GREENSBORO, N.C.–The CEO of a corporate credit union who during his career saw the successful growth of corporates, the difficult times around the corporate crisis and who also serves as a board member of a credit union is offering a number of unique observations as he prepares to retire.
David Brehmer, the president and CEO of Vizo Financial Corporate Credit Union, has announced plans to retire on Jan. 5, 2024, after 44 years in credit unions, 29 of which have been with the corporate.
Vizo Financial, which was created in 2016 with the merger of Mid-Atlantic Corporate FCU and First Carolina Corporate CU, said that since that time, Brehmer has led Vizo Financial (alongside former CEO Jay Murray until 2021) to “achieve a full payback of member credit unions that lost capital with the corporate during the Great Recession, reach a position of solid financial strength, form an award-winning workplace culture and embody the guiding credit union principles of cooperation among cooperatives, concern for community and diversity, equity and inclusion,” Vizo Financial said at the time the retirement was announced.
Below, Brehmer shares his insights in this CUToday.info Exit Interview.
CUToday.info: How did you come to be involved in credit unions?
Brehmer: Simple answer, I needed a job. After college, I moved to San Diego and applied for a customer service position. This was 1979 so all I had to go with was a small newspaper ad. I had never heard of a credit union, but the interviewer sold me on the idea of a financial cooperative. I worked one day in customer service and then they said they thought I would be bored so they moved me into the collections department. At 22, this was not what I had envisioned for the start of my career.
CUToday.info: How has the role of the corporate credit union changed during your career and what is that role now?
Brehmer: When I came to First Carolina Corporate in 1994, I believe there were around 40 corporates that collectively owned U.S. Central. Assets were growing and corporates were building expertise in ALM and investments, in addition to their traditional role in correspondent services and liquidity. Most corporates invested a majority of their funds at U.S. Central and managed with small spreads taken on what we earned at U.S. Central. To various degrees, corporates outsourced other services to U.S. Central which led to efficiencies but also created more hardships when U.S. Central had its troubles.
Leading into the financial crisis, there were 26 corporates and U.S. Central. Today, there are 11 corporates and no U.S. Central. While the core role of a corporate remains liquidity, settlement services, investments and payments, all corporates had to quickly develop the internal expertise and systems to deliver all services independently. We also do many more investment-related transactions off the balance sheet to keep assets in line with our capital. From a capital ratio perspective, I don’t think the corporate credit union system has ever been this well capitalized relative to assets.
Most corporates have also added more advisory and educational services, and the entire corporate system is now much more transparent and self-sufficient. That said, there has been an increasing amount of collaboration amongst corporates to work together in finding solutions for credit unions, which I see as a very healthy trend for the system.
CUToday.info: During your career you witnessed the tumultuous period for corporates during the financial crisis of 15 years ago, which led to the demise of five corporate CUs. In looking back, what do you remember most and how do you view what happened now?
Brehmer: I have very vivid memories of that time period. I was on the board of U.S. Central, so I witnessed the demise of that organization firsthand. The mistakes made with the portfolio were not a result of greed but the desire to continually return more to the credit union system. U.S. Central did not create the financial crisis, but it was certainly a victim of it. A lot of good people who had nothing to do with the portfolio problems lost their jobs, and the credit union system lost a tremendous asset.
On a more personal note, my own corporate went through several years of not knowing whether NCUA would allow us to survive and rebuild our capital. The engine that had been built over 30 years was still strong, just absent of any retained earnings. When NCUA came out with their new regulations, we were quick to submit our Recapitalization Plan and move ahead.
When I reflect on that time now, I remember many sleepless nights, but, more so, the support I felt from my staff and my board. I really gained an understanding of the power of relationships and whom we could depend on. I think our ultimate success with members was based on being honest and transparent, sharing the good and the bad with internal and external parties.
While I would never want to relive those years, I learned more about myself in terms of leadership and resiliency than any other time during my career.
CUToday.info: What lessons have you learned with both CUs and corporates when it comes to driving growth?
Brehmer: Along with my role as CEO of a corporate credit union, I have also been a volunteer at Latino Community CU for 20 years and a board member for the last 10. This has allowed me to stay close to what credit unions are experiencing and better understand their pain points. The question of growth is very different for credit unions and corporates. Corporates have a shrinking market, as consolidation within the industry continues to reduce our membership size. Credit unions have a much greater potential for growth in numbers of members and services, although I think it’s fair to say competition for that business has never been greater.
What is applicable to both in terms of growth comes down to relevancy and having the right product solutions at the right time. This comes down to understanding your members and their needs, and our ability to provide timely solutions. Much growth for corporates now comes from new advisory services and broadening a relationship with a credit union. Many of these new services are offered through CUSOs that can specialize in a certain service or product line. Growth at credit unions is based on knowing the membership and where your own core competencies overlap with member needs.
I think it is extremely important to understand what you do best and focus on making that your niche. I am a big believer in quality of services over quantity, especially at the corporate level.
CUToday.info: What is your view on the future of credit unions/corporates, if there is to be one.
Brehmer: Sadly, there will undoubtedly be more industry consolidation. With continued consolidation at the credit union level, we will probably see additional consolidation at the corporate level as well. I still believe in the credit union model as the best for serving consumers’ financial needs, but I think it is critical that we understand credit unions are niche players, regardless of size.
I have attended both small and large credit union roundtables, and at times it seems I could be in the same meeting as both groups talk about needing more scale. I think we need to understand that even two large credit unions merging does not put them on par with the likes of Bank of America or JP Morgan. They spend billions per year on technology.
Being a niche player doesn’t mean you can’t aggressively grow your credit union. It does mean, though, that you understand your relevancy within your membership base. I think credit unions that understand where they excel within their market can be extremely successful. Corporates’ success will mimic credit union success because that is who we serve.
Corporates are essentially CUSOs that happen to be financial institutions. We have seen a big uptick in CUSOs that are owned by multiple credit unions because our system understands the benefits of collaboration. I believe corporates will continually evolve based on credit unions’ changing needs and recognition that CUSOs are an excellent collaborative model, which will only help to make the corporate system more valuable to their owners.