Members first: STCU leader puts service on a pedestal

STCU’s humble start was the stuff of Norman Rockwell paintings.

During the Great Depression, Ernie McElvain and other Lewis and Clark High School teachers pooled their resources and launched Spokane Teachers Credit Union with $4,000 and a bell.

The bell hung outside a second-story window at LC, with a long rope dangling below. The credit union only operated after school and on weekends, when the building was locked. If members wanted to transact business, recounted McElvain, “they’d pull on the rope and let us know they were waiting.”

Members could each deposit up to $20 a month, and borrow as much as a month’s wages – $83, in the case of first-year teachers.

Initially cash was kept in a shoebox until it could be deposited in a local bank. Two years after opening, the credit union purchased a safe for $8.50.

Today, STCU is the Inland Northwest’s largest credit union, with 18 branches.

Tom Johnson is only the fourth president and CEO in the organization’s 80-year history, succeeding Steve Dahlstrom in 2011.

During a recent interview, Johnson discussed how the credit union has evolved, some changes ahead, and what he learned while riding in a parade float.

S-R: Where did you grow up?

Johnson: In the Midwest – Rockford, Illinois.

S-R: As a teenager, what career did you envision?

Johnson: Based on a battery of tests I took my junior year, I was told I was good at math and should pursue an engineering degree. But once I got to the University of Illinois, I switched to business administration. Later, I earned an MBA at what is now Clarkson University in upstate New York, and passed the CPA exam.

S-R: What was your early career path?

Johnson: My first job was in a management training program with a fastener manufacturer in my hometown. And I worked for Young Life, a national Christian outreach program for high school kids, for about 10 years while earning my graduate degree.

S-R: What brought you to Spokane?

Johnson: Whitworth College. In 1989, I was recruited to take the job as vice president for finance, and worked there 17 years. During the last 12 of those years, I also served on the STCU board. Eight and a half years ago I was hired here as vice president of administration.

S-R: What skills learned at Whitworth transferred to the credit union arena?

Johnson: Seventeen years of running the finance side of Whitworth helped me develop business acumen and management skills and get to know the Spokane community. Also, Whitworth and STCU are about the same size, both are nonprofits, and both are mission-driven. The university’s mission is to serve its students. STCU’s is to serve our members.

S-R: How has STCU evolved since you were hired in 2006?

Johnson: Our assets have doubled. Our membership has grown from about 80,000 to 134,000. And the business continues to get more sophisticated, as illustrated by almost daily newspaper stories about (security) breaches.

S-R: What distinguishes STCU from other financial options?

Johnson: The fact that we’re a not-for-profit cooperative is the underlying difference between us and a bank. When you go in for a loan at a bank, there are three people at the table: you, the banker, and the investor who owns the bank. Some of your money has to pay the banker to cover expenses, and some of it has to pay the investor a return. When you come to a credit union, there are only two people at the table: the borrower and the lender. Anything we make beyond expenses goes back to the membership in the form of higher deposit (interest) rates and lower loan rates.

S-R: How does your management style differ from your predecessor’s?

Johnson: I’m more involved outside STCU. When Steve became CEO (in 1991), this was a much smaller organization. As we’ve grown, so has the expectation that we become more engaged with the community. So I serve on a number of local and state boards.

S-R: How many hours a week do you work?

Johnson: Probably around 60.

S-R: What impact did the recession have on STCU?

Johnson: Our members were dealing with lost jobs and reduction of hours, so we saw an increase in (loan payment) delinquencies and charge-offs. Prior to the recession we had only one foreclosure, maybe ever. During the recession, we had between 200 and 300.

S-R: Are people buying houses now?

Johnson: Having come through the past eight years, our members seem reluctant to commit to the major obligation of a home. Instead, they’re in the market for cars. That reflects national trends.

S-R: Is it getting easier to borrow for a house?

Johnson: It’s easier than it was a year ago, but underwriting standards are still tougher today than they were before the recession, which makes it difficult for younger members to get into the housing market.

S-R: If a relative or friend asked you if now is a good time to buy a house, what would you say?

Johnson: It is a good time to buy – interest rates are at an historic low. But the decision should be based on your housing needs, not about an investment.

S-R: Has STCU had problems with security breaches?

Johnson: We’ve certainly had members’ identities stolen. All financial institutions are dealing with it. But we’re coming out with a couple of things this year that will provide additional protection, including Apple Pay, and credit and debit cards with EMV chips. One thing to remember is that, in spite of all the breaches that have occurred, consumers are protected. It’s financial institutions that pick up the tab.

S-R: What do you like most about your job?

Johnson: I love the people I work with.

S-R: What do you like least?

Johnson: People problems. With 525 employees, there always seems to be something going on.

S-R: Have your membership demographics changed?

Johnson: Yes. About 15 years ago, our state regulator allowed credit unions to serve any individual who lives, works or worships in Washington. That changed our membership base significantly. Less than 25 percent today are teachers.

S-R: What are you most proud of?

Johnson: When I became CEO, we were on the cusp of switching all our members’ financial records from this computer to that computer. It all happened over a three-day weekend, and on Monday morning everything worked. That was a real tribute to the STCU team that devoted three years to making it happen.

S-R: Have there been any major stumbles?

Johnson: Yes. The same time we converted the financial records, we switched the software that allowed members to access their accounts online. Within six months we knew we’d made a mistake, and spent another two years converting to a different online banking platform.

S-R: What did you learn?

Johnson: That when you think you’ve done enough due diligence, keep looking, because there might be a story you haven’t heard yet.

S-R: Will you hire more people this year?

Johnson: Yes.

S-R: What do you look for in potential employees?

Johnson: We focus on serving our members, so not every person who applies fits our culture.

S-R: How would you characterize your management style?

Johnson: Treat employees well, and they’ll serve our members well. That’s part of the secret sauce.

S-R: What’s your favorite customer reaction?

Johnson: About five years ago, I rode the STCU float in the Lilac Parade, and discovered there are three types of people who attend the parade. There’s the reluctant husband who doesn’t want to be there, and has a scowl on his face. Then there are the people who wave, and smile when you wave back. The third type are people who, when they see our float coming, reach into their wallets, pull out their STCU debit cards, and hold them up to show us they’re members and proud of it.