Three CEOs, Different Roads, One Destination

There was a striking contrast about credit unions on full display last week that might be best summed up as "There are a lot more than one way to grow."

A local community focus. Discipline that leads to efficiencies. Innovative thinking. SEGs. Small touches. Big year-end dividends. Unique differentiators. New products. Old standbys. Each of those and so many more could be found carrying a flag during Credit Union Journal's Grow Show.

The name of this annual event implies almost a singularity: it is, after all, a Show about how to Grow a credit union (and is part of Credit Union Journal'slarger editorial mission of doing the same). But the insights shared were anything but singular.

There were 23 speakers spread over two and a half days along with too many hallway and meeting room conversations to count. This issue of Credit Union Journal provides an overview of what was discussed. (To get the full story, make sure you're part of the next Show!)

Here are just a few of the notes I was able to jot down while having the privilege of moderating Grow Show:


* You know the mantra, and perhaps have chanted it yourself: Mobile is the future, Mobile is the future, All hail mobile..." Indeed, Grow Show kicked off with a panel of experts saying just that, with PSCU CEO Mike Kelly even arguing that the mantra is all wrong and that mobile is the present.

So it was hard not to do one of those old Warner Brothers' cartoon double-takes when Jeff Disterhoft, CEO of the rapidly growing and successful University of Iowa Community CU, said he's not buying, that UICCU doesn't offer mobile, and currently has no plans to do so. It's not like UICCU serves Iowa's Amish community. But while there may be demand among some small segments of its membership for mobile access, Disterhoft made clear UICCU's efficient operation reflects discipline about where it invests its capital (which it manages to an 8% ratio).

Besides, noted Disterhoft, should it reach that tipping point where it needs to add mobile, off-the-shelf solutions could have members tapping a mobile app within 60 days.

One other interesting note: Disterhoft was eloquent in discussing the three legs of its business model-Value, Growth, Efficiency (too bad it's not Value, Efficiency and Growth, and then he could say its strategy is to VEG), and most especially the value piece.

His CU "lives by" nine values: truth, trust, mentoring, openness, risk-taking, giving credit, integrity, caring and respect. Disterhoft admitted he initially saw little value in the values. "Now I am the poster child for values," he observed.


* Disterhoft shared the stage with Mark Shobe, CEO of DFCU Financial CU in Michigan, and while the two CEOs have taken different approaches, they shared a fundamental focus on being efficient (although Shobe's CU does offer mobile). DFCU Financial's ROA is 1.53%.

It has added six branches over the past 13 years, but still has the same number of employees. That emphasis has led not just to member and loan growth in a state that has seen an outflow of population, but to the biggest year-end dividends paid by a CU in the U.S. ($130 million since 2006).

By the way, it's worth a visit to DFCUFinancial.com to click on the Special Dividend Calculator link to see how to do this right.


* Speaking of efficiencies, a third CEO related a tale of what happens when the issue with efficiencies is the lack thereof.

John Tippets, former CEO of American Airlines FCU, who was brought in by the board of North Island FCU in San Diego when its numbers were headed toward Mexico, recalled his early days after the prior CEO left. The FCU was ordered by NCUA to enact a Net Worth Restoration Plan, and the remaining senior management spent Fridays looking out windows.

You know you're CU is a mess when another CU doesn't want to merge with you, especially in hyper-competitive San Diego.

Not that other CUs in San Diego didn't have their own issues, due in part to a "lemmings" like environment in which everyone had seemingly gone over the real estate cliff. "Bubbles are very deceptive," observed Tippets. "Everyone rationalizes them, but they are very real."

Tippets, who credited the senior managers who remained for their talent and contributions, went to work on the balance sheet. Expenses were pared (including leasing out floors of its new $42-million HQ) and it led a "tactical retreat" as part of the NWRP. "A NWRP is not a long-term plan," pointed out Tippets. "If you follow it to its logical conclusion, you will have great capital on the day before you go out of business."

He said North Island renamed its NCUA problem case officer as the "opportunity case officer," and over three years was able to shrink the one-time billion-dollar CU back into the black. It wasn't until year three that it refocused on lending. Tippets has re-entered retirement (but was gracious enough to be a part of Grow Show), and today "the Island" is no longer surrounded by a sea of red ink.

Frank J. Diekmann can be reached at fdiekmann@cujournal.com.