Q&A: Brad Beal
President and CEO, Nevada Federal Credit Union
Fri, Sep 25, 2009 (3 a.m.)
Brad Beal has spent much of his career in the financial sector and not only leads Las Vegas’ largest credit union, Nevada Federal, but for the past two years he has served as chairman of the National Association of Federal Credit Unions.
As president and CEO of Nevada Federal, Beal said he prefers the nonprofit status his credit union enjoys, allowing his employees to focus on the members, rather than garnering profits.
Although much of the economy is suffering, Nevada Federal is growing: In the past year, it has grown 3.7 percent.
Beal is also a muscle-car enthusiast and rehabber. You may spot him on the road driving his bright red 1967 Mustang convertible.
IBLV: Tell us about Nevada Federal Credit Union.
Beal: Well, Nevada Federal Credit Union, like all credit unions, is a member-owned cooperative. We’re owned by our depositors — (about) 85,000 of them, to date. We are technically a not-for-profit organization. We’re a service organization here to serve the needs of those 85,000 members.
We’re governed by a seven-person board of directors, who are elected from the membership. They are volunteers, they don’t get paid for their service and they direct the operations of the credit union.
We have 23 branches and about $800 million in total asset. We serve anyone who lives, works or worships in Clark County, Nev. We also serve the community of Pahrump and the downtown areas of Reno and Sparks.
How has membership growth been lately?
It’s been really good the last couple of years. We’ve actually had record growth the last two years, as I think people are looking for security and maybe getting away from the ups and downs of the stock market. Our branch network is pretty convenient for them, so we’ve seen good membership growth in the last couple of years. Very strong.
You are a certified public accountant?
Well, I have an inactive license, (but) I still am licensed in ... Nevada. A recovering CPA (laughs).
You worked most of your career for credit unions. What drew you to that, instead of other types of financial institutions?
Well, when I first came to credit unions in the mid-80s, there was a lot of opportunity, and there still is, for talented management people. I actually started up in Carson City, at what was called then the Nevada State Employees Credit Union. I came to Nevada Federal in 1987.
Was there anything specific about credit unions that you liked better than, say, banks?
I liked the not-for-profit and the service orientation. Since we’re not focused on profits, we can really focus on serving our member-owners, and that appealed to me, yes.
You recently served as chairman of the National Association of Federal Credit Unions. What are some of the most pressing issues credit unions face today?
I actually continue to serve as chairman. I’m on my second year as chairman of our national trade association.
Clearly, the recession is the biggest challenge that most credit unions face today. Credit unions are in the business of lending money and primarily to consumers. And, of course, with the unemployment rate and the other factors involved with the recession, we have a lot of folks encountering some financial difficulties, and the credit union industry has experienced that as well. As their members have had difficulty repaying some of their loans, so, too, have some of the credit unions struggled. So, we’ve seen that.
We’ve seen an ever increasing regulatory burden, particularly with things like anti-money laundering rules and the Patriot Act, where we have to kind of monitor who opens accounts and be on the lookout for suspected terrorists and things of that nature.
The regulatory burdens and the effects of the recession are probably a couple of the biggest challenges we face as an industry.
Financial institutions have been among the hardest hit during this recession. How do you see banks, credit unions and others recovering?
Well, I think the recovery’s going to be very gradual. We will recover as our members recover. As we eventually see the unemployment rate start to come down and people go back to work, we’ll begin to see a recovery in the credit union industry as well. It’s going to take a period of time, but it will come. Just as the economy will recover, so will the credit unions.
Do you think other financial institutions will mirror that as well?
Yes, I think they will. I hope so, anyway.
The banking industry is more business-focused, and so a lot of its recovery, I would suppose, will be dependent on how the business economy recovers. From the consumer side, that’s where credit unions are more focused.
In the first quarter (of this year), Nevada Federal recorded a loss of $10 million and its loan-loss provision increased nearly $7 million. Why is that?
Unfortunately a number of even our very, very strong members — some of them have lost their jobs, some of them have had their hours cut, and they find that they’ve been unable to meet their financial obligations. So we set aside those funds and we set aside more in the second quarter to provide for those potential loan losses. At the same time, houses that we financed in 2005 and 2006 are worth much less now. When we do, unfortunately, get some of those homes back, they’re worth quite a bit less than what we financed on. That’s why we set aside some funds to cover potential loan losses.
On that same note, the credit union has also reported an increase in its bad loans from $3.1 million the year prior to $16.6 million in the first quarter, and it also has $3.3 million in foreclosed properties. While on a ratio basis your credit union is faring better than most others locally, what kind of loans are being defaulted on and how does the credit union expect to remedy the losses?
The defaults are primarily on first-mortgage loans, again primarily made during the time period when home prices were very high. The remedy to that situation, frankly, is our accumulated capital. The fact that we had accumulated well over $100 million in capital, that’s kind of the credit union’s rainy day savings account and that’s coming in handy very much now to help us absorb these losses. That’s what it was accumulated for, for a possible economic downturn and now we’re using it.
I’m happy to report that we’re still over 10 percent of our total assets that is in our capital and in our net worth, which continues to make us one of the strongest credit unions in the country.
Nevada Federal is closely linked to the Las Vegas economy. Where do you see the (economic) trend going?
Like everyone else, we’re hoping for a recovery. Again, we expect it to be slow and gradual and take a long period of time. We do not expect a rebound, a short-term bounce back to where we were in 2005, 2006, but rather a more gradual building of our economic base.
Once the national economy recovers and more consumers are willing to come to Las Vegas, as the convention business picks back up in Las Vegas, we expect to see a slow and gradual recovery of the local economy as well.
Has the credit union had to eliminate staff, cut back on branch hours or scale back elsewhere in its operations?
We have not laid anyone off, I’m happy to report. We have not closed any branches, I’m also happy to report that. We have made a number of expense cuts to try to improve our bottom line as much as we can. What’s interesting about our credit union is that our core business has actually been very strong. Our net income from operations has, believe it or not, been running at record levels right now. But, unfortunately, the loan losses and the money that we have to set aside to absorb future loan losses, is outpacing even those record high earnings numbers, which is what is resulting in our net loss.
How do you account for the high earnings?
It’s a number of things. We have a number of products and services that the local consumers like and want, that are responsive to the current economic environment. Our branch staff and our phone center staff do a great job with member service. We have a very strong marketing function, so all of those factors together, I think, have contributed to our increase in business over the last year or so.
Since the start of the recession, how has the credit union’s members’ products and service needs changed?
It’s interesting. Believe it or not, our first-mortgage business has been incredibly strong. We’re on track to be at or near a record for first-mortgage loans this year, all of which we sell on the secondary mortgage market, by the way. But now is a great time to buy a home in Las Vegas, if a person has a stable income and a little bit of down payment money, it’s a great time to buy a home. We’re seeing a lot of our members buy homes and, of course, we’re getting the financing on a lot of that. The home lending has been very, very strong.
We introduced a new product a couple of months ago called Green Checking. It uses electronic statements rather than paper statements. It encourages members to use their debit cards for transactions rather than writing checks, and that’s been very, very popular, as well, for the last couple of months. It’s fairly new, but we’ve already opened several thousand accounts there. Green Checking is doing well, and home lending is doing particularly well.
We’ve had a lot of demand for our financial education classes. We provide those around town to different groups and different employers. As a matter of fact, we had to stop because we’ve had so much demand that we put those folks on to videotaping those courses and we’re going to put them out on the Internet, where more people can have access to them and much more efficiently deliver that service. They’re free, of course, and they deal with very fundamental topics: How to manage your checking account, how to set up a household budget, what does your credit score mean and how can you improve it — things of that nature. That has been a very, very popular subject under the economic circumstances. In the next little while we’ll have all those little classes up and on the Internet for folks to watch.
Will you be working with the (Clark County) School District at all to develop one for children?
We’ve been working with the School District for a number of years through a local organization called JumpStart. As a matter of fact, a number of our senior-management members are on the board of the local JumpStart chapter. We’ve been working with the School District on financial education for some time.
Where do you see Nevada Federal heading in the future?
I think we’re going to continue along on the track that we’ve been on — trying to meet the financial needs of our members. Since we’re owned by them and we work for them, identifying and meeting their needs is our No. 1 priority. And since we’re a community credit union, identifying community needs, financial needs and trying to reach out to folks who may not have otherwise come into the credit union (and) to try to meet their financial wants and needs and desires as well.
You’ll continue to see us offering convenience with a pretty expansive branch network, although the growth there might slow down a little bit. We’ll continue to offer a lot of electronic services. People like our home banking. They like our debit card, the modern sort of electronic delivery that people seem to enjoy.
For the second year, your credit union has been named as a top place to work for people age 55 and up by AARP, as well as a best place to work by the Southern Nevada Human Resources Association. Why is this important to Nevada Federal?
I think it’s an important recognition for our people. Those awards are truly tributes to the 300 or so people who work here. It’s really more of an honor for them than it is for the credit union. That’s why we think it’s important. We are fortunate to have a really great group that works here, and it deserves that recognition, and we’re very, very happy to see it be recognized in those ways.
What about the best practices that are used to develop the sorts of things that get you that recognition?
You have a couple of hours (laughs)? I can spend a lot of time talking about how we work with our people.
If I had to boil it down to just a couple of items, we’re very big on three main topics: teamwork, leadership and service. We do regard ourselves as a team — all 300 folks who work here. Everybody has an important job to do. The success of the team is really dependent on everyone doing their job as well as possible.
It’s important for everyone on the team to know what the game plan is. We spend a lot of time communicating and helping them to understand where the credit union is going. It’s important for all of them to understand what their role is in advancing those teamwork objectives. We spend a lot of time and resources on training and on education and on internal communications. So, teamwork is very, very important.
The other aspect of teamwork that we devote a lot of attention to is positive reinforcement and a lot of recognition. We have a monthly meeting — different monthly meetings for the different departments and segments of the credit union — and everyone meets once a month for a little celebration where we recognized people who have achieved special things, those who have achieved their goals. That recognition goes a long way toward motivating people and making them feel like they’re part of an organization. So, a lot of positive reinforcement and a lot of teamwork.
Leadership we preach at all levels. You don’t have to be a supervisor to be a leader — as a matter of fact we have a lot of leaders who aren’t supervisors. Anyone who has a follower is a leader. If someone likes the way you answer the phone or likes the way you greet the members, and they emulate that, that person is now a leader. So, we preach leadership, we value leadership, we even have a leadership training class in the credit union.
And then, of course, service. We’re a service organization: We believe highly in service, not only service to our members, but service to each other, in terms of employee to employee. We work the service angle a lot.
In a nutshell, those three elements are the key elements to the culture that we have here. That’s what’s led our people to excel and what’s led them to earn these important awards.
Earlier, you mentioned federal regulations. What is your response to bankers who say that credit unions should be restricted to the roles they’ve held in the past and not expand services, such as those available to businesses?
I don’t exactly know what they mean by saying that we should be limited to our role in the past. Our role has always been to serve our members. Credit union members across the country expect modern, convenient, financial services just like anyone else. To suggest that we should go back to the days of the handwritten passbook savings and that’s all we should do, that just isn’t responsive to what our members, our owners, want from their credit union. We’re doing what we’ve always done and that is meet the needs of our membership, and as those needs change and become more modern, we change with them.
In a letter to members, you said the credit union is reducing several fees. What fees are those, and why did Nevada Federal make this decision?
There were some fees involving the minimum balance that was required to avoid a fee. We lowered that somewhat. There were some fees involving an (automated teller machine) adjustment. We’ve got folks who were making a lot of mistakes, putting their deposits in the ATM, which increased our costs, frankly, to produce those. Well, we thought better of those (fees), and we reduced those fees or eliminated them in some cases. We are looking at a couple of others we might be able to eliminate, as well — just to kind of help out a little bit here and there. We realize it’s not a lot of money for most people, but right now every little bit helps.
You mentioned Green Checking. What are the projected cost savings? I’m assuming you won’t be having to send out a lot of paperwork.
Yeah, the monthly statement runs somewhere in the neighborhood of $1 a month per statement, and, of course, if we can deliver that electronically, that doesn’t cost anything. The cost to process checks is not substantial, although when you get a lot of checks going through the system the few pennies per check does tend to add up. We do encourage our members to use their debit card. We really don’t need to encourage them much because they really use it a lot already. On average, our members use their debit cards about 14 times a month per member, so that’s already a popular service. This just kind of fits in with their habits and needs already, and, of course, everybody likes going green and trying to help the environment and the economy. That’s been pretty popular. It’s working out really well.
Your credit union has started a humorous marketing campaign aimed at bank customers. What’s the motive there?
A number of things ... we wanted to have some fun with it, do something that’s clever and kind of unique and kind of different, so we did that.
And, you know, right now in this economic environment, we all need a little laugh. We thought we could do all those things with our little billboard campaign.
Any particular billboard a favorite?
Well, they’re all pretty funny. The (Better than) Pens and Tellers (Green Checking) is nice, but again, just a way to add some lightheartedness to an otherwise difficult time.
Is there anything you’d like to add?
Come join Nevada Federal Credit Union (smiles)!
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