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The CuSO ISSue Unspooling the Payments Value Chain Disruptive Trends and Technologies That are Reshaping the Way Members Expect to Save Spend and Make Money february 2014 VOLuMe 9 ISSue 2 9.95 Win-Win How Co-opetition Helps Local Institutions Level the Playing Field CU Regulation Preparing for the New Year New Cuso Requirements WE RE A LITTLE EXCITED We get it. Life insurance is not a fun topic of discussion but when it comes to protecting our financial institution clients we are downright thrilled By partnering with SWBC Life Insurance Company you can provide your members and borrowers with the life insurance that they need while also managing risk. Call us today at 866-632-7340 to learn how SWBC Life insurance Company can help you implement a turn-key payment protection and individual insurance program for your financial institution. Our passion and enthusiasm is unmatched CREDIT LIFE & DISABILITY TERM LIFE INSURANCE UNIVERSAL LIFE WHOLE LIFE DEBT CANCELLATION 2014. SWBC. All rights reserved. Life and disability insurance programs are provided by SWBC Life Insurance Company or its distribution associates. All products may not be available in all states. 1361-5431 1 14 CONTeNTS Credit Union BUsiness february 2014 V O L u M e 9 I S S u e 2 4 6 8 PoV The GAC CUsO issue Tim O Hara aCHIEVINg SkILLS 29 31 34 38 40 TECHNICaLLY SPEakINg Financial Organizations Unite to Combat Patent Trolls Roy W. Urrico CU REgULaTIoN self Promotion Holly Herman Preparing for the new Year new CUsO Requirements Brian R. Witt CU CoNTENT UNDER THE HooD Unspooling the Payments Value Chain Disruptive Trends and Technologies That are Reshaping the Way Members expect to save spend and Make Money Ryan Anderson What needs to Change at Your Credit Union in 2014 Laura Enock CRoSSWoRD CU SPoTLITE 12 15 17 20 23 CFo CURRENCY Emily Mor Hollis Mortgage Pipeline Hedging CU MaNagEMENT Alycia Meyers THE LENDINg LINE Bob Schroeder CLE CoMPLIaNCE UPDaTE Commodore Perry Credit Union steps into Traffic On The information Highway Sharon Sweda Be an innovator The Trend is Your Friend Guide to the Risks Associated With the Ability-To-Repay Rules Jeff Andersen CU MaRkETINg Get it for the entire executive team register Win-Win How Co-opetition Helps Local institutions Level the Playing Field Keith Brannan February 2014 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 Ashok Kumar Circulation Director THE CUSO ISSUE Unspooling the Payments Value Chain Disruptive Trends and Technologies That are Reshaping the Way Members Expect to Save Spend and Make Money FEBRUARY 2014 VOLUME 9 ISSUE 2 9.95 Win-Win How Co-opetition Helps Local Institutions Level the Playing Field CU Regulation Staff Writers Holly Herman Achieving Skills Emily Mor Hollis CFO Currency Sharon Sweda CU Spotlite Roy W. Urricho Technically Speaking Preparing for the New Year New Cuso Requirements CUB_FEB.indd 1 2 11 14 2 00 PM 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. Contributors Jeff Anderson Ryan Anderson Keith Brannan Laura Enock Alycia Meyers Bob Schroeder Brian R. Witt Sales and advertising Bernie Fitzgerald Advertising executive Bernie or 561-282-6015 1 Greg Halpern Advertising services Manager Greg or 561-282-6015 4 Contact Information Credit Union BUsiness Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) tim 2 Credit union buSINeSS February 2014 Missing your RDC conversion goals Convert more commercial clients from paper to electronic deposits You can dramatically increase the number of check-dependent clients depositing electronically by introducing them to the JetScan iFX solution. This revolutionary product is extremely attractive to highvolume check clients because it s fast reliable easy and affordable. It handles both checks and cash on one device -- a perfect combination for retailers corporations government agencies and others. With high speed and amazing accuracy even RDC-resistant clientele will be quick to switch to electronic deposits. And that makes it easier for you to meet your goals grow your business and streamline operations. See why more financial institutions are offering JetScan iFX to their check-intensive clients. Watch the video at cub FROM tiM Publisher s POV The GAC CUsO issue i look forward to February because it means i get to spend the last weekend of the month at CUnA s Governmental Affairs Conference in Washington DC. i ve been attending the conference for more than 20 years and i don t remember ever coming home disappointed despite having been totally immersed in all things credit union the entire weekend. Before CUnA moved the show into the massive Walter e. Washington Convention Center the GAC meant spending a weekend with several thousand people all jammed into the Washington Hilton Hotel. The bustling exhibits hall--with its low ceilings and aisles so narrow that one had to sidle crablike through the throngs of CU vendors vying for the attention of hundreds of credit union attendees--is where i spent the majority of my time. it was like spending three days in a very crowded cave. it took getting lost and wandering the labyrinth for several hours during one of my first visits for me to realize that the exhibit hall was just an underground parking garage. it was neither big nor grand. By contrast the Walter e. Washington exhibit hall could easily fit two marching bands side-by-side moving in opposite directions. it is big and grand. i am particularly proud of the editorial content of this GAC issue of Credit Union BUsiness. Our editorial focus this month is on CUsOs and appropriately Ryan Anderson Vice President of Product for The Members Group wrote our Under the Hood cover editorial feature. His article begins on page 8 and in it Mr. Anderson asserts that credit unions have a great opportunity to both get closer to their current members and build new memberships by offering cutting-edge mobile banking and m-commerce applications capable of bringing members closer to their money wherever they are in real-time. He goes on to describe several examples of cutting-edge apps that offer both convenience and immediate payment options that will attract more member loyalty and wider use while streamlining CU costs. As always competition for the consumer s wallet continues to be a dominant theme. 4 Credit union buSINeSS NDLE in December i SEND YOU A FREE KI told you about a visit i made Sign up for a 3 year DIGITAL subscription a g to BancVue an and CUB will give you The Basics of Managin y Kindle Reader to enjo Interest Rate Risk Concept every issue Austin TX based of Duration 69 x 3 207 company that sees t Also available in prin 89 x 3 267 megabanks as the greatest threat SIGN UP AT to the health of credit unions and community banks alike. BancVue writes about co-opetition and suggests that community financial institutions (CFis) should work together to take market share away from the big banks. Both CUs and local banks benefit. BancVue s Chief Marketing Officer Keith Brannan discusses how it can be done on page 23. it seems that lately i ve been spending more time and money buying iPad mini tablets from the Apple store for our monthly Crossword Puzzle contest that runs through December 2014 (page 38). Don t forget to enter for a chance to win your own free mini tablet. And thanks to CUB s special offer for new memberships--a free Kindle e-reader with every three-year paper membership ( 89 per year x 3 years 267) or digital only membership ( 69 x 3 years 207)--i ve been spending a good deal of time online at buying Kindles and shipping them directly to new members. i hope i can send one to you today. i ll guarantee two-day delivery if you are attending the GAC and this magazine was delivered to your hotel room please come down to the exhibit hall and say hello. i ll be at booth 401. Thanks for reading ISSUe The LendIng 11 9.95 voLUme 8 ISSUe november 2013 BECOME A NESS CREDIT UNION BUSI L MEMBER AND WE L 3-YEAR and the A Mid-Sized Credit Union Spreads Its Wings how Congressional Federal migrated From Using a mortgage Less than 6 ounces CUSo to offering Fits in your pocket Full-service Lending s Holds over 1 000 book 60 seconds Downloads books in with built-in Wi-Fi d fonts New darker hand-tune for easier reading February 2014 THE POWER OF KASASA Uncover the power of our Success Formula visit CU CUNA-GAC Booth 326 How Co-opetition Can Drive Your Revenue And Growth aChIeVINg SkILLS Self Promotion hat do you think of when you come across the expression self promotion Bragging Arrogance something your mother told you not to do Let s face facts Whatever you might think if you re not going to promote yourself who else will To get ahead in business whether you re in a corporate environment run your own business or work for a non-profit you ve got to promote yourself to get ahead. i don t have a press agent do you Most of us aren t in positions that come with press agents or handlers so i ve come up with a few tips that should make your efforts at self-promoting a little easier and a bit more effective. Just remember You may still feel uncomfortable promoting yourself but that usually means you re getting used to doing something new and different. Like most skills the more you practice the better you become. W By Holly Herman vexing problem developing a new and more efficient system or procedure etc. Telling another person what you ve accomplished may not be easy for you but remember that person can be your spouse partner best friend sibling co-worker boss or department head. Announce it in a meeting or during a casual conversation with someone you run into. This might take a little practice so take it one step at a time. The more you do it the easier it gets. Sub-tip Keep it succinct. Anyone who wants to know more detail will ask. Tip 3 Talk about your team or work group. Work group or departmental accomplishments reflect well on you by association. Tip 4 Use we instead of i. it s often easier to talk about what we did. if you re uncomfortable talking about yourself switch to the first person plural--we. it will take the focus away from you but still keep you part of the story. As the use of we becomes more comfortable begin slipping in an occasional i. You ll be the only one who notices. And never switch over to i exclusively. Remember unless you work alone you re always part of a team. Learn how to balance self-promotion with group accomplishment. Tip 5 Learn that it s ok to be great You need to let others should know that you re really good at what you do. some people wait for others to validate their greatness. When you do nothing to get noticed and don t call attention to your accomplishments you could be waiting a long time for validation. 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. Tip 1 Recap your accomplishments every week. You should get in the habit of writing up a report (a simple email will do) for your supervisor that lists your accomplishments for the week. include what you re currently working on and what you plan to finish over the next week. You should keep the report brief and factual and highlight only what s important for him to know. Remember to include accomplishments that will help your supervisor quickly and accurately write up your performance evaluation. You ll soon discover that writing a weekly report is an excellent tool for staying focused on priorities and avoiding miscommunication. Sub-tip if you re self-employed writing a weekly report is an excellent way to stay focused and moving forward. Tip 2 share major accomplishments with another person. each week tell at least one person what you ve done. Don t report on routine tasks but do share important benchmark accomplishments such as successfully finishing a project signing up a new and important client solving a particularly 6 Credit union buSINeSS February 2014 uNder The hOOd Unspooling the Payments Value Chain disruptive Trends and Technologies that are reshaping the Way Members expect to Save Spend and Make Money T By Ryan Anderson Vice President of Product for TMG oday evolving consumer behaviors are no doubt changing the way your credit union serves and builds relationships with members. it wasn t all that long ago when consumers clamored for financial institutions that offered convenient ATMs. Today individuals are more likely to be attracted to services and technology rooted in mobility or personalization. While the onus for innovation is an enhanced consumer experience leading to long-term loyalty and growth today there s a winding path to get there. not only that your chosen path will be flanked with competitors shifting attitudes and other risks. By increasing awareness of these trends and with a sharper focus on delivering value-added services you can successfully drive member retention attract new business and generate more revenue. Focus on Member Relationships and engagement Today credit unions are operating in an extremely competitive environment. not only are members tastes and expectations changing technology is evolving rapidly and new channels are emerging and expanding. Two of the biggest areas in the mobile landscape that have the potential to improve the user experience are mobile banking and m-commerce. M-commerce opens up even more doors for introducing innovative products that will attract and retain members. M-commerce in the financial 8 Credit union buSINeSS services world can enable a multitude of actions such as moving funds into a money market account getting financial advice or paying for groceries via a mobile device. experts are quick to point out that the mobile landscape is just one area of innovation and credit unions need to offer segmented member experiences that are consistent across various applications and advanced digital wallet capabilities. A mobile banking study sponsored by Cognizant titled segmentBased strategies for Mobile Banking found that consumers are looking for secure anytime anywhere financial capabilities that are customized and chocked full of social features and valueadded services. February 2014 uNder The hOOd non-traditional players such as mobile app providers are also making strategic moves introducing even bolder applications. in doing so they are encroaching on the role of the credit union as a trusted financial advisor and chief of everything having to do with buying and saving. Lauren Pollak financial services practice lead at Jump Associates believes the most innovative retailers or mobile device and app providers are taking advantage of these shifting behaviors and attitudes by offering new ways for people to engage with their finances. she asserts individuals are hungry for real-time financial information whether it is cross-account control or recommendations for investing. Value-Added services and social Features With the explosive growth of digital channels and as mobile devices continue to grab even greater share of members time and attention credit unions have the opportunity to leverage this obsession to drive member loyalty and engagement. nontraditional players in the market are no doubt taking this opportunity seriously. Take for instance applications like Mint. com. With 10 million users Mint automatically updates and categorizes financial information from various sources and suggests ways to save. Automatic alerts like bill reminders can be sent to a user s mobile phone or email. While users can only see their moneynot transfer or access it the application does pull information from accounts such as checking accounts credit cards and retirement accounts to provide a complete financial picture on one convenient interface. it allows users to set a budget and create a plan to reach personal financial goals with built-in tracking capabilities. Working within new digital parameters today s most successful financial innovators are also snapping into the social aspect of banking and money management. Take smartyPig for example. This web application helps people save for specific financial goals like a wedding a vacation a charity event or even a flat-screen TV. The FDiC-insured savings account also encourages members to share spending goals with friends and family and offers rewards for hitting the savings goal. This feature scratches at the surface of another consumer trend the need for social engagement from anywhere anytime. Personal information that was once considered private even financial transactions and goals can now form the basis of a Tweet With the explosive growth of digital channels and as mobile devices continue to grab even greater share of members time and attention credit unions have the opportunity to leverage this obsession to drive member loyalty and engagement. a Facebook post or in the case of smartyPig a blast email to friends and family encouraging them to contribute their own funds to a user s personal savings goal. A provider called Moven is working to outpace the competition and set itself apart even more from old-school banking by offering no branches no paper and no plastic. This concept of a cardless bank is gaining attention namely because of its omnichannel approach to banking. The mobile device application enables users to transfer funds both in and out pay friends over Facebook and withdraw cash from ATMs. With the Moven app customers can see their account balance before and after a purchase in real time. Transparent clear information about the status of their accounts is another draw for users. As the Founder and Chairman of Moven Brett King explains The core of the concept is really the feedback loop that you get from the app as you make individual payments. When they re getting that feedback they find that saving is easier because they see the account balance fall. Another interesting player in this market is Dwolla. The innovative payments ecosystem lets consumers make personto-person payments through email and through social network sites like Facebook and Twitter. The payment platform even allows consumers to identify nearby merchants called spots that accept Dwolla payments. Consumers can pay the merchant for goods or services without plastic or cash and record the transaction instantly this can then be shared with friends online. February 2014 Credit union buSINeSS 9 uNder The hOOd Consumers Trust Their Fi Most for Big Purchases in an interview with The Paypers Richard Johnson sVP of strategy for the Monitise Group stated he believes the key for financial institutions is to protect their role in the mobile space from newcomers by creating more high-engagement mobile applications. He cites research from the Future Foundation that says consumers are more likely to trust money applications delivered to them by their credit union or bank compared to those delivered by startups or other players in the market. in addition the report states more than one-third of consumers surveyed are willing to pay for advanced security features such as biometrics and nearly 30 percent of respondents indicated a willingness to pay for mobile payment capabilities. Johnson believes providing relevant streamlined content to customers is crucial to holding their attention. He said some recent research we commissioned with the Future Foundation revealed that consumers would trust m-commerce that was brought to them by their bank more than from other players. This was also reflected in where they d be prepared to purchase high-value items. Bringing content in this way not only enables the bank to play a bigger role in consumers lives but also protects them against distintermediation and generates significant new revenue streams. Financial applications that deliver better shopping experiences are also gaining traction. Take for example new digital-wallet services from Visa and Mastercard. by Visa allows for simpler shopping with one-click checkouts for online shoppers. Cardholders enter their existing card data into a secure online service one time the service then stores the data securely allowing the cardholder to make online purchases without re-entering their card data every time they make an online purchase. similarly MasterPass is an anytime anywhere payment solution with advanced anti-fraud capabilities. it allows consumers to use any payment card or enabled device to make a purchase and it enhances the shopping experience online in-store or on any device. Both V.Me and MasterPass essentially enable credit unions merchants and partners to offer their own digital wallets. Technology and mobile banking applications that are underlined in convenience and those that let members decide how and when they interact with their credit union are likely to be the most successful. Giving members a consistent personalized experience anytime anywhere and on any device is key to coming out on top. individuals in high-value influential groups like Gen Y Hispanic and the underserved are looking for innovative ways to interact with their finances succinctly and conveniently. By taking a proactive approach to emerging solutions for payments your credit union will be better positioned to satisfy these changing appetites and in doing so capitalize on this new stream of value-added services revenue. Ryan Anderson is Vice President of Product for TMG. As such he is responsible for overseeing strategy and execution for the payment company s product developments and enhancements. A former senior executive at the Wells Fargo Company Ryan is a recognized thought leader who presents at industry conferences and leads strategy and advisorygroup sessions to identify and prioritize key focus areas for innovation. innovation in How Users save spend and Make Money The good news is credit unions are overcoming barriers to innovation and are committed to staying relevant by introducing new products and services that reshape how members save spend and make money. Many are making significant effort to introduce advanced features like mobile bill payment customizable alerts and overall delivering a more personalized and consistent experience across all banking channels. in fact the innovation in Retail Banking 2013 report revealed that as the global economy recovers financial institutions across the world are increasingly investing in innovation as a means of generating revenue and controlling costs. The study which surveyed 148 financial institutions in 66 countries also found that 77 percent are increasing investing in innovation. Just more than 60 percent currently allow or plan to allow customers to do some form of product personalization. 10 Credit union buSINeSS February 2014 CfO CurreNCy Mortgage Pipeline Hedging By Emily Hollis CFA M ost credit unions are in the business of originating mortgage loans. some do not retain all the loans that they originate but instead sell to FnMA or FHLMC (Gses) on a periodic basis. This is done for liquidity needs or to decrease interest rate risk. The Gses usually sell these loans in the secondary markets. The length of time mortgage loans are retained through the process of originating and selling is called the mortgage pipeline. During this process the credit union can be exposed to market rate movements and thus pricing risks from the time the loan coupon is committed to the time of sale. Originators manage this process in one of two ways financial forward agreements directly with the Gses or internally hedging their pipeline with capital market instruments (usually with the aid of a consultant or investment advisor1). This form of hedging is permissible under Part 703.21 of the nCUA rules and regulations. Financial Forward Agreements A financial forward agreement is a contract between two parties to either buy or sell a specific financial instrument at a specified date in the future. As an example a purchaser agrees to buy a home from a seller with a closing date 30 or 60 days forward and locks in a rate today so he she isn t exposed to changes in rates between now and when the loan closes. 12 Credit union buSINeSS The mortgage originator (the credit union) commits to fund the loan from the purchaser at the agreed upon forward closing date. if interest rates increase the value of the committed loans will decline and the originator is exposed to market value losses. The two most common forward agreements used by mortgage originators are best efforts commitments and mandatory forward commitments. Best efforts commitments occur when the credit union agrees to the Gse s mortgage terms on a best efforts basis. if the consumer closes the loan the credit union is required to deliver the loan to the secondary markets at the agreed upon terms. if the loan does not close the credit union is not required to deliver and therefore experiences no financial loss. Best efforts sales have their place with uncertainty however they are not financially efficient with huge mark-up costs to the credit union. The mark up is a way to compensate the Gse for taking the risk that the loan may have already been sold to the secondary market and has not been delivered into one of its mortgage pools (a to-be-announced TBA security). Mandatory commitments obligate the credit union to deliver the loan at the agreed-upon terms including a date of delivery. Risk occurs when the loan does not close or when the loan closes at different terms than originally agreed. should the credit union be unable to deliver part or all of its mandatory commitment the Gses will calculate a pair off fee 1 ALM First offers mortgage pipeline hedging services. February 2014 CfO CurreNCy which is a fee calculated as a function of both the undelivered portion of the commitment and the corresponding market movement. This can be fairly costly. internally Hedging the Mortgage Pipeline An alternative to best efforts or mandatory forward commitments is internally hedging the mortgage pipeline using secondary market instruments basically doing yourself what the Gses are charging you to do. This process entails analyzing the loan files on a daily basis calculating hedge ratios and shorting the TBA mortgage-backed securities (MBs) or buying put options on Gse securities which is also a permitted activity under Part 703.21 of the nCUA rules and regulations. in this article we focus on shorting the TBA market. TBA is a term used to describe a forward mortgage-backed security. The term is derived from the fact that the actual mortgage-backed security that will be delivered by the Gses is not completed at the time that the trade is made. Fallout Ratios Pipeline risks are affected by changes in market interest rates. All loan commitments do not close. The percentage of loan commitments that do not close is the fallout ratio. This ratio varies over time and is directly linked to the level of market interest rates. As committed loans migrate through the mortgage pipeline and approach funding they are more likely to close and less likely to fallout. Thus fallout ratios decrease as funding dates approach. Market interest rates also greatly affect fallout ratios by altering the financial incentives for the borrower to follow through with the closing. if market interest rates increase the borrower s financial incentive to close increases thus decreasing the fallout ratio and vice versa. February 2014 Credit union buSINeSS 13 CfO CurreNCy The mortgage-backed security investor who buys a TBA is actually making an agreement to buy a pool of loans that are in someone s pipeline at the time of purchase. When a credit union makes a mandatory commitment those loans will eventually be going into a TBA pool. Theoretically since the credit union owns the loans they short or forward sell their loans into the structure of which the Gses will place their loans at a later point in time. of best efforts versus mandatory can be as high as three percent which equates to 300 000 per every ten million dollars sold. in total the cost savings of best efforts versus shorting TBA securities is currently about 336 000 per each ten million dollar sale. But this is just a fraction of what the cost savings truly is. By internally hedging the financial institution is much more flexible in selling. The loans can be retained on its balance sheet for up to four months prior to selling. The incremental income of holding these 4.0 percent mortgages prior to selling can be extremely profitable. Here is How it Works. Assume that 10 million of 4 percent 30-year loans are in the pipeline. suppose that the credit union sells a TBA 30-year security at par (100.00 price). Thirty days later rates move up by 50 basis points and a new loan can be originated at 4.50 percent. The credit union contacts FnMA and receives a price of 95 to sell its 4 percent mortgages for a 5-point loss. The credit union then sells its loans to FnMA. But on the same day it buys back the TBA security. Rates have moved up. The security that the credit union had sold at par can be bought at 95 for a 5-point gain. The loss of the loans is offset by the gain of the security. Benefits TBA positions can be increased or decreased daily to ensure appropriate hedge ratios which are much easier and efficient than committing to the Gses. This presents so much more flexibility in rebalancing. The main benefit is cost savings. The chart below shows our estimates. so Why Does This save Money As s umption B es t E ffort v s Mandatory Deliv ery P ricing 2.726 A L M S av ings C ompared to F Mandatory Deliv ery Av erage Amount in S av ings C ompared to suppose the P ipeline B es t E fforts Monthly Is s uance originator commits 5 000 000 20 000 000 364 000 2 616 400 on a mandatory 10 000 000 40 000 000 728 000 5 232 800 basis to sell the loans 30 days 15 000 000 60 000 000 1 092 000 7 849 200 forward to FnMA at 20 000 000 80 000 000 1 456 000 10 465 600 par (100.00) or no 25 000 000 100 000 000 1 820 000 13 082 000 gain or loss. FnMA must hedge the loan. it will charge the credit union this hedge fee by embedding it Conclusion into the forward price. Detailed observation shows that the internally hedging a mortgage pipeline can be financially difference between the 30-day forward price of a mandatory beneficial. The potentially huge savings and greater efficiency delivery versus the current price is more than a third of a point makes looking into this process definitely worth the effort. which equates to about 36 000 per every ten million dollars in loans sold. (The charge for 60-day forward is even higher.) Emily Hollis CFA is a partner with ALM First Financial Best effort s commitments are much more costly. The mark up Advisors LLC. 14 Credit union buSINeSS February 2014 Cu MaNageMeNT Be an Innovator By Alycia Meyers e mployee-Led innovation Program Reaps Real Results in its First Year Promoting innovation is a critical factor in the growth of any company and most innovation initiatives start from the top down with management leading the directive. But what happens when an innovation initiative is designed and led by employees with the support of management i believe that an employee-driven model is a good one to follow it encourages innovation and promotes the free exchange of ideas across the organization and between management and non-management employees. People will work ten times harder on an idea they feel passionately about and employees who are given the opportunity to implement their own ideas work even harder and demonstrate greater job satisfaction. CU Answers management has promoted an open-door policy with staff members since its founding which made it the perfect place to launch my Be An innovator program. We launched the program in December 2012 and hold meetings (Be an innovator idea and networking luncheons) every two months. each meeting begins with an introduction followed by time for employees to present ideas and gather feedback. We ask participants to fill out an evaluation form (employee idea form) by answering a few questions at the end of each session. We use the evaluations to help grow the program. We currently have a nearly 50 percent employee participation rate and have generated a number of promising initiatives since our Be an innovator program began. in fact twenty ideas have been discussed at our Be an innovator idea and networking luncheons since our May meeting and we plan to implement six of the big ideas that have come out of the program this year. What ideas Are Being implemented since CU Answers is a technology company several of the new ideas are technology-related. Two are new products ideas and one entailed initiating a collaborative meeting to improve a process in the programming department. not all of the ideas we re implementing involve client technology improvements however. One idea suggested we form a group that would encourage employee involvement in community events an idea first discussed at a Be an innovator idea and networking Lunch and then submitted via an employee idea form. i am especially proud of this one since it fosters employee collaboration and community building. All of the ideas discussed at the lunches and submitted through employee idea forms were new ideas or challenges that had not been discussed prior to the start of the Be an innovator program. We ve Gained More than the implementation of ideas While we realize the implementation of ideas is important we ve learned not to evaluate the program solely on the number of ideas we re acting on. The feedback i get from the evaluation Credit union buSINeSS 15 February 2014 Cu MaNageMeNT forms helps me discover what people were getting out of the meetings and why they continue to participate. Of course learning about employee ideas is always at the top of the participant feedback list. Hearing from colleagues always generates excitement and promotes collective enthusiasm for seeing their theories put into practice. Meeting and talking to colleagues with whom they did not normally speak was the second most common comment. CU Answers has grown and prospered over the past several years making it increasingly difficult for staff to know all of their coworkers. Be an innovator meetings have provided an opportunity for everyone to bridge the widening gap making it easier for various teams within the organization to collaborate on other projects across departments. We now begin each meeting by having participants introduce themselves and provide a bit of information about who they are and what they do. While this might seem like a simple thing we ve discovered that a number of people unknowingly shared some common bond playing a musical instrument or working together at different companies. These connections help build community within our company. The third most frequently mentioned feature on the evaluation forms was how much people liked the informal access to management. People appreciated that management took an interest in employee ideas and cared enough to attend Be an innovator meetings. We now have more than two hundred employees and meetings make the company feel smaller by bringing teams face-to-face. What Are People saying About Be an innovator i asked for feedback on Be an innovator and this is what our CeO wrote The innovators group at CU Answers challenges our corporate designs for innovation. We value it as an employee challenge to the ways our organization drives change into our network. It takes practice to put ideas out there to challenge the entrenched and to lead in bringing product to market both internally and externally. This group helps build that experience encouraging everyone to take ownership of their responsibility to champion our future. i received this reply from a lending consultant I find it refreshing that there is a forum for ideas and innovation. In many companies you don t often have the opportunity to contribute in a meaningful way and have an impact. This forum allows everyone an opportunity to be heard to present ideas and encourages teamwork and participation across channels and lines of business. What Makes Be an innovator Unique Be an innovator has reversed the direction of innovation. in talking to other people about other innovation programs i hear about management or consultant-run programs where no effort is made to collect ideas from front-line staff and i have yet to hear of one run by an employee. A CeO once asked me if i thought everyone should be included in his credit union s innovation plan. i was surprised by his question it never crossed my mind that a successful program would not include every employee. What do employees want They want to have a voice in growing and shaping the company where they work to be recognized for having great ideas and playing a role in implementing the ideas they suggested. By developing Be an innovator to encompass all three of these areas i have strived to develop a program that encourages employees to take risks and make CU Answers an even better place to work. We are a collaborative company and by collaborating with each other we all--management nonmanagement clients and network--win. Alycia Meyers is a Technical Writer at CU Answers. She can be contacted at ameyers cuanswers or through Linked In or Twitter. What has Leadership at CU Answers Done to encourage the Growth of the Group To our leadership Be an innovator is valuable because it is committed to the goal of creating innovators and leaders by providing them with a forum to voice their goals. Hones the skills of team members to identify and brainstorm ideas with the potential to rise to the level of innovation. Teaches employees how to negotiate concepts and opportunities that might become candidates for followup by the firm individuals or unique subsets of our employee communities. 16 Credit union buSINeSS February 2014 The LeNdINg LINe The Trend is your Friend i By Bob Schroeder CLE graduated from northern illinois University with a Bachelor of science degree in Finance hoping to become a stockbroker. That was my dream job. i read many books on buying and selling stocks in an attempt to improve my skills and one of the common themes was the trend is your friend. Buy stocks when the prices are trending up and chances for success are in your favor. sell stocks when prices are trending down and you ll save yourself some money. Just like today the job market was soft for recent college graduates the year i graduated and unable to find my stockbroker dream job i found myself working as a valet at the local country club the same job that got me through college. When summer drew to an end i found a collections job at an auto finance company where i worked in the field which was simply a nicer way of saying i was assigned to the rougher neighborhoods of Chicago. The father of my first high school girlfriend set me up with the job so i was glad i had treated his daughter well when we dated although it didn t help me out much in high school she went to the Prom with my brother But that year--six years after we dated--it paid dividends. Who could have known After a year of debt collecting in the meaner streets of Chicago i took an inside job collecting for a large airline credit union that needed help after thousands of its members had been furloughed. i was transferred to the loan department once the airline recalled its furloughed employees. Lending was easy at the airline credit union You knew a member s income by the number of stripes they wore on their uniform and from their employment seniority date. We funded most loans in ten minutes or less. Lending became increasingly complex as my career progressed. i went on to work for a large multi-sponsored telecommunications credit union and then for a community credit union. With job and time changes came complications including indirect lending risk based pricing a housing bubble a major recession and a number of new regulations to make life even more challenging. i recently accepted a new position as a consultant for Lending solutions Consulting inc. (LsCi) where i ve spent the last four months shadowing Rex Johnson industry icon and company founder. Paying attention to credit score trends is a key component of his training program and an interesting connection to my past. Loan officers make investment decisions for credit unions by investing member deposits in loans to other members. This provides a valuable service to borrowers and hopefully produces a nice ROi for member-savers. i wondered if the trend is your friend concept applied to making loan decisions. The concept of risk-based loan pricing means offering lenders compensation commensurate to the level of risk they take. Loan rates are lower for those with high credit scores and higher for lower credit score members. Believe it or not even though this concept is widely applied today it was revolutionary in the early 1990 s. Today regulatory agencies have asked credit unions for credit score migration studies. Most credit unions have their CFO VP of Lending or analyst study credit score migration on their existing loan portfolio. They assess how many A s have moved down to B C D or e scores how many e s moved up to D C B or A scores where the B C and D loans are now etc. The Credit union buSINeSS 17 February 2014 The LeNdINg LINe number and dollar amount of loans are analyzed to determine any risk changes in the loan portfolio. if the direction of credit scores on your existing portfolio is important to study isn t it also important to study the direction of credit scores before loans are funded The LsCi renowned University of Lending teaches credit union staff how to determine credit score trends by reading credit reports. The school encourages applying the same intellectual acumen required at CFO and VP levels to the loan office. instead of studying the trend of existing loan portfolios we are teaching the skills needed to identify credit score trends before loans are approved. suppose you have evidence that shows a member s 740 credit score is trending downward. Your first impulse may be to offer that member the best available rate because of his 740 credit score in spite of the downward trend. However that low rate coupled with the knowledge of a downward shifting credit score should tell you that offering that member a loan at the lowest market rate means you may not be adequately compensated for your risk. Does it make sense to give this member A rates knowing that they will not stay in the A credit tier for long Would that be a good investment decision for your credit union What should you do suppose you have evidence that a member with a 540 credit score is trending upward. Giving this member a loan at the highest interest rate knowing that his credit score is trending upward will make this loan or investment decision a financial bonanza for your credit union. You will get the highest possible loan rate knowing the risk is overstated with the 540 credit score. Referring back to the books i read on buying and selling stocks that embraced the trend is your friend concept i would suggest that the best decision you could make would be to approve the 540 credit score rated loan and be cautious with the 740 credit score loan in the above examples. The 740 credit score member is a textbook case study that most of us encountered. A twenty-plus year credit history with perfect payment history and then just like that something changes. Maybe large unexpected medical expenses or a job loss caused the financial problems and you understand stuff happens. The member continues to make payments as agreed because that s what he s always done. But then he starts carrying balances on credit cards maxing them out and opening up new 18 Credit union buSINeSS The LSCI renowned university of Lending teaches credit union staff how to determine credit score trends by reading credit reports. The school encourages applying the same intellectual acumen required at CfO and VP levels to the loan office. Instead of studying the trend of existing loan portfolios we are teaching the skills needed to identify credit score trends before loans are approved. accounts. Anyone with a twenty-plus year credit history without a missed payment should have a credit score of 830 plus. But his score is moving down because he s reached capacity or is maxing out card balances and extending debt term on existing credit as he opens new accounts. At LsCi we call this living on inflated income. Many credit unions approve these loans and end up taking losses. What if your staff knew the credit score was moving south and avoided making the loan or made a loan that survives bankruptcy T he 540 credit score loan is also a textbook example that most of us have experienced. This member is the same member with the 740 credit score however his score moves to 540 after filing for bankruptcy. imagine that member having had a perfect payment history before bankruptcy. Do you expect bankruptcy to suddenly change that member s payment habits Will it automatically turn him into a slow payer and bad credit risk On the contrary i would argue that these are some of the best loans a credit union can make. Bankruptcy has relieved him of his debt his low credit scores mean high loan yields and February 2014 The LeNdINg LINe with perfect payment habits his credit score will move up. The credit union will receive a risk premium with little risk. This is a member you want to build a life-long relationship with. it is also a great example of why LsCi teaches credit unions to build relationships with bankruptcy attorneys and market to recent bankrupt people to develop business opportunities but that is a subject for another article. The key to developing the skills needed for identifying credit scores trends lies in knowing the credit score model and focusing on score codes. A score code of 10-- proportion of balances to credit limits is too high on bank revolving or other revolving debt is a great example. This would be the first score code on the 740 credit score example we discussed. The first thing to do when you see a code 10 is review the level of unsecured debt. if the level of debt is reasonable you have nothing to worry about if the debt is excessive make sure the When looking for opportunities to increase loan yields by funding loans for C D and e loans always look at the direction of the credit score. if the credit score is moving upward the trend is your friend. in order for credit unions to succeed and prosper in this low interest rate environment they must use all available tools to reduce losses while looking for opportunities to offer high yield loans that make sense. Training your staff on credit score trending will help you overcome these challenges and prosper. This article was written while we have been working on the 7th edition of the LsCi University of Lending book. We re adding new materials that emphasize credit score trends. i hope to see you and your staff at the new University of Lending to learn and master the skill of recognizing credit score trends. in this class you will learn many techniques in addition to the ones discussed in this article. Credit score Trend example loan you build survives bankruptcy. seeing a code 10 coupled with years of perfect payment history and a score less than 800 tells you the credit score is trending downward. One would expect to see a score in the 800 s with that type of history. seeing the first score code of 38 or serious delinquency and derogatory public record or collection filed with a credit score of 600 or more indicates the credit score is rising. if the serious delinquency or public record was current you would expect to see a credit score in the mid to low 500 s. The fact that the credit score is above 600 indicates the delinquency or public record is old news and the credit score is moving upward. Happy lending to all Bob Schroeder vice president consultant of Lending Solutions Consulting Inc. or LSCI began his thirty plus year credit union career in collections before moving on to lending. He has eleven years experience with two of the largest credit unions in the country rising to the level of vice president of credit before moving on to serve as CEO of a community credit union. During his twenty-one year tenure as CEO the credit union experienced a period of rapid growth and strong earnings. Bob can be reached at bschroeder Credit union buSINeSS 19 February 2014 COMPLIaNCe uPdaTe guide to the Risks associated With the ability-To-Repay Rules By Jeff Andersen introduction The ability-to-repay rules add a new cause of action available to consumers that raises new risks for credit unions. Credit unions have two primary ways to comply with the new rule and defend against this new action qualified mortgages (QMs) and abilityto-repay (ATR). The QM standard involves more stringent product and underwriting criteria. For example points and fees cannot exceed three percent of the total loan amount for loans over 100 000 the debt-to-income ratio cannot exceed 43% and QM ATR rule Appendix Q (appendix containing the standards for determining monthly debt and income) must be used to underwrite the loan. The benefit of getting QM protection is that you will get safe harbor protection from litigation under the new rule. The ability-to-repay standard is a less restrictive underwriting standard and does not have the product and pricing restrictions present in the QM standard (such as the points and fees and debt-to-income ratio cap.) The abilityto-repay standard requires the credit union to consider eight factors but does not mandate specific underwriting standards-- credit unions are still free to develop underwriting standards that fit the needs of the credit union and its members. Because it is less restrictive you get a lesser legal protection instead of a safe harbor you get a rebuttable presumption. This new rule requires a credit union to make numerous business decisions and to assess the risks associated with such decisions. The difficulty comes in the impossibility of being able to fully assess the risks because of the uncertainty in knowing how courts will treat QMs and ability-to-repay loans. i have outlined some key decisions that may be triggered by the new 20 Credit union buSINeSS rules and a general description of the risks inherent in such decisions below. note that these are just opinions and your individual risk assessment may vary considerably. Qualified Mortgage v. Ability-to-Repay safe Harbor v. Rebuttable Presumption Qualified mortgages are generally afforded safe harbor protection from borrower ability-to-repay claims while using the ability-to-repay standard will give the credit union a rebuttable presumption. in theory a safe harbor should protect your credit union from liability and have minimal litigation costs. in reality however plaintiffs attorneys can still claim that loans are not QMs and should not be afforded a safe harbor. The credit union will then have to prove that it is a QM. Depending on the February 2014 COMPLIaNCe uPdaTe complexity of the loan this could involve proving that Appendix Q was followed and a lengthy discovery process. if the credit union is able to prove that the loan is a QM it will get protection from any liability and the borrower s claim would be cut off at that point. The process of proving QM status however could still involve substantial legal costs. For the rebuttable presumption the credit union will still have the evidentiary issue of proving that the credit union met the ability-to-repay standard. This will involve proving that the credit union considered the eight underwriting criteria mandated by the ability-to-repay rule. The difference between the safe harbor and the rebuttable presumption is that under the rebuttable presumption even if the credit union proves it followed the ability-to-repay standard the borrower s claim will not necessarily end there. The credit union will get a rebuttable presumption moving forward but the borrower will still have the opportunity to argue the credit union did not make a good faith determination that the borrower would have a reasonable ability to repay the loan. The borrower would have the opportunity to argue that the credit union s underwriting standards were not appropriate or that the credit union did not appropriately apply its underwriting standards to the borrower s circumstances. Credit unions will need to be prepared to demonstrate that after considering debt and income the borrower had sufficient residual income to pay the mortgage loan and meet living expenses. Although it is not clear how courts will interpret and apply the ability-torepay QM rules defending an action with the ability-to-repay rebuttable presumption instead of the QM safe harbor will likely involve additional legal cost and risk. As courts begin to address the ability-to-repay rules the process costs and risks involved in an ability-to-repay action should crystallize. comfort. The key quote is the Agencies do not anticipate that a creditor s decision to offer only QMs would absent other factors elevate an institution s fair lending risk. This quote is not as clear-cut as we would like it to be but it does indicate that they do not see the institutions deciding to make QM-only loans raising significant fair lending risks. Despite this statement fair lending should still be considered. secondary Market Considerations Another consideration risk involved in deciding whether to exclusively use the QM standard is the marketability of nonQM loans on the secondary market. Fannie Mae and Freddie Mac have adopted the Consumer Financial Protection Bureau s (CFPB) points and fees threshold so all loans that a credit union intends to be eligible for purchase by Fannie Freddie need to be below that threshold. Until Fannie Freddie adopt their own definition of QM or otherwise adjust their purchasing guidelines the points and fees threshold is the major change for loans sold to Fannie or Freddie. There is a lot of uncertainty in the marketplace as to when or if Fannie and Freddie will adopt a definition of QMs. There is also uncertainty as to what standard other current secondary market purchasers will require. Will they only buy QMs as defined by the CFPB What representations and warranties will they require Lastly who will step in and fill the market need for a purchaser of non-QMs Credit unions should keep track of all of these considerations. The decision-making and evaluation of risks did not end on January 10 2014 credit unions will need to continue to assess and evaluate their options as the marketplace adjusts for the new rules. if the secondary market ultimately shapes out such that only QMs are being purchased it could change your decision-making. Potential Fair Lending issues in making any decisions on product offerings credit unions must consider the potential fair lending risk. The same is true in deciding whether to offer only QMs. After numerous comments from banks and credit unions the regulators released a statement addressing fair lending risk as applied to the abilityto-repay rule. in the release the regulators don t absolutely say they will not bring fair lending actions based on the decision to offer only QM loans but their statement should provide some Liability for Ability-to-Repay Violations Violating the ability-to-repay rule could bring liability from multiple fronts. First the credit union would have potential liability under the existing Truth-in-Lending Act section that provides for actual damages statutory damages and attorneys fees and costs. in addition there are new ability-to-repay statutory damages that can include certain finance charges and fees paid by the borrower. Lastly in a foreclosure action the borrower can assert an ability-to-repay violation and seek February 2014 Credit union buSINeSS 21 COMPLIaNCe uPdaTe recoupment or setoff. These potential damages could add up and could give attorneys for borrowers a significant bargaining chip in foreclosures and other litigation. in addition as discussed above the legal costs of defending ability-to-repay violations could themselves be a significant cost. Jeff Andersen is regulatory counsel at PolicyWorks a national leader in credit union compliance solutions and known for having the vision and expertise necessary to assist with the most challenging of compliance issues. In working with individual credit unions on a variety of federal regulatory compliance matters Jeff provides strategic compliance direction while assisting credit unions with the day-to-day implementation and understanding of federal laws and regulations. For more information visit www. The services provided by PolicyWorks should not be construed as legal services legal advice or in any way establishing an attorney-client relationship. Qualified Mortgage v. Ability-to-Repay Critical Considerations Analyze the legal risks involved with potentially defending against a borrower s ability-to-repay claim using the QM safe harbor versus the ability-to-repay and higher priced loan rebuttable presumption. This could involve analyzing current volume of delinquencies or foreclosure where ability to repay could potentially be raised as well as discussion with counsel about what the legal costs would look like depending on the standard used. Analyze the underwriting standards in Appendix Q and in the ability-to-repay rule and assess the operational costs involved with underwriting in accordance with one or both. Consider the fair lending risk that could be raised by only making QMs as a matter of policy. What are the lending needs of your members Will only making QM loans meet the needs of your members What will be the market for non-QM loans from a competitive standpoint if other institutions only make QM loans will there be a market need and opportunity for the credit union Consider the ability to use QM or abilityto-repay loans as collateral. For example for Federal Home Loan Bank Members what underwriting criteria will be required to get an advance 22 Credit union buSINeSS February 2014 Cu MarkeTINg How Co-opetition Helps Local institutions Level the Playing Field Win-Win By Keith Brannan M anaging a credit union has its fair share of challenges to say the least. near the top of that list is the competition to attract and retain members but have you ever considered whom you re actually competing against While most of us tend to focus on the bank and credit union across the street megabanks have gobbled up 70 percent of U.s. deposits a number that continues to grow at an alarming rate. Battling over the megabank leftovers is not a path to long-term sustainability or growth. The only way to reverse the trend is for credit unions to reconsider how they think about competitors. Accepting megabanks as our competition isn t easy it s far simpler to shy away from such a Goliath. And no one would blame us. However once you accept the megabankas-competitor reality it s worth asking who else is competing against the megabanks and if there is any way to leverage your position against a shared enemy. After all there are a lot of us in the same boat examples from several other industries demonstrate that cooperating with local competitors under certain circumstances--what we re calling co-opetition --can yield successful outcomes for both parties. Kasasa the national brand of innovative consumer banking products thrives on this concept of co-opetition among community financial institutions (CFis) to the tune of a 50 percent lift in account acquisition with a 54 percent reduction in acquisition costs. While credit unions have a long history of cooperating to capture advantages of scale (CO-OP ATMs shared branching etc.) we ve never extended that cooperative thinking to reach beyond our own insular world. But a foe as large as the megabank requires an entirely new way of thinking Reaching out for a new level of co-opetition that will help us fully harness the power of our potential scale without damaging our individual autonomies. in this battle local community banks can be our allies. There it s been said. More Than The sum Of its Parts Cooperating with competitors seems to violate strategy basics every consumer your rival acquires means one fewer for you. And wouldn t sharing your branding with a partner dilute your independence and confuse consumers Or can the opposite true Under particular circumstances does cooperation yield better outcomes for both parties Can two brands actually reinforce each other Game theory says yes. Developed a half-century ago by mathematicians John nash and John von neumann game theory proposes that trying to maximize your payoff in a competitive Credit union buSINeSS 23 February 2014 Cu MarkeTINg situation As soon as a drug store opens the market is no longer equitably split and price wars erupt to draw consumers past the more convenient store location. Drug stores compete on brand promise service selection loyalty cards and other variables not just on price or location. Other businesses group themselves too. Think of a restaurant row gas station intersection or a motor mile of car dealers. These businesses deliberately locate themselves near competitors. While each establishment is still competing for market share together they create a larger overall market to divide. in the case of locally owned restaurants this density also defends homegrown businesses against national chain eateries. By sharing advertising costs with competitors they can match or exceed the national chain s media footprint. This same benefit is at play with Kasasa. As of January 2014 the 209 credit unions and community banks offering Kasasa represent the 11th largest branch network in the nation collectively spending over 11 million annually promoting Kasasa. This effort has resulted in several billion media impressions for Kasasa a presence no credit union product can achieve on its own. And the buzz works. Of all Kasasa account holders nationwide 24 percent had never heard of their new financial institution prior to learning about Kasasa. On the flip side 73 percent had heard of the institution but weren t motivated enough to open an account before discovering Kasasa This phenomenon is similar to the starbuck s effect. Consumers already know that starbuck s means good coffee no matter who is serving it. so simply by flying the starbuck s logo grocery store chains and convenience stores that were once entirely disregarded for coffee on the go have become a preferred destination for consumers on their way to work every day. This co-opetition is no different for credit unions and community banks flying the Kasasa logo. And the starbuck s effect goes beyond merely attracting new consumers. A whopping 93 percent of Kasasa account holders love their account compared to 73 percent of megabank customers who are unhappy with their banking relationship. The tide of public opinion is already in our favor it s just a matter of competing with the megabanks on an equal scale in order to successfully Keith Brannan Chief Marketing Officer at BancVue situation without considering the other player s response yields poorer results for both players. Over time as you learn more about how the other players respond to your actions you will begin to observe that your gain doesn t have to come at the other players expense. According to nash and neumann the more you play the more you learn that cooperation is beneficial. The game they re talking about is actually all about strategic decision-making. Zero-sum games-- heads i win tails you lose --are fairly uncommon in the business world where the complex web of interdependencies means that a supply-chain partner for example might also be a competitor in certain channels. it s not always comfortable or ideal but it s a manageable often productive reality. Game theory s insights play out in the business world all around you. Have you ever wondered why competing drug stores tend to cluster around the same location it s because they ve achieved nash equilibrium a condition whereby all players have equal access to the same customers. evenly distributing the drug stores would seem to make more sense and cut driving times for most customers but it actually produces an unstable 24 Credit union buSINeSS February 2014 Cu MarkeTINg capitalize on consumer opinion. This can only be achieved by fully leveraging co-opetition s capacities. Once you re sensitized to the idea of co-opetition you see it everywhere. Airlines compete for airport landing slots but link their frequent-flyer plans. Megabank competitors Chase Wells Fargo and Bank of America develop a shared clearXchange platform for peer-to-peer (P2P) money transfers. Toyota and General Motors assemble the same car (Matrix and Vibe respectively) in the same California factory but package price and promote their versions differently. The Visa or MasterCard logo shares space with your credit union logo. Apple runs a national iPhone campaign with AT&T and Verizon featured in the ads. Both carriers see a lift in new contracts. Amazon lets competitors list their products on the same page as Amazon s and will frequently ship a competitor s item. The lesson here Co-opetition yields positive results when companies collaborate while maintaining market differentiation and independent credibility. This Town s not Big enough For Two Brands . . . or is it starbuck s is just one example of how co-opetition can bring two brands together and enhance both in the process. nissan installed generic sound systems in its vehicles for years. Finally it realized that more accurate sound could be a marketable feature. Rather than just upgrading its audio componentry nissan turned to Bose which has more acoustic expertise than any car company as well as a premium brand reputation. Bose optimized the speakers digital circuitry to match each model s acoustic properties and featured its logo prominently within car interiors. everyone wins here nissan strengthens its own brand s value proposition while profiting from new upsell opportunities Bose extends its presence into a new market space and happy car buyers no longer need to shop for aftermarket solutions. Together the two brands share a halo effect. When Chevy Mazda Porsche and other manufacturers introduce comparable Bose systems nissan isn t threatened or undermined in any way. To the contrary broader Bose adoption validates the co-branding strategy removes the need for salespeople to explain a one-of-a-kind partnership and frees nissan to focus on its core competencies. As the Bose brand appears in more dealership showrooms it confirms for nissan buyers that they made the right choice in terms of audio quality--while still getting all of the other car attributes they valued. For Credit Unions is Co-opetition a Tactical Risk--or a strategic Must Consider today s consumer financial-services landscape More than ever non-banks like Wal-Mart (with its Amex Bluebird prepaid debit account) Google (with its Wallet) and Kickstarter (with a small-business alternative to loans) are offering banklike options. in response local and regional players can and must showcase the day-to-day value of personalized service and community investment. But to have that opening new members must be walking through the door virtual or otherwise. every community financial institution s (CFi) strategic plan must find a way to reverse account attrition identify new opportunities to make money and maintain margins. Meanwhile megabanks are claiming the lion s share of new accounts the opposite of only a generation ago. Like it or not co-opetition is mandatory here. Why You can t do it alone. Regardless of your reserves and asset base you can t outspend out-research or Brand Partnerships Leverage economies of scale for smaller Market Participants. A jeweler with three community locations for example is unlikely to have the resources to produce a television commercial or buy regional ad placement in a national magazine. Along comes Rolex inviting local stores to piggyback on its marketing campaign and leverage its advertising dollars. Again consumers respond positively assuming that the national brand is endorsing the local players who still compete with each other based on personal service selection and reputation. 26 Credit union buSINeSS February 2014 Cu MarkeTINg out-design the megabanks on your own. There s a need to share resources with partners who align with your goals. Your individual resources are inherently insufficient whereas Kasasa s research and media budget is on par with a megabank s. Your base is dying. Harsh but true. What s your membership s demographic makeup What s the balance between under-40s and over-60s How many college students To be serving members in a decade you must explore new strategies to win back younger account holders. The average Kasasa account holder is ten years younger than the average CFi consumer and uses 33 percent more of your products per household. Technology could render you a relic. The Cloud. Big Data analytics. Cyber hacking. Disintermediation. One reason megabanks have gained so much ground is their serious investment in state-ofthe-art consumer technology. You need to access comparable constantly improving expertise to remove that as a consumer decision factor. BancVue s Kasasa platform is a perfect example of business coopetition. When a CFi introduces a Kasasa-branded checking account it immediately gains access to 1 million in primary consumer research account profitability metrics from 700 CFis award-winning design expertise ongoing insight into demographic and psychographic trends in the financial world help with strategic planning and premium-brand marketing including television radio print in-branch and out-of-home advertising. What are you risking CFi s fear a loss of autonomy and differentiation if they share their brand with a third party. However just as with nissan and Bose two brands can co-exist and thrive when they collaborate. A strictly local checking account brand carries little weight (can you name your competitors brand names ) and is generally ignored by consumers. On the other hand a Kasasa checking account offers consumers a reason to believe they can get the technology quality and rewards they seek at the community institution they prefer. What about other Kasasa partners in your market area BancVue has found that multiple Kasasa institutions can actually increase their account numbers at a faster rate without Questions Worth Asking Who are you really competing against and how well are you doing What s your growth strategy for 2016 Are you growing your business with younger consumers Does your account brand have market value Do you participate in the social media conversation How do you obtain and apply custom market research cannibalizing each other. it s really a matter of economics enabling BancVue to amortize greater promotional spending across more potential customers and to negotiate lower advertising rates. so at first glance cooperating with other credit unions and even (gasp) community banks to acquire new members might seem counterintuitive this article has demonstrated that such co-opetition is not only beneficial but also essential. Hundreds of CFi s already have and all you have to do is see how it s working for them. Keith Brannan is Chief Marketing Officer at BancVue. February 2014 Credit union buSINeSS 27 TeChNICaLLy SPeakINg Financial organizations Unite to Combat Patent Trolls i By Roy W. Urrico t is not often that CUnA nAFCU the iCBA and the ABA unite to support a cause. nevertheless the four organizations--along with the American insurance Association The Clearing House Financial services Roundtable nACHA and The national Association of Mutual insurance Companies signed letters calling on Congress to pass legislation that combats patent abuse. Demand letters from so-called patent trolls signify a great and growing threat to financial service organizations and other end-users of technology. A patent assertion entity (PAe) aka patent troll is an entity (person or company) that instigates a patent rights case against accused infringers in an effort to accrue licensing fees. The accuser does not create products or provide services based upon the patents in question. The modus operandi remains pretty much the same. PAes acquire patents and then use them to initiate lawsuits against infringing companies hold the patent without planning to utilize the idea in an attempt to freeze other companies productivity or engage in financial rent-seeking. A PAe s main objective is to use patents to extort payments from others. PAes have become a big business. since 2005 the number of defendants sued by PAes has quadrupled. According to reports in 2012 PAes sued almost 7 000 defendants and sent thousands more threat letters. PAes filed more than half of all patent lawsuits in 2012. The number of patent infringement claims filed against U.s. banking institutions by patent-holding companies exploded in 2013. For example in late October 51 patent infringement suits tied to payments-related technology were filed by Long Corner security a Texas-based patent-holding company against U.s. payment card networks payment processors and e-commerce sites. in 2013 one of the world s largest patent-holding companies intellectual Ventures filed infringement claims against leading U.s. banking institutions. PAes comprehend that defending just one patent lawsuit can an organization cost millions of dollars and that the trolls can earn money offering settlements that cost less. Credit unions as non-profit financial institutions with nearly 100 million members cannot afford to fight patent trolls either. That is why in December John Dwyer president CeO of new england FCU Williston Vt. testified on behalf of the CUnA and his own credit union at a hearing entitled Protecting small Businesses and Promoting innovation by Limiting Patent Troll Abuse. The president of the Vermont-based new england Federal Credit Union asked Congress to create a public registry of so-called patent troll demand letters as the senate Judiciary Committee-- 28 Credit union buSINeSS February 2014 TeChNICaLLy SPeakINg Dwyer described an additional patent troll letter offering a financial institution a special one-time limited time offer for smaller banks such as yours to receive a fully paid up sublicense for 2 000 per ATM and eventually upped this demand to 5 000 per ATM. Frankly this language sounds a bit more like a late-night infomercial than a serious attempt at dispute resolution Dwyer said. To help prevent future instances of patent trolling Dwyer in written testimony said CUnA supports Giving the Federal Trade Commission enforcement and rulemaking authority over patent trolls that operate in unfair or deceptive ways Developing minimum disclosure standards that would help ensure that only demand letters truly asserting a potentially valid claim of infringement are sent and Requiring an entity that sends more than 10 demand letters in a single calendar year to enter all letters into a registry that would be publicly available and maintained by a federal agency. Demand letters to financial institutions prompted a group of organizations including CUnA nAFCU the iCBA and the ABA to urge Congress to pass legislation that combats patent abuse. in a letter sent to sen. Chuck schumer (D-n.Y.) the organizations made their case for passage of the Patent Quality improvement Act of 2013. in 2009 you along with senator Jon Kyl of Arizona led the successful effort to include in the American invents Act a provision which provided for the first time an opportunity for the PTO (Patent and Trademark Office) to review certain business method patents against the best prior art. important safeguards exist in the original provision to ensure that inventors are not harassed or unduly burdened they wrote. By all accounts the program has been successful. not only has the PTO been able to examine prior art and issues of subject matter eligibility to invalidate some low-quality patents but the courts have better managed their own resources by staying cases pending PTO reexamination. The organizations said the Patent Quality improvement Act would expand the AiA signed into law by President Obama in 2011. s. 866 improves on your original provision while still maintaining important safeguards. By making the program permanent you ensure that that full spectrum of low-quality business method patents will be subject to review if asserted Dwyer courtesy of led by sen. Patrick Leahy D-Vt.--held its first hearing on legislation designed to curtail the practice. Dwyer was the only financial services representative to speak at the hearing. Dwyer warned the committee that left unchecked the predicament of patent troll demand letters will deter institutions like his from using new technologies including ATMs online and mobile banking remote check capture and check processing. in his statement the credit union CeO said his credit union which has more than 85 000 members finds itself in the midst of expensive discovery in a patent infringement case related to 23 ATM machines it provides for members. The case has been a costly and distracting headache he said. The case began he explained with an ill-researched vague demand letter that referred to his credit union as a bank did not specify which of his credit union s ATM machines allegedly infringed a patent and contained absolutely no information as to why the entity believed the credit union infringed. Dwyer told the committee that almost every credit union in Vermont had received the same demand letter including one that does not own any ATMs. A federal appeals court already has declared the patents in question to be invalid Dwyer noted. The letter only provided a simple list of patent numbers he said. Attempts to clarify claims made in the letter were met with similar form letters from the patent trolls and Dwyer said The troll has recently turned up the heat in its rhetoric. Credit unions as non-profit financial institutions with nearly 100 million members can t afford to fight patent trolls either. February 2014 Credit union buSINeSS 29 TeChNICaLLy SPeakINg under the threat of litigation they wrote. no longer will it be possible for patent assertion entities to wait for the period between the expiration of the program and the expiration of the patent to commence litigation. When the program was originally contemplated we encouraged Congress to make the program permanent for that precise reason. The group also sent a letter to sen. Orrin Hatch (R-Utah) the ranking member of the Judiciary Committee in support of the Patent Litigation integrity Act of 2013. To deter abusive patent litigation we must reverse the economic incentives that fuel frivolous patent infringement lawsuits. Fee shifting or the ability of the court to award the prevailing party reasonable fess and other expenses is a critical component to discouraging meritless lawsuits they wrote arguing that the bill would give more power to the courts. The legislation ensures that fee shifting will be effective by empowering the court on a motion from the defendant to order the party alleging infringement to post bond to cover the other party s expenses the letter said. Of course the issue of patent trolls extends beyond financial institutions. As a result a wide range of interests-- newspaper and magazine publishers retailers hospitals restaurants transit authorities hotels banks and credit unions and telecommunication companies--have joined consumer groups the motion picture industry automobile manufactures and grocers to seek comprehensive legislation to limit meritless patent litigation. Their unified voice joins the software industry and much of the high-technology sector to reflect a growing consensus that now is the time to address this issue. in the meantime federal legislation has been introduced that aims to restrain patent-holding companies capability to initiate these types of technology suits against banking institutions and businesses. The innovation Act of 2013 introduced by Congressman Bob Goodlatte [R-Va.] on Oct. 23 would hold patent holding companies liable for filing frivolous suits over patents. in november Leahy and sen. Mike Lee R-Utah introduced a bill aimed at patent trolls. The bill titled the Patent Transparency and improvements Act of 2013 aims to endorse transparency in patent ownership. it seeks to shield customers and end users of products by allowing cases against them to be stayed while the manufacturer litigates the suit. in December the House of Representatives passed its own version of patent reform by a bipartisan vote of 325-91. Gary shapiro author and president and CeO of the Consumer electronics Association (CeA) the U.s. trade association representing more than 2 000 consumer electronics companies wrote in an article in next Gov that Our patent system is totally misguided and in need of reform. every year patent trolls bilk U.s. businesses out of billions of dollars in legal fees and unnecessary payments money that could be spent on research and development and hiring new employees. 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 CEO SUBSCRIPTION WiTh BenefiTS Benefit your CFO COO CMO CCO CLO CIO HRD With free Monthly E-Newsletters Subscribe NOW register 30 Credit union buSINeSS February 2014 Cu reguLaTION Preparing for the New Year New CUSo Requirements By Brian R. Witt NCUA recently amended its CUsO Rule to include sweeping changes that will affect all CUsOs owned by federal and state chartered credit unions. it s time to prepare your CUsO for the new rules that take effect in June 2014. On november 21 2013 the nCUA Board issued amendments to the CUsO Rule (Part 712) that added registration and reporting requirements for all CUsOs and further extended its regulatory reach over federally insured state chartered credit union CUsOs. As expected nCUA s final rule closely tracks its original proposal. However nCUA also adopted risk targeted reporting by complex or high risk CUsOs and delayed the effective date for registration and reporting. Overview of new CUsO Requirements The CUsO rule amendments designed to assist nCUA in regulating credit unions interests in and loss exposure for CUsO operations add significant new administrative work for CUsOs. Generally the CUsO rule amendments become effective on June 30 2014. However the new registration and reporting requirements will not become effective until the new government reporting system is operational which nCUA expects no later than December 31 2015. The CUsO requirements include national CUsO Registry all CUsOs must register on nCUA s future online registration system CUsO Annual Reporting all CUsOs must submit annual reports to nCUA CUsOs conducting complex or high risk activities must register and report additional detailed business & financial information Current financial & accounting requirements were extended to CUsOs of federally insured state chartered credit unions Restrictions on recapitalizing CUsOs were extended to federally insured state chartered credit unions in addition to issuing its final amendments to Part 712 nCUA issued Letter to Credit Unions 13-CU-13 providing an overview of the CUsO Rule changes and reporting requirements. CUsO Losses Result in More Regulation nCUA took a year and a half to propose and finalize the rule. While there was strong opposition from the CUsO industry which seemed to stall the rule the underlying impetus for the rule-- CUsO losses--continued to grow. According to nCUA since 2008 CUsOs have caused credit unions more than 300 million in direct losses and still pose potentially widespread financial and operational risks to credit unions and the national Credit Union share insurance Fund (nCUsiF). nCUA claims it has not been able to conduct offsite monitoring to assess these potential risks because they lacked access to financial and operational information from CUsOs. nCUA has always had full access to any CUsO information just not in an organized registry. Whether the increased regulation will reduce CUsO losses over time is questionable. nCUA s supervisory enforcement authority over Credit union buSINeSS 31 February 2014 Cu reguLaTION credit unions and corporates has not resulted in reduced losses or risk to the nCUsiF. Restrictions on Recapitalizing CUsOs extended to FisCUs Currently FCUs that are less than adequately capitalized or would be after making a CUsO investment must obtain prior written approval from the applicable nCUA Regional office to recapitalize its CUsO. nCUA has extended this don t throw good money after bad money rule from FCUs to FisCUs too. The rule restricts additional investments in a CUsO by an FisCU that is or would be rendered less than adequately capitalized. A FisCU must obtain written approval from its state regulator and notify their nCUA Regional office before further investing in a CUsO that will result in an aggregate cumulative cash outlay (up to seven years) that exceeds the applicable state CUsO investment limit or if none the federal limit (one percent paid-in & unimpaired capital & surplus). 2014 CUsO Requirements All CUsOs are faced with new administrative requirements that will require action prior to the June 2014 effective date. in particular CUsOs of federally insured state chartered credit unions (FisCUs) must transition to the same set of rules as federal credit unions (FCUs). Financial & Accounting Requirements extended to CUsOs of FisCUs nCUA extended several CUsO rule requirements of FCUs to FisCUs. Currently nCUA requires CUsOs to enter a written agreement with their FCU owners to ensure that the FCU and nCUA have full access to the CUsO s financial books and records. The CUsO is also required to keep its books and records in accordance with GAAP prepare quarterly financial statements and (except for wholly owned CUsOs) obtain an annual CPA financial statement audit. nCUA extended these requirements to all CUsOs of FisCUs. now nCUA can gain complete access to any books and records and internal controls of CUsOs of FisCUs. CUsO subsidiaries nCUA clarified its long-standing position and industry understanding that any subsidiary of a CUsO is itself a CUsO. Thus any subsidiary entity in which a CUsO forms operates or just invests is itself a CUsO subject to the requirements of nCUA Part 712. new CUsO Written Agreements All CUsOs Prior to investing in a CUsO a credit union must obtain the CUsO s written agreement to the financial and accounting standards and information access. All CUsOs will need to update or adopt a new agreement before June 30 2014. For CUsOs of FCUs the update is necessary to reflect the new registry and reporting requirements. For CUsOs of FisCUs the written agreement is entirely new due to nCUA s rule extension. For these CUsOs their written agreement with credit union owners must address the financial and accounting requirements records access registration and reporting. The written agreements provide no benefit to CUsOs but are helpful for a credit union with a minority ownership in a CUsO to ensure access to updated financial information. More importantly the agreements give nCUA full CUsO access by contract. 2015 national Registry & Annual Reporting for CUsOs nCUA added significant new requirements applicable to all CUsOs for registration and annual reporting of operational information to nCUA. The new online registration and reporting will apply to all CUsOs including all currently existing CUsOs whether or not operational new CUsOs within 60 days of formation and business acquisitions that become CUsOs. Again the new CUsO registration and reporting requirements are not immediate and have been delayed until 2015. Basic Registration for All CUsOs All CUsOs must register with nCUA. A CUsO s registration will be made on an online registration system to be developed by nCUA by 2015. The basic registration includes CUsO administrative data as well as some proprietary information including 32 Credit union buSINeSS February 2014 Cu reguLaTION CUsO Legal name Tax iD number Physical Address Telephone number Website address (URL) Primary CUsO contact person CUsO services offered names & charters of credit union owners names & charters of credit union lenders Customer information names & charters of all federally insured credit union service recipients customers names and information about CUsO owned subsidiaries. Based upon industry comments calling for a more risk-based reporting scope nCUA decided to require additional financial statement and CUsO service information for riskier CUsOs but not all CUsOs. However most CUsOs engage in activities that will require the higher standard of reporting. service information services provided to each credit union owner lender or service recipient and the level of activity conducted investor information investment amount of each credit union owner Lender information loan amounts of each credit union lender CUsO Financials most recent annual audited financial statements CUsOs providing credit & lending services detailed loan information categorized by each type of loan The total number and dollar amount of outstanding loans The total number and dollar amount of loans granted year-to-date Annual Reporting for All CUsOs All CUsOs will be required to submit an annual report to nCUA and the CUsO s state regulator if applicable. Thus national CUsOs with credit union owners throughout the country will need to establish multi-state reporting procedures. The annual report will include current basic registration data plus business and financial information for complex high risk CUsOs. The annual reports will be submitted via the nCUA online system. in its Letter to Credit Unions 13-CU-13 nCUA stated that the Freedom of information Act (FOiA) and applicable exemptions in nCUA s FOiA regulation apply to any information a CUsO submits to nCUA. nCUA also gave assurances that nCUA will safeguard and not release information reported by a CUsO. nCUA can and will share information with state regulators. nCUA s increased regulation of CUsOs has not stifled CUsO innovation and collaboration in the past and should not diminish their innovation and collaboration ability in the future only their resources. Brian Witt is an attorney with Farleigh Wada Witt law firm in Portland Oregon who represent CUSOs and credit unions nationwide on formation corporate and ownership issues licensing operations contracts regulatory compliance and state and federal regulatory matters. bwitt Additional Registration Data for Complex High Risk CUsOs CUsOs that engage in the following activities are deemed to be complex or high risk CUsOs subject to more extensive data registration and reporting Credit & lending activities MBL origination consumer mortgage origination loan servicing & support student loan origination and credit card origination information technology electronic transaction services record retention security disaster recovery services and payroll processing Custody safekeeping & investment management services For riskier complex CUsOs nCUA will require reporting of detailed proprietary business and financial data in addition to the basic registration data above including February 2014 Credit union buSINeSS 33 Cu CONTeNT What Needs to Change at Your Credit Union in 2014 H By Laura Enock appy new Year all you Credit Union Business readers Assuming you re interested in growing your credit union this year or at least keeping up with changes in technology and marketing best practices i d like to introduce you to my good friend Jeff. Jeff is the marketing director at a credit union somewhere in the Midwest with assets of just under 100 million. He s been with this credit union for just over five years. Prior to his current job Jeff was the marketing and business development director at a well-known corporate group with highly specialized six-figure clients as well as other high-profile clients. Jeff s education and corporate background give him a unique set of knowledge and skills that no one else at his credit union has. One might think that was why he was hired it should have been a plus. But it wasn t. instead of giving Jeff the leeway he needed to take the credit union to the next level the credit union s senior management (read CeO and board) had fixed ideas about how things ought to be done. Their thinking went something like this Jeff was hired to do marketing That s excellent He should get in his car drive around town and deliver flyers to every select employee Group. Done with that Then please help the tellers complete their new member applications. Have we mentioned that he also needs to order staff uniform shirts coordinate holiday decorations with each branch and plan the staff holiday party After all that s what marketing is right Uh didn t someone say marketing and business development By way of explanation there s a reason for this. Many years ago even before Jeff s predecessor came on board marketing was a group effort whoever was available to distribute flyers was the day s marketing person. Given this background why would anyone listen when Jeff talked about introducing new member 34 Credit union buSINeSS campaigns or digital marketing What does he know about strategically growing business through advertising One or two ads per year are sufficient right Why should he spend his time teaching staff about products and training them in cross selling After all what do any of these things have to do with marketing and business development Rather than recognizing Jeff s talents and capitalizing on his experience Jeff was simply expected to slip into the marketing role that the credit union s upper management had created for him based on their limited understanding of his area of expertise. While this particular credit union is rife with politics many credit unions have projects and processes that management doesn t want shared with other organizations. At one credit union for example an individual who may have done a good job five years ago now handles email marketing even though he is woefully under qualified and would benefit from learning updated best practices. To make matters even worse 25 percent of this credit union s members receive e-statements and those members do not get the CU s printed newsletter and no e-version exists. Why haven t they created an e-version of the newsletter February 2014 Cu CONTeNT They re physically at work but they ve psychologically retired. Any CU leader in that situation causes problems their attitude trickles down and permeates the entire company culture. But back to Jeff Despite all the obstacles and setbacks he succeeded in implementing an aggressive marketing program and has been able to shake things up in a good way. While he didn t expect accolades--many of us don t feel appreciated for what we accomplish at the office--he shouldn t be asked to write every article in the newsletter himself (that s what CUcontent can do for him... and you) and he should be given the tools he needs. Today Jeff is at a crossroads. His successful marketing campaigns have brought in new business but the CU s ability to handle the increased branch business has not been addressed. People come in and wait for hours to see a loan officer Jeff explains so how can i in good conscious bring in more business now it s not that dramatic for most credit unions more employees are hired as membership grows. is your credit union giving employees the right tools and appropriate authority that enables them to perform their jobs to the absolute best of their abilities Or is it afraid to think out of the box embrace inevitable change and take the risks suited for realizing growth and maximizing potential i recently spent time discussing the changes Jeff would like to see in the coming year. While each credit union is unique and every situation is different you should ask yourself if your own credit union could benefit from adopting some of these ideas. Jeff said We need more structured planning. The credit union should move toward creating a more corporate environment. Right now senior management s vision is too limited and it would be ideal if we could offer additional education to senior administration. Yes the credit union was once a mom-and-pop sort of operation but for better or worse those days are long gone and the time for strategic planning has come. Jeff would also like to see marketing and business development play a more important role and be better appreciated. Both are vital to the growth and success of every business and credit unions are no different. not surprisingly morale is low throughout Jeff s credit Is your credit union giving employees the right tools and appropriate authority that enables them to perform their jobs to the absolute best of their abilities Or is it afraid to think out of the box embrace inevitable change and take the risks suited for realizing growth and maximizing potential which is so easy to do in today s technology-drenched world Because the VP of Marketing and Business Development doesn t have the authority to go ahead and create one. it reminds me of a conversation a friend recently shared with me she asked her teenage daughter not to leave her Walkman in the car. To which her daughter replied Uh mom What s a Walkman And that s a great way to sum up this conundrum. As long as credit unions use a Walkman instead of an iPod or a Commodore 64 instead of an iPad or as long as your marketing director is hand-delivering flyers to seGs instead of all of the other important tasks he should be doing you can t expect to achieve better results. so where are these problems coming from Why is it so difficult to see that marketing is important to the credit union When will marketing directors be given the tools and authority they need to get their jobs done in some cases problems arise when a CU has an aging management team and or board a CU for instance where people have worked since the credit union s inception. Perhaps they are a few years away from retirement and are simply going through the motions. Mentally they ve already checked out 36 Credit union buSINeSS February 2014 Cu CONTeNT union. it s a domino effect Jeff comments. Morale will be low without staff buy-in which is unlikely when upper management is short sighted and opportunity for employee growth remains stunted. The desire to see a new or more open-minded management at the CU sits at the top of Jeff s wish list. Jeff was recently offered a position with another credit union. Outsiders see what those close to the situation can t Jeff is a talented professional who is doing an outstanding job despite having to work in an environment where he s not appreciated. Yes Jeff is a real person who for obvious reasons has asked to remain anonymous. As we begin the new Year i ask you if there is a Jeff on your staff. i ve met many Jeffs in many marketing departments over the years but a Jeff can be found in any department. so here s my challenge to you take an honest look at how much leeway the employees at your credit union have and ask yourself if every employee is able to live up to his own potential. Areyouinvestinginyouremployees Areyougivingyouremployeestheauthorityand proper tools they need to give their most to the credit union Doyouunderstandthevalueofmarketingandhowit affects your credit union Iseachemployeedoingtheirutmosttohelpyour credit union grow from the position they re in Candid and honest answers to these questions may not yield the responses you re looking for and it s always easier to leave well enough alone but if you want to take your credit union to the next level and you re ready to broaden your own horizons i challenge you to begin an open dialog with your staff. not ready for that Try an anonymous survey but make sure you re asking the right questions. Change doesn t happen overnight but there s power in beginning the journey. Laura Enock is Founder and Publisher of a credit union-specific content service. Join hundreds of credit unions getting FREE monthly content Email her at laura or visit COMPLIANCE IS OUR POLICY PolicyWorks is a national leader in credit union compliance solutions. Our team of experienced professionals offer a wide array of compliance services. We re your partner to make compliance easy. Visit us online to learn more February 2014 Credit union buSINeSS 37 CrOSSWOrd Qualify to win an iPad Mini on February 28th Enter to win an iPad Mini on February 28th 1 2 4 6 8 9 7 3 5 February CUB Crossword Puzzle 10 ACROSS 4 Flexible and innovative ______ solutions (Back Cover) 9 (Page 11) 10 SWBC ___ ____ COMPANY (Inside Front Cover) DOWN 1 ___ - call Reslolution. (Page 41) 2 With over _____ of investments under management (Page 13) 3 We speak the same _____ (Page 25) 5 The ____ is your friend (Page 17) 6 Missing your _ _ _ conversion goals (Page 3) 7 _ (Page 22) 8 The Power of _______ (Page 5) To qualify 1. 2. 3. 4. 38 Credit union buSINeSS Read Credit Union Business. 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