you've had the same CEO forthe last 35 years.
How does a light bulb not go offfor somebody?
Yeah, at some point, Elmer'sgoing to retire.
And so you see those sorts ofthings.
And that's also kind ofbothersome.
So, you know, I know it's kindof a far-ranging answer to your
point and to the question.
(27:12):
But one thing that is true aboutcredit unions, it is true about
democracy.
You know, you get out what youput into it.
And this is true, very much trueof credit unions, where you see
some that are really vibrant,where members are really
involved.
You know, you see this in SummitCredit Union in Madison,
Wisconsin.
They draw 4,000 or 5,000 peopleto their annual meeting.
(27:33):
They publicize it.
But, you know, you get out of itwhat you put into it, and
tragically, some don't put muchinto it.
SPEAKER_02 (27:41):
Well, and some SEGs are very active, like Disney is
active with partners, of course,but
SPEAKER_01 (27:48):
Well, some credit unions have grown.
If you look back, I've beenaround since credit unions were
deregulated and since FOMs wereallowed to be expanded.
And certainly, certain fields ofmembership have advantages.
Navy Federal has a great fieldof membership.
It's steady.
And combined with goodmanagement, they've grown.
(28:10):
It used to be, government SEGswere pretty strong.
Now with the federal government,things are a little bit more
challenging.
If you have a high-paidworkforce or you're a
pharmaceutical company orsomething, you can be a pretty
successful credit union withthat single SEG.
And then, of course, as youmentioned, you know how partners
or someone happens to have kindof a vibrant field of membership
(28:32):
that is reflected in the creditunion.
You know, those are allpositives for the credit union.
But there's no reason,regardless of who your field of
membership is, you cannot everblame a lack of growth that
maybe, hey, our field ofmembership's too dull.
That's on you.
SPEAKER_02 (28:48):
What do you think about credit unions merging with
banks?
Is that anathema?
Is that evil?
Is that right?
Is that
SPEAKER_01 (28:55):
who cares?
Yeah, it's really credit unionacquisitions of banks.
It's a very difficult merge.
But the...
To me, this comes back to thepoint I made earlier.
Can you show me the value?
If this person was a customer ofa bank, a year later after
merging with the credit union,how are they better off?
Are their loan rates lower?
(29:15):
Are the fees lower?
Are the rates on depositshigher?
Then yes, it's worth it.
If you did it, For any otherreason than that, maybe you just
wanted to branch into Floridafor some reason so your board
could fly to Florida once a yearand have it be a company expense
or something like that.
I don't think that that's reallya reason to drive a merger.
(29:38):
But if you're driving value backand you have more credit union
members, then that, at least inand of itself, ideally should be
a positive.
SPEAKER_02 (29:47):
Do you have any...
a sense of how many mergers havebeen rejected by members.
SPEAKER_01 (29:53):
Oh,
SPEAKER_02 (29:53):
relatively few.
Yeah.
There was that one in Virginia acouple of years ago.
And that was written about likeJesus has crossed the Potomac.
We saw him walking down.
SPEAKER_01 (30:03):
And I was probably one of the Jesus reporters.
SPEAKER_02 (30:06):
Yeah.
Yeah.
This was widespread reporting.
It's like,
SPEAKER_01 (30:09):
yeah.
Yeah.
Yes.
When you see that happen, it'spretty rare.
And it's because it's so darnhard to oppose a merger anymore
and to reach out to your fellowmembers.
The NCUA does have a componentin their disclosure forms and
online where you can registeryour objection.
(30:30):
But again, how many people seethat?
And who is going to...
In these rare occasions, you dosee typically...
It's former management atAccredianian that may lead the
objection to the merger.
But yeah, it's relatively rarebecause it's so darn hard to
(30:50):
pull off.
SPEAKER_02 (30:53):
Yeah, although you just kind of suggested state
employees, which is in some sortof uproar with its membership
because some former managementis opposing policy changes.
SPEAKER_01 (31:08):
Yeah, that's been well documented.
I've reported on that prettyextensively.
State employees has always,certainly under Jim Blaine and
then under Lord, who followedhim, always opposed any tiered
pricing.
It was one price for everyone onloans.
State employees' currentmanagement argument is that the
(31:31):
world has changed.
And they are missing out on alot of A-grade loans because
those members get better rateselsewhere.
So those members, and they saytheir data shows that they've
gone elsewhere.
So you did have a slate ofcandidates who ran for that
board.
But what's important to note isthese candidates ran and they
(31:52):
won their seats because theywere of the position that the
credit union should not go totiered pricing.
And yet, once they were aboard,perhaps, and I wasn't privy to
the meetings, but once they wereaboard and on that board, state
employees still went to tieredpricing and they have not backed
away from it.
SPEAKER_02 (32:11):
What I find interesting there is the power
of the retired executives tohave influence on the
organization.
SPEAKER_01 (32:19):
Yeah, Jim Blaine, and I really like Jim, known him
for a long time, I've alwaysadmired his writing, and again,
I've had a good relationshipwith him for a good long time.
He's an outlier, and he's a verypowerful personality at a credit
union.
And you don't see a lot of JimBlaines.
(32:39):
And, you know, he certainly,gosh, his record of overseeing
growth there is as incredible asit's one of a kind while he was
CEO.
But he's a powerful personality.
He's passionate and good forhim.
But he didn't go quietly intothe night.
He has his blog and he haspeople who really follow him and
respect him and believe in him.
(33:01):
But he's an outlier.
Frankly, it may be uncomfortablethat the world could use more
Jim Blaines, more people who arededicated to this concept of
philosophy and don't think of itas some antiquated notion.
He's good for credit.
So
SPEAKER_02 (33:16):
do you think we're going to just see more and more
mergers?
Yes.
Are we at peak merger?
I mean, what's happening here?
SPEAKER_01 (33:23):
I think the pace of mergers is going to continue.
To some degree, mergers begetmergers.
And, you know, you see othercredit unions merging and you
begin to think maybe that'ssomething we better do.
And you get a little bitnervous, you know, whether you'd
like to admit it or not.
Again, you're thinking aboutthis from your own personal
employment point of view.
(33:44):
in your own future.
So we're certainly seeing a lotof the sub$10 million credit
unions being sopped up.
And in many cases, look, they'renot viable.
When I look at these creditunions and report on them, I
mean, some of them, it's hard tobelieve it's 2025.
Some of them don't even have awebsite.
So they're not reallycompetitive.
(34:05):
I've long felt that what we'lleventually see, and I could be
completely wrong, When I'm oftenasked, people say, well, the
small credit unions are going todisappear.
I think what's going todisappear is the middle class.
I think we're going to have kindof a donut-shaped credit union
community.
Or you've got large creditunions and you have small credit
unions.
I used to hear them described asoperating between the toes of
(34:26):
the elephant or riches andniches, just filling a lot of
niches.
And then you have your largercredit unions that are emerging
in this almost constant pursuitof efficiency.
And We know why, we know whatthe expenses they face are, but
that efficiency nut is a hardone.
So yeah, I think we'll continueto see it for a lot of different
(34:48):
reasons.
SPEAKER_02 (34:50):
I pretty much agree with you.
I would say that with the smallcredit unions, what I envision
is it's kind of a variation onthe Jim Blaine model where there
is a big computer farm that doesall the back office processing
for all credit unions or mostcredit unions under$100 million.
(35:11):
Then the credit union can go doits front end on its own.
You can have people, faces, reallife, human beings.
But the technology is beyond thebudgets and the skills of most
small credit unions today.
And it's just getting harder andharder.
And that's not the essence of acredit union.
The essence of a credit union isnot computer coding.
(35:33):
It's member interaction.
So is anything lost in that?
I don't think so.
SPEAKER_01 (35:40):
Well, that model...
That idea of a common backoffice has been the holy grail
for credit unions for a longtime.
SPEAKER_02 (35:46):
Well, Maine has been doing that,
SPEAKER_01 (35:48):
though.
Yeah, Maine does it, and you seeit elsewhere with CUSOs trying
to provide.
And then there's been somesuccess stories.
Mitchell Stankovic is doing somereally great work with their
credit union shared servicesthey call CUS initiative.
They're trying to get off theground and operating there.
you see this effort that, yeah,exactly as you say, Gradient
should be focused on servingmembers, not in the back office
(36:12):
wondering what the heck'shappening with our core.
So that's been something that'sbeen chased for a long time as a
model that's been tried in othercountries.
You saw a big effort in Irelandfor a while, too, everyone to
operate off the same coresystem.
And in Africa, I've seen somesimilar efforts there.
So that is a...
(36:34):
an objective that we've seen inplace for some time and with
varying levels of success.
SPEAKER_02 (36:42):
Well, I think one thing that's changed is that
there's greater acceptance ofdoing computing in the sky.
It doesn't have to be in yourgarage.
20 years ago, credit union CEOswere nervous about a core system
that they couldn't hug at night,whereas now very few people care
about that.
SPEAKER_01 (37:02):
That's correct.
Right.
There's an embrace of the cloudand you can buy FinTech
technology cheaper in manycases, but then you don't know
what you're buying.
And then that can be challengingas well.
And who's going to support it?
And, you know, is there somealignment issues with your,
perhaps with your core?
So, yeah, the options that,again, that's another challenge
(37:22):
to the leader of a small credit.
You need so much on your plate.
Where do you start?
SPEAKER_02 (37:29):
Yeah.
Well, yeah, you mentioned that.
a few minutes ago about theretirement of a CEO and say a 50
or a hundred million dollarcredit union.
And I agree with what you'resaying, but I also think that's
a hard job to fill becauseoftentimes the person's not paid
that much money.
They're putting in a lot ofhours.
(37:51):
If the teller is sick, you go dothe teller shift on Saturday.
Even if you were playing golfthat day, you go do the teller
shift because no one else isavailable to do it.
SPEAKER_01 (38:00):
Robert, you're absolutely right.
It is a very difficult job.
It does not pay great.
There have been some efforts bysome large credit unions to
place maybe an up-and-comingexecutive into a smaller credit
union and have him or her kindof really learn on the job
there.
We've seen some limited attemptsat doing that so that that
(38:22):
smaller credit union remainsviable.
The person leading theorganization gains really
valuable skills and probablysomething that would be terrific
if we saw more of.
SPEAKER_02 (38:32):
Yeah, yeah.
I'm certainly not sitting heresaying, geez, I hope all small
credit unions die.
I'm quite the contrary.
I'm not super optimistic abouttheir future.
And if I were on the board and Ihad to fill out a succession
plan at a small credit union,NCUA now wants succession plans
for the CEO, I'd write in thatlittle box, I'd probably write,
(38:53):
going to merge.
SPEAKER_01 (38:55):
Yeah.
Well, unfortunately, as we know,that is the trend.
But you should have a successionplan, not just for the
retirement of your CEO, but whatif something happens to him or
her?
Yeah.
So you should have a plan inplace for that anyway.
SPEAKER_02 (39:11):
Yep.
There's no bench strength insmall credit unions
SPEAKER_01 (39:14):
usually,
SPEAKER_02 (39:15):
and that's what's really troublesome, but how they
don't have the money.
SPEAKER_01 (39:20):
That's a commonality with any small organization, any
small company, any smallbusiness.
Your bench is, you've got yourstarters and you have no bench.
SPEAKER_02 (39:33):
Before we go, think hard.
about how you can help supportthis podcast so we can do more
interviews with more thoughtfulleaders in the credit union
world.
What we're trying to figure outhere in these podcasts is what's
next for credit unions.
What can they do to really,really, really make a difference
in the financial scene?
Can't all be mega banks, can it?
(39:54):
It's my hope it won't all bemedical banks.
It'll always be a place forcredit unions.
That's what we're discussinghere.
So figure out how you can help.
Get in touch with me.
This is rjmcgarvey at gmail.com.
Robert McGarvey again.
That's rjmcgarvey at gmail.com.
Get in touch.
We'll figure out a way that youcan help.
We need your support.
(40:15):
We want your support.
We thank you for your support.
The CU 2.0 Podcast.
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