No credit union left behind: Reimagining the role of credit union leagues

[00:00] Juan Fernández Ceballos: We need to wake up. I think we need to realize that if we’re not growing, we’re dying, and we need to identify those credit unions that are willing to put in the work. And then we as organizations that support credit unions, like leagues, we need to be there to hold their hand and really help them get there.

[00:19] Narrator:  Welcome to 22 Minutes in Lending, your go-to podcast for insights on all things lending from lending practices, regulatory updates, how to enhance lending efforts and more. In each episode, Vince Passione connects with industry leaders to discuss the latest trends and happenings around the lending industry. Let’s dive in to the latest in lending.

[00:41] Vince Passione: Welcome everyone to 22 Minutes in Lending. I’m your host, Vince Passione. I’m excited to welcome Juan Fernández-Caballos, the president and CEO of the Louisiana Credit Union League as our guest for this episode. Juan Fernández has worked in the credit union movement for over two decades, and he has extensive experience in both credit unions and government affairs. Juan Fernández, welcome to the podcast. It’s great having you.

[1:00] Juan Fernández Ceballos:  Pleasure to be here. Thanks for the invitation.

[01:03] Vince Passione: Great for you to join us. And so you’ve been about 18 months in a new job, right? In the Louisiana Credit Union League, which is now Luminate. It sounds like a great brand. Tell us a little about the league. How many credit unions are there? How many members?

[01:16] Juan Fernández Ceballos: Well, again, Vince, thanks so much for inviting me. And it has been about 18 months since I made the transition from the hot desert to the bayou here in Louisiana. Our league is headquartered in New Orleans. We have roughly about 145 credit unions in the state of Louisiana, really from basically corner to corner of the state. We have credit unions in every area of the state.

[01:43] Juan Fernández Ceballos: A big difference between Louisiana and New Mexico, I would say, is that we have a lot of small credit unions. Roughly 80 credit unions in the state out of the 145 have assets of $50 million or fewer, so we have a lot of small credit unions throughout the state. But it’s really been a great journey. Louisiana, it’s a really fun state as most people know, when people come visit.

[02:08] Juan Fernández Ceballos: There’s a lot of culture, food, things to do, great, great people, but also has a lot of opportunities. And that’s really what drew me to Louisiana, is I really felt I could make a difference and help credit unions really reach more folks in Louisiana with the power of credit unions.

[02:28] Vince Passione: Great. Now, researching, I was looking at the new website because the old website, somehow I got knocked off and I found Luminate, so great brand. And I saw collaborate, innovate, and thrive. So talk about what the brand means to you, and when we get down to these three components, it looks like the three legs of the stool, the collaborate, innovate, and thrive. How does that support the mission of Luminate?

[02:50] Juan Fernández Ceballos:  It’s been 18 months since I came to Louisiana and the board wanted to go on a new direction. So we’d looked at our brand, we had had the same brand for 90 years. This year marks the 90th anniversary. Andwe really wanted to look at the things that we were doing well and how could we do more of those things? We wanted to look at new things and we wanted to identify those things and what were the things that we wanted to stop doing.

[03:18] Juan Fernández Ceballos: So we really settled that collaborate, innovate, and thrive were really the three pillars that really encapsulate what we wanted to strive to do for our credit unions. We really felt that collaboration’s key in order for credit unions to not just survive but thrive. We need to come together and really lean in on the collaboration between cooperatives and credit unions, and we want to be the ones that facilitate that here in Louisiana.

[03:44] Juan Fernández Ceballos: We want to innovate. We want to look for partners that are innovative. We want to come up with new ways to serve members so that credit unions really are ready for the changes of the future. And we want to help credit unions thrive. I’ve been in credit unions now for 21 years, I would say for the whole 21 years, many credit unions have been doing well, have had some growth, but most are pretty stagnant.

[04:14] Juan Fernández Ceballos: And I feel like it’s time for us to really put our thinking caps together and really think outside the box and help credit unions have true asset growth by bringing new people to the credit union space and not just post, but really thrive into the future.

[04:31] Vince Passione: That’s great. So you touched on the, it sounds like almost 80% of your credit unions, you’d classify as small credit unions. And I know you’ve got this no credit union left behind initiative and you’ve been pretty vocal about it. You talk about growing credit unions. It even look like you’re selling T-shirts, so you’re pretty wedded to this.

[04:52] Vince Passione: Tell me, though, we lose about 140, 150 credit unions a year, it feels like, and some of them being merged, some of them being shut down and you hear different reasons. I’ve heard it’s no succession plan, so there was no one to step up and take the mantle from the current leadership. Then I’ve heard, well, it’s FinTech. They don’t have current technology and they’re no longer relevant.

[05:14] Vince Passione: What do you think? What is the issue here? Why do we see we’re losing this many credit unions a year? And that’s been for a while now. When I started 14 years ago in supporting credit unions, there were over 10,000 credit unions. So it’s really disturbing to see numbers around 4,200 credit unions across the country.

[05:34] Juan Fernández Ceballos: So a couple of things. When we say no credit union left behind, we really mean that no credit union left behind. So no matter if you are a multi-billion dollar credit union or a multi-million dollar credit union or even smaller credit union, if you have the desire to be purposeful to really grow to serve your community in innovative ways, we want to be there every step of the way and help you thrive. So that’s what we mean by no credit union left behind.

[06:06] Juan Fernández Ceballos: I think that we have been losing credit unions because I think succession planning is a big problem. I think we need to do a better job of really developing the next generation of leaders, but I think we’ve become a little complacent. I think many boards, the board members have been there for decades and they are used to doing what they’ve been doing. And I think we need to wake up. I think we need to realize that if you are not growing, we’re dying, and we need to identify those credit unions that are willing to put in
the work.

[06:41] Juan Fernández Ceballos: And then we as organizations that support credit unions, like leagues, we need to be there to hold their hand and really help them get there with innovative ideas, with the right sound strategies to really help them not try to compete with other credit unions or banks, but really find new paths forward that will really carve out their niches and really help them be relevant in the future because I think what’s gotten us here is not what’s going to get us to the future.

[07:10] Vince Passione: Now, Juan Fernández, you touched a little bit on boards. And I was at an underground event recently, and Brandi Stankovic was there and I had her on the podcast. And it’s not just at her conference, I picked this up at other conferences as well, that when it comes to leadership, the average age of a credit union CEO has got to be well over, well, 55 plus, I think now. At least those are the numbers that I’ve seen in the past.

[07:34] Vince Passione: And the commentary that seems to be pervasive is a lot of these folks are risk averse. They’re getting close to the end of their careers, making tough decisions like, should I get off this core processor and get onto something that’s more contemporary where I might be able to open up some APIs? It’s a big endeavor, could take multiple years, lots of risk.

[07:55] Vince Passione: And that those folks need to eventually retire out so that we can bring in younger leaders, new leaders, more willing to take some risk. Is that something that you see as well? Because I can understand some of it. To make change takes time, and if you’re towards the end of your career at a credit union, are you going to take that risk?

[08:19] Juan Fernández Ceballos: I think risk is a huge factor. I also think that boards of directors should reflect the type of member that you’re trying to attract to your credit union so that they understand the needs of those communities, they understand the desires of that community, and they could also be ambassadors to those communities.

[08:40] Juan Fernández Ceballos: So if you’re trying to attract young members and lower the average age of your membership, well, perhaps you should have some people from the younger demographics in your community, professionals that are well-connected in those communities so that they can let you know and help inform the strategy of the credit union of what’s needed. But they could also be out there getting their friends and family and networks to join the credit union.

[09:10] Juan Fernández Ceballos: And look, I’m not here to tell people, hey, it’s time for you to get out of the board of directors. I think we need to be thankful to people that have really served for many, many years, but at the same time, we also need some fresh blood and fresh ideas in our movement in order for us to remain relevant.

[09:32] Kara: This is Kara VanWert, chief lending officer at Veridian Credit Union. Since 2016, we’ve been working with LendKey and joined the Member Student Lending QSO to help provide student loan solutions to our members. As the current QSO board chair, I’m proud of the QSO-LendKey partnership as this has allowed Veridian to help over 12,000 of our credit union members finance their education and improve their financial health.LendKey’s streamlined processes simplifies the lending experience, making it easier for our members to
access the financial support they need.

[10:09] Vince Passione: Well, I talked about leadership and the impact it might have on smaller credit, it’s about FinTech. Every conference I go to, people just talk about FinTech. And I have pretty strong opinions, FinTech’s been around for a long time. I graduated a computer science degree in 1983, so I am a trained computer scientist, I programmed for a long time. So to me, FinTech’s nothing new.

[10:35] Vince Passione: But it seems real new to credit unions, and we throw it around as this panacea. What’s your opinion on FinTech and the impact it’s going to have or could have on smaller credit unions or even larger credit unions?

[10:48] Juan Fernández Ceballos: I think technology is here to stay, and I think we just need to keep in mind, well, why are we doing the things that we’re looking to do? What’s the problem that whatever FinTech is looking to solve? I think there are some FinTechs out there that are doing some great things that credit unions really need and desperately need and couldn’t do on their own. So I would say we need to keep an open mind.

[11:08] Juan Fernández Ceballos: I think that’s a role for leagues to play, is let’s identify those FinTechs that could really help propel small
credit unions forward, help them save money, help them offer new products and services through their
membership. But at the same time, again, I don’t think it’s a silver bullet that’s going to solve all the ails of
the world. I think that no FinTech can really change that connection that a credit union can have one-onone, getting to know someone.

[11:38] Juan Fernández Ceballos: I know many credit unions that, for example, have centralized lending and they do everything centralized. And just yesterday I was listening to a podcast that one of our team members puts together, and she was saying how the first time she ever went to a credit union, she had gone to a bank and applied for a $300 loan to be able to offer her son a Christmas. And the banker basically not only said no, but said, “You’re also never going to be able to own a home.”

[12:10] Juan Fernández Ceballos: She went to the credit union and had a personal connection with the loan officer who reached across the desk and told her, “I listened. I see you and I see where you’re coming from and I’ve been in your shoes.” And got to know her on a personal level, was able to offer that loan, and eventually got her ready to homeownership, and eventually she was able to get a home loan through that.

[12:36] Juan Fernández Ceballos: And that’s where I think you need that combination. You need the tools, you need the technology so that you’re able to serve your members, compete, have those efficiencies. But at the same time, I think you still need that personal touch, that personal connection that you can’t just do remotely or do by machines. I think that if we were to do that, we could just have one credit union in the whole country to do everybody and it would just be an algorithm. I still think we need that personal connection, but do lean in on technology.

[13:11] Vince Passione: No, I agree with you on the personal connection. We run customer service for the loan portfolios that we service for our clients, and we pride ourselves in the fact that we answer the phone and we don’t hide getting to a customer service rep as the ninth option on the list because that’s what credit union stand for, is really being there for their members and having that personal touch.

[13:31] Vince Passione: But when I look at tech and we talked about getting young, I’ve got a 25-year-old and a 30-year-old. And today my youngest daughter moved into her new apartment and the van showed up and I said, “You’re going to tip them?” And she says, “Yeah, but I’m just going to Venmo them with money.” So it’s Venmo, it’s Zelle, it’s Acorns, it’s all these cash apps that requires technology.

[13:54] Juan Fernández Ceballos: It does.

[13:55] Vince Passione: And I agree with you, I think my daughters would benefit from working with credit unions because they’d learn a lot about managing their finances. But to me, like you said, financial technology is technology that’s here to stay. What I struggle with is when I see smaller credit unions trying to take on that decision of that next bill payment system, that next core processor. They’re trying to run lending themselves when many of their clients, the younger ones, probably they don’t want to go to the branch the first cut.

[14:28] Vince Passione: They want to first see in the privacy of their home, will I get approved for the loan? And then they probably may want to go into the branch later. I always thought the QSO model and the cooperative model work so well to reduce the cost of entry, leverage the wisdom of the crowds so that we can make more technology available to these smaller credit unions where it’s more accessible, it’s more economical, and it’s not as big a challenge for them to manage.

[14:56] Vince Passione: Do you share that belief? I looked at your site and you have a bunch of FinTech partners, some of them are QSOs. But talk to me about that.

[15:03] Juan Fernández Ceballos: I think that that is critical for us. When we talk about no credit union left behind, I think we have a duty to do that. And by the way, leagues used to do that, and in some ways leagues used to do a lot of these services ourselves. So it’s almost like what’s old is new again. And I think we must.

[15:20] Juan Fernández Ceballos: I worked for a small period of time at a credit union in the state of Washington a couple of years ago. And one of the hurdles that I ran into is anytime I wanted to do something, BiServ wanted to slap a fee and it made it extremely cost-prohibitive. And they were small, but they were a larger small, I guess let’s call them medium. So that’s even more pronounced for smaller credit unions.

[15:48] Juan Fernández Ceballos: So I do think that leagues ought to have to play a role in negotiating and creating QSOs and creating purchasing pools so that these tools are necessary or are affordable by credit unions because they are necessary. And to your point, Vince, I can’t remember the last time I wrote a check. I use Apple Pay almost all the time. I do think that for smaller credit unions, they do need to have a lot of these tools.

[16:24] Juan Fernández Ceballos: However, I think it does have to be that combination. And that’s really what makes us unique because that’s what makes us different from a Bank of America who has all the technology in the world, but they don’t have the personal touch, but they do have the technology. So I think where we can really strike that balance is we can have both. We can have the technology and have that personal connection that makes us different.

[16:50] Vince Passione: An interesting anecdote. So I was at the Underground event in Vegas just before Money20/20. There were probably maybe 75 credit unions there for this particular panel on small credit unions. And Tyler Valentine was the CEO of StagePoint, he was one of our guests. They’re about a $75 million credit union, and they just merged with a WIC Central, and they’re about a $30 million credit union.

[17:12] Vince Passione: So not a huge credit union to merge with, but his challenge was his core processor of WIC. He’s trying to merge the core systems and now as he said, “I’m being held hostage in how I get out of this.” Which was hard to hear. And then I talked to him about the contract and it’s, the contract’s for 10 years, there’s all kinds of penalties to get out. I have to work with the core processor to actually do the conversion. They don’t have an incentive to convert me off.

[17:43] Vince Passione: Which is really tough to hear. Here’s someone who is trying to build scale, solve a problem for both credit unions. He’s gotten through the tough part to merge and now he’s going to get hung up on this core processor conversion, I think.

[17:56] Juan Fernández Ceballos: It’s a big, big problem. And again, the core is at the core of everything a credit union does. No pun intended, but if you want to offer a new service, you have to use a core. If you merge, you have to figure out the core situation. It’s a conundrum, and I think we need to do better, and I think that cores need to do better. And I am not a fan of these contracts that many of them have because if you’re that good, if you’re that confident behind your product, you wouldn’t have to hold people hostage because people would want to stay with your product.
[18:30] Juan Fernández Ceballos: So I think that we as leagues, we as people that care for credit unions and FinTech need to come together and really think about strategically about how to help credit unions through these transitions because again, the strategies that got us here are not going to be the strategies that will help us grow and thrive into the future.

[18:51] Vince Passione: So switching gears, new administration, always a tough one. We’re going to talk a little about politics. So you guys play a big role in advocacy. So what does the incoming administration mean for credit unions? Where are the opportunities? Where are the challenges?

[19:05] Juan Fernández Ceballos: So in all honesty, I think as with everything, a change of administration brings some good and some bad and some ugly. So I think in the good part, I think we have been battling now for, it feels like forever, a lot of new regulation. We already have thin margins and it’s felt for a long time that Washington was looking for every way to even shrink those margins even further through regulation and attacking fees, that’s the other.

[19:42] Juan Fernández Ceballos: So I think that’s going to be much less of a concern going forward. I don’t think we as credit unions need to focus in quite as much in those areas. But I do think we have some new threats and some new threats that honestly could be some of the biggest threats are movement has seen in recent history. If you look at Project 2025 and Agenda47, it’s clearly laid out that the new administration intends to have some regulatory overhaul in consolidation.

[20:17] Juan Fernández Ceballos: We’ve been there. Back in the late ’80s, there was an attempt to really push the NCUA and credit union regulators into banking regulation. And we were successful at not being lumped, other industries were not. And those industries are really gone, in part because of that change. So I think that could be truly devastating. We have a strategy in Louisiana, I think we’re going to have to have a strategy nationally to really stand up and really press on Washington why an independent regulator is needed.

[20:56] Juan Fernández Ceballos: The other one is taxation. I know we’ve talked about this on and off through the years about the threat of taxation. I think it’s real now more than ever. So next year there are literally trillions of dollars of tax cuts that are going to be coming up for expiration. So if Congress did nothing, it would be trillions of dollars of new tax cuts. That’s not going to happen.

[21:20] Juan Fernández Ceballos: So they’re going to come together, they’re going to renew the bulk of those tax cuts, but they’re going to be looking for revenue. It’s something that’s needed, it’s a priority. So they’re going to be looking for what they’re calling tax loopholes. And I know that many of the folks watching this or listening to this will say, “Well, my congressman has promised that they are going to stand up for the credit union tax exemption.”

[21:45] Juan Fernández Ceballos: Well, guess what? This wouldn’t happen in a standalone bill. This would be part of a large tax overhaul legislation, which I think that’s where the danger lies. So I encourage anyone that works in a credit union, anyone that volunteers in a credit union, anyone that cares about credit unions to start getting engaged today, to plan on going to hike the hill, to plan on going to GAC.

[22:11] Juan Fernández Ceballos: Not necessarily to talk about the tax-exempt status of credit unions, but really talk about the impact that your credit union is having in your communities. What makes your credit union unique, special, and worthy of the tax exemption? We have a story to tell. We need to be there and tell it because if we don’t, the story that’s going to be told is not going to be ours.
[22:29] Vince Passione: So league system. You’ve been in the league system a long time, right? New Mexico League, now here, New York Credit Union League. Leagues are contracting too. We’re down to, I think 33 of them. Good things about it, bad things about it. The relationship between the league and what was CUNA, now is America’s Credit Unions. How do you view what’s happening? Is it good in that we’re getting more leverage with fewer leagues? How is it affecting the leagues and their roles for credit unions?

[22:58] Juan Fernández Ceballos: So I’ll start out with a good. I think that leagues are becoming more efficient, they’re doing more in advocacy. They’re able to elevate their advocacy programs and do more within advocacy. I have worked at three different leagues that have been single state leagues. One of the beauties of being a single state league is that we can get to know our CEOs really well. We get to know what their challenges are, what their communities look like. We’re able to provide a lot of resources to them.

[23:29] Juan Fernández Ceballos: So I do believe that as you have more and more regional leagues, the smaller credit unions become smaller and smaller. And I think that’s a problem because as we were discussing before, I think we need to do more to ensure that credit unions of all sizes survive and thrive. And as we talk about taxation, we tell our small credit union stories all the time. So large credit unions need small credit unions to be there and to do well as well. So I see that as a potential weakness.

[24:06] Juan Fernández Ceballos: What we’re doing here in Louisiana is we’re part of something called the TRGroup, and it’s seven leagues in the South. It was established maybe nine years ago. We’re doing a lot more with that. And the idea is to have states come together, leagues come together across state lines, not to merge, but really to collaborate and do more together. To create programming together, to do education together.

[24:31] Juan Fernández Ceballos: We’re looking at doing a lot more of that. We’re looking at leaning into collaboration across borders with other leagues so that we can deliver those efficiencies and really increase the value of our educational programming for our credit union so that essentially we can have the cake and eat it too. We can have those efficiencies in that higher caliber of offering while at the same time offering that one-on-one personal connection with our credit unions.

[24:59] Juan Fernández Ceballos: And last but not least, I am very passionate that if we want credit unions to thrive into the future, we need to identify talent and we need to train them, we need to equip them with the tools they need to really be successful in our movement, and we need to really make them passionate advocates of the credit union difference so that we no longer have to be looking at other sectors for talent. We can be developing our own.

[25:28] Juan Fernández Ceballos: So I want to do that because that is the only way to ensure that we have the succession that we need and that we have the younger, more diverse generation of leadership that we’ve been talking about for many decades.

[25:44] Vince Passione: Oh, good point. We’re going to leave it there. So that’s everything we have for today, Juan Fernández. Thank you so much for being with me. I appreciate your insights and the time you spent with us. Thanks to our listeners for tuning in, and don’t forget to subscribe so you can enjoy future episodes. And I’ll meet
you back here at our next 22 Minutes in Lending. Juan Fernández, thank you again.

[26:02] Juan Fernández Ceballos: Thank you. Thanks, everybody.

[26:04] Narrator (26:04): Thank you for listening to the 22 Minutes in Lending podcast. We hope you enjoyed today’s episode. You’ll find links to any resources mentioned in the show notes. If you’re enjoying our show, be sure to subscribe and leave us a five-star review.