ESPANOLA—While two Gore Bay area residents, armed with 246 signatures on a petition and several letters from local individuals and businesses, implored members of the Espanola and District Credit Union (EDCU) to reconsider its decision to close the Gore Bay branch and move it to Mindemoya, it appears the board will not be reversing its decision.
After a board meeting Monday, EDCU board chair Bill Hickey told the Recorder, “We talked about what was presented and the decision that has been made, but I don’t think there will be a lot of changes made. We received the letters and will be responding to all of them,” he said. “We’ll think about this before our next meeting and determine if we are going to make any move on this, but I don’t think there will be a change in decision.”
“It is purely a business decision, it’s the lack of profitability that is our concern at the Gore Bay location that is the biggest concern,” said Mr. Hickey. “And one of the major reasons we have not seen gains in Gore Bay is because of the decrease in our loans portfolio. But it is not just loans, we have not been making money at the Gore Bay branch since 2008. Our actual deficits are up while our loans are down and we have not been getting the support we needed. We have a few businesses that are members, but the local real estate agencies are with the Bank of Montreal, along with the Lodge, Manitoulin Transport and the town (Gore Bay) as well are not members.”
Jeff Hietkamp and Carol Robertson met with the EDCU Monday. “Tonight we ask you to reconsider your decision, look into the matter further, question and test the recommendations made to you by management and listen to the suggestions from the member-owners before making such a huge decision,” said Ms. Robertson, proprietor of Robertson’s IDA in Gore Bay. “It only takes a motion by one board member to reverse the vote and open up the matter for further discussion.”
Mr. Hietkamp, of the LaCloche-Manitoulin Business Assistance Corporation (LAMBAC) said, “The biggest reason I’m here is that I live in Gore Bay and am a member of the Credit Union. I am a community-based person, and I’m here on behalf of four organizations I belong to who bank with the Credit Union.”
“The decision that has been made is really upsetting to people in Gore Bay and around Western Manitoulin,” said Mr. Hietkamp. “I know it was a tough decision, and that all of you have had to go through a lot of heartache in making this decision. We are hoping that maybe you will reconsider.”
“While opening up a new location in Mindemoya is a good idea, as it is undergoing a growth population, I just wanted to mention that in looking at the 2011 census, Gore Bay-Western Manitoulin has a population of 1,962, and 2,040 in 2006. In Central Manitoulin the population in 2006 was 1,944 and in 2011 it was 1,958, a slight increase in population of 14 people. In talking to Pentti (Palonen, an EDCU board member) I was told one of the reasons for the decision was the population growth in Central Manitoulin. From the census you can see there was a slight decrease on Western Manitoulin and a modest increase for Central Manitoulin.”
“I think the idea of expanding-opening up a branch office in Mindemoya is a good idea, but not to move out of the Gore Bay location,” said Mr. Hietkamp. “Revenues seem to be the issue, that you are not generating enough loans. I have been a loans manager for about 30 years, so I understand this part of the business. I called McQuarrie’s, Fogal’s and four realtors, and no one was able to tell me who the loans officer is at the credit union, nor had they ever been provided with a presentation from a loans officer on the services you could provide. If the type of lending you hope to garner is those that come through the door I don’t think it will happen. I think you need to be a little more aggressive in your loans program, promoting and marketing it, which will in turn mean more profit.”
The EDCU made a net income in 2011, however the financial statements do not separate the three branches to indicate what the financial status was for Gore Bay, said Mr. Hietkamp.
It was pointed out that the financial statements are not separated, they look at the EDCU overall. “Loan wise, deposits are allocated and looked at separately, and we don’t have the revenues in Gore Bay,” said Lindsay Liske, chief executive officer.
“It seems to me keeping the Gore Bay branch and expanding into Mindemoya is a good idea,” said Mr. Hietkamp. “But branching into a new location and hoping to gain more loan activity when the community (Mindemoya) already has an existing Bank of Montreal that has been around 100 years will be very difficult. In the Gore Bay branch you have 840 members, and I would guess you will lose at least three-quarters of them with this move. I know among the four organizations I represent we provide $1 million in deposits on a yearly basis, and they will all be leaving the Credit Union if you close the Gore Bay branch, as will the four or five other people I’ve talked to about all of this.”
In looking at the Deposit Insurance Corporation of Ontario (DICO) website, Ms. Robertson noted that, “Credit unions are different than traditional banks. They are co-operative organizations guided by co-operative principles of equality, equity and mutual self-help. They are wholly owned by their members and are governed by a board of directors selected from the membership,” noting this same message can be found on the EDCU website.
“EDCU members are also part owners,” said Ms. Robertson. “They are not just a customer but an actual voice in the credit union. The involvement of our owner-members is what make the credit union work.”
Ms. Robertson explained the board hires a manager, or CEO, to manage and control the day to day activities of the credit union. Although the CEO can develop and make recommendations regarding policies and the business plan of the credit union it is ultimately the board that decides the business plan. “In order to be effective, the board must be able to act independently from the management in order to ensure that member’s interest remain paramount. The board is the boss of the management, but at the same time the board answers to the member-owners. The board of directors represents all members of a credit union, and has a duty to ensure that not only are members deposits are secure, but that members rights are upheld.”
“This is why there are 840 members of the Gore Bay branch of the EDCU. We have chosen to become members of a credit union rather than a traditional bank because of the ability of the member-owners to have a say in the running of the establishment and because the sense of community and autonomy this brings in a small town,” continued Ms. Robertson.
“You have let us down as a board of directors,” stated Ms. Robertson. “You have listened to what management has presented to you without testing its validity and strength. According to Mr. Liske, the conversation of closing the Gore Bay branch has been going on for four to five years.
“In that time what have you, as a board, done to turn that around?” Ms. Robertson asked. “You have had four to five years to make a change. The members were notified of the closing of the Gore Bay branch last Wednesday—five days ago.”
Ms. Robertson continued, “In these five days, this is what we’ve discovered. We’ve learned that Mr. Liske has been pushing for the Gore Bay branch closure for several years citing poor revenue stream due to a decrease in loans. We’ve learned that although there may be a decrease in loans it seems that not much has been done by management to turn that around. I have not heard any members being contacted directly in order to offer them loans. As a matter of fact, I have with me tonight a letter from one Credit Union member who did approach the Credit Union for loan, but the loans officer did not follow-up and the loan went elsewhere. There hasn’t been contact with local real estate officers or car dealerships encouraging them to direct new loan hopefuls to EDCU.”
“We’ve learned that the Gore Bay branch owns the building it currently operates out of, but would have to rent space in a new location, thereby adding expense to the operation,” Ms. Robertson told the board. “We’ve learned that the threat of DICO stepping in and closing the Gore Bay branch in a few years anyway is just that, a threat. Upon phoning DICO, I was told hey have not contacted EDCU about any potential problem regarding its viability. We’ve learned that DICO is not in the business of closing credit unions anyway. They only deal with insuring deposits and before a branch would be closed, they would step in and try to turn it around first.”
“We’ve learned that, the EDCU had a profit in the last year of $135,000, but Gore Bay branch was showing a loss. When asked to see the financial statements of the Gore Bay branch specifically, I was told that the financials do not break out each of the three branches separately, so how can the loss be attributed solely to Gore Bay?” asked Ms. Robertson.
“I was told by Mr. Liske that the closing of the Gore Bay branch is a done deal, what’s done is done, but all that is actually done is a vote, and that can be undone,” said Ms. Robertson. “I’m sure that over the past five days, each of you has received several phone calls and letters from concerned member-owners. Tonight I brought with me five letters from commercial account members and several petitions with signatures of 246 people, 29 percent of membership.”
“We will consider what you have presented here tonight and take it from there,” said Mr. Hickey, pointing out, “We have debated this issue at length.”
“I am a community person, and we won’t go down without a fight—this is important to our community,” said Mr. Hietkamp.
“We can see that,” said Mr. Hickey. “Its profitability and revenues that is the big concern. You wouldn’t run a business at a loss.”
The Recorder had interviewed both Mr. Liske and Mr. Hickey prior to the meeting to discuss the difficulty the Credit Union is having in Gore Bay and the decision to close the branch and move to Mindemoya.
“The board met on Monday (last week) concerning the future of the Gore Bay branch and the decision was basically made based on three options,” said Mr. Liske. “We could remain status quo, close Gore Bay, or close the location and relocate it to Mindemoya. Remaining status quo is not an option because of how much business has declined. The solution that the board felt would be better suited was to move the Gore Bay location to Mindemoya.”
They both pointed out that the number of loans has declined over the past few years. “The number of new loans, what we need to make revenues-profit, has decreased in Gore Bay,” confirmed Mr. Liske. “In Gore Bay we had 19 new loans last year, 26 the year before that and 30 the year before this. You need loans to make money to stay in business to stay. You need to make enough in loans to offset the pay down of loans.”
In comparison, Mr. Liske noted the Little Current branch had 60 loans last year, 57 the year before and 59 two years ago.
As for the deposit part of the business, “We are in good shape in this way,” said Mr. Liske, “but making money is in loans. Membership is not borrowing with us, why? This is a difficult question to answer.”
Mr. Liske said a survey was done several years ago of businesses-individuals in Mindemoya as to how they would feel if the Credit Union opened there and whether they would use the services of the Credit Union. “The response was very positive, open to a branch opening there both as businesses and individuals.”
The board decision last week was unanimous among the board members, said Mr. Liske, noting the Gore Bay building will be put up for sale, and staff positions will be transferred to Mindemoya. “We are looking at two locations in Mindemoya to rent,” he said.
“This was a decision that was certainly not taken lightly,” stated Mr. Liske. “It was done with a lot of thought and discussion over the past few years. The bottom line is we weren’t getting the loans and garnering the revenues needed to remain in Gore Bay.”
“The number of loans we have provided in Gore Bay has been decreasing for the past five-six years,” said Mr. Hickey. He said the Gore Bay branch has not been making profits for quite some time. “We have been talking about making changes for the past five years. We have been losing money and had not received support from the town and area people that is needed. Money on deposits helps obviously, but not in paying on the operation.”
Mr. Hickey said, “we as a board think there is a lot of growth potential moving to Mindemoya. This was strictly a business decision but if we don’t get the support in Mindemoya we would find our selves in the same position there. We are not in the business of losing money.”
The EDCU is looking to make the transfer this fall. “It was a long, hard decision, to shut down a branch office is not an easy decision, but we can’t keep pouring money into something that we were not seeing profits from,” added Mr. Hickey.