Nearly three years ago John Tippets accepted what some said was a losing proposition — trying to turn around North Island Credit Union, then teetering on the brink of collapse.
When he retires for the second time, next month, Tippets can leave knowing he achieved that.
Tippets’ performance was recently recognized by Debbie Matz, chairwoman of the National Credit Union Administration, the federal agency that oversees the credit union industry.
“North Island was one of the credit unions on the brink of failure. I was told there was virtually no way that North Island would make it as a stand-alone credit union,” Matz told the National Association of Federal Credit Unions in July. “But John and his board were not willing to give up. There were a lot of late nights, and a lot of tough choices.”
At the trade association’s annual convention in Nashville, Tippets accepted the CEO of the Year award, insisting that the inscription on the award carried the words, “Island team,” referring to NICU’s brand.
Tippets said he had a number of positive things already in place when he came on board in November 2009, replacing retired CEO Michael Maslak.
Good Management and Systems
For openers, the management team in place was competent and had installed good systems for its operations, he said. The institution wasn’t besieged by lawsuits, had a well-known brand, and had a good performing business loan portfolio, Tippets said.
However, what was deeply troubling was the extent of the credit union’s problem loans, particularly its mortgages and home equity lines of credit.
“We were losing $2 million to $2.5 million a month in loan losses,” he said. “If that continued at that rate, we wouldn’t be in business today.”
Because of the heavy losses that totaled about $100 million over two years, NICU’s net worth fell below the minimum required by regulators. The capital ratio actually dropped below 4 percent, an undercapitalized position that made it subject to federal takeover.
When large credit unions fail, regulators usually merge them into stronger credit unions.
The fact that Tippets was the chief executive at American Airlines Credit Union for 17 years and familiar with regulators and what they were seeking likely helped NICU’s situation, Tippets said.
Boosted Capital Levels
To right the failing institution, Tippets and his board took aggressive steps to shrink its size, which resulted in boosting the credit union’s dangerously low capital levels.