By Ray Birch
LITTLE CANADA, Minn.—The pace of small credit unions merging out doesn’t need to be a swift as it has become, says the leader of one $41-million cooperative, who contends too many tiny shops simply give up and don’t try to continue once the CEO decides to retire.
David Sawin, who leads MN Catholic Credit Union, also believes too many small credit unions are not doing their duty and putting a succession plan in place.
As CUToday.info has reported in its ongoing reporting on mergers, the lack of a succession plan and manager/CEO retirements are frequently cited by smaller credit unions seeking to merge in the disclosure forms filed with NCUA.
“This is a message I want to get out within credit unions: Don't give up. If you're doing OK, fight. Don't give up,” said Sawin, who will retire from MN Catholic at the end of 2022 after leading the organization for more than 16 years. “Every small credit union serves a purpose and should remain independent. I think the credit union industry is a patchwork quilt and, unfortunately, these small patches are going away at a rapid pace.”
Swain said his credit union has been working with Cornerstone Resources in its executive search.
“Too many small credit unions, unfortunately, don't do things like planning sessions,” said Sawin, who added his organization has held a planning session annually since he became CEO.
He said he leaves that meeting with three main objectives for the year and six tactics to help accomplish the goals, and further reports to the board on his progress each month. “We hold our sessions and each year, as I have gotten closer to retirement, there has been no talk of merging out.”
Not Understanding Purpose
For many small CUs, suggested Sawin, a big contributor to the lack of any succession planning is a lack of purpose.
“Your purpose is why you exist,” he said. “We had a brainstorming session about 15 years ago trying to figure out why we exist, and it's not the same as it was when our credit union was chartered in 1946.”
When it comes to that purpose, Sawin said his credit union decided to focus even more sharply on its field of membership, which is local Catholic parishes and the Knights of Columbus.
“We are here to protect and foster the financial well-being of our members and our communities,” Sawin said. “Being focused on our Catholic community, that's really led to our success. Too many small credit unions are too busy playing whack-a-mole and can't raise their heads out of the boat and see where they're going. They're just too busy getting by every day.”
Sawin reiterated that MN Catholic has continued to be profitable by focusing on its members and designing products that meet their needs. The CU has averaged $130,000 in annual net income over last five years, has 7.79% capital and ROAA of .43%.
“We work in the churches and the members see that and it's just fed on itself. We are out in the community, and the members see that and like that,” said Sawin, whose credit union has three offices all within church facilities. “I think too often small credit unions don't market to their own people. They don't do the things that it really takes to be successful. Sure, there's budgetary constraints, and finding partners is important, as well. We've used loan participations when they have been needed. I found a wonderful marketer that helped us do things like focus groups to find out what our members are actually thinking.”
A Lot of Hats
Swain acknowledged running a small credit union takes a lot of work from the CEO and the wearing of multiple hats. It’s a scenario he believes contributes to boards not putting a succession plan in place, as they decide they will never be able to replace their hard-working leader upon retirement.
“First, they don’t have a succession plan in place. Second, they often don’t even look,” contended Sawin. “The CEOs and managers of many small CUs and their boards just think there is no one out there who could possibly do the job the boss is doing at the salary being paid. And then, they just decide to merge out.
“If you don't plan, if you don’t look, you're never going to find those people who are out there and who can do the job—and they are out there,” continued Sawin. “I was one of them in 2006 when MN Catholic was a $15-million organization. At that time the credit union did not want to merge, and I didn't take a big salary. But I wanted to drive my own bus and I took the job. There's a lot of people out there like me. But a small credit union can find them, and it helps using a search firm to locate the right person.”
Sawin emphasized the process to find his replacement is detailed and is intentionally taking time, about a year, he said.
CEOs, Boards Are Tired, But…
“I think CEOs just get tired. I think boards can get tired, too. And they think if our current CEO can’t make this place grow, who can? They see the simple solution is to merge out,” Sawin said. “I am telling small credit unions that is a mistake; at least look for someone. I have had conversations with a number of CEOs who are retiring from small credit unions and they're not even considering looking for somebody. They aren't doing anything. They are not telling their boards to look for somebody. In fact, they're telling the board the opposite—nobody can do this job at my pay.”
That type of thinking, and an unwillingness to “fight,” is hurting the movement, insisted Sawin.
“If my words can convince one credit union…if one credit union decides not to give up and says at least I will look for a replacement for the retiring CEO…I will feel good,” said Sawin. “I hope more small credit unions will follow what we are doing here.”