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THE markETing iSSUE JUNE 2013 VOLUME 8 ISSUE 6 9.95 under the hood Marquis A Family Business that delivers More than they Promise CFo CurrenCY derivatives demystified The Kassing Brothers From top Jay John and Jud CREATE A CAR-BUYING EXPERIENCE your members will love with AutoPilot Lending With SWBC your credit union can offer a car-buying experience that goes beyond just issuing a car note. Our AutoPilot Lending solution includes the superior MPOWERTM loan with complimentary vehicle and loan protection products giving your members financial security when they need it most. Plus we ll help you provide superior service and member communications that keep you top-of-mind when it comes to purchasing a vehicle. Scan the QR code to download the AutoPilot Lending product sheet or call 866-316-1162 for more information. For more information please visit autopilot-lending SWBC 2013. All Rights Reserved. MPOWER TM is a trademark of Enterprise Financial Group Inc. 5540-987 05 13 COnTEnTS Credit Union BUsiness jUnE 2013 V O L U m E 8 i S S U E 6 4 6 10 12 16 20 24 Pov Go Marquis Tim O Hara AChieving skills Holly Herman Cu Business 28 30 33 Cu trAining Training That every Branch Manager needs Ken Gonyer leAdershiP i m Doing My Best Credit Unions and small Business A Great Opportunity Charles B. Wendel under the hood shattering the Glass Ceiling it Really Does exist Dr. Sandra L. Torres teChniCAllY sPeAking Marquis A Family Business That Delivers More Than They Promise Tim O Hara Cu Content CUsO Going strong After smooth Conversion with Precise Planning and strong Alliances Roy W. Urrico Cu sPotlite 40 Focusing on the Right Loan Products Brings success to Toledo Metro FCU Laura Enock CFo CurrenCY Fremont Federal Credit Union Meets Members needs Sharon Sweda Get it for the entire executive team register Derivatives Demystified Emily Mor Hollis Cu lending From A to Regulation Z Breaking Down the new Mortgage Rules Andrea Stritzke June 2013 Credit Union BUSinESS 1 aBOUT US Publishing Team Tim O Hara Publisher tim Steve Magnuson Managing editor steve Iliana Nord Operations Manager iliana Patti Manzone Designer Homer Marshman III Circulation Director UNDER THE HOOD THE MARKETING ISSUE JUNE 2013 VOLUME 8 ISSUE 6 9.95 Marquis A Family Business That Delivers More Than They Promise CFO CURRENCY Derivatives Demystified Staff Writers Laura Enock CU Content Ken Gonyer CU Trainingw Holly Herman Achieving Skills Emily Mor Hollis CFO Currency Tony Rizzo Marketing Matters Sharon Sweda CU Spotlight Roy W. Urricho Technically Speaking Dr. Sandra L. Torres Leadership The Kassing Brothers From top Jay John and Jud Subscriptions Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine inc. A one-year membership costs 89 for print or 69 for Digital. An online membership form is available at register. Sales and advertising Bernie Fitzgerald Advertising executive Bernie or 561-282-6015 1 Greg Halpern Advertising services Manager Greg or 561-282-6015 4 Contributors Andrea Stritzke Charles B. Wendel Contact information Credit Union BUsiness Magazine P Box 2223 Palm Beach FL 33480 .O. (561) 282-6015 (561) 588-7711 (fax) tim 2 Credit Union BUSinESS June 2013 The last title you want to have is With new laws tighter regulations and increased litigation today even a small error or oversight can result in a costly and perhaps even catastrophic legal action. You do your very best to fully comply and surround yourself with the best advisors and managers possible. CUNA Mutual Group s Management & Professional Liability Insurance combines risk assessment with flexible enhanced coverage to help protect your credit union and the personal assets of your executive staff and board members. DefeNDANT Take the Right Steps CUNA Mutual Group s Employment Practices Liability (EPL) claims grew by 2.5 million in 2011 over 2010 a 28% increase. Do you have the right coverage Protect yourself and your board. Contact your CUNA Mutual Group sales executive today at 800.356.2644 or visit Source CUNA Mutual Group 2010 and 2011 Claims Data MPL is underwritten by CUMIS Insurance Society Inc. 10002616-1111 CUNA Mutual Group 2012 All Rights Reserved. FROM tiM M Publisher s POV union s marketing dollars will deliver results said Jay Kassing who champions MARQUIS overall marketing and manages their compliance efforts. MARQUIS will be happy when every marketer has earned a rightful spot on their credit union s Executive staff. According to research by MARQUIS just 37% of all marketers present their results to senior management. The same research also shows that 75% of those marketers who prove their ROI are members of the Executive management team. Surprised I m not. The Kassing brothers impressed me with their unyielding focus on execution and their success rate in delivering on their promises. Jud Kassing who manages all product development programming and research says that MARQUIS underlying business principles began with their father Les Kassing. Dad always instilled in us the basic tenets of his business philosophy exceed the expectations of each client (and your team) deliver real measurable results and do everything with integrity remembered Jud Kassing. John simply added This is the essence of the MARQUIS family. Les Kassing taught his boys that integrity is one of the most effective and important business concepts. Now that I ve had the opportunity to sit and visit with the three Kassing brothers I am not at all surprised that MARQUIS is so successful. While they each seem a little old-fashioned in a good old-fashioned way I believe that anyone who embraces conducting business with a doing what they say philosophy is both honest and refreshing and means good business. Clearly the results speak for themselves. This family means business old-fashioned good-as-ahandshake business. Thanks for Reading eeting a group of people that run a business and know who they are what they stand for and where they are going is rare but I found them--brothers no less--at MARQUIS. Jay John and Jud Kassing share the title of President at this highly regarded fast-growing marketing research company and they know who they are and -- just as important -- who they aren t. Now in its 26th year MARQUIS boasts over 65 employees and helps financial institutions get measurable results from marketing through their software products and consulting and direct mail services. In fact the slogan Results Nothing Else Matters is the foundation for all things MARQUIS and each brother agrees. John Kassing who leads the sales and marketing consulting staff adds Marketing without the benefit of provable repeatable results that can be shown to management helps no one. We focus exclusively on helping credit unions satisfy their strategic objectives. While our expertise resides in leveraging data analytics and direct marketing at the end of the day our success is measured by each client s ability to prove results. It s really a pretty easy formula. During my recent meeting at the MARQUIS offices in Plano TX I found the three brothers relaxed conversationalists effortlessly moving from serious to silly and back again while covering a single topic. Their ability to stay on topic even while horsing around was fascinating almost like watching the Twitter-verse spring to life before your eyes. Behind the laughing and joking however was a team of smart professionals focused on elevating the perception of marketers at financial institutions everywhere. Marketers must take on a central role in leveraging the power of each credit union s brand promise but they will fail unless both senior management and the Board see them in this electrifying new role. Can marketers be seen as leaders in the movement Not without proving that how they invest their credit 4 Credit Union BUSinESS June 2013 aCHiEVing SkiLLS i m Doing my Best nd so are you Everyone is doing their very best all the time. That simple and commonly used phrase may not be part of your belief system. It s easy to believe that you are doing your best all the time--but is everyone else as well Think about it--do you ever set out to do a poor job You may find areas that you could improve upon or do differently because you have additional information when you look back on your performance. When you set out to perform however you did your best with what you had--the skills knowledge energy and resources available to you at the time. I challenge you to practice believing this for one day or a week and see what changes for you. A By Holly Herman person you re teaching. People learn in many different ways visual audio step-by-step instructions learning by doing and correcting errors. Find out what best fits the person you re trying to teach and use their method which may be different from your own learning style to teach them. Find 2 Resources. There may not have been enough resources available to complete the task. Resources can include computers with adequate power or speed sufficient Internet connections enough team members team members who carry their weight and complete their part of the project or enough focused time devoted to a project. Dig a little deeper to find out why a project has come up short. Find 3 Results. You may not have fully explained the results you were looking for. Assuming that everyone knows what you want is a faulty assumption. Take a few minutes to explain why Find 1 Training. Your non-performer may need additional someone is doing a task how it fits into the greater whole what training to perform to your standards. Remember that you you expect to happen and when you d like it completed. Then are teaching someone something that may be second nature ask if there are any questions. and therefore easy to you but it may not be easy for the Here s what you might find when others aren t performing as you d like. 6 Credit Union BUSinESS June 2013 aCHiEVing SkiLLS Find 4 Skills. You may have attempted to fit a square peg into a round hole. People have skills in the areas they enjoy-- you ll want to do more of whatever you re good at because you enjoy doing it and the more of it you do the better you ll get. Ask an artist to put together a spreadsheet and you ll see what I mean. Making sure you assign the right people to the right tasks ensures success. Find 5 Beyond your scope. Your non-performer may have other issues going on in their lives that have nothing to do with you or the task at hand. Family illness relationship troubles family problems and tragedy all play a part in your employees lives. You should approach the situation with compassion without probing for too much information whenever a performer suddenly stops performing. The conversation could go something like Jack your performance hasn t been up to your usual high standards while I don t need to know what is happening I hope we can work together to return your performance to where it was before. There are resources for you to take advantage of such as our EAP (employee assistance program). Please let me know what I can do to help your performance get back to par. Holly Herman is a former CEO of two credit unions Chief of Staff for National Credit Union Administration Chairman Johnson and currently an Achievement Coach helping individuals and organizations. She can be found at www. or contact her at Holly AchievingSkills. com. CEO SuBSCripTiOn WiTh BeneFiTS Benefit your CFO COO CMO CCO CLO CIO HRD With FRee Monthly E-Newsletters Subscribe NOW register June 2013 Credit Union BUSinESS 7 CU BUSinESS Credit Unions and Small Business a great Opportunity M By Charles B. Wendel any Credit Unions have a great opportunity to serve the needs of small businesses in some cases companies already owned by a Credit Union s current members. Faced with unmet credit needs and higher costs an increasing number of business owners are looking for alternative providers of financial services. Credit Unions with their competitive pricing high levels of customer service and overall reputation for fairness can be an attractive choice for small businesses. CUs can also benefit from further establishing themselves in their community and demonstrating their willingness to meet a critical customer need. Why a need exists. Last year small businesses had credit requirements of roughly 700 million that banks did not meet and even many non-borrowers want relief from the high charges banks assess for checking and transaction activities. As a result of the recent downturn banks have narrowed their credit box meaning they have limited the types of companies they will lend to and the amount they will lend. They often have little to no interest in companies with less than two or three years of operating history companies that have suffered recent losses even when bottom line performance has recently recovered and certain industries such as restaurants and contractors which are put on internal do not lend lists. One large bank we know negatively views all loans to companies with revenues below 1 million because their big bank cost structure makes lending to these companies unprofitable. The net impact of this lending retrenchment results in more banks fighting over a smaller pie They price extremely competitively for the customers they want and avoid most others. At the same time banks are reducing their lending targets they are expanding the fees they charge all business customers. In many cases they ve raised minimum balance requirements and charges for virtually all services such as stop payments money transfers and ATM usage. Small business costs have risen partly in response to limits on the fees banks can charge consumers including debit card and overdraft fees. Banks reluctance to lend has opened the door to what is commonly termed alternative lenders. These companies offer merchant advances or other financing based upon past credit card receivables or cash flow indicators. In some cases 8 Credit Union BUSinESS June 2013 CU BUSinESS the lender has access to the company s checking account and pays itself a small daily loan payment. This type of transaction tends to be very expensive and often charge annualized interest rates in excess of 100%. Some critics call these loans Payday loans for businesses although some borrowers simply need the funds to survive or expand. Most of these borrowers have either been turned down by a bank or don t care to go through the uncertain and time intensive process that dealing with a bank requires. They calculate that the likelihood of obtaining funds from one of these non-bank lenders justifies the high cost. Small businesses would welcome a financial services provider that offers lower rates than alternative lenders does not fee customers to death and prefers developing relationships rather than pushing products. Credit Unions meet those requirements and more. Depending on how they are defined there are between ten and thirty million small business companies in the U.S. (the larger number includes home-based part-time businesses). Of the ten million full-time small businesses roughly 90% are companies with revenues under one million dollars. Those smaller companies are ready targets for Credit Unions. Choices for success. Credit union management needs to make some basic choices in deciding the best way for them to compete in the small business arena. 1. Define it. Management saying they want to build their small business franchise is easy doing so is not. I have probably been asked How do you define small business hundreds of times over the more than twenty years I ve worked in this sector and how you define small business still serves as a very good starting point to entering the market. For various reasons not the least of which is easy identification of targets most banks focus on company revenue as the main screening criteria. For many Credit Union microbusinesses or companies with less than one million dollars in sales and core small businesses with one to three or one to five million dollars in sales present the richest targets. These are the groups that many large and regional players avoid by focusing almost exclusively on larger companies. June 2013 Credit Union BUSinESS 9 CU BUSinESS In general loan and deposit products should be few in number and as simple to sell as possible. The customer set tends to avoid complexity making complex products more difficult to sell and more expensive to support. Many quality third-party providers offer product suites that meet the majority of business customer needs. Avoid customization whenever possible given the cost it entails. Many of the competitive dynamics favor Credit Unions over small and regional banks. Creating and relentlessly executing a plan to go after small businesses will help establish a Credit Union as the lead player with the potential for a handsome pay off. 2. Select segment or industry focus. In addition to company size Credit Unions need to think about which industries they are comfortable with and which they would prefer to avoid for two reasons. First members may own companies that operate in what your CU might consider an unattractive industry. Second all Lenders seem to want to back and avoid the same industries. While I slightly exaggerate management needs to decide whether they can or should play where their competitors don t. For example one lender bank we know has succeeded in working with restaurants an anathema to most banks. Another company concentrates on construction companies currently considered a pariah by many banks. Playing me too by emulating the behaviors of others around you is not a sustainable strategy. For Credit Unions selectivity in lending is particularly appropriate. Being a new player Credit Unions want to ensure a strong credit portfolio and since a cap exists on the dollars they can lend to commercial accounts CUs can afford to be choosy. 3. Determine the loan product emphasis. Most credit unions orient their lending toward real estate. However many businesses in the real estate market operate without sufficient real estate collateral or need to exploit growth opportunities by using their working capital lines of credit. Given their lending caps and skill base working capital lending is probably not a good business for most Credit Unions. Should lending limits increase or if this type of lending seems attractive CU management must work with third parties to put the necessary operations and risk systems in place. They will also need to hire working capital lending specialists. 4. Consider alternative channel usage. Today making a personal visit to a business customer requires increased justification. In a vertical city like New York calling efficiencies are possible. In most of the rest of the country however the travel time related to making calls is harder to justify. While inperson calls remain important and should be targeted at high impact situations using technology to keep in close contact with customers is equally if not more important. In our view customer interest in face-to-face meetings with bankers or prospective bankers has hit an all time low. Time pressures have increased substantially and business owners are trying to do more with fewer workers meeting with bankers is not high on their priority list. Of course Gen Xers and beyond are particularly focused on using technology to conduct business. Ironically the commercial lender should actually be spending time behind his desk as long as he is pursuing proactive customer focused activities while sitting there. The best use of proactive manpower may center on telephones call centers teams coverage Skype texts etc. for maximal productivity. All of this technology and more is readily available. Roadblocks ahead. There are at least three roadblocks for potential mistakes that Credit Union management should address as part of launching a new business effort Mistake one Believing that current lenders used to monitoring existing customers from behind their desks can lead a small business growth effort. The tendency at many Credit Unions and banks both for cultural and cost reasons is to work with the staff already in place. In most cases this is a major mistake. To succeed find and hire staff with a passion for developing and selling wide-ranging solutions to businesses. 10 Credit Union BUSinESS June 2013 CU BUSinESS Mistake two Self-delusion as a strategy. Too often we hear managers say that the required skills already exist within the company rather than admit that they need to bring in new expertise and vitality. Believing this to be true on the sales side is an unfortunate mistake believing it to be true in the lending department may turn out to be tragic. Commercial real estate lending requires tighter loan structuring more monitoring and closer follow-up than residential lending at minimum. or investment advisors the best small business bankers and managers should be able to develop their own annuity-like business within the Credit Union. The CU benefits from having a strong portfolio of good earners and a high achieving and wellmotivated employee. Ensure senior management commitment. If Credit Union leadership has only a half-hearted interest in the small business segment it would be best for everyone involved if they focused Mistake three Penny wise and pound-foolish. The efforts elsewhere. Senior management is great at expressing best lenders and transaction bankers are hard to find and cost support but must demonstrate their support by making the more to attract when you do find them. Credit Unions and appropriate investment in time and money necessary for it to community banks often head toward the less expensive and succeed. frankly less capable hire and less capability is exactly what they get. Credit Unions and banks need to break away from their past Final thoughts. This article has touched on just a few of the emphasis on hiring two 75k employees rather than one 150K issues important to Credit Union success in the small business employee. The head of HR can either be a facilitator or a huge arena. Other areas that merit consideration include how to leverage technology working with third-party providers roadblock in doing so. the role of treasury management as a lead product etc. Yet despite the complexities involved the basic message remains Aligning the Organization for success. The path to small business success has many curves and bumps. positive small business remains an attractive segment that is While there is no pot of gold at the end of this venture Credit open to Credit Unions for developing profitable and long-term Unions can find strong earnings and deepen its ties to the relationships. Many of the competitive dynamics favor Credit community as well as to new and existing members. Here are Unions over small and regional banks. Creating and relentlessly executing a plan to go after small businesses will help establish a some of the necessary elements for success Create and manage against detailed job descriptions with Credit Union as the lead player with the potential for a handsome clear expectations. For example relating to the office manager pay off. However as in most areas of business strong leadership and unwavering commitment are critical to achieving success. What are his small business sales responsibilities What responsibilities are being shifted away from him Charles Wendel is President of Financial Institutions to allow him the time to call on small companies Consulting Inc. based in New York. He can be reached at What support system exists to train monitor and cwendel coach him Similar job descriptions need to be developed for lenders the credit head and other key business personnel. Establish incentives. An obvious point but often overlooked this is an area where many Credit Unions fail to be innovative or even competitive. If you want to achieve sales success you need to incentivize appropriately. Just like insurance agents June 2013 Credit Union BUSinESS 11 UnDEr THE HOOD a Family Business That Delivers more Than They Promise marQUiS By Tim O hara T o say that MARQUIS has transformed their business over the years is almost an understatement. The fact that they have done so well in spite of taking on well established billion-dollar competitors is nearly unbelievable. Yet in the case of MARQUIS truth trumps fiction. Once known for selling the software big banks used to manage HMDA CRA and Fair Lending in the late 1990s MARQUIS began to transform itself into a marketing company by developing software solutions that help financial institutions leverage client data. This proved to be a successful strategy and 15 years later MARQUIS has become the world s leading provider of MCIF CRM software and services. MARQUIS recently launched their third division--direct marketing--to solidify their position in the world of financial services marketing and today is the industry s fastest growing creative agency. It isn t big news to learn that many companies have enjoyed success over these last few decades but it is interesting to ponder how this family company has been able to achieve so much success. The way MARQUIS conducts business contributes as much to their success as the products and services they offer MARQUIS does business the old-fashioned way. That is one of the reasons why MARQUIS was chosen as one of 2012 s CUES Suppliers of the Year MARQUiS does business the old-fashioned way. Les Kassing a former CEO of multiple community banks with a penchant for seeing the future founded MARQUIS over 26 years ago. Les is now retired and his sons John Jud and Jay Kassing carry on the family business. Les Kassing s vision and basic rules--exceed expectations deliver provable results to each client and be sure to remember that honor and integrity are verbs--still guide the organization. You can hear Jud Kassing describe how Les established these three tenets when he started the company by going to their website (www.gomarquis. com). Of course saying that you believe in rules is one thing but developing a company culture that actively honors these principles in all of their work is a value proposition all on its own. Dad was right honor and integrity are verbs. The Brothers The three brothers John Jud and Jay continue to run MARQUIS to this day. They attribute much of their success to their belief in the power of Les Kassing s three founding principles and find that adhering to these rules makes all the difference in working toward a successful outcome whenever they assess a client s current and future needs and opportunities. Of course each 12 Credit Union BUSinESS June 2013 UnDEr THE HOOD Kassing brother also contributes his own unique experience and skills to every task insuring that MARQUIS consistently delivers more than they promise. Jud KaSSing President of Product Corporate Development JOhn KaSSing President of Sales and Marketing Consulting Previous life VP of TUMI the luxury luggage and small leather goods firm. Little Know Fact Interned with the FDIC as an examiner in the late 1970s. Previous life Led the development & sales teams as VP of a banking software firm. Little Know Fact Responsible for the name MARQUIS. It stands for the quasi acrostic MARketing QUery Information System. MARQUiS is a family business and we rely equally on both words family and business. Every client is a part of our family and every member of our team knows that when family calls it is time to drop everything and honor these relationships first. that means being available responsive and following through. Managing a business has its own challenges and expectations. Yet it is the framework of running a business within the context of family with unyielding support where we have found growth great friendships and success. John Kassing Dad was right. Honor and integrity are verbs that if practiced daily will make it dramatically easier to grow and sustain a business. it also helps to deliver more than what you promise. We are proud of this old-fashioned approach. We are honored to work side-by-side with our fellow Marquisians as they live out these principles every day in serving clients all across the globe. Jud Kassing June 2013 Credit Union BUSinESS 13 UnDEr THE HOOD Jay KaSSing President of Compliance and Corporate Marketing Previous life National Sales Manager of Hyundai Electronics America (yes the same Hyundai but a small 100 M division) Little Know Fact Jay is a reformed radio disc jockey. Developing easy complete and affordable solutions for financial institutions starts with listening. We have learned that it is imperative that marketers have the power and flexibility to do everything they need so they can deliver provable repeatable marketing results. Candidly helping marketers prove to their senior management team that they really do move the needle is what we are all about. Jay Kassing So how do three independent voices get along especially when they belong to brothers John says We don t always agree that s for sure. Yet when the time comes to actually make the decision not just talk about it we almost always end up on the same page. If we don t agree on something it s usually because we hadn t evaluated the thing properly or it simply hasn t risen to a level of importance to one or more of us yet. hen asked how new products or enhancements to existing solutions come about Jud took the lead saying Many new ideas comes from clients themselves. We are always listening. Whether the new idea comes from a client or from someone internally in order to make it into the software we need to be confident this new capability will enhance the value of the solution by being universally desirable and usable for every client. MARQUIS acknowledges and accepts one universal reality Marketers must embrace change in order to help their financial institutions generate real growth. Gone are the days when marketers are given a pile of cash without any accountability for the results. Just as MARQUIS has changed what their business looks like every marketer in financial services must take a hard look at what they are doing to drive and measure success. Proven revenue growth is the fastest way to get bigger marketing budgets and almost guarantees that your budget will never be cut a perfect outcome. To underscore this fundamental change in marketing Jay Kassing wrote a book ingeniously titled Change Your Marketing Change Your Results. Call or write and ask him for a copy he loves sending them out for free. Jay s first book was so successful that he wrote another on a compliance topic titled How and Why You Must Prove You are Lending Fairly. As many credit unions as banks have ordered the book from the www. website. Jay will offer his third book Marketing Execution in the near future. Be sure to check the MARQUIS website for details. And yes he s offering it again for free. Of course you can also buy it on Amazon. W Developing solutions starts with listening. MARQUiS is driven to educate marketers. 14 Credit Union BUSinESS June 2013 UnDEr THE HOOD M A page from the website offers informational modules via streaming video. any books have been written about marketing and compliance. When asked what makes his books different Jay replied I try to present ideas in a minimalist visual way. While each of my books can be read from beginning to end in 20-30 minutes I don t think you will miss the 10 000 words I left out and almost every other author leaves in. Each book is an ideal tool to use in explaining to senior management and the board what compliance and or marketing requires today. In addition to the books the MARQUIS website offers dozens of white papers e-books and case studies all of which outline the what and why that generate marketing results every time. In fact much of the information and most case studies include detailing the actual results that marketers have achieved. If you want to learn about marketing today MARQUIS wants to make it easy. John sums it up in this way You don t keep knowledge and opportunity away from anyone in your family. In fact you encourage them to avail themselves of every resource so they can be the best they can. Doesn t everyone want that for their family members Pages from the website While MARQUIS is a leader in marketing and financial services compliance with industry leading software services consulting and direct marketing their success story begins and ends with how they deliver what they promise. By relying on old-fashioned principles MARQUIS has taken on the biggest and outperformed them all. Truth trumps fiction. Honor and Integrity are verbs. These are not secrets to the MARQUIS staff or the clients they serve. June 2013 Credit Union BUSinESS 15 CU COnTEnT Focusing on the right loan Products Brings success to toledo Metro FCu H By Laura Enock ow does a 34 million credit union go from a 30% loan to share ratio to over 60% in just eighteen months That s exactly what Robb Poore President and CEO of Toledo Metro FCU in Ohio has accomplished since joining the credit union less than two years ago. Not only has the loan to share ratio doubled but over the past twelve months the credit union ranked number one in its peer group for loan growth in Ohio. Perhaps even more impressive Toledo Metro FCU s delinquency rate dropped from 1.5% to less than 0.6% as this phenomenal growth occurred. Not surprisingly last year was the most profitable in the credit union s 60-year history. What s their secret sauce and how can you use it to achieve similar results at your own credit union We made a concerted effort to avoid heavy mortgage lending because we believe rates will increase at some point and we didn t want to be in the position of holding loans at 3.5% Poore says. We portfolio and keep most of the loans we do and we didn t want to regret it later. Other than mortgages auto loans are one of the first bills people pay since they need their car to get to work. The credit union found a perfect niche in pre-owned vehicle purchase financing and in existing auto loan refinancing. As he focused on increased lending one of Poore s first strategic decisions was to put a strong emphasis on just one product pre-owned vehicles. Rather than compete with auto manufacturers who offer notoriously low interest rates because their goal is selling cars not financing Toledo Metro opted to help members who were looking for used car auto loans. Micke Plath Director of Lending with Wendy Williams reviewing loan files Rather than compete with auto manufacturers who offer notoriously low interest rates because their goal is selling cars not financing toledo Metro opted to help members who were looking for used car auto loans. 16 Credit Union BUSinESS June 2013 HELP YOUR MEMBERS SAVE BIG MONEY ON VEHICLE REPAIRS AND CREATE NEW FEE INCOME WITH NAC As a nationally recognized administrator of top quality vehicle service agreements NAC is focused on providing the products credit unions need to create new fee income and expand membership. NAC s fully insured plans provide YOUR MEMBERS with peace-of-mind protection against expensive vehicle repairs. Our powerful online technology provides YOU with simple-to-use sales tools to automatically match vehicles to eligible plans display cost-effective options and generate PDF contracts for your customers when finished FOR YOUR MEMBERS Great Benefits - Roadside Assistance Rental & More Superior Customer Service Fast Claims Processing FOR YOU Online & On-Site Training Fast Personal Support Easy Online Submissions Custom Marketing Materials Auto Powersport & RV Plans NACSOLUTION.COM 800-664-5724 CU COnTEnT Another best practice at Toledo Metro CU is their shift in focus from being order takers to becoming financial advocates. For example before the shift in focus a member might come in to the credit union ask for a 1 000 Christmas loan get approved and walk out reasonably happy with the 1 000 in their pocket. Today loan officers have been trained to look at a member s whole picture--a loan for the holidays Is cash flow tight --and to initiate a conversation about the member s entire financial situation. Seeing the whole picture and helping members with products they may not even realize they need is good business practice for the credit union and it s good for members too. It s also an organic and very effective marketing technique. Our loan officers have done a fabulous job of uncovering member needs Poore says. The most powerful marketing in the world occurs when someone goes home to their family sits down at the dinner table and talks about what the credit union did for them that day. Poore says the Ohio Credit Union League provides good online training and the credit union offers some in-house on the job guidance. Mike Plath director of lending at the credit union starts every day by reviewing the prior day s loans and possible opportunities with the credit union loan officers. Additionally he role-plays with the staff so they have a chance to experience what members might say and show how they might react. While a typical meeting may only last 15 minutes it is enough time to give the loan officers direction acknowledgement for all they ve done right and a breakdown of what could have been done differently. Rather than having loan officers sell members product they don t want Plath works with loan officers to help members buy what they need. Our people aren t selling Poore explains. We don t want members to have buyer s remorse. We want them to walk out of here happy. Poore thinks that a loan officer s primary role should be providing members with comprehensive and satisfactory solutions to whatever issues are going on in their financial lives rather than offering bandages that merely cover up underlying issues. Another extremely popular loan product at Toledo Metro Credit Union is a 500 payday loan alternative that requires no minimum credit score. Its only requirement is a minimum of six months membership and a direct deposit account with the credit union. The credit union has helped 160 members with this product to date. Poore says We do review credit even though there s no minimum score because we want to uncover opportunities. Some members actually had 24% interest auto loans that the credit union was able to refinance and others learned that they had better credit scores than they thought they had. Ultimately the credit union was able to remove many payday borrowers from the never-ending lending cycle. Toledo Metro also helped members avoid starter interrupt devices that target low credit score borrowers. When a payment isn t made on time the mechanism prevents the car from starting 18 Credit Union BUSinESS June 2013 CU COnTEnT Poore s advice to credit unions is powerful Don t be afraid to take a chance on your members to give them the opportunity to take out a loan and pay you back. My board was gracious about trying it Poore says. People have gone through difficult times in our country today and a person s worth shouldn t be defined by a three digit credit score. This is one of the things that differentiate credit unions. Let s take that extra step to understand how they got where they are and figure out how we can we help them. Wise words indeed and what separates credit unions from banks. It may just be the mindset that helps your credit union succeed. Laura Enock Managing Editor of Credit Union Toolbox and founder of provides credit unions nation-wide with content for their websites newsletters email marketing and social media communications. Enock moderates the popular CreditUnionToolbox webinars on best practices and provides individual credit unions with social media marketing and PR support on a consulting basis. Contact her at laura or follow her on Twitter CUtoolbox. We are in an area that has experienced a tough economic period and someone who defaulted on a medical bill or even Visa bill five years ago may be in a very different position today and we look for ways to give them a chance. and triggers repossession. Car owners get a verbal reminder three days before the payment is due. We get people out of those Poore says. We believe everyone should be treated with dignity. The credit union is consistent in the collection process. Both A paper and E paper borrowers get the same calls intervals and conversations but with a riskier borrow the credit union works with borrowers to create payments that will help improve their credit scores. One best practice all credit unions should consider adapting is to verify that all member phone numbers on file are current. It s amazing how many credit unions make a 40 000 car purchase loan and don t have a valid telephone number for the recipient Poore says. We make a phone call at some point during the process so we know we have a working number. Numbers need to be updated especially when someone has been a member for more than a decade. Poore also analyzed the returns generated by A and B paper loans and found that there was no margin--no money--to be made on them. In reevaluating their Visa portfolio Poore found that Toledo Metro was not being adequately compensated for risk and that excellent credit wasn t being rewarded. We ve focused on long-term members with good deposit histories and have been less concerned with their previous credit history at other institutions. We aren t necessarily concerned about whether or not they ve paid others back but are concerned about whether or not they will they pay us back. We are in an area that has experienced a tough economic period and someone who defaulted on a medical bill or even Visa bill five years ago may be in a very different position today and we look for ways to give them a chance. CEO SuBSCripTiOn WiTh BeneFiTS Benefit your CFO COO CMO CCO CLO CIO HRD With FRee Monthly E-Newsletters Subscribe NOW register June 2013 Credit Union BUSinESS 19 CFO CUrrEnCy demystified Derivatives I By Emily Hollis CFA Partner ALM First Financial Partners LLC sheet risk and financial intermediation are the only options to enhance capital. Generally institutions generate income by exposing their balance sheets to different types of risks-- interest rate convexity liquidity--and through financial intermediation--gathering a portfolio of member deposits and building a portfolio of member loans. Understanding and applying strategies for managing these risks and strategies for balance sheet construction can enhance returns. But they also present risks if interest rates rise or liquidity spreads widen. On the other hand the often-used conservative practice of selling member-issued mortgage loans can negatively impact earnings. In this strategy the interest rate risk is removed but so is the asset s yield spread that institutions would rather retain. When used properly derivatives can allow financial institutions to enhance earnings and offset their interest rate risk. n June 2011 NCUA released its first Advanced Notice of Proposed Ruling (ANPR) for credit union derivative authority. In late January 2012 NCUA issued its second ANPR for derivative authority. On May 16 2013 the NCUA released a notice of proposed ruling for derivative activity. NCUA points out in the supplementary information that 28 percent of banks with assets between 250 million and 1 billion and 57 percent with assets between 1 billion and 5 billion use derivatives to insure against interest rate risk. This fact says it all It is a normal practice for financial institutions. Understanding the concept of hedging is not difficult. In fact it is much easier than understanding some of the other products and strategies on CEOs plates today. It just takes a little focus and some groundwork to get it going. Simply put hedging is a form of insurance. The practice of using hedging strategies is a diligent approach to managing interest rate risk. If hedging is not accepted in the credit union industry and an unthinkable rapid rise in interest rates occurs the industry will face catastrophic losses. We see it when we model outlier what-if scenarios. The lesson learned from the corporate debacle is not that regulations should be all encompassing rather the lesson is that we need to believe catastrophic events can happen. How Does an interest Rate swap Work NCUA is allowing the use of interest rate swaps and caps. The interest rate swaps market began decades ago as a way for financial institutions (and corporations) to manage their debt and has since grown into one of the most useful and liquid derivatives markets in the world. The notional1 amount outstanding in interest rate swaps is huge at more than 350 trillion. Because swaps are highly liquid and have built-in forward rate expectations as well as a credit component the swap rate curve (the relationship of the swap fixed rates of varying maturities) has become an important interest rate benchmark for credit markets. In some cases it has supplanted the U.S. so Why Would Credit Unions need Derivatives Without the regulatory authority to raise capital through secondary markets generating income by managing balance 1 The notional amount is the specified amount on which the exchanged interest payments are based. A notional principal amount is the amount used as a reference to calculate the amount of interest due on an interest only class which is not entitled to any principal. 20 Credit Union BUSinESS June 2013 CFO CUrrEnCy Treasury Yield Curve. An interest rate swap is an agreement between two parties to exchange one stream of interest payments for another over a set period of time. Swaps are useful when one financial institution wants to receive a payment with a variable interest rate while the other wants to limit future risk by receiving a fixed-rate payment instead. Each group has its own priorities and requirements so these exchanges can work to the advantage of both parties. The most commonly traded and most liquid interest rate swaps are known as vanilla swaps and are the type permitted by the NCUA. Vanilla swaps exchange fixed-rate payments for floating-rate payments based on LIBOR (London Inter-Bank Offered Rate) the interest rate high-credit-quality banks charge one another for short-term financing. LIBOR is the benchmark How Does an interest Rate Cap Work An interest rate cap is a derivative in which the buyer pays a premium and in exchange receives the right to payments at the end of each period for a specified amount of time in which the interest rate exceeds the agreed strike price. An example of a cap would be an agreement to receive a payment for each month that the LIBOR rate exceeds 2.5 percent (the agreed upon strike) for a period of seven years. The beauty of a cap is that the buyer can never lose more than the premium paid. The higher the agreed-upon strike rate the lower the premium. This lower premium can be likened to a high deductible insurance premium. When rates move up the cap buyer receives income which will offset the locked in low rate it is trying to hedge. Hedging is Used to Manage interest Rate Risk not Avoid it. Interest rate hedging should not be confused with derivatives such as credit default swaps2 that did lose significant market value in recent times. Some believe the demise of the failed corporate credit unions was due to their derivatives power but that simply is not true. Their failure was caused by credit losses on non-conforming securities. Derivatives that hedge interest rate risk are fairly straightforward and they performed extremely well during the credit crisis. for floating short-term interest rates and is set daily. Although there are other types of interest rate swaps such as those that trade one floating rate for another plain vanilla swaps comprise the vast majority of the market. By convention each participant in a vanilla swap transaction is known by its relation to the fixed-rate stream of payments. The party that elects to receive a fixed rate and pay floating is the receiver while the party that receives floating in exchange for fixed is the payer. Both the receiver and the payer are known as counterparties in the swap transaction. The counterparty that receives the floating leg will see the value of its swap transaction increase as rates move up because it is receiving higher interest payments. Payments are based on a notional amount and are off-balance sheet. The notional amount never exchanges hands between counterparties only the interest payments that are based on the notional principal. nCUA Proposed Regulations The proposed regulations are fairly limited and will have a minimal impact if passed in the initial form especially for smaller institutions. Limiting the notional amount will severely constrain any real hedging strategy. The OCC (Office of the Comptroller of the Currency) clearly states that fact in its guidelines. The maximum negative mark-to-market restriction also misses the offsetting asset or liability. Credit default swaps are agreements where counterparties transfer credit risk. A counterparty agrees to insure a third-party credit risk in exchange for regular payments or an insurance premium. If the third party defaults the party providing insurance will have to purchase the defaulted asset from the insured party or at times pay the market value loss of the insured asset. 2 22 Credit Union BUSinESS June 2013 CFO CUrrEnCy Another major restriction in the proposed regulation is the assessment of a fee when applying to the NCUA. The use of derivatives among the larger credit unions will decrease risk within the entire industry. Application fees have never been assessed on acceptable vehicles that have historically entered the financial industry. Case in point Fees were not applied when credit unions invested in or issued collateralized mortgage obligations non-conforming securities indirect loans commercial loans etc. Plain vanilla swaps and caps are simpler than most of these products. It is merely an issue of keeping up with the times. Credit unions are financial intermediaries for memberowners not rate bettors. Derivatives hedge this gap. Properly used derivatives can offset interest rate risk that is inherent within the credit union industry today. This is vital because as competition grows it will allow credit unions to complete effectively. Credit unions that qualify should take the time to look into these interest rate risk management tools. Emily Mor Hollis CFA is a partner with ALM First Financial Advisors LLC. Credit unions are financial intermediaries for member-owners not rate bettors. Derivatives hedge this gap. Properly used derivatives can offset interest rate risk that is inherent within the credit union industry today. this is vital because as competition grows it will allow credit unions to complete effectively. Credit unions that qualify should take the time to look into these interest rate risk management tools. June 2013 Credit Union BUSinESS 23 CU LEnDing From A to regulation Z Breaking Down the new mortgage rules hen the Consumer Financial Protection Bureau (CFPB) issued nine rules in ten days in January of this year those of us in the regulatory business knew that keeping all the rule changes straight would be somewhat chaotic. Indeed the more we learned the more confusing they became. It can be difficult for any credit union to move forward implementing its compliance strategy without benefit of a layman s breakdown of the information. Credit union leaders charged with understanding the scope of some of the new rules amending Regulation Z as well as the exemptions for the rules that may apply to their cooperative can use what follows as a starting point in their review. It s important to understand how Regulation Z defines a dwelling before you begin studying the specific provisions of each rule. The new rules define a dwelling as a residential structure that contains one to four units whether or not that structure is attached to real property. The term includes an individual condominium unit cooperative unit mobile home and trailer if it is used as a residence. The Official Staff Interpretations go on to indicate that a vacation home or second home may be a dwelling unless the rule specifies a principal dwelling. Let s begin our breakdown with a rule that has a very broad scope and will impact many credit unions The Ability to Repay Qualified Mortgage Rule. W By Andrea Stritzke Ability to Repay Qualified Mortgage The ability to repay rule (also known as the qualified mortgage or QM rule) requires lenders to determine that a consumer has the ability to repay a covered transaction at the time of consummation. The rule applies to closed-end consumer loans secured by a dwelling. However the following transactions are excluded from the rule Timeshares Reverse mortgages Temporary or bridge loans with terms of 12 months or less The construction phase of a construction-topermanent loan Because the rule applies to closed-end loans it excludes openend home equity lines of credit. Additionally the rule applies to consumer loans (personal family or household purpose) so it excludes business loans or investment loans. Also the rule does 24 Credit Union BUSinESS June 2013 CU LEnDing may include condominiums manufactured homes boats or trailers if used as a principal dwelling. The rule also provides an exception for some creditors specifically those that meet all of the requirements below Have an asset size of less than 2 billion Make more than 50 percent of their first lien covered transactions in a rural or underserved area Originated 500 or fewer first lien covered transactions in the preceding calendar year Do not currently escrow for any mortgages The appraisal rule provides that a higher-priced mortgage loan may not be extended without obtaining a written appraisal of the property to be mortgaged. The rule also prohibits extending a higher-priced mortgage loan to finance the acquisition of the consumer s principal dwelling without obtaining two written appraisals in certain cases specifically when the property has been flipped within a certain amount of time. A higher-priced mortgage loan has the same definition in the appraisal rule as in the escrow rule. However the appraisal rule does have different exceptions than the escrow rule. It excludes the following Reverse mortgages Temporary or bridge loans with terms of 12 months or less The construction phase of a construction-topermanent loan Qualified mortgages Transactions secured by new manufactured homes Transactions secured by mobile homes boats or trailers The last rule we will cover here and issued by the CFPB that amends Regulation Z is the high-cost mortgage rule. it is important to note that highcost mortgages have not historically included open-end loans. However the amendments to the rule now include open-end consumer credit transactions secured by a principal dwelling that meet the definition of a high-cost mortgage. not specify that it applies to a principal residence. So the rule may apply to a first lien or subordinate lien loan secured by a dwelling which may include a mobile home boat recreational vehicle condominium or vacation home if used as a residence (and is not a business or investment-purpose loan). Higher-priced mortgages are a bit more complicated with two additional rules applying. escrow and Appraisal Rules for Higher-Priced Mortgages The escrow rule under Regulation Z covers a higher-priced mortgage loan secured by a first lien on a principal dwelling and extends the required escrow period for these transactions. A higher-priced mortgage is a closed-end consumer credit transaction secured by a consumer s principal dwelling where the annual percentage rate (APR) exceeds the average prime offer rate (APOR) by 1.5 percentage points for a first lien 2.5 percentage points for a first lien jumbo mortgage and 3.5 percentage points for a subordinate lien. However the escrow rule does not apply to subordinate lien mortgages. The following transactions are excluded from the rule Reverse mortgages Temporary or bridge loans with terms of 12 months or less The construction phase of a construction-topermanent loan Because the rule only covers closed-end loans open-end home equity lines of credit are excluded from the rule. A dwelling High-cost mortgage rules The high-cost mortgage rule amends the definition of a high-cost mortgage and provides additional restrictions and consumer protections related to them. A high-cost mortgage is any consumer credit transaction that is secured by the consumer s principal dwelling in which (1) The annual percentage rate applicable to the transaction exceeds the average prime offer rate by more than 26 Credit Union BUSinESS June 2013 CU LEnDing Transactions originated by a Housing Finance Agency where the Housing Finance Agency is the creditor for the transactions Transactions originated pursuant to the United States Department of Agriculture s Rural Development Section 502 Direct Loan Program. It is important to note that high-cost mortgages have not historically included open-end loans. However the amendments to the rule now include open-end consumer credit transactions secured by a principal dwelling that meet the definition of a highcost mortgage. This section of the rule does not have its own definition of dwelling and thus relies on the general Regulation Z definition of dwelling which may include a condominium unit cooperative unit mobile home or trailer if it is used as a principal residence. Knowing the scope of the rules can help credit unions begin to identify what products are offered and how these rules may impact those products. Once a credit union has determined which rules apply to which products it is time to dig deeper into the rules and begin drafting a plan for implementation as there will be many other things to consider in the coming months. And these are only some of the rules issued by the CFPB. Andrea Stritzke is Vice President of Regulatory Compliance at PolicyWorks. PolicyWorks is an Iowa-based firm known for providing solutions to credit unions regulatory compliance needs and influencing critical public policy issues through our government affairs services. Our firm is committed to being a valued dependable business partner to our clients. 6.5 percentage points for a first-lien transaction 8.5 percentage points for a first-lien transaction if the dwelling is personal property and the loan amount is less than 50 000 8.5 percentage points for a subordinate-lien transaction. (2) The transaction s total points and fees will exceed 5 percent of the total loan amount for a transaction with a loan amount of 20 000 or more or The lesser of 8 percent of the total loan amount or 1 000 for a transaction with a loan amount of less than 20 000. (3) under the terms of the loan contract or open-end credit agreement the creditor can charge a prepayment penalty more than 36 months after the member becomes obligated on the loan or account opening or prepayment penalties that can exceed in total more than 2 percent of the amount prepaid. The following transactions are exempt from the high-cost mortgage provisions Reverse mortgages The construction phase of a construction-topermanent loan June 2013 Credit Union BUSinESS 27 CU Training Training That Every Branch manager needs B By Ken Gonyer ranch managers wear many hats. To run their branch well they must be experts in all aspects of day-to-day operations from products and services to technology and procedures. They need to be well-grounded in the organization s policies and skilled in dealing with lots of different personalities and problems each day. Branch managers are also responsible for overseeing their staff ensuring that credit union members receive exceptional service and building branch business. In most credit unions branch managers receive regular resourcing in the operational side of their job and get the training they need to keep up with fast-paced changes in technology new products and updated rules and regulations. Fewer resources have been available to teach branch managers how to handle the critical responsibilities of helping employees grow enhancing customer service and reaching out to the community. Every branch manager needs this training if they are to build a successful branch. It trains them in leadership and improves their staff development member service and business development skills. Team Leadership Leadership skills training is designed to teach the branch manager how to build a team of engaged employees to work collaboratively and take ownership in achieving branch objectives. As a team builder the branch manager should know how to define and articulate branch objectives guide the group in setting specific goals and creating action plans and know when and how to correct and praise the team and its individual members. Once the team has defined their objectives established a plan and committed to a timeframe the welltrained branch manager should know how to evaluate goals measure progress and provide feedback. Coaching skills Coaching skills training gives the branch manager tools for teaching and mentoring which enables them to help individual staff members develop new competencies and improve performance. As teachers branch leaders should be trained in best practices for educating staff with different learning styles ways to create an encouraging environment for learning and techniques for one-on-one instruction. To be effective mentors branch managers need to understand the complexities of the mentor mentee relationship. They should know how to relate to subordinates in a manner that is both supportive and honest while establishing clear expectations and administering positive feedback and constructive criticism. staff Development Training If you take care of your people your people will take care of the customers and the business will take care of itself. Sam Walton founder of Wal-Mart Teaching managers how to help their staff members grow and develop professionally is one of the most important jobs of every branch manager. Morale goes up staff members work harder and members receive better service when the branch manager is interested in employee development. Branch managers need to master two key skills for successful staff development knowing how to lead a team and how to coach individual staff members. 28 Credit Union BUSinESS Member service Training If you do build a great experience customers tell each other about that. Word of mouth is very powerful. - Jeff Bezos founder and CEO of June 2013 CU Training Many branch managers rose to their leadership position because of their skills in serving members and solving their problems. They often have a knack for making members smile even in messy or upsetting situations. Unfortunately not every branch staff member has that ability. They need a leader who will not only model excellent member service but also expect it from their staff. As branch leaders managers need training in how they can replicate their service and problem-solving attitude in their team in order to create a service-oriented cando atmosphere in their branch. Together manager and staff can build the kind of experience members will tell others about. to connect with the new member prospects and pursue their business. As the credit union s physical outpost in the community the branch is the hub for new business development activity. In order to take full advantage of existing growth opportunities branch managers should be trained in the business-building skills of community outreach and sales. Reaching Out to Potential Members Business development training should give branch managers the tools they need to identify understand and reach their target market. By knowing the common characteristics and financial services needs of the restless banking customer the branch manager and staff will be better prepared to develop the branch s marketing plan. In support of this plan branch managers should be taught how to create a contact management system that will ensure a consistent ongoing and long-term relationship with potential members member businesses and SEGs. Member experience Management Customer service training should introduce managers to a range of service practices and techniques they can model and teach to branch staff. Branch managers properly trained in communication and relational skills clarify staff expectations and lead by example setting the stage for excellent service. The tools that managers share with their branch team will assist them in creating a member experience that s fast friendly accurate and helpful. In addition customer service training will equip selling Credit Union Products and services branch managers with the skills they ll need to develop service For branch managers who began their career on the teller line standards and integrate them into staff job descriptions. sales skills may be quite limited. Business development training should give managers an advanced set of selling behaviors that they can use when making sales visits. They should learn the Resolving service issues Problem solving is an important aspect of member service basics of how to build rapport recognize financial services training for branch managers. Whenever members are frustrated needs and recommend relevant products and services. They with the service they re getting they ask to speak to a manager. will also need to develop presentation follow-up and sale Well-trained managers learn skills such as active listening closing skills. To resource branch staff branch managers need empathy effective communication and critical thinking which education in sales management as well. Branch managers have a complex and daunting job. Given help them resolve problems and avoid conflict. This training teaches the branch manager how to control tension-escalating better training they can become experts in staff development situations and helps prepare branch staff to deal with problems member service and business expansion. They ll be well equipped to lead their credit union branch and contribute to before they escalate. the success of the credit union as a whole. Business Development Training Today s financial services market is not only extremely competitive but is also highly volatile. According to the World Retail Banking Report 2013 ten percent of retail banking customers worldwide says they are likely to leave their bank in the next six months. An additional 41% of bank customers say they are unsure whether they will go or stay. This consumer environment provides credit unions with a ripe opportunity Ken Gonyer serves on the executive team at Park View Federal Credit Union in Harrisonburg VA overseeing member care. He is a member of the American Society for Training & Development (ASTD) and the International Association of Coaching (IAC). The Virginia Credit Union League hosted his recent Train the Trainer workshop. Contact him at www. Credit Union BUSinESS 29 June 2013 LEaDErSHiP shattering the glass Ceiling it really Does Exist O By Dr. Sandra L. Torres ne would think that in the twenty first century and in a country as progressive and modern as the United States no one would be concerned with gender issues. Glass Ceiling is a term popularized in the early 1980s describing the invisible barriers that women (and minority men) confront in their ascent to the corporate hierarchy. According to The Economist the popular weekly news and international affairs publication it most certainly does exist and it s a problem. The journal has even compiled its own Glass Ceiling Index to show where women have the best chance of equal treatment at work - and the best place is New Zealand The study by The Economist compared the following five indicators across 26 countries the number of men and women respectively with tertiary education female laborforce participation the male-female wage gap the proportion of women in senior jobs and net child-care costs relative to the average wage. New Zealand had the highest score on all indicators (100 best for working women). Surprisingly the United States came in 12 out of 26 countries and scored slightly over 70. What Are the effects of the Glass Ceiling In 1991 the US Department of Labor officially defined the Glass Ceiling as artificial barriers based on attitudinal or organizational bias that prevent qualified individuals from advancing upward in their organization into management-level positions. The Department went on to establish a commission to investigate it in an effort to level the playing field for women and minorities. The goal was to identify the Glass Ceiling barriers that blocked the advancement of women and minorities to decision making positions in the private sector. The commission concluded that barriers that block advancement were the following inadequate recruitment practices lack of opportunity 30 Credit Union BUSinESS to contribute to and participate in corporate development programs and lack of top level ownership of equal employment opportunity principles. Twenty-two years later we find that those barriers still exist. Many women insist that the commission s findings represent the real barriers to accessing male-dominated positions in business. Conversely many challengers say that barriers exist mostly because women choose to focus on family. Whatever the case the fact remains that women who choose to focus more of their time on family and cannot dedicate as much time to their career are usually the first to experience the effects of the Glass Ceiling. Research from a 2011 Grant Thornton International Business Report found that women now hold 20 percent of senior management positions globally a decline from 24 percent in 2009 and also found that the percentage of organizations that have no women in senior management has risen to 38 percent in 2011 from 35 percent in 2009. Only 16 percent of women in G7 countries held senior roles while 27 percent in Asia-Pacific did so with increasing numbers in Hong Kong and Thailand. Globally only 8 percent of companies had female CEOs and in the US only 3.6 percent of Fortune 500 companies. In contrast June 2013 250 000 Credit Union Employees 92 Million Members 100 Million Miracles Since 1996 Credit Unions for Kids has raised more than 100 million for Children s Miracle Network Hospitals giving hope and healing to kids in your local community. YOUR FUNDRAISING DOLLARS IN ACTION MILLION 10 2 1 iMRI machine and surgical suite 1 Cardiac X-ray machine 1 Ultrasound machine 1 Bone marrow transplant 1 Fully-equipped Giraffe OmiBed incubator MILLION THOUSAND 270 THOUSAND 250 THOUSAND 100 LEaDErSHiP in Asian economies Thailand had 30 percent female CEOs China 19 percent and Taiwan 18 percent. The study also reveals that in the US there have been a number of backward steps with respect to gender equality. In the field of law women are more than 50 percent of the law students but less than 25 percent of law firm partners federal judges and law school deans. In 2012 women were expected to earn 63 percent of master s degrees and 54 percent of doctoral and professional degrees but comprise only 20 percent of full university professors and only 25 percent of college presidents. Internationally the US ranks 85th in the world in its share of women in national legislative bodies Women comprise only 17 percent of the US House of Representatives 16 percent of the US Senate bring you of state governors and 24 percent ed message will 16 percent success in employee motivation as of as in building a positive largest 100 cities in wellall state legislators. Of theproductive workplace.the US only 9 percent haveleaders employeeA appreciation is part of their For many female mayors. recent Catalyst Corporation report showed that can be a scarce 16 percent of Board of DNA but for others itwomen held onlycommodity. in fact many Directors seats at offering leadership development training to organizations are large companies and more than 25 percent of Fortune 500 companies had no female executive officers. lEADErSHiP ensure that leaders develop skills in this area. Take this ThanksEarly this year make your workplace the exception and use evgiving season to Facebook s Chief Operating Officer Sheryl Sandberg once again brought into focus the disparity between ery opportunity to the number of your and women who hold leadership roles in demonstrate men major businesses. Her book Lean In Women Work and the gratitude to your Will to Lead is full of grim statistics about women s standing team. in the public sphere most of which concur with the Grant Thornton Report and the Catalyst Report. Sandberg has also Author speaker started to foster a community where women can and leadership exchange ideas Mi- information receive education on topics consultant and such as leadership and communication and has introduced ami-based Dr. the concept researched LeanIn circles allow around to meet Torres has of circles. leadership practices women the world. regularly to support eachexperience in the credit of trust indusMore than 20 years of other in an atmosphere union and confidentiality. her an ardent believer and practitioner of the try has made leaders need to say thank you in a genuine manner. Your team members will likely work much harder if they feel that what they re doing really makes a difference and that their efforts are noticed by those with power. Minority Men and the Glass Ceiling writings trainSi offers bilingual leadership expertise via her Glass Ceiling barriers exist at all levels of an organization and ing workshops and speaking engagements. Her specialty is affect minority men just the same across various industries. women s leadership. Get to know her better by visiting leadAnd while CEOs increasingly recognize the value of work force diversity particularly at the management levels Glass Ceiling credit union philosophy people helping people. Leadership Dedicated to developing leadership across cultures. Leadership Programs Develop Talent and Achieve Results Studies show that on average leadership development programs have a 20-40% significant impact on the following Personal Ability--Communication - Collaboration--Teamwork Productivity--Quality and Cost of Work Consider how an investment into coaching mentoring or training initiatives will result as a positive ROI on your organization s income statement. Dr. Sandra L. Torres Leadership authority and founder of Leadership Si (see) offers bilingual leadership expertise via her writing training programs workshops and speaking engagements. Become an extraordinary leader June 2013 November 2012 Develop great leadership skills. For more information contact her at drsandi 32 Credit Union BUSinESS 21 Credit Union BUSiNESS LEaDErSHiP how to Shatter the Glass Ceiling 1. Realize that you cannot be equal - you must be better than your competition. This may sound unfair but it is reality. In the example of a promotion you must make a solid case for being promoted and it must be a clear case. 2. Recognize your company s philosophy. Look to your company s senior management and Board of Directors if there are no ethnic minorities or women try to affect change and be the first. 3. Don t waste your time. Look to advance your career with an organization that values workforce diversity and eliminating the Glass Ceiling. Organizations that don t adopt this philosophy will continually see good people leave. Eventually they will realize that change is a must. 4. If you have a lot invested you want to stay and fight. Unequal pay and consideration for promotions is discrimination. Seek change by persuasion education and argument be a warrior and pave the way for the next generation. Dr. Sandra L. Torres is an author speaker and leadership consultant. Miami based Dr. Torres has researched leadership practices around the world. More than 20 years of experience in the credit union industry has made her an ardent believer and practitioner of the credit union philosophy people helping people . Leadership Si offers bilingual leadership expertise via her writings training workshops and speaking engagements. Her specialty is women s leadership. Get to know her better by visiting barriers continue to deprive this group the opportunity to compete for and hold executive level positions in the private sector. A 2012 report from executive search firm Spencer Stuart points out that top leadership positions are still overwhelmingly held by men that are not minorities. One reason for this may be that minority men are often hired at a lower level therefore movement into higher positions do not take place even with equal promotions. This can lead to a situation where gender and racial inequalities for promotions to higher levels are stronger than inequalities for promotions to lower levels. shattering the Glass Ceiling The term Glass Ceiling has become a permanent part of the American lexicon since first appearing in several published articles during the 1960s. Today it is viewed as a reflection of gender roles and relations which give rise to and perpetuate inequalities between women and men in all walks of life. But no matter what we call it the bottom line is that it is discrimination. The Glass Ceiling is a constant manifestation of the continual struggle women and minorities live in their quest for equal employment status and equal opportunity and not only in our country but globally as well. The diversity mix is beginning to change but perhaps not quickly enough. Great talent can be found and nurtured across the gender background and age spectrum and companies should review their succession planning and recruitment strategies to ensure they can leverage the range of talent available. Americans who complain about the Glass Ceilings should keep in mind that glass can be shattered if one strikes it hard enough and long enough if not there s always New Zealand June 2013 Credit Union BUSinESS 33 TECHniCaLLy SPEaking after Smooth Conversion with Precise Planning and Strong alliances bout two summers ago CNP (Core Network Processing) based in Lenexa KS a CUSO that supplies core data processing to corporate credit unions found its back against the wall when regulators closed down U.S. Central Credit Union which hosted CNP. Forced to find a new partner to provide hosting operations CNP put a detailed plan in place for a new IT partnership that resulted in a smooth conversion and in the process forged strong new IT and business alliances with Alloya Corporate FCU of Warrenville IL and Worknet Inc. of Naperville IL a managed IT services provider. CNP is a limited liability corporation (LLC) set up years ago by U.S. Central to provide back-office data processing for a group of corporate credit unions. Corporate credit unions also known as central credit unions provide services to natural person (consumer) credit unions. They are sometimes referred to as the credit union s credit union. CNP which provides financial services and payment services (such as automated settlement certificates of deposit and other electronic payment services) serves about 2 000 natural person credit unions. On March 20 2009 NCUA placed U.S. Central Credit Union in conservatorship. With 34 billion in assets U.S. Central was the biggest federal credit union in the nation when it failed. The NCUA infused 1 billion into U.S. Central in 2009 to keep it afloat and then set up a U.S. Central Bridge facility in October 2010 to prevent disruption and ensure that U.S. Central s failure didn t also bring down credit unions that relied on its services. 34 Credit Union BUSinESS Cuso going strong A By Roy W. Urrico Deadline Approached Fast During the summer of 2011 there still was a prevailing belief that a group of credit unions would come together to support a payment CUSO of some kind that would allow many of the U.S Central products and services to continue to be offered to corporate credit unions and their credit union members recalls Teresa Brent managing director of CNP. It was during this August-September 2011 timeframe that the CUSO began to realize that this was not going to happen and in December 2012 regulators were talking about closing U.S. Central for good. That gave us less than a year to figure out what we were doing explained Brent now an employee of Alloya because CNP does not have any employees of its own. She June 2013 TECHniCaLLy SPEaking Closing U.S. Central Bridge is the last step in the effort to stabilize and reform a corporate credit union system that was close to collapsing NCUA Chairman Debbie Matz said in a release. Decisive actions by both NCUA and credit unions brought the system back from the brink. Teresa Brent managing director of CNP had been an employee of U.S. Central when it went under. Already faced with a difficult deadline CNP needed to face the fact that the deadline was even shorter than first realized when the NCUA informed CNP that March 2012 was actually the deadline for the CUSO to move out of U.S. Central. So Brent put together an RFP for hosting operations and administrative support and sent it out to various entities. She needed to find a home for everything--all of the infrastructure hosting monitoring accounting risk management and administrative (including herself as managing director) and operational support. Basically we needed to find a new home for everything that a data processing CUSO is required to have said Brent. Closing U.S. Central Bridge is the last step in the effort to stabilize and reform a corporate credit union system that was close to collapsing NCUA Chairman Debbie Matz said in a release. Decisive actions by both NCUA and credit unions brought the system back from the brink. It wasn t easy and it required sacrifices but there was no interruption of service to members while we overcame the worst economic crisis since the 1930s. smooth Transition After the proposal process a new IT partner Alloya Corporate FCU was chosen. The first new corporate to be capitalized and chartered by members in nearly 20 years it is among the largest corporate credit unions in the nation with 1 100 credit-union member-owners. Alloya and CNP moved ahead and signed a non-disclosure agreement in December 2011. However Alloya taking a holistic approach was not completely sure if it wanted to bring on additional infrastructure and servers. While Alloya wanted to help CNP manage its corporate credit union clients it wasn t interested in running and maintaining the additional servers these clients would need. This led them on a search to find a managed service provider (MSP) that could host a private cloud environment for CNP s clients. A managed service provider is a third-party contractor that delivers network-based services applications and equipment to enterprises or other service providers. This is where Worknet Inc. came into the picture. Worknet is an information technology services company that provides organizations with IT infrastructure and runs data centers in Naperville IL and Indianapolis IN. CNP signed an agreement with Alloya in March 2012 with the goal of going live on Worknet s IBM iSeries and Windows servers through Alloya s contracted services with Worknet. Transitioning CNP s computing environment to Worknet s physical location happened quickly over one June 4 2012 weekend--but only after extensive planning and testing. The three entities spent extensive time charting the migration and performing quality assurance user acceptance and disaster recovery testing. Meanwhile Alloya wrote APIs directly between CNP s core data-processing application (CorPower) and the C400 IBM iSeries midrange system allowing CNP to scrap their previous middleware at a substantial long-term cost savings. In the end CNP went from an in-house hardware Credit Union BUSinESS 35 June 2013 TECHniCaLLy SPEaking to over 3 000 credit unions that currently use their backend systems. The new relationships also produced an offspring--an Alloya offering which is called Information Technology Services Powered by Worknet. Because of Alloya s and CNP s experience with Worknet Alloya contracted with Worknet as a partner to offer these same IT hosting and support operations services to natural-person credit unions for their own data processing needs which is kind of a neat outcome said Brent. Alloya Corporate s Information Technology Services powered by Worknet helps credit unions design implement and manage dependable IT infrastructures. Services include managed backups and disaster recovery services 24 7 monitored and managed in-house or offsite technology secure cloud hosting hosted email systems managed virtual-desktop employee workstations and utilities and facilities (mobile generator mobile satellite network workspace relocation voice system recovery emergency notification) business recovery solutions. We ve started to bring on natural credit unions--some that are Alloya members and some that are not but that have heard of us and have decided they want to work with us said Myre. (CNP is a CUSO that is a separate legal entity. It is an LLC and currently owned by a group of corporate credit unions Tricorp Federal Credit Union based in Maine Volunteer Corporate out of Tennessee Corporate America in Alabama Louisiana Corporate Missouri Corporate SunCorp of Colorado and Kentucky Corporate.) Roy Urrico is a freelance ghostwriter and byline writer of books articles newsletters guides case studies and white papers about financial institutions financial technology compliance information security credit and collections foreign exchange and many other financial topics. To find out more about how Roy can help your organization check out Roy s profile on LinkedIn visit his Web site at or email him at roy Biff Myre Worknet director infrastructure housed at U.S Central to a private cloud-hosting environment at Worknet which was contracted by Alloya. Everything moved to Alloya including myself explained Brent. The transition to Alloya went flawlessly operating expenses were lowered and IT capabilities were increased. Growth and Offspring The environment has been up and running at Worknet for a year providing hosting and management to CNP s iSeries and open-systems IT infrastructure in a secure high-performance setting featuring private-cloud technology. The total-solution team-centered transition points out Biff Myre Worknet director typifies Worknet s Technology Plus program which incorporates ideas flexibility scalability personal service and total transparency. We provide the hardware two SSAE 16 certified hosting data centers the infrastructure software and the technical expertise to manage and monitor it 24 7 noted Myre. Basically other than third-party applications pretty much all IT infrastructure is provided and managed by Worknet. From the IT perspective Alloya is focused on the database and the application management and software development. Worknet takes care of all the other IT infrastructure items and provides disaster recovery-as-a-service (DRaaS) including testing and documentation for compliance. In addition to a smooth data-center migration the offering featured significant IT-infrastructure upgrades thus strengthening operations for CNP s credit-union members. CNP also went from providing services to over 2 000 credit unions 36 Credit Union BUSinESS June 2013 Ideas and people coming together CUNA Community Credit Union & Growth Conference October 8-11 2013 Uncasville CT Join together with passionate credit union peers and a line-up of forwardthinking speakers to develop ideas and lead bold strategies. You ll leave each session with action items to drive growth back at your credit union. Keynote speakers Paul Smith Director of Consumer & Communications Research at Procter & Gamble and author of Lead With a Story. Chad Hymas Named by The Wall Street Journal as one of the 10 most inspirational people in the world and author of Doing What Must Be Done. 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We provide financing for most property types in primary and secondary markets Loan amounts of 500K to 20MM Competitive rates Terms of 3 5 7 or 10 years 25 year amortization Up to 75% LTV of appraised value or purchase price of the loan amount Loan fees 1% Atlanta GA - Los Angeles CA - Chicago IL - Dallas TX - Denver CO - Stamford CT CU SPOTLigHT Fremont Federal Credit Union meets members needs M By Sharon Sweda ega credit unions have the ability to navigate through new technology expanding member services and new product development with greater ease and speed thanks to their larger financial and technological resources. Large institutions have multiple branches with membership that spans geographical distance rather than city blocks and their size provides them with extra sets of hands to help develop new markets and expand member services. Growth and expansion are commonplace for credit unions that have already experienced decades of expansion. But what can the small community credit union do Establishing a niche or creative brand although challenging is one path a neighborhood or small community credit union can take. Fremont Federal Credit Union in Fremont Ohio is a credit union cooperative that is defining its niche by uniquely targeting the loan product and service s void that larger financial institutions have largely ignored. While FFCU welcomes new auto purchase loans for example the thrust of their new focus targets borrowers with existing auto loans at higher interest rates or with less favorable terms than FFCU offers along with a 2% rebate on the loan amount. Understandably this offer includes a 300 per loan cap. A consolidation loan product is another carrot Fremont Federal is dangling in front of its members. Many lenders lost their appetite for issuing consolidation loans following the credit tightening of the last decade. While the need for this product did not disappear availability narrowed considerably. Consolidation loans continue to be a great way for households to align lopsided budgets and avoid the consequences of budgets stretched beyond one s means. Fremont Federal protects members from stretching budgets beyond their means in another way as well by offering a nominal twenty-five dollar overdraft protection fee. The fee covers both ATM and VISA Check Card overdrafts and allows members fifteen days to make their account current. FFCU also offers free individual credit counseling for members who want to take greater fiscal control of their budget. Fremont Federal recently launched a radio and Internet campaign to support their loan programs. An important element of their promotion includes language that encourages borrowers to deal locally elucidates the benefits of using a credit union for banking products and is followed by an invitation to membership for those who qualify. FFCU promotes their loan consolidation program using photos of street signs that read Rock and Hard Place along with the slogan Stuck here with too many bills and an invitation to ask about their consolidation loan program. By focusing their growth objectives on reaching and cornering those markets where they are most likely to excel FFCU has found a market niche that has the power to attract new members while best serving FFCU s existing members. While all financial institutions are concerned with overall growth and stability FFCU has found their niche and gown their market share by keeping one eye on a different ball. Fremont Federal Credit Union s membership platform broadly accepts members who work live worship or attend school in Sandusky County Ohio. The credit union has been serving members since 1946 and is a fine example of how a small rural American credit union might just be small enough to meet members unique and distinct. Sharon Sweda is a freelance writer who has worked in the real estate and finance industries for the past 28 years. Contact Sharon at SharonSweda to SpotLite your CU. 40 Credit Union BUSinESS June 2013 800.365.4274