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Wednesday, 19 June 2013 15:41

Innovation Credit Unions losing sight of history in southwest

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I would like to discuss the recent announcements made by the Innovation Credit Union. I know how easy it can be for the general public to hear these stories in the news and think “too bad for them, glad it’s not me.” 
I am hoping that this letter will make everyone that is a member of Innovation Credit Union realize how big of an impact these announcements really have on everyone.
I was able to attend two of the community meetings this week and also took the time afterwards to ask the CEO and some of the Board members some questions and share concerns. My overall feeling is that this credit union has lost sight of its visions and values. I think over the past several years there has been some decisions made at the cost of members and we are just beginning to feel the consequences. I also think that the decision to close 6 branches and cut other costs is a knee jerk reaction that has been accelerated by the recent federal budget.
During the presentation that has been prepared for these community meetings several trends, statistics and comparisons are made. One of the topics covered expresses concern over the lack of members who utilise our credit union for all of their financial needs. In order for the organization to make money, a percentage of the deposits must be realized in loans to other members. Innovation members are not using the credit union for enough of their financing.
At the meetings I attended, there were several examples raised of individuals or businesses that tried to access loans or mortgages through the credit union but were given unrealistic requirements such as 65% down payments.
Also mentioned was the need for Innovation to try to meet the rates of its competitors. We were told that if Innovation matched the rates of competitors the profit margin is so small that it’s not worth it. The important thing to understand here is that credit unions do not operate the same as banks. They have requirements and regulations they must meet in order to remain a credit union. I understand that Innovation may not be able to offer the same rates as all of its competitors. I do think that they need to communicate how more loans increases their income which is returned to its members through member allocations. And there is probably some room for improvement in offering better loans to members as well. This is after all what their website states is their vision:
Our strength supports members, businesses and communities as they work to achieve their own financial goals. It enables us to offer competitive rates and an exceptional choice of products and services.
As a member who uses the Hazlet Branch for most of my banking, I was inclined to ask questions specific to this branch. At no point during the community presentations are any specific numbers shared outlining the financial status of all branches and how the six set for closure compare. Our community requested these numbers for our branch to have before the meeting. One of the greatest expenses of any branch is the overhead allocation. Although we were never given a detailed list of what is included, after asking several questions my understanding is that Innovation as an organization has overhead costs for the whole organization. These include things like HR costs, software, programs, etc.
The overhead costs of the organization are then allocated to all branches using a formula that is determined by the branch’s assets. The overhead allocation for the Hazlet Branch for 2012 was approximately $328,000.00.
That cost is not going to go away when our branch closes. Innovation is working to bring overhead of the organization down over time. But for right now that overhead will be passed on to the rest of the existing branches along with the allocations from the other five branches that are closing. That will increase the expenses for all branches. I wonder how that will affect the remaining smaller branches. I would think that next year there will be other branches that run at a deficit because of it.
At our meeting, we were told that the plan is to annually review the performance of branches as part of their branch restructuring initiative.
Here is another interesting piece of information we learned at our meeting. The new facility in Swift Current is still not paid for. We were told there is still over $3 million owing on that building. That expense is included in the overhead allocation I was just referring to. In other words, part of the reason branches like Hazlet’s are not making money is because we are paying for that building. The really frustrating part is that that building was built in 2005. In the charts and figures that were presented at the meeting we were repeatedly told that trends are showing that membersuse in branch transactions less and less all the time.  These trends were already at play when the decision was made to build this multi-million dollar facility.
The last thing I want to share is Innovations Credit Union’s lack of interest in working with branches to increase their viability. The announcement of the closure of the Hazlet Branch came as a shock to our community. We are a community that has seen a steady growth over the past decade. As many of you will know, we are very creative and innovative and find ways to keep our community viable. Having the Board Members and Staff come to our community for this meeting with absolutely no desire to work out any sort of alternative plan is very discouraging. Listening to Board Chairperson Gord Lightfoot stand in front of our hall and tell us we are not loyal and too passionate was completely unprofessional and uncalled for. It also goes against the values and visions posted on the Innovation CU’s website:
We help make good things happen. Innovation Credit Union has breathed renewed spirit into rural Saskatchewan. We believe in our members, our communities, our Saskatchewan way of life.
I would like to applaud Dan Johnson for all of the time he has spent in person, over the phone and through email over the past couple of weeks. His personal commitment to the members of our Branch has been very much appreciated. It makes me think there is still a glimmer of hope for the cooperative spirit within Innovation Credit Union.
In closing I would like to remind the members, management and Board of Innovation Credit Union that credit unions were started by people in communities like Hazlet. We are the reason credit unions exist. They were started because people wanted a more accessible and personal option than the banks in large centers. The last couple of weeks have shown me that the focus of Innovation Credit Union has changed from the beliefs they were built on.
If you are a member like me and you believe that credit unions are meant to live up to their co-operative roots then start making the current management and Board of Directors accountable for the values they claim to be based on. Call them, email them, and visit them. After all, according to their website, “Members First!”
And for those of you that are members of credit unions other than Innovation Credit Union, doesn’t this make you wonder if this is something we will see in all credit unions as we move forward? Saskatchewan used to have 300 credit unions and now they count 50. Bigger isn’t always better, especially if you are in a rural area. Start asking questions before you are placed in a situation like ours.
Rebecca Anderson
Innovation Credit Union Member……..for now.

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