It may be hard to imagine a time when credit unions didn’t offer member services like mortgages, ATMs, and debit cards. But the advent of those services represented a significant shift for credit unions and credit union leagues when the industry started rapidly growing. When larger institutions began to dominate the industry, leaders of the credit union movement had to find new ways to meet members’ evolving needs to survive. Embracing collaboration and innovation and filling the gaps in expertise and services offered were the differences between credit unions closing their doors or thriving.
Our latest C.U. on the Show guest tells us how he helped his credit union league work through this period of growth to continue advancing the credit union mission. Doug welcomes Steve Fowler, retired president and CEO of the South Carolina Credit Union League (SCCUL). Steve, who has only ever known a career working with credit unions, has held various league positions, including auditor, member service representative, and president.
In the episode, Steve discusses his role in the significant merger the SSCUL made in the early 2000s due to the quickly changing credit union environment. His experience is a valuable lesson for credit union executives across the country, who continually face changes with technology, regulation, and their members’ needs, in how they may adapt when new trends and services emerge.
When credit unions began expanding their services to offer mortgages, certificates of deposit, and other member benefits, there was an economic boost among large credit unions in the country. The SSCUL and other leagues began to evaluate how they would need to change, too.
Listen to the full episode to hear how Steve’s and other credit union leagues learned to stay relevant in a changing environment.
Doug English: (00:02)
Hello credit union executives. Welcome to C.U. on the Show, where we give you up-to-date information on how you can reduce risk, keep key talent, and take a strategic approach to your personal financial wellness. Hosted by me, Doug English, a CERTIFIED FINANCIAL PLANNER™ and former credit union insider with Act Advisors. Here with me today is the retired president of the South Carolina Credit Union League, Steve Fowler. Welcome Steve.
Steve Fowler: (00:30)
Hi, Doug. How are things going?
Oh, things are wonderful. How are things for you?
Things couldn’t be better. I thought before I talk to you about my career and credit unions, I’d focus on how I got started. I had just graduated from the University of South Carolina back in 1970, where I met the love of my life. We’ve been married over 50 years now. I was looking for employment and my neighbor up the street stopped by one day and said, have you found a job yet? And I said, no, and he set up an interview. He ran the audit division for a credit union. It was the South Carolina Credit Union League. And we went over and interviewed and to make a long story short, I was hired. I served in just about every capacity at the league that was available in the service corp and corporate. The Peter Principle finally took over when I became president and CEO and after five years, I realized that after 43 years it was time to say goodbye. When I took over as the president and CEO, our management team had been looking at our market.
I want to back up a little bit, cause you just said a whole lot right there. Did you get done with college and go straight to the credit union league? And so was that your only place for your whole profession?
That’s the only full-time job I ever had.
That’s extremely unusual, right?
When you worked for the South Carolina league, once that got on your resume, you could not get gainful employment anywhere else. That was explained to me by Tommy Belk, another former president of the league.
Well, tell me about the structure of the league. I know from knowing you that there was a service core and there’s the corporate league. Talk about that structure, please.
All right. When I came to work with the league back in ‘70, the league consisted of the league at your trade association for credit unions, nonprofit, and we had a service corp that was for-profit. We had a print shop for newsletters and whatnot. We had an insurance services division for credit unions. We had a marketing division for credit unions. We also had the corporate credit union and back then it was called the South Carolina League Credit Union. It not only served credit unions, but it served groups too small to have their own credit union. This was before credit unions were allowed to take in different groups. But at that point, we became a true corporate entity because we were competing for those groups with our existing credit unions. So we spun those groups off to credit in individual credit unions that we became corporate.
But back in ‘70, we also had a data processing company help at the credit union accounting center. And we managed the credit unions that actually owned it. Each credit union purchased a share of stock, $1.50 for every member account they had, every member, not account members with different accounts. So there were four different entities when I came to work. By the time I left, the corporation had blossomed, we were doing CHA clearing for credit unions, not just in South Carolina, but probably in 30 to 32 states. We were mailing statements for our credit unions. And when I say mail, we delivered electronically and whatnot for credit unions across the nation. We actually did item clearing—ShareDrive clearing—for credit unions in Hawaii. I always wanted to call on those credit unions. They would not let me, but the league itself had a league president.
So Steve, tell me about how you had a lot of different entities at the South Carolina Credit Union League. What caused those to come into existence? Was it driven by the need to diversify revenues for the league, or was it driven by the member credit union needs? And then when you had that all built out, what was the way the revenue floated, like how much came from the member services versus the service corp?
When we offered any service to a credit union, whether it be through us coming online and offering that service ourselves, or whether we endorsed someone who offered a service—and for us to endorse someone was quite an involved process; we didn’t endorse just Willy nilly—we didn’t endorse just for the revenue stream. We explained to whoever after we did investigations to make sure they were compatible that if they had a problem with one credit union, they had a problem with 200 credit unions. And that kind of kept all of us on the same page. The way we were structured was a credit union supported itself. The accounting center, the computer processing was a separate entity. It received its revenue and fees for processing. I think in the beginning it was 15 cents an account a month.
And that included statement mailing and all that kind of stuff. The internal revenue would not allow the league to make a profit from outside services and maintain its tax-exempt status. So rather than try to have our accounting department note this was for-profit—are these are league dues and are they sheltered—we said no, we’ll form a profit-making entity, which was our service corporation. Its funding came from our revenue stream from our insurance services division. Now the academy annual income went to the league because that was credit related. We offered insurance, automobiles, mobile homes, and stuff like that before CUNA Mutual. Through our insurance services to the agent, we did the statement mailing; that was a revenue product that generated income, and our print shop was the same. That way, the league was funded primarily by dues from credit unions and also income stream from CUNA Mutual. At the top of the pyramid, you had your league president, but just under that were three vice presidents or your service cooperation and the accounting center. So that was your management team, your senior management team.
Was this a pretty normal structure of a league from what you saw across the country?
I didn’t do a whole lot of travel early on, as an auditor. I’d been doing that for about 14 months when I was called in and told I was not cut out to be an auditor. I didn’t understand that auditors came in after the battle and shot the wounded. I wanted to nurse them back to health. They moved me over to member services rep and then I started to travel a little bit. One time I went to Madison and got off an airplane to four feet of snow and knew then that this Southern boy wanted to go back home. But what I saw in other leagues was not the same; we were a little different. Bill Brobstern is the guy who really set everything up in South Carolina, as far as the way the league was structured. So tell me about the trends that drove the league to kind reconsider its existence and the way things were operated. Like, what trends did you start to see and how did those trends change over the years?
As credit unions, we’re able to take in groups to offer checking accounts to diversify their services. Also mortgage departments, CDs, that kind of thing. We saw a big boost in your larger credit unions. Those that had the resources jumped in full bore and began to really grow, while your smaller credit unions were really, really worried. They could not afford ATMs. They could not afford checking accounts. They couldn’t afford debit and credit cards. And they were like, we’re just going to be a small savings and loan club and that’s it. And so some of them began to look around to try to find a compatible philosophy with a credit union and they would merge. We had noticed over the years, the shrinking number of credit unions and when I became CEO, actually the very first month, we took the senior management group out on a weekend retreat.
We sat down and looked at every credit union individually and we said, since the credit unions are our market, let’s look at their markets, but let’s see what they need from us. And we kind of were brutally honest and we saw a continued decline in credit unions. We also saw a market from our end that was rapidly changing. Our larger credit unions were growing some levels of expertise that we would need as an organization, as their trade organization. Our strongest need for them was in the governmental affairs area, to protect regulations and legislations and that type of thing. Our smaller credit unions really relied heavily on us for audit. We had an accounting/bookkeeping service or an accounting center for smaller credit unions. And I shouldn’t say just for smaller credit unions, because some of our larger credit unions used it for bank recs and that kind of thing, which their auditors love and CUA loved.
But as we looked at the credit unions’ markets and our market and how we could best serve, it didn’t take a rocket scientist to realize something needed to happen. So we added strategic discussion to every board agenda. And we would sit down and we may spend 30 minutes. We may spend half a day talking. And during that first weekend retreat, we developed four different strategies, our outcomes for the board. One was status quo. We’ll just hang on as long as we can and let nature take its course. We could also try to combine services with another league, just sort of let them be the expert in this area. We would develop expertise in this area. We looked at mergers, and then we wondered if there was a fourth option out there.
We looked at Texas, which had a regional concept at that time. Bear in mind, this was probably around 2008 or 2009. As we began to move forward, looking at these various options, we would discuss them with the board. What we finally came to was the idea that we would invite leagues philosophically aligned and geographically close to come in and talk to us about what they had at this time. Florida and Alabama had already combined into one league and we invited them to come in like a southeastern credit union. We had Georgia come in, we had North Carolina come in, we had Virginia come in and we had Tennessee come in. We were doing businesses.
Our corporate gathered at that point; we did joint staff meetings, joint training, philosophically. We were aligned. We met with each of the leagues; we invited the league president and any other staff they wanted to bring at that time and their board chair to come over. And we would go off campus. We would spend a complete day meeting and talking; we’d bring them in the night before, take them to dinner and then spend the whole next day going through options and whatnot.
So Steve, you started interviewing leagues throughout the Southeast. And was that because you had decided on a particular outcome for the South Carolina league or through these interviews, you were going to figure out the outcome for the league?
It was a combination of the two. We were talking with the leagues to see if there would be the possibility we may partner with another league on various services. We were also considering if we were to merge our league or combine where we philosophically were the same, what type of services would our credit unions gain that we didn’t have and would they lose any of those services? What was the dues structure, all of that type of thing, what we were trying to do when we began that process, as I said, we had seen the trend and it was not good. We wanted to be proactive. We wanted to, I guess in effect, kind of come to this problem where we were dealing from a position of strength and not weakness. We didn’t want to wait until the well was almost dry and kind of have to come with our hat in our hand and be forced to make a decision. And so that’s how we came about this method of sitting down with the credit unions and talking.
But have you seen this trend continue for other leagues in other areas? Obviously you’ve seen it very much for credit unions. I assume the trend is also there in leagues.
Yes, it is. I have not remained real active on the out-of-state scene. I still work with some credit unions, on training and planning sessions and whatnot in the state, but I do sort of keep up with where things are going. I think that as you just mentioned, credit unions are combining to be able to reach economies of scale, to offer their members what they need. You’re seeing the same with leagues. Leagues are really different creatures. The only thing you have in a league that you can say you offer is service and your people, they are experts—the ones who bring that to the table. So you’re top heavy on a league as far as the cost to deliver that expertise. However, credit unions with limited resources, especially in low interest times, want their dues to be as low as possible.
It’s like what Tommy Delk used to say, the highest paying dividend or interest rates and the lowest low price loans. That would be absolutely wonderful. I would love to have a wife that loved to cook and didn’t spend money. I don’t have either. But as we’re looking, we finally settled on the fact that North Carolina was pretty much identical to South Carolina. They faced the exact same problems we did. We met with their board, we had joint board meetings and staff meetings to gather, to discuss. And what we ultimately decided to do was if the credit unions approved it, we would liquidate the two leagues on the drop dead date and form a brand new league, the Carolinas Credit Union League was to be split fairly equally between the two states in the beginning.
Board members came up with the bylaws, which again required representation at a certain level from both. We flip-flopped the annual meetings—one year in Myrtle Beach in South Carolina, one year at Pinehurst in North Carolina. I had already announced my retirement for that “drop dead” date. And John Wright, who was president and CEO at that time in North Carolina, became the CEO of the new Carolinas Credit Union League. What really drove us in doing what we did was not just to ensure that the entities succeeded and continued, but it was in what services credit unions needed in both states. For the final vote in South Carolina, we had 52 credit unions that actually voted in favor of the merger and two that voted no.
And in North Carolina, they had, I think, either one or two no votes. So we spent over a year going around to credit unions and meeting with them— regional meetings, chapter meetings, educational sessions—at every gathering the leagues hosted. I would bring John into South Carolina. I would go to North Carolina. We made our staffs interchangeable. We were already using a legal compliance service that North Carolina had. We were doing printing and check processing with them. Our audit services were interchangeable, and things went really, really well. I will tell you that at times I used to worry about the future of the movement because I would see these trends going the wrong way, but when I retired, I had a really good feeling and I can tell you that I’ve stayed in touch with staff from both leagues. And I really still have that good feeling today.
Looking back then on the process, on the interviews, on the things that you didn’t ask or the things you didn’t think of, is there anything that kind of stands out? I know you said you could take up hours with all the mistakes you made, so we won’t cover all of them, but just in regard to the process of deciding to merge the league—is there anything you kind of go back and say, you know, I wish I’d done a little bit more of that, and that was a real detail that was important again. Of course, we’re talking to league leaders who might be in this situation.
Sure. I think when I look back on it, there are a couple of things that kind of stand out to me. I really wish we had come to a decision a little sooner and spent more time meeting individually with credit unions. I tried to meet with as many of my CEOs and their boards as we could to answer questions, to make the presentation, to let them know why we were doing what we were doing, what the effect would be. And I think John did the same in North Carolina. I think it’s just kind of tough when you’re trying to get around and see, 89 or so different credit union CEOs. It was interesting that of the two no votes in South Carolina, one had told me early on when I met with them, they understood the need for it, but they just weren’t ready to let go.
The other credit union CEO met with me, but would not let me meet with this board. And I could kind of tell where he was coming from. He didn’t want to see it, but like I said, the other item that kind of goes hand in hand with what I’m talking about, about meeting with credit unions, is that our smaller credit unions were very concerned that they could be left out. We had a division in the league that we called our emerging credit union service. And that was to concentrate on those credit unions. And we kind of drilled into their heads that the emerging credit unions weren’t all small credit unions. We had a very small hospital credit union that decided if we’re going to exist, we’ve got to have checking accounts. Well, every model we ran showed they weren’t going to make it doing checking accounts. Didn’t matter. They did checking accounts. They got into ATMs. That credit union today is flourishing, it’s about a $300 to $400 million asset credit union. I guess healthcare is where you want to be.
So it kind of sounds like when you look back on that decision, it looks like the right decision and obviously credit unions are flourishing throughout the country. You know your feedback to try to spend more time meeting with the leaders of credit unions in a state as small as South Carolina seems fairly more achievable than it would be in states that are larger. Maybe they don’t have as much density in credit unions; I guess that would depend. Thank you for your insights. That’s all the insider or credit union knowledge we have for this episode. If you can’t wait for the next episode, they’re always available through our website, that’s act-advisors.com, act-advisors.com. Thank you, Steve Fowler. We appreciate you greatly. Thank you to our listeners. We’ll look forward to talking to you next time on CU.
Thank you. I appreciate you having me.
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