Many Factors Play Role in Corporate Decision

By Larry Roland President/CEO, ECU Credit Union

 

As ECU Credit Union’s long-time President/Chief Executive Officer, I can’t remember a time when my credit union didn’t have an account with Southeast Corporate Federal Credit Union.

But the events of the past three years have many credit unions rethinking their corporate relationships.  At ECU Credit Union, it didn’t take long for us to decide that staying with Southeast Corporate was the right decision. There is more to lose – and little to gain – if we leave.

A partnership in development
ECU Credit Union is based in Seminole, Fla., and for 28 years, I have come to count on Southeast Corporate as our “clearinghouse of choice.” Initially, Southeast Corporate provided clearing services for our share drafts, but we expanded services to handle all check processing in 2002. We also rely on Southeast Corporate for our  investments, overnight accounts and various loan programs.

Through the years, I estimate the Corporate’s processing program has saved ECU Credit Union countless staff time and thousands of dollars. Southeast Corporate basically serves as our exclusive “mini” Federal Reserve and serves that role very well.

A partnership in question
But following the failures of the nation’s largest corporate credit unions – as well as the subsequent losses and special assessments to natural-person credit unions – many in the industry began to question their corporate relationships, ECU Credit Union included.

Initially, I was very disappointed in the write off, of paying for the sins of others. Of course I didn’t like it. But I also am not one to make knee-jerk reactions. I tend to step back and get my hands around the situation before I make decisions.

The new rules and regulations for corporates left them with few choices: they could recapitalize to meet the new, stricter standards; they could merge with another corporate; or they could shut down operations. Southeast Corporate elected to recapitalize, asking its members to make new investments in perpetual contributed capital.

I believe any corporate that doesn’t require additional capital today will have to require it sometime down the road. And I don’t think anyone should chastise a corporate for having this need. In the case of Southeast Corporate, I believe they showed good judgment, given the information available at the time. There were just too many outside factors, too many things they (and other financial institutions) didn’t have control over.

Nevertheless, ECU Credit Union, with $35 million in assets, considered our options for an outside service provider: finding another check processor or sticking with Southeast Corporate. I also knew I wanted to work with a provider from within the industry, as I feel all credit unions have a responsibility to support the movement to which we belong.

As part of my decision-making process, I did consider one other corporate. But it seemed ECU Credit Union’s smaller size wasn’t attracting much attention, with our questions going unanswered and our information requests being delayed – something I seldom experienced with Southeast Corporate.

A partnership intact
My Board of Directors didn’t hesitate about supporting the decision to stay with Southeast Corporate but did ask about the rationale behind it. I cited a number of reasons – views I’ve also shared with other credit unions.

First, acknowledging the past few years have been times of stress for all financial institutions, the question I asked was, “Why this stress did occurred in the first place? Was it the fault of Southeast Corporate? Did they put natural-person credit unions in jeopardy?” The answer for ECU Credit Union was “no.” We would have taken the same steps on making investments, so why penalize our Corporate for doing what most anyone else would have done? Even U.S. Central wasn’t intentionally making bad investments; others were gaming the system. No one was immune.

Another point I considered was the long-standing, solid partnership ECU Credit Union has enjoyed with Southeast Corporate. They have been a good partner over many years, offering quality services to help us succeed. They support us, providing the products we need, when we need them. And this relationship is far-reaching: ECU Credit Union can offer our members reasonably priced services because Southeast Corporate provides the same to us. To me, it made little sense to lose that history and start over with someone new.

I also looked at the situation in reverse. If it were my credit union in that situation, would I make the decision to leave?  Southeast Corporate’s management team and the services provided to us have meant something through all these years. They treat me with the same professionalism and respect as I treat them. If I were to walk away, it wouldn’t speak highly of me.

Finally, I considered the likelihood of a recurrence of the last three years – will it happen again? Probably not – at least not in the next 20 to 30 years. The financial system’s downfall didn’t happen overnight but was a gradual build up over time. Now, with new regulations and changes to Fannie Mae, Freddie Mac, and Ginnie Mae, I believe the measures are in place to prevent similar events in the near future.

When I got right down to it and took all these things into consideration, there wasn’t a good case for leaving Southeast Corporate. Some credit unions have reasons for leaving, but if their decisions are based only on having to pay PCC, I’d say that’s a personal choice, not a business one.

For ECU Credit Union, there’s never been reason to leave Southeast Corporate during good times, so there’s no good reason to leave now.  I believe this is the time we need to stand together, the time when credit union cooperation really counts.

Staying with Southeast Corporate put is the best decision for us.

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