Wise Words with Steve Dahlstrom

Steve Dahlstrom, president and CEO of Spokane Teachers Credit Union, oversees a banking institution with 14 branches in Eastern Washington and North Idaho, 85,000 members and nearly 400 employees. He knows his employees by name and often personally calls his customers to help them figure out banking problems. In recent years, Dahlstrom’s soft-spoken leadership has garnered him best-boss honors, as well as best-place-to-work recognition for STCU, an institution that continues quiet but steady growth in the worst economy since the Great Depression. This is the complete transcript from a recent “Wise Words” interview with Dahlstrom, 57.

I grew up in Missoula. My family was hard working, blue-collar folks. My dad was a body and fender man. He and his dad had a little auto repair shop. After my grandpa died, my dad worked on trucks, logging trucks, painting and fixing stuff. My mom was a stay at home mom who sewed draperies on the side and that kind of thing. There were two children, me and my sister. I’m the oldest. My sister is two years younger and she lives in Missoula.

The message in our family about money? We never had any of it. My dad, he didn’t care much about money. He got paid, he cashed his check, he came home and gave mom what he thought she needed and that was it. That’s all I ever saw — here’s the money, cash. My mom wrote checks occasionally. They borrowed from the finance company. They were just working people.

My mom was a meticulous record keeper. When my mom passed away, we went to her apartment, and we were cleaning it out and all she had left was a little cedar chest that they used to get when they graduate from high school. She had her cedar chest we were going through and in it, we found a notebook that she had been keeping track of her expenses. She and my aunt had lived in San Francisco while my father was in the Navy during the World War. And she had been writing down, 25 cents for this, and she just kept track of everything. She was always that way. When I was in Little League baseball, she’d be the one in the stands keeping track of who got a hit. She was very meticulous. She was very good at keeping track of everything. She graduated from high school. She never went to college.

We always valued every dime we had, because we just didn’t have that much. I’m the first, and the only, person in my family ever to go to college. Dad, as long as he had a few dollars in his pocket, he was fine. They were pretty frugal people. What of my background do I still use in my job? I think I really understand people who don’t have money. I’ve been there. I remember when we were growing up the first car I ever had was when my grandmother died, I got her 1950 Plymouth — a three-speed shifter. I thought it was the neatest thing I ever got. I didn’t realize they could have gotten me anything else.

We lived outside town. So we fed the pigs and had the dogs and horses and alfalfa fields. We always worked when we were kids. The other thing that was a big part of childhood was that I got into Cub Scouts. My mother was the den mother. Dad became the Scout master. I got my Eagle Scout. My dad got the silver Beaver, the highest award that a male scouting executive can get, and my mom had the highest for a woman. We were just 24 hours a day scouting, from the time I was a Cub Scout until I was 19 years old. We did a lot of family stuff.

What do I still use from scouting? Do my 10 best? Do my duty? You just get engrained with that. There are so few opportunities today to practice character, to do that good deed every day. I didn’t know there was any difference. That’s just the way we were raised. My sister is the same way. She’s very involved in the Eagle’s Lodge. They volunteer all the time. We just didn’t know anything else.

I graduated from high school in 1971. My draft number was 36. So I knew I was going into the service. My neighbor lady was secretary for the draft board. So I just told her to give me a call the day before she sent out the draft notice, and I’d go and enlist. So my father and his three brothers were all in the Navy. So I decided to go into the Navy. I spent a couple of years in the Navy and that couple of years paid for three years of college. I had enough credits from doing GED courses and going straight to school for 36 months to pay for my college. That’s what I did. My parents couldn’t have paid for me to go. So I thank the Navy and the G.I. bill for paying me.

My family was excited. My mom thought it was great. My dad never finished high school. He was an artist when it came to painting and that kind of thing, but he just didn’t have any formal education. Much to his chagrin, in a way, because his brothers were all educated. I have an uncle who is a music teacher and another uncle who is a music teacher. They were all educated, except for my dad. My mom was really tickled. I think she wanted to go to college. But then the war happened, they got married. There was so much sacrifice at that time. People gave up so much so we all could be better off.

My main message to people trying to finance education? Don’t go into debt. You mortgage your future. I see so many kids graduate from college with $100,000 in debt. That’s a house. I’m a big fan of working while you’re in school, getting scholarships and doing everything you can to pay for college. I’m helping my daughter get through college, but she’s working. There’s a value to work and school. I’m not one to judge people, but I’ve just seen how burdensome that can be on people. If you can avoid it somehow.

The other thing that was beneficial for me? When I graduated from high school – and I was a good student and all that in high school – but when I graduated from high school, the first quarter I went to the university, I didn’t do very well. I had my mind on going away to the service and I didn’t really know what was going to go on. And so I wasn’t really a very good student. Then I went away for a couple of years and went in the Navy and it really occurred to me why I was going to school. Man, I was probably the worst classmate anyone wanted. I really wanted to be there. I studied real hard. I typed my papers over three times so there wouldn’t be any mistakes. You sometimes have to take a little break there to realize why you need to go to school.

If you’ve been in the business long enough, you see all the cycles. I’ve seen 20 percent interest rates. When I started at STCU, we had a moratorium on new loans until someone made a payment. There was a credit freeze in 1980 when I came there. These things come and go. I have a background in economics, so I understand business cycles.

What I was worried about was the impact on people. Business is business, but in the end, it’s people. We didn’t get hit like some parts of the country – New York, California, Arizona, Florida. I don’t think we really saw it here in Spokane. I have colleagues in other parts of the country, and I saw it hitting before we saw it here, so we could kind of prepare for it. If your house goes down in value, your house goes down in value. That’s all there is to it. There’s nothing you can do about it. You’re not a bad person. It’s just the way things are.

We got whacked, but the Spokane market is better than other parts of the country. Some other institutions have investments in those other parts of the country that are worse than Spokane. I wouldn’t blame it on being smart. Sometimes, it’s just a function of our nature. We’re a local institution. We’re not investing in markets that got hit as hard. Part of it is the fact we’re based in Spokane.

Members will ask me all the time: “How come the credit union didn’t get in trouble?” My answer is “Well, we made loans to people like you.” And generally, 99.9 percent of people are good, honest hard-working people and they’re going to pay their loans. And that’s what we have on my books – loans to people.

A lot of institutions sold their loans. And so they didn’t take their risk, necessarily. And since they didn’t take their risk, they maybe didn’t do all the steps you need to do to verify that people are going to pay you back. The other thing is that even though I have some loans that are bad, I don’t have a pressure to make my quarterly earning number. My stock price doesn’t fluctuate. I don’t have any stock. So if a member is willing to work through it, we’ll work through it. We’ve got time. In a 30 year relationship with a member, a six-month problem is a blip. It’s like selling your stocks when the market is down. The market didn’t cause the problem, your sale made the problem. So if you wait, it will come back. And we’re helping members restructure their loans or defer their payments so they can get through these things. We’re trying to salvage as much of it as we can.

I do have a lot of former principals on my board. Once a month, I get to go to the principal’s office to report on what I’ve done. But what you see is more stability in that group of people (teachers.) Education, especially K-12, hasn’t seen the cutbacks that other parts of the economy has. But STCU is certainly more than just teachers. We have 85,000 members throughout the Inland Empire.

The bottom line here is that our philosophy is this: We don’t try to make a loan to put you in trouble. We think the loan committee meets at the breakfast table. People sit down and decide whether to get the loan or not. Not us. What our job is to give them enough information to make that decision, whether it’s right for them. Sometimes, we’ll be criticized for turning down a loan, but really all we’re trying to do is give them enough information that says we don’t think the time is right for you right now to buy this thing you want to buy.

You can look at it two ways. We have a delinquency ratio of ½ of 1 percent. I could say, “Oh my gosh, ½ of 1 percent of my loans are delinquent.” Or I could say, “Well, 99 ½ percent of the people pay on time. I’d rather look at the 99 and ½ percent than focus on the people struggling. I think, generally, just trust people. If you do that and treat them right, they’ll pay you back.

I had a member just the other day call and complain about losing her membership in the credit union, because she defaulted on a loan. We have a rule: Default on a loan and cause us a loss and you’re not a member anymore. She just wanted back in. She missed us, so to speak. We said, “You realize you cost us some money.” She said, “You just wrote that off anyway.” We said, “Well, we don’t write things off. The money we lent you was your neighbor’s money. Your neighbor didn’t get paid.” And that was like a big shock to her that gosh, it was really someone’s money that she didn’t pay off.

We’re not a taxable entity. We’re a co-op. We don’t pay taxes, but we don’t have write-offs either. You are actually spending and loaning and borrowing other people’s savings. And when you make a deposit in the credit union, I’m going to loan it off to someone else who needs a loan. There’s always a tension between you who want to get the most dividend possible and your neighbor who wants to pay the lowest interest rate possible. As a co-op, you really see both sides of the equation.

How did we keep morale up this past year? No. 1, I wanted to keep jobs. We’re going to get through this and I’m going to need these good people that work for me. So what does that mean? That means we’ve got to cut some things. Everybody in the company from me on down gave up their bonuses. Incentives is a better word than bonus. We pay incentives if the credit union does well, the employees will do well. If the credit union doesn’t do well, we don’t get paid.

We tightened our belt on marketing and travel expenses. We deferred opening up of a couple of branches. Those were all things that were forward-facing stuff. My feeling was we needed to preserve the core.

Having said that, we’re not in a contraction in our company. Our company is in a growth mode. What it meant was everybody had to do more with what we already had. You have to just communicate all the time and convey we’re all in this together and we’re going to get through this, but we’re all going to have to make a sacrifice and we did.

The members didn’t go away. They are still coming in wanting loans and cash and checks. Our business didn’t decline at all, in fact our business is increasing. So I couldn’t really cut back. I didn’t want to suffer the service to members. That’s what we focus on – service. So I didn’t want the service levels to go down.

There are two answers to a budget crisis. One is to cut costs, one is to expand business. I’m always on the income side. I’d rather increase our income than cut our expenses.

We have a monthly staff meeting. I just got up in front of the staff meeting and said, “This is what we’re going to do.” I think they were all nervous. At the time, things were pretty unsettled. And we’re not this closed little ship. We’re impacted by what’s going on in our industry and Congress. Some of the things that happened were not within our control.

We have the most enormous thank-you culture in our credit union. We have all kinds of recognition programs. Maybe 10 years ago, we adopted the fish philosophy. Most people do the fish philosophy for six months. We’ve been doing it for 10 years. It’s based on the Pike Place market and what they do over there. The basic philosophy is you shouldn’t come to work unless you are going to have fun. You need to choose your attitude when you come through the door. You need to make the day of the person you are helping. So those things permeate our organization.

We have one thing called the “Star bucks.” As a coworker can recognize that you did a really great job with Mrs. Jones. That nomination goes into a fish bowl. And we draw out for prizes and we read what Mary did to help Mrs. Jones. We focus on examples on what it means to provide good service. Our credit union a few years ago was named one of the best places to work in the country. It’s because we constantly hire people who are service fanatics. There’s some value in me getting up saying hey, you did a great job. But I think it’s just as valuable having your coworkers say, hey you’re doing a great job. If you’re getting encouragement from all around you, then you are going to do a good job.

Our products aren’t any different than other financial institution. Checking accounts and credit cards and so far. When you call up and talk to someone, you want someone who cares. On the way here, I was talking to a member on my cell phone. He wrote a letter, because we had a little disagreement about the loan. He got the loan, but he didn’t get it quite the way he wanted to get it. So I called him out of the blue. We’re talking and he says, “You know, I’ve been a member for 20 years, and I finally called Darla.” Well, that’s a person in our credit union. She’s our branch manager. He didn’t care about the credit union. He cares about his relationship with Darla. Because that’s the person he’s going to get his loan with.

We have people that go into our branches. They wait in line until they can see “Mary” because “Mary” is the teller they want to see. Or they call their favorite loan officer. Our people become involved on a personal basis with people. Even though we have 85,000 members, we tell the tellers, “You may deal with 200 members a day, but the member only deals with one teller a day, so you have to treat that interaction as the most important transaction you will do the entire day, because it’s the most important transaction you’re going to do that entire day, because it is for that person.” It’s a culture of wanting to help.

I’ve always been a big fan of savings, because we never know what’s going to come along. I think people are more conservative today. They are waiting to make that purchase a little longer than they used to. They are putting more money down. How long will that last? I don’t know. I think the days of really easy credit are not going to come back in my career.

The one thing I know is that we have many members in the credit union who are very comfortable in their retirement. I ask them, “How did you get comfortable in your retirement?” Almost all of them will say, “You know when I first started teaching they told me to put a little out of each paycheck away. You know, it worked.” You don’t have to save a lot, but you have to save a long time.

Our parents should be giving that message. One thing we do at the credit union is spend a lot of time and money in financial education at the schools. Most kids learn from their parents what to do and what not to do with money. A lot of the parents don’t know how to do that. You just provide the information. The young people are willing to learn on their own. They don’t want to look stupid. They want to be responsible.

We were launching a Visa card campaign and we made up a sign we thought would appeal to the young people. It was all about “With your new debit card, you can buy things online and do all sorts of things.” So we took the mock up of the poster to my daughter’s high school DECA class. We showed it to them to get their reaction. They all looked at it and said, “That’s a stupid thing.” We said, “Really, we thought you’d all want this debit card because of this cool marketing.” They said, “You know, we don’t want the debit card because we can go buy stuff. We want the debit card because that shows you trust us.” I thought, “Oh, we sort of missed the whole thought there.”

Debit cards are about trusting you to do the right thing and to handle debit responsibly and to have a little savings account, not to encourage you to just go out and spend money. We had to readjust our thinking on it, and it was the kids who taught us that. That’s the message we try to impart in our financial education programs. This is about responsibility and trust.

We still have Christmas Clubs. You save all year and then we give you a check in October. It’s having a goal you want to attain – whether it’s to have money for Christmas or a vacation or retirement. It’s sitting down and saying how much do I need to set aside each month to reach that goal? Was I surprised Christmas Club accounts pretty much disappeared in our culture? Yeah. They were sort of replaced. We used to joke a few years ago that a savings account was having money left on your credit card balance. That was your savings account, your emergency fund. I think people are realizing it’s not such a good plan anymore.

If you really want to stop the conservation at the cocktail party, ask people how their budget is or their 401 (K). Nobody wants to talk about that stuff. I’ve been a budgeting fanatic all my life and I teach people to do that. Budgeting doesn’t mean how you’ll spend every dime of your paycheck. It’s how you’ll set aside some of it for current use and some for future use.

You can talk about savings all you want, but people are still going to borrow for cars and houses. What this economy has taught us is that you can’t keep borrowing to pay off your other borrowing. If you lose your job, you’re only a few paychecks away from trouble. That’s made people more cautious.

What’s going to happen to our economy? It will get better. My economics professor always said predicting the direction of interest rates and the timing in the same sentence was a mistake. I know it will get better than it is today. Spokane’s economy is somewhat related to the weather. I wouldn’t expect to see anything before spring. That’s what we see in our organization. Loans pick up in the spring. House buying picks up in the spring. People buy new cars. I don’t expect much to happen through January and February and maybe even March, and then we’ll see things start to get better.

Five years from now, what financial wisdom do I think people will still be practicing? The price of your house and the price of stocks don’t always go up. The other thing that has happened is that we’re all older now. We baby boomers are moving from the I-need-to-accumulate-everything-I’m-ever-going-to have to I-need-to-save-for-retirement. That’s changing the way people think. The bulk of us are reaching those years where we don’t have that much time to accumulate for retirement, so we are trying to pare things down, pay things off. At the credit union, one of our newer products is a 10-year mortgage. People are saying, “I want to get this thing paid off, before I retire.” That would have not been something we offered 10 years ago.

I have a garage full of stuff I’d like to get rid of. I don’t need any more stuff. I told my daughter, “Look at all this stuff you’re going to get someday.” She said, “I really don’t want it all, Dad.”

I think we are turning a corner. In the next five years, you’ll start to see this changeover in the work force as the boomers retire and the younger people get a chance to take on new challenges.

Am I optimistic? America is a wonderful country. It’s still the best country in the world. We’ll figure this out. We always have. One book I always recommend is “The World is Flat.” If you read that, you really start to understand it’s not a U.S. versus everybody else world. What happens in Canada and Europe and Asia affects us differently than it has in the past. There’s opportunity there and we’re in a position to take advantage of that. So I think it’s very positive in the future.

I serve on several nonprofit boards and right now, man, it is really tough for nonprofits. Now is the time when nonprofits serve a lot of needs in the community. Our company tries to set an example by investing back in the community. I would encourage everybody to think about that and during the holiday, find a way to support a nonprofit or a community agency.

There isn’t as much of a safety net for people. What we’re finding out in our company is that people are experiencing financial problems who have never had a problem before, and they don’t know who to call or how to deal with it. They are embarrassed by it. A little compassion and helping hand helps us all get through this situation. I see lots of opportunity for the people who are doing well.

When we go into a classroom and talk to kids and say, “We’d like to start a penny drive.” Kids find pennies. When we have our youth savings class, our financial literacy class, we give them a little savings jar and the savings jar has three slots on it. One is for spending, one is for saving and one is for giving. We try to teach people that if you have a little bit to put it away, a little bit of that could go to someone else. That’s the way we ought to treat people in our economy right now.

Our employees are amazing. When we have a staff meeting, they bring food for the food bank or clothes for the kids going back to school. The United Way is on right now. It’s an opportunity for everyone to step up.