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T H E O N LY ALL- D I GI TAL ALL -BUSINESS RESOURCE FOR CREDIT UN IO NS T H E S E C U R I T Y S A F E T Y & S O U N D N E S S I S S U E CREDIT UNION TRAINING JANUARY 2016 VOLUME 11 ISSUE 1 Think Small Business Not Small Credit Union KENNETH C. BATOR COMPLIANCE UPDATE All Hands on Deck for Successful FI Marketing CINDY WILLIAMS STRATEGY Is Your Credit Union Getting the Best Deal GEOFF BACINO 5 Ways to Save Money on Products and Vendors Kenneth C. Bator MBA Managing Risk Doesn t Have to Be a Juggling Act It doesn t matter if you have 100 or 100 000 loans risk management is a vital component of the success of your institution. But with a complex loan portfolio limited resources and an ever-changing regulatory environment it can sometimes feel like a juggling act. With multiple turn-key user-friendly risk management software and service programs SWBC can help you gain control of your risk management goals. Visit or call 866.647.8749 today to learn more AUTOPILOT COLLECTIONS AND RISK MANAGEMENT COLLATERAL PROTECTION INSURANCE (CPI) ASSET RECOVERY LENDER PLACED TRACKING AND PLACEMENT DEFAULT RISK MITIGATION 2015 SWBC. All Rights Reserved. 5540-1327 0415 TABLE OF CONTENTS JANUARY 2016 VOLUME 11 ISSUE 1 THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS Managing Risk Doesn t Have to Be a Juggling Act 4 6 10 13 18 20 23 UP FRONT Visit or call 866.647.8749 today to learn more Happy New Year Tim O Hara LENDING SOLUTIONS 29 32 35 39 BRANCH BUSINESS Tips to Transform Outdated Offices Into Profitable Branches Meredith Deen DIGITAL SERVICES Catching Members on the Way Up Making Loans Others Turn Down Lorrie Wohlfeil CFO CURRENCY The Small Business Opportunity Driving Growth through Digital John Davis MEMBER BUSINESS LENDING Ryal Tayloe MARKETING MATTERS Return on Equity Its Significance to Credit Unions Alec Hollis CEO VELOCITY SBA Guarantees A Sweet Opportunity Next-Generation Marketing Automation Onboarding and Cross-Selling Help CUs Drive Loan Growth The Art of the New Deal in Automated Integrated Marketing Propensity to Purchase and Member Retention. Ken Burns BRANCH BUSINESS Doug Fecher Getting Back to Roots at WPCU Scott McClymonds All Hands On Deck for Successful FI Marketing Cindy Williams DATA LOSS PREVENTION Brian Berglund STRATEGY COMPLIANCE UPDATE Data Security Internal & External Risk Factors Is Your Credit Union Getting the Best Deal 5 Ways to Save Money on Products and Vendors Geoff Bacino CREDIT UNION TRAINING 43 46 Lessons from SPIRE A Depression-Era Credit Union Looks to the Future Kaitlin Morrison MILLENNIAL MANAGEMENT TEAM 25 Think Small Business Not Small Credit Union Kenneth C. Bator U N I O N They Get Millennials Because They Are Millennials Introducing ANECA s Millennial Management Team Eric Gagliano 1 C R E D I T B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M ABOUT US THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS PUBLISHING TEAM Tim O Hara Editor & Publisher tim Ashok Kumar Associate Publisher ashok Patti Manzone Designer UP FRONT Tim O Hara LENDING SOLUTIONS Lorrie Wohlfeil CEO VELOCITY Scott McClymonds CFO CURRENCY Alec Hollis COMPLIANCE UPDATE Cindy Williams DATA LOSS PREVENTION Brian Berglund STRATEGY Geoff Bacino CREDIT UNION TRAINING Kenneth C. Bator BRANCH BUSINESS Meredith Deen DIGITAL SERVICES John Davis MEMBER BUSINESS LENDING Ryal Tayloe MARKETING MATTERS Ken Burns BRANCH BUSINESS Kaitlin Morrison MILLENNIAL MANAGEMENT TEAM Eric Gagliano 2 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M T H E O N LY A L L - D I G I TA L A L L - B U SI N E SS R E SO U R C E F O R C R E D I T U N I O N S T H E S E C U R I T Y S A F E T Y & S O U N D N E S S I S S U E CREDIT UNION TRAINING JANUARY 2016 VOLUME 11 ISSUE 1 Think Small Business Not Small Credit Union KENNETH C. BATOR COMPLIANCE UPDATE All Hands on Deck for Successful FI Marketing CINDY WILLIAMS STRATEGY Is Your Credit Union Getting the Best Deal GEOFF BACINO 5 Ways to Save Money on Products and Vendors Kenneth C. Bator MBA SUBSCRIPTIONS Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine Inc. A one-year Digital membership is 75 yr x 3 ( 225). An online membership form is available at register. SALES AND ADVERTISING Tim O Hara Publisher tim or 561-282-6015 1 CONTACT INFORMATION Credit Union BUSINESS Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) tim 250 000 Credit Union Employees 92 Million Members 100 Million Miracles Since 1996 Credit Unions for Kids has raised more than 100 million for Children s Miracle Network Hospitals giving hope and healing to kids in your local community. YOUR FUNDRAISING DOLLARS IN ACTION MILLION 10 2 1 iMRI machine and surgical suite 1 Cardiac X-ray machine 1 Ultrasound machine 1 Bone marrow transplant 1 Fully-equipped Giraffe OmiBed incubator MILLION THOUSAND 270 THOUSAND 250 THOUSAND 100 UP TAB FRONT BY TIM O HARA I Happy New Year to come to work and members continually want do business with your credit union you need a B C S Formula. Simply put this stands for brand culture and strategy alignment. In other words we need to be clear about the image we want to portray the experience we need to create both for and through our staff and how we are going to drive more of the right members to our credit union. We will be discussing different aspects of brand concept culture building and strategic planning to help you build your unique B C S Formula within your credit union. I m looking forward to our ongoing dialogue. And I am looking forward to reading every one of Ken s CU Training articles Passing Ships ... Just as we welcome Ken Bator to the editorial mix of CUB we have to say farewell to Brad R. Bergmooser the legal expert who has written our The Law column since last Brad R. Bergmooser February. I just got word that Brad hung up his CUB writing pen in favor of becoming the lead in-house counsel at Baxter Credit Union. We are grateful for his tenure with us and wish him the best in his new endeavor. To get 2016 off to a good start I want to renew my invitation for excellent writers with real-life credit union experience to join our All Stars team. I look forward to welcoming you personally. Thanks for reading Tim ve got a very strong feeling that 2016 will be a good year for all of us I hear that the economy is in the best shape it s been in years and that credit unions continue to grow in both members and assets. From all that I read (and I read a lot) CUs are lending like crazy. And they re building good solid loan portfolios that will help them grow even stronger in the future. What I m feeling most happy with is the editorial content written by some of the brightest professionals in the industry or as I like to call them the Credit Union BUSINESS All-Stars. This is a group of outstanding professionals whose experience advice and counsel is widely sought after by credit union executives. We ve been building on the group for many years. I love it when exceptional people agree to write real business information for CU BUSINESS Case in Point Kenneth Bator MBA begins what I hope will become a long-term franchise in this issue of CU BUSINESS with his new regular monthly column CU Training. I ve known Ken for many years and have Ken C. Bator always admired his style which is First Class Ken has more than 20 years of experience in helping organizations make money save money and survive internal challenges and tough economic conditions. As a facilitator for training and strategic planning sessions and as an expert in brand concept culture building and management Ken has helped hundreds of organizations since 2001. Ken puts it best If you want to create an experience where employees actually want 4 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M LIMITED TIME OFFER Introductory Rebate LENDING SOLUTIONS BY LORRIE WOHLFEIL CLE Catching Members on the Way Up Making Loans Others Turn Down T How can your credit union achieve the recommended level of net yield in 2016 It s all about taking big risks to secure big profits. But how do you ever get your team comfortable in taking on such risk These tips will help you and them feel more at ease. products all have in common Risk risk and more risk. We will explore how to get your staff more comfortable with taking these types of risks in this month s article. We believe the number one factor in being able to make loans others can t is simple and it can be narrowed down to one word interview. Your staff has to find out more to the story than other lenders are and they cannot let a low FICO score allow them to stop short. Many lenders do not dig deeply enough to give themselves a chance. Opportunities to dig deeper where many lenders simply quit are as follows he last few articles we have written at Lending Solutions Consulting Inc. have focused on profitability for credit unions. As prefaced previously we believe measuring and achieving strong net yield may be the most critical determining factor in producing strong earnings. Your recommended net yield which is defined as gross yield minus charge-offs is 6.5 percent or higher. Attaining this level requires some key factors all working for the greater good of the credit union. These factors include the following 1. Appropriate pricing according to risk and FICO with six tiers and a spread of 13 to 15 percent between your highest and lowest tiers 2. Healthy amount of unsecured loans and credit cards that comprise approximately 15 percent of your total portfolio 3. Appetite for risk with the following breakdowns A A 35 percent B 30 percent C 20 percent D E 15 percent Bullet points numbered two and three both create challenges for credit unions. They require an appetite for risk and a comfort level with loans that carry greater risk (e.g. debt consolidation loans). Credit unions strongest yielding products include any unsecured loan product and C D and E auto loans where up-charging occurs for terms and loan to values. What do these 6 C R E D I T U N I O N B U S I N E S S 1. Employment Concerns Instead of denying a borrower for lack of job stability you must require more information. Your application should require specific start and end dates. It is essential to understand J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M LENDING SOLUTIONS insights An instance of capturing the true nature of a thing. why the applicant left his or her previous job and how employable and motivated he or she is. Does the member have acquired and transferrable skills Is the new job using any of the same skills as the previous How has the income changed Does the job require a degree Did the member graduate college The vast majority of credit union loan applications do not allow or require an in-depth analysis of job strength. When you are looking at making the types of loans that carry strong yield job stability may be one of your biggest allies. You already know that the credit report most likely has some flaws. very loyal and they will remember that you gave them a chance. For past bankrupts look at how the credit was handled prior to the bankruptcy. If it was strong this can be a plus. Don t be afraid to dig deep into the factors that have caused the score to plummet. 2. Low FICO Scores As discussed in the previous Lending Solutions article the trend of the score is far more critical than the current state of the score. Many credit unions approve numerous loans on a daily basis where the score is trending down despite being in the 680 range. Many of these loans carry tremendous risk due to the amount of revolving debt in relation to installment and capacity concerns. These loans often suggest imminent bankruptcies and do not allow you to be compensated for the risk. How would that score look in 90 or 180 days As referenced in previous articles you also want to avoid being one loan too late. We believe past bankrupts or members who have lower scores due to medical or other small collections represent excellent loan candidates. These members often are debt free and have little risk if your loan is packaged correctly. In addition the yield you will receive is tremendous. Many of these members or new members can become C R E D I T U N I O N B U S I N E S S 3. Delinquent Credit History with Others The only reason you should deny a loan is if you believe you cannot get repaid. In fact we suggest your lenders document in the loan notes why the credit union cannot get repaid and why the money is better off left in investments earning one or two percent instead. Denying for delinquent credit with other is especially confusing to your members when they have held up their end of the bargain with you. In your efforts to hone in on how borrowers repay you we suggest requiring how many loans and on-time payments have been made specifically to the credit union. This information should be documented on the front sheet as well as in the loan notes. Taking this strategy one step further focusing on like loan repayment is also key. If the member is looking for a car loan require your lenders to add up how many car loans in total have been successfully repaid. How a credit card is repaid is far less significant when you are looking at approving a car loan. 4. Debt Ratios This denial reason is often used as a crutch or an easy out by hiding behind a loan policy. If you must put a maximum debt ratio in your loan policy we suggest 60 percent as a good number. When perfect payment patterns are occurring there is 7 2 0 1 6 C U B U S I N E S S . C O M J A N U A R Y LENDING SOLUTIONS g. Was it a vehicle that holds its value h. Has the member paid similar loans with similar payments in the past usually more to the story. Instead of quitting early ask the member how he or she is doing it. S he will tell you. There may be additional household income or someone else is helping pay one of the obligations on the credit report or helping with rent etc. Most consumers will pay their auto loan if they like and need their vehicles. If the member has a good job if the loan amount is 50 percent of gross annual income or less if the loan has forced payments and if the member is not a bankruptcy threat then the odds are in the lender s favor. Many of these loans that are typically turned down could be made. When we come in to credit unions for training we will take a sampling of recent turndowns and review them with the staff compiling questions we didn t get the answers to. We will then call the member or applicant in front of the decision makers and get the rest of the story. In almost all cases the CUs would like to be able to reverse their decision. It is telling how many of your turndowns can be approved with the proper INTERVIEW. There should be evidence that all parties are fighting for the member in the loan 5. Collateral Information Go back and look at your last 15 secured turndowns to see if the following information was gathered. a. What is the vehicle they are purchasing or refinancing b. What is the value c. Was the vehicle their primary mode of transportation d. Was the vehicle needed for work e. Did you inspect the vehicle f. Did you know the condition or time left on tires etc. 8 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M LENDING SOLUTIONS notes. Remember there is always a solution. At the end of this article we have provided a member s credit report that is less than perfect but has great payment history on an auto loan. How would your staff handle this member Would they be quick to hide behind one of the topics outlined above Lorrie Wohlfeil began her career at LSCI in August of 1995. Lending Solutions Consulting Inc. (LSCI) is the industry leader in providing consumer lending advice to credit unions across North America. As a business analyst Lorrie is primarily in charge of the Portfolio Analysis program an external audit dedicated to helping credit unions make stronger loan decisions and seek sales opportunities. Lorrie also works hand-in-hand with our onsite consultants and has attended numerous Rex Johnson s University of Lending and specialty schools. Before starting the Portfolio Analysis program Lorrie designed the highly successful training program in place at Lending Solutions Inc. (LSI). Spending four years as an onsite consultant for LSI she personally trained many of the corporation s loan underwriters. During that time she not only educated credit unions on lending but also trained their staff to make superior lending decisions. Lorrie graduated from the University of Kansas with a degree in Business Communications. Scott M cClymonds and CEO Velocity help financial institutions like yours increase earnings member loyalty and employee productivity. Scott has helped hundreds of CEOs and senior managers find answers and solutions to tough questions like Who are your most profitable members and how vulnerable are they to attrition Where can you find m ore of them Are they already doing business with you How does your strategy need to be adjusted to improve your results by 20% or more What technology updates will give you the highest payback How should you develop your most promising leaders Email scottm to request a free paper on how to find and close earnings gaps in your credit union. 479.263.0774 C R E D I T scottm ceovelocity.comc U N I O N B U S I N E S S Scott McClymonds is one of the most creative strategists in the financial services industry. - Elio Spinello Principal RPM Consulting 9 J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CFO CURRENCY BY ALEC HOLLIS Return On Equity Its Significance to Credit Unions If your credit union is evaluating the keys to success in 2016 don t bypass return on equity. In the New Year profitability should be viewed as a service to members rather than taking away from them. Learn more about this often overlooked metric and how to leverage it to your CU s advantage. A s 2015 comes to an end and lenders begin to focus on 2016 readdressing what it takes to make a credit union successful may be timely. While many characteristics of a successful credit union are thought to be intangible and culture related let s not forget profitability and recall a concept that sometimes takes a backseat in credit union performance reporting return on equity (ROE). Because credit unions are member owned shareholders equity can be replaced with members equity. Ultimately credit unions should consider profit orientation as continued value enhancement to members. Conventional industry thinking sometimes associates profitable credit unions with taking from the members hogwash An institution with a lower ROE is generally in a riskier position than one with high capital returns and does a disservice to its members. Remember while the additional risk of low profitability may not be measured within an interest-rate risk framework it must be considered. An institution that is barely breaking even is not building its capital base to ensure it can meet its liabilities down the road which presumably would increase at least with the rate of inflation. It may also lack resources to stay up to date with technology and other service advancements leading to additional risks related to security and member satisfaction. Profitable institutions often possess more funds to invest in technology that will enhance business flow and member-centric services. Furthermore they are better equipped to instill members confidence in the security of their assets improving their capability of making a difference in their local community. Return on equity is calculated as net income divided by net worth or members equity. Despite its reputation for being more bank-centric this metric can be highly useful to credit unions. Understanding this metric gives insight into a credit union s risk and whether it is doing too little or too much with its capital. Furthermore ROE is an essential metric used in managing profitability and can be thought of as a value add for members. Because credit unions are member owned management and the board should consider having a targeted ROE that is compatible with their institution s risk guidelines but also capable of delivering institutional goals. 10 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CFO CURRENCY Trends in credit union profitability have fluctuated quite a bit with industry profitability experiencing a robust recovery since the 2009 lows. However over the past three years industry profitability has trended downward. Small credit unions in particular are struggling with tightening profit margins. Exhibit 1 displays the aggregate annualized ROE of the industry over the past three years. Below it Exhibit 2 shows the Q3 2015 annualized ROE of six different peer group classes based on NCUA categorizations. As the exhibits demonstrate profitability has been on the decline and small institutions are largely struggling. Exhibit 1 Credit Union Aggregate Return on Equity 3-Year Trend Exhibit 2 Credit Union Return on Equity by Peer Group Quarter 3 2015 11 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CFO CURRENCY CFO CURRENCY CURRENCY CFO CFO CURRENCY are calculated figures not assumptions. The have significant implication on the ALM conclusion. The of time. Credit will need to be assumptions used should be changed government bond inputs allow the user to model cash flows with an end maturitybenchmark if budget surpluses dry up thein progressive intervals Alec Hollisreviewed and authorized and joined ALM First To examine are drivers of declining industry market. the output should be recalculated to determine the impact and They have already become the standard for pricing and decay rates that the similar to amortizations. this can in 2012. profitability and to understand why the present valuemany corporate bonds. Financial Advisorstake weeks. Mr. of a different assumption. Dividend and discount rates allow for smaller credit Hollis and spreads are will allow If you are liability unions are less profitable modeled interest rate scenario. Knowing where swap rates performs assetuncertain as to calculations (premiums) in eachit is helpful to analyze the analyses forthe many requirements of financial institutions determinants of profitability. An adaption of DuPont Effective duration calculations can then mathematically bebetter hedging and investment execution. When investors need Conclusion various what-if analyses budget applying and using derivatives Analysis for financial institutions aids in this analysis compared to that of the institution s assets. In this case effectiveto gauge credit risk and market be viewed as aswap curve is Non-maturing deposits can sentiment the franchise value forecasting to analyze.engaging an external liquidity forecasting by relating an institution s ROE to its return on assets becoming the more important curve consider duration is calculated by merely backing into the price change or benefits generated fromother modeling requirement loyalty of the membership when and any service provider to help you (ROA) and financial leverage. We can then further formula. For example if the liabilityof ROAvalue assess in the deposits are retained fit thedividend rates are clients. As present to is 100 the when needs to partner with of ALM s low in a higher decompose the determinants through the steps. Emily Hollis CFA is a ALM First Financial base 101 in the up 100from point scenario and 99 in the down anmarket environment. And vice versa Aresponsibilities Associate factors detracting basis performance. Ultimately an Advisors LLC. Mr. Hollis s additional financial derivatives Properly used institution 100 basis point ROA is a the effective duration isitone percent include the presentation of dividend rate higher thanandrisk that offers a non-maturity results tooffset interest rate institution s scenario function of how well controls can client ALCOs market (i.e. (101-99) 200). to attract hot money will as mentoring new financial its its costs and generates revenue as measured by profit senior management as welldecrease the economic within ofthe that is inherent value liabilities. It is imperative margin and asset utilization respectively. Exhibit 3 analyst team members. to model these accounts for a more because as competition competencies to meet the final requirements. The second part credit union industry today. This is vitaldegree in finance Mr. Hollis holds accurate depiction of a bachelor s rate unions Sensitivity Analysis used to measureall requirements are grows derivatives can interestcreditrisk. to compete more displays the method each component allow and final application is submitted when and the formulas used to calculate them. The regulator strongly suggests sensitivity analyses as a means from the University of Notre Dame in South Bend effectively. completed including dealer contracts. Emily to quantify the effects of changing assumptions. Sensitivity Indiana.Mor Hollis CFA is a partner with ALM First Financial Setting up a line at a dealer is similar to becoming a Advisors LLC. analyses are essential because the core share evaluation may Emily Hollis CFA is a partner with ALM First Financial member of the FHLB--it can be laborious and takes a good deal Advisors LLC. Exhibit 4 The outputs Some analysts view swaps as the most likely replacement for Treasury bonds as a financial benchmark if budget surpluses dry up the government bond market. 12 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M November 2014 Credit Union BUSINESS 15 CEO VELOCITY BY SCOTT MCCLYMONDS Doug Fecher Getting Back to Roots at WPCU Recently I had the privilege of facilitating a presentation at the Cornerstone Credit Union League s New Ideas Institute in San Antonio on the topic Have Credit Unions Lost Their Way The main presenters were Doug Fecher CEO of Wright-Patt Credit Union (WPCU) in Beavercreek OH and Steve Hennigan CEO of SACU in San Antonio. The premise of the presentation was that credit unions generally speaking are behaving more and more like banks and have forgotten and deviated from their congressional mandate of helping people of modest means. ornerstone s CEO Dick Ensweiler and University Federal Credit Union CEO Tony Budet both of whom were instrumental in making the presentation happen felt strongly that what Doug and Steve had to say would challenge league CEOs into considering how well they were fulfilling their duty of serving people of modest means. In addition to facilitating their presentation I have spent substantial time with each CEO and have gotten to know their stories well. This article will unpack Doug s story and next month I ll do the same with Steve. What you ll read will provide some challenging questions for you and your board to consider as you determine how well your credit union is fulfilling your fundamental responsibility to Americans of modest means. Doug Fecher CEO WPCU C Real World Leadership While leading WPCU to a position of better serving moderate income people has been a primary focus for Doug from a broader perspective his story is also about credit union CEOs leading with vision creating a culture around that vision aligning goals and execution to achieve the desired vision and culture and having their communities benefit from the credit union s efforts. I have written about and emphasized this point repeatedly in this column and it is a fundamental skill that all CEOs most develop in order to successfully lead their credit unions. Doug is in the midst of transforming WPCU to become more focused and adept at understanding 13 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CEO VELOCITY the needs of Americans of modest means but it is a complex process of cultural transformation business case analysis and keeping regulators happy. The metamorphosis of WPCU began in the last few years as Doug became increasingly uncomfortable with where the credit union was going relative to the very real needs of WPCU members and the stated congressional mission of credit unions. All the financials were sound at the 2 billion asset CU but Doug felt strongly that WPCU needed to return to its roots. Come with me as we discover why and how this transformation IS occurring. Doug s Challenge to Credit Union CEOs Doug Fecher likes to ask credit union CEOs what keeps them up at night. Is it data security branding the NCUA your digital strategy While these and other issues are clearly important to every credit union Doug would challenge every CEO to also deeply consider the plight of middle-America and what their organization can do to address the difficulties faced by millions of people. He quite provocatively tells CEOs that if the needs of this vast population are not foremost on their minds they are thinking about the wrong things. Backing up his point Doug cited a quote from a prominent banking executive who said that no bank can do better than it s customers . This is one reason why a number of banks have begun reaching out to their communities with jobs forums small business assistance units and financial literacy initiatives. While not saying banks are altruistic the point that their financial well-being depends on how well their customers are doing has hit home for many of them. Of course the same holds true for credit unions. If the bulk of your members are struggling financially so will your credit union. Therefore learning to meet the needs of modest income people is not only the federally mandated thing to do but it is also good for business. As an example of what many middle-income Americans face Doug pointed me to the Spent Movie which highlights the difficulties faced by real Americans for whom the mainstream financial system is not working. Some are struggling entrepreneurs needing a boost of capital others have encountered severe health or family situations that have depleted their incomes and savings while still others are plagued by bad decisions made years ago. All the folks in the movie are honest and hard-working yet their circumstances which are not uncommon have few it any solutions within most credit unions and banks. Doug showed the Spent Movie to his board of directors and said it resulted in one of the best board table discussions they ever had. Few if any directors really understood the challenges faced by Americans of modest means and this increased awareness has created a strategic change within WPCU. WPCU Strategic Changes A strategic initiative for WPCU in 2016 is helping their members improve their financial health. Their relationship with the Center for Financial Services Innovation led them to understand members in three primary financial health segments Thriving Coping and Vulnerable. As they examined their product offerings WPCU found they were mostly serving the Thriving segment and in essence missing the needs of more than half its members. Creating a product mix that addresses the financial health of all three segments is a key goal in 2016. Financial Health Product Mix Doug emphasized they are just beginning the journey of creating a strategy and product line that helps all 14 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CEO VELOCITY Managing Risk Doesn t Have to Be a Juggling Act three types of members. Some ideas are still being worked out while others have immediate application. For example becoming the anti-debt lender is one of the strategic changes being considered by Doug and his team. By this they mean teaching people to pay off debt and save more money. Within this objective would come short-terms loan to pay off higher interest debt but the goal is to help high-debt members improve their financial health by teaching and helping them to get out of debt and build strong cash reserves. An example of a WPCU product for members in the Coping segment is their no rewards credit card at prime plus three. It is their second most profitable product even after losses and the repayment rate is excellent. WPCU also has a product that is an alternative to payday lending and is used by many in the Vulnerable segment. It is both popular and profitable. Its annual fee serves as a loan loss reserve the interest rate pays for any operating losses and members pay significantly less than they would at a payday lender. Visit or call 866.647.8749 today to learn more As WPCU further develops its new product line and approach toward financial health Doug said they might use their employees in focus groups and in pilot testing. The notion is that if more than half of WPCU s membership is coping or vulnerable a good portion of the credit union s 650 employees may be in these groups also. From a leadership standpoint this is brilliant. What could engender greater enthusiasm and testimonials than products employees helped develop and test themselves CEO Velocity Viewpoint While the conversation in credit union circles this year has been absorbed with credit union relevance mobile banking millenials and regulatory relief I have heard very little about how to achieve their social mission. As I told the Cornerstone CEOs the relevance of credit unions is baked into their not for profit social mission. Credit unions are inherently relevant and with the increasing propensity of millenials to do business with socially conscious organizations that relevance is strengthening. Being true to that mandate while providing superior service is what will differentiate forward thinking credit unions. I often tell credit union CEOs about the story Acres of Diamonds by Russell Conwell. In short a farmer wants to get rich so he sells his farm and goes in search of his fortune. Meanwhile the buyers of the farm discovered the world s largest diamond mine underneath the land they had purchased. The morale of the story is that the key to success is much closer than you think perhaps under your feet. 15 Creativity Testing and Buy-In Of course no CEO executive team or board can accomplish something as large as the transformation Doug has in mind without significant employee support. That s why Doug gave his entire presentation to his employee base. Their response was enthusiastic they want to be part of a company that values all member groups and provides them with the products and services they need to improve their financial wellbeing. C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CEO VELOCITY As Doug has done credit union CEOs should consider whether or not they using their federally chartered social purpose to guide them into successfully fulfilling their mission. The search for relevance and a differentiated brand may be right under your feet. More specifically Doug and his team will need to embrace a form of what I call the 7 Keys to Credit Union Relevance Impact and Performance CEO Velocity Advice Like any major endeavor Doug and his team are going to have to make sure the vision to help each of the three segments maximize their financial health becomes the ongoing drumbeat within WPCU. In other words they are going to have to get true lasting buy-in from board members and employees at all levels in order to show authenticity and value to their field of membership. This is not easy since new initiatives abound in business. I ll never forget the answer an employee gave me when I complimented her on a performance turnaround. She said Once I saw you really were serious about the new direction and didn t plan to back off I decided to put my energy behind it . In addition to buy-in from his leadership team and employees strong systems are going to need to be developed to support the initiative and make it successful. As the following diagram shows Doug will need to integrate leadership people and systems support around his initiative in order to develop the velocity (speed and direction) that will take he and WPCU toward their goals. 7 Keys to Credit Union Relevance Impact and Performance Formula for Business Velocity Executive Performance As I have said previously in this column executive performance is the engine of a credit union. It controls the CU s ethics morale and financial performance. Doug s executives may feel threatened by the new directions e.g. ( Will we still be as profitable If we re not will I have a job ) and he will need to mitigate those fears through coaching. Executive performance measures also need to be tied to the initiative. Strategy and Alignment A new initiative like this requires intense preparation. WPCU needs to build a solid well-rounded strategy they can adapt as they learn more from member responses. There also need to be goals and metrics around the overall initiative and its pieces and a communication plan must be put in place that reinforces the purpose of the initiative and allows employees to track tangible progress. 16 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CEO VELOCITY Employee Engagement From Gallup s Study on the American Workforce we know employees want to do a great job but need the tools communication training and management support to perform at high levels. While the initiative at WPCU is laudable it will come down to employee engagement and whether or not the management team has the day-to-day leadership abilities to keep employees focused on the goal. Member Value Creation I can t tell you how many times I ve heard leaders say we absolutely know what our members customers want but when I ask them how they know they can t tell me how they know or what mechanisms they re using to get that input. Neither are they tapping into other gold mines of information such as the vast amounts of telling information in their database. Primary and secondary sources of information should be used at WPCU to fully understand how each segment defines value. Systems Optimization At every financial institution I visit they tell me their systems are spaghetti that is disparate and non-integrated making it impossible to get the information they need in a timely manner. This is why my partners and I created an integrated system for financial institutions. Optimized systems allow for the speedy and complete execution of strategy as well as the feedback flows needed to make rapid adjustments. While painful many credit unions should be looking at new core providers to help with this optimization. Strategic Marketing The great Peter Drucker called marketing one of the two primary functions of business yet most credit unions do not take advantage of the wealth of capabilities available to them. The days of print advertising are dead. My firm integrates variable such as member preferences market demand and social media profiles to develop market strategies that are spot on providing the appropriate high value information each segment needs and engaging them in topics they care about. That is at the fingertips of each credit union and WPCU will need to engage the three C R E D I T U N I O N B U S I N E S S segments similarly through social media and other channels. Locational intelligence can help them create marketing campaigns around payday lender locations and WPCU can use that to show people in Coping and Vulnerable segments a better way. Community Activities This is where the rubber hits the road where WPCU gets to meet face to face with members and the community. More than words in social media texts or emails the best marketing WPCU can do is show it is truly serious about improving the financial health of people and having a strong presence at the appropriate places in their community will demonstrate their authenticity. They will need to let their members know about these events as well through their marketing not in a self-aggrandizing or congratulatory way but rather to reinforce their commitment to people s financial health and allow their members to tell their friends and family how to gain the same benefits. Scott McClymonds is a senior banking executive turned consultant executive coach and speaker. His real world experience in strategic marketing and leadership bring significant growth to profitability sales force efficiency member loyalty and employee performance. Scott s firm CEO Velocity specializes in helping executives create dramatic performance improvements a sustainable competitive advantage and a strong relevant brand. Scott can be reached at scottm scottmcclymonds or 479.263.0774. 17 J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M COMPLIANCE UPDATE BY CINDY WILLIAMS All Hands on Deck for Successful FI Marketing T Are your credit union s marketing efforts being given the organization-wide attention they deserve To maximize your success every member of your CU should be involved in tandem every step of the way. Learn the repercussions that can result from making marketing an afterthought and how to circumvent them. Another common practice we see in working with credit unions across the country is critical marketing and communication activities happening in unexpected places. Assertive staff used to taking initiative as they wear multiple hats will draft for example their own collections script that accidentally flies in the face of the Telephone Consumer Protection Act. Or a well-meaning loan officer just looking to spread the word about a new type of loan product will email his professional network opening the credit union up for a fair lending violation. While these enthusiastic go-getters are not trying to exclude marketing or compliance from the process the end result is often the same. When marketing compliance and product managers are working in tandem from the outset consistency across marketing channels becomes much he world of credit union marketing continues to evolve. New regulatory expectations are introduced frequently and today s marketers are facing pressure to adapt to ever-changing marketing methods and technologies. The combination of these two factors calls for an all hands on deck approach to credit union marketing. In many organizations both in and outside the financial services industry marketing is an afterthought. A product or service idea is conceived researched scoped developed tested tweaked and prepared for launch. It s often at this point that marketing staff is brought into the fold. In the highly regulated financial industry however this can create huge stumbling blocks with both financial and reputational repercussions. With the product team naturally anxious to hit send on a promotional campaign marketers are pressured to execute quickly and may not spend (or have) an adequate amount of time checking materials contact lists and methods for compliance with regulations. Marketers too have been known to embark on their own endeavors before looping in the right internal experts. Take social media for example. Social campaigns and activities are most often developed and executed by marketing staff sometimes in a bubble without the involvement of senior leaders. 18 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M COMPLIANCE UPDATE insights An instance of capturing the true nature of a thing. Working Together From The Very Beginning To ensure accuracy consistency and compliance with ever-changing regulations create a checklist at the outset of every new product or marketing campaign. Ask the following of product marketing compliance What product are we selling Through which channels will we promote the product Which regulations apply Which market are we targeting What exceptions are there With the internal resource you have built answering these questions should be fairly simple. You may want to consult with an outside resource however because these individuals are educated across product lines and channels. The other benefit of working with an independent partner is that your credit union is allowed to focus on what it does best leaving compliance up to the people who do that best. Marketers especially benefit from this type of partnership because they are allowed to flex their creative muscles and push the boundaries with the assurance they won t fall over the edge. Cindy Williams is vice president of regulatory compliance for PolicyWorks a national leader of credit union compliance solutions. She can be reached at cindyw more attainable. Today as credit unions are promoting products and services in person on the phone online and inside social networks or mobile apps the risk of deviations has grown exponentially. A Living Internal Resource Saves Headaches To guide all members of your cooperative-wide compliance team in their collective quest build an internal resource. This can be done in two basic steps. First list the regulatory guidance laws and regulations that include marketing components. Be sure to dig deep including the lesser-known ones like CAN-SPAM Children s Online Privacy Protection Act and Weblinking. Next compile the requirements by product (e.g. deposit products open-end loans credit cards mortgage loans etc.). Create subcategories within each product for the various delivery channels (TV radio digital social in-branch direct mail etc.). A natural time to add information to this living resource is when you conduct your marketing reviews. You can even plug sample disclosures into the resource as you review and approve them. Over time the updating process will become more efficient. So too will marketing reviews because you won t have to conduct start-from-scratch research with each new advertisement or marketing piece. 19 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M DATA LOSS PREVENTION BY BRIAN BERGLUND Data Security Internal & External Risk Factors N Are your credit union s data security measures up to snuff for 2016 If last year is any indication the financial industry needs to be on high alert for breaches both internal and external. There are four major data leak points that your CU should be focusing on. Find out what they are. Personal information for 1.1 million members was found to be compromised at Blue Cross Blue Shield. However member password encryption prevented access to social security numbers medical claims employment records credit card numbers and financial data. Premera Blue Cross Blue Shield was not as fortunate with a breach that compromised 11.2 million subscribers names birth dates social security numbers bank account info addresses and other information. The billion-dollar bank cyber heist affected 100 banks around the world. Employee account credentials and privileges were obtained through phishing (social attacks) tactics. Fraudulent transfers and hijacked ATM machines resulted in a loss of 1 billion. early every industry from A to Z including healthcare the IRS hotels prisons universities retail credit agencies the FBI brokerage firms pharmaceuticals national security surveillance and yes financial institutions has been impacted by data breaches at some point during the past year. Unfortunately 2015 ends with the all-time high of 732 data breaches exposing 176 325 059 records.(1) According to Paul Ausick from 24 7 Wall Street as of mid-December 66 breaches occurred in the banking credit financial industry. These breaches exposed more than 5 000 000 records which is nine percent of the total number of breaches for the year and 2.9 percent of the records exposed. With the turn of the new year it is no surprise that companies are on alert. They are ramping up their data security from both inside the company and from outside hacker sources. Security risks and attacks occur in many forms both internally and externally. Cyber attacks phishing (social attacks) and malware are the largest threats from outside the company as experienced recently by the following businesses. 20 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M DATA LOSS PREVENTION TAB Significant damage can arise from all data breaches but the silent unsuspecting and unreported attacks are most harmful and most prevalent across the globe. Small medium and large businesses have experienced countless opportunities for theft and malicious intent from downloaded data stolen encrypted drives printed records virus installations and human error. Theft malicious intent and errors account for the majority of internal security exposures. In fact Experian a global information services group projects that employees mistakes will be companies biggest threat in 2016. Although there is heightened sensitivity for cyber attacks amongst business leaders a majority of companies will miss the mark on the largest threat employees. Between human error and malicious insiders time has shown us [that] the majority of data breaches originate inside company walls. Employees and negligence are the leading cause of security incidents but remain the least reported issue. The growing threat is from within. U.S. companies and organizations accounted for 40 billion in losses from unauthorized use of computers by employees in 2014.(2) According to research conducted by the U.S. Computer Emergency Response Team (USCERT) estimates that almost 40 percent of IT security breaches are perpetrated by people inside the company. Criminal attacks are particularly likely to happen from the inside. Indeed one recent study estimated that 90 percent of criminal computer crimes were committed by employees of the company attacked. Databases were stolen at Epsilon compromising 60 million to 250 million records.(3) The breach at Target severely affected business with 110 million records compromised and the attack was from the inside network.(4) 54 000 members of Molina Healthcare were impacted when a former CVS employee downloaded customer information onto his laptop.(5) I nternal or external breaches come in all shapes and sizes from various resources and by various types of cybercriminals. Network monitoring of all systems files and employee activity greatly increases protection for small medium and largesized businesses including error data downloads and theft of data and devices. Secure the Network from the Four Major Data Leak Points Have employees Have data Risk happens by unintentional human error and intentional theft. There are four major data leak points. 1. Email messaging and instant messaging 2. Internet use including using offsite storage solutions such as cloud sharing and file storage applications (Google Drive Dropbox etc.) 3. USB removable drive devices (thumb drives CDs floppy disks pictures external hard drives etc.) 4. Printing is another way that is simple and involves less data but it is still another avenue to walk data right out the front door. Security Measures within the Network A Full-Service Internal Security Monitoring Analysis Reporting System It is common that as support activities have grown in volume and complexity IT budgets have decreased. This has placed added stress on already taxed systems and personnel. As a result many organizations are still in firefighting mode combating compliance issues data breaches disparate systems and antiquated manual processes within their businesses and IT operations. Security oftentimes falls by the wayside costing more money frustration and potential for breaches leaks and theft. Strengthening the network with an airtight full-service security system that offers 24 7 monitoring analysis and reporting is the first step to deter and prevent internal security risks with employees. 21 22 00 11 66 C U B U S I N E S S . C O M C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY DATA LOSS PREVENTION TAB Surprisingly an internal monitoring system does not have to be complicated or expensive but a full-service solution should offer the following features. Benefits of Internal Security Monitoring System 1. Reduce theft and misuse of information. 2. Enjoy successful audits. 3. Understand now what you don t know (where data is where it is going how it is being used). Preventing employees and external hackers from retrieving proprietary data whether personal information or intellectual property is a high priority that can be a well-managed simple installation falling within a reasonable budget. The key is to be sure that all the areas for possible breaches are covered and that audit requirements are incorporated into the fullservice plan. 1. http images breach ITRCBreachStatsReport2015.pdf 2. http news articles 2014-09-26 companies-worst-hackingthreat-may-be-their-own-workers 3. http us biggest-databreaches news-19083.html 4. http article index. php story_id 132004JXDG4C 5. http Data-Breaches molina-health-data-breach-an-inside-job.html Brian Berglund is the Director of Development at CTH Technologies. Based out of Chicago Illinois USA CTH is a security software development company offering data security solutions to all industries including credit unions. The CTH SecureCARE DLP (data loss prevention) solution protects credit unions against any internal loss of customer data either accidental or otherwise. At the same time it exceeds the required compliancy regulations set by state and federal agencies. CTH Technologies Security Consultants are specially trained in assessing existing security processes and vulnerabilities. Brian Berglund can be reached at BBerglund Key Focus Areas for Control These are the main focus areas your organization needs to understand and control 1 What sensitive data exists and where is it located Local drives network drives databases etc. data is everywhere. Can you locate all sensitive content 2 What user is taking which actions with sensitive data Users have the ability to email message upload copy and print all your data at any given time. Do you know that is happening 3 Where is that sensitive data going Where did the data go This is a question that no one wants to ask. 4 What policies are needed to mitigate the risk of these actions Do you have policies or procedures in place to mitigate risk Important Features and Effective Solutions for Secure Networks 1. Protect customers sensitive information. 2. Comply with all government regulations such as PCI GLBA etc. 3. Secure communications with business partners brokers and agents. 4. Automatically encrypt email endpoints and documents according to user security policies. 5. Restrict and monitor access to confidential financial information. 6. Monitor inspect encrypt and retain any webmail communications. 7. Monitor user actions and retain forensic evidence of any wrongdoing. 8. Inspect and monitor content across multiple protocols like social networks and web mail. 22 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M STRATEGY BY GEOFF BACINO Is Your Credit Union Getting the Best Deal 5 Ways to Save Money on Products and Vendors While your credit union is taking stock of your priorities and costs this New Year you should also be conducting a review of your vendor contracts. Answering these five questions will ensure your CU is receiving the most product and vendor bang for its buck. A s credit unions continue the budget and planning season there should be an evaluation of priorities and costs. It is also the time to review vendor contracts. Too often credit unions just plug last year s costs into budgets and forecasts without evaluating whether these costs are the best deal for them. A smart institution can find a number of opportunities to reduce product and vendor costs by simply asking the right questions. should be able to save money. 2. Can a current contract be renegotiated Even if the credit union signed a long-term contract it still can be renegotiated. A renegotiated contract results in immediate savings and it all depends on the contract language. Standard debit and credit processing contracts might be open for renegotiations within 24 months after These Are The Five Questions Every Credit Union Should Ask During Budget Season. 1. Is the credit union getting the best deal in the market Perhaps the contract was competitive when it was signed maybe it wasn t. Regardless things most likely have changed in the marketplace since the deal was originated. Increased competition economies of scale and technological advances may have pushed down costs. Or maybe the automatic price increases that were agreed to years ago have resulted in the credit union overpaying. By reviewing current vendor pricing comparison shopping or utilizing third-party benchmark data the credit union 23 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M STRATEGY the first signing. Other vendors may be willing to renegotiate now for goodwill later especially if the credit union is paying above-market rates. One credit union reviewed a 12-month-old core processing contract and found a seven-figure gap between industry benchmarks and what it was paying. The credit union was able to renegotiate a contract that had seven years remaining at a price that was much closer to market rate. 3. What does revenue cost When it comes to revenue generators such as credit and debit cards credit unions tend to focus on one line item net income and how to grow it. Yet there are attached costs such as fraud and marketing and margins can be increased by decreasing these costs. The Durbin amendment has created costsaving opportunities for credit unions that request additional funding for card replacement and reissues. 4. Which contracts are expiring in the next 12 to 36 months To put the credit union in the strongest negotiating position that CU needs to focus on a contract at least two years in advance of its expiration. The ability to evaluate pricing and other vendors is most effective if it is done with time to process such data. Waiting too long can reduce both options and the negotiating advantage of the credit union. 5. When was the last time the credit union audited vendor bills Although this is not a regulatory requirement it would be more useful than NCUA receiving vendor authority. Credit unions should regularly audit most if not all of their payments. One of the foremost authorities on this topic is Strategic Resource Management ( SRM will regularly uncover hidden savings costs in a number of areas. Some of these areas are obvious but others might fall through the cracks were it not for the SRM review. Consider phone bills one credit union was paying for lines that were disconnected years ago or for services at a branch location it no longer owned or operated. Auditing vendor bills allows the credit union to eliminate costs that aren t necessary such as call waiting for a fax line. While these matters might be small cost savings when compared to ATMs or processing agreements they all add up in a time of compressed margins and earnings pressure. As your credit union undertakes the budget process or strategic planning or even a midyear review ask these questions. The bottom line and the efficiency of your credit union will benefit. Geoff Bacino is a two-time presidential appointee who has served on the NCUA Board and the Federal Housing Finance Board. He is currently a partner in Bacino & Associates an advocacy and consulting firm that provides strategic planning and regulatory guidance to a number of credit unions. He can be reached at Geoff or 202-5490253. 24 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CREDIT UNION TRAINING BY KENNETH C. BATOR MBA Think Small Business Not Small Credit Union O Is it time for your credit union to engage in a paradigm shift in how you think about yourself. If you still consider your CU part of the massive financial services industry it might be time to put that notion aside. Read on to discover why a small business mindset might be a better one for your credit union. that can do wonders for the brand culture and strategy alignment what I call the B C S Formula of almost any credit union as well. The keyword here is think. As the late Stephen Covey might say we need a paradigm shift. Thinking like a small credit union may be the equivalent of the glass is half empty perspective. I take that back. It s more like I m down to the last sip in this darn glass and the well is dry. I get it. When we re running a 25 million credit union and looking at the entire financial services horizon we can feel pretty small. Citibank has 15 branches and 27 ATMs within a 3.5-mile radius of us. How could we hope to compete Wells Fargo just opened a branch less than a block away from us and they have over 12 000 ATMs nationwide How could we hope to compete Heck a 3 billion credit union just rolled out a slick new mobile banking service. How could we hope n November 28 2015 we celebrated Small Business Saturday. It s one of my favorite days of the year for a number of reasons. The first is I firmly believe that the small business community is the backbone of our economy. That is where the majority of jobs are going to be created. That is where the economy is going to flourish. I love the prospect of what the Millennial generation and Gen Z are going to create through technology and innovation throughout the small business community in the next decade and beyond. The second reason I love Small Business Saturday is that over 80 percent of my clients are small businesses and small credit unions. Based upon the dynamics of small business I would categorize even a 1 billion financial institution as small. While 1 billion in assets gets your CU into a special category possibly even an elite club within the credit union industry when you consider the overall banking world that s still pretty small. And when you think about it within the context of the overall financial services industry 1 billion can seem downright insignificant. That insight led me to ponder that most credit unions have much more in common with small businesses than they do with big bank brands like Citibank and Wells Fargo. Although I actually do think there are some aspects of the brand culture and strategy alignment of Wells Fargo we can learn from I digress. There are a number of aspects in thinking like a small business 25 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CREDIT UNION TRAINING to compete When we look at the landscape in this manner it can feel pretty daunting. However if a local coffee shop run by a neighborhood couple can be profitable and also thrive despite being surrounded by multiple Starbucks why can t a 25 million credit union do the same If a local women s clothing store started by a young entrepreneur with only three employees can be doing just fine despite a Nordstrom Rack down the street then why couldn t a 30 million credit union with nine employees be the financial institution in town If a personal trainer can open up a gym by herself and be profitable in three months then why can t a 5 million credit union build a brand within its field of membership If we think like a small business and not simply like a small credit union it changes our paradigm. We put our business in a different classification ... better yet a different brand category. Let s look at something much more fun than financial services coffee clothing and definitely fitness. Let s take a look at beer. If you re Coors Brewing Company you are in the big leagues. You re going toe to toe with Budweiser and Miller. That s OK. You re in their brand category of large domestic beer brands. If you re Coors you have the brand recognition as well as the resources to fight in that cage match even if you re only number three in that category. Conversely if you re Kettlehouse Brewing Company in Missoula Montana or Brooklyn Brewery in New York you re not squaring off against Budweiser if you re smart. In fact customers who religiously drink Bud Light probably aren t your customers anyway ... much like a member who needs access to 10 000 branches probably isn t your ideal member. Sierra Nevada Brewing Company probably thinks of itself as one of the top three brands among craft beers in America rather than possibly the number 69th brand among all beers in the country or maybe in the world. People who want to drink nothing but Miller High Life aren t its customers. Beer drinkers who want a good craft brew are. 26 C R E D I T U N I O N B U S I N E S S So what does all this mean for the small credit union other than when is happy hour It implies that your brand category and primary competition may be a much smaller universe than you suspect. It may also mean that you are actually a lot closer to that 1 brand position than you thought. Here are a few perspectives that may help with that paradigm shift 1) You have more in common with the ma-andpa restaurant down the street than you do with Chase Bank of America or even Navy Federal Credit Union for that matter. Stop putting your credit union in these institutions brand categories. It s not an arena you want to play in anyway. As Kevin O Leary Mr. Wonderful on Shark Tank would say They will crush you like a cockroach. The ma-andpa restaurant isn t trying to compete with Ruth s Chris Steak House. Instead it is offering the best darn homemade meatloaf you ever tasted. So don t try to offer five different checking accounts with a myriad of features. Offer one or J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M CREDIT UNION TRAINING TAB two particular products that cater specifically to your unique field of membership (FOM). 2) David will often beat Goliath. I heard this statement spoken by a successful businessman during a conference for collegeage entrepreneurs. It reminded me of a television commercial I saw for a credit union a few months prior. The advertisement was a mock interview with the CEO where the reporter asked in essence what do you have to offer at the credit union To which she responded We have many of the same products as the big banks. I immediately thought then why wouldn t potential members just go to a big bank for financial services instead of a me too credit union You have to give consumers a reason to do business with you that s important to them. Small business Davids understand what specific customer problems they want to solve better than the big brand Goliaths. Members don t care that you offer checking accounts and loans a lot like Bank of America. They do care about feeling special. So instead of telling your FOM about products tell them why YOU are the best institution for teachers police officers firefighters or a specific community because you understand their unique needs and problems better than any other provider. And by the way many people particularly Millennials don t want to work with the so-called Goliaths. They How would your customers rate their experience at your drive up Maximize Teller Productivity with a Currency Dispenser (or Recycler) Contact us at Proven Performance and Quality Phone 800-243-2624 Email dispensers Online 27 22 00 11 66 C U B U S I N E S S . C O M C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY CREDIT UNION TRAINING TAB want to work with local businesses. So embrace your David-like image. 3) Don t let what you can t do keep you from doing what you can do. You may not be able to offer all the technological bells and whistles. That s not an excuse to say Let s just look for a merger partner and be done with this place. Figure out what you do best. Case in point one credit union client I had the pleasure to work with struggled with this very issue. A number of our strategic conversations revolved around technology and convenience as well as the lack of budget to be able to offer everything the CU felt it should. At the beginning of a particular session I asked a simple question What do you do best that your members really enjoy After a little thought and discussion the credit union realized that it was really good at going above and beyond helping its members clearly understand their financial situation. So we talked about what we could do to leverage that talent such as partnering with a financial advisory firm creating fun educational YouTube videos covering some of the common problems its members faced and using Skype or Google Hangouts to create better member engagement than just a phone call with members who lived several miles away from the nearest branch. That last point may be the best example of thinking like a small business first and not necessarily like a small credit union. Entrepreneurs think I can t afford to hire a big design firm so let s check out or 99 Designs. Small business owners reason Although I don t have a budget to hire the big law firm I can go to the local Small Business Development Center (SBDC) or Clarity for some advice. Thriving small businesses think What can we do with the resources we do have Thinking in a similar manner can allow your small credit union business to thrive too. As even Wells Fargo states in some of its ads Small is Huge. Ken Bator has more than 20 years of experience in helping organizations make money save money and survive internal challenges and tough economic conditions. As a facilitator for training and strategic planning sessions and an expert in brand concept culture building and management Ken has helped hundreds of organizations since 2001. In addition to his career of working with CEOs CFOs and COOs he has also served as an executive of three different financial institutions throughout the country and has assisted many small- to medium-sized businesses in reaching new levels of effectiveness. Ken is also a co-founder of the Police Officers Credit Union Association and author of The Formula for Business Success B C S The Pocket Guide to Strategic Planning The 90-Day Quick Fix for the Business Owner or Manager and The Strategic Planning Workbook and Guide for Financial Institutions. His articles have appeared in many trade publications including Lifestyle Entrepreneur Magazine Credit Union Journal and ABA Bank Marketing. Born and raised in Chicago he earned a Bachelor of Science in Finance and an MBA in Entrepreneurship from DePaul University as well as a Certificate in Integrated Marketing from the University of Chicago. 28 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M BRANCH BUSINESS BY MEREDITH DEEN Tips to Transform Outdated Offices into Profitable Branches If your credit union has outdated and inefficient branches figuring out what to do with them in this mobile age is a major dilemma. This is especially true for small CUs lacking the financial resources to replace them. These action steps will help you transform your obsolete offices into profitable arenas. A s financial institutions (FIs) seek to reduce expenses and as consumers use branches less and mobile devices more for everyday banking FIs are confronted with a conundrum what to do with all those large outdated and inefficient offices. It s an issue whose answer is not as easy as simply replacing the old branch with a brand new smaller footprint and more efficiently designed location. Closing these older and fully depreciated offices isn t an option for many given the tremendous cost to replace them. A Codigo study titled 2015 Branch Transformation Report shows most institutions are hesitant about adding new branches and 65 percent of those adding offices are FIs above 1 billion in assets. So what most smaller banks and credit unions are often left with are offices designed for banking operations that meet consumers needs from days gone by. In the past banks and credit unions required enough branch space to accommodate a large teller staff extensive filing cabinets bankers desks and more. Now with the number of daily branch transactions falling space needs are a fraction of what they used to be. This tendency creates inefficiencies and offices that are simply an eyesore. The Codigo study indicated however that smaller community institutions are now getting busy. They are responding to the problem by focusing resources on adapting current locations to comply with the banking C R E D I T U N I O N B U S I N E S S demands of today s consumer. In fact 51 percent of smaller banks and credit unions are remodeling a branch now through 2016 compared to 26 percent in 2014. If transforming these large spaces into more efficient and profitable areas is on your 2016 or 2017 to-do list here are steps to consider. Self-Service High-Tech Product & Info Hubs In a growing number of new and redesigned FI offices customers are as likely to interact with a data screen as they are a person. Credit unions and banks are loading branches with high-tech tools and repurposing backoffice space. Follow their lead with the offices you have. Replace bulky unfriendly teller lines with tech bars where members access tablets and browse your CU s services on their own guided by easy-to-follow menus. Large interactive video walls also let consumers know what your CU has to offer. And high-tech video 29 J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M TAB BRANCH BUSINESS tellers which connect members with employees in a centralized call center to perform almost any transaction a staff member could handle in person are worth your investment consideration. But it s certainly not all about self-service when refurbishing an older location. The new wave of consumers many being Millennials want advice more than to deposit a check. Transform your depositcentric branch into a center for consultation and sales by deploying the right skilled employees and training at the branch. Making this important change will result in higherquality interactions with accountholders that lead to deeper relationships. Open a Coffee House That s why transforming that cold barren lobby into a coffee-house-like area encourages conversations with accountholders. Where are people more likely to want to talk with your staff standing in a teller line or relaxing with a latte in their hand Install a coffee bar and add some snacks. Make the space inviting with comfortable seating and free WiFi. Create an atmosphere that gets people in the right relaxed frame of mind to talk about their financial needs. It makes cross-selling much easier. With a comfortable place to talk to customers arm universal associates with tablets so they can work side by side with members reviewing their financial needs and delivering a heightened level of personal service. 30 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M BRANCH BUSINESS TAB When looking to repurpose existing space and create something new the first question is Why said Anthony Burnett Level 5 chief evangelist. We want to quantify why we want to transform a space then we can make decisions on what it should do and look like. Assess Your Situation First Level 5 a leading design-and-build firm serving banks and credit unions emphasizes that whatever changes take place they should be made only after careful analysis of accountholder needs. When looking to repurpose existing space and create something new the first question is Why said Anthony Burnett Level 5 chief evangelist. We want to quantify why we want to transform a space then we can make decisions on what it should do and look like. Burnett said this means banks and CUs should understand the business case driving the transformation. Knowing what we want to have happen in the branch will drive decisions about technology branding service delivery and human investment in the new space. The customer experience for many FIs is being centered around maximizing high-value interactions with customers that enter the branch said Burnett. We want to capitalize on these opportunities to drive deeper into relationships build trust increase wallet share and provide a level of service that goes beyond traditional order-taking via a teller line. With redesigned offices typically leading to smaller space needs Burnett recommends using excess square footage for partners such as insurance and wealth management advisers. That way the FI can continue to position itself as a place where problems are solved. This approach goes hand in hand with how branches are transforming into centers for sales and advice. So solve the riddle of what to do with those old large outdated offices. Make them more functional and more profitable focusing on adapting them to the banking demands of today s consumer. Meredith Deen is the President of FMSI. FMSI provides easy-to-use yet sophisticated business intelligence and performance management systems that facilitate efficient staff scheduling and systematic lobby management of the branch. She can be reached at meredithd For more information visit or call (877) 887-3022. 31 22 00 11 66 C U B U S I N E S S . C O M Implement Software to Better Align Staff with New Traffic Demands When transforming the physical aspects of your branches you should also address how staffing needs are changing. Studies show that many times as FIs move from a big branch to one smaller more efficient one they don t reduce the number of staff in the office. This is especially true with credit unions. And often the reason despite branch transaction volume falling extra staff are needed to deal with peak traffic hours. That situation underscores the importance of tracking branch traffic patterns to better position staff. Workforce optimization solutions get that tracking done. Consider using lobby tracking software and mobile-branch appointment scheduling tools to maximize your branch staff as well. Lobby tracking solutions allow you to accurately schedule staff to cover peak hours as opposed to relying on outdated scheduling practices that don t make the best use of employees time. Appointment scheduling tools let accountholders use their mobile devices and PCs to book branch appointments through their FI s website and mobile banking app. The mobile tools not only make it more convenient for consumers to engage with the FI but they also optimize the institution s talent as well. Knowing each employee s availability and skill sets makes it much easier to deliver a meeting with the right staff member at the right time. C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY DIGITAL SERVICES BY JOHN DAVIS The Small Business Opportunity Driving Growth through Digital T Competing with big banks tops many credit union s concerns. Digital services may be just the ticket to leveling the playing field when it comes to attracting two big market segments younger members and small businesses. Learn how to leverage digital tools to your CU s advantage. mobile banking and call centers such services are rarely joined up in a satisfactory way. Digital provision is also a must for a group of customers who are increasingly relying on automation and cloud services to survive small businesses. These small businesses are an essential part of local economies and their continued success ensures that communities will continue to thrive. rust in banks has never really recovered from the financial crisis of 2008. The idea of the friendly local bank manager already on the wane was broken completely. Customers have since struggled to believe that banks truly have their interests at heart. In fact according to research from PricewaterhouseCoopers (PwC) less than one in three customers now trusts their retail bank. Meanwhile trust in credit unions remains steady. According to a Harris poll only 18 percent of Americans say that their trust in credit unions has declined over the last few years with 77 percent still trusting credit unions. This trust hasn t translated directly into success for credit unions. The struggle of many credit unions to grow and of some even to stay afloat has been well reported. This seeming contradiction is explained by an aging customer base the average age of a credit union customer is 47. Because credit unions need borrowing as well as saving to survive an aging customer base is a problem. As a rule younger people tend to borrow and older customers tend to save. Digital has been talked about as a potential solution to this problem. For many customers especially younger ones digital banking isn t the new way to do banking or an added extra it s the main way they interact with their financial provider. Retail banks may be behind credit unions when it comes to trust but they are way ahead when it comes to digital provision. Even for those credit unions that have online services C R E D I T U N I O N B U S I N E S S Managing Risk Doesn t Have to Be a Juggling Act Visit or call 866.647.8749 today to learn more 32 J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M DIGITAL SERVICES TAB However at the moment business customers who use credit unions services do so despite specialist business provision. Anecdotal evidence points to them using personal accounts for business purposes ostensibly due to lower fees fairer interest rates and better customer service than big banks. There is an opportunity here for credit unions. Digital services have the potential to attract both a younger demographic and business customers both of whom are more likely to borrow. But even with digital services how can a credit union compete with the services and reach of a bank in order to win these customers The answer is it shouldn t. When credit unions thrive it is not because they are mimicking banks but because they are in fact something quite different a community asset that their customers are proud to be a part of one that offers unbeatable personal service and is not tied to a corporation with unknown attitudes toward ethics. In a recent survey data showed that 67 percent of U.S. small business owners had never had any contact with their relationship manager at their bank and yet 52 percent had held their account for over five years. This lack of personal service is playing a role in pushing U.S. small businesses to leave their banks. Indeed 53 percent have thought about switching. Credit unions are in an ideal position to welcome small businesses that are fed up with banks indifference to their customers by coupling the qualities they are known for fair fees and great customer service with a forward-thinking approach to digital. Launching and growing a small business is no mean feat. Each business faces similar day-to-day challenges whether it s creating a detailed business C M Y CM MY CY CMY K 33 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M 33 DIGITAL SERVICES TAB plan that takes everything necessary into account dealing with late-paying clients or attracting the right talent to help it grow. To meet these challenges today means using digital tools to deal with marketing accounting HR and other functions the cost of which most small business owners have not been able to justify. These tools used to be the preserve of big business that could afford IT departments to manage them and had the budgets to pay for the licenses. But parts of a business that used to require entire teams of people are now virtualized by software and these tools are increasingly available as cloud services. Credit unions must consider delivering these tools alongside their other services. So for example rather than simply providing a loan or overdraft credit unions should instead listen to their customers requirements and provide the tools for them to take action. If a sole trader is spending too much time balancing his or her books but can t afford an employee who can be dedicated to this task then the solution may be accountancy software rather than a loan to increase headcount. That loan might be better used to increase stock at peak times of the year something the accountancy software might help that trader discover. Take for example a carpet cleaning business that has until now got by on word-of-mouth recommendations and the occasional incoming call via a business directory. Using a customer relationship management (CRM) system supplied by its credit union could help the business retain customers. Using this tool the business identifies loyal customers and launches a referral scheme to acquire new customers. Now the business is getting more inquiries. This can lead to expansion higher credit balances for the credit union and a requirement for additional finance. However none of this is possible without having an engaged customer base that sees their financial services provider as a business partner rather than a utility and is willing to go to that provider for support. The same survey found that 44 percent of small businesses would feel more engaged with their 34 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S financial service provider if they were given access to online tools that helped them grow and manage their business. Another 42 percent would switch providers if the new provider could demonstrate that it understood the business. Step forward cloud-based tools. They re attracting huge interest because of the rich types of data they generate which can be turned into actionable insights. Now credit unions can personalize services and support to a level that was inconceivable in the days of relationship managers. These tools won t remove the need for human interaction by phone or through live web chat for example. But they will provide many more touch points with customers and more reasons to engage. Such interactions can then deepen a bank s knowledge of its customers and broaden the areas where it provides support. This type of cloud-based business application platform presents the best solution for driving engagement in an increasingly digital environment. Credit unions thrive when their customers do well so it is in their interest to position themselves as the true friend to small businesses. They have an opportunity to learn from the mistakes banks have made and from what small business owners are telling them they want. By building on the traditions of personal service and fair banking with a well thought-out digital offering to small businesses credit unions have the potential to enable the success of their communities as well as themselves. John Davis is Managing Director of BCSG a leading cloud services marketplace provide. He has unrivaled experience and understanding of what SMEs need to grow and how to deliver it to them. He joined from Barclays Bank in 2011 where he held various commercial roles before rising to the position of Marketing and Product Director for Barclays Business a 1bn revenue 1m customer division. In his time running and overseeing SaaS businesses over 500k SMBs have subscribed to his company s catalogue of services. 22 00 11 66 C U B U S I N E S S . C O M J JAANNUUAARRYY MEMBER BUSINESS LENDING BY RYAL TAYLOE SBA Guarantees A Sweet Opportunity What do SBA lending and maple syrup harvesting have in common Both can be challenging to get just right but the sugary rewards are worth the effort. Implementing these six key strategies into your SBA lending initiatives will help your credit union savor all the sweet benefits. n the frigid northeastern United States and in Canada maple syrup harvest season is right around the corner. Between February and April each year thousands of small producers in Quebec Vermont and New York install taps on their trees and begin collecting their sweet bounty. Maple syrup production is a time-consuming delicate process that demands high levels of expertise and patience. If boiled too long during production the syrup will crystallize. If undercooked the result is a watery flavorless solution that may ferment and spoil. Much like maple syrup harvesting SBA lending can be a challenging enterprise. It requires experience planning and continuous oversight to minimize the risks of developing off-flavors or even losing your entire harvest. But with some planning and patience the rewards can be just as rich and satisfying. (which includes the popular SBAExpress for loans under 350 000). Participating in the SBA s 7(a) program can offer a number of benefits to your credit union and membership. These include the ability to Minimize potential losses from default Grow your MBL portfolio faster Structure loans with more flexibility than NCUA and state regulators generally allow and Support the growth of small businesses and the creation of jobs in your community. Just as critical for many credit unions the guaranteed portions of SBA 7(a) loans do not count against the statutory 12.25 percent of assets business-lending cap. I Six Keys to SBA Lending SBA lending experts cite a few keys to successfully starting up a new SBA loan program. Be sure to Why Consider SBA Guarantees A growing number of credit unions are discovering the benefits of the U.S. Small Business Administration s (SBA) guarantee programs. Over the past five years total credit union SBA loan balances have grown by 153 percent to nearly 1.6 billion (Fig. 1). The SBA offers a variety of programs that can be an attractive and core part of your credit union s member business lending (MBL) portfolio. These programs include the flagship 7(a) Loan Program 35 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M MEMBER BUSINESS LENDING TAB 1. Get buy-in from the top. Before you decide to start tapping the trees it is prudent to ensure that your CEO senior management team and board of directors are in lockstep with the SBA opportunity. This goes for all types of business lending of course but SBA guarantee programs are designed to serve newer riskier businesses and your leadership needs to understand this nuance. Your senior leadership and board must be in concert says Ken Getz senior vice president of commercial lending at SAFE Credit Union ( 2.2 billion in assets out of Sacramento Calif.). SBA is not a switch you can turn on that creates huge benefits on day one. It is similar to opening a branch in a new market in that an SBA program is an extension of your service model that is designed to support your membership in a different way. As part of your planning process be sure to incorporate SBA lending into your business loan policies. One of the advantages of 7(a) lending is that you can structure loans outside of a normal loan-to-value (LTV) ratio and length-of-term guidelines. But you must ensure that your appetite for risk is codified within your board-approved policy. 2. Have a marketing plan and growth strategy. For the best chance of success you should have a solid plan for the types of members you are targeting how you will reach them and what you hope to gain from these new relationships. In our region Getz says most business owners are not programmed to think to go to a credit union for business financing. How do you plan to get the word out in your community SAFE takes a multi-pronged marketing approach and has seen strong growth through person-toperson marketing especially with centers of influence such as accountants attorneys and real estate brokers. 3. Hire for experience. Possibly the most critical step The 1 Solution for Member Business Lending 36 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MEMBER BUSINESS LENDING TAB in ensuring a successful SBA lending program is hiring the right staff. The SBA s documentation and application submittal requirements are complicated and an experienced credit underwriter will make all the difference. Back office is crucial from a loan structuring and underwriting standpoint says Jason Bengert division director of Park Place Equity a division of Northwest Federal Credit Union ( 3.0 billion in assets in Herndon Va.). You have to have an experienced back office to get rolling. This holds true for servicing as well look to hire an administrator who fully understands the SBA s Form 1502 monthly reporting requirements including exception tracking and mitigation. On the front end your loan officers or business development team should have a solid understanding of SBA products and requirements. Only if they are confident in the details will they be able to sell the program effectively. Lastly it may be challenging to find qualified experienced SBA staff in the current marketplace considering that so many banks and credit unions have started up their own SBA programs in recent years. You can achieve similar end results by partnering with a lending service provider (LSP) or credit union service organization (CUSO) that offers SBA underwriting and consultation services. 4. Keep a sharp eye on credit risk. The SBA allows for flexibility in terms of structuring loans including the amount of equity required and the length of term. But an SBA guarantee doesn t make a bad loan good. You should always follow your normal underwriting guidelines when considering a new loan application regardless of whether an SBA guarantee may be an option. 5. Stay on top of documentation. With SBA lending credit unions are most at risk during the closing servicing and liquidation stages. Although we never like to think of a loan going into default it does happen. If you don t have all of your buckets properly aligned under your trees your guarantees C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S may be in jeopardy right when you need them most. Leading causes of guarantee denials include lien and collateral deficiencies ineligible borrowers unauthorized use of funds and poor documentation during the servicing phase. The SBA has recently begun promoting its SBA One online application portal as an optional way for financial institutions to submit applications and documentation through the administration s E-Tran platform. Yet it is important to note that SBA One has not yet been fully tested and implemented and some leading cloud-based loan origination platforms also offer integration with E-Tran. An advantage of using a private cloud-based solution to submit your SBA loans is that such systems are designed to also house all of your conventional business loans. As a result they allow you to manage your entire portfolio in one place. SBA One may be sufficient for credit unions that transmit just a couple of SBA loans each year but it is not ideal for those institutions planning to transact heavier volume. 6. Use technology to enable efficiency accuracy and speed. As mentioned above the SBA process can be very cumbersome. Fortunately there are some excellent technology solutions on the market today that can ease the pain of application submittal underwriting pipeline tracking and servicing of SBA 7(a) loans. Look for a cloud-based solution that offers streamlined workflow the ability to submit new requests directly to SBA s E-Tran portal through a built-in interface and robust pipeline tracking. It is absolutely crucial to have software in place for pipeline management Bengert says. The lifecycle for an SBA loan can be three to six months. You need to have the ability to understand where each loan is through the various stages. According to Bengert your software should be able to guide your team through the loan processing and closing steps which are very different for SBA 37 J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MEMBER BUSINESS LENDING TAB Figure 1 look at my portfolio on any characteristic and get an immediate picture of how the portfolio is doing on a real-time basis. That allows me to make better credit decisions. With some smart planning and solid execution your credit union can successfully tap the SBA guarantee opportunity helping you grow your MBL portfolio expand your membership and support your local small business community all with minimal impact to your MBL cap. What a sweet deal Ryal Tayloe is vice president of credit unions for Wilmington N.C.-based nCino the leader in cloud-based operating solutions for the financial services industry. Through its flagship operating system nCino leverages the power of to provide credit unions and other financial institutions with superior transparency and clarity into their existing loan production pipelines portfolios and operating efficiencies across all business lines resulting in increased profitability productivity gains and regulatory compliance. For more information visit or connect with the company on LinkedIn and Twitter nCino. loans versus conventional underwriting. Even spread analysis can be a bit different. Northwest FCU is in the top 100 of SBA lenders nationwide. Bengert emphasizes the importance of using a cloud-based solution if you serve geographically dispersed markets. The software we have has proven to be very useful as we originate SBA loans from multiple offices Bengert says. It allows us to log in from any PC anywhere in real time. With the help of cloud-based technology Live Oak Bank ( 1 billion in assets out of Wilmington N.C.) has grown to become the second largest originator of SBA 7(a) loans in the country. It has also risen to become the top bank in return on assets (ROA) and return on equity (ROE) in the United States within its asset category. [Our cloud-based solution] provides me with wonderful tools for risk management says David Lucht chief credit officer of Live Oak Bank. I can 38 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M TAB MARKETING TAB HERE MATTERS HERE BY AUTHOR NAME HERE BY KEN BURNS Next-Generation Marketing Automation Onboarding and CrossSelling Help CUs Drive Loan Growth The Art of the New Deal in Automated Integrated Marketing Propensity to Purchase and Member Retention. Is your credit union doing enough to stay relevant with members both prospective and current It s all about an integrated marketing program. And key to such a program is a marketing automation platform that encompasses onboarding and cross-selling. Keep reading to find out the rewards that can be gleaned from such efforts. key strategic objective of virtually every credit union today is to attract acquire engage and retain members. In the process the goal is to make these members profitable as well as active participants in the credit union cooperative. Unfortunately member data indicates that almost as many members leave the credit union as have joined in any given period. So how can credit unions ensure that they remain relevant to the member Offering the right mix of products and services is vital to remain significant with members. But what we see as being the most pressing issue is not so much the product and services being offered. Rather it the methodology timing and frequency with which prospective and existing members are targeted marketed to and communicated with. Understanding the breadth of marketing automation and how credit unions can effectively integrate such C R E D I T U N I O N B U S I N E S S A platforms into their marketing strategy and operations has now become a best practice in the industry. Marketing automation onboarding and cross-selling can become inspiring and highly effective experiences that transcend the traditional lines between marketing and IT while simultaneously encouraging creative collaboration across the organization. A marketing automation platform sits at the core of an integrated marketing program fueling automated 39 J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M MARKETING MATTERS and customizable communications that help to solidify and deepen member relationships. What Is Marketing Automation Marketing automation like the invention of the wheel the steam engine and the computer can be a real element of change. Via connected data it incorporates email marketing campaign management marketing programs lead generation CRM integration social marketing resource management and marketing analytics. Forrester Research ( defines Marketing Automation as a tooling and process that helps generate new business opportunities manage volumes of business inquiries improve potential buyers propensity to purchase and increase alignment between marketing activity and sales results. The productivity gains from marketing automation can be staggering.... According to Gartner Research event-triggered messaging saves approximately 80 percent of direct mail budgets. Companies that invest in marketing automation solutions see 70 percent faster sales cycle times and 54 percent improvement in quota achievement. Jupiter Research reports that relevant emails delivered through marketing automation drive 18 times more revenue than email blasts. 2013 Focus Research revealed that 75 percent of companies using marketing automation see ROI within 12 months and 44 percent do within six months. Focus Research 2013. In early 2015 Digital CU implemented a dynamic marketing automation platform that easily integrated with its mortgage loan origination system (MLOS). Predesigned drip campaigns were developed triggered from an hourly encrypted synchronization occurring between the MLOS and the marketing automation platform. A specific campaign the credit union executed targeted those members who had been preapproved for a mortgage loan but had yet to successfully complete an accepted offer on a property. Historically these members had been difficult for the credit union to stay connected with. With the new marketing platform automated marketing communications were strategically being sent out to members via email. When those same members identified the home of their dreams Digital Credit Union was top of mind. Within six months of implementing the program Digital Credit Union was realizing a 100 percent improvement in preapproved mortgages that were Managing Risk Doesn t Have to Be a Juggling Act A Credit Union Success Story Digital Credit Union like so many other credit unions recognized that the significant volume of mortgage business seen by the industry over the past couple of years was driven by low interest rates and a resulting mortgage refi-boom . The credit union s real challenge moving forward however was to improve the conversion rate of existing preapprovals and mortgage applications to funded loans. 40 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M Visit or call 866.647.8749 today to learn more MARKETING MATTERS subsequently funded. (The funding rate increased from 25 percent to 50 percent.) In addition in-bound calls related to the status of loans that had moved to an active application status declined by over 15 percent. This reduction was achieved by effective timely communication of loan status updates which informed the member of the current status (driven from the hourly synchronization) of his or her loan. Digital CU expects a number of additional benefits from its automated marketing strategy. One of these benefits is a measurable improvement in overall member satisfaction as a result of the intelligent timely and relevant email communications that keep the member engaged and the CU top of mind. The Digital CU case study exemplifies the leadnurturing aspect of a marketing automation strategy. The credit union has been able to capitalize on its ability to keep prospects [members] engaged with the brand through periodic personalized communications and campaigns until they are ready to make a purchase. Best-in-class marketing automation platforms typically offer a number of pre-built nurturing steps or actions. They also provide the ability to customize both the content and process. Bottom line these programs help credit unions build relationships with their members and they effectively drive interaction with sales when members are ready to finance their next loan. Finally each particular piece of content shared with a lead through a nurture program should have a specific call to action linking back to a dedicated landing page and encouraging conversion for a loan or new account. Onboarding and Cross-Selling Automated onboarding eliminates the time spent millennials A generation marked by increased use of social media and digital technologies. Would this ad matter to the generation that can make or break a brand within a few keystrokes These digital natives are the current prime target for credit unions everywhere and PSCU has the social media tools and insights you need to reach them in a way that s relevant. The leading CUSO for 30 years we know a thing or two about embracing change and having conversations that matter. Let us show you how. 888.918.7357 41 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M MARKETING MATTERS TAB insights An instance of capturing the true nature of a thing. shuffling forms and worse failing to introduce much of the organization s product offerings to the new member. It also reduces errors and frees up member service staff to provide truly personal attention when members ask for it. Automation also builds member confidence by providing better first experiences and creating opportunities to engage members across other marketing channels. Let s consider indirect auto lending. A significant percentage of members financed by a credit union through the indirect lending channel have no idea who their new lender is. By integrating with an auto dealer s lending platform such as CU Direct s CUDL Lending System an integrated marketing automation campaign would introduce the new member to both the credit union and its full stable of products and services. This would include those services specific to the vehicle the CU funded such as GAP or mechanical breakdown insurance. With synchronized integration to the marketing automation system the credit report relied upon for approval of the member at the dealership can be used as the basis to trigger additional real-time offers for a line of credit mortgage or refinance of yet another vehicle owned by the member. The offer acceptance could also be made in near real time. Next generation marketing automation is transforming the member experience. No longer is convenience defined as the branch nearby or the product available on the credit union s website. Convenience requires personalization customized communications delivered to the member as a prospect up to and including at the point of purchase. The methodology timing and frequency with which prospective and existing members are targeted marketed to and communicated with have become the art of the new deal. Ken Burns is a seasoned financial services industry executive. His experience and expertise includes successfully serving as CEO for three large credit unions Bay Federal Tech Credit Union and Patelco. Ken has refocused his credit union talents with Intuvo a CU Direct company which provides automated marketing programs and services to the credit union industry. As EVP of Sales and Business Development for Intuvo Ken s executive leadership is being leveraged to assist credit unions in creating highly targeted automated marketing campaigns and improved loan funding percentages. 42 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M BRANCH BUSINESS BY KAITLIN MORRISON Lessons from SPIRE A Depression-Era Credit Union Looks to the Future S A lot can be learned from a credit union that has managed to grow and thrive for over 80 years. These four lessons can help your CU maintain the same kind of success and longevity. Keep reading to find out what they are. taying competitive as a financial institution is a challenge let alone standing strong for eight decades. Founded in 1934 SPIRE Credit Union of Minnesota and Wisconsin proves that growing and thriving as a credit union for almost a century is possible when you focus not only on the health of your organization but also on building strong branches. SPIRE s long history of smart service offers several important lessons to credit union leaders and branch staff. Early on credit unions turned banking on its head by being member-focused and by returning profits back to individual branches and the communities of members they serve. SPIRE was founded in the middle of the Great Depression by Edgar Archer and his coworkers at Midland Cooperative Oil Association. Its mission was to meet the financial needs of everyday workers a market largely neglected by banks at that time. Originally named Twin City Co-ops Credit Union (TCU) SPIRE eventually grew to have 16 branches. Today it is nationally-ranked by SNL Financial as the best-performing credit union in Minnesota and the 15th best-performing credit union in the United States. As credit unions reach out to the future they need to stay committed to the health and viability of their branches if they want to grow their legacy. New branches should begin with the training and support they need without more established branches being neglected. Branch employees remain the first point C R E D I T U N I O N B U S I N E S S of contact most members have with the credit union and they represent the first opportunity to build relationships with the membership. As times change a commitment to best practices and innovative ideas will carry branches through difficult markets. Credit unions should consider these four oldfashioned principles from SPIRE a credit union with plenty to teach about lasting leadership. Lesson No. 1 Invest heavily in hiring and training the right people for your branch. Upon being hired by SPIRE an employee spends a minimum of one week in new employee training 43 J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M BRANCH BUSINESS TAB at our administrative offices says Bridget Petersen Market VP of SPIRE Credit Union. Petersen says that SPIRE does use online training but also emphasizes one-on-one and group in-person training. Rather than allowing the computer to substitute for human interaction SPIRE uses multiple methods to deliver information to trainees and to encourage learning comprehension. New hires are intended to be long-term employees at SPIRE. As such they receive personalized investment and attention. Strengths Finder 2.0 is an employee engagement program the credit union uses to provide extensive training and guide employees through a selfdiscovery process. The program includes a strengths assessment with a two-hour private coaching session for each employee Petersen says. The next step is an effort to sustain the culture by teaching managers how to lead from a strengths-based perspective. By investing in people credit unions like SPIRE can reduce their turnover and support the people who interact with members the most. Lesson 2 Focus on supporting credit union members with solid educational initiatives and recognize their investment in your organization and in each branch. With SPIRE s award-winning Adult Financial Literacy Outreach Program members have access to financial classes that help them understand basic personal finance and learn about how to make better financial decisions. By teaching members about budgeting and by boosting their financial literacy credit unions can help their members become more financially responsible. Loan Originator training You ve got this. Do you still need to satisfy your training requirements Look no further than the comfort of your own office. A new NMLSapproved self-study course is specifically designed for credit unions and meets the continuing education requirements of Reg Z. Enroll today at MLO Check it off your to-do list Enroll today at MLO OFFERED BY INSTRUCTED BY The services provided by PolicyWorks should not be construed as legal services legal advice or in any way establishing an attorney-client relationship. Making compliance easy for you. 866.518.0209 POLICYWORKSLLC.COM 44 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M BRANCH BUSINESS TAB Besides offering programs that improve members lives credit unions can also show their appreciation for their member-owners. At this year s annual meeting SPIRE gave back 78 900 to its members 25 per participant. We are in business to serve our members and we want to be the BEST at serving our members Petersen explains. SPIRE uses its annual meetings as an opportunity to recognize its members. This year the recognition paid off with a 39 percent increase in attendance compared with the 2014 meeting. Lesson 3 Live your values and your credit union branches will be poised for leadership roles in the communities they serve. Community involvement is not only the right thing to do it s also a great way to build brand recognition and community engagement. SPIRE Credit Union encourages its employees to volunteer in one year 200 employees contributed 300 total hours of volunteer work ultimately benefiting over 4 000 people. For its efforts SPIRE has won the Dora Maxwell Award from the Minnesota Credit Union Network. This award celebrates credit unions social and community initiatives. A recent SPIRE ad campaign emphasizing this commitment placed the credit union among the top best-recognized financial institution brands according to Minnesota Public Radio. Credit unions can build recognition in their communities by building goodwill. Lesson 4 Strengthen your branch management by embracing best practices. Branch management teams deserve to have the right resources for success and leadership should be listening to both members and employees. Management should stay open to new ideas and approaches. As part of the strategic planning process credit unions should provide more of their leaders and employees with opportunities to voice ideas and concerns to top leadership. At SPIRE strategic planning is conducted using a method created by the CU s President CEO Dan Stoltz. C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S The board of directors and supervisory committee provide their recommendations with management members also being included in the process and provided with opportunities to personally meet with the CEO and offer their own input. Board members and C-suite management personally hear the suggestions of managers who interact with daily operations a bit more directly resulting in better-informed decisions and ideas that include more employees. From Old Lessons to New Opportunities Credit unions face substantial challenges yet these circumstances can be navigated with help from oldfashioned ideas. As SPIRE looks to the future the credit union s leaders seek ways they can stay close to their principles. Environments change but members remain loyal to institutions that serve their needs. Branches that understand their members and practice excellence position themselves to be ready for market changes. By learning from the past credit unions can recognize the best opportunities hire and train the best people and prepare for whatever lies ahead. In addition to covering Branch BUSINESS for CU Business Kaitlin is a freelance business writer based in Central Washington State. She is passionate about educating her readers and is a proud credit union member and supporter of credit unions. You can read more of her writing at 45 J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MILLENNIAL MANAGEMENT TEAM BY ERIC GAGLIANO They Get Millennials Because They Are Millennials Introducing ANECA s Millennial Management Team Managed by a team of twenty- and thirty-somethings ANECA Federal Credit Union is in a position like no other CU to understand the coveted Millennial generation. Young leadership has propelled the credit union to profitability thanks to a focus on attracting younger members. Could the same approach work for your credit union ANECA Federal Credit Union may be entering its 76th year but it is younger than it has ever been thanks to its new C-level management team that ranges in age from 29 to 35. n 2012 ANECA s Board hired Stephanie Sievers as CEO. Sievers immediately began to move the once struggling credit union toward profitability. Her ultimate goal Attracting the Millennials. ANECA Credit Union (pronounced ah-kneeka) has three branches in Shreveport Louisiana 95.7 million in total assets and 5 506 members. When Sievers took the helm in 2012 ANECA was limping pretty badly. ANECA was not in good financial shape she explains. We were losing money. There had been a merger and we were experiencing member runoff from that. Also the work culture was pretty bad. Lots of negativity. I 46 Turn It Around Shrink to Grow As ANECA s new CEO Sievers first major move in turning around the CU was to assemble her version of a dream team. Herself just 35 Sievers created a core management team of younger professionals. To be C R E D I T U N I O N B U S I N E S S clear age was not the sole criterion. Sievers wanted individuals who brought fresh energy and enthusiasm to the table as well as strong experience imagination and creativity in their respective areas. That team is Amanda Simpson Chief Operations Officer Eric Rippetoe Chief Information Officer and Colton Kyle Chief Financial Officer who at 29 years old is the 2 0 1 6 C U B U S I N E S S . C O M J A N U A R Y TAB MILLENNIAL MANAGEMENT TEAM Already They re Seeing Results In loans for the year we went from 54 million to 59 million since December 2014 explains Kyle. Also as a result of the contract adjustments and process improvements ANECA has seen its annual yearly expenses reduced by more than 400 000 over the last three years. All that without cutting staff Kyle adds proudly. From One Millennial to Another The Plan While core processors and improved processes and procedures are critical to ANECA s growth plans reaching Millennials is even more important and would take something out of the ordinary. Enter TeamANECA. Because of their age this management team has one foot in the Millennial generation and is poised to attract the target as peers not just as bankers. We don t have to try to understand them tells Rippetoe. We are them. With a management team that is itself composed of its key target audience ANECA is uniquely positioned to tap into the Millennial mindset. Sievers explains To reach Millennials we have to become THAT institution. The one that aligns itself with the Millennial population s values. Millennials as a segment don t have a lot of trust in big banks nor do they respond well to traditional marketing. We not only have to grow and improve our services but we [also] have to embody the Millennial mindset ... and we do Sievers says emphatically. youngest member of the team. These individuals would become the catalyst for creating a new more energized ANECA culture that has shaped the CU s new brand. Further they would be the key to guiding the credit union in its quest to market more successfully to Millennials. In addition to recruiting this younger management team ANECA took a close look at expenses as well as its procedures and policies. The credit union put all of its contracts under the microscope. We asked ourselves Do we really need this Do we really use it A lot of times the answer was no and we adjusted our contract commitments accordingly explains Sievers. It s like that gardening technique how you have to shrink a plant sometimes to help it grow. ANECA doubled down and scrutinized its procedures and policies as well. There was widespread inconsistency from branch to branch so we centralized policies and procedures across all the branches to create a more consistent and positive member experience shares Sievers. Also in 2014 ANECA installed a new core processor CU Answers that is enabling the CU to offer new services to its membership and to compete more effectively in the marketplace. The Millennials And why Millennials Well unless you have had your head in the sand for the last few years you know they are the group to reach. They represent the biggest opportunity to build revenue. This is a fast-growing segment that totals 80 million and spends approximately 600 billion a year. Not only that Millennials are ... 47 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MILLENNIAL MANAGEMENT TEAM TAB graduating from high school or college launching new careers and enjoying a new level of income they might need help managing trading in that 84 Buick Regal beater for that first real car getting married having kids buying a first home possibly starting a new business In other words Millennials represent just about every conceivable life-stage banking opportunity. But they re not an easy sell. Only 40 percent of this generation feel their bank has the appropriate products services and methods of delivery to meet their needs and demands. Or consider this According to the Millennial Disruption Index 71 percent would rather go to the dentist than a bank and 33 percent believe they won t need a bank at all. Those are some pretty strong opinions to overcome. 2015 Growth Strategy Survey from Bank Director Getting Tactical Let s Make It Fun To help ANECA connect with this much soughtafter segment hiring has become far more strategic. Following the Sievers-led re-org ANECA wanted to begin to reinvent itself to create a more youthful fun and energized culture. To be clear though we re not necessarily hiring younger people but the right people. People who would live and breathe the ANECA personality. People who would carry our brand out into the community tells Amanda Simpson. People who were comfortable joining professional organizations and being the face and voice of ANECA in the community. This willingness to be part of a community presence is key to ANECA s plan to target Millennials because so much of the CU s marketing efforts are non-traditional community-based initiatives that require staff support and participation. In addition to being fluent in the ANECA spirit says Simpson we want the staff to be well-versed in technology AND to know how to present and offer tech-leaning products and services to customers. Beyond the shift in hiring strategy over the last few years Sievers has begun to ramp up more of a feet on the street approach to marketing. The market here is pretty much saturated she explains. One of the best things we can do to build brand awareness is to put our personality out there. To get people thinking that there is something different about these ANECA folks. That s why we are doing all the right things for the community. To create a brand that people want to be a part of. In other words a powerful way to sell to Millennials is to NOT SELL to Millennials. The ANECA team has mapped out an impressive brand-building and awareness campaign that is in full 48 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S J JAANNUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MILLENNIAL MANAGEMENT TEAM swing. Much of the attention and word-of-mouth brand awareness they have generated has come from a variety of guerilla-branding efforts. Currently the team is working on the second rapstyle video in what has become known as the Swagger Boost series. These humorous videos feature staff and even a few members. theANECAway is an ongoing Pay-it-Forward style campaign that s created a lot of awareness and media attention as ANECA staffers go out into the community with a random acts of kindness approach. As part of its community involvement ANECA participates regularly in National Dance Day. Check out the CU s YouTube channel at user ANECAFCU. ANECA participated in the Krewe of Highland Parade as well and staffers threw over 3 000 packages of ANECA-branded Ramen noodles to the crowd. One of those packages contained a special golden ticket worth 750. (While there s no ready research on the subject with many Millennials being recent or current college students chances are good Ramen noodles hit just the right note.) The credit union also takes part in the Louisiana Startup Prize competition. Here local entrepreneurs pitch new business ideas and ANECA awards 100 000 in seed money to each of the top five ideas. We then push all these activities and stories out on Facebook and through other social media channels explains Sievers. You see people having fun people doing the right thing for the community. All these efforts are a great recruitment tool for employees but also members obviously. Of course when it comes to reaching Millennials technology is key. While there have been many changes with respect to culture and personality at ANECA there have also been more tangible efforts. Currently we are developing new mobile apps website upgrades and other products and services that will appeal to the new generation of ANECA members reports Rippetoe. Chemistry This is not your parents bank says Amanda Simpson. The energy and the change is everywhere. I can feel it. This atmosphere is due in large part to the team s chemistry and their shared vision for ANECA s growth and success. That s not to say we nod in agreement with each other. We disagree often but in a healthy way that leads to a deeper more wellrounded examination of the problem at hand tells Kyle. Because they are the audience they re trying to reach team ANECA can ask themselves Does this resonate with us Imagine the insight you d have if your credit union had the same kind of precision B.S. detector to help you weed out the good from the bad on all things branding. That kind of intimacy with your primary target audience is something research dollars just can t buy. We re like a 76-year-old startup Sievers adds with a laugh. We have been around for that long but there is really not much brand recognition. But with all the sweeping changes going on it really feels like we re a startup. A startup that s laying down a beat giving its image a major swagger boost and rapping its brand into the hearts and minds of Millennials throughout the market. Eric Gagliano is a leading credit union marketer with more than 20 years of marketing experience. As Executive Vice President at MarketMatch Eric helps to guide credit unions with focused marketing strategy designed to generate momentum and yield proven results with an ROI Guarantee. 49 C R E D I T U N I O N B U S I N E S S J A N U A R Y 2 0 1 6 C U B U S I N E S S . C O M cuso A community joined together for a common purpose. In what ways does collaboration benefit a credit union Can it expand reach and outpace the competition Provide greater services and prevent newer risks At PSCU we know that credit unions are stronger when they stick together. And we re proud to be a 30-year leader in credit union connectedness. When you join PSCU you re joining the ranks of more than 800 credit unions nationwide that leverage the power of our cooperative. 888.918.7357