GLENDALE, Calif.—One of the movement’s most outspoken CEOs, Stuart Perlitsh, retired at the end of March after 21 years of leading the $355-million Glendale Area Schools CU. As he departs—like he did during his career—Perlitsh spoke frankly about the issues that threaten the future of credit unions, including how large, “bank-like” credit unions, are “eating our young.”
CUToday.info: How has the business changed during your career?
Perlitsh: The cost to keep the lights on has grown exponentially. The technological costs for home banking, bill pay, RDC, business continuity/disaster recovery backup, etc. is on steroids. Members expect services without the associated costs. Credit unions are being impacted with operating expense challenges, driving down the bottom line. Billion-dollar credit unions are eating our young. It is economic cannibalism among our industry. It is not competition—it is annihilation. Credit unions without the depth, breadth, or resources can't compete in the marketplace. Notice the shrinkage of credit unions under $250 million in assets. Now, notice the billion-dollar-plus credit unions merging together (California CU and San Diego CU). Huge credit unions are the piranha in the fish tank and the small credit unions are the prey.
CUToday.info: What does it take to effectively compete as a credit union in your asset size group?
Perlitsh: GASCU has operating expenses at 1% compared to peer at 3%. Operating efficiency is mission-critical. Pay attention to your efficiency ratio. Pay careful notice to credit unions that are over a billion in assets that have a field of membership that overlaps your franchise. SchoolsFirst CU is not a friend of other school credit unions. We are targets of their business development merger acquisition group. Credit unions such as SchoolsFirst undermine, by encroachment, the efforts of smaller credit unions seeking to grow their book of business. How many small hardware stores have been put out of business by the big box stores? The personal service is gone. Unfair competition is not fair. Big vs. small is not fair.
CUToday.info: What is your view on the future of credit unions?
Perlitsh: The decimation of smaller credit unions will continue at an exponential speed. It is out of control. There will be far fewer credit unions in five years and the number of huge credit unions will continue to increase. Big credit unions are becoming increasingly bank-like and it is a sad commentary on behalf of our "people helping people" foundation. Small credit unions will increasingly find it difficult to compete as consumer demands and expectations will exceed the ability of smaller credit unions to deliver. And when large credit unions pimp credit unions’ CEOs with huge financial incentives to merge…they do.
CUToday.info: How did you come to be involved in credit unions?
Perlitsh: I started the first student credit union west of the Mississippi in 1974 while a student at Burbank High School. Students received class credits as we—elected directors, credit committee, supervisory committee—maintained operating hours, the general ledger, approved prom loans, car loans, etc. We did the loan disbursements, collections, and month-end, quarter-end, year-end calculations. Upon graduation/matriculation, the student accounts would merge into the sponsor Burbank Schools FCU (now UMe FCU). I was elected to the California Credit Union League Assembly of Delegates in 1976. While in college and law school I worked at various credit unions. After law school, I became a CEO at a $1-million credit union—Stainless Steel Products FCU in Burbank—and never left the credit union industry. I became CEO at GASCU in 1995.
CUToday.info: What have you learned about managing people during your career?
Perlitsh: I have learned to both be supportive and protective in people management. As I have supported and protected them, I have found they have always supported and protected me. From file clerks and management, to the board of directors, my deliberate choice was to be supportive and protective. I have found this works well with my wife, Miriam, and my son and daughter, too.
The role of CEO at credit unions under $500 million is one of many hats. One must recognize the human resource development component to the associates on your team. Careful attention and open communications is critical with your board of directors. A "hard hat" is required in dealings with the NCUA exam “specialists.” Each has different requirements, temperaments, and requires special handling. You don't learn this in management school. All the while, 24/7/365, one must stay focused on the balance sheet and income statement. It is challenging to be a successful CEO—and a role not for the faint of heart.
CUToday.info: What do you pay a lot more attention to now as a CEO that you perhaps didn’t when you started?
Perlitsh: Sadly, more attention must now be focused on government regulation. This burden is a distraction from providing service to the membership. Now you must consider the government regulation impact on any new product or service and the additional costs associated with being government compliant. Although, we are state chartered and privately insured (ASI), countless hours are still spent on NCUA rules and regulations. Beyond that, we now have to contend with the CFPB. The regulations never end. New rules emerge daily—it never stops.
CUToday.info: What have you found most effectively connects with members?
Perlitsh: MBWA—management by walking around. I always allocate 20 minutes in the morning and in the afternoon to walk the teller line, greet members in the lobby, and visit members while they obtain a loan. This resonates with the members. When is the last time you saw a bank president in the lobby or at the teller line? Never! After 21 years they are no longer members, they are an extension of your family.
CUToday.info: You have been one of the most outspoken CEOs, and one never afraid to share your viewpoints candidly—and certainly unafraid of speaking out on NCUA.
Perlitsh: Credit union CEOs are operating in a low testosterone environment. Far too many CEOs are afraid to speak up, likely fearful of backlash from the regulator. It is likely CEOs are anxious, concerned their candid viewpoints will offend directors, colleagues or regulators. Instead of standing up and speaking up, far too many CU CEOs fly under the radar screen. The result is weak leadership at the trade association level. We all drink the same Kool-Aid and yet, when the corporate credit unions collapsed, we acted surprised. Where were the corporate credit union directors? Were any directors held to account? Not a single one. And just how many CEOs stood up or spoke up?
When the over-concentration taxi medallion credit unions failed and went into conservatorship, we seemed shocked. Were any “federal civil servant protected employees” at the NCUA held to account? Not a single one. Tell me who at the NCUA allowed Progressive CU to get a loan-to-share ratio of 191%? Can you say, “concentration risk?” With net worth of 33% they report an ROA of -9.27% and year-end income is negative $57 million. The lights are on at Duke Street (NCUA’s headquarters), but is anybody home?
CUToday.info: What will you miss most about working in credit unions?
Perlitsh: There are many things about my professional life I will dearly miss. However, the government’s over-regulations didn’t make the list of things I’ll miss.