COLUMBUS, Ohio—Lee Butke is stepping down as president and CEO of Corporate One FCU, leaving the organization in sound financial shape. But what may be most notable about that accomplishment is that Corporate One is still around.
Butke and the team at Corporate One made a number of decisions prior to the Great Recession, failing to take on riskier investments that many other corporates—most notably WesCorp—accepted as they chased yield and eventually failed, leading to the corporate crisis.
Butke spoke with CUToday.info about that period in his life, as well as his 25-year career at Corporate One.
CUToday.info: You mentioned that you have a strong philosophy that has guided you through your career?
Butke: Our corporate’s mission has always been to help our member credit unions succeed and to help them help their members succeed. That thinking has always placed us in the right place at the right time, providing our members with the right products and services. That has been my mantra throughout my entire career.
CUToday.info: Corporate One was possibly the largest corporate to successfully survive the economic downturn without impairing members’ capital shares or costing the share insurance fund even $1. Talk about managing the credit union through those years.
Butke: I look at the corporate crisis we all went through not necessarily as a failure of the corporate system, but really a failure in our responsibilities and mission as corporate credit unions. While Corporate One did not suffer the problems that many of the other corporates did, we did get painted with the same brush. That was a difficult time for us to manage through.
But those times reinforced some of the things I firmly believe in—being truthful and transparent with our members, with our board and with the regulators.
Having a strong financial position going into the crisis certainly helped. But keeping those beliefs and values top of mind during that time allowed us to have the trust of the regulators that we could see this through to the conclusion. And we did, and we now find ourselves in a very good position today.
I can tell you though, that going out and asking your members to recapitalize you, to put more money into you, to rededicate to your organization, really puts you out on a limb. But all those years of transparency and the trust we established really did pay off. I think our capital raise with our members was about $140 million and another $80 million from Southeast (Corporate FCU, which merged into Corporate one in 2012). Getting 220-million of equity capital was one of the my most significant accomplishments in my career and I am proud of that effort, because it symbolized the trust our members have in us.”
CUToday.info: You said regulators trusted Corporate One to do its job. They also trusted WesCorp for many years. What are some of the key steps you and the CU took before and during the financial crisis that kept you from failing.
Butke: First, all organizations should have a basic and solid understanding of their numbers, operational model and risk. Even though the rules at the time allowed it, we would simply not allow ourselves to have, what I will call, this irresponsible concentration of assets that a particular corporate had. It was not in our DNA to do that. Even before NCUA placed the new rules on us, we placed our own asset allocation limitations on the various forms of asset-backed securities.
Yes, we were constantly pressured at that time by what I would say were outrageous rates (a number of other corporates were paying on investments). For example, a particular organization had as its goal to make 20 basis points over agency. The only way we found at that time to achieve that was to buy down in the credit spectrum.
But what was interesting at that time is that not all AAA investments were created equal. We found huge variances depending on the issuer and we would just not go into those investments—especially when we didn’t understand the bond and didn’t understand the risk. They were filled with 110% to 120% equity lines. We knew those things would not work in the long run and we did not buy them. We could have bought them. The rules allowed it. But we didn’t chase yield. We just used good common sense.”
Lee Butke
We were conservative with our investing but we are not a conservative organization when it comes to doing creative things and starting new initiatives to help our members succeed. That is where you take risks as a corporate credit union—bringing your members to the future—and not on your balance sheet. That is where several of the corporates failed.
CUToday.info: Following the crisis and the new rules NCUA placed on the corporate system, you often spoke of how the corporate had to look to the future, to innovate and deliver new solutions to members to succeed.
Butke: I am excited about the future of this organization and I think I have positioned it to go on very successfully. We have a great team to keep this organization moving. We’re prepared for the future. Many of the things we are working on today will come to fruition in the next few years, and there will be profound changes. I am a huge proponent of looking forward to the next major change, and in the payments world that is faster payments. The changes there will be profound and revolutionary. Check 21 was a major change in payments. And I ranked that as a two or three on a scale of 10. Faster payments is an eight to 10, in my opinion. And Corporate One has been working hard in this area for our members. It’s one of our key strategies. We have the only credit union representative on the GFFT (Governance Framework Formation Team), the founding committee for all things faster payments. We are right in the middle of this, really representing every credit union in the nation on faster payments.
Finally, I believe you surround yourself with great people to drive your organization forward and make some of your lofty dreams and goals successful. It takes a team to make that happen—and at Corporate One we have a deep bench.
CUToday.info: How large of a role will consolidation play in the future of the corporate system?
Butke: I was asked many years ago, during the financial crisis, would we survive? We’re thriving now. It’s all about your desire to wake up every morning and do the hard work. It’s really not about size. I think those corporates that will be around in the future are those that are looking to the future and have decided that innovation and development are keys, to provide the new tools and services your members are asking for. Consolidation is not the answer—it’s finding ways to take things that are leading edge and bringing them into this movement. That’s really what corporates should be thinking about.