The President’s Perspective

​ND credit unions on the verge of FOM expansion – we need your help to contact state representatives! Plus, our Foundation Vacation Sweepstakes is off to a great start! 

Greetings and Happy Tuesday!
It feels like this winter has been one long Groundhog Day! I’m not referring to the actual day that we celebrate on February 2 each year, but rather, it’s more like the movie “Groundhog Day” where one long dreadful day repeats itself over and over. At least in the movie, the main character is able to overcome his cynicism and eventually escapes the repetitive nightmare. Unfortunately, we don’t have that power and are forced to make do with this never-ending winter season. Who can blame anyone for being a little negative? After all, we are now heading into our sixth consecutive month of snow with record amounts and ongoing winter conditions without even a hint of spring. Three weeks ago, I just gave up and stopped wearing an overcoat. I just got tired of having to put on a winter jacket and deal with bundling up day after day. But beyond the inconvenience of dressing in layers, everyone does need to remain mindful and aware of changing weather conditions – so please stay safe out there!
 
North Dakota CUs on the verge of major expansion to FOM with SB 2266.
If the winter weather doesn’t cancel work at the Capitol in Bismarck, today will be legislative day 58 in the North Dakota session. The pending winter conditions may have an impact on today’s proceedings. If not, today could be significant for our North Dakota state chartered credit unions as we expect our field of membership (FOM) expansion bill, SB 2266, to come out of the House IBL committee. If that happens, it is likely that we could have a floor vote, perhaps this Friday or next Monday.
 
It’s been 40 years since the North Dakota credit unions have pursued a legislative statute update. That effort in 1983 was successful and produced the ability for state chartered credit unions to accept public deposits. Fast forward to 2005 when SB 2263 was introduced. This bill was a game changer for state chartered credit unions – and not in a good way.
 
The bill’s sponsor was Senator Duane Espegard, a retired Bremer Bank president and former chair of the North Dakota Bankers Association. The bill clearly was meant to lock down credit unions and curb their growth and expansion in the state. The intentions were to put an end to credit union “leapfrogging,” which at the time, was the only way for a credit union to expand beyond its original geographic boundaries. This meant a credit union would build a branch within the 50 mile radius from the home office, and could then go another 50 miles from the satellite branch and establish another branch. Banks called this “leapfrogging.” In reality, “leapfrogging” has had a positive impact on the state by establishing credit union branches in smaller, rural communities, providing consumers more options for affordable financial service products. However, the 2005 legislative amendments prevented credit unions from implementing this practice and limited membership to those residing in a geographic radius of 75 miles from a home office.
 
Following the bill’s passage 18 years ago, the only way for a state chartered credit union to expand is to merge, which is exactly what happened. Within three years following the passage of the 2005 bill, 9 credit unions merged into larger credit unions. Overall, since 2005, our North Dakota credit union numbers have decreased from 58 to 32; we also had a fifty percent drop in state chartered credit unions, from 26 to 18 today.
 
In comparing credit union growth in neighboring states over the same time period (2005 to 2022), North Dakota credit union membership growth has literally been left in the dust. North Dakota unions have experienced a 9 percent growth while Montana and Minnesota have each grown by 25 percent; Nebraska and South Dakota credit union membership growth has exceeded 33 and 35 percent; and U.S. credit union membership has grown by 35 percent. The restrictive North Dakota FOM statute is the clear contributing factor to our credit unions falling behind and not keeping pace with growth trends in the region and across the country.
 
North Dakota banks succeeded in curbing credit union membership growth and limiting North Dakotans access to more affordable financial products and services. Today there are 428 bank branches, including 88 out-of-state, compared to 126 credit union branches. Even with their 90 percent market share in deposits and assets, the opposition banks are arguing that credit unions have an “unfair advantage” and there is an “unlevel playing field” because of the special tax status credit union have, and because they are not subject to the Community Reinvestment Act.
 
However, North Dakota credit unions could convert to a federal charter and expand their FOM under the NCUA’s Rural District FOM Rule. Under this rule, smaller and rural based credit unions can expand and diversify their FOM across contiguous geographic boundaries and state lines within populations of up to one million people. Essentially, this means a North Dakota credit union could expand their FOM to include the entire state.
 
So, why don’t North Dakota credit unions just convert to the federal charter then? That’s a fair question. The easy answer is because there is a clear advantage of having a local regulator that understands our rural economies and the unique farm and ranch loan portfolios our members have. It’s also more economical and less expensive to be a state chartered credit union.  
 
The reality is that our bill, SB 2266, will give our state credit unions a more level playing field – allowing them to keep pace with federally chartered credit unions – and to keep pace with the growing bank market share. North Dakota credit unions will have similarity with federally chartered credit unions in many areas, allowing an individual to join a credit union if they work or attend school in the FOM, instead of being limited to “residing” as is the current statute. Additionally, SB 2266 will expand our FOM radius by 50 miles, from 75 to 125, from their home office. More importantly, this bill will allow our rural credit unions the ability to expand and diversify their FOM to address safety and soundness issues.
 
In my testimony last week before the House IBL Committee, I made the statement that local banks should allow this statute modernization because they really don’t want our credit unions to convert to a federal charter. Why? Because our members could expand and grow without legislative statute revisions or state credit union board approval, nor would banks have a say or be allowed comment on expansion of North Dakota’s credit unions.
 
One telling tale in the opposition testimony last week that supported this argument was when the banks were asked by committee members “if they cared whether North Dakota credit unions converted to a federal charter?” The consistent answer from three different testifiers was a solid “no” – they didn’t care, which really exposes their hypocrisy. Why would they oppose a simple language update and a modest increase of 50 miles when our state chartered credit unions could actually gain much more if they converted? Face palm!
 
Dakota CU Foundation Vacation Sweepstakes Off to a Great Start!
The Dakota Credit Union Foundation’s Vacation Sweepstakes is open, and in less than two weeks, we have already received $2,850 – each $25 donation receiving an entry to win a voucher for $5,000 towards a dream vacation of their choice! This sweepstakes is open to anyone in North or South Dakota; find all the important details, official rules, and entry form here. Please continue to help us promote this fundraiser; feel free to reach out to Shawn Brummer for the marketing kit complete with point of sale posters, banners, and social media graphics.
 
I would also like to thank the many CEOs/credit unions that are helping to fund the purchase price of the sweepstakes prize, allowing the foundation to retain more of the proceeds. To date, we have received $2,005 to help cover the $5,000 cost. We will continue to accept direct prize donations until May 10 when we hold our drawing. If you would like to help, you can make a direct donation here or contact Shawn if you prefer to receive an invoice.
 
Value-Added Summit – Smiles, everyone!
For the first time ever, we have decided to include a “value added” feature at our 2023 Summit! We have hired a professional photographer from “Faces Fargo” to set up a photo booth during our exhibitor showcase hours on May 9 and May 10. Whether you need to update your existing photo or you have never had a professional headshot, now is your chance to enhance your image for no additional cost! Be sure to check out the related story in the Memo this Thursday for details and some helpful tips for a great professional result. Smiles, everyone!

Dakota CEO Virtual Town Hall Scheduled for next Tuesday, April 11th
As a reminder, we’ll be hosting our Q2 Dakota CEO Virtual Town Hall next Tuesday, April 11 at 2:00 p.m. (CT) or 3:00 p.m. (MT). You should have received the email invite with the meeting link in your email inbox; if you need the link please contact me.
 
Have a great week, and thanks for all you do!

DakCU President/CEO