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T H E O NLY A L L - DIG ITA L A LL-BUS INES S RES OURCE FOR CREDIT UNION S T H E P AY M E N T S I S S U E CEO VELOCITY Steve Hennigan SCOTT MCCLYMONDS FEBRUARY 2016 VOLUME 11 ISSUE 2 Orchestrating Meaningful Cultural Change at SACU COMPLIANCE UPDATE CEO VELOCITY CFO CURRENCY CREDIT UNION TRAINING MEMBER BUSINESS LENDING BRANCH BUSINESS LENDING SOLUTIONS MARKETING MATTERS NEW Team Builder DETAILS PG. 4 Introducing The Team Builder from CU Business Magazine Helping to strengthen credit unions and their communities. VIEW FROM THE CROW S NEST COMPLIANCE UPDATE LENDING SOLUTIONS MARKETING MATTERS TECHNICALLY SPEAKING BRANCH BUSINESS CFO CURRENCY CEO VELOCITY MEMBER BUSINESS LENDING BUILD YOUR TEAM Tim O Hara Publisher CU Business Dear Tim You know how much I enjoy reading your magazine which is always filled with helpful and timely articles Sign up at Join hundreds of CUs across the country by sharpening the skill sets of your department heads by signing up to 10 team members to receive CU Business monthly eMagazine weekly eNewsletters and over 5 years of back issues on our website. We email each Team Member PDF versions of pertinent articles before they are published according to title CEO gets CEO Velocity and View from the Crow s Nest CFO receives CFO Currency Lending department gets Lending Solutions Marketing Executives receive Marketing Matters Compliance department gets Compliance Update Trainers receive CU Training Branch Supervisors get Branch BUSINESS. Cost is only 500 per year 20% of which is sent to Children s Miracle Network to be filtered to the CMN children s hospital nearest the CU s community. A Website Wall of Fame will credit each CU with the CMN donation citing CU name city asset base and CEO. With the new Team Builder program I ll be able to retain hard copies of your magazine and ensure that my colleagues receive helpful articles on a position-specific basis I also think supporting the Children s Miracle Network is a wonderful idea Thanks again and keep up the great work Best Walter Walter Merkle Executive Vice President Northwest Georgia Credit Union Signing up is simple Send a check for 500 ( 100 of which goes to CMN) along with a list of names titles and email addresses of up to 10 team members. Or pay just 46.60 per month on any major credit card www. register. PO Box 2223 Palm Beach Fl. 33480 Or call 561-282-6015 1 TABLE OF CONTENTS FEBRUARY 2016 VOLUME 11 ISSUE 2 THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS 4 6 10 13 18 20 23 UP FRONT Many Milestones Tim O Hara LENDING SOLUTIONS 28 32 35 38 40 MEMBER BUSINESS LENDING Financial Makeover Bob Schroeder CFO CURRENCY Alec Hollis CEO VELOCITY Mining A Hidden Gem Unearthing Sales Success Through Branch Referrals Ryal Tayloe MARKETING MATTERS The Fed s Impact On NMDS Steve Hennigan Orchestrating Meaningful Cultural Change at SACU Scott McClymonds COMPLIANCE UPDATE NEFCU Gambles on Non-Traditional Approach to Advertising and Wins Kelly Durcan BRANCH BUSINESS Consumer Onboarding Building New Member Loyalty at the Branch Kaitlin Morrison THE LAW Overdraft Practices Spur Regulation But Also Litigation Cindy Williams AT C LEVEL Cyber Security Is Your Credit Union Safe Daniella Casseres RISK MANAGEMENT Mark Hein Gordon s Knot Marc Bringman CREDIT UNION TRAINING Kenneth C. Bator Managing Risk with Your CPI Program Do You Really Want a Sales Culture 1 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M TAB 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 Bob Schroeder CEO VELOCITY Scott McClymonds CFO CURRENCY Alec Hollis COMPLIANCE UPDATE Cindy Williams AT C LEVEL Marc Bringman CREDIT UNION TRAINING Kenneth C. Bator MEMBER BUSINESS LENDING Ryal Tayloe MARKETING MATTERS Kelly Durcan BRANCH BUSINESS Kaitlin Morrison THE LAW Daniela Casseres RISK MANAGEMENT Mark Hein 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 NEW T H E O N LY A LL- D IG ITA L A LL- BU SIN E SS R E SO U R C E FO R C R E D IT U N IO N S T H E P AY M E N T S I S S U E CEO VELOCITY Steve Hennigan SCOTT MCCLYMONDS FEBRUARY 2016 VOLUME 11 ISSUE 2 Orchestrating Meaningful Cultural Change at SACU COMPLIANCE UPDATE CEO VELOCITY CFO CURRENCY CREDIT UNION TRAINING MEMBER BUSINESS LENDING BRANCH BUSINESS LENDING SOLUTIONS MARKETING MATTERS Team Builder DETAILS PG. 4 2 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M Stuck in the past Sure your current CPI program works but is it the best option for your borrowers and your staff Hybrid CPI transforms the way you track your loan portfolio--reducing risk the administrative burden on your staff and regulatory concerns. Hybrid CPI is a product that doesn t inflate delinquencies so we don t have to worry about that when underwriting someone s ability to repay a loan. The program allows us to lend more because the tracking program will pick them up without kicking the person into the collections queue. --Arick Williams Vice President of Lending Columbine Federal Credit Union Click here to download our free case study and find out what our clients have to say about Hybrid CPI. 2015 SWBC. All rights reserved. 5540-1442 UP TAB FRONT BY TIM O HARA I Many Milestones f you stick around long enough milestones seem to come up with regularity. I ve been around a while and I m looking at some pretty significant milestones this month. This February 2016 (Vol. 11 No. 2) issue of Credit Union BUSINESS eMagazine represents the 60th consecutive monthly edition to be posted on our website www. creditunionbusiness and it s there to see by all of our valued subscribers but you need to be a paid subscriber. Sixty months five years of easily accessible business articles for you to read and learn from every day I would guesstimate that there are in the neighborhood of 700 separate articles about credit unions readily available on our website. I would also wager that those 700 articles represent the closest thing to a fact-filled library available in the credit union publishing industry This library is neatly laid out and searchable so our subscribers can research every CU topic with ease. A portion of the Team Builder subscription also goes to help the communities of participating credit unions in the form of a direct contribution of 20% of the subscription cost to the Children s Miracle Network. I m told that 100% of the CUB donations go directly to the CMN hospital closest to the contributing credit union. And soon the CU BUSINESS website will display a growing Wall of Fame to showcase those wise and generous credit union leaders. And speaking of milestones and CMN this February 2016 issue is another milestone of sorts. That is because it represents CU Business Magazine Inc. s 125th consecutive Children s Miracle Network fullpage ad which we ve run pro-bono in support of this wonderful organization. CUB s longstanding affiliation with CMN began when Marc Bringman long-time editor of CU BUSINESS introduced me to the organization and we began a multi-year helping relationship with them. Marc was in my opinion a brilliant business editor with an uncanny grasp of everyday office working relationships which he portrayed in his monthly column At C-Level. We lost Marc to cancer a few years ago and I miss him every day. Every now and then I enjoy resurrecting a Bringman At C-Level to share with our readers. I ve included an especially good one entitled Gordon s Knot which first ran in the October 2007 issue. I hope you will enjoy it Thanks for reading Tim 2 0 1 6 C U B U S I N E S S . C O M This CU library ties in very neatly with our new Team Builder subscription program. Credit unions are signing up to receive CU business information 10 team members at a time. And included in the price of admission are the monthly eMagazine and weekly eNewsletters as well as specially delivered pdf copies of the important articles by job title and full use of the CU BUSINESS website 4 C R E D I T U N I O N B U S I N E S S F E B R U A R Y LENDING SOLUTIONS BY BOB SCHROEDER Extreme Makeover Financial Edition H Is your credit union giving the people who walk through your doors what they want or what they need Leveraging the opportunity for want into both want and need could see your member participation loan yields and ROAs soar. Welcome to the financial version of TV s Extreme Makeover. order You had a great chance to make a big impact on their life and you gave them what they asked for not what they need. A while back I read a book on Steve Jobs. One part I thought was interesting is that he did not believe in focus groups. The reason He felt people do not know what they want. Could you have envisioned your need for an iPod tablet or smartphone before they were developed I believe in many cases our members do not know what they need. They come in asking us to fill an immediate want. Give them what they want AND what they need. In many cases it is an Extreme Makeover Financial Edition The credit union will benefit from increased member participation leading to more loans with much higher yields than investments. The end result is higher ROAs. ave you seen the Extreme Makeover Home Edition It is an American reality television series providing home improvements for less fortunate families. The show s team takes a family home and makes substantial improvements to it which also improves the quality of life for the family. At times we do a similar thing with an Extreme Makeover Financial Edition But are we consistently offering our members the best financial solutions Our members are the backbone of America. They build cars roads and buildings teach our children work at the steel mill repair our cars work at the airline work for the federal or state government are employed by telephone companies and more. While they are experts in their field that does not make them financial experts. Many stumble through their financial life. The get a credit card because a lender such as Capital One mailed them numerous solicitations. They received their car loan from the finance manager at the dealership who is trained to close 90 percent of loans. They purchased a home with a mortgage from their Realtor friend. They maxed out their credit card improving their home and when the dishwasher unexpectedly went out they applied for a Lowes card to finance the replacement. Not exactly a master financial plan. Somewhere along the line they get to your credit union. They ask for and receive a vacation loan. Congratulations you did an excellent job filling the 6 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M LENDING SOLUTIONS It all starts with the loan interview. We fill in the blanks of the loan application. The marketing gurus of the past convinced us we need the shortest application to make it easy to get a loan. While I agree this strategy works well with filling orders it also means we are not getting the entire story on the member. Your staff needs to be very well trained to effectively use the abbreviated loan applications. What assets do the applicants own What is the equity position of these assets What expenses do they have coming up Weddings college or elderly care If we can get the entire picture including a list of assets liabilities dependents and upcoming expenses we can complete an Extreme Makeover Financial Edition. Example 1 financial makeover with loan requests Bill a grocery store manager earning 78 000 per year applied for a 2 000 Visa. His debt-to-income ratio was 72 percent. The loan was turned down because of excessive obligations in relation to income. Sound familiar This along with inadequate collateral and insufficient income is loan officers favorite denial reason. Bill had 35 trade lines with balances. His credit report summary looked like this Balance 1 Real Estate Loan 1 Vehicle Secured Loan 33 Signature Loans & Credit Cards Total Debt to Income or DTI 72% Unsecured Debt Ratio or UDR 118% 93 339 19 203 92 958 205 500 Payment 980 450 3 250 4 680 We were working at this credit union for the week and they gave me this loan asking me what opportunities I saw. I agreed we could not make the loan however I also stated we could not decline the loan because we did not have enough information. I then called the member to get the rest of the story. We found out that his wife worked at a local university earning 35 000 per year. The additional income drops his DTI to 50 percent. He had lived in his home raising his five children for over 20 years. His baby was a senior in high school and he had recently remodeled his home because the kids were pretty rough on it over the years. He d put on a new roof installed new windows doors and floor coverings and upgraded to a new kitchen and bath. The kids were able to cover their own educational expenses with the help of Mom s benefits. Many of the credit card balances were used to cover the home remodeling expenses. We discussed the pros and cons of a home equity loan. The member was receptive and believed the home would be worth 175 000 on today s market. In addition he had another auto free and clear that we could add as collateral. We were concerned with the amount of unsecured debt in relation to income and discussed bankruptcy. We told him There are no right or wrong answers here but I have to ask Have you ever considered bankruptcy He was adamantly against it. He firmly believed that one needs to pay back those borrowed from. That s just the way it was. He further stated he had a plan to get everyone repaid. In 16 months he would reach full retirement age and would receive 7 2 0 1 6 C U B U S I N E S S . C O M C R E D I T U N I O N B U S I N E S S F E B R U A R Y LENDING SOLUTIONS 2 200 per month from social security. He would use that income to pay off his unsecured debt. After hearing the rest of the story we came up with the following solution Balance First Mortgage Second Mortgage Vehicle Secured Loan (2 cars) Total Debt to Income 25% New Loans to the CU 175 000 117 400 59 000 28 000 204 400 Payment 1 030 780 520 2 330 Loan denials end relationships while extreme financial makeovers enhance relationships. This member was thrilled that the credit union cared enough to reevaluate the loan request after the initial decline. He referred a number of new members to the CU over the next few months. The finance charges on the new loans and the new member relationships generated more than enough income to cover our consulting fees for the week. End result Free training for the credit union. Example 2 a financial makeover in collections While working delinquencies on new loans I came across a member who surrendered four cars that were currently at the auction. The credit union was looking at a projected 23 000 loss after the sale. We asked the collection manager to pull the cars out of the auction while we reviewed the account. The member was with the credit union for over 23 years. He was a disabled veteran earning 40 000 annually in disability benefits. He had colorful credit and while auto loans to those with good incomes and colorful credit are good they should be limited to such individuals primary means of transportation. That would be one loan up to 50 percent of his annual income or in this case 20 000. The CU gave him four auto loans totaling 40 000 too much for this member to handle. 8 C R E D I T U N I O N B U S I N E S S The most recent car loan pushed his CU payments up to 1 350 per month. The member started being a regular user of courtesy pay and cancelled his direct deposit once it became clear that his check would be going to his negative checking balance. We called the member wanting to look for a solution. We found out he had two cars that he has owned for a number of years. When asked why he owned six cars he said I am a disabled Vet with lots of time and I like to turn wrenches. Through the interview process we learned he also owned a fishing boat lakefront property and a mobile home free and clear. The solution became obvious. We gave him his four cars back and refinanced his loans using the 40 000 property as additional collateral. We also paid off a few other bills such as payday lenders and a furniture loan. We were able to reduce his interest rate with the real estate as collateral and extend the terms to 84 months. This lowered his payments over 600 per month The member was excited to get his cars back at a payment he could afford. The credit union was excited to get out of the 23 000 loss. Financial makeover complete and more free training. Our members are not financial experts and rely on their credit union for assistance. As we get bigger we create a consumer loan department and a real estate loan department. Eventually we split the real estate loan department to first and second mortgages. F E B R 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. The consumer loan officers come up with a financial makeover that only includes consumer loans. Are you surprised What training did you provide them in real estate lending The second mortgage lender comes up with a second mortgage solution and the first mortgage department comes up with a first mortgage solution. The best solution for your member does not change. Your staff s ability to find the best solution is limited to their training and experience. My approach is to make a list of assets and loans with totals then 1. Finance as much as you can on a first mortgage. (You may skip this step if the member has a lowrate mortgage that cannot be beat.) 2. Utilize a second mortgage up to the maximum allowed. (We recommend 100 percent LTV in stable real estate markets.) 3. Finance as much as you can on secured loans. 4. Use unsecured loans for the remainder. (Make sure borrowers are not bankruptcy candidates when using this solution.) I usually keep student loans out of the mix and recommend the member consolidate his or her loans with one of the many great programs that are available. I like to compare the financial makeover to the Magic Slate toy we had as kids. You remember the Magic Slate a black wax-covered piece of cardboard with a plastic sheet over the top. You draw a picture using a plastic stylus and when you want to erase it you just lift the plastic sheet and start a new drawing. Our members credit report is their financial picture on the Magic Slate. Lift the plastic and redraw their picture via a financial makeover. Give them what they want AND what the need. Bob Schroeder vice president consultant of Lending Solutions Consulting Inc. or LSCI began his 30 -year credit union career in collections before moving on to lending. He has 11 years of experience with two of the largest credit unions in the country rising to the level of vice president of credit before moving on to serve as CEO of a community credit union. During his 21-year tenure as CEO the credit union experienced a period of rapid growth and strong earnings. Bob can be reached at bschroeder or 815-761-0135. 9 C R E D I T U N I O N B U S I N E S S F E B R 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 The Fed s Impact On NMDS T What does the recent interest rate hike mean for your credit union These statistical analysis measures and account traits could indicate the likelihood of withdrawals in the weeks and months ahead in light of the increases. Coupled with expertise culture and excellent customer-centric services they could mean the difference between faltering and thriving. . movements in a reference market rate. Accounts with a higher beta coefficient may require a more aggressive pricing strategy thus carrying a higher risk of withdrawal if deposit rates do not keep up with market rates. High amounts of hot money Offering a higherthan-market deposit rate to grow depository funding is commonly referred to as buying hot money. Because funds are deposited on the basis of rate offered this practice attracts funds more likely to be withdrawn when rates rise. Buying hot money tends to impair the value of the deposit franchise. That is because it attracts undesirable depositors who are more likely to withdraw funds when rates rise. Technology has exacerbated this phenomenon by making the comparison of products easier and switching costs lower. Attempting to retain hot money may turn out to be more expensive than it s worth. High coefficient of determination or he first Federal Reserve interest rate hike in nearly a decade is behind us. The Fed recently increased its target rate to between 0.25 percent and 0.50 percent resulting in the long-awaited first stage of liftoff. More rate hikes are widely expected throughout 2016 and will eventually impact every financial institution in the country. With higher rates almost certainly in store this year the topic of deposit outflow has received heightened attention. This focus is particularly due to the combined impact of rising rates and new technology making it easier to switch accounts. Given that the Fed funds target rate remained unchanged for so long the prospect of higher rates begs the question What adjustments to the retail deposit rate structure are warranted While this question may seem like a daunting game-theory scenario when budgeting and planning readdressing the tools available to analyze depository funding characteristics may provide some relief. One vital approach to understanding a depository base is separating core from non-core deposits. Further analyzing the pricing strategies along with assessing the behavior-based cost helps shed light on a deposit base s sensitivity to increases in interest rates. Accounts most likely to experience withdrawals could be characterized as having these traits High beta coefficients A beta coefficient measures a deposit rate s historical sensitivity to 10 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M CFO CURRENCY CURRENCY CFO CFO CURRENCY CFO CURRENCY TAB 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 and authorized While They have alreadybe recalculated to remember that and R-squared When used in an autoregressive market. the output shouldit become revieweddetermine the impact the standard for pricing and highly useful is important to and decay rates that are similar to amortizations. this can take weeks. model R-squared shows the for the present value statistical analysis of a different assumption. Dividend and discount rates allow explanatory power many corporate bonds. does have limitations. Deposit if as are will allow of variable in relation to another variable (e.g. Knowing where same limitations you are uncertain as to calculationsa(premiums) in each modeled interest rate scenario. analyses face the swap rates and spreadsthe data inputs the many backwardexpected account balances given a change in that go into them. Furthermore they arerequirements of effective duration calculations can then mathematically bebetter hedging and investment execution. When investors need Conclusion applying and using derivatives deposit rates). A high R-squared indicates account looking in nature. 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 consider With the exception of money market accounts rate balances are likely to decrease if an institution s becoming the more important curve to analyze.engaging an external duration is calculated by merely backing into the price change or benefits generated from loyalty of the membership when service an institution s offer rate is lower than competitors and does not decisions are likely driven more by provider to help you formula. increase as the market ratepresent value is 100 in the overall business strategy dividend rates are low instaff For example if the liability increases. deposits are retained when like reducing branch a higher through First Financial Emily Hollis CFA is a partner with ALM the steps. base 101 in the up 100 basis point scenario and 99 in the down and developing the expertise to offer advisory services market environment. And vice versa A financial derivatives Properly used institution Advisors LLC. 100 basis point scenario Decay rates primarily model the that offers a non-maturity dividend rate drivingthan market (e.g. higher Low decay rates the effective duration is one percent and technological advancescan offset interesttrafficrisk rate (i.e. (101-99) 200).non-maturing liabilities or the rate at toward mobile channels and adopting a economic withinofthe to attract hot money will decrease the inherent value its behavior of that is universal-teller liabilities. itindustry model these accounts for a more is imperative This is vital because as competition which certain accounts will leave an institution. model). credit union competencies to meet the final The second accurate depiction of interestcreditrisk. sensitivity Analysisdecay requirements.requirements part grows derivatives canaren t the only reason consumers But deposit rates allow rate unions to compete more While a low rate does not necessarily and final application is submitted when all are imply undesirable depositor behavior as a means effectively. The regulator strongly suggests sensitivity analyses accounts choose an institution. Depositors consider a wide range completed including dealer contracts. with significant hot money assumptions. sensitivity factors in addition to rates including services offered to quantify the effects of changing tend to have low (or ofEmily Mor Hollis CFA is a partner with ALM First Financial setting up a decay rates due to supernormal growth a and a variety other tangible and intangible incentives. line at a dealer is similar to becoming Advisors LLC. analyses negative) 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 from buying hot money. 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. 11 C R E D I T U N I O N B U S II N E S S B U S N E S S November 2014 F FEEBBRRUUAARRYY 22 00 11 66 Credit Union BUSINESS C U B U S I N E S S . C O M 15 CFO CURRENCY Trying to attract depositors through expertise culture and excellent customer-centric services will increase liability franchise value. As a complement to statistical analysis it is vital to assess the qualitative aspects of a deposit base to corroborate the assumptions used. In other words do your assumptions pass the sniff test Do the beta coefficients truly represent the current pricing strategy in place Developing a narrative summary in conjunction with the quantitative statistical analyses could be useful because it allows an institution to determine the more intangible aspects of depository value like loyalty and customer satisfaction. As part of an effective ALM framework liability franchise analysis serves as an early warning system to exposure to rising interest rates and it can help with decisions about setting deposit rates. Alec Hollis joined ALM First Financial Advisors in 2012. Mr. Hollis performs asset liability analyses for financial institutions various what-if analyses budget forecasting liquidity forecasting and any other modeling requirement to fit the needs of ALM s clients. As an Associate Mr. Hollis s additional responsibilities include the presentation of results to client ALCOs and senior management as well as mentoring new financial analyst team members. Mr. Hollis holds a bachelor s degree in finance from the University of Notre Dame in South Bend Indiana. 12 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M CEO VELOCITY BY SCOTT MCCLYMONDS Steve Hennigan Orchestrating Meaningful Cultural Change at SACU For the second month in a row Credit Union BUSINESS s CEO expert drinks from the fountain of Cornerstone Credit Union League s Top 50 knowledge. This go-around SACU s chief shares insight on how credit unions can get back to their roots of serving real people of financially struggling and modest means. ast month my featured CEO was Doug Fecher of WPCU in Dayton Ohio. Doug was one of two featured speakers at the Cornerstone Credit Union League s Top 50 meeting and he related some of the ways his credit union is improving service to members of modest and struggling financial health. This month I am highlighting the other featured speaker Steve Hennigan of SACU in San Antonio Texas. Like Doug Steve is concerned that many credit unions have lost focus of their congressionally mandated mission of serving people of modest means. He and I have had three fascinating discussions on this topic as well as cultural change and leadership and I will bring the substance of those discussions to you in this article. When I first met Steve in San Antonio he showed up in jeans sandals and a guayabera shirt. After I expressed admiration for SACU s dress code he told me he had been out all day in moderate- to low-income neighborhoods talking to residents. It s something he does periodically to stay in touch with real people and their needs. L Steve Hennigan of SACU Cultural Shift Driven by Modest Means Mandate As we settled into our discussion at the Marriott it didn t take Steve long to begin describing the cultural shift he and his organization have been involved in since 2009. The nexus of this change was the financial crisis in 2009 when SACU s leadership realized the credit union s culture structure and leadership approach needed to evolve. During the ensuing cultural transformation SACU s board members decided in 2013 to keep their federal charter. This led to a deep examination into the purpose of federal credit unions and that process uncovered the people of modest means mission. At that point the credit union s board was forced to further evaluate their transformational efforts in light of Congress s primary reason for creating credit unions. 13 2 0 1 6 C U B U S I N E S S . C O M C R E D I T U N I O N B U S I N E S S F E B R U A R Y TAB VELOCITY CEO As evidence of this primary mission Steve pointed me toward Congress s adoption of the Credit Union Membership Access Act. This legislation delineates how credit unions differ from other for-profit financial institutions and says they are exempt from federal and most state taxes because they are member-owned democratically operated not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers especially persons of modest means. Who s Having the Modest Means Conversation I remarked that I had not heard this modest means mission mentioned one time in all the national and regional credit union conferences I had attended. Millennials yes. Digital banking yes. Moderate income people no. If this is the primary reason for existence why isn t it a main topic in public forums I wondered if I had just missed the conversations but Steve told me I hadn t. He said a big reason for the absence of discussion around modest means is the lack of performance metrics tied to it. A look at the NCUA website shows myriad financial metrics but nothing measuring how credit unions are performing against their modest means mission. The tendency of NCUA regulators is to measure financial performance and safety and soundness impacts what gets measured in most credit unions. And of course what gets measured gets done. Taking this to its logical conclusion Steve noted that CEO compensation packages are rarely if ever tied to how well the credit union has served people of modest means. 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. 14 scottm 479.263.0774 C R E D I T U N I O N B U S II N E S S B U S N E S S Scott McClymonds is one of the most creative strategists in the financial services industry. - Elio Spinello Principal RPM Consulting F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M CEO VELOCITY The Challenge of Defining Modest Means Having defined the issue the consultant in me wanted to solve it. First how do we define modest means and what performance metrics can we create to measure how effectively we re serving individuals of such means Unfortunately there is no clear definition around modest means. SACU has formed a team to explore and make recommendations to its board on both the definition of modest means as well as performance metrics. In the early stages of this process several metrics options appear to be available ranging from census to HMDA data. CEO Velocity Interjection I would suggest a simple way to get started is by borrowing the banking world s definition of low to moderate income meaning families earning less than 80 percent of an area s median income. Gadberry a strategic partner of mine has household income data at fairly granular levels for most of the households in the United States (scary I know) and it would be quite easy for SACU or any other credit union to use that data to not only identify individual member households by low mod definitions but also display those members and their neighborhoods on maps. An exercise like this identifies the quantity of modest means households in your member base as well as your market area. It also provides a solid foundation for focus groups and data analysis leading to the development of products and services to help people in this income range. Of course once these folks are clearly identified a credit union can measure anything around them such as debit card transactions loan volume checks cashed etc. This is the same kind of information used by NCUA to determine a Low-Income Designated Credit Union but unlike the banking sector the term modest means has never been more rigorously defined by either Congress or NCUA. Thus interpretation is left open. steps are creating awareness and developing clearly expressed board values. His biggest challenge with his board was creating awareness and understanding of the modest means mandate. Discussing the topic of modest means with the board has brought up questions such as How do we define modest means and Can we make money serving people of modest means Of course the last question challenges the conventional notion of whether credit unions really are for profit or not for profit. The fact is that SACU serves a lot of those folks already as a Low-Income Designated Credit Union. However the board does not deal directly with human stories in its governance work so it is challenging to gain a meaningful understanding of modest means individuals and what serving them means to SACU s operation. To overcome this gap Steve and his board have been looking hard at their values and beliefs with the goals of creating clarity on what s important in SACU s mission and ensuring that values drive the board members conversations. The following values of SACU s board are expressed in the credit union s vision which was created in 2009. The first value was added last year after reviewing the federal credit union charter. SACU volunteers and staff believe and thrive... in promoting thrift and credit for provident purposes to people of modest means in serving with accountability integrity trust and respect in continuous learning and growing to ensure a sustainable and dynamic future in communities enriched by human dignity interdependence opportunity and social justice. Steve said this level of values activation requires a different kind of discussion than what the normal board governance process calls for. Hence the credit union is learning to include values discussions in board dialogues. 15 Creating Awareness among Board Members In aligning SACU s mission more strongly with serving modest means people Steve emphasized that the first C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M TAB VELOCITY CEO The Cultural Change Imperative Cultural change in any organization takes time especially in a larger credit union like SACU. Generally it takes more time than most are willing to give because it involves embracing new beliefs and assumptions and people don t give up old ones quickly. Transitions take time and they involve a process of letting go and that can be scary if done too fast. I asked Steve to tell me what he would recommend for other credit union CEOs who want to re-engineer their operation around the modest means mission. Here are his main points Focus on the organization s values first to ensure that the real commitment [is] to a new direction. If there is no commitment from the leadership at the board and senior management it won t go anywhere. You can t simply task assign this and expect it to move. Creating renewal is hard and requires top leadership and board commitment. mandate and NCUA s focus on financial results there was no pressure whatsoever to forge this path. Instead he followed his conscience and decided to do the hard work of change. Feeling strongly that his moral and ethical responsibility as CEO is leading his credit union back to the roots of the movement s founding Steve is almost seven years into a massive organizational transformation to better focus SACU on serving people of modest means. The transition has shaken the core beliefs of some people and it has required extraordinary energy and teamwork. As you reflect on Steve s story I want to challenge you to answer the following questions 1. To what degree is the modest means mandate a part of your credit union and how satisfied are you with your efforts 2. Strong and distinctive culture that attracts and keeps great employees while meeting the needs of your community 3. If your core values beliefs and vision need to be sharpened are you willing to provide the leadership to make those changes Scott McClymonds of CEO Velocity helps credit unions transform profits brands executive performance and culture. His coaching and consulting integrate leadership strategy marketing and technology to develop high value for credit unions that are looking to strongly impact their communities. Subscribers to Credit Union BUSINESS can receive a free one-hour consultation by contacting Scott at scottm ceovelocity. com 479.263.0774 or on LinkedIn at in scottmcclymonds. 22 00 11 66 C U B U S I N E S S . C O M Seeing the World with Fresh Eyes Of course in every company s transition story there are individual transformations and I wanted to know what Steve went through to lead such a large cultural change. His biggest transition has been his worldview and how he approaches his role. He has moved out of day-today operations and fully into the future context of the world to understand how SACU fits into and serves its communities. This has required him to see the world with fresh eyes and to visit neighborhoods and people who are thriving declining and just getting by. Steve recommends all CEOs utilize this same approach to stay grounded in the reality of the communities they serve. CEO Velocity Viewpoint We have two lessons here. One is the issue of serving people of modest means and the other is orchestrating meaningful cultural change around core values and beliefs. Steve Hennigan could have chosen to pursue business as usual the relentless pursuit of more. With the vague definition of Congress s modest means 16 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY mobile Capable of moving or being moved readily. So are you Your members are. Your future members are. And so are your competitors. As the leading CUSO PSCU can move you forward in the way of mobile delivery. That means putting you in all the places your members are and helping you outpace the competition on the road ahead. mobile 888.918.7357 COMPLIANCE UPDATE BY CINDY WILLIAMS Overdraft Practices Spur Regulation But Also Litigation H More rules may not be all your credit union has to contend with when it comes to 2016 s overdraft practices. The potential for lawsuits is very real as well and no CU is safe. Find out how your credit union can avoid overdraft-related legal action in the months ahead. the ins and outs of overdraft assessment is essential to understanding how easy (or difficult) your policies are for a member to understand. aving studied overdraft practices for some time the CFPB appears ready to act in 2016. While many in the movement are rightly concerned about the prospect of more rules the burden may be even more encompassing. That s because litigators have been known to charge ahead with or without regulator guidance. Overdraft-based lawsuits aplenty demonstrate how regulator curiosity is often enough to propel litigation. It didn t take long following the CFPB s public disclosure of its interest in overdrafts for parties to begin filing suits. The lawsuits started with big bank defendants but have since spread to credit unions evidence that no financial institution is safe from legal action. In some cases the questionable overdraft practices alleged in these suits appear to be intentional. Others however can be traced back to inadvertent back-office software settings. Today overdraft fees are both legal and acceptable to many consumers. However regulators suspect the unsavory practices of some require their attention. So what kinds of practices are regulators investigating (and litigators exploiting) And most importantly how can your credit union stay out of the crosshairs of each one Transaction Order This is the big one. Do your members transactions hit their accounts in an order that maximizes overdraft fees There are a variety of posting orders that can significantly change the number of fees charged to an account. Posting a 2 000 mortgage payment ahead of a 175 trip to Target for example can turn what otherwise may have been one overdraft assessment into two. Posting Inconsistencies Some recent lawsuits have alleged financial institutions used funds availability rules to place holds on certain deposits and not others (without providing the proper Reg CC hold notices). When practices like this are in place members can have difficulty predicting when their funds will become available. Debit Card Authorization Holds On certain debit card transactions such as pay-at-thepump and hotel stays merchants may place a hold on a consumer s account until the transaction is complete. These holds can be in place for as long as two days. Some recent lawsuits have alleged financial institutions order these transactions by the date of the hold rather than the date of the final transaction. This tactic may 2 0 1 6 C U B U S I N E S S . C O M Excessive Fees Does your credit union offer a grace period before an overdraft fee is assessed Is there a dollar limit before a fee is assessed Is there a daily maximum Sitting down with your deposit and operations teams to understand 18 C R E D I T U N I O N B U S I N E S S F E B R U A R Y COMPLIANCE UPDATE allow the credit union or bank to collect an overdraft fee it may not otherwise have been able to. Available vs. Actual Balance Determining which balance your credit union uses to assess overdraft fees is incredibly important. Some financial institutions will calculate funds availability from the available balance which does not include recent deposits. Others use the actual balance which does include recent deposits. Obviously the former would allow for greater assessment of overdraft fees. Marketing and Member Information A few recent lawsuits say consumers have not been provided adequate or proper information specifically as it relates to posting orders holds and the types of balances used to calculate availability of funds. Be crystal clear in your understanding of the credit union s practices and ensure all marketing regulations are followed as you communicate the finer points to your members. While much of the trouble with unfair overdraft practices started with the CFPB and large banks credit unions are now in the thick of it. Your deposit marketing and compliance teams should work from the assumption they are as on the radar as the big guys when it comes to overdraft practices. Cindy Williams is vice president of regulatory compliance for PolicyWorks a national leader of credit union compliance solutions. She can be reached at cindyw 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 19 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M AT C LEVEL MARC BRINGMAN Gordon s Knot G When a superior demands something of Gordon that goes against his principles the situation gets tight around the collar. How can Gordon do the right thing without compromising his and his boss s job Find out what happens when a subordinate stands his ground and learn an important lesson your credit union s managers can take away from this heated debate. a dog could hear him when he replied Mr. Hanley what can I do for you Son I need a favor. You up to it Hanley frequently ended his statements with this question more of a challenge than a question really. Yes sir Gordon replied confidently. He had only met Hanley once but he wasn t about to mess up a chance to excel. I m told you re in charge of the training results from that recent seminar. Indeed I am sir. I need those results. How soon can you have them Hanley had a way of putting the rush on everything. You called at just the right time Mr. Hanley. I m working on the summary report as we speak and I can have it on your desk by 3 00 p.m. Does that work for ordon sat quietly at his desk studying the results of the recent in-house managementtraining seminar. The report came in two sections individual feedback by name and department and a summary. Participating managers were told that their individual results would never be released except as part of the aggregate. By asking many personal questions department trainers hoped to provide participants with a unique insight into their potential and how they rank among their peers. Gordon was tasked to compile the information and prepare an executive summary to accompany the aggregate results a simple straightforward task and one that Gordon never thought would threaten anyone s career. By lunchtime he was in the process of adding the finishing touches to the report and although he was a young manager he knew the importance of producing a finished product. Even his e-mails were always organized and well written. Doing the right thing was a way of life for Gordon. He worked hard at it and until today the right thing had always been easy. At precisely 11 57 a.m. the phone rang. He remembered the time because he had just checked his watch anticipating lunch. It was also the moment in which his budding career began to wither. Gordon picked up the phone. Gordon Hanes. Hanes Hanley here said Charlie Hanley the group VP. Gordon tried but failed to drop his voice an octave. He was sure only 20 C R E D I T U N I O N B U S II N E S S B U S N E S S F J EABNRUUAARRY Y 22 00 11 66 C U B U S I N E S S . C O M AT C LEVEL TAB you This was perfect. The big guy calls and Gordon had exactly what he needed. Summary I understand you have the detailed results on each manager. Yes sir but those results are confidential. Gordon did not like the sudden turn of the conversation. Confidential To whom Hanley asked. Gordon hadn t expected this question. Worse he didn t know the answer. He began to stumble. Mr. Hanley ... the individual results cannot be released to management only the aggregate. That s nonsense son. Please bring that information to my desk this afternoon. At this point Hanley would typically hang up the phone and things would happen. This time however he sensed an uncertainty in Gordon s voice so he waited for a confirmation. But sir the participants were told that the individual results would not be released to management. Gordon thought a logical approach might work. I m not releasing the information son just looking at it. I want to see what kind of managers I have. Now get that complete report to my office. This time he intended to hang up. Sensing this Gordon quickly added No sir The interjection was intended only to prolong the conversation but that wasn t how it came out. Are you refusing to give me this information Rejection was unfamiliar territory to Hanley and he possessed few coping skills. Gordon recognized the emphasis on you in Hanley s threatening question and again blurted out what seemed like the right answer. No sir ... I mean I will be happy to bring the aggregate results to you right away. He hoped promising the results sooner would resolve the situation. He was wrong. I understand Hanley calmly replied. And you ll be a whole lot less happy before the day is out. This time he did hang up. Hearing the click and the resulting empty echo that was now his future left Gordon stunned. He slowly returned the receiver to its cradle took a long breath and whispered This is bad. C R E D I T U N I O N B U S II N E S S B U S N E S S Thirty minutes later Gordon sat motionless rewinding his brief career and hoping to discover a different ending to the same set of events. His third-floor corner office was quite small but offered a beautiful view of the lake and right now watching the yellow goslings follow their mother down the trail provided some calm not serenity just a welcome peace. That s when he noticed Joan his boss standing ankles crossed silently leaning against the office doorframe. Her folded arms told him all he needed to know. Hanley had already tracked her down. Now with eye contact Joan spoke. Are you trying to get me fired She forced a smile at her favorite subordinate. Gordon wasn t sure if he knew the answer to this question either but answered No. Then he hit her with his best set of coweyes. It didn t work. Gordon do you know who you are messing with Hanley s the group VP. He s been in that job for as long as I can remember. He has nothing to lose. He s my boss s boss manages more than fifteen hundred people and Gordon he really does make the big bucks. She took a deep breath and let the air hiss through tightened lips. Then she posed a single rhetorical question Do you have any idea of how dark it is in this rat hole we re in Joan walked straight into the small office. Joan he wants the detailed reports. So what Well. Gordon hesitated. Answers come slower in dark places. Joan you assigned me to this project and part of the project is to protect the individual results. 21 F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M AT C LEVEL AT C LEVEL GORDON S KNOT Yes sir but those results are confidential. Gordon told like the The participating managers weredid not in writing that sudden turn of the conversation. their results would not be shared. And that s what I m Confidential To whom Hanley trying to protect our commitment. Gordon studied asked. her reaction to his attempt to put her in the same boat. Gordon hadn t expected this question. Her silence left Worse he didn t dark waters alone. After a him treading know the answer. He long moment she said stumble. Mr. Hanleyrub the is that began to Let s see the ... here Hanley wants the private data cannot beGordon nodded. individual results right released And who would know only the gave it to him to management if you aggregate. That s replied. I suppose nobody he nonsense son. Please Then why bring that information to my desk this don t we just give him the report Is afternoon. At this point Hanley would there anything in there that you see is a problem I don t know. typically hang up the Gordon never thought I didn t look. phone and things would happen. This time however to look. he sensed an uncertainty in Gordon s Well at least you re consistent. I ll give you that. voice so he waited for a confirmation. She thought for a moment. OK I ll tell you what you But sir the participants were told give it to me and I ll take it up. I ll schmooze Hanley that the individual results would not and watch your released How s that Gordon words be back. to management. Joan s struck Gordon as final authoritative and obvious. Then thought a logical approach might years of rusty counsel passed through his mind. Each supportive Hearing the clickcreates resulting empty echo that was environment and the motivated employees. work. now his boss should be willing to use returned the thought splashed into a not releasing theof uncertainly and looking writes A future left Gordon stunned. He slowly his or her I m choppy pool information son just She at receiver to its cradle took a long breath and whispered confusion untilit. I want to see whatthought bubbled have. Now influence and even go to bat for the employee with finally a single kind of managers I to the get that This is bad. complete report to my office. This time he intended higher-ups when appropriate. Protecting employees is to hang surface Thirty minutes later Gordon sat motionless rewinding up. Choose your battles carefully. For the first time much easier said than done. Not only must leaders face his brief career and hoping to discover a different ending Sensing this Gordon quickly added be difficult questions of what is in his short career he faced a decision that had to No sir The to the same set of events. right and wrong they also His third-floor corner office was interjection wasor delay onlyHeprolong the conversation made. He couldn t avoid it intended it. to owned this must determine the long and short view of the lake on the quite small but offered a beautiful range effect and right but that wasn t how came waited patiently moment this decision. While itJoan out. employee. watching the yellow goslings follow their mother down now Are you refusing to give me this information Rejection Gordon took a painful moment to consider his answer. If you haveprovided some calm not situation you will. the trail not faced a similar serenity just a welcome was unfamiliar territory to Hanley and he possessed few Finally he looked at her and said with a sigh I can t For example That s when he noticed Joan his boss standing ankles peace. a young manager raises a controversial coping skills. give this to you either. recognizedshe emphasis on smilein Hanley sduring a silently leaning against this the doorframe. Her Again the forced a you point crossed meeting. Hearing the office CEO raises Gordon folded arms told him all he causes an overreaction and said Gordon you ve got and again blurtedwith my an eyebrow. That single motion needed to know. Hanley had threatening question a lot of guts out what seemed like already tracked down. career. She paused no doubt assessing herI career too to bring the managing VPher even though the CEO thought the right answer. No sir ... I mean will be happy in the and then continued. You know what You re right. nothing of Now with eye contact the time. The you trying to get the comment at Joan spoke. Are opportunity aggregate results to you right away. He hoped promising the me fired She forced a smile at her favorite subordinate. It s a small thing but sometimes even situation. He was wrong. abuse of power exists on every rung of the results sooner would resolve the the smallest for Gordon wasn t sure if he knew the answer to this question I understand Hanley calmly replied. And corporate ladder. Near the top and with real power less things are important and I can see this is important you ll be a either but answered No. Then he hit her with his best set of to you. And it swhole lot less happyIbefore the day is out. This time he didis needed to impose one s will making it easier important that support you. OK I ll force cow-eyes. It didn t work. hang up. cover. With that Joan turned for senior managers to misuse power intentionally handle this you take and left. Somewhat relieved Gordon sat back in his 8 Credit leave. As she walked away he chair and watched herUnion BUSINESS October 2007 looked at her quite differently. She seemed to be much Jane Boucher the author of taller. How to Love the Job You Hate reminds us that a or unintentionally and at the same time ignore the harmful effects. The best managers will remain aware of the potential for abuse and will create environments in which all employees can operate freely. Marc A. Bringman was the second Editor at Credit Union Business. 22 C R E D I T U N I O N B U S I N E S S F E B R 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 Do You Really Want a Sales Culture I Your credit union may think it wants to adopt a sales culture but when it comes to the nitty-gritty behind achieving such an atmosphere that desire may not be what it seems. Using a case study from his longstanding brand culture and strategy alignment career CUB s sales training expert illustrates why it s time to stop and examine your surroundings. wrote a version of this article in 2003 about 18 months after I started my consulting firm. I had had some success in sales both in retail banking and in business-to-business (B2B) financial services throughout the 1990s. So when I started offering consulting services to credit unions in 2001 my primary offering was teaching frontline staff how to effectively cross-sell products. The fact that I started my own firm in 2001 is part of the sales culture story in and of itself. The successful B2B selling I accomplished in the late 90s had been done with and through a competent business development team while working as Business Development Manager and later as VP of Marketing for a corporate credit union in the Midwest. In early 1999 the CEO announced a planned merger with another corporate credit union. I remember distinctly about an hour after that announcement sitting in an office with a fellow executive talking about the potential merger. One of the first things he said was I hope we don t lose the sales culture we built. His words were a bit prophetic as about two years later I was ... shall we say made available for other employment. It s quite possible my sales-driven management style didn t fit as well with the more operationally centered culture that had evolved after the merger. It s also possible that if I had been more self-aware and adaptive in my early 30s that I might not have been shown the door in 2001. But that s a subject for a different article or a conversation over a glass of wine during the GAC. As I delivered my cross-selling training to multiple credit unions in 2002 I discovered something. While concepts such as features and benefits consultative selling discovering the need and building rapport were certainly valuable and teachable skills I was just touching the surface on the greater issues of culture building. This discovery led me to the tip-of-theiceberg concept and what I call today the B C S Formula (Brand Culture and Strategy alignment). The biggest realization came late in 2002 while working with the entire staff of a 25 million credit union. In my effort to assist in true culture change rather than simply teaching surface-level tactics I gave the entire group an exercise. I asked them to break up into three teams and develop a draft of service standards prior to our next training session. I gave them additional direction based upon our topic of discussion 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 CREDIT UNION TRAINING informing members of services that would truly benefit them had less to do with sales and much more to do with service. In essence to not make a member aware of a product he or she needs would thus be a disservice. A month later I returned to this credit union to facilitate our next training session. About 20 minutes into the program I asked So how did we do on our service-standard exercise The question was met with the sound of crickets and the look of blank stares. After what seemed like 90 seconds I asked Did we not do the exercise All of a sudden the CEO popped up from the back of the audience like a clown out of a tiny car in a circus. As he was walking toward me waving a piece of paper he exclaimed I got em right here. While scanning the service standards that had been listed on the sheet I asked Oh did everyone work on these together After another short silence the CEO replied No. The COO and I came in one Saturday and put these together. You didn t have to be a psychologist to see and feel that the entire staff had been deflated. Weren t we supposed to get into teams to develop service standards and then discuss them today This was the first question I received during the break by one of the more outspoken frontline employees. She deliberately asked her question loudly within earshot of the CEO. I had to make a split-second choice come up with some politically-correct spin of an answer to 24 C R E D I T U N I O N B U S I N E S S protect the ego of the CEO or simply reply in a blunt and truthful fashion. I chose the latter. Yes. The plan was to work in teams and discuss what all of you had created. Needless to say my consulting engagement with this credit union ended that afternoon. While it was painful to lose that cash flow in my first full year of business the fact remains that I wasn t going to help that credit union. The CEO missed the main point of the exercise. The list of service standards was the end product. It was the process of getting everyone involved and obtaining buy-in from the entire team that was the primary value of the program. During that final training session a number of the cracks that stemmed from the very core of the culture became apparent. Unless I could help the CEO see those cracks and unless he was in a state of mind to become aware no amount of sales training hours was going to help this institution. Not surprisingly that credit union is no longer around today. Within a few months after this experience I began to dissect what CEOs were truly asking for when they said to me I want to adopt a sales culture here. I inferred that there was a mindset for many executives that we could simply stamp a cookie-cutter process of selling onto any credit union staff much like a bestpractices operational procedure. It then occurred to me that within the sales culture at the corporate I worked for in the 90s that we never talked that much about features and benefits or sales tactics. We did however talk a lot about the why. We talked about vision standards values and being more than just another supplier. It s those concepts we all rallied around that F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M TAB CREDIT UNION TRAINING helped us to achieve the sales goals we set. This led me to write the following in my newsletter in 2003 A number of financial institutions say they foster a sales culture. Fortunately most if not all of those companies have failed in implementing a sales culture in the traditional sense of the word. They have built something much better a service-team culture. Even to my surprise I have witnessed credit unions with a service-team culture successfully sell products and services year after year without offering incentives. The fact is that incentives whether they be commissions or non-monetary rewards are only secondary motivators. The marriage of the proper culture and a good incentive program however can be a powerful combination. Furthermore employees of a service-team culture understand that the incentive is just icing on the cake ... Regardless of what your culture is labeled as if the institution has taught employees to embody the true essence of the organization and member-satisfaction ratings are high odds are management has succeeded in establishing the proper culture for the institution. The next time people ask you what type of culture your institution has you can tell them you have a team-service culture. However if you want to save time you can just say you have a sales culture and avoid the questions and lengthy explanation to follow. You know what type of culture you have and more important you know it works. This is an excerpt of the full article but you get the gist. The point I made the same point I try to make today is that staff needs to understand the why. Sales skills incentives bonuses and even recognition are highly valuable tools but not in the absence of creating the right employee experience for your credit union. Fast forward to late 2015. Two of my credit union clients approached me with a We need to adopt a sales culture conversation. My reaction was probably similar to the times I m driving up to a stale yellow light I see a traffic cop out of my peripheral vision and make a rather sudden stop just short of the crosswalk. In other words it s time to stop and examine our surroundings - Review the why. Organizational drivers such as the mission vision values and service standards are not only the foundation of the credit union s unique B C S Formula but also valuable management tools. These tools need to be used to help all employees understand exactly why they have a responsibility to become experts in the products and services why the products and services offered by their credit union are better than those offered by any other financial institution and why they have a fiduciary duty to make current and prospective clients aware of how their CU s products and services can help these clientele achieve their goals. - Do we truly have buy-in If our staff hasn t bought into the why or better yet played a role in defining the why we can teach all the sales 25 C R E D I T U N I O N B U S I N E S S F E B N U A R Y J A R 2 0 1 6 C U B U S I N E S S . C O M TAB CREDIT UNION TRAINING skills there are and implement the most attractive incentive plans but never come close to hitting our sales targets. That s because every employee is tuning out. Maybe our products aren t that special after all but what is special is the way we deliver them. As one credit union CEO told me early in my career We all offer the same (bleep). - What makes us different is us That realization and the embrace of such by each employee is the epitome of buy-in. Yes sir you can get a checking account and a loan at Chase but no one knows ______ (fill in the blank with police firefighters teachers this community this company or a group of your choice) better than we do. What is the personality profile of the employees both individually and collectively Arturas Bulota recently stated during his TEDx presentation Expectations of Generations X Y and Z There s no such thing as company culture anymore ... the next big thing is that there is a culture of individuals. While I would argue the first portion of the quote he s definitely onto something with the second part. Each individual is tuned into WIFM What s in It for Me. This mindset is even more prevalent today than it was 10 years ago for a number of reasons. However it is still possible to align WIFM with WBFM What s Best for the Membership. We need to start with what makes each employee tick and helping each individual understand it so we can engage him or her in a manner he or she needs to be engaged. Whether we use DiSC Predictive Index or another tool understanding both the individual profiles and the collective makeup can be invaluable in delivering the right message approach and training for our unique credit union. Delving much deeper than simply teaching sales skills certainly is not the easy way but it s the lasting way. The fact is that since I wrote my original article in 2003 26 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M TAB CREDIT UNION TRAINING both culture building and sales success have become much more of a challenge. However the answers to the achievement you seek already lie internally within your credit union and not externally in another institution s sales process. 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 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 The Credit Union Journal and ABA Bank Marketing. Born and raised in Chicago he earned a Bachelor of Science degree in Finance and an MBA in Entrepreneurship from DePaul University as well as a Certificate in Integrated Marketing from the University of Chicago. 27 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MEMBER BUSINESS LENDING BY RYAL TAYLOE Mining a Hidden Gem Unearthing Sales Success through Branch Referrals L Is your credit union taking advantage of all the business cross-selling opportunities that are crossing your branches thresholds on a daily basis Keep reading to see how one CU has successfully mined its branch networks for business referrals and how you can implement a winning referral program of your own. sales and the typical response will range from fear to loathing. Long-time credit union employees were brought up in the culture of providing outstanding service to their memberowners and to them sales runs counter to the concept of doing what s right for the member. Strict sales goals and incentive-based compensation have long been the province of traditional retail banking and credit unions pride themselves on being the anti-bank. But it doesn t have to be this way. United FCU builds upon a foundation of member service where sales is a natural byproduct of meeting each member s financial needs. United FCU s tellers and desk staff (called member service advisors or MSAs) are taught to engage the member in a conversation and assess his or her needs. ike many credit unions today you may not realize that a highly effective yet underutilized sales force is hiding right under your nose your branch team. According to the U.S. Small Business Administration there are 28 million small businesses in the country an increase of 49 percent since 1982. Odds are small business owners are walking into your credit union branches every single day. This tendency presents a huge opportunity to cross-sell member business loans and deposit products to your existing member base. So how do leading credit unions mine their branch networks for business referrals and how can you implement a successful branch referral program at your cooperative United Federal Credit Union has enjoyed immense success in this arena over the past several years. With branches spread across six states including Michigan Indiana Ohio Nevada North Carolina and Arkansas the 2 billion-asset credit union works overtime to maintain consistency in sales and service across such distinct and diverse markets. I recently caught up with Stacy Fillmore vice president of national sales and service and asked her about United FCU s branch referral sales program. Here is her roadmap for success 1. Sales Fits the Credit Union Culture Ask any number of credit union professionals about 28 C R E D I T U N I O N B U S I N E S S F E B R 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 When serving a member tellers are trained to pick up on conversational cues and to review certain triggers within the relationship such as large balances sitting in an account. Tellers use open-ended questions to assess the member s needs and based on the answers may refer the member directly to an MSA performing a warm handoff right then and there. Or if the member doesn t have time the teller will log the referral into the cloud-based referral tracking system for later follow-up by the MSA. We always try to make the personal handoff Fillmore says. The member is able to meet with a well-informed MSA who understands our products our services the features and benefits and [who] can ask the appropriate questions to determine what would best serve the member s needs. 2. Set Clear Expectations Upfront In any organization it is imperative that you set clear goals and expectations for your team members before you turn them loose. These goals should be achievable and aligned directly with your credit union s overall objectives. Different organizations take varying approaches toward goal-setting and team incentives. United FCU s management team has chosen not to offer a sales-based variable compensation plan to their branch team. Instead they have instituted a program called Stratification in which all tellers and MSAs are evaluated on areas including product knowledge and service skills as well as sales results to ensure that they are not simply pushing product over but rather are truly serving the members needs. The 1 Solution for Member Business Lending 29 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MEMBER BUSINESS LENDING TAB The Stratification plan is made up of four different levels. An individual employee may move up a level based upon success in achieving the various testing benchmarks. It is a meritorious approach where once a teller achieves a certain level he or she is paid on the same scale as peers within that level. Our employees are not paid per product sold which is typical in the banking industry Fillmore says. Instead every teller in a particular level is paid the same amount and they are [all] in complete control of what level they want to rise to and maintain. Fillmore notes that this transparent approach has proven to be very attractive to potential recruits especially within the banking industry. The wages are competitive and recruits understand that it is needs-based selling Fillmore says. It is a rewarding feeling for the staff to build relationships by simply acting in the member s best interests. 3. Support Your Team with Training and Coaching You can set the most aggressive plans and goals in the world but execution is where success is achieved. Without a commitment of dedicated resources to training and coaching your team your credit union will undoubtedly fall flat. United FCU places great emphasis on training and staff development taking a two-pronged approach. Human resources handles the initial training and on-boarding of new employees into the credit union s culture. HR also educates the team on processes procedures and the importance of outstanding service. The second part of United FCU s training and coaching model occurs out in each of the geographic divisions at the market VP level. The vice presidents in each of our markets are extremely hands-on and engaged with the staff Fillmore says. They spend time in each location and are out in the community. We get together every Monday and talk about what s going on across the 30 C R E D I T U N I O N B U S II N E S S B U S N E S S nation the challenges and successes and that s how we maintain consistency across the board. 4. Use Technology and Establish a Solid Workflow Process Where the rubber truly meets the road is in the tracking reporting and managing of your referral program. Thankfully today s cloud-based technology platforms offer new capabilities and efficiencies that weren t available even a few years ago. United FCU uses a leading cloud-based bank-operating system that provides both customer relationship management (CRM) and loan origination functionality to drive the credit union s referral process workflow. Starting with the teller or MSA once an opportunity is identified the employee records the referral right in the online platform. The mortgage originator or business lender can then view the pending referral in the dashboard queue including details on the member relationship and notes to help guide the introduction. At that point the lender is in a position to confidently reach out to the member make an appointment and take over the process. Once a sale is booked the referring employee is automatically informed of the outcome. Also CRM technology can be used in conjunction with marketing automation software to provide team members with sales prompts customized to a particular member s needs or interest. If a member has shown interest in a specific product through one or more sales channels that information is shared with the MSA who can then follow up in a face-to-face conversation or via an outbound call. With branch locations in six states across the country senior management at United FCU needed a system that provides such real-time tracking and transparency. Because we have goals that are tracked using our cloud-based platform we can witness our successes and disappointments as they take place. For example sold referrals and pending referrals can be monitored on the F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M MEMBER BUSINESS LENDING branch level and all the way up to the corner office Fillmore says. I have the ability to keep track of many business locations and different types of business lines by observing the tracking system and then I can coach compliment or provide other feedback as appropriate. 5. Communicate Communicate Communicate From setting goals to training staff and tracking results the most critical common denominator is ensuring consistency through constant open transparent communication. This is another area where technology plays an important role. Technology is essential Fillmore says. It is a key communication tool. It enables those who are out in the field working directly with the member to have all the information they need right at their fingertips. And it allows the representative to quickly input information so that members can choose where and how they want to be served whether it s through the call center at the branch or in the member s own office through a visit from one of our employees. A cloud-based system also serves as a tool for fostering internal motivation. There is friendly competition among staff and branch teams Fillmore adds. How many appointments have you had How many calls have you made Who s had the best member experience story Technology allows us to monitor evaluate and compare performance across the board. It provides tremendous insight to the leadership team and the team as a whole. Generating business services referrals through your branch sales team is not something that will happen overnight. For many credit unions it starts with a mindset change guiding your team members to a place of understanding that by evaluating member needs and offering the right product they are truly providing the best member service. From there success is dependent upon a disciplined approach toward sales and product training tracking and reporting results and full transparency across all critical areas with the help of leading cloud-based technology to ease the burden. But once you start digging you ll hit pay dirt in no time 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. Dig Deep Business services offer the largest growth opportunity for many credit unions today. Contrary to popular belief the most formidable obstacle to growth is not the member business lending cap or competition from banks. Rather it is mobilizing the traditionally retail-focused credit union to support the cause of the business services team. 31 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M MARKETING MATTERS BY KELLY DURCAN NEFCU Gambles on Non-Traditional Approach to Advertising and Wins F Sometimes the best approach to advertising isn t building your credit union up in the eyes of viewers. Rather it is tearing the banking competition down in a light-hearted playful manner. Keep reading to see how one credit union made such a marketing effort work in a major way. customers best interests at heart. The commercial makes just one reference to NEFCU. We came to the conclusion that our marketing would have so much more of an impact if we focused on the negatives of big banks and simply reminded people that we do the opposite said Valerie Garguilo vice president of marketing and community relations for NEFCU. We don t need to shout who we are a whisper is much louder. The commercial also introduced NEFCU s new tagline Better banking because we re not a bank. It s a powerful spot that doesn t have to work so hard to sell NEFCU. It s brilliantly simple in defining who we are without mentioning one specific benefit or attribute said Ms. Garguilo. Armed with greater recognition and awareness the Westbury N.Y.-based organization followed up that effort with one in early 2015. That latter endeavor has since garnered several advertising and financial mar- or one credit union the most effective way to say who it is is to show who it isn t. That s been the thinking behind the award-winning advertising campaign for NEFCU which spends much of its valuable advertising airtime lampooning its bloated banking brethren rather than discussing its own low rates and attractive member services. That formula may sound antithetical to basic marketing but it has proven to be a successful one for the 160 000-member Long Island credit union. Located in a community of banking behemoths NEFCU boldly decided to go directly after its imposing competitors as a way of defining itself. Despite continued growth in the market and success in attracting members NEFCU realized there was still a need to educate a great number of Long Islanders as to who NEFCU was what it did and even how to pronounce its name. The result was the creation of a new television campaign that debuted in 2013. The first spot followed in the wake of the banking bailouts presenting an unflattering look at banks and the charmed life they lead despite their unpopular practices and countless failings. As an Italian aria hauntingly plays beneath the announcer s condemnation of banks viewers see a boardroom gathering of silver-haired self-satisfied and out-of-touch bankers who clearly do not have their 32 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M MARKETING MATTERS TAB keting awards. The commercial Heart is a jauntily playful look at the heartless nature of banks today. Buttoned-up bankers sing If I only had a heart from The Wizard of Oz while they go about their business blithely ignoring customers unconcerned and unaffected by how they are perceived. The latest commercial was awarded the top prize in its category at the advertising awards show The Telly Awards. It also won the top prize at the financial marketing awards show The Midas Awards this year. Clearly these commercials resonate with those who are absolutely fed up with banks said Andy Brief head of account services at DeVito Verdi the New York advertising agency that created the campaign for NEFCU. Bank customers know [that] they re getting the short end of the stick and that banks are in business to reward shareholders not customers. We pulled no punches in these two spots and given the circumstances that makes for a fairer fight. Throughout the process NEFCU knew it wanted to present a new look a new feel and a new voice for the organization. It didn t want to be viewed as a me too financial institution with its advertising and it needed to show it was a better choice for consumers. For most financial institutions doing advertising one of the biggest hurdles is trying to communicate the details of a superior benefit in just a few seconds of airtime or in a frequently glanced-over print ad. NEFCU s marketing team concluded that consumers members didn t need to know the specifics of a particular benefit in a TV ad. They just had to know that NEFCU promised better banking. Landing on the Better banking because we re not a bank tagline seems to have captured the essence of the credit union. It succinctly states a premium positioning a clear idea of the CU s business and a promise of superiority. What s interesting is that there is no other word than bank that describe the activities services and products NEFCU provides. But on the other hand it s the last thing [the credit union] should be called. So we used that conundrum to our advantage which is how we got to the tagline and the creative execution of the commercials said DeVito Verdi s Mr. Brief. Key to the advertising NEFCU felt was that the commercials delivered a message that NEFCU was a smarter choice than a bank. But when your competitor is considerably larger than you and can clearly outspend you on advertising making the smarter choice argument can be seen as an uphill battle. In opting to accentuate the negatives of a competitor however NEFCU made a smart choice. The results have been precisely what the fast-growing credit union needed to do to raise its profile and define who it is. Although these two commercials focused primarily on what s wrong with banks NEFCU also spent part of its marketing budget on print and digital ads that concentrated on typical banking communications from ads touting its attractive 3 percent checkingaccount rate to its expertise with mortgages car loans and credit cards. 33 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M TAB MARKETING MATTERS The television commercials were key to driving home what NEFCU did and how it was different. The remainder of our marketing communications needed to show consumers the specifics of what we offered and how these products and services are beneficial said Ms. Garguilo. The campaign has clearly been noticed by competitors and the public alike. Marketing critics have lauded the work and NEFCU employees have expressed their delight in their credit union going after the big banks. Launching an ad campaign that focuses almost exclusively on accentuating the negatives of a bigger rival shows a tremendous amount of heart and guts. And given the results to date it shows some brains. Kelly Durcan is director of public relations at the awardwinning advertising agency DeVito Verdi based in New York City. Throughout his 30 years in the industry Kelly has handled public relations for scores of national brands and companies non-profits trade organizations banking institutions foreign governments and international entities. NEFCU is one of Long Island s leading not-forprofit full-service financial institutions. It proudly offers its affordable banking services to all Long Islanders. With more than 2.3 billion in assets and over 160 000 members NEFCU is headquartered in Westbury N.Y. and has branches and a shared branch network throughout Nassau and Suffolk Counties. For more information about NEFCU visit call 516-561-0030 or find the credit union on Facebook at NEFCU. NEFCU Long Island s third largest credit union whose smokefilled room commercial lampooned bankers as greedy and uncaring is preparing a new salvo in its campaign to contrast its culture with that of banks. The latest commercial which shows three well-heeled bankers dancing and singing If I Only Had a Heart from The Wizard of Oz debuted in March. (Credit NEFCU) 34 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M BRANCH BUSINESS BY KAITLIN MORRISON Consumer Onboarding Building New Member Loyalty at the Branch E Attracting credit union members is one thing keeping them is altogether another. These four onboarding lessons will help your CU improve its member loyalty so that those who enter under your inviting umbrella are retained for the long haul. It starts at day one. very credit union knows that recruiting new members is important but it is after registering a new member when the real work for branch employees begins. New member retention is vital to the branch s survival. By embracing these four onboarding lessons your credit union may improve member loyalty. It s all about reaching new members from the very first days of their membership. Onboarding Takeaway 1 Use Your Branch to Strengthen Your Credit Union s Technology Offerings Often member onboarding relies on technology and requires members to download an app or register for online account access. While this can be an excellent strategy to reach tech-savvy members of the Millennial generation and others reliance on technology can be a barrier to some members. A report published by J.D. Power and Associates in 2015 found that some retail banking consumers were more frustrated with banks use of smartphone technology last year. In fact consumer satisfaction actually dropped to 47 percent from 57 percent in 2014 due to a lack of clarity of information and ease of navigating in the new tech features offered by banks. Of the customers who said they fully understand mobile technology 46 percent stated they would stay at their bank while just 34 percent of less tech-savvy customers expressed such loyalty. Perhaps this tendency represents an opportunity for branches. Taking the time to educate your C R E D I T U N I O N B U S I N E S S members on the technology your credit union offers encourages them to visit their local branch when they have questions. From there building relationships with members provides opportunities to suggest services that are relevant to their lives. We try to overcome these challenges by showing them the ease of our services [by] taking the time to set up direct deposit and getting our members acclimated with online mobile banking said Teresa Morillo Branch Manager of the Germantown Maryland branch of Montgomery County Employees Federal Credit Union (MC EFCU). Onboarding Takeaway 2 Relationship Building Starts and Ends at the Local Branch Creating a culture of service that allows branch staff to learn about members personal and financial lives is key to the success of your branch. Relationships you build with your members help to craft personal ties 35 2 0 1 6 C U B U S I N E S S . C O M F E B R U A R Y BRANCH BUSINESS that bring them back. Branch managers tellers and personal bankers share this responsibility. Onboarding members during those first 90 days is very important. Our goal is to encourage our members to establish an ongoing personal relationship with their local branch manager tellers and member service representatives said Nancy Duffett Branch Manager of NEFCU s Massapequa New York branch. At NEFCU this personal relationship starts with ongoing contact. Members are called to see if they need help or have questions. Later new members are called again and offered information on the credit union s other services. Duffett believes that this initial contact from the branch is an important part of offering the high-quality service that makes new members rave about her credit union to others. Onboarding Takeaway 3 Every Branch Employee Is Responsible for Onboarding New Members Every employee at the branch level should be familiar with your products and services but they should also know how to communicate financial basics with members and be ready to introduce more people to the credit union s services. Instead of upselling I try to coach my team on the skills of identifying the needs of the member(s) and educating them on the different products and services offered by the credit union that will satisfy the need said John Schneidawin Branch Manager of NEFCU s Huntington Station New York branch. Schneidawin identifies questions that his staff should ask members to match the right products to the right people. His branch regularly reviews information about the credit union s products so that every staff member is ready. By conducting product knowledge huddles with your team [members] they build confidence in speaking about the products which makes it easier to upsell Schneidawin said. Onboarding Takeaway 4 New Member Onboarding Has a Short Window and Smart Onboarding Practices Boost Member Retention When a new member enters your branch you immediately start a countdown from 90 days. At the end you will either win over that person with your branch s service or you will lose him or her to another financial institution. During the first year attrition rates among new members may be considerably high. Data shows that members who are not substantially utilizing your credit union s services may soon take their business elsewhere. A report by Aspen Marketing Services claims that banking customers using bill payment services for just one bill are 76 percent less likely to switch to another institution. If the customer pays five bills automatically the likelihood he or she will leave drops to 95 percent. Members who are not using your credit union s basic services may have a variety of reasons for not doing so but it is your branch s responsibility to find out why and assist them. Employees perform follow-up calls to members within three to six weeks of account opening. In these calls employees ensure the member is satisfied with the services that are being provided and verify which products or services the member is already using to help understand how they manage their account said Allison Horn Branch Manager of the Michigan State University Federal Credit Union s (MSUFCU) Central Park Branch in Okemos Michigan. If necessary MSUFCU staff will work with new members to switch accounts and even assist members with the administrative process knowing that extra hassle and difficulty are compelling reasons for many members to avoid using the basic services available to them. 36 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M TAB BRANCH BUSINESS Become Great at Onboarding to Be Better at Member Service Ultimately your credit union branch exists to serve the membership. A strong personal-onboarding plan will go a long way toward improving the quality of your services all while encouraging your credit union s members to visit your branch for all their financial needs. Avoid the temptation to reinvent the wheel. If you perfect your onboarding you may be amazed at how many members recommend your branch to their friends and family. In addition to covering Branch BUSINESS for CU Business Kaitlin is a freelance business writer basedin 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 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 37 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M TAB THE TAB HERE LAW HERE BY DANIELLA CASSERES BY AUTHOR NAME HERE Cyber Security Is your credit union safe When it comes to the safety of your credit union members personal information online this year is going to be more tightly regulated and enforced than ever before. Read on to find out the various state and agency reforms that may impact your CU s cybersecurity measures in 2016. F or years regulators have required credit unions to maintain the security of consumer non-public personal information. In 2016 it appears that information security specifically cyber security will be at the top of regulators legislative and enforcement agendas. As virtual networks become more important to business growth so does the need to protect information shared through those networks. Regulatory focus on cyber security is evident from various state and agency reforms that have either recently taken place or are imminent. Wyoming for example recently updated its information security laws to amend its definition of personally identifiable information. The state also changed its security breach notification requirements. Other states including California and New York have launched cybersecurity initiatives to propose and implement new legislation. The New York Department of Financial Services issued a letter in November 2015 inviting feedback from federal agencies including the National Credit Union Administration to develop comprehensive financial industry cybersecurity regulations. New York s letter included a list of proposed standards that would require financial institutions to maintain cybersecurity policies and procedures require minimum contract terms with third-party service providers concerning cyber security designate a qualified chief information 38 C R E D I T U N I O N B U S I N E S S security officer conduct cybersecurity audits and vulnerability assessments and implement specific notification guidelines to report security breaches. The increased emphasis on cyber security for financial institutions highlights the need for strong thirdparty vendor due diligence which is already required by federal regulators such as the Consumer Financial Protection Bureau. Third-party vendors that have access to a company s information technology systems or a consumer s non-public personal information pose a great risk if they have weak security systems or controls in place. Freddie Mac recognized this thirdparty-provider risk by amending its guidance. Effective F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M THE LAW May 2016 the mortgage corporation will now require its sellers servicers to ensure that third-party providers and outsourced vendors meet information security requirements. As agencies ramp up their cybersecurity legislation and exam procedures we can expect additional enforcement. Credit unions should ensure that they are adequately implementing and updating any policies and internal controls to ensure that non-public consumer information is safely maintained. Every credit union should monitor information security in connection with its information safeguards policies and should maintain and test its business continuity and disaster relief plans. In addition due diligence at the onset of third-party vendor relationships and regular monitoring will be essential to complying with existing and forthcoming new regulatory requirements. As we begin 2016 an examination of current cybersecurity policies and procedures should be a priority for credit unions. Daniella Casseres legal practice focuses on laws and regulations governing mortgage lenders mortgage brokers financial institutions and consumer finance companies. She regularly advises clients on state and federal compliance laws and regulations including fair lending advertising licensing privacy TILA RESPA FHA FCRA and BSA requirements. 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 39 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M RISK MANAGEMENT BY MARK HEIN Managing Risk with Your CPI Program I Is your credit union experiencing any of these five disruptions associated with having Collateral Protection Insurance in place You may not be able to avoid CPI altogether but there are some aspects of the provider-ship that are entirely within your control. Read on to learn what they are.. nsurance tracking and placement is a critical component of a lender s risk management arsenal albeit not always a very popular one. It is unpopular with credit union staff and obviously borrowers who have either errantly or unfortunately been force placed. However it s unavoidable right Collateral Protection Insurance (CPI) with all of its shortcomings has been around for decades and it generally reduces the risk to your credit union s lending portfolio. By tracking your auto loan portfolio and proactively communicating with your borrowers about the status of their insurance coverage you can limit risk due to uninsured losses at least in theory. But as most credit unions know some of the problems associated with CPI can be quite disruptive to their operations Ensuring regulatory compliance Increased member complaints Deficiency balance exposure due to high premiums and subsequent payment increases An increased administrative burden due to refund activity Increased collection and repossession efforts due to subsequent payment increases evolved because of regulations and fines passed down from state insurance departments Fannie Mae Freddie Mac and the Consumer Financial Protection Bureau (CFPB). Throughout the years and with the increased practice of tracking insurance lenders have found themselves embroiled in litigation about CPI programs. These lawsuits have arisen from the practice of adding exorbitant coverage that did not directly benefit the borrower but was unfortunately built into the premiums. In addition many institutions were under the false impression that CPI should or could be a source for non-interest income. Now after hundreds of millions of dollars in penalties have been paid the trend is to simplify the practice of tracking insurance and the coverages that accompany those programs. This tendency leaves credit unions with a huge burden to ensure their CPI providers are compliant. Ensuring Regulatory Compliance Lenders face a unique set of challenges as regulations surrounding lender-placed insurance are changing every day. Over the last few years the industry has 40 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 6 C U B U S I N E S S . C O M 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 TAB MANAGEMENT RISK Increased Member Complaints and Administrative Burden When the premium add-on from a CPI policy causes a borrower s monthly auto loan payment to significantly increase there will naturally be complaints particularly if the CPI policy was errantly false placed. Either scenario is difficult for your employees to explain to your members and making all of the necessary and manual account adjustments is time-consuming. Unhappy members put a strain on your relationship and in this day and age of intense competition in the financial services industry an unhappy member could soon be a former member. is in your control. Whether you re in the market for a new CPI provider or you just want to conduct a highlevel due diligence of your current provider here are a couple of questions you can consider 1. Are the provider s processes archaic The outdated way of insurance tracking goes a little like this send letter send another letter issue a CPI policy and then unwind after borrower presents proof of insurance. This process works but it is certainly not the most efficient way of managing the process not when there is technology available that allows you to score borrowers based on their past insurance history and communicate accordingly. By using information from credit bureaus on whether a borrower is likely to have the insurance coverage required for his or her auto loan the technology is able to make predictions with 87 percent accuracy. Borrowers who score higher can then be sent additional automated messages or they can be given more time to provide proof of insurance. 2. Does the provider offer alternative policies As we all know the traditional force-placed insurance policy is costly. It can cost up to 2 000 for an annual policy. In general if a borrower was in a position where he or she couldn t secure a standard full-coverage auto insurance policy you can deduce that a 2 000 policy is going to cause financial Deficiency Balance Exposure and Increased Collection and Repossession Efforts In the worst of cases a borrower can be pushed into delinquency because of a premium add-on. By raising their monthly loan payment to cover the cost of an annual CPI premium some borrowers are forced into voluntary repossessions because they can t afford the inflated price. When such a scenario transpires your credit union is left susceptible to charge-offs and loan losses. As deficiency balances and delinquencies rise collections workflow increases and cash flow is impacted. Delinquency and repossession as a result of CPI premiums are a lose-lose for everyone involved. Evaluate Your Provider Collateral protection insurance in general may be unavoidable however the quality of your provider 42 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M RISK MANAGEMENT TAB hardship in some cases pushing the borrower into delinquency and worst-case scenario repossession. Is an annual policy the only option for you and your borrowers or does the provider also offer a more borrower-friendly monthly option A monthly option with premiums in the 50 to 90 range can be significantly more manageable for your borrowers. It can keep them out of delinquency and your collections staff focused on legitimately delinquent borrowers and repossessions as opposed to involuntary repossessions from inflated premiums. Hybrid CPI addresses many of the challenges faced by auto lenders with respect to compliance concerns member noise deficiency balance exposure from premium add-on staff administrative burden and increased collection and repossession activity from payment increases. By reducing the premium amount from 2 000 annually to 50 to 70 monthly borrowers are less likely to experience sticker-shock and be pushed into delinquency. Want to learn more Our case study highlights the successes three of our credit union clients experienced by transitioning from an older-generation CPI program to Hybrid CPI. Click here to read their stories. A Different Perspective While out with the old in with the new might be a great motivator for updating your wardrobe or buying a new car when it comes to transitioning out of a CPI program you ve grown comfortable with over the years it can be more difficult to let go of the old. However the challenges and daily nuisances to both your staff and your members are hard to ignore particularly if there is a better option available in the marketplace. Our deficiency balances are way down. We used to have two people spending one day per week posting insurance premiums to loans. Not having to change loan payments and the automation through our core has been a godsend said Randy Brown SVP of Lending with Heritage Family Federal Credit Union regarding his credit union s transition to Hybrid CPI. Mark Hein is the CEO of SWBC s Financial Institution Group. He manages the day-to-day operations and sets the strategic direction for the division. To connect with Mark on LinkedIn click here. 43 C R E D I T U N I O N B U S II N E S S B U S N E S S F FEEBBRRUUAARRYY 22 00 11 66 C U B U S I N E S S . C O M Ready for more value from your ATM provider Open your doors to a new ATM provider For decades Cummins Allison has helped you make the most of your branch resources. Now we re excited to offer a complete line of highly reliable secure full-function ATMs to fit any branch configuration from drive-up to walk-up. And best of all our ATMs are backed by the responsive dependable local service you need and have come to expect. So open your doors and give us a try. When you re ready to replace add to or expand your ATM network let s talk. Visit letstalk 2016 Cummins Allison Inc. All rights reserved.