Closing the Credit Union Doors in Appleton

After 31 years at the helm of AAL Credit Union, Roger Fischer, and his counterpart, Kay Hinkens, president of AAL Members Credit Union for 14 years, spent their summer not on vacation, but at work, hammering out the closing of both institutions.

 
 

After 31 years at the helm of AAL Credit Union, Roger Fischer, and his counterpart, Kay Hinkens, president of AAL Members Credit Union for 14 years, spent their summer not on vacation, but at work, hammering out the closing of both institutions.

Both Appleton, Wisconsin, credit unions were closed June 30 and reborn as the AAL Bank and Trust. They kept most employee positions intact, but the CEO spots, and most member accounts were transferred.

''This decision was made by our sponsor of 14 years, the Aid Association for Lutherans,'' said Hinkens, whose CU was formed to serve fraternal members of the Aid Association for Lutherans throughout the country. (AAL CU served AAL employees.) ''The sponsor, an insurance company, wanted to capitalize the institution, and, as a credit union, that was not possible. They informed us they would no longer be our sponsor.''

''They can invest their money as they need and see fit, but if they did it as a credit union, it would become the members' money,'' explained Fischer. ''Of course, the members themselves had to decide whether to liquidate the credit union,'' he said, adding that it was a purely democratic process, with which both CU boards of directors struggled mightily.

Hinkens said both CUs were left with three options. ''We could merge with another credit union; we could go out on our own or we could liquidate.'' (AAL Members Credit Union had $187 million-in-assets and 48,000 members; AAL Credit Union had $37.9 million-in-assets and 8,300 members.)

''Going on their own was deemed unworkable,'' said Hinkens. ''We're in our sponsor's building and were using their mainframe. That entire infrastructure would have disappeared and we'd need a new location. The costs would be prohibitive. And because we serve members of AAL in all fifty states, no local credit union merger partner seemed appropriate.''

Both boards decided it was in the best interest of members to explain the circumstances and conduct a vote to liquidate. Members could opt to sell their loans and keep deposits in the newly formed bank, or move them elsewhere. About 90% of AAL Members CU did just that, and 93% of AAL Credit Union members did so.

''To split the capital, we paid a liquidity dividend of $50 to each eligible member, after repaying all debts'' said Hinkens. ''Most employees were offered positions. Neither Roger nor I were asked to remain.''

Hinkens' CU career spans some 30 years time (she started with Nationwide CU) and later, helped to start AAL Members. ''I'm proud of what we accomplished here. Without branches, we built a thriving credit union using mail and later, the Internet. Neither of these credit unions went out of business for safety and soundness concerns. Our sponsor just went in a different direction. I'm glad they were considerate enough to take the members' options into consideration,'' she said.

AAL Bank and Trust had its banking powers approved in March, 2001 and opened its doors as of June 1; AAL Members CU closed its doors on June 30 th.

''There's no object lesson here,'' surmised Hinkens. ''This is really nothing new. Military credit unions have closed before. Credit unions sponsored by paper mills and other kinds of manufacturing companies have closed. I don't see a pattern. Our sponsor had a different vision to have a capitalizing entity to grow. I've been treated well and I have no regrets.''

''AAL Bank and Trust will not likely be a 'traditional' bank,'' noted Hinkens, because AAL is the sole stockholder. ''I think it'll be more of a 'fraternal' bank that will keep its members' interests in mind. But it is a stock held bank and not a credit union. The members no longer own it.''

''Yes, something was lost,'' agreed Fischer. ''The members lost stock in something they owned, something in the past. The sad part is, with a lot of people- if you asked them what it was- they probably wouldn't know.''

Neither Fischer nor Hinkens have made definite plans of their own. ''I thought about driving a truck. Or working for a builder. Or maybe taking another credit union job. I don't know yet what I'll do.'' Hinkens said she is through with the 8-to-5 grind. ''I've had a passion for credit unions almost my whole life. Maybe now I'll try something else. I might work with the local arts community, do some volunteer work consulting for other credit unions. But first I'll take a few months off to just relax.''

 

 

 

Aug. 13, 2001


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