Over the past two weeks, Priority One Credit Union's President, Charles R. Wiggington, Sr. has disclosed that he is aggressively implementing corrective actions needed to taper and eventually stop the credit union's ongoing financial losses. He describes three areas where he is targeting his efforts. These are:
- Identifying key causes for financial loss
- Resolving issues plaguing employee morale
- Reducing account closures
He is the single-most contributor to the decay of employee morale at the credit union. Unless he's gong to undergo a dramatic change in conduct, his alleged efforts to resolve this will fail.
On January 4, 2007, he announced that he would be implementing a retention program which would reduce account closures. He described a plan which would appoint one or two employees who would intercede and speak to members who request closing their accounts and offer them incentives to retain their membership. To date, his retention program had yet to be implemented and based on his history of procrastination, don't expect it be realized at anytime in the near future.
It's not only non-exempt staff who have grown tired of the President's failing business decisions and abhorrent personal behaviors. There has been growing dissension within the managerial sector, with some managers becoming more vocal about the President's leadership style and some have expressed a reluctance to comply with his directives.
"The past months, including July brought many challenges for the credit union. Our net capital decreased 0.61% to 6.35%, due to computations made on our mortgage loan modifications."
"Every effort is being made to control delinquencies. However, we currently have $,338,509.26 in delinquent mortgages which represents 78% of our total delinquency. Loans decreased by $419,259.67 and shares decreased by $1,211,480.69. Our total membership decreased for the first time since the inception of shared branching by 35."
"The decrease in membership is mainly due to dormant account closures. The total amount approved for loan modifications were $1,252,786.30, which includes three first mortgages totaling $1,133,623.63."
"We will also continue to aggressively control operating expenses in all areas. Our focus is to control dividend expense and generate greater income."
The President is again, not being forthright. The decrease in membership is due to increased account closures. The most frequent reason provided by members closing their accounts is "poor service." That has absolutely nothing to do with the subject of dormant accounts.
However, the procedure of closing dormant accounts was in place long before Charles R. Wiggington. Sr. was appointed President but when he became President in 2007, he intentionally neglected closing long-standing dormant accounts. His excuse: "[Dorman accounts] make it look like we've got more members." Yes, it does create the false impression the credit union has a large sector of members but Dormant accounts belong to members who are actively participating in what the credit union has to offer, thus making them inconsequential to new business. The problem with President Wiggington is he has never developed a single strategy that tries to convert dormant account holders into active participants of the credit union.
President Wiggington has had more than 2 years in which to implement aggressive controls over operating expenses and he's done absolutely nothing about doing so. However, the reason operating expenses are a problem is because of his failure to implement methodologies that develop business, generate profit and increase membership. Every business has operating expenses and every business should control unnecessary business but why is it that his predecessor had no issues with operating expenses while under President Wiggington, these have become a critical problem?
President Wiggington talks and talks and talks, continually repeating the same empty assurances and never achieving his supposed goals for the credit union. So is the problem the national economy, operating expenses or President Wiggington? You know the answer.
The simplest explanation for the credit union's decline in Net Capital is a lack of new business and over-spending by President Wiggington.
The President has failed to create strategies that produce the amount of profits needed to offset overhead. He often blames the national economy and claims "all credit unions are losing money." His statement is of course untrue and is a gross generalization. A search of the Financial Performance Reports ("FPR's") on the NCUA's website for other credit unions reveals that in spite of the national economy, some credit unions have grown and are thriving. Of course, the leaders of those organizations quickly responded to the challenges which arose when the national economy suffered and found through their diligence, ways of re-inventing how their organizations do business. Not so at Priority One where the President is lazy, incompetent, and more immersed in gossip and creating internal discord than he is in developing business.
President Wiggington's most frequent complaint is that real estate loans don't have a quick turn around time, forcing Priority One to wait for years, sometimes decades, before a real estate loan is paid-off. Though his statement is true, it is rather conspicuous that this only became an issue after he became President on January 1, 2007.
Prior to his appointment, his predecessor developed and offered seasonal loans which created a reliable stream of income, but in January 2007, Charles R. Wiggington, Sr. ended all seasonal loans because in his words, "I don't want anything my predecessor developed." Not only is his statement inane, it is psychologically disturbing and suggests that the root of the credit union's financial troubles are rooted in the President's emotional state.
CONTROLLING OPERATING EXPENSES
The following paragraph appeared in our last post.
The audit was conducted by Turner, Warner, Hwang, and Conrad, Priority One's contracted external auditors. The investigation took place over a three-week period and has now been completed and found that tens of thousands of dollars were embezzled by a former receptionist assigned to that location.
YEAR-TO-DATE NET INCOME
Prior to January 1, 2007, the date Charles R. Wiggington, Sr. began his appointment to President, Priority One's Net Income approximated $172 million.
As reported in our last post, from January 1st to July 31st, 2009, Priority One's Net Income decreased by $4,003,555.89.
In a it's financial statement to the Board of Directors, the President provides the following actuarials:
WesCorp write-down of Capital Permanent Capital Shares:
Increase in Allowance for Loan Loss account:
Increase in Allowance for Loan Loss account:
NCUSIF Initial Adjustment 1% to 1.3% of Insured Shares:
Year-to-Date Net Operating Loss:
Other information contained in the report, cites that:
- Delinquency Ratio increased from 4.18% to 4.86%
- Delinquencies increased from $4,789,226.74 to $5,544.909.06
- Net Charge-Off ratio improved slightly, reducing from 2.64% to 2.68%
- Return on Average Assests (ROA) declined from -2.62% to -2.65%
- The Net Capital Ratio decreased from 6.96% to 6.35%*
*Undivided earnings of $7,575.844.62 plus Regular Reserve of $5,128,606.33 plus Allowance for Loan Losses -$2,600,000.00 minus Classified Loans of $3,737,003.00 divided by Total Net Income in the amount of $182,201,537.08.
The President also states that the unpaid balance of "$10 million" from the loan obtained in mid-2008 from the credit union's line-of-credit, will be paid in full sometime in September. Payment of the loan will reduce "Net Income by $10 million and will increase Net Capital from 6.35% to 6.72%.
Based on the President's statement to the Board, the loan of $20 million may have increased the amount of Net Income on paper but it contributed to the decline in Net Capital while burdening the credit union with an exorbitant and completely, unnecessary expense.
Earlier today, President Wiggington met with the Board of Directors to discuss the credit union's present financial standing but his spiel that paying off the remaining $10 million balance of the loan he borrowed in 2008, may soon improve the credit union's lagging performance, was not met with the enthusiasm he had expected.
Despite his assurances that business is about to undergo a dramatic improvement, even the ignorant Directors seemed unable that this is the same sales pitch he's used since 2007 and each month, the credit union seems more and more immersed in financial issues.
Though apparently not entirely persuaded by the Board, its Chair, Diedra Harris-Brooks not to hold the President entirely accountable for the credit union's problems and took a moment to point fingers at long-time CFO, Manny Gaimaitan, who they labeled "uncooperative" and who the President accused of not possessing the ability to understand the President's "vision" for the credit union.
Following years of employment, the CFO has suddenly lost his comprehension skills. What's more, he lacks the ability to comprehend the President's "vision." What the CFO may not understand are President Wiggington's "hallucinations."
Historically, Charles R. Wiggington, Sr. finds scapegoats.who he promptly victimizes and blames for his many inept business decisions. The CFO has officially become his latest victims. The CFO, who loyally served former President, William E. Harris, and whose abilities were never scrutinized or berated, has now become the latest target of the highly flawed President's aspersions.
In 2007, after refusing to carryout security procedures which resulted in the mailing of ballots in envelopes on whose exterior were printed member credit union account and social security numbers, President Wiggington quickly placed the blame on the then IT Supervisor though the supervisor had absolutely no involvement in the security breach.
Since 2007, President Wiggington has refused to market business in Riverside County resulting in rampant account closures at the Redlands and Riverside branches. The President has typically leveled all blame on his predecessor, accusing the retired President of orchestrating a bad merger which he says has created a "mess" for him.
Though prior to the date of his appointment to President, the Marketing Department was the recipient of annual industry awards, in 2008, the President blamed the department's former Director stating that she somehow and inexplicably created problems that have caused the credit union to lose the ability to generate new business. The President, of course, fails to cite anything that proves that she is the cause of business problems that coincidentally started on the day he became President. Who would the President blame if he were the only living survivor on planet Earth?
And though President Wiggington has been insisting he is reducing spending, "streamling" and "working smarter", so many of his cost cutting decisions are constantly being offset by spending- spending orchestrated by him.
His implemented wage freeze has had its most profound effect upon employee salaries, while he and his executive staff have been exempted from receiving annual raises and bonuses.
The President with the help of AVP, Rodger Smock, who is also the Director of Human Resources, has again violated law and has ordered that many employees work outside their job classifications. This is illegal under California labor laws.
He also has ordered that many part-time employees work 40-hours per week without receiving benefits allotted to full-time staff.
The President's campaign to reduce spending was recently counteracted by his decision to hire t he consulting firm of Lillestrand and Associtates http://www.lillestrand.com/. The firm was highly recommended by COO, Beatrice Walker, who describes them as reputable and as a firm she worked with previously while employed at another credit union. According to their website, the firm promises to "squeeze every drop of performance improvement possible from the [effects of the] current [economic] "catastrophe."
The firm touts itself as staff development specialists and according to their website, "In the new information economy, people are the new capital. You can select from a wide menu of over two dozen insightful and effective developmental workshops to help enhance your team’s job satisfaction and work effectiveness."
On August 18th, owner and consultant, Loren Lillestrand, visited the South Pasadena branch and over the next 2 days, met with groups of employees who were administered tests to determine their personality types.
When testing was completed, Mr. Lillestrand informed employees that the tests would be used to determine the "likes" and "dislikes" of each person. These would be used to place them in positions where they would most benefit the credit union while allowing them to enjoy their work. So was Mr. Lillestrand hired to assess employee strengths and preferences or was he hired to help President Wiggington identify which employees were dissatisfied with the President's mode of administration so that they could be targeted, branded, and driven out of the credit union?
After each meeting, Mr. Lillestrand met with individual employees whose names were provided by President Wiggington and AVP, Rodger Smock. So why would the President in the midst of expense reductions, hire Mr.Lillestrand's firm? Not only did the President approve the hiring of Lillestrand and Associates but also contacted Jeff Call of Focus, a company whose services include employee coaching, management development and specialists in helping forge strategies that create effective marketing. Their website is located at http://www.focusandexecute.com .
So where has the President found the financial resources needed to hire expensive consultants? Based on the areas where he's introduced expense reductions, the source may be money saved as a result of the wage freeze implemented over non-exempt staff salaries.
During what the President boasted as a strategizing two-day session, the President ordered catered food service, again bringing into scrutiny his so-called cut-backs in spending. It of course never occurred to the obnoxious President that a positive affirmations to his efforts to reduce spending would have been set if Directors, Supervisors and other officers had purchased their own food and beverages.
BACK TO THE DRAWING BOARD
Contrary to the President's 2008 assurances that his then new phone system would resolve all service issues and avoid creation of a Call Center, COO, Beatrice Walker, recently convinced the Board that what Priority One most needs is a Call Center. Ms. Walker has disclosed that the Call Center will serve as an "all-stop center" and will enhance service by providing nothing less than stellar member service. Does this mean that Charles R. Wiggington, Sr. wasted $600,000 on a telephone system that may prove obsolete if and when the Call Center is created?
The failed telephone system was purchased and implemented without the President first conducting a careful study to show its feasibility to meet the credit union's needs. Its technical issues further intensified the credit union's member service issues which heightened Priority One's already debilitated relationship to its membership.
So how much will the credit union now spend to build a Call Center? Ms. Walker has disclosed that the credit union will have to purchase equipment and software needed to carryout the center's functions along with purchasing new furniture and telephones. The credit union will also have to hire a staff for the center and procedures and policies will have to be written for the new addition. The credit union will also have to implement and emergency back-up plan and create a schematic to ensure everything functions as planned.
A NEW WORLD
Net Income and Net Capital have declined. In response, President Wiggington has implemented drastic expense reductions. At the same time, he's now committed the credit union into entering some highly expensive enterprises. All the while, the biggest impact of spending cut-backs is the effect the President's wage freeze is having upon non-exempt staff, the same people who do the work of the credit union. The President has also found a new scapegoat in CFO, Manny Gaitmaitan, who according Charles R. Wiggington, Sr. is difficult, uncooperative, and unable to understand the President's vision which we think is a reference to his special brand of delusions that drive his abysmal business decisions and abhorrent personal behaviors. So what the future hold for the formerly prospering credit union? Well, we don't foresee success in Priority One's future and we think its safe to say, this is one organization that isn't going to experience future growth.