Humble, Hungry, And People Smart: The 2-Decade Reinvention Of Northern Credit Union

Investments in culture and technology have underpinned the rise of this North Country cooperative.

 
 

CU QUICK FACTS

Northern Credit Union
Data as of 12.31.19

HQ: Watertown, NY
ASSETS: $282.7M
MEMBERS: 31,709
BRANCHES: 9
12-MO SHARE GROWTH: 15.2%
12-MO LOAN GROWTH: 8.4%
ROA: 0.60%

After 65 years of operation, Northern Credit Union ($282.7M, Watertown, NY) still strives to remain humble, hungry, and people smart. After all, it’s those three guiding principles that have helped the mid-size credit union become one of the most successful and enviable cooperatives in the state of New York.

The credit union got its start in 1955 as New York Air Brake Federal Credit Union. At that time, it served a blue-collar membership in Watertown, NY, named for the Black River and its falls that powered the city’s manufacturing and industry. In 1996, after mergers with several smaller credit unions and expansion into Jefferson, Lewis, and St. Lawrence counties, the credit union rebranded as Northern Federal Credit Union to more clearly articulate its field of membership. On October 1, 2018, the credit union dropped “Federal” from its name and again expanded its field of membership, by five additional counties, through conversion to a state charter. Today, Northern serves five of seven counties in New York’s North Country at the state’s northern frontier.

“It’s rural,” says Nathan Hunter, the credit union’s CFO. “And unlike the city, the community is close. We take pride in offering solutions for these people.”

And often, Northern has found that offering solutions to members translates to a resource more valuable than a product or service: trust.

“The trust and business we’ve earned from our members has a lot to do with our approach,” says CEO Dan St. Hilaire. “We try to be real with them, not sell them something they have no interest in and will derive no benefit from.”

At 8.4%, 15.2%, 11.7%, and 4.9%, respectively, the credit union’s annual loan, share, asset, and membership growth all bested the average for state, asset, and national peers in the fourth quarter of 2019. The performance highlights the strategies of a successful shop well-positioned to succeed in the next decade. But rewind the clock 17 years, and success was not such a sure thing.

A Better Purpose

It’s Friday. Payday. Summer 2002. Northern’s long-term CEO is retiring and Dan St. Hilaire walks into the lobby of the credit union’s corporate branch to interview for the position.

“I had to navigate my way through six lines of people who literally had their backs against the wall,” the CEO remembers.

According to St. Hilaire, tellers were running triple duty, answering and closing consumer loans while processing transactions.

“If they didn’t answer the phone, the former VP would come out and yell at them in front of the members,” he says.

That was his first impression, and the more he learned about the organization, the more he understood the job he needed to do.

At that time, the credit union was under a Letter of Understanding and Agreement (LUA) from the NCUA, and St. Hilaire says there were more regulators in the corporate office than employees on some days. The leadership structure was broken, the core system archaic. Each branch had its own phone number, only two employees had access to an AOL internet connection that crashed every Friday, and non-leadership staff had unionized as a last resort following years of voicing concerns to management and leadership, to no avail.

We had people here with real heart, conviction, and determination who desperately wanted to work for a better purpose.

Dan St. Hilaire, CEO, Northern Credit Union

“If anyone knew what was going on inside the organization, they would have run away,” St. Hilaire says.

So, why did St. Hilaire, a seasoned leader who previously served as CEO at three credit unions, two in Maine and one in Iowa, want the job?

“Despite a myriad of internal issues that threatened its continued existence, the credit union had 23,000 loyal members” he says. “And, we had people here with real heart, conviction, and determination who desperately wanted to work for a better purpose, including a dedicated board who shared my vision and has contributed greatly to it from my first day.”

A Foundation Of Trust

There was a lot to build on, and for St. Hilaire, that started with trust.

“My role was to restore trust in leadership for the 29 people who worked here, our 23,000 members, and anxious federal regulators,” the CEO says.

To do that, he simultaneously worked on culture and the long list of LUA items, then re-engineered a set of products and services that members would want to use. Within weeks, the credit union began establishing a new set of core value statements that represented what the financial institution wanted to be as well as the kind of employees it wanted to hire. It took several weeks to draft the initial list and a few more weeks to solicit the feedback of employees, present the list to the board, and finalize — with unanimous support — eight core value statements, which included:

  • “Driven by a common passion to “WOW” our members in doing whatever it takes to exceed their expectations.”
  • “Focused on conducting all business, internally and externally, with the highest degree of honesty, integrity, consistency, and ethics.”

Northern took a similar approach in building its mission and vision statements, which did not exist prior to his arrival. St. Hilaire says the process was “engaging” and “transparent” and credits it with helping to establish among staff members a sense of ownership that is the foundation for the shop’s success.

“If we’re going to call them owners, we’ve got to treat them like owners,” he says. “That means giving them a real opportunity to influence direction on important items.”

BEST PRACTICE: CORE VALUES CAN EVOLVE

When Dan St. Hilaire became CEO of Northern Credit Union in June 2002, he engaged the organization in creating its first ever set of core value statements. In early 2019, Northern re-evaluated those eight statements and reduced them to six. “We rephrased, condensed, and consolidated to reflect how we’ve modernized and evolved as a credit union,” says Jessica Ridsdale, senior vice president of human resources, training, and compliance.

On the member side, in 2003, Northern started building trust through home equity and residential mortgage loans. Product performance quickly grew Northern’s loan-to-share ratio, generated other relationships, and significantly improved ROA. In late 2006, Northern’s checking account penetration was in line with state- and asset-based averages. In 2007, Northern introduced a rewards-based checking account that paid up to 6% interest for qualifying members. The credit union immediately began to grow wallet share, and by year-end 2007, 62% of members had a Northern checking account. Today, that’s up to 82%.



“We decided the only way to build the organization through the lens of our core values, mission, and vision the right way was to build long-lasting relationships,” St. Hilaire says.

Timing was everything. While many banks and credit unions pulled back at the onset of the Great Recession in late 2007, Northern’s leadership chose to stay the course and remain true to their purpose, including eliminating half of its 32 fees, knowing area unemployment would spike and wanting to make members’ lives easier. To this day, it hasn’t reinstated those fees.

“Families in our area were experiencing real hardship,” the CEO says. “Eliminating fees for those living paycheck to paycheck made a meaningful difference.”

A Best Company

In his effort to improve culture and identify internal champions to manage it, St. Hilaire tapped Jessica Ridsdale, the credit union’s senior vice president of human resources, training, and compliance, to establish a culture committee in late 2015. There was an application and vetting process for applicants interested in joining the committee, which contained a cross - section of departmental participants ready to serve as more than a mere cheerleader.

Anyone can say ‘No.’ It’s our job to find a way to say ‘Yes.'

Brian Caird, Director Of Underwriting, Northern Credit Union

“We wanted those who were strongly opinionated and wouldn’t hold back if they have a concern about our culture,” St. Hilaire says.

The committee conducts surveys to take the pulse of the organization. However, its biggest responsibility, in combination with human resources, is to administer the application process for the Best Companies to Work For awards program, sponsored by the Best Companies Group, an independent research firm.

In 2019, Elaina Mendoza, Member Relations (Pictured), and Amanda Cupp, Member Relationship Supervisor, received The Best Companies To Work For in New York State designation on the credit union’s behalf.

Culture can be difficult to quantify and harder to grade. As an organization that invested time and effort into rebuilding its culture, however, Northern wanted a way to measure how far it had come. So, in 2017, the credit union entered the statewide competition.

The first year, Northern ranked 26th among small- to medium-sized companies and third among similarly sized financial institutions in New York state. That’s notable because rankings are based on a workplace survey an organization’s employees complete anonymously.

“We don’t get any updates other than the number of people who participate until results are announced,” Ridsdale says. “The program paints a true picture of what it’s like to work here.”

Although 26th and third were appreciated, more important to St. Hilaire was the ability to dig into the results, which Best Companies Group releases in a report. Specifically, the CEO wanted to see staff’s trust in leadership.

“We saw employees generally believed in the direction of the credit union,” he says. “But there was room to improve.”

That improvement has taken several forms. In 2017, Northern instituted team-hiring practices to ensure new staff members were as culture-focused as the credit union.

“We realized we should look less at a resume and more at who they are as people,” St. Hilaire says. “If they aren’t a cultural fit, it doesn’t matter how talented they are.”

Now, rather than applicants interviewing first with human resources and then coming back to meet with others in the organization, team leads and St. Hilaire join HR from the start. Since 2017, St. Hilaire estimates he has sat in on more than 500 interviews, which the CEO likens more to conversations in which Northern is looking for signs the applicant’s values and attributes align with the credit union’s guiding principles and purpose.

BEST PRACTICE: PURPOSE POWER PERFORMANCE

Northern’s purpose is to enhance their member’s financial wellbeing and deliver an exceptional experience in every interaction.

In addition to improving hiring practices, Northern has taken steps to improve training and support, too. Northern gives new hires a copy of The Ideal Team Player by Patrick Lencioni and asks them to read it as well as complete an assessment that helps them understand their strengths and weaknesses. New hires then discuss their results with their teams so everyone understands how to work together and support one another.

“We talk about providing everyone with a GPS for success,” Ridsdale says. “That comes from trusting in the feedback offered by leaders and peers and always doing the right thing.”

And giving feedback is key. Without it, Northern’s employees risk shortchanging one another, the CEO says.

“Feedback is core to our culture,” St. Hilaire says. “We need everyone to understand they’re doing us a disservice if they don’t offer feedback when they see learning opportunities.”

So, have these improvements paid off? Indeed, they have.

In 2018 and 2019, Northern ranked first and second, respectively, in the Best Credit Union to Work For national ranking among asset-based peers, with assets between $200M-$500M. The credit union expects to perform well again when the 2020 results come out later this year.

“The win and high placement give us a sense of pride in everything we do,” Ridsdale says. “We’re connected on a deeper level.”

A Progressive Vision

When St. Hilaire joined the credit union, he brought with him the desire to spark a cultural change. Externally, he also wanted to radically alter the credit union’s physical footprint.

“I thought we had real opportunity to differentiate ourselves from the competition through technology and service,” the CEO says. “Especially if we acted fast.”

In practice, this meant investing in technology. Since fourth quarter 2003, the credit union has run an operating expense ratio north of 5.6% each quarter as it seeks to better its self-service capabilities through technology. Since St. Hilaire took the helm, the credit union has opened four branches that all house smart offices in which members can privately video chat with agents to open accounts or take out loans. Additionally, Northern was an early adopter of personal teller machines and today operates 17. By the end of 2020, the credit union expects that number will increase by 10, to 27.

We realized we should look less at a resume and more at who they are as people. If they aren’t a culture fit, it doesn’t matter how talented they are.

Dan St. Hilaire, CEO, Northern Credit Union

Technology helps the credit union meet members where they are, but the strategy doesn’t work without products and services that members need.

“We look for ways to provide solutions to our members,” says Dan Estal, vice president of lending.

Those solutions consider the credit union’s deep roots in blue-collar communities, which might be more accustomed to seeing roadblocks than welcome signs.

“Anyone can say ‘No,’” says Brian Caird, director of underwriting. “It’s our job to find a way to say ‘yes.’”

A commitment to service combined with the understanding the best way to serve members is to meet them where they are means Northern offers products such as a high-interest checking account that pays 2.26% up to $35,000 as of press. And as an alternative to a VA loan, the credit union also offers an equity advantage mortgage, which is a hybrid HELOC-mortgage product that requires 0% down and no PMI.

BEST PRACTICE: CHRISTMAS IS FOR CLOSERS

During the holiday season, Northern purchases Christmas trees as mortgage-closing gifts for members. “We give them something they need for where they are in life,” says Heather Moran, assistant vice president of lending.

And then there’s Northern’s NEXTProgram. Targeted specifically at younger adults who are just starting out, the program includes a savings account that pays 5% interest up to $500, checking with ATM fee refunds or cashback, a first-time homebuyer product, student loans, and an auto loan up to $12,500 plus a micro loan up to $1,500 that don’t require a credit history.

“If we identify one person who needs a particular product or service, there’s probably more,” says Heather Moran, assistant vice president of lending. “That’s when we work to introduce something new.”

If the credit union’s expanding membership is any indication, Northern will be working on new products and services for the foreseeable future.

In October 2018, Northern converted from a federal charter to state one, increasing its county count from three to eight and dropping its members-per-potential-members ratio from 16.9% to 3.9%.

Onondaga is one of the new counties Northern has added to its field of membership. That’s important because it includes New York’s fifth-largest city, Syracuse. In the coming years, the credit union will work to serve this new population through new products and services, including member business loans and credit cards, as well as new relationship centers and delivery channels.

It’s the culmination of a nearly two-decade journey made possible by years of investments in culture and technology. But as a new decade begins with social and economic uncertainty, Northern will rely on all that’s been built before to help members get through what comes next.

“Our mission hasn’t changed,” St. Hilaire says. “Every day, every month, every year, we get stronger.”

Wait, There’s More!

This is just one section of the Anatomy Of Northern Credit Union series that appears in Credit Union Strategy & Performance. Read the whole discussion today.

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Anatomy