Plugged In - A Banking Podcast
Plugged In brings you raw, honest takes on all things in the banking industry. That means you aren’t going to get some buzzword-filled, cliche podcast – you’re getting an unfiltered look into topics in the financial world no one else is talking about. Your hosts, Al Dominick and Steve Williams, will talk to top players in the industry about what matters now, and what will shape the future.
To groove along with Al and Steve's song references each episode, check out the official Plugged In Spotify playlist: https://open.spotify.com/playlist/1Z7NWPIQuaXQlfHxLWJb3g?si=o552CzjwTr6R4mx13NmOBA
Plugged In - A Banking Podcast
Ep 25: Pizza parties, digital banks, university appeal // April Clobes
In this episode, Al and Steve sit down with April Clobes, president and CEO of MSU Federal Credit Union, to chat about growth strategies in Michigan, a state that ranks 49th in overall population growth since the 1990s. Spoiler: For the university credit union, it includes more intimate marketing, like sponsoring green-and-white pizzas (the university’s colors) and pizza-making classes.
April also dishes on the credit union’s two digital banks, while the crew explores how to deal with lost revenue when becoming a $10 billion institution (thanks, Durbin).
Coming up a brand new episode of Coinichon Advisors, plugged in with a superstar CEO and, if you can see in the background, a book lover like my friend, steve Williams.
Speaker 2:Love bucks.
Speaker 1:No, doesn't hate him, we found that out. But, steve, I'm at my kind of home away from home, but this is where you walk it down on a fairly regular basis, so I feel it's only appropriate for you to introduce our guest today.
Speaker 2:Want to say hello to April. April, how you doing, yeah, I mean, I think for folks over in the credit union industry they know someone who has seen a remarkable story of growth, but more than just growth, innovation and taking risk and trying new things. So we have the CEO of Michigan State University Ghost Barton's federal credit union, april Clovis.
Speaker 1:So welcome, hello how are you all? We are gonna have some fun. We are gonna have some fun with this episode, I believe.
Speaker 2:I hope so. This is someone. April, I wanna get the right asset size when you were named CEO.
Speaker 3:It was about two and a half billion.
Speaker 2:Two and a half billion and now knocking on the door of 10, around eight billion now and growing and a lot of great things going on. So we wanna kind of dig into this growth story, but also kind of a leadership story. How are you doing so many things at once? How do you keep your team aligned? I think any organization bank, credit union, fintech would be interested in this.
Speaker 1:Yeah, and if you're a Gonzo banker award reader, you will recognize both the business at April Runs and April's name, because we've recognized her and the team for some really exceptional things over the last few years.
Speaker 2:So yeah, Two Gonzo awards one for strategy this year and one related to a very cool innovation related to financial, health and behavioral science. So I'd encourage you guys to read the Gonzo awards.
Speaker 1:Yeah, well, thanks for that. It's shameless plug right there for Cornerstone, but you know what? Let's just dive right in, Like we always do when plugged in. So we've got five different songs that Steve and I creatively agreed to Curated About 20 seconds before we hopped on with April. That we thought would be a really wonderful way to juxtapose our business conversation with some kind of pop culture references. So you know we talk about a lot of things that plugged in, but really we wanna start by focusing on the state of Michigan. It's been in the news over the last few days thanks to a different schools football team that we won't talk about, but the state of Michigan ranks 49th in overall population growth since 1990. So when you think about where people are moving to, the state of Michigan doesn't normally come up in conversation as one, two or three. But what's interesting is the credit union that April runs has seen an increase in its member base of about 40% over the last five years.
Speaker 2:Right, and a no to slow growth state.
Speaker 1:So that's pretty impressive. So if we were to use a song, I think we've gotta use Irene Cara's Flash Dance, because what a feeling it must be to see that type of number associated with the business that you're running. So you know, could you talk a little bit about the proverbial secret sauce? Yeah, what's the?
Speaker 2:secret sauce. How do you people often blame their market? I could grow. It's just my market. You took a market and grew, and grew substantially more than other credit unions or banks in growth markets.
Speaker 3:Well, okay. So one I have to admit not only do I love books, but I love music, so I can't wait for the song unveiling at every moment. So that's gonna be fun for me. But the you know, I think I know that Michigan is a declining population. In fact, a headline that's been in Cranes, detroit, in the last two days is U-Haul. Michigan ranks 49th on the states of one way out, so we have the highest out. You know like we're numbered. I think the second highest state with, you know, going out traffic for movement.
Speaker 3:So a couple of things for us that I think is important. So one I don't look at. Our region actually is not shrinking. So where we are centrally located, which has a university, the state capital, and has a really unique opportunity to attract startup businesses, we have legacy GM plants in our market that are now attracting suppliers and EV batteries and stuff. So we actually see our region a little bit of growth, but I think our growth is coming from. We do have a great field of membership where we get a renewing incoming opportunity every year, and so for me, like Michigan State admits 9,000 students every year, that's 9,000 new people that we can attract. They have new faculty coming. They you know alumni stay with us when they leave the state of Michigan and then we also serve Oakland University in the Metro Detroit area and they have the same, you know, experience with new students coming and we are their institutions. So we have an opportunity to grow in that capacity. We've done unique things to try to capture other segments of the market, I guess as well.
Speaker 2:Yeah, but I think you must be retaining a lot of that university traffic because other credit unions or banks they get the students and then the students leave. But are you retaining a pretty good amount of those?
Speaker 3:Yes, so we track, so you know, the first year 95% of course right, like I'm staying and I'm going to college still, but by about five years post-graduation we are over 75, 80%.
Speaker 3:10 years out it gets a little closer to 60, 50%. But when we track that to the rest of the membership that is not student focused, the numbers are 5% to 10% higher than the average membership right. And so I do think there's some marketing, you know, involved in that right. You're loyal to your first card, you're loyal to your first institution and we get the benefit of that when we are the first place that I have my adult grown-up account and that benefits it and we have an affiliation. So I know you mentioned maybe there's another institution to go to college in the state of Michigan, but if you have a lot of affiliation to where you went to college as an undergrad and so our credit cards, you know, frankly, have an MSU logo on them, they have the Spartan helmet on it. So people want to carry that, they want to have that a pride in that affiliation, and so I think it stays with them and they stay with us longer.
Speaker 2:Now April mentioned the word marketing, and the trivia I have for you is April came up through the marketing side of the house and I asked you what kind of song could we apply to that? And you had a great one. So song number two, April.
Speaker 1:Well, you got to take me where the future is lying With St Elmo's Fire.
Speaker 2:You're taking your way back.
Speaker 1:It's good, I am, I like that, even I have the future's lying St Elmo's Fire.
Speaker 3:That's good.
Speaker 1:I like the singing. Can we harmonize? Next time you do this, give me a little warning so that we can actually get the duo up and rolling.
Speaker 3:I love it so much. I'm a product of the 80s music, so you can keep it going.
Speaker 1:But like all you're kidding though, I have a marketing background. I think most people aspire to understand how to position and to differentiate your business and it doesn't happen because you have a slick green logo on your credit card. So the marketing function itself has been reinvented and continues to be reinvented, and I think your perspective is really appropriate for a lot of the listeners to better understand. Because the business of banking, it needs some sexiness, it needs some flavor and personality. If you're able to resonate with a very young crowd, there's got to be some hooks that you start to get proud about as a marketer. Can you talk a little bit about those?
Speaker 3:Sure, so we're doing a few unique things. I would say my philosophy as a marketer is when we do engagement, what are all the ways that we can do it? Somebody can say so. This is my favorite example in the last week. We have a local pizza place and they make very unique pizza, and so we are the sponsor of the Green and White Pizza and what that is is pickles on pizza, but it is, if you come to Michigan State, young people that's the pizza they're going to buy because it's the Green and White Pizza but it is named for us so we can just pay for the naming.
Speaker 3:But we don't. We do coupons to members. We get to sponsor. They buy one, get one Half off day. They do pizza making classes for young people that you know. All of that is kind of under this sponsorship.
Speaker 3:So we try to do, I would say, multi-level engagement at all times. It's not just mass marketing, it's how do I get to a one-on-one with our members, but ways that we're doing unique marketing. We definitely are spending time in the brand influencer space with. We're doing name-imaged likeness with the MSU Women's Basketball Team.
Speaker 3:They do a lot of social media posts for us, they engage with us, they come to events and programs and the other thing that's engaging for young people is really connected to philanthropy, to social support causes, and so what we did this year for our new student promotions you know why would you get an account at the credit union? And we did for all the students who opened an account, we made a $5 donation to a charity and then everyone that opened the account got to select, you know, and do a popular vote on which charity that we sent those funds to and that you know. We sent, you know, a nice check of almost $20,000 to the student food bank and you know that's part of you know understanding different generations and what they value and how to speak to the values that align together. And as a credit union, of course, we have great philanthropy, community giving values, and that resonates with our young people for sure.
Speaker 1:April. You talk about the NIL stuff. I'm curious. I had a conversation with a bank CEO on the East Coast who has a Clemson football player. He's their brand ambassador and I had asked him how did they vet the relationship? And it essentially became a personal one, where the CEO had a family relationship with this player's parents, so he they felt comfortable with the reputation risk that was associated with. You know, bringing somebody in like this. How did you think about that Michigan State women's basketball team for that NIL deal? I mean, there has to be some type of internal control that allows you to feel comfortable saying we're going to put our name and likeness against theirs, not just theirs against ours.
Speaker 3:As a marketer in my life, I've always hesitated to do what I would call, you know, a human attached to your brand, because humans can make mistakes, and then, depending on how significant that is attached to you.
Speaker 3:We've all seen those brand Hello Elon, hello Elon, yeah, right. And so what we worked on were a few things. First, we selected the women's sports in basketball, right, so one. We wanted to do maybe something that isn't as popular, right? Everyone wants to get the star quarterback and to promote their brand. Therefore, those players also become too expensive, for even though we're a larger institution, I can't compete with some of the contracts that are being offered today for really high-level football players or basketball players.
Speaker 3:And then, when we first started this, very few people were focused on women athletes, and so that became an area where we could make a difference and also give parity and equity to women in sports. Because, you know, and in this case I had a personal relationship through the years of just being at MSU together with the women's basketball coach, and so I knew how important it would be for her team to have the same access and opportunity as the football team, and so we went down the path with the women's team. First of all, it's a small team, so you know, a football team is 100 and some players basketball teams are 15. You know, so it was A we could afford it. B we knew the players. You know, in a different level C, we did a contract and we did meetings with the students and we walked through line by line what the expectations were, when they would or would not get paid. If they did anything reputational that would violate the contract, you know, then they would be terminated.
Speaker 3:A lot of making sure that the students really understood the relationship and the legal relationship they were entering into with us. But the players have embraced it. They're really supportive. We were at the women's game last night. I mean they come up and give us hugs. The former some people have graduated in the last year still text me. You know they're playing in other countries and you know sending me holiday messages and you do form a relationship. It's like all things in life, right? So then they know me, I go to the meetings and so they know that I know who they are and I think it just is one more level of accountability, probably, like you know, knowing the family, I guess, right.
Speaker 1:Well, it's cool, as you say that I love that you identified an underserved part of the community and were able to step in, but I also have to imagine you've been patient to see that program really develop over time. I think sometimes we as consumers, as people who love brands, want the immediate gratification and the satisfaction of saying I put some money in and this is where I get out of it. I think taking the longer view where you can say I actually have a relationship that's both personal and professional lends itself to something far more sustainable that people will realize is authentic as opposed to just transactional Right.
Speaker 3:Well, in our case, right, a lot of the players are in their third and fourth year at school and should they know us, and so they also rely on this relationship and they want to make sure that they do a good job. So we renew every year with them and they see the value for themselves after being paid for the year, right, and so they want to be successful also.
Speaker 1:Yeah, now, steve, you and I grew up in the wrong time because some of this NIL money. If you start reading about Big Ten football teams, we'll take Michigan State out of this, but, like Nebraska, they're buying quarterbacks that are five stars for a few million. They're getting their offensive line all tricked out and they pick up trucks.
Speaker 2:So if I'm a junior, I make more money as a senior. Are there?
Speaker 1:NIL deals at Cornerstone. How do I get into there?
Speaker 2:Okay, Well, sadly we're going to have to find some other things to talk about then sports Well, I want to take one, and that is that the business model of banking and credit unions, and want to note something that I've seen firsthand that Michigan State University, fcu, has done, and that is build what's called a QSO, a subsidiary, essentially called the receda group, and, as you know, when you hit 10 billion there's a little bit of a haircut called. Thank you, dick Durbin.
Speaker 1:But another Gonzo Award loser A loser. Not winner at this time a loser.
Speaker 2:But the idea was, how do we build a revenue stream that we're going to lose? And April and team built something called a receda group, because all kinds of services, marketing, print, other things to build non-existence income, but also to sell services to other financial institutions. So what's the state? One thing I'd give you, april it's been pretty loud out there. You haven't been a quiet receda group out there, but how is it going selling services and growing a different kind of business than a mortgage loan or a checking account?
Speaker 3:Well, it definitely is a different business, and so what I tell everybody is we segregated and created like the holding company qso show. All qso activities and fin tech investments go into that, because it is a separate focus from your you know your credit union day to day. I have a great human that I think you've recognized, ben maxim as well, and he's our chief operating officer, and so ben Is responsible for what is created out of recita. So we have a couple different arms of recita. One is we've invested in some technology and we're a minority investor. Then we have either acquired or created software and digital technology that we produce and sell, and that's what ben is, the c? O over recita products.
Speaker 3:And then we have acquired, as you noted, a printing company and an ad agency, and so together, when we look at our financials, you know the value of that portfolio consolidates out to be about six million dollars a year, and that's a variety of all of that coming together, right? So earnings on selling products, earnings from the printing and the Add agency, from their revenue, but also from our usage that we were already using them, you know consolidating that in the accounting. And then we've had, you know, an investment or two that is, benefited us financially from one sale and others that are producing revenue to us every year, and so the goal was, within five years, that we may be able to, you know, replace about a third which is almost where we are right now of the revenue we might lose from the Durban, you know, transition for our debit interchange revenue and we're projecting about a seventeen million dollar loss and revenue based on today, and you know so.
Speaker 3:Five to eight million dollars would be really helpful when that happens.
Speaker 1:I love the Midwest sensibility that April's modeling right now you're just like. Very matter of fact, we got a printing agency and that agent we do have delivery, because it's like these things don't just happen in creating business that has real reputational value and can also deliver. You know it takes time and effort. You know again I use that word patients like everyone wants to have the immediate gratification but to build something that is durable.
Speaker 2:You know it takes leadership and takes a vision and you had the song safe and sound by capital cities.
Speaker 1:Well, there's a lyric that says I can show you what you want to see and take you where you want to be. I can lift you up, look so that's so.
Speaker 2:I feel like that's proactive nature of getting ahead of the Durban act before you.
Speaker 1:Sometimes I feel like we've not met our calling. We could have been old school college DJs up in, up in Michigan. We could have gotten, you know, maybe a green pizza sent to us, sent to us speaking of old student radio station here is amazing, so I guess we don't have a job opportunity.
Speaker 3:Been on the studio is student radio station. I used to love it.
Speaker 1:We're talking college like, let's just bring it, let's just bring it, let's talk college. Which one?
Speaker 2:would you like to think of? Well, as you know, michigan State Credit Union also launched two digital banks in the last year digital banks one alumni and one campus Digital banks designed to be partners to colleges and, obviously, to provide digital banking to colleges for alumni. So you?
Speaker 1:have a great song here. What did you have? Some background, the background music I think, has to be from animal Right. We think the theme for the animal house right. I think that's appropriate because you know, yeah, well, what is it that front and stupid is no way to go through life. I'm gonna try to not, you know quote movie lines right now. I'm gonna ask you know you've got these two, you know digital brands like Take us out maybe three to five years. What does success look like in your mind for those two independent entities?
Speaker 3:so they they are a little less independent from each other than we intended. I see them now working together. So what we have is collegiate was created. So we obviously serve Michigan State. Then we serve another brand and a trade name called Oakland University and we run OU credit union out of that and it came from other schools at a smaller you know enrollment size wanting to partner with us, and and just the economics and the efficiency of creating ten small brands and having the employees answer the phone with ten different Brand names didn't seem like a sustainable model. So we thought, well, we'll come up with collegiate, which can then be customized and could be collegiate at Olivet University, collegiate at Almak University, you know things along that line that could. Then still, we could buy mass amount of you know debit cards for collegiate and not you know 50 per college, and so that's where collegiate came from.
Speaker 3:But then, as we Really started working, we were going to just promote alumni differently, and now the universities are like but once I graduate, I don't want to be in collegiate, I want the alumni. So now we kind of pair them together. As you know, this is your solution, based upon where you are point in time in life. You're either in college, collegiate, you're out of college, here's alumni for you, and so we have one signed institution right now, which is Olivet University, and then we have four others in contract stages right now, and so I would say in the three to five year I'd like to have about 15 universities on that brand and with their enrollment size, probably about 10,000 total members. It's not going to be Significant in terms of, you know, competing with our main branded institution, but I can see where we wouldn't have been able to attract people, because MSU, in our name, is somewhat prohibitive, based on, maybe, where you went to.
Speaker 3:University and so this is for us an opportunity to appeal to you. Know you could have gone to any university and you like what we offer and we'll have that.
Speaker 1:So it's interesting listening to April it. It reminds me of a conversation we had with Kevin Blair, the CEO of synovas, a few months ago on this on this show, talking about why they started massed, which is money as a service, as an acronym, same, you know, basic idea, which is not to compete with the main brand or the main business, but it was to explore new delivery channels and new opportunities to engage in ways that were creative. Now I'm bringing up banks and credit unions, so we probably have to clear our throat and think about times.
Speaker 2:We're woman of the year dance around things at plugged in, so right.
Speaker 1:I like to dance around when I put a little bad blood on because, baby, now he got some bad blood.
Speaker 2:We did tell us with bad blood, because we know that's it's not always so thanks.
Speaker 1:Banks and credit unions aren't always sympatico when it comes to certain conversations, but we're starting to notice that some credit unions are acquiring banks and I think my math and my research is correct and thinking that your Credit union has acquired a few. So Steve and I just wanted to kind of talk a little bit about credit unions buying banks in the business case that you see and, conversely, the ones that banks acknowledge when they get into a conversation with you.
Speaker 2:Yeah, what, what you saw in the value and what the bank selling to you, because they obviously Wasn't bad blood when the bank said we will gladly sell to you. So tell us about kind of what the exchange looks like.
Speaker 3:Well, couple things. So I have a philosophy of the bad blood concept is an advocacy group, but is how they approach it. It's necessarily when you talk to individuals at banks and you talk to individuals at credit unions. I don't think that we have as much bad blood when we have a conversation as is hyped. Right.
Speaker 3:A community bank is very similar to a credit union. They're smaller, they have a community service focus. They are competing against the big five banks, just like we are, and I think when they're looking for merger partners, they have a couple of options. And if they choose a larger banking institution, what generally happens, right, if they merge into a Chase, chase doesn't need another two branches in that town. They just won't have those branches and they won't need their employees and they're just going and now deposit gathering, and so I think the appeal for credit unions is that as an industry, we weren't as large as the banking industry. We don't have as many branches. This is a way credit unions can grow into communities with established brand footprint, locations, staff and a membership right, and so I think it's important that there's alignment right. And so the community banks are looking to make sure that their community continues to be served. Their branches exist and their employees have a job Sounds just like a credit union merger to me, and the only differences are is generally there's no conversation about board seats.
Speaker 3:There's very little conversation about executives, because they usually are shareholders and they're not looking to stay either. And so then you're really looking at we're receiving the assets of the institution and their customer base to become our members and their employees, and some of the maybe more challenging conversations in mergers are kind of off the table, and that's been nice for us. And then I think there's just not as many credit unions to partner with, and I am not a fan of knocking on doors and asking people would you like us to merge you in, because you may be more challenged at your size? I don't like to do that. I wanna see the industries survive and thrive, but banks are asking to be purchased, right? It's a whole different experience.
Speaker 2:The attorney does. That said, that one bank owner was like I've made enough money. What I care about now is community and my employees, and so I do think this is gonna be interesting to see as an option for especially the privately held family banks and what they wanna do with an asset when they kind of feel like I've got enough money at this point.
Speaker 1:Well, it's a great point because we know that banks aren't bought, they're really sold. I mean, this is one of those adages that makes its rounds at many banking conferences. But that idea that there's some privately held, family owned organizations and institutions that need a dance partner and they're not going to attract, leave chase out of it. They're not gonna attract a regional or even a larger community bank. So finding a way to continue to serve their communities. I think there is some really interesting conversations that probably are gonna continue to take place, because we know on the bank side there's a lot of pent up demand to see acquisitions start to be announced. We think there's some things percolating right under the surface. So we'll probably be talking about smarter banks, getting opportunistic in that sense. But yeah, and to kind of close with music.
Speaker 2:I kind of see these banks family owned banks. It's kind of like Springsteen and Sting's music rights. They may wanna monetize this asset while the capital gains are where they are. And I think that there's always that fear of what if you double the capital gains tax rate? And Bruce Springsteen may sing against the man, but he also reduces his taxes through music sales and I think that's going on in the family and we won't Family banking business too.
Speaker 1:We did warn April, when she accepted this invitation to join us on plugged in, that we were gonna give her a little music reference. I promise five. Steve just gave a vote of six. So everyone who's listening in consider yourself lucky. Six songs, one great conversation. He's Steve Williams, I'm Al Dominic and we really appreciate everyone getting plugged in with Cornerstone Advisors on this very special episode.
Speaker 2:Thanks, April great to see you. Thank you both. I'll see ya one minute.
