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A History of Humboldt Credit Union

“To insure progress and service in future, let us always remember that a credit union is an association of people, not dollars.” ~ Excerpt from 1962 Annual Report

It’s no wonder that with such beginnings Heartland Credit Union has become the strong community-driven organization you see today. A financial institution whose opinion from inception was that “The way to continued growth and progress of our community lies in moving ahead together to meet the challenges of making this a better place to live and work.”

Such notions prompted the creation of credit unions in the midst of the Great Depression. Saskatchewan farmers were only yielding ten bushels per acre due to continued drought, and the depressed economy drove prices down to as little as 58 cents per bushel. With banks pulling out of rural Saskatchewan, credit unions offered people the opportunity to control their own financial futures. The first officially chartered credit union was established in Regina in 1937, and by the end of 1938 there were already 14 credit unions throughout Saskatchewan.

Heartland’s journey began in 1958 when Chris Sali, manager of the Humboldt Co-operative Association, and Gerald Hergott, among others, felt strongly that Humboldt should have its own co-operative financial institution. People frustrated with the trends and policies of the four chartered banks in Humboldt were choosing to make the trek to neighbouring credit unions. There were those, however, who knew that Humboldt had a bright future and decided that this was where they wanted to invest their hard-earned dollars.

In short stead, canvassers were sent out to explore the feasibility of this proposal. Community support was overwhelming and their first campaign raised approximately $34,000 in capital. Because of this show of commitment, Humboldt and District Savings and Credit Union, Limited was incorporated on May 5, 1960.

Founding members of Humboldt Credit Union were Ernest Ford, George Bolster, William Jenkins, Gerald A. Hergott, Joseph A. Hinz, F.J. Sutter, Stanley C. Stopa, A. Maney, George Klimosko and Lawrence Schreiner. Each of these men contributed to the starting capital of the credit union by purchasing five shares each at $5 per share, for a total of $250.

The first provisional Humboldt Credit Union board included Lawrence Schreiner, president; George Bolster, vice-president; directors Ernest Ford, William Jenkins, Gerald A. Hergott, Joseph A. Hinz, Chris Sali, Alphonse J. Wiegers, and Stanley C. Stopa. George Klimosko was appointed as General Manager. At the first annual meeting on February 28, 1961, Schreiner was elected president of the first board of directors, Wiegers as vice-president, and Egill Buschmann as second vice-president. Also elected as directors that first year were Jenkins, Bolster, Hergott, Stopa, Andrew Mueller and Adolph Zens.

The offices of Humboldt Credit Union were originally located at 808 6th Avenue, just off Main Street in Humboldt. In its first years, General Manager, George Klimosko, remained the credit union’s only employee, staffing the offices for a few hours each afternoon.

After only eight months in operation, the assets of Humboldt Credit Union totalled $140,195. Memberships as of December 31, 1960 numbered 291, over a third of which were gained in the first month of operation. These first members contributed a total of $108,783 by purchasing shares in the credit union at $5 per share – this price remains unchanged even today. $892.94 (2%) was paid out in dividends on these first shares. Revenue was recorded at $3,906.90, and statutory reserve (equity) totaled $148.53. Business boomed in that first year as local merchants and citizens seized the opportunity to share in the success of this new community-driven institution.

1961 brought an additional 123 members, bringing the total membership to 414. Assets jumped to $223, 384.35 this year, and revenue climbed over 315% to $12,322.04. To date, $269,807 in loans had been granted.

At the 1962 Annual Meeting, it was decided that the board of directors would consist of five seats, duly elected by the members, each for a term of three years with staggered term ending dates.

In the mid-1960s, the positive growth in business necessitated increases in cash on hand from an initial $3,500 in 1960, to $5,000 and $25,000 in 1965 and 1966 respectively. The credit union’s first steno/teller was hired in 1965, and in 1967, Humboldt Credit Union employed one stenographer and two tellers in addition to the general manager.

A new building was needed to house the growing business, and in 1967 the credit union was relocated to 607 9th Street in downtown Humboldt.

September 1, 1969 saw the amalgamation of Humboldt Credit Union with the nearby Burr Savings and Credit Union, Limited. An estimated 125 members were gained. This year also boasted an 11.2% increase in assets, approximately $100,000 of which can be attributed to the amalgamation. This year’s annual report predicted that in all likelihood, 1970 would be “a very rough year” with the economic crises facing farmers at the time. However, the credit union was well equipped to weather the storm with $280,000 in cash reserves, well in excess of minimum statutory requirements.

The early ‘70s saw major growth in the size of Humboldt Credit Union. Assets grew from $2,004,399.47 in 1970 to $7,533,584 in 1975, a 376% increase in only five years.

Recession was evident in the United States and parts of Canada in 1975, but the Saskatchewan economy remained strong, mainly because of strength in the agricultural sector. Spiraling inflation, though, was affecting all Canadians by the latter months of that year. Interest rates were somewhat unstable, and in October, wage and price controls were announced in an attempt to curb runaway inflation numbers.

None of this was putting a damper on the progress of Humboldt Credit Union. The rapid growth and crowded working conditions necessitated the construction of a new building at 724 Main Street in Humboldt. This new premises offered additional private offices for the loans and accounting departments to give members the opportunity to conduct their business in greater privacy. Up to six customer service representatives could be accommodated (three were employed at the time) in this new facility, and provision for a second floor was made for future expansion. First steps were also made this year to computerize operations.

Dennis Biblow took over the position of General Manager in 1975 from George Klimosko who had served since incorporation in 1960.

Saskatchewan’s agricultural sector greatly influenced the growth of credit unions in this province. With interest rates still somewhat unstable and the slight decline in agriculture, Humboldt Credit Union experienced only satisfactory growth in 1976. Conversion from paper to a computerized banking system continued, though, and as of March 1, 1976 all loans were converted to computer data processing. Total conversion was targeted for 1978/79.

In 1977, the credit union started offering their members Registered Retirement Savings Plans. For the first year offered, this plan attracted 87 accounts totaling $281,390. Also this year, membership increased by 205 members to 2,587, and a bylaw was passed allowing directors to serve no more than three consecutive three-year terms.

Humboldt Credit Union’s staff complement increased to 12 full-time employees in 1978. Membership again increased by 205 members to 2,792.

1979 saw the establishment of a national credit union task force to investigate the feasibility of a credit card for credit union members. The Credit Union MasterCard was first introduced in Saskatchewan in 1982.

1980 was noted as “one of the more difficult years for the board in setting direction for credit union operations.” Some of the major challenges included rapidly changing interest rates, a change in management, and poor crop prospects.

The Chartered Bank Prime lending rate reached an all-time high of 17.5% in April, fell to 12.25% in August, and then shot up to 18.25% in December. This put pressure on the credit union’s margins, caused borrowers additional hardship, and created uncertainty in the minds of investors.

Cliff Karst assumed the role of general manager in 1980 upon the resignation of Dennis Biblow.

1981 was a year of change. Consolidated statements were introduced, membership requirement was reduced from five shares to one share, and the board of directors was increased from five to seven members. Unfortunately, interest rates remained volatile and unusually high as well.

In an effort to increase employee productivity and improve the quality of member service, Humboldt Credit Union converted to the 3600 online computer system in September 1981. An automated teller machine (ATM) was up and running as of November 17, 1981. By the end of the year, 2,896 cards had been sent out and approximately 600 personal identification numbers (PINs) had been issued.

During 1982/83, the credit union undertook major building renovations totaling $121,300. Included were new offices, redesigned member service areas and modern furnishings.

At the end of 1982, Humboldt Credit Union was able to offer MasterCard II. For the member, this card provided the same convenience as writing a cheque, but with the worldwide acceptability of an internationally recognized credit card. For the credit union, it reduced the number of paper cheques, thus reducing operating costs.

While much of Canada suffered through increased business failures, massive layoffs and drastic drops in real estate values in 1983, the economy of Humboldt and its surrounding communities remained stable. Because of increased competition and the growing stature of Humboldt as a trading centre, the credit union made the decision to become more aggressive in its marketing in order to develop a larger market.

Also of note in 1983 was the retirement of long-time director, Egill Buschman, from the board of Humboldt Credit Union. Egill was first elected to the board of directors in 1961. He stepped down in 1962 because of changes in the board structure, but in 1963, he was re-elected and served for 21 consecutive years – three years as vice-president and seven years as president. His leadership and sense of fair play in the development and growth of the Humboldt Credit Union was considered immeasurable.

Membership increased to 3,516 in 1984, and the staff complement increased to 15 full-time employees. Humboldt Credit Union was selected by the Saskatchewan Chamber of Commerce for its achievement in business excellence, and was presented the Quality of Life and Physical Environment award because of its outstanding success with the Employee Bonus System.

The continuing price-cost squeeze in the agricultural sector along with poor crops because of drought or hail damage that year resulted in the credit union having to extend itself into a higher level of risk in an attempt to help these members through difficult times.

The financial industry experienced its own problems in 1984, particularly with the collapse of several trust companies. Depositors were becoming more and more concerned for the safety of their dollar. From the beginning, deposits with Humboldt Credit Union, and with all Saskatchewan credit unions, have been fully guaranteed by the Credit Union Deposit Guarantee Corporation (CUDGC), which was created in 1953. To the credit union member, this meant security in uncertain financial times. Even today, no one has ever lost a dollar deposited in a Saskatchewan credit union.

Humboldt Credit Union celebrated its 25th year in May of 1985. As part of the celebration, 93 people were recognized as having become members in 1960 and who were still members 25 years later. An old-fashioned picnic was held and approximately 900 members of the community attended. Membership stood at 3,623.

1985 brought its share of pressures, too. Governments and businesses alike were having to deal with the changing values and expectations of a society dealing with an uncertain future. People were becoming more cautious, distrustful and demanding than ever before, and confrontations such as lawsuits were becoming more commonplace. Others were equally willing to opt out of their financial responsibilities by taking advantage of existing credit and bankruptcy laws. A change in attitude in the courts and government resulted in more protection for farmers, which in combination with a declining agriculture industry made it difficult for the credit union to protect its assets.

Though it was a difficult year, Humboldt Credit Union still realized that agriculture is the foundation of this economy. Relying primarily on a single industry meant that the credit union’s performance would be subject to the cycles experienced by agriculture. It had gone through difficult times before and survived.

The Daily Interest Chequing Account was introduced in 1985 and the Plan 24 Daily Interest Savings Account was revised to provide a higher rate of interest on higher balances. Credit unions were the first to offer tiered daily interest-bearing chequing and savings accounts.

Humboldt Credit Union developed its first unique corporate symbol in 1986. A stylized wheat sheaf identified with Humboldt’s surrounding agricultural area. Two solid parallel lines supporting the wheat sheaf represented a feeling of stability and security. The use of fine, repetitive parallel lines extending from the top of the wheat sheaf indicated progressiveness and advancement. The typestyle used (Caslon Light) is distinctive and precise representing characteristics of the banking industry. The incorporation of the credit union international symbol into the base added familiarity and security.

Saskatchewan credit unions negotiated access to the Interac network of automated teller machines in 1986. For members of Humboldt Credit Union, it meant access to their accounts for the purpose of withdrawing cash anywhere in Canada from an ATM showing the Interac logo.

1986 continued to bring low grain prices – meaning very little in profits for farmers. This translated into increased delinquency and a weakening of the security position of the credit union. Losses due to uncollectable loans and the potential losses on problem loans unfortunately forced a more critical approach to the approval of new credit and the review of existing credit. Years of setting aside reserves may have been seen as excessive at the time. Now they were being severely tested.

These circumstances persisted into 1987, when for the first time, Humboldt Credit Union reported a small operating loss of $145,467 after Provisions for Doubtful Loans and Loan Write-offs were taken into account.

Membership increased slightly that year to 3,778. Also, Registered Retirement Income Funds were introduced for members who wished to convert their RRSP into retirement income and enjoy more flexibility in withdrawing the funds without having to invest in a Life Annuity. Humboldt Credit Union continued to be a major provider of automated banking services with still the only ATM in Humboldt.

1988 started with a fair amount of optimism. Grain prices were on the rise, farmland was being sold and loan demand was up. However, yet another year of drought was in store. Farmers had to depend on crop insurance and other government programs to provide cash flow for their farm operations. Rising feed grain prices compounded the problems of hog farm operators who were experiencing depressed sale prices as well.

In the spring session, the provincial government passed Bill 37 – The Saskatchewan Farm Security Act. This new piece of legislation increased the risk of farm lending and restricted the credit union’s ability to realize on existing loans. Provision for losses on several loans had to be set up. Foreclosed properties were sold at market prices, which were often below outstanding loan balances. While these losses were hard to take, the reduction of non-productive loans and the sale of foreclosed property, even at a loss, meant freeing up cash that could now be used for productive assets.

Humboldt Credit Union again showed an operating loss in 1988, this time of $28,352, after allowing for loan losses and loan write-offs of $267,657. Interest rates favoured investors, starting with a prime rate of 9.75% that steadily rose to 12.25% during the year. The number of staff positions increased to 15.5 full-time positions.

1989 was the fourth consecutive year in which farm receipts were below average for the area because of adverse weather conditions, and an operating loss of $471,260 was incurred. However, membership increased to 3,894 and staff consisted of 18 people in 16.5 positions.

The population was shifting as Humboldt Credit Union headed into the ‘90s. Urbanization continued and as of 1990, 74% of Saskatchewan’s population resided in urban communities. In 1961 this figure was only 58%. Jobs were in the cities and young people were heading out to fill them, leaving an aging population in the rural areas. As well, both the federal and provincial treasuries were under intense pressure and could no longer provide the financial assistance they once did.

The services offered by financial institutions in Canada were also changing. The traditional roles of payments, deposits and loans were now being supplemented by services such as mutual funds, brokerage services and even insurance in order to satisfy the demands of customers.

Opportunities for good loans were on the decline, and Humboldt Credit Union recorded a loss of $34,115 in 1990. Revenue was under pressure and new sources needed to be unearthed.

During 1990, membership increased to 4,120 and the staff complement consisted of 20 employees occupying 18.5 full-time positions.

Financially, 1991 was another disappointing year for Humboldt Credit Union. The financial statement showed a loss of approximately $440,000 with no allocation to contingency reserve. As a result of the year’s loss together with losses during the past few years, reserves fell below 1% of assets.

As a result of this trend, Humboldt Credit Union, Limited was placed under the supervision of the Credit Union Deposit Guarantee Corporation (CUDGC) on February 12, 1992. Supervision simply meant that the credit union was “watched” to ensure that quality decisions were made by the organization and its board and that sound business practices were employed. Plans to return the organization to a profitable standing was paramount. A new general manager, Jack Tuchscherer, was brought in to implement the strategic plan.

Two primary economic trends were influencing the financial performance of Humboldt Credit Union at this time: declining interest rates and declining property values. Low interest rates meant fewer member deposits, and in turn, less funds for the credit union itself to invest. Low property values meant that some outstanding farm loans exceeded the value of the security, forcing the credit union to incur a loss.

As a result, assets declined due to reduced member deposits and increased allowances with member loans. Member loans declined due to tough economic times and members were using their savings to repay obligations rather than borrowing.

A User Pay Policy was introduced meaning more financial services would be service chargeable and service charges would likely increase. Every component within the organization was to be reviewed during the next year to ensure efficiency.

1993 marked a return to profits for Humboldt Credit Union, this year totaling approximately $60,000.

Membership numbers fell dramatically over the previous five years to 3,491 in 1993. Most were due to closure of inactive and multiple memberships, however, some members left the organization dissatisfied because of the service charges now being levied. Staff positions were cut to 15 employees in 13 full-time and 2 part-time positions. Many member deposits shifted to money market funds and mutual funds in response to low interest rates. The productive loan portfolio decreased due to slow loan demand in the currently sluggish local and provincial economy and because of updated pricing of member loans.

Teleservice was made available to the membership in 1993. The new service allowed members 24-hour telephone access to Humboldt Credit Union products and services via their personal accounts. Direct payment was also introduced, allowing a member’s purchase to trigger an immediate transfer of funds from their account to that of the business.

Ethical Mutual Funds were also introduced in 1993. This exciting new product addressed the ever-increasing concerns of investors who were starting to really care about where their money went. Ethical Funds were the first to advocate socially responsible investing in which companies are chosen according to six Ethical Principles. The company must be non-tobacco, non-military and non-nuclear, it must have progressive stakeholder relations, and respect human rights and equal opportunity.

In June of 1993, Englefeld, Humboldt, LeRoy, Middle Lake, Muenster, St. Benedict and St. Gregor credit unions met with the Director of District Development from Credit Union Central of Saskatchewan to discuss future service delivery of financial services in the district. Desiring to remain autonomous, Muenster, LeRoy, Englefeld and St. Gregor credit unions withdrew from the amalgamation talks. In November, the remaining credit unions (Humboldt, Middle Lake and St. Benedict) were approached by Young Credit Union, who wished to be a partner in the district rationalization process.

With a continually declining rural population in Saskatchewan and the average age of the membership on the rise, membership numbers were being threatened. Average agricultural loan size was increasing due to growth in farm size at the same time loan limits of individual, autonomous credit unions were decreasing. (Loan limits were determined by the amount of equity held at each credit union. Low equity levels meant lower loan limits.)

On the national scene, mergers and acquisitions in the financial sector were occurring at a rapid pace. Banks were expanding their operations by purchasing brokerage companies and trust companies in an attempt to provide their customers with these services. Economies of scale were becoming very prominent in the financial landscape.

Credit unions were facing the same challenges. Consolidating memberships would provide the stability needed to support and extend the preservation of the rural communities by maintaining the presence of financial institutions in rural areas while some of the large banks were pulling out.

Advantages included a stronger competitive position through the elimination of duplicated costs, expanded financial services, improved delivery of financial services through specialization, improved profitability, savings with volume purchasing and more efficient utilization of human and financial resources.

As of December 31, 1993, each credit union contributed the following to the new organization: Humboldt Credit Union joined with $37.3 million in assets, equity of 0.35% and a membership of 3,500; Middle Lake Credit Union added $9.5 million in assets, equity of 0.10% and a membership of 1,054; St. Benedict Credit Union contributed $7.7 million in assets, equity of 3.50% and a membership of 842; Young Credit Union added $6.7 million, equity of 2.20% and a membership of 736.

Heartland Credit Union emerged as a new organization with a fresh vision. Its mission, “Financial strength along with member satisfaction is Heartland Credit Union. We are a member-focused, highly motivated sales team delivering competitive financial services with the highest professional conduct. We represent a positive presence in our community and are responsive to people’s changing needs. Service excellence is Heartland Credit Union.” Values included “Financial stability, member satisfaction, product excellence, financial strength and professionalism, positive presence in the community, integrity and leadership.”

Amalgamation was a success in more ways than one. Members now had access to more investment vehicles, loan interest rates decreased, investment rates increased, and some service fees were eliminated or reduced. Staff members were able to receive more training, and agricultural and commercial specialist support was available to the service centres.

In 1995, Heartland Credit Union members were introduced to wealth management, estate planning, financial planning, and new life insurance services through MemberCARE Financial Services. Heartland Credit Union teamed with six other credit unions in the area to contract with Cumis Life Insurance Company and Co-operators Life Insurance Company to provide members with these exciting new products.

Saskatchewan Credit Unions were financially stronger than they had ever been. Assets amounted to $6.1 billion, equity had grown, and credit unions continued to increase capital despite less than ideal economic times. They employed 2,556 people in Saskatchewan with over $80 million in salaries. In more than 120 communities, the credit union was the only financial institution.

1996 was deemed another successful year for Heartland Credit Union with assets increasing over $3 million (5.25%). Equity grew to 2.7%, well on its way to the target of 5.0% by 1999. Delinquent and doubtful loans were on a downward trend and $2 million was invested in Ethical Mutual Funds. Membership reached 6,128.

Members were demanding the convenience of any time, anywhere, any way access to services as personal computers with modems became more commonplace. Management and staff were continually working to bring telephone services, home banking, and innovative services such as electronic cash. New products including Choice Rewards, Take 10 RRSP Loans, the Skip-A-Payment program and Quick Loans were made available to members in 1996. The mobile account manager concept was also introduced that year.

1997 brought a new look to the Humboldt Service Centre and a new vision for Heartland Credit Union as a whole. Customer service areas were redesigned to allow members to conduct their front-line business in a semi-private atmosphere while standing or sitting. In their transition to a sales culture, employees were encouraged to build lasting business relationships with members so they would be able to recommend products and services that met their needs. Heartland’s vision was to become the financial service provider of choice for our community through sales and service excellence – anytime, anywhere, any way.

Growth that year was heavily influenced by trends in the agricultural sector in Saskatchewan, and the Humboldt area was fortunate to have diversification in local industry. The composition of Heartland’s assets moved from lower earning investments to higher-yielding member loans. Productive loans outstanding at year-end were a whopping 28.87% compared to the system loan growth of 11.51% for the same period. Member deposits grew by 4.32% compared to the system growth of only 0.59%, and target equity increased again above expectations. It was another successful year.

Also in 1997, the three rural service centres were converted to the on-line banking system from the in-house off-line banking system. Inactive memberships were cleaned out (bringing the membership down to 5,918) in preparation for conversion to the VisionWest banking system on July 25, 1998. This new state-of-the-art banking system brought increased functionality and flexibility, allowing faster development and delivery of new products as well as improvements to existing ones.

The Credit Union Act, 1998 was passed by the Saskatchewan legislature in June of 1998 and came into effect on February 1, 2000. This now allowed credit unions to do business with non-members.

Heartland Credit Union was presented with an exciting opportunity in 1999 – the acquisition of the Humboldt branch of the Bank of Montreal. The deal included the accounts of 2,400 BMO customers, funds under administration of approximately $25 million, the physical facilities and contents of the bank, and the experienced employees who already had a good relationship with the bank’s customers. By increasing its assets and membership base, Heartland was able to take advantage of economies of scale, thereby enhancing its ability to deliver financial products and services at an attractive price. The effective date of conversion was April 14, 2000.

Home banking was introduced to Heartland Credit Union customers with the launch of an interactive website in 1999 at http:\\www.heartland-cu.com. In 2000, internet banking allowed members to do much of their banking from the comfort of their own homes using a personal computer.

January 1, 2003 saw yet another amalgamation for Heartland, this time with the credit unions in Drake, Lanigan and Guernsey. On March 1, these service centres were introduced to the real time banking system, allowing them access to new and improved products and services. As of December 31, 2003, the staff complement of Heartland was 50 employees with a full-time equivalent of 37.2 employees.

For the first time for Heartland Credit Union, a 5% patronage allocation was approved on qualified member loan interest paid and deposit interest received. The total amount of the allocation equaled in excess of $265,000, representing about a third of net income before taxes. Allocations were credited to individual member equity accounts on April 22, 2004.

Corporate giving by Heartland Credit Union in 2003 totaled approximately $108,000, representing 1.44% of gross revenue and 11.87% of pre-tax profit, far exceeding the 1% of pre-tax profit benchmark recommended by the Canadian Centre for Philanthropy. Throughout its existence, Heartland (and formerly Humboldt) Credit Union has been a vital contributor to its towns, villages and surrounding regions. Being locally based and locally owned, Heartland has played a major role in fostering community well-being by investing in community projects, sponsoring community activities and events, promoting economic development, and initiating public education programs aimed at fostering a better understanding of financial matters.

Heartland has been a supporter of the St. Elizabeth’s Hospital Foundation, Humboldt Broncos, Middle Lake 4-H, Humboldt Community Band, Meals on Wheels, HCI Football Team, Sommerfest, St. Benedict Dinner Theatre, Young Swimming Pool and Playground, Yellow Creek First Responders, Telemiracle, Ducks Unlimited, Minor Sport – Ringette, and graduate bursaries in Young, Middle Lake and Humboldt. In 2003, Heartland also waived the service charges on the accounts of local community organizations.

Heartland Credit Union is now the 15th largest credit union in Saskatchewan, and as of 2003, it served over 7,139 members and 896 non-members. Its new vision is “To be the regional financial service provider of choice” and its mission is four-fold “to provide an experience of banking that is lifelong, to ensure safety of deposits through profits, to deliver service with the highest standard of excellence, integrity and professionalism, and to build community because community builds us.”

Compiled and written by Robin Cline