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ThE LENDINg ISSUE The Top Gun Lending School celebrates its first graduating class JULY 2013 VOLUME 8 ISSUE 7 9.95 credit unions vs. banks again Over Member Business Lending Rules member business lending platforms reborn again 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 jULY 2013 V O L U M E 8 I S S U E 7 4 6 8 12 pov Lazy vs. energized Tim O Hara achi evi n g skills 28 30 cu training Q&A Ken Gonyer leaDership Capacity Holly Herman busi n ess lenDing Want to Affect Positive Change in People and Organizations Become a Transformational Leader Dr. Sandra L. Torres technically speaking Member Business Lending Platforms Reborn Again Patrick Hoss market i ng matters 33 40 Credit Unions vs. Banks Again Over Member Business Lending Rules Roy W. Urrico cu spotlite The Four Keys of Client Retention Your Growth Depends on Reducing Your Attrition Rate Tony Rizzo cu con t ent Family First Credit Union invests in Preparation Sharon Sweda 15 19 22 PROFiT it s a Beautiful Credit Union Thing Laura Enock cfo currency Get it for the entire executive team register Commercial Mortgage-Backed securities as Legal Credit Union investments Emily Mor Hollis Breathe Life into Your investment Portfolio Tom Telford cu mon ey July 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 THE LENDING ISSUE The Top Gun Lending School Celebrates Its First Graduating Class JULY 2013 VOLUME 8 ISSUE 7 9.95 Credit Unions vs. Banks Again Over Member Business Lending Rules Staff Writers Laura Enock CU Content Ken Gonyer CU Training 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 Member Business Lending Platforms Reborn Again 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 Patrick Hoss Tom Telford 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 July 2013 FROM TIM Publisher s POV i must have been really lazy A few minutes ago I was talking on the phone with Katy a technician from our e-mail vendor and found myself gearing up for an e-mail flight. I was valiantly attempting to get the body of my message centered on the page and Katy was doing her best to help me. Together we carefully studied each line and character of HTML code. To those of you uninitiated in the arcana of HTML code it looks exactly like this td width 600 colspan 2 style padding-left 25px padding-right 25px color 073645 font-family Verdana Geneva sans-serif line-height 135% font-size 11px p style color 073645 font-family Verdana Geneva sans-serif line-height 135% font-size 9px marginbottom 20px em Please do not reply to this email. em p -- p style color 073645 font-family Verdana Geneva sans-serif line-height 135% font-size 9px marginbottom 20px margin-right 25px em This is an HTML e-mail please adjust your settings to view. Remember &ndash you can receive the latest news from XYZW by visiting courier modern which requires a User Name and Password. If you require any additional assistance or have questions contact your Account Executive or Service Account Manager. em p -- Except in this case it covered an entire page and consisted of thousands of characters which frankly all looked Greek to me It was on my third pass of slogging through the text trying to find a telltale align right message when I suddenly stopped and asked myself What in the world am I doing I used to be a sales executive and a top-tier frequent flyer--first class upgrades--paid to travel all over country. I treated customers to really nice lunches and dinners and many rounds of golf. I thought it was hard work. Now that I own my own business I frequently fly around my office taking care of every chore that needs doing writing spell checking promoting mass mailing and telephoning. I m 4 Credit Union BUSINESS not exactly licking stamps but I am affixing them to hundreds of envelopes promoting my business. I m definitely not lazy now I m energized Especially now as we re putting together the 8th Anniversary Issue of Credit Union BUsiness magazine. The care and tending of this adventure has been the highlight of my professional life. I m having a great time and loving every minute of it And speaking of Credit Union BUsiness I created this magazine at the suggestion of an esteemed credit union CEO who told me that he wanted to see a publication that catered to the business aspects of running a credit union the same way Forbes and Fortune magazines specialize in general business. I don t want to read about CUs being robbed because I take steps to make sure our branches don t get robbed. And I m not interested in golf tournaments or bake sales. I want help running my BUSINESS he said way back in 2004. I m extremely proud to announce here that Rex Johnson has agreed to extend his credit union lending expertise to CUB in the form of an ongoing lending column The Lending Line which launches with this issue. It s taken me nearly eight years to snare Rex and his Lending Solutions Consulting Inc. team and I m looking forward to following this important column each month. We begin with one written by David L. Tuyo II Vice President of Solutions at LSCI that outlines a new and important professional certification program for CU lending professionals which upon completion awards the designation Certified Lending Expert (CLE). Thank you for making the past eight years the hardest working and most fulfilling time in my life. And if anyone needs help interpreting complex HTML code send it my way Katy and I are ready Thanks for reading July 2013 AChIEVINg SkILLS Capacity T By Holly Herman thought 2 storage game. Think about all the stuff you have in storage (garage basement attic closets etc.). What if you didn t have the room to store everything Would you rent a storage locker to keep it Storage units can cost anywhere from 50 to 200 per month. Is it worth 600 2 400 a year to keep your stuff How long would you be willing to keep it if you had to pay for storage If you re not willing to pay storage costs each year consider giving away what you re not using. thought 3 Busy Do you have enough to do Are you able to get everything done in the amount of time you have available If your days are filled to capacity set some boundaries before taking on any new responsibilities. If your boss asks you to do one more thing and you are all ready on overflow it s time to sit down and have a priority discussion. Discuss the work you re already trying to finish how much time it will take to complete each project and ask for help prioritizing everything that needs to get done. Outside of work stop hitting your brain s automatic yes switch when someone asks you to do something. It s OK aking in taking on adding to and bringing in new requires capacity. Capacity is defined as the maximum amount or number of something that can be contained or accommodated. It s easy to forget that capacity plays a role every time we try to introduce something new into our lives. When you re operating at capacity and you try to add something new something else has to give there is no more room. Frustration and anxiety often follow whenever we forget this truth especially when we talk ourselves into believing that we have limitless capacity. Here are some random thoughts relating to capacity. thought 1 Physical objects. Unless you re starting from scratch any time you bring something new into your home or office dispose of something you already have by donating it or throwing it away. This will help you keep your physical world from getting too cluttered. Do not become a hoarder you only need so much stuff. I ve seen parents teach children that one new toy means an old one goes to charity. 6 Credit Union BUSINESS July 2013 AChIEVINg SkILLS to say that you are at capacity and that you ll consider helping out another time. up. What have you done to prevent exceeding your capacity 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. thought 4 new responsibilities. When you want to take on new responsibilities inside or outside of work assess how much time they may take. Let go of old responsibilities by passing them onto someone else whether through training or delegation. Allow someone else to get involved with after hours committees or volunteer work. I ve seen many colleagues take on new tasks while holding on to all their old ones a certain career stopper. thought 5 time. The 24-hour day is the ultimate capacity lesson. You can t add any more hours even when you desperately need to. Take a moment to prioritize your day by making a list of what you want to accomplish. Pick no more than three items from your to-do list. Think about the people you want to give your time to. Consciously living each day and taking a realistic approach to your capacity will help smooth any frustration that may spring CEO SubSCriptiOn With Benefits Benefit your CFO COO CMO CCO CLO CIO HRD With free Monthly E-Newsletters Subscribe NOW register July 2013 Credit Union BUSINESS 7 BUSINESS LENDINg Member Business lending platforms reborn Again T By Patrick Hoss he credit union industry has successfully competed with big banks by underscoring the collective value proposition exceptional service and incentivized banking platforms. Business lending however has proven challenging as big banks have traditionally defined this all-important segment. In recent years progressive credit unions have seized lending opportunities in hopes of finally leveling the playing field. The current state of business lending for credit unions is strong said President of Biz Lending and Insurance Center Inc. Murray Halperin who has 20-years industry experience. With the economy picking up there seems to be ample opportunity in most markets. The return of big banks to small business lending further threatens CUs with their MBL programs because big banks are investing heavily in upgrading their small business loan process with the technological innovations that increase the speed and need for such lending products. explained Zalman Vitenson CEO at Integrate Financial a finance and technology company based in San Diego California. Lack of ABL lending practices technology and lengthy underwriting process to obtain small business loans at CUs are often large deterrents for their business members which have influenced the movement in higher credit-quality members choosing other lending options. On the other hand according to NSBA s Small Business Access to Capital Survey which polled 300 small businesses in May 2012 the once dismal outlook on small-business financing has changed in light of last year s Jobs Act. More than 19 percent of respondents were prompted to seek outside investors to further grow respective business models. This growing trend represents lending opportunities for forward-looking credit unions. Where Credit Union Business Lending Went Wrong While the Great Recession impacted all financial institutions ability to lend credit unions have long struggled to compete for market lending share. In August 1998 President William Jefferson Clinton gave a boost to the industry when he signed into law the Credit Union Membership Access Act (H.R. 1151). This move amended the Federal Credit Union Act (signed into law in 1934) that constricted certain lending opportunities for credit unions. In the forthcoming years--late 1990s to the 2000s--many credit unions across the nation--big and small--entered the small business lending market in growing numbers. There were certain credit unions that experienced success but others failed miserably. The most recent and highly publicized example is Telesis Community Credit Union which was forced into conservatorship with the National Credit Union Administration (NCUA) appointed as its conservator. At the end-of-year 2011 Dr. Keith Leggett vice president and senior economist at the American Bankers Association noted that the state-chartered federally insured credit union headquartered in Chatsworth Calif. reported that 12.24 percent of its loans were 60 days or more past due with total delinquent loans totaling 29.8 million. Telesis Community Credit Union is not the only example as Texans Credit Union was also placed into conservatorship by the NCUA after it went into the red to the tune of roughly 60 million resulting from countless failed commercial real estate loans. Both organizations were among an approximate 120 credit unions that NCUA exempted from the industry standard of a 12.25 percent lending limit of assets in business loans larger than 50 000. 8 Credit Union BUSINESS July 2013 BUSINESS LENDINg This is a big issue especially for small credit unions because we can only loan based on a percentage of our capitol said Linda Pettit President and CEO of the 90-million Ontario Calif.based Cal Center Credit Union that serves an approximate 1 700 members. The regulatory oversight makes it hard to support even small business loans and we would like the opportunity to participate in more business loans. small Business Loans in High Demand According to NSBA s 2012 Small Business Access to Capital Survey 43 percent of small-business respondents reported that they were not able to secure suitable financing to underwrite business needs over the last four years. This resulted in push back with 32 percent of business owners reducing employee rosters and 20 percent reducing employee benefits. Making matters worse 29 percent of small-business respondents said that loans and lines of credit were reduced over the same time period. Approximately one in 10 of these business owners had their loans or lines of credit revoked by the lending institution with less than 15 days notice. With the average balance on a loan or line of credit at 256 060 the two-week time frame has sullied these financial institutions reputation and many report never having received a reason for the loan call back. One of the main stumbling blocks to a balanced business lending portfolio is not having the expertise or an effective sales team. For the small credit union it is almost impossible to find room in their budget or time in their day to develop a program said Halperin. Add in the increased risks associated with business lending and you ll know why most small credit unions do not offer it. While many medium sized credit unions have business lending policies and procedures in place the majority of them have yet to underwrite a single loan. I think the reasons are basically the same as with the small credit union budget staffing and being too busy taking care of current business to divert resources into building a lending program said Halperin. Many large credit unions have built active and very robust programs. Most of their focus is on making commercial real estate loans. Small-to-mid-sized credit unions that look to compete with regional big bank branches by acquiring member business lending accounts must tap into the cooperative ethos of the industry by partnering with third parties explained Zalman Vitenson Integrate Financial CEO. My suggestion for credit unions is to enter the field one step at a time. For example first start off with a depository relation then partner up with other ABL lenders for responsible lending products which allows them to maintain the member relationship while examining and testing the portfolio said Vitenson. Raising the Business Loan Cap As Pettit pointed out without a restructuring on the credit union loan cap her hands as well as those of other credit union CEOs are tied. The issue of capped lending hasn t fallen on deaf ears as Representative Paul Kanjorski (D-PA) sponsored the America s Small Businesses Act of 2009 which would again amend the Federal Credit Union Act and increase the lending maximum of an insured credit union (excluding those made to non-profit religious organizations) to 25 percent of the credit union s total assets. Unless Congress raises the cap some credit unions might actually be forced to slow down their lending and place more loans with small business association (SBA) or other government sources that provide a guarantee said Halperin. Competition for SBA loans especially 7(a) loans is fierce because of the profit potential by selling the guarantee portion. The bill which gained bipartisan support from 127 cosponsors would increase the maximum total extension of a credit union from 50 000 to 250 000 before any extension of credit shall be considered a member business loan. While this is potentially good news for all credit unions the bill has stalled on Capitol Hill. When it was first reported I was excited as it is important for our members and our industry said Pettit. But with healthcare reform tax reform immigration and other national issues it looks to be on the back burner for now. While the bill languishes in Washington the NCUA did take a proactive measure in late June by increasing lending the limit for eligible state-chartered federal credit unions to 100 percent of net worth. It is too soon to determine if this measure will benefit all credit unions and be deemed an effective lend ratio risk model. July 2013 Credit Union BUSINESS 9 BUSINESS LENDINg The next step includes the credit union partnering with third parties for treasury services technology platforms--including payments merchant processing reporting and accounting--as well as other value added services such as lockbox trust estate retirement healthcare and insurance. When asked if partnering with companies that have ABL or commercial lending experience is beneficial for credit unions Vitenson said that was a loaded question. He suggested that credit unions first hire industry professionals (i.e. consultants) or work with companies that already have this niche know-how. It is important to try to bypass legacy systems and concentrate on next generation systems which also requires expertise. For Pettit and Cal Center Credit Union partnering with a third party is essential to ensuring that certain loans are approved. For micro business loans we use the consumer platform but for larger loans we look to partner with other credit unions or outside companies to underwrite the loans she said. Credit unions need to have a robust business lending and deposit program to create enough revenue to support the people that would be needed to serve underwriting booking closing monitoring and servicing systems said Halperin employees. These business owners pay 44 percent of total U.S. private payroll and have generated 64 percent of net new jobs over the past 15 years. We need more ability to give entrepreneurs loans as these employers are responsible for hundreds of thousands of job nationally said Pettit. By providing more secured loans credit unions can generate more business. Members Business Lending LLC which serves credit unions nationwide with assets of 40 million to over 4 billion is one CUSO that gets it right . MBL whose motto is serving the underserved offers participating credit unions access to a commercial SBA department that covers all aspects of commercial SBA lending. MBL also maintains strategic relationships that allow credit unions access to state-of-the-art turnkey technology solutions. It is important to test the initial credit and operational systems which is easier to do with a partner that can help design and monitor a program so that the credit union does not have to bear unnecessary risk in the initial phases said Vitenson. The Credit Union Business Lending Value Proposition With lending caps firmly in place credit unions eager to capitalize on lending opportunities have to look at alternative methods. For example a credit union service organization (CUSO) with advanced technologies and a well-staffed team can serve as a reliable partner when underwriting larger loans explained Halperin who noted that NCUA s recent lending announcement stipulates that CUSO originated loans are separate entities and can t be attributed to loan owners (e.g. credit unions). Credit unions need to have a robust business lending and deposit program to create enough revenue to support the people that would be needed to serve underwriting booking closing monitoring and servicing systems said Halperin. This is one of the main reasons why it is so difficult to compete with the large banks that have these systems in place the people to support them and the sales staff to service their most productive business accounts. Credit unions that partner with CUSO to underwrite loans have a significant upswing potential because the market is rife with opportunity. According to Small Business Association American small businesses represent 99.7 percent of all employer firms and employ over half of all private sector To Build Buy or Partner What remains clear is that in order to not just survive but thrive in the post-Great Recession market credit unions have to gain business lending market share. For smaller credit union such as Cal Center Credit Union partnering with a proven CUSO like MBL is advisable. This buy approach is not always right for the mid-to-large credit union that are often best served building an in-house lending platform. 10 Credit Union BUSINESS July 2013 BUSINESS LENDINg I believe all credit unions should start out very slowly with a defined product niche that is easily managed and supported. I recommend they begin by partnering with a firm or CUSO that has the expertise to help them make good decisions in finding the right loans that will be easy to service said Halperin. There is an old adage that works well in this industry you can never have too many eyes looking at a deal. If a credit union is using a CUSO or an outside underwriter as its exclusive source for underwriting I recommend they find a third party to periodically or annually review a sample of the loans approved by the source. In order to maintain a sound portfolio and rating system a credit union should also have multiple sources conducting annual reviews. Every credit union should think the process through with an experienced advisor. Try not to develop a program on the cheap said Halperin. Doing so usually creates problems all through the system that ultimately become very expensive to fix. For Pettit and the credit union colleagues she often confers with there is a growing demand for small business loans in the alternative-lending marketplace. And well-positioned credit unions that partner with trusted third party underwriters can gain market share although the lessons learned from Telesis Community Credit Union and Texans Credit Union are not soon forgotten. Since the recession there are a lot of smart talented people looking to start new businesses because they might have lost their jobs. These are often small mom and pop businesses but the generate revenue and produce jobs said Pettit. The problem is that there are many credit unions that have already reached their lending cap so it becomes essential to partner with successful 3rd party ABL lenders and underwriters. Patrick Hoss is the Founder and Acting President of BaseInsight a Financial Technology Company that provides a disruptive web-based platform for Alternative Risk and Credit Management System Data Repository Predictive Analytics and Scoring Solutions to the Financial Institutions. Hoss serves as an Advisory Board Member at SDSU Entrepreneurship Society as well as a Business Consultant and Instructor at SDBC. July 2013 Credit Union BUSINESS 11 MArkETINg MATTErS The Four keys of Client retention your growth Depends on reducing your attrition rate By Tony Rizzo running in place It is hard to grow at this rate of member loss. Imagine how much growth you could achieve if your marketing efforts cut attrition rate in half you d be a star Employing a retention plan may be the easiest way to get results from your marketing. The trick lies in knowing where to begin. I f you re in marketing you probably spend most of your time finding new and creative ways of acquiring clients and cross-selling existing relationships and too little time on reducing client churn. Perhaps it s because you don t know how or where to begin. Or maybe you ve fallen victim to that too much other stuff to do excuse. But it s not a difficult marketing challenge and paying attention to member retention yields significant benefits. In order to help focus your retention efforts it s worthwhile to confirm the depth and breadth of the profit risk associated with attrition. While many studies have been conducted the most noteworthy is the Celent Communications study from a few years back. It states that the average financial institution loses 14.6% of their clients each year. Again this percentage is only an average and we ve seen institutional attrition rates exceed 20%. Let s put this into context. In order for your bank or credit union to grow by even one dollar with a 20% attrition rate your sales must increase enough to first replace all of your lost clients--along with their profits--just to maintain status quo. That means you re expending a great deal of effort just to get back to where you began. You ll have to exert far greater effort to actually grow your business. While there will always be a need for new member growth and cross selling getting a handle on your attrition problem significantly changes the metrics of how marketing can drive profit growth. You can boost your personal worth and bring corporate-wide value by placing managing member retention at the core of marketing--it s that important. Think of attrition as a leaky bucket. You pour new members in the top and lose almost as many out the bottom. Talk about 12 Credit Union BUSINESS The Four Keys to success with Retention There are four fundamental keys to every successful program and you leave any one of them out at your own peril. While we shall discuss each component in detail the four keys are as follows 1. Identification of TOP Clients 2. Reaching Out 3. Cross-Selling 4. Tracking Results While this may not be a sexy list each component is essential to establishing a thoughtful retention program. How you attack each element may differ but you must explore a strategy that includes each element. 1. identification of tOP Clients Our research has shown that only a few hundred relationships provide most of the profit for the average financial institution. Amazing huh You have tens of thousands of accounts and households yet only a few hundred relationships make most of your profit. It is true. Retain this group of high-value relationships--at their dramatically higher rates--and watch as heads turn. In combing through our research we found a few startling numbers. For example high-value relationships each bring about 7 500 in profit at financial institutions with roughly 400 July 2013 MArkETINg MATTErS Million in assets. The larger your institution is the more this dollar amount grows. Conversely the dollar amount shrinks as your organization s assets decline. Your institutional style or focus of impacts this number as well. A credit union s average profit per TOP member will be lower than the TOP clients at a commercial bank which means losing key clients has a greater impact at smaller institutions. Further research advances the case even further. Identifying these relationships at your institution is a critical first step. As you compile your top member list remember that it should not be an account level report of highest balance accounts. Identifying relationships that deliver most of your profit starts when you synthesize your accounts into households (or rooftops) because you ll quickly discover that most of your top clients have multiple accounts with you. Those top clients who do not have multiple accounts are at greatest risk of leaving your institution. Many financial institutions perform householding and profitability analysis using an MCIF software program or a service that outsources the MCIF data mining and analysis for them. Surprisingly less than 25% of all financial institutions use an MCIF program in either of these ways. Are you beginning to understand why there is such large attrition at credit unions Once you have performed householding calculated profitability at the account level and rolled up all accounts held in every household simple reporting will spotlight your highvalue clients. And once you know who they are you can reach out to them for the next step. assume you have 300 TOP relationships that need to be called by three top executives and two branch managers. Divide the 300 by five and each officer only has 60 calls to make each quarter. That s just 20 calls per month. Remember these are your TOP relationships. Your senior management should have a vested interest in personally knowing these folks. If they don t carefully explain the profit risk these members represent. Once they understand how valuable these TOP clients are I m sure your key officers will gladly participate in this worthwhile calling program. When they call make sure your management callers tell your TOP members how important their relationship is to your credit union and be sure they say thank you during their conversation. One of our clients embraced this idea several years ago and found that the attrition rate among their TOP members dropped to below 2% annually and deposits within this group increased over 35%. Phone calling TOP clients is a simple yet extremely effective idea. Try it. Could you call all of your clients Perhaps although it s unlikely that senior management could or should undertake this effort. But the rest of your team can and if customer service is your market differentiator calling members is a good idea and a perfect way to reinforce your customer service message. Reaching out with special offers to your high-value clients is also worthwhile. We have seen especially high response rates on targeted direct mail offers to clients who have been made to feel appreciated. Which leads us to step three cross-selling. 2. reaching Out There are a variety of worthwhile ways to reach out to your TOP clients as well as at risk relationships. We will break these down into three categories top clients onboarding and reboarding. By using these three methods your attrition rate will decrease measurably. And in marketing we measure everything right ReACHinG OUT TO TOP CLienTs The best way to reach out to your TOP clients is to call them. Crazy idea huh If you have only a few hundred relationships on your TOP client list you can spread the phone call responsibility among the top officers at your institution. Let s 3. Cross-selling The third step in a sound retention program includes a serious cross-selling effort. But how you approach your clients when you reach out to them and what you offer them are important factors. Two important techniques are described below. The great thing about both techniques is that they are highly trackable. We love measuring marketing campaigns it proves that marketing generates results and results matter. OnBOARDinG Onboarding is a marketing phrase for new account cross-selling. Did you know that 30-40 percent of all new relationships will leave your institution within the first year of joining Think about this for a moment you spend a great deal of time and money July 2013 Credit Union BUSINESS 13 MArkETINg MATTErS adding to your stable of satisfied clients each year yet 30-40% of them will leave you in the first 12 months. This is an area of attrition that you must address Hello onboarding New account cross-selling--or onboarding--is the method that allows you to cross-sell more product to your newest relationships while improving the retention rate of these hard-won clients. Sound good That s because it s effective. New relationships are particularly open to new product offers during their first 180 days. Because attrition rates are highest among your newest clients it is important that you introduce them to other new products as soon as possible. By adding even just one more account dramatically reduces the likelihood that a client will leave and in terms of profitability having multiple accounts makes them more valuable. How do you set up an onboarding program Using direct mail offer some new product every month. More sophisticated programs analyze each new client s life-stage demographics and their original product and use that information to set up a sophisticated matrix of offers. Each offer uses a creative array of variable data elements to design a more personal mailing. Going this extra mile will dramatically improve the response rate of your onboarding program. Re-BOARDinG In the same fashion as onboarding re-boarding looks at existing members with only one account. These clients have a 50 percent retention probability. Offering different products to these clients using the same matrix discussed for onboarding is an effective technique to use to re-engage existing at risk relationships. On average 30% of existing relationships held by financial institutions have only one account in the household. Targeted attention to these clients will do wonders in reducing attrition rates. Re-boarding is one more technique that works in fighting customer churn. No CEO wants to pull back on marketing efforts that delivers real provable revenue and profit growth. Most institutions treat marketing as a cost center when they offer no tangible proof of results. Since marketers know they hold the keys to growth they simply have to prove it. If your senior management isn t seeing the results you deliver start tracking and showcase your proof Tracking retention requires the same attention. After learning what your current attrition rate is implement these four key steps and watch your retention rates rise. By tracking the results you will be able to show what you did and how it worked. Then watch management cheer. Reducing your financial institution s attrition rates makes it dramatically easier to grow bank revenues. Developing and executing Your Own Retention Plan This article is about having a successful retention plan. How can you implement a retention strategy that will positively impact the loyalty of your existing relationships Here are the four keys elements to get you started 1. Identify your TOP clients 2. Reach out to them 3. Cross-sell new and at risk clients aggressively 4. Track everything Client retention is not nearly as sexy as acquiring hundreds of new clients every year yet it is as important--if not more important--to your financial institution s growth. A good deal of research has shown that it is eight to ten times less expensive and more successful to retain existing clients through crossselling than it is to acquire new ones. That s an excellent starting point for any marketer especially when your budget is limited. Embrace your own retention strategy. You can t do anything more valuable or provable for your organization. Your institution s growth depends on reducing your attrition rate. Tony Rizzo is the general manager and creative director of MARQUIS Software Solutions. MARQUIS is the largest provider of MCIF CRM solutions to credit unions worldwide with a long-standing reputation for excellence. 4. tracking results Everything in marketing must be measured especially direct mail campaigns and retention efforts. Management trims marketing budgets in tough times but those budgets are harder to cut when marketing has delivered real measurable results. 14 Credit Union BUSINESS July 2013 CU CONTENT profit it s a beautiful credit union thing T By Laura Enock I ve worked for three credit unions in the past twenty two years Graham says and whenever something changes both employees and members express concern that we may be turning into a bank. However Graham and her team knew that in order for the credit union to make pricing decisions that would benefit the entire cooperative they had to understand where the true revenue was coming from. After a lot of data mining and numbers crunching-- loading information into the system took the better part of a year and was a joint project between marketing and finance-- the credit union concluded that in the simplest terms the more a member used the credit union s products and services the more profitable they were regardless of age income or length of membership. Likewise members who used Desert Schools modestly--perhaps just a small savings account--provided negative value to Desert Schools and those same members received very little benefit in return. Once defined it s a pretty simple concept as in any winwin situation the more services a member uses the more profit they bring to the credit union. Simultaneously the more services a member uses the more value he or she gets from the credit union. What s best for the credit union is not surprisingly best for the member too. Desert Schools FCU now has the data to support this claim. CUNA takes all your data fees rates etc. and does a comparative analysis of banking institutions in your area says Graham. The value of being a member is x but the more a member uses the credit union the more value they get back by using our products and services. All well and good but how do you communicate this message internally to get employees to buy into something that sounds on the surface so very bank-like To overcome that challenge Desert Schools CU created a script with the help of their ad agency and called the concept Credit Union BUSINESS 15 he word profit alone is enough to make many credit union executives scramble to explain that credit unions are NOT for profit they always put members before numbers. However the reality in today s world is that if you re not focused on your credit union as a business you cannot take survival for granted. After all that s why you read Credit Union Business right Cathy Graham VP of Marketing at Desert Schools Federal Credit Union had doubts about bringing profit into the marketing picture until the recession forced DSFCU to work smarter and become a leaner business. The credit union s MCIF system had the capacity to track this kind of information but it simply hadn t been a priority. 2008 s financial crisis made it priority one. In July of 2011 Desert Schools completed a membership profitability analysis to determine which members were profitable which were unprofitable what factors lead to profitability and what factors had no bearing on profitability. Cathy Graham VP of Marketing at Desert Schools Federal Credit Union July 2013 CU CONTENT Member Relationship Value . Member Relationship Value uses simple language to explain how members with only savings accounts don t get much value from their membership and represent a loss to the credit union. Members using more CU services bring more value and get more value back. It s a real credit union way to look at profitability. Once we understood it this way it felt like our culture Graham says. We could use this information to reinforce a sales culture because it represented something that s good for members. For the first time the credit union reviewed members with just savings accounts. What a missed opportunity These are members who are not getting as much value as they could. It was a huge turning point for the organization. By this time Desert Schools FCU had developed a simple mantra one more solution. It doesn t matter what it is Graham explains. Getting one more solution into the hands of our members helps them while helping the credit union. As a result of this new focus employee buy-in and an incentive program the number of services per household has increased and employees have begun to feel more confident about selling members additional products knowing that it fits in with the credit union s creed since it also helps members. As part of launching this new approach Desert Schools FCU created a 7-minute video which was introduced to every branch and used at senior management discussions with employees. Our people felt it made sense Graham says. It told a story and was not so much numbers driven. Sure there were some long-term employees that didn t like the idea of analyzing member relationships for profitability and it took them a while to turnaround. We weren t focused on numbers though Graham explains. We re rewarding enhanced member relationships. Today their new business philosophy is second nature to most employees because the credit union put programs in place to reinforce the message. For example there is now an employee incentive plan. Many credit unions struggle with this but it s working well for Desert Schools FCU. The amount of incentive an employee receives is proportional to what the credit union gets and employees know the revenue for each product. Financial results are shared with employees on a monthly basis. There are incentives for tellers MSRs managers assistant mangers anyone likely to directly impact members. Senior management has different incentive plans that are mostly tied to the organization s overall performance. The credit union used their IT staff to build an incentive plan tracking system in-house. Employees now know how much sales revenue they re generating which is a powerful motivator for them as employees. Starting in the next few weeks Desert Schools will be communicating the value approach to members. The credit union has an updated study from CUNA and is looking at testimonials from members who have saved money by adding 16 Credit Union BUSINESS July 2013 THAT S THE A L WE DO WHAT IT LIED ADVANT AGE. TAKES. [Wha tever it is] The Allied Advantage means unparalleled service for credit unions. From risk management to consumer lending we provide solutions that put you in control. Solutions that give you more opportunities to deliver precisely what your members need.We re ready to apply our expertise and enthusiasm to help you attain your goals. That s the Allied Advantage. For more information visit or call 866.633.1480. W W W. A L L I E D S O L U T I O N S . N E T CU CONTENT We have to acknowledge that there are roles that more directly impact what we re doing. You can t say it s going to be absolutely fair across the organization or we wouldn t be able to have incentives for anyone. Cathy Graham H new products. DSFCU is hoping to feature member success stories in their auto loan promotions. One member for example had a 13% loan that Desert Schools FCU refinanced at 3.5%. as the incentive program met with any resistance You ll always have some negativity around this kind of thing says Graham. We have to acknowledge that there are roles that more directly impact what we re doing. You can t say it s going to be absolutely fair across the organization or we wouldn t be able to have incentives for anyone. If someone that s not eligible for an incentive complains that person is offered work in a job that s part of the incentive program. More often than not however people who work non-sales jobs prefer to keep it that way. While the board asked challenging questions basically everyone at the credit union is happy with the new business approach. It s proved that an 18-year old can actually be a valuable member while a member who s making 400 000 a year but who only has a small savings account at the CU brings neither value to himself nor profitability to the credit union. Graham s advice to credit unions is to make profitability a priority. She also cautions those credit unions looking to focus more on profitability should first carefully analyze and scrutinize data warning them not to take any initial information and run with it. We found several errors in the data after the initial analysis was completed Graham says. Do some quality control on the data and make sure you understand it before you share it with everyone. You don t want to present a report and have to retract it a month later. Today employees at Desert Schools FCU understand that when they are recommending products and services to members they re not just selling they re providing direct value to members as well as to the CU. That s profitability seamlessly merged with the credit union message something Dessert Schools FCU has been able to accomplish. Is your credit union ready to take that step 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. 18 Credit Union BUSINESS July 2013 CFO CUrrENCY Commercial Mortgage-Backed Securities as legal credit union investments hat are Commercial Mortgage-Backed Securities (CMBS) Commercial mortgage-backed securities (CMBS) are bonds collateralized by mortgages on income-producing properties such as retail centers office properties health care facilities industrial properties multifamily dwellings and hotels. CMBS pools are diversified by geography property sector loan size and tenants. Commercial loans that were originated either to finance a commercial purchase or to refinance a prior mortgage obligation are the basic building blocks of the CMBS structure. The mortgage payments of these loans are dependent on the rental stream paid by the tenants to the property owners. These payments back the CMBS. W By Emily Mor Hollis CFA Partner which resulted in changes to securitization legal structures at the bond level changes to securitization subordination levels and changes to other business terms. By 2011 issuance topped 30 billion for the year. During the first seven weeks of 2013 seven new deals have been issued for a total of 9 billion. Credit enhancements Conduit CMBS deal structures are less complex compared with their cousin residential mortgage-backed securities (RMBS). The deals are sequentially oriented in terms of pay downs. Sequentially structured means that principal pay downs are directed to a series of defined sequential classes with all principal payments directed to the first class until it matures the second until it matures and so on until all the mortgages are paid off. Commercial mortgage loan trusts are bankruptcy-remote CMBs structures which means the lender looks to the proceeds from the sale of CMBS structures can be classified in three categories the property for repayment not the borrower if interest and LegacyconduitCMBS(thoseissuedpriorto2008) principal payments are not satisfied. That said each property ConduitCMBS2.0 3.0 CMBSissuedbygovernment-sponsoredagencies(GSE) is viewed by the administrator as a stand-alone business and is subject to credit risk evaluations. The overall rating of CMBS securities is dependent on each class s level of subordination. non Agency CMBs The first two categories are non-government-sponsored agency To have AAA rated classes there must be sufficient credit CMBS. In this sector there was more than 230 billion of CMBS support (typically greater than 25 percent for legacy and 30 issuance in 2007. But due to the credit crisis and the collapse percent for 2.0 3.0 structures) from lower-rated classes to of the secondary markets issuance was almost non-existent in absorb losses on the underlying collateral. Credit review of the underlying loans is very important 2008 and 2009. Then there appeared CMBS 2.0 issuance in especially loan-to-values (LTV) of the underlying commercial 2010 and CMBS 3.0 issuance in 2011. Basically CMBS 2.0 3.0 means issuance with lessons learned from the credit crisis properties the debt-service coverage ratio (DSCR) and the debt yield. July 2013 Credit Union BUSINESS 19 CFO CUrrENCY Agency CMBs Following the sharp decline of the conduit CMBS market the GSEs Fannie Mae Freddie Mac and Ginnie Mae have played an increasingly important role in the CMBS market. Agency CMBS issuance has surged with 11 billion in structured transactions in 2009 and 26 billion in 2010. Agency CMBS products fall in the four major securitization programs GinnieMaeProjectLoanREMICs FannieMaeMultifamilyDUSMBS DUSMegas and DUS REMICs FreddieMacMultifamilyK-Deals and SmallBusinessAdministration(SBA)Programs including SBA 7(a) Pools SBA DCPCs (CDC 504) and SBIC Debentures. Fannie Mae Delegated Underwriting and Servicing (DUS) loans and Ginnie Mae project loans can trade individually and each loan is insured for principal and interest in the event of default. In contrast Freddie Mac multifamily mortgages do not trade individually in the secondary market and are not individually insured. Instead Freddie Mac wraps the senior bonds in deals backed by multifamily loans from its portfolio. Each agency offers structured transactions which pool and redistribute the cash flows of several loans. Fannie Mae Alternative Credit Enhancement Securities (ACES) and Ginnie Mae REMICs are sequential securitizations incorporating interest-only Z floater and inverse floater tranches. Freddie Mae K-Deals are structured similarly to conduit CMBS. The senior bonds receive credit enhancement both from subordination and a Freddie Mae guarantee while the mezzanine bonds only receive credit enhancement from subordination. Thesecuritymeetsthedefinitionofmortgage-related security as defined in 15 U.S.C. 78c(a)(41) and the definition of commercial mortgage-related security as defined in section 703.2 Thesecurity sunderlyingpoolofloanscontainsmore than 50 loans with no one loan representing more than 10 percent of the pool and Theaggregatetotalofcommercialmortgage-related securities purchased by the federal credit union does not exceed 25 percent of its net worth unless authorized under section 703.20 or as otherwise provided in this subparagraph. CMBs as investments One important difference that sets CMBS apart from RMBS is the existence of strong call protection provisions for the underlying loans which curb voluntary prepayments and provide a cushion to the undesirable negative convexity that is generally present in RMBS. Most commercial loans have severe prepayment penalties making prepayment predictions somewhat more predictable. Thus there is little variability in average life. During the credit crisis five-year average-life AAA-rated CMBS were yielding more than 1400 basis points over the fiveyear swap rate which was approximately 15 percent to 18 percent. Now securities of this type are yielding 1.50 percent or 1.75 percent. Some of the highest-quality 2007 vintage bonds have dollar prices approaching 120. Originated in the 1980s issuances have dramatically grown in dollar amounts and frequency. CMBS structures can have good relative performance versus competing asset classes. Agency CMBS provide many of the benefits of conduit CMBS with an explicit or implicit government guarantee of principal and interest in the event of default. Given the slowdown in conduit issuance during the credit crisis these securities are hard to find. On the other hand Agency CMBS is most likely where good relative value securities can be had. Emily Mor Hollis CFA is a partner with ALM First Financial Advisors LLC. Regulatory Restrictions According to section 703.14 (j) a federal credit union can invest in CMBS permitted by Section 107(7)(E) of the Act and pursuant to Section 107(15)(B) of the Act a CMBS of an issuer other than a government-sponsored enterprise enumerated in Section 107(7)(E) of the Act provided the following Thefederalcreditunionconductsanddocumentsa credit analysis that reasonably concludes the CMBS is at least investment grade 1 The DSCR is the cash flow (net operating income or net cash flow) divided by the debt service (e.g. principal interest). The LTV is the ratio between the principal amount of the mortgage balance and the appraised value of the underlying property. The debt yield is the yield of the mortgage balance. 20 Credit Union BUSINESS July 2013 CFO CUrrENCY 2 (41) The term mortgage-related security means a security that meets standards of credit-worthiness as established by the Commission and either (A) represents ownership of one or more promissory notes or certificates of interest or participation in such notes... which notes (i) are directly secured by a first lien on a single parcel of real estate including stock allocated to a dwelling unit in a residential cooperative housing corporation upon which is located a dwelling or mixed residential and commercial structure on a residential manufactured home as defined in section 5402(6) of title 42 whether such manufactured home is considered real or personal property under the laws of the State in which it is to be located or on one or more parcels of real estate upon which is located one or more commercial structures and The regulations also state that under section 703.20 A federal credit union that has received a composite CAMEL rating of 1 or 2 for the last two (2) full examinations and maintained a net worth classification of well capitalized under part 702 of this chapter for the six (6) immediately preceding quarters or if subject to a risk-based net worth (RBNW) requirement under part 702 of this chapter has remained well capitalized for the six (6) immediately preceding quarters after applying the applicable RBNW requirement may hold private label CMBS in an aggregate amount not to exceed 50% of its net worth. Commercial mortgage-related security means a mortgage-related security except that it is collateralized entirely by commercial real estate such as a warehouse or office building or a multi-family dwelling consisting of more than four units. 4 3 July 2013 Credit Union BUSINESS 21 CU MONEY breathe life into your Investment portfolio C By Tom Telford embracing a more comprehensive view of institutional asset management. Institutional asset management impacts a narrow group of assets on a Credit Union s balance sheet. This list of assets specifically includes those that are considered as permissible or otherwise impermissible investments. Permissible investments include those in which Credit Unions traditionally invest that don t adhere to special consideration as outlined in NCUA 701.19. Following NCUA 703.13-14 permissible investment options include certificates of deposit government treasuries and various bonds. It is important for Credit Unions to understand that there are other investment options outside of those common permissible investments. These otherwise impermissible investments fall under the auspices of NCUA 701.19 which allows a Credit Union to reallocate its permissible investment dollars or cash into alternative investments provided that the future earnings of those investments have been dedicated to offsetting the Credit Union s current and future employee benefit obligations. These obligations could include medical insurance premiums 401(k) employer-match contributions 457(f) and 457(b) plans and any other employee benefit plan types. redit Unions will continue being forced to become more creative for the foreseeable future as the interest rate environment and low loan volume continues to impede margins and growth. Current investment assets are one area that Credit Unions are beginning to examine more closely. For most organizations asset balances are growing while yield performance is in decline. Many Credit Unions don t have the time or expertise to manage these assets so that they perform in a way that positively impacts their bottom line. Most CFOs spend the bulk of their time overseeing accounting and other operational divisions and don t have the time or expertise to manage their Credit Union s multi-million dollar portfolios. As a result a growing percentage of Credit Unions are partnering with firms that are experts in either permissible or otherwise impermissible investment management. These firms comprise teams of asset managers analysts and risk mitigation and regulatory experts. Some of these firms manage tens of billions of dollars of non-profit organization assets. Being able to take advantage of outside knowledge and management structures with the goal of enhancing net interest margins and profitability an increasing number of management teams are 22 Credit Union BUSINESS July 2013 COMPLIANT ARE YOUR E XECUTIVE BENEFITS We Work to Ensure Compliance with State and Federal Regulations. BFB specializes in executive benefits for Credit Unions. Our knowledge of ever-changing regulations will allow you to rest easy knowing your plans have been designed to be compliant and defensible... and our ongoing support will ensure they stay that way. Contact us today to find out how your organization can BENEFIT FOCUS FRO M OUR 888-494-8911 tquigley CU MONEY Options for otherwise impermissible investments generally fall into two categories. The first is the purchase of insurance related products. For example many Credit Unions are utilizing institutional-priced life insurance as an option for an otherwise impermissible investment. The second category is non-insurance investment. This option could include the blending of low-tomoderate-risk and institutionally priced mutual fund portfolios. Credit Unions are understandably focused on yield performance and increasing earnings in their investment portfolios. However giving careful consideration to NCUA Letter No. 10-CU-18 regarding investment due diligence is critical in determining the risk adjusted portfolio design. Not unlike allocating a personal investment portfolio an institutional investment portfolio has similar objectives in terms of maximizing the risk adjusted return potential. Careful assessment of potential investments and planning in regard to risk mitigation and the safety and soundness of any Credit Union should always be a primary concern. By taking advantage of the many investment options available and with careful management of those institutional investments your Credit Union can be sure its investment portfolios are working to strengthen your Credit Union and the members you serve. Tom Telford is Executive Vice President of Burns-Fazzi Brock & Associates. Tom has over 15 years of experience in institutional financial services with expertise in incentive compensation executive benefit plans and institutional investment management. Tom has consulted with and designed plans for multi-million-dollar-generating organizations and multi-billion dollar financial institutions in both the non-profit and for profit sectors. 24 Credit Union BUSINESS July 2013 ThE LENDINg LINE the top gun lending school Celebrates Its First graduating Class T By David L. Tuyo II This new designation is designed to raise our industry s intellectual capital to historic levels. Why is this important Because the core function of every credit union is to promote thrift and provide credit to the marketplace also known as educating and lending money to individuals and businesses. In order to deliver the best value to those we serve our people need to become the elite of the elite in all functional areas. Today s ever-changing globally competitive multi-channel landscape values human capital as the highest of all corporate assets. Our industry is about more than just credit scores and applications we are a people centric business. The best investment we can make with the highest return is an investment in intellectual capital our people. The designation of CLE promotes pride professionalism and trust--key assets to our industry our members and our community. LCSI analyzed over 22 financial certification programs as well as another 20-plus certificate programs for banking and credit unions as they developed their program. They examined many of the strengths and weaknesses in current market offerings to finesse their program creating what they believe will become one of the most sought after designations in the financial services industry. Financial services professionals must survive a rigorous training regimen in order to earn the designation of Certified Lending Expert (CLE) and requires commitment and the desire to be not just the best of the best but the elite of the lending business. In order to earn this designation CLE candidates must attend the University of Lending the Advanced Lending Institute and complete two on-line courses with California Southern University. Participants must pass a final exam after their Advanced Lending Institute coursework to ensure that Credit Union BUSINESS 25 op Gun a movie filmed in 1986 brought national attention to the United States of America s Strike Fighter Tactics Instructor Program. The Paramount movie focused on the top one percent of the top one percent of all naval aviators and how they were trained to become the best of the best. This elite class of graduates was put through some of the most rigorous military training ever offered in order to create the most advanced pilots. A new class of elite professionals has been put through a similarly stringent process in the financial services industry. The best of the best are recognized in each discipline within the financial services industry including specialists in accounting finance human resources sales and technology. One such example is Certified Public Accountant or CPA a title earned through the hard work and commitment of professional schooling. Lending is one key area that has been neglected in our business and until recently very little professional training and no degree certification programs were available. Lending Solutions Consulting Inc. (LSCI) has partnered with California Southern University to offer an industry best of the best training program leading to the professional designation of Certified Lending Expert (CLE). This structured program offers an education focused on balancing undergraduate and graduate level coursework that is designed to limit the knowing-doing gap maintain and update professional knowledge and teach standards of practice with a defined code of ethics. Rex Johnson Credit Union Hall of Famer and LSCI President described the program as the most significant strategic investment in industry human capital since the University of Lending was created nearly twenty years ago. The financial services industry has never had a designation like this before. July 2013 ThE LENDINg LINE they thoroughly understand the curriculum. In order to keep their skills sharp and retain the right to use the CLE designation recipients are required to undergo continuing education every two years. Online opportunities exist to satisfy ongoing education when travel is not possible during any two-year time frame. select group of 28 industry professionals has completed the first step in earning their Certified Lending Expert (CLE) designation after attending the inaugural Advanced Lending Institute held in Crystal Lake Illinois. The participants ranged from loan officers and lending executives to Credit Union Presidents and Chief Executive Officers and came from all over the country including Alaska. Their sponsoring credit unions varied in size with assets running from approximately forty-five million to over two billion dollars. The graduates were eager to be part of the first class ever to set a new professional bar for the entire industry. every two years or complete equivalent online coursework at California Southern University. Other education may be submitted for approval in lieu of continuing education requirements. Advanced Lending institute program review The Advanced Lending Institute will focus on the following topics 7 P s People Planning Policies Pricing Pay Practice Performance Review of Topics Covered in University of Lending Courses Standards of Practice and Code of Ethics Financial Shenanigans Lessons from History Asset Liability Management Economics Consumer and Member Business Lending Collections Case Studies A Here is an overview of the CLe program Program Overview CLE Designation requirements In order to earn the Certified Lending Expert (CLE) designation the candidate must perform each of the following and receive confirmation of completion. 1. Attend the University of Lending 2. Attend the week long Advanced Lending Institute Complete two of the following courses (or equivalent) at California Southern University a. Introduction to Banking (undergraduate level) b. Principles of Lending (undergraduate level) c. Lending in Consumer and Corporate Markets (graduate level) d. Management in Banking and Financial Services (graduate level) 3. Agree to and sign the Certified Lending Expert Pillars of Practice and Code of Ethics 4. Satisfy the annual membership requirements Continuing Education requirements To maintain the CLE designation the certified lending expert must attend approved offerings and coursework 26 Credit Union BUSINESS California southern University Coursework online offered Undergraduate Level Coursework introduction to banking This course provides learners with an introduction to the core content knowledge and skills in the field of banking (or credit union operation) and finance. It provides an academic foundation in the areas of financial service transactions customer member services regulations and procedures critical to the financial services industry and identity theft. The assessment structure is practice driven with an application of skills aimed at gaining a basic understanding of the financial services arena. principles of Lending The Principles of Lending course explores the fundamental lending principles currently practiced in the United States. The course serves as a basic overview of lending principles including information on the lending cycle forms of lending the legal and regulatory environment and social responsibility. July 2013 ThE LENDINg LINE Graduate Level Coursework Lending in Consumer and Corporate Markets This course examines the consumer and corporate lending processes. Lending trends and techniques are discussed as well as the lender customer member relationship. This course also addresses the operational and regulatory components pertinent to consumer and corporate lending. The assessment structure will include an emphasis on case studies and problem solving that simulates the work environment and will involve research on issues encountered daily in consumer and corporate lending. Management in banking and Financial Services This course explores the strategic concepts of banking and financial services. This course aims to provide the students with a further understanding in the areas of investments loans capital liabilities liquidity and duration. The focus is on practices within the United States as they function within a global market economy. Once participants have completed the process their title may read Mary Jamison CLE CEO of XY Credit Union or Bob Williams Certified Lending Expert Chief Lending Officer. Earning a CLE designation requires significant time and a serious commitment. It s time professional lenders get the same respect and achieve equal stature with their fellow professionals who have also earned advanced degrees and certification. The CLE designation will set charter holders apart from all other lenders and professionals and will help establish a new standard for professionalism in the CU industry. David L. Tuyo II CIMA CUDE CCE CLE MBA is Vice President of Solutions for LSCI and the founder of the CLE program. July 2013 Credit Union BUSINESS 27 CU TrAININg Q&a ccording to Nielsen media rankings from 2012 eight of the top ten programs were reality shows. Our culture seems to love reality TV because we re fascinated with the inside story of everything and everyone. While there may never be a reality show about credit unions CU leaders can benefit from taking a look at how other credit unions conduct business. This CU Training Q&A is your backstage pass to the training department at Park View Federal Credit Union a 125 million multiple common bond credit union in Harrisonburg VA. PVFCU has 50 full time employees in four branches. We have no full-time training staff but several employees coordinate training part-time. A By Ken Gonyer are always learning something new just to remain competent. While monetary incentives seem to energize our employees interest in learning we don t have to work very hard to get employees interested in training. In fact a lot of the material we offer is in response to staff requests. Non-mandatory class attendance sometimes exceeds fifty percent of the staff. They relish the opportunity to learn more. To help motivated employees who want to move beyond competency we offer a clear self-guided progression plan that defines the learning objectives and coursework required for promotion. We ve linked educational achievements with the employee salary scale and a pay increase is available to those who earn certification as a financial coach or specialist in marketing human resources compliance or lending among others. They must keep their certification up-to-date to keep the wage increase. Smaller cash awards are given when an employee completes a certain number of in-house cross-training courses. CUB What do you hope your training program will accomplish PVFCU We want to give our staff the training resources they need to be able to perform all aspects of their jobs with confidence and skill which means that they need to know all the procedural nuts and bolts of their jobs as well as the policies behind the methodology. By knowing both procedure and policy--the what and whys of their jobs--they ll be ideally prepared to interact with members knowledgeably and efficiently. Beyond the basics we want our staff to get whatever specialized training their positions demand along with continuing education to keep them up-to-date and to make sure our management team gets best practices training in supervision and leadership. We want to create a culture in which employees are constantly growing and learning and whose skills are continually developed and honed. CUB What kind of training are your employees asking for We periodically survey departments looking for training needs to satisfy and find that employees routinely ask for refresher training in the more complex aspects of their jobs and skills training to improve their performance. There is always a great demand for training in new technologies such as in the hardware and software used on the job or in any new electronic service being offered to members. Our staff shows a high level of interest in understanding the whole spectrum of financial services offered by the credit union. While they aren t asking to be cross-trained in every department they CUB how do you get your employees interested in want to have a basic knowledge of all the products services and processes our CU offers. Given the recent economic crisis learning PVFCU One of the key motivators is simply an employee s need they ve also asked to learn how to interpret and understand the to keep up. Anyone working in a financial institution knows credit union s financial ratios performance and management that change is the only constant and that means staff members of assets and liabilities. 28 Credit Union BUSINESS July 2013 CU TrAININg We offer academies that provide intensive classroom training that includes demonstrations practice and role-play. An academy s content is specific detailed and targeted toward complex procedures. They typically last between a half or full day and are team-taught by managers to smaller groups of employees. Intensive one-on-one training works best for teaching basic job skills such as how to use equipment or perform transactions. The learner begins by observing then works side-by-side with a trainer for several days until they are competent enough to work alone. Along with one-on-one training independent study gives employees an ideal opportunity to practice what they ve learned using mock workstations and dummy data. After several practice sessions employee confidence rises and they become more comfortable performing tasks in real work settings. Several times per year we invite outside speakers to address our workforce as part of our in-house training program. These professional trainers present up-to-date material in complex subject areas such as harassment prevention and response the Bank Secrecy Act and disaster preparedness. Online training is another way employees can build their knowledge and skill sets. Web-based courses provide a flexible educational channel that staff can access when and where they choose. This venue works very well for mandated annual training and to fulfill the continuing education requirements necessary for maintaining certification and licensure. The abundance of fresh and relevant content delivered by national experts is one of the major benefits of online training. This year our employees have access to 103 webinars related to regulations and compliance alone. Like many other credit unions we earmark significant funds for conferences and travel and offer college tuition reimbursement. We actively encourage our employees to participate in professional development clubs like Toastmasters International. Involvement in the Toastmasters communication and leadership program has greatly improved the people and presentation skills of our employees while encouraging their overall professionalism. Intensive one-on-one training works best for teaching basic job skills such as how to use equipment or perform transactions. The learner begins by observing then works sideby-side with a trainer for several days until they are competent enough to work alone. CUB What does training look like at PVfCU The majority of our training is done in-house but we also provide staff with access to online education national conferences college classes and professional development clubs. In-house educational options are delivered in a variety of ways including classroom training one-on-one teaching independent study and invited speakers. We offer twelve to fifteen Knowledge Builder classes throughout the year to provide general information about products services processes rules and regulations. Employees from every department are encouraged to participate in these courses. Students must pass a course exam to receive credit toward certificates and cash awards. Co-workers who are experts in the subject matter by virtue of their daily work teach the one-hour Knowledge Builder sessions. A loan officer for example teaches a class on how to read a credit report. This not only ensures that the content is relevant it gives the instructors an opportunity to develop their organizational leadership and presentation skills. The member services staff is expected to teach a Knowledge Builder as part of their progression plan. We offer two-hour workshops that are designed to deliver more material and in-class group work. Workshop subjects include financial coaching improving accuracy and enhancing people skills and are offered once each quarter. Enrollment is voluntary and employees attend with the permission of their supervisor. July 2013 Credit Union BUSINESS 29 CU TrAININg CUB What are some of your biggest training challenges The most challenging aspect of training is keeping up with the ever-changing array of products processes and regulations. We had to develop systems for alerting employees of all upcoming changes and instructing them in how to implement new processes. Additionally we needed to create and maintain goodquality documentation. At PVFCU we use internal newsletters for retail departments marketing etc. along with a weekly tenminute meeting to help keep staff informed of changes. We invest significant time to produce detailed procedure manuals cheat sheets and FAQ resource documents. CUB What kinds of training haven t worked well We ve learned to be highly selective about what outside resources we make available to our employees. Occasionally we ve been disappointed in the cost and quality of some of the educational material we purchased from trade associations and national training organizations. We ve also discovered several ineffective training seminars and conferences. Still doing all of our training in house simply doesn t work. We recognize that we need outside resources and have learned to research available options carefully before investing large amounts of money and staff time. We ve learned to be highly selective about what outside resources we make available to our employees. Occasionally we ve been disappointed in the cost and quality of some of the educational material we purchased from trade associations and national training organizations. different. We d love an invitation to look behind the scenes at your organization If you would like to participate in a future CU Training Q&A contact Ken Gonyer at ken.gonyer 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 CUB What training has worked particularly well Peer-led training has had extraordinary benefits. We ve found recent Train the Trainer workshop. Contact him at www. that the material presented is more relevant when staff experts teach and student response is generally more positive. Because so many employees are involved in our Knowledge Builder classes and co-workers are depending on the teachers to do a good job there is a high degree of ownership in the training. A side benefit of peer-led training is increased collaboration. Staff teachers unite employees from different departments into groups and get them working toward a common goal. As these Benefit your CFO COO CMO groups work together and build relationships they become CCO CLO CIO HRD a team which improves cross-department communication develops camaraderie and boosts morale. With free Monthly E-Newsletters This CU TRAINING Q&A gave you an inside look at the employee training and development efforts of a mid-sized credit Subscribe NOW register union. If your credit union is under 50 million or over 1 billion in asset size your training program may be significantly CEO SubSCriptiOn With Benefits 30 Credit Union BUSINESS July 2013 LEADErShIp Want to Affect positive change in people and Organizations become a transformational leader T By Dr. Sandra L. Torres he most popular of all leadership theories is most likely that of transformational leadership. And the reason why is simple. Transformational leaders have a positive effect on their followers and in turn influence positive change. Transformational leadership was first introduced by James MacGregor Burns an authority in leadership studies in 1978. Originally he discussed the concept of transformational leadership in his descriptive research on political leaders. Later he related the concept to the difficulty in differentiation between management and leadership and claimed that the differences were in characteristics and behaviors. Today transformational leadership is the most coveted of all leadership styles. This is due to the tremendous impact it has on follower motivation and performance. The modern leader is confronted with numerous internal and external challenges. The manner in which a leader deals with these challenges depends on the ability of the leader to make changes through example articulation of an energizing vision and challenging processes. According to Burns the transforming approach creates significant change in the life of people and organizations. It redesigns perceptions and values and changes expectations and aspirations of employees. Leaders who transform are idealized as working towards the benefit of the team organization and or community. Pseudo-Transformational Leadership Transformational leadership can also be negative. Pseudo-transformational leadership has a potential immoral and unethical dimension that can be exploited by unscrupulous leaders. They can inflict grave damage on naive and unsuspecting followers. Certainly we can point to past political leaders that have transformed entire populations by appealing to the values of their followers by offering an inspiring but misleading message. In organizations the pseudo leader is usually described as narcissistic manipulative and self-centered. He inflates his ego at the expense of his employees by sarcastically and at times charismatically expressing lofty goals and unrealistic policies and processes. He succeeds only through a belief in himself rather than a belief in others. This can eventually lead to his downfall and in some cases that of the organization. The pseudo leader shows his employees the path to ruin rather than to betterment. His employees never really become followers. Practices Behaviors and Abilities of Transformational Leaders Leaders are not appointed. They are not selected as heir apparent or are they negotiated as part of a merger or acquisiCredit Union BUSINESS 31 July 2013 LEADErShIp inspire a shared Vision Leaders passionately believe that they can make a difference. They envision the future creating an ideal and unique image of what the organization can become. Through their magnetism and quiet persuasion leaders enlist others in their dreams. They breathe life into their visions and get people to see exciting possibilities for the future. Challenge the Process Leaders search for opportunities to change the status quo. They look for innovative ways to improve the organization. In doing so they experiment and take risks. And because leaders know that risk taking involves mistakes and failures they accept the inevitable disappointments as learning opportunities. enable Others to Act Leaders foster collaboration and build spirited teams. They actively involve others. Leaders understand that mutual respect is what sustains extraordinary efforts they strive to create an atmosphere of trust and human dignity. They strengthen others making each person feel capable and powerful. encourage the heart Accomplishing extraordinary things in organizations is hard work. To keep hope and determination alive leaders recognize contributions that individuals make. In every winning team the members need to share in the rewards of their efforts so leaders celebrate accomplishments. They make people feel like heroes. tion. Leadership is not a position. Leadership is a passion. It is a calling. Leaders emerge. They rise up in times of adversity while others stay seated. Transformational leaders have loyal followers. Many of which follow the leader from one organization to another and if that s not possible they leave and go elsewhere. And why is that The reason is that transformational leaders have certain characteristics and behaviors that attract followers. These are part of the leader s personality. If a leader is not born with these characteristics it is possible to acquire them but this involves a full reformation of one s values and beliefs. Transformational leaders are change agents. They influence the organization s mission and objectives to make way for a brighter future for all concerned. The Leadership Challenge (Kouzes & Posner 2002) describes five leadership behaviors of an exemplary leader. These are synonymous to transformational leadership. They illustrate certain behaviors or an observable set of skills and abilities of transformational leaders. Five Leadership Practices of exemplary Leaders Model the Way Leaders establish principles concerning the way people should be treated and the way goals should be pursued. They create standards of excellence and then set an example for others to follow. They unravel bureaucracy when it impedes action they put up signposts when people are unsure of where to go or how to get there and they create opportunities for victory. 32 Power and integrity Transformational leaders use their power to empower others. They provide followers with the knowledge skills information resources and support to accomplish goals. They use their power and influence to assist others and thus raise the productivity of the organization. People who don t trust their leader do not follow them effectively. Honesty and integrity are essential elements for sustained effectiveness. Without integrity a leader can put her company at Credit Union BUSINESS July 2013 lEADErSHiP LEADErShIp ensure that leaders develop skills in this area. Take this ThanksAuthor speaker leadership consultant exception and use evrisk due to compliance problems human resources issues and giving season to make your workplace the and college professor Miami based lack of effective action dishonesty and communication blocks. ery opportunity to Dr. Torres has researched leadership practices around the demonstrate yourworld. More than 20 years of experience in the credit union Become a Transformational Leader gratitude to your industry has made her an ardent believer and The road to becoming a transformational leader offers many team. practitioner of the credit union philosophy people rewards. Transformational leaders not only transform organiza- helping people. Leadership Si offers bilingual leadership expertise via her tions but also the individuals who will affect change in the orga- Author speaker writings training workshops and speaking leadership nization. The ideal leader acts as a strong role model for others. and engagements. Her proficiency encompasses all areas of leadership MiHe assumes a great deal of responsibility as many followers place consultant however her specialty is women s leadership. Get to know Dr. a great deal of trust in their leader. Therefore this calls for be- ami-based her better by visiting on the web. has researched leadership practices around the world. haviors that engender trust and commitment. To be motivated by TorresShe can be reached directly at drsandi leadership-si. com than 20 807-1681. values and ethics is not easy but it is very fulfilling. More or (305) years of experience in the credit union indusThe Five Practices of Exemplary Leadership are fundamental try has made her an ardent believer and practitioner of the in becoming a bring you success in employee motivation as ed message will transformational leader. Focus on them reflect credit union philosophy people helping people. Leadership upon in building a positive productive workplace. well as them incorporate them and share them with others. By Si offers bilingual leadership expertise via her writings trainmaking them a part of your life--both professionally andof their For many leaders employee appreciation is part person- ing workshops and speaking engagements. Her specialty is ally--you ll others it can be a scarce commodity. in fact many DNA but for follow a proven path toward leadership success. women s leadership. Get to know her better by visiting leadorganizations are offering leadership development training to 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. 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 July 2013 November 2012 Develop great leadership skills. For more information contact her at drsandi Credit Union BUSINESS Credit Union BUSiNESS 33 21 TEChNICALLY SpEAkINg Again Over Member Business Lending rules credit unions vs. banks By Roy W. Urrico C redit Union and bank lobbyists appear headed for a showdown . . . again. The banking industry has become gradually more determined in their attacks on credit unions calling for a repeal of the credit union tax status criticizing credit unions for satisfying member business lending needs in the market and opposing regulatory alterations that would give eligible credit unions access to supplemental capital and improve the safety and soundness of the credit union system. Credit unions have been making member-business loans (MBLs) since their inception in the early 1900s. In the first 90 years of existence there was no business lending cap. When Congress passed the Credit Union Membership Access Act (CUMAA) (P.L.105-219) in 1998 they restricted credit unions ability to offer member business loans. Congress codified the member business loan definition and limited a credit union s member business lending to the lesser of either 1.75 times the net worth of a well-capitalized credit union or 12.25 percent of total assets. Also pursuant to section 203 of CUMAA Congress mandated that the Treasury Department study the issue of credit unions and member business lending. In January 2001 the Treasury Department released the study Credit Union Member Business Lending which summarized the following Business lending is a niche market for credit unions. Overall credit unions are not a threat to the viability and profitability of other insured depository institutions. In certain instances however credit unions that engage in member business lending may be an important source of competition for small banks and thrifts operating in the same geographic areas. A 2011 study commissioned by the Small Business Administration s Office of Advocacy also established that bank lending was mostly untouched by credit unions business lending changes and that credit unions have the capacity to counterbalance declines in bank business lending during a recession. And it has over the past several years. That seems to have upset the banking lobby. The banking industry is unhappy because consumers and small businesses are increasingly choosing credit unions as a source of reasonable credit and retail banking services point out William J. Mellin and Diana Dykstra in an opinion piece in Roll Call. They add Today 34 Credit Union BUSINESS July 2013 TEChNICALLY SpEAkINg more than 90 million Americans look to credit unions as their preferred source of consumer financial services and private sector lending. As a testament to the value credit unions provide hundreds of thousands of consumers have transferred their bank accounts to credit unions over the past several years. Credit unions have earned the confidence of members by prioritizing service and value no matter what the economic environment. When consumers homebuyers and small businesses hit a credit wall during the recent recession many looked to credit unions to meet their needs--and credit unions responded. Credit unions increased first-time mortgage lending in 2009 up by more than 35 percent to 95 billion. At the same time other lenders posted the largest declines in more than 70 years. Small businesses and start-ups pursue many diverse sources of funding. More than 80 percent of small firms use some form of credit according to data compiled by the Federal Reserve Board Survey of Small Businesses Finances. They rely on many different sources of capital including their own savings loans from family and friends and business loans from financial institutions. Credit cards credit lines and vehicle loans are the most often used types of credit. Commercial banks are the leading suppliers of credit followed by owners and finance companies. Following the mortgage collapse numerous big banks effectively turned off funding to small businesses. Credit unions decided to take advantage of this hole in the marketplace by increasing their small business loan-making. While the recovery from the worst financial crisis since the Great Depression remains fragile credit unions have the capital to help America s small businesses thrive says National Association of Federal Credit Unions (NAFCU). However due to the lingering member business lending cap their ability to kindle the economy by providing credit to small businesses is hampered. Because of government barriers to credit-union business lending thousands of entrepreneurial ventures may be unnecessarily deprived of the seed capital credit unions could provide to them. In February 2013 at the beginning of the 113th Congress Reps. Ed Royce (R-CA) and Carolyn McCarthy (D-NY) reintroduced legislation--the Credit Union Small Business Jobs Creation Act (H.R. 688)--that would lift the arbitrary member business lending cap from 12.25 to 27.5 percent of total assets. We appreciate Reps. Royce and McCarthy s continued Credit unions have earned the confidence of members by prioritizing service and value no matter what the economic environment. commitment to and confidence in credit unions and their ability to help small business said Fred Becker president and CEO of NAFCU. Led by Senator Mark Udall (D-CO) a bipartisan group of Senators introduced similar legislation (S.968) in May 2013. Under these bills credit unions would need to meet the following criteria to be deemed eligible Must be considered well capitalized [currently 7 percent net worth ratio] Must have at least 5 years of member business lending experience Must be at or above 80 percent of the current 12.25 percent cap for at least 1 year prior to applying Must be able to demonstrate sound underwriting and servicing based on historical performance and strong leadership management Of course we have been down this road before. Trying to loosen the Government s grip on member business lending is not new. In May 2005 Reps. Paul Kanjorski (D-PA) and Ed Royce (RCA) introduced the Credit Union Regulatory Improvements Act (CURIA) which credit unions maintained would facilitate productivity and efficiency in a competitive marketplace. CURIA contained three major sections Modernize credit union net worth standards Advance credit union efforts to promote economic growth and Make several needed modifications to credit union activities governance and oversight The Credit Union Regulatory Improvements Act underwent several modifications and adaptations before dying when the 110th Congress adjourned in late 2008. Instead the credit unions strongly represented by the NCUA CUNA NAFCU as well as credit union leagues and associations have been pursuing legislation to increase the credit union member-business lending cap. Credit Union BUSINESS 35 July 2013 TEChNICALLY SpEAkINg Udall the Colorado Democrat was told a previous version of his bill would receive a Senate vote in the prior Congress. But Majority Leader Harry Reid pulled it from the calendar as the session wound down saying it didn t have the 60 votes needed to block a filibuster. The House measure introduced this year hasn t advanced since February. Asked if the bill s prospects have improved in this Congress which has 100 new members Udall said There are never any assurances. (But) there s still bipartisan support. There s still a need for capital to be made available in greater volume to the small-business sector. And finally the economy still needs attention. His measure faces tough odds and will pit credit unions against influential banks--a conflict that has gone on for more than ten years with the banks winning every time. Removing or modifying the credit union member business lending cap would help provide economic stimulus without costing the taxpayer a dime suggests NAFCU. In addition officials at the Treasury Department and the NCUA have expressed support for lifting the MBL cap. Several outside groups from all sides of the political spectrum have also endorsed the legislation including the Consumer Federation of America (CFA) and Americans for Tax Reform (ATR). Fred Becker Jr. president and CEO of the National Association of Federal Credit Unions praised Udall for re-introducing the bill and for recognizing the value of credit unions as providers of credit to small business. Credit union lobbyists said this time around there is a growing reality in Congress that allowing credit unions to do more to help small businesses may give the economy the boost it needs. It s a private sector driver with zero taxpayers dollars. It is credit unions using their own money to help their own members. Americans need jobs and more money for small businesses means more jobs. But the banks position is that if credit unions want to act like banks they must pay taxes like banks. Bank lobbyists contend that Credit unions can make as many under- 50 000 loans as they want and can issue unlimited loans of up to 5.5 million backed by the Small Business Administration. They should not retain a tax-exempt status and still go into commercial lending. Related to this argument is the expectation that House Financial Services Committee Vice Chairman Gary Miller s (R-Calif.) anticipated regulatory relief bill most likely won t include a stipulation that would boost the member business Asked if the bill s prospects have improved in this Congress which has 100 new members Udall said There are never any assurances. (But) there s still bipartisan support. There s still a need for capital to be made available in greater volume to the small-business sector. And finally the economy still needs attention. lending cap said CUNA Executive Vice President of Government Affairs John Magill during a press call in June. Miller who represents Southern California s Inland Empire area said April 10 during a Congressional hearing that the bill could include credit union-specific provisions. Credit unions play a unique role in our economy the California Republican said in a statement following the hearing. Unlike other financial institutions they are cooperatives and exist to serve their member-owners not outside stockholders. This allows them to provide lower loan rates higher interest on deposits and lower fees. Hampering their ability to perform these services and to provide loans to families and small businesses will harm millions of American consumers and stifle economic growth and job creation. 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 36 Credit Union BUSINESS July 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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Self-Service Coin Centers Currency Dispensers Currency Recyclers Proven Performance and Quality Facilities & Design Lending A Nationwide Lender with the Expertise to Get Your Deal Closed Business Partners is a nationwide provider of commercial real estate lending services with years of experience funding loans. 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 Family First Credit Union Invests in preparation S By sharon sweda aginaw is a quaint community nestled within the Flint tri-cities region in the State of Michigan. It spans a conservative 18.1 square miles is home to just over 60 000 residents and it s lower-than-average cost of living lends enormous appeal. Saginaw has plenty of parks many festivals and lots of year-round recreation as well as all the modern conveniences normally associated with urban centers of greater size and population. Saginaw is also home to Family First Credit Union which organized in 1939 under the name of Saginaw Municipal Employees Credit Union. Originally an employees credit union SMECU s founding objective was to offer clients a member friendly alternative to the obstinate banks that had evolved as a result of the Great Depression. It was organized by a small group of city employees in the basement of Saginaw s City Hall. As they grew they moved into a small home that sat across the street from City Hall and later moved into an even larger home in the same neighborhood. In 1989 they made their last move into what is now their current location at the intersection of North Michigan Avenue and Holland Street. In 2003 Saginaw Municipal Employees Credit Union like many other employee credit unions shifted focus and direction by broadening its membership changing from employee to community charter. Their new charter opened membership to all residents living working or attending school or church or any retiree age 55 and older receiving a pension in Saginaw or Bay Counties. To mark this transition SMECU changed its name to Family First Credit Union. 2011 brought further expansion by adding Genesee and Midland Counties to the membership eligibility fold. Family First Credit Union has grown its products and services roster along with its membership to keep itself competitive with its traditional banking neighbors--often a challenge to other credit unions of similar size. The primary goal at Family First has long been to provide outstanding service to its members a 40 Credit Union BUSINESS heritage inspired by the simple desire to provide members with a pleasant banking experience from frontline service to back office security and recovery. One of the most frustrating issues for small credit unions is the threat of business interruption. Unlike their larger counterparts with in-house tech specialists to avert or quickly resolve service disruptions smaller credit unions stand to lose member confidence whenever disruptions cause member inconvenience. Member tolerance is fragile and Family First is keenly aware that some tasks are better shared with outside partners knowing that IT management and disaster recovery is best handled by experienced management and recovery professionals. This need led Family First to its affiliation with PLANet. PLANet since renamed AssuranceCM Business Continuity Software is a software program designed to create a complete BIA (business impact analysis) in order to build an efficient BCP (business continuity plan) that is both feasible and conforms to regulatory requirements. PLANet s software was designed specifically for use by small credit unions concerned with member and system protection. It took Family First fewer than 30 hours over a two-month period to customize their BCP and they now have a their protection plan in place that secures every service function accessed by the credit union s members. The implementation of PLANet puts Family First in a position to focus time and resources on member concerns and front office duties where their skill set is best utilized with the assurance that any crisis or interruption will be efficiently managed. Sharon Sweda is a freelance writer who has worked in the real estate and finance industries for the past 28 years. 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