KEKAHA — Kauai’s small local credit unions serve customers like family members. However, larger outside banks are noticing the island’s robust financial growth, and mergers threaten to change the financial landscape.
“We’re a small island, and we should stay with this small community concept,” said Stu Burley, volunteer leader for Kauai Credit Unions. “We don’t need a big conglomerate to control our finances.”
Founded by Kekaha Sugar Company Plantation workers, the Kekaha Federal Credit Union has been serving its members on the Westside of Kauai since 1938. Currently led by CEO Scot Tsuchiyama, the Kekaha bank has grown its membership to more than 1,700 with assets of more than $20 million.
The credit union has one of the largest capital ratios in the state of Hawaii, according to Tsuchiyama, who is preparing for retirement to focus on health after recovering from kidney cancer and hoping for a future organ transplant.
“We’re going with a deeper bench here, because I’m the loan officer, the collection officer, the mortgage loan guy, the BSA officer, compliance officer, the HR guy,” he said. “In a larger credit union you have departments to handle everything, and we would like to have that expertise.”
The Kekaha office of four employees has brought in the Oahu-based Aloha Pacific FCU to manage its back office operations and help with the transition.
“They’ll be taking over the day-to-day management of the place, because I’ve been battling some health issues for the last five years,” Tsuchiyama said. “It’s becoming hard to manage a credit union and keep up with my health.”
Aloha Pacific will be reporting to the current board, providing them with the reports and support, according to Tsuchiyama.
The much-larger Honolulu bank currently serves 48,000 members with $820 million in assets but has no volunteer leaders who live on Kauai.
When asked about the possibility of merging with another Kauai credit union, Tsuchiyama said the board was “kicking around the idea.”
“For members, it will be seamless, because right now we offer just about everything under the sun as a small credit union,” he added.
“My front-line staff will still be here to take the deposits and chat with them.”
But some island residents and financial experts are still concerned about the future implications of a possible merger on Kauai.
“It would be a heartbreak for the Kekaha community to endure a merger by the prospective large Honolulu credit union,” said Corinne King, retired president and CEO of Kauai Government Employees FCU, past president of Kauai Credit Union Chapter and former board member of Hawaii Credit Union League.
“That credit union has a reputation for closing branches and leaving credit union members who used those branches in the lurch. They also sold off all their ATMs,” King added.
“I urge Kekaha members to do their due diligence before they vote so to make an informed decision.”
Credit union bylaws require members to vote such major decisions.
If a merger happens, some feel that local representation will be lost, shifting the majority of decision representation off island and pooling local money into larger outside funds without local leadership.
“There are so many options for Kekaha here on Kauai the members must consider: two large Kauai credit unions offered to merge with Kekaha, sharing a CEO with another credit union and not merging at all, or selling their block of mortgages are three ideas that come to mind,” King said.
“It breaks my heart to learn Kekaha management thinks looking outside our Kauai community at an entity unfamiliar to Kauai is better.”
Volunteer boards of directors running Kauai credit unions make decisions based on knowledge as members of the community, but merging could give less weight to local decisions.
“If you are in a small community and you miss a payment, more than likely you’re gonna get called by your auntie or uncle saying you missed a payment and you can make it up,” said Burley, a member of Kekaha FCU.
“If it’s on the Mainland and you miss a payment, they can jack that interest rate up to 26 percent. A percentage like that is devastating.”
For Kekaha and Kauai, the potential impacts of a merger include less control on decisions, such as keeping a local branch in a smaller rural area if it is not performing well.
Larger corporate growth ambitions from off-island will be the driving force.
Potentially all of Kauai’s credit unions could get merged with larger banks, removing choice and niche cultural fits currently
available.
Burley likes the fact that if you want to make a loan at a small credit union, you can talk to people you know, who know you and what you’re doing on the island.
“If they can take over Kekaha, maybe they can start looking at some of the other small credit unions, then take over the next one and the next one and the next one,” he said.
“Before you know it, some big credit union on the Mainland is running Kauai one step at a time.”
