The Most Magical Credit Union On Earth

Partners FCU serves the employees of The Walt Disney Company. But making its members financial dreams come true is no fairy tale in a moment of deep economic uncertainty.

 
 

The Walt Disney Company has a simple mission: to entertain, inform, and inspire. And through its various business segments — which include media networks, studio entertainment, and parks and experiences — Disney has grown into one of the largest and most successful media companies operating in the United States.

CU QUICK FACTS

Partners FCU
Data as of 09.30.20

HQ: Burbank, CA
ASSETS: $2.1B
MEMBERS: 181,072
BRANCHES: 13
12-MO SHARE GROWTH: 20.2%
12-MO LOAN GROWTH: -5.9%
ROA: 0.37%

Its operations are so varied, in fact, that not long ago Disney had sponsored more than one credit union.

Founded in 1960 to serve the employees of Walt Disney Studios, Vista Federal Credit Union focused on the feature film production arm of the company. When employees of Disneyland Park — which is located in nearby Anaheim — wanted to take advantage of the benefits a credit union provides, the NCUA encouraged them to start a new cooperative rather than join Vista. They did, and DRC Federal Credit Union was founded in 1968 to specifically serve park employees.

During the 1980s, DRC FCU rebranded as Partners Federal Credit Union and Vista FCU picked up employees of Walt Disney World — located in Orlando, FL — as a select employee group. For the next several decades, the two credit unions operated separately, serving different populations under the Disney umbrella.

The credit unions tried to merge at least twice with no success, says John Janclaes, the current CEO of Partners. When Janclaes joined Vista as CEO in 2004, he knew the history of the two organizations but also believed a unified shop would be key to the future success of both cooperatives. So, he tried again — this time by first establishing a joint venture focused on wealth management services.

Fast Fact: All employees of the Walt Disney Company are called cast members, whether they work in the parks or in its studio, a nod to its entertainment roots.

“We discovered we had more in common than not and could work together,” Janclaes says.

The credit unions finally merged on Nov. 5, 2007. The larger Vista FCU assumed Partners but took the smaller institution’s name. The surviving organization claimed nearly $800 million in assets and more than 100,000 members.

Of course, the merger was just the beginning. For a credit union that serves those who make Disney’s parks and film and TV production the most magical around, the past fifteen years has sure made for a good story.

A Typical Credit Union With Big Ambitions

When Janclaes became the CEO of the combined Partners in 2007, the credit union had growth on its mind.

“We were a typical credit union with big ambitions,” Janclaes says.

John Janclaes, CEO, Partners FCU

The combined Partners had nearly $800 million in assets and approximately 103,000 members. But because all Disney employees were now the focus of a single institution, the credit union could grow by both marketing to new populations and deepening relationships with inherited members. The per-merger Partners posted loan and share growth of 4.6% and 0.5%, respectively, while its average member relationship was $10,350, performance the now-combined credit union knew it could improve upon.

But for the combined Partners to grow, however, Janclaes turned inward.

“For us to succeed it had to start with culture,” the CEO says. “People, processes, and technology.” 

FAST FACT: Partners FCU is a low-income designated credit union, and a large percentage of its members hold blue-collar jobs at Disney parks, resorts, and studios. This past spring, 25% of the credit union’s members were furloughed or unemployed as a result of COVID-19.

The credit union named Karen Spires as chief financial officer — a promotion from her post as Vista’s vice president of finance — and hired a new chief lending officer. The two hires helped retool Partners’ lending discipline and established a relationship-based pricing model to encourage members to do more business with the credit union.

“We wanted to reinforce the idea that if you’re a real participant in the credit union, you’ll get more value in return,” Janclaes says. “What we call ‘fair exchange of value.’”

The arrival of the two hires also coincided with the launch of an executive management school, an internal program that offers training on leadership philosophy and the science behind management. Partners initially limited the training to executives but gradually opened it to managers and now all employees.

“We’re always looking to train up that next group of leaders,” Janclaes says.

On the technology front, financials services was a different world before smartphones and digital-first banking, and Janclaes was focused on strategic changes more so than physical ones. Namely, the CEO wanted to know how the credit union could use technology to grow.

When Janclaes joined the credit union movement in 2004, members prioritized service over rates and fees, and rates and fees over access and convenience. That has shifted over time, he says. Now, members prioritize access and convenience over service, and service over rates and fees. This reversal prompted Partners to invest more in its digital experience over the years.

“We needed more forward-leaning technology that was ready to answer the wants and needs of our members,” Janclaes says.

Three years ago, Partners implemented a “4X strategy” to increase the pace of digital development to four times that of its 2017 baseline. At the same time, the credit union adopted the agile methodology to project management. Together, these two changes to operational philosophy helped Partners reach its goal in 2020 — a year that included releases and updates both large and small, from a new online banking system and person-to-person payments to improved UI and UX.

“We focused on bringing value to members in the areas where they want it most,” Janclaes says.

Two Crises, One Decade Apart

The November 2007 merger between Vista and Partners occurred at an auspicious time. In December, the United States officially entered a recession brought on by a housing bubble burst, subsequent market correction, and subprime mortgage crisis.

Starting in the fourth quarter of 2007, total delinquency among credit unions nationwide began to rise and would ultimately peak at 1.79% in the third quarter of 2010; for California credit unions, delinquencies peaked at 2.35%. At the onset of the recession, Partners held approximately 60% of its loan portfolio in real estate, compared with nearly 52% for credit unions nationally.

Partners set aside cash in reserves and limited certain asset classes to protect itself against losses, says CFO Karen Spires. Total delinquencies peaked at 3.54% and net charge-offs at 2.30%, but capital remained at or exceeded 11% for the duration of the recession.

Karen Spires, CFO, Partners FCU

“It was stressful in the moment,” Spires says. “But in the long-term, I think it helped us understand the risks we hold in our balance sheet and how to continually manage capital.”

Since the recession, Partners has been more likely to sell first mortgage originations to offset concentration risk and prop up non-interest income. Historically, non-interest income as a percentage of total income at Partners has outpaced national and state peers. As of third quarter 2020, 34.5% of its total income was of the non-interest variety, compared with 27.9% for credit unions nationally and 24.2% for credit unions in California.

Additionally, Partners beefed up its capital planning efforts in mid-2018 to better understand the risk present on its balance sheet. Post-recession, Partners has maintained a loan-to-share ratio at or higher than 100%, which presents credit risk. But based on projections for internal investments or adverse scenarios, the credit union wanted to ensure it was covered in case something happened.

Managing through the Great Recession also helped Partners better understand how to meet members’ needs during a crisis.

At the onset of the recession, Partners instituted an aid package — dubbed the Member Assistance Program (MAP) — that included fee waivers, payment deferrals, and other forms of assistance. The skills employees honed while creating the program — such as listening, finding creative solutions, and working across the credit union — proved beneficial when fires and earthquakes in California and hurricanes in Florida necessitated institutional aid. And when COVID-19 brought on economic hardship in 2020, Partners once again expanded the program to meet the needs of members.

Like institutions everywhere, Partners had to help members respond to the pandemic while it was adjusting to a remote-first environment. Unlike institutions everywhere, Partners had to juggle local guidance and the effects of the virus on two different coasts, which at times had significant differences in restrictions.

Thus far, the pandemic has had a real impact on Partners’ balance sheet, though total delinquencies remain lower than the national average; share growth has spiked to more than 20%, and loan growth has moved negative. Infection numbers are rising during the winter months, and the Walt Disney Company is expected to layoff approximately 32,000 cast members in the first half of its 2021 fiscal year — 28,000 will come from its parks division, which has been hard hit by COVID-related lockdowns.

Throughout 2020, Partners has done what it can to support members through the major changes the year had in store, and it knows members will likely need even more support as the calendar turns to 2021. For its part, Partners is preparing for a large operational change of its own: CEO John Janclaes’ planned retirement on March 31, 2020.

BEST PRACTICE: MARKET WHAT PEOPLE WANT

Because of its relationship with the Walt Disney Company, Partners has access to branding and marketing materials — including intellectual property that includes Avengers and Jedi Knights as well as princesses and mice — that reflect who its members are and what they do.

“There are rules we have to follow, but we try to be creative with how we deploy these characters,” says Mike Terzian, chief member service officer. “We have access to this IP, but we’re still trying to create things that people want.”

2021 And Beyond

When Janclaes retires, he won’t completely leave the credit union industry. He plans to join the board of directors at AKUVO, a CUSO that offers data analytics services, and also serve as an industry advisor at NYMBUS, a cloud-based banking systems provider. In effect, he wants his next steps to make a wide impact.

In his 17 years with Partners, Janclaes’ voice and direction has helped the credit union grow into one of the largest in California and serve well one of the most iconic of American companies. He’s overseen the construction of 11 new branches and the hiring of 300 new employees. Under his leadership, assets have grown nearly tenfold and membership has increased more than 130,000.

Janclaes has shepherded Partners through an influential merger, hurricanes, fires, and earthquakes, and through his focus on people, processes, and technology, he helped Partners become the modern credit union it is today. Still, he’s looking forward to tomorrow.

“I think after 17 years, it’s time for someone else to lead,” he says. “It’s a big deal to be the organization that someone trusts with their financial dreams. We’ve always made sure those needs and those people were being handled well.”

Partners mission statement — “Making all financial dreams come true today and tomorrow” — holds special meaning for members, for the next generation of credit union leaders, and for the Walt Disney Company itself.

“When a company as successful as the Walt Disney Company can point to Partners and say, ‘this is the credit union that can help make your financial dreams come true,’ it goes to show we’ve been doing things the right way,” Janclaes says. “And that will only continue.”

Who? What? Where? When? Why?

Who? Walt Disney co-founded what would become The Walt Disney Company in 1923. As an animator, he created the cartoon characters Micky and Minnie Mouse, Donald Duck, and the dogs Pluto and Goofy. As a producer, he won 22 Academy Awards — an individual record.

What? The Walt Disney Studios in Burbank, CA, serve as the international headquarters for The Walt Disney Company. The Burbank Disney Studio buildings are the only studios to survive from the Golden Age of Film.

Where? Walt Disney initially wanted to build Disneyland adjacent to his Burbank studio. When that site was deemed too small, he purchased a 160-acre site in Anaheim, CA. Disneyland officially opened on July 17, 1955.

When? In March 2019, Disney officially acquired the non-news and sports divisions of 21st Century Fox. Based on valuation, the Fox acquisition ranks as the fourth-largest ever media merger.

Why? The city of Burbank is named after David Burbank, a dentist who traveled west in the 1800s with two principal intentions: to buy land and to raise sheep.

Sources: LAist, Deadline, Britannica