Members of $10 million Hartford Postal Employees Credit Union recently discovered that their hometown credit union had no choice but to merge with a larger credit union due to regulatory burdens.
CEO Barton Werner told The Hartford Business Journal that his three employee financial institution could no longer handle the myriad of regulations and policies being hurled in its direction and had to make tough decisions.
“We are too tiny with all the regulations,” Werner said. “We looked at getting out before it got too overwhelming.” Hartford Postal is in the process of merging with $1.4 billion American Eagle Federal Credit Union (East Hartford, CT). Werner said that American Eagle could provide its membership with more service and resources to handle the revolving landscape of regulatory changes and updates.
Werner isn’t alone in his concerns about trying to keep pace with regulations. “In my experience, regulations and compliance gets more and more of our attention every single week,” says Joy Watts, CEO of Carolina Postal Credit Union ($81 million, Charlotte, NC). “The exam focus is pushed more in that direction and they come at us so fast, we can’t even take a break. With the fear level so high that you’ll let a ball drop, the pressure is enormous.”
Watts says that in terms of her credit union, her compliance officer doesn’t panic, maintains a strict calendar and a highly focused system in order to avoid allowing a deadline to pass. However, she says that she can empathize with what some smaller credit unions are experiencing, especially when they are managed with limited resources and staff.
“The saddest part is that I’ve been contacted by two small credit unions since March asking if we would like to merge with them,” Watts says. “That to me is very unfortunate. We need small credit unions--they are very important because they provide something that banks cannot.”
However, she contends that one board chair she spoke with at a very tiny credit union admitted that regulations were impossible to keep up that the credit union did not even want to keep pace.
Credit Unions Should Ask for Help Before It’s Too Late
William Myers, Director of Office of Small Credit Union Initiatives at National Credit Union Administration (NCUA) says that he wants small credit unions to reach out for assistance before becoming too overwhelmed.
“The role of our office is to make sure small credit unions survive and thrive,” Myers explains. “We are constantly looking at the field and the statistics. We’re also examining business models to see how small credit unions grow and provide training, consulting and online resources to assist small credit unions.”
Myers says that his biggest concern is getting to the at-risk credit unions before risk becomes distress. “Honestly the number of failures is fairly low--we’ve lost eight credit unions this year,” Myers adds. “And the numbers of credit unions migrating from small to larger is actually a more substantial statistic. However, what is most concerning is the group of credit unions that are shrinking. Those are the credit unions that must recognize what is occurring and reach out for assistance.”
Watts says that her credit union is always available to lend a helping hand to any credit union in need. “If we can get the larger credit unions to mentor the smaller, struggling credit unions we could see a positive outcome,” she says. “On a weekly basis I receive calls from other credit union managers asking to see policies--I’m more than happy to share what I have if it can help inspire another credit union to use ours as a roadmap in order to develop their own.”
“We’re all in this together,” Watts adds. “I love the cooperative spirit of a credit union--that’s what we’re all about. That’s what it should be all about. Not what’s your risk tolerance, for example. Leave that to the banks.”
Myers says that his office also has a phenomenal record of working with small or troubled credit unions to resolve problems. “We typically run into two issues,” he says. “In some instances the credit union waits too long to ask for help and it becomes more difficult to provide assistance in order to turn the situation around. Perhaps if the credit union saw the rising tide sooner to request assistance, it would not be in a troubled position.”
“Secondly, we don’t save the credit union, but provide the education and resources to the credit unions that want to be saved,” Myers continues. “You need the board and management behind revitalizing the credit union, as well as having a succession plan. In the event where the manager becomes ill, injured, or dies and there’s no one in the number two position, you run into trouble.”
Myers says that his office is in the process of creating a comprehensive training video aimed at helping small or troubled credit unions. He says that the video will address the signs credit unions should be aware of and the importance of preparedness. “You don’t say, ‘Let’s not talk about earthquakes because it would be awful.’ We have to be prepared even though you don't want something terrible to happen.”
Aspects the video will cover include strategic planning and knowing not only when a credit union should consider merging, but also what it can do to spot trouble. “Additionally, we will address the best practices merger and teach credit unions that are in the position to merge how to field offers and discern which offer will be beneficial to both staff and members,” Myers adds. He says that the video will be available through YouTube and promoted through his office following completion.
Can Members Help Their Small Credit Union?
Myers says that the members’ role is vital to keeping small credit unions in business. “There are several things members can do, but most importantly is to give your credit union business. Deepen relationships, move beyond a savings account and consider your credit union first when you need a loan.”
He recalls a time when he managed a credit union and was in the process of generating letters that addressed inactive account closings. “We sent letters to remind members of the services we offered,” he says. “I received one letter in response where the member pleaded with me to not close the account because the member ‘loved’ the credit union. The message is that if you really love your credit union, do business with it. Support your credit union by opening accounts and building relationships.”
Additionally, Myers says that small credit unions can usually use a helping hand. “Small credit unions are always looking for volunteers and may be recruiting for board member positions. Contact your credit union and find out how you can help through volunteerism.”