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Kansas CU regulator Assets loans members are up

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WICHITA, Kan. (6/23/08)--Assets, loans and membership for credit unions in Kansas are up for the first three months of 2008, putting the state's credit unions in good shape, according to the state regulator. Data from the Kansas Department of Credit Unions for first quarter 2008 show increases in all three areas (Wichita Eagle June 19). Total assets rose 9.6% to $3.19 billion in first quarter 2008 over the same period in 2007. Loans totaled $2.13 billion, up 6% over the period last year. Credit union membership increased 2% to more than 513,000 members. KDCU Administrator John Smith noted the gains in membership and assets may be because consumers are depositing savings instead of investing in the stock market, the newspaper said. Loan delinquency amounts rose more than 20% to $23 million from $19 million since first-quarter 2007. However, they dropped 12.8% or $3.4 million between fourth quarter 2007 and first quarter 2008. The number of credit unions dropped to 87 from 90.

Kenyan bill would block CUs from money transfers

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NAIROBI, Kenya (6/23/08)--A bill under discussion in the Kenyan Parliament would bar Kenya's savings and credit cooperative societies (SACCOs or credit unions) from the money transfer business and from wholesale or retail trade or investments in enterprise capital to diversify their revenue. SACCOs rely on the retail or wholesale business to grow revenues to earn dividends for members, said All Africa (June 19). Money transfers activities is one of the most popular services SACCOs offer. Commercial banks are pushing the proposed law, which would narrow SACCOs' investment choices and force them to concentrate more on small self-help loans they are noted for, said the article. Most SACCOs run legitimate businesses but some have non-core activities--such as running restaurants, bars, office blocks and matatu fleets--that generate pyramid schemes, the article said. According to Carilus Ademba, managing director of the Kenya Union of Savings and Credit Cooperatives (KUSCCO), a trade association for credit unions in Kenya, outright barring of SACCOs from operating money transfers will limit their growth and give an advantage to banks. Last year, the World Council of Credit Unions and KUSCCO signed a partnership for a joint international fund transfer facility to enable member credit unions to start international money transfer operations through the Vigo money transfer plan. The transactions are seen as possible growth drivers, said the article. KUSCCO is lobbying to amend the bill and said Kenya's minister for cooperative development supports KUSCCO's proposed amendments.

Membership Growth Series CES CU

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MOUNT VERNON, Ohio (6/23/08)--Autonomous, small branch growth and focused indirect lending are two keys to 9.5% membership growth in the past year for CES CU, a $115 million asset, Mount Vernon, Ohio-based credit union. The credit union experienced about 27% membership growth over the past five years, conducting business in very rural community in Knox County, Ohio. The county has a total population of about 57,000, CES President/CEO Kelly Schermerhorn told News Now. This is the fifth installment of the News Now Membership Growth weekly interviews with fast credit union growers. The series is as part of an initiative of the Credit Union National Association (CUNA) Membership Growth Task Force. The task force, chaired by Dick Ensweiler, president of the Texas Credit Union League, was convened at the request of CUNA's Immediate Past Board Chair Allan Kemp McMorris. Its purpose is to investigate, report on, and encourage credit unions to embrace opportunities, techniques and processes that will increase credit unions' membership retention and growth. “We have a strategy of core membership growth,” Schermerhorn said, referring to one facet of CES’ multi-pronged growth strategy. “We try to extend our reach by opening small branch offices with three, four or five employees. We opened one 18 months ago and are looking to open another in 30-45 days. We then will have five total branches. We’ll have a physical presence in four out of five counties that we operate in when we open the new branch.” Ohio has a very growth-friendly state charter in which a county can count as a select employee group, Schermerhorn explained. “Our strategy is, instead of waiting to grow $30 million to $50 million to open a big branch, we’re opening smaller branches to bring in business,” he added. Growth through branch expansion is a key part of CES’ growth strategy. “We have a decentralized style of management so the span-of-control issue is overcome, because the branches have a lot of autonomy,” Schermerhorn said. “We’re too small to be big, and we’re too big to be small,” he continued. “We don’t have the economies of scale of bigger credit unions, and we don’t have the extent of personal relationships that smaller credit unions have. We’re in the middle.” That middle point is where many credit unions spin out of control because they aren’t sure what to do, Schermerhorn said. “Our success with our growth strategy is because of the independence of our branches in setting their agenda,” he said. “We give them goals, but the branches decide how to accomplish them.” Indirect lending is the other key component of CES growth. “There is a national bias against indirect lending,” Schermerhorn said. “Most think of it as a monster.” “My advice is, if you’re trying to service 27 auto dealers, you’re going to be the No. 4 or No. 5 choice on their list,” he said. “We have five dealers that we have a close personal relationship with. My associate vice president of lending knows all of those dealers. He spends as much time in their office as he does in mine. So we’re the No. 1 choice on the lists of five dealers instead of being the No. 4 choice or less at 27 dealers.” This also results in a good span of control with indirect lending, Schermerhorn said. “We don’t care if we do business with any other dealers. We have a strong relationship with the finance and insurance officers at five dealers. That’s what sets us apart," he added. Still, Schermherhorn admits it can be hard to convert indirect members to active members. Although CES is "not very good yet at going after younger members," Schermerhorn, along with CES’ vice president of lending operations, and its director of marketing met with an area college president about placing an ATM on campus. "However, he wants us to put a branch on campus and have direct access to students,” Schermerhorn said. CES will pursue the opportunity, Schermerhorn added. “If you don’t get them by age 25 as members, you likely will never really have them,” he said. One idea that CES has put to use was derived from the Filene Research Institute’s i3 program, called “prize-based savings.” Every month, CES gives away $5,000 to a member in a random drawing. Every dollar a member has in savings at CES is a chance to win the drawing. CES’ certified public accounting firm has random selection software and documents the drawing. The first winner was a 12 year-old girl, Schermerhorn said. “We got great press coverage out of this in the local paper,” he said. “It’s like free advertising.” The $60,000 per year in prize giveaways has been more than offset by an increase in core savings of $1.7 million at CES in the first five months this year. “More people are saving, and although I can’t empirically link the increase directly to the monthly $5,000 giveaway, I knew that we are counter-cyclical--in that our core savings are going up rather than down.” Anyone who wants to contact the CUNA Membership Growth Task Force can e-mail the account established for this purpose at cunamgtf@cuna.coop.

Benefits plans can help CUs keep top execs

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HOLLYWOOD, Fla. (6/23/08)--Credit unions face challenges recruiting and retaining talented executives in a competitive marketplace, but several available executive benefit plans can help resolve the issue, Rick Boothby, executive benefits specialist for CUNA Mutual Group, told Discovery Conference attendees Thursday. Boothby explained the types of benefits that non-profit and tax-exempt organizations can offer to key executives are limited by specialized tax rules under Section 457 and Section 409A of the Internal Revenue Code. “The good news is these limits are not the end of the story for credit unions. Fortunately, alternate plan designs are available for non-profit, tax-exempt organizations, which are not governed by Section 457 or 409A,” Boothby said. “Understanding how these alternate plan designs work can help credit unions recruit, retain, reward and retire top talent.” Credit unions may offer one of five non-qualified retirement benefit plan designs, depending on executives’ needs:
* Section 457(f) plans; * Split dollar loans; * Split dollar loan/457(f) combo arrangements; * Executive bonus plans; and * Restricted executive bonus arrangements.
CUNA Mutual has implemented tailored executive benefit programs at about 1,600 credit unions, but that is less than one-fifth of the approximately 8,300 U.S. credit unions today, said Boothby. “With the volatility in the banking industry, we’ve seen an increase in the number of credit unions implementing 457(f) plans as a ‘golden handcuff’ or ‘glue in the seats’ tactic for retaining key executives. Credit union executives are contacted daily by head hunters offering positions in larger credit unions or other businesses outside the credit union industry,” he said. “Many executives leave, lured by attractive executive benefit plans offered by competitors,” Boothby added. “In many situations, a supplemental executive retirement plan is written into the pre-employment offer letter to provide 50% to 80% of the executive’s future retirement income.” To keep their credit unions competitive with other organizations, credit union board members must provide executives with incentives to remain with the credit union, Boothby stressed. The best plan-design will be based on mutually desired features, Boothby said. In addition to attracting and retaining valuable executives, an executive benefit plan can help the credit union because it counters existing benefit package shortfalls, has minimal impact on the balance sheet, and is easy to establish and maintain. “Credit unions should identify their most valuable executives and determine the effect on the credit union if those employees were recruited elsewhere. Then, design an appropriate benefits solution to ensure that does not happen,” Boothby concluded.

Mid-Atlantic Corporate elects officers honors retiring CEO

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HARRISBURG, Pa. (6/23/08)--Mid-Atlantic Corporate FCU re-elected three directors to its board during an annual meeting Thursday night. Officers re-elected include:
* Joan Moran, CEO, Department of Labor FCU, Washington, D.C.; * Mike Pastirik, CEO, United Community FCU, West Mifflin, Pa.; * Connie Wheeler, CEO, Penn State FCU, State College, Pa.
Ed Fox, retiring CEO of Mid-Atlantic Corporate FCU, also was honored during a special reception Thursday night in Gettysburg, Pa. More than 200 credit union leaders gathered to celebrate his retirement. Fox will retire on July 31. Jay Murray will assume the role as CEO in August (Life is a Highway June 19).

Hill re-elected as NCCUL board chairman

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GREENSBORO, N.C. (6/23/08)-- The North Carolina Credit Union League has re-elected Ben Hill, manager of Blue Flame CU, Charlotte, N.C., as chairman of its board of directors. Hill was elected during the league’s 73rd annual meeting in Pinehurst, N.C. The board also announced the officers slate for 2008-2009:
* Vice chair: Maurice Smith, president/CEO, Local Government FCU, Raleigh; * Treasurer: Jeff Jones, president/CEO, Freedom FCU, Rocky Mount; * Secretary: Patty Idol, president/CEO, Mountain CU, Waynesville; and * Executive officer: Bill Flowers, CEO, Carolinas Telco FCU, Charlotte.

Speaker Reg changes add to tough lending landscape

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HOLLYWOOD, Fla. (6/23/08)--Credit unions can continue to expect regulatory changes while in the throes of a difficult lending environment, but some changes may present
Bill Klewin of CUNA Mutual Group updated Discovery Conference attendees last week on key lending regulatory issues. (Photo provided by CUNA Mutual Group)
opportunities, attendees at the CUNA Mutual Group's Discovery Conference were told Thursday. "The lending environment is difficult now, and part of that is increased regulatory scrutiny, but there are some positives,” said Bill Klewin, associate general counsel, CUNA Mutual. “First, with 11% capital, credit unions have money to spend. It’s an excellent time to invest in technology to take apps, close loans and embrace electronic signatures to meet the needs of your next generation of lenders.” Klewin updated attendees on regulatory issues important to credit union lending, including:
* Truth in Lending (Regulation Z)--The Federal Reserve Board’s 2007 proposal could have a harmful effect on multi-featured open-end lending. It would change the way about 3,500 credit unions do lending based on Truth-in-Lending. Credit Union National Association and CUNA Mutual officials have proposed alternatives to the Fed proposal, emphasizing the harm this proposal would cause credit unions. * RESPA--Housing and Urban Development’s (HUD) Real Estate Settlement Procedures Act (RESPA) would result in significant change to how the closing process works. The regulation likely would result in a requirement for the ability to perform underwriting earlier in the lending process. It assumes closings would occur in a face-to-face environment. Final regulations are expected in early 2009. * Unfair Deceptive Acts and Practices Rule--The regulation would prohibit certain activities with credit cards and overdraft protection programs. Credit unions and others would be unable to raise rates on existing balances based on changes in a member’s creditworthiness. “This could be a big deal from a safety and soundness standpoint,” Klewin said. “The net result is a credit union may not get the kind of return on its portfolio that it is today.”
E-signature legislation, which passed in 2000, has not been fully embraced by the financial services industry, Klewin said. The e-commerce legislation provides e-signatures with the same force as a paper contract. However, uncertainty over technology and security has limited its use by many credit unions and banks. Klewin added the legislation affords credit unions an opportunity to prepare for the expectations of future borrowers. “The new generation of borrowers, Gen Y and younger Gen X’ers, will insist on this technology. It would behoove credit unions to look into how this technology can be integrated into their future business plans. “With continued lending uneasiness, increasing competition and a dynamic regulatory environment, changes will keep challenging your operations, marketing and sales,” Klewin said. “Be aware of some of those changes that may be coming and take action that will prepare you better for the future.” The conference, in Hollywood, Fla., ended on Saturday.

CU System briefs (06/20/2008)

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* WINNIPEG (6/23/08)--Computer problems shut down service at credit unions in Manitoba Thursday, preventing members from withdrawing money from their accounts through ATMs (CJOB 68 June 20). An information technology company was servicing the Interac system when the problems began Thursday morning. Although the system was back up by Friday, Assiniboine CU was still without the service Friday and was working to solve the glitch … * CANTON, N.C. (6/23/08)--Three credit unions in North Carolina set up accounts to benefit the family of slain Highway Patrol Trooper and credit union member David S. Blanton, 24, who was murdered last week during a traffic stop. Blanton was a member of Mountain CU, and his wife, Michaela Layman Blanton, was a former employee of Champion CU. They have a newborn son. The credit unions and Raleigh-based State Employees' CU, which includes the Highway Patrol in its field of membership, have created accounts for the family. A Florida man, Edwardo Wong II, 37, has been charged with first-degree murder. Wong faces the death penalty in the slaying (Citizen-Times June 19) … * LOUISVILLE, Ky. (6/23/08)--Counterfeit cashier's checks circulating in Kentucky bear the name of Louisville-based L&N FCU, says a Federal Deposit Insurance Corp. alert. The items are circulation in relation to a secret shopping scam. L&N FCU does not issue cashier's checks, but does offer official checks. The counterfeit items bear a routing and transit number--011007092--assigned to Boston (Mass.) Safe Deposit and Trust Co. L&N FCU's official checks are issued by Moneygram Payment Systems, a Minneapolis, Minn.-based service through an account at the Boston company … * RANCHO CUCAMONGA, Calif. (6/23/08)--The Richard Myles Johnson (RMJ) Foundation has presented two community service grants totaling $22,500 to several Bay Area credit unions for financial literacy efforts. A $20,000 grant will help launch the San Francisco Chapter Financial Literacy Consortium Project--a partnership between eight credit unions and San Francisco Unified School District's School-to-Career Program, Academy of Finance. Credit unions partnering with the consortium project are: Patelco CU, Bay Media FCU, The Golden 1 CU, McKesson Employees FCU, Redwood CU, SF Fire CU and Spectum FCU. The project will establish multi-lingual, multicultural credit union financial literacy programs to reproduce Mission SF CU's Youth CU Program, a youth-operated credit union, at the district's 17 high schools. Also, Jones Methodist Church CU, San Francisco, received $2,500 to continue its Financial Boot Camp for youth in the local area. … * WARRENVILLE, Ill. (6/23/08)--Jay Petty of Carlsbad, Calif., has joined Members United Corporate FCU as a senior business consultant serving credit unions in California. Petty previously was business development consultant/member services officer with CUNA Brokerage Services, a broker/dealer subsidiary of CUNA Mutual Group. He also has served as president/CEO of Pentagon Federal Financial Services …

Demand rising for long-term care insurance

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HOLLYWOOD, Fla. (6/23/08)--With the need for long-term care remaining the greatest unfunded liability a person can face in retirement, long-term care insurance is one of the most sought-after executive benefits today, attendees of CUNA Mutual Group’s Discovery Conference were told Friday.
Michael McNerney, senior long-term care specialist, CUNA Mutual, discussed how long-term care can act as umbrella protection for a person’s accumulated benefits at last week’s Discovery Conference in Hollywood, Fla. (Photo provided by CUNA Mutual Group)
Long-term care involves a variety of services that helps meet the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for extended times. Other significant risk factors are covered by various forms of insurance--health, home and vehicle--but long-term care is not widely insured. Yet the need is real and growing, said Michael McNerney, senior long-term care specialist for CUNA Mutual. “As many as 70% of people over age 65 receive some home care, and the average cost of nursing home care is $195 per day,” said McNerney. “An unexpected need for long-term care, either for the executive or a family member, can virtually wipe out an entire lifetime of savings.” Credit unions faced with increased competition for talented key executives can offer long-term care as part of an executive benefit plan. “Long-term care is an innovative benefit that is becoming expected. In a 2001 survey, 17% of respondents included long-term care insurance in executive benefit packages. By 2007, that number rose to 27%. An increase of 10% in that timeframe is extremely significant,” McNerney said. Yet the majority of credit unions today do not offer long-term care insurance. This is a concern, McNerney said, because most retirement projections do not take the possible need for long-term care into consideration. “For the executive, long-term care insurance completes a lifetime of retirement planning, acts as an umbrella of protection over other accumulated benefits and provides for the entire family if care is needed,” McNerney said. “For the credit union, long-term care insurance can be used as a tool to reward and retain key executives, is a flexible benefit component and costs only pennies on the dollar,” he added. The federal government is taking steps to encourage workers to invest in long-term care insurance by setting favorable tax treatments of long-term care benefits. The benefits are not taxable as income and the premiums may be deductible as a medical expense. The government has set these tax advantages to help relieve a strain on Medicare, Medicaid and Social Security, McNerney said.

CUNA Mutual pilot How to engage indirect borrowers

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HOLYWOOD, Fla. (6/23/08)--To help credit unions turn “one-and-done” indirect borrowers into long-term, profitable members, a CUNA Mutual Group pilot yielded results and several findings from which credit unions can build strategies, according to a recently published white paper. “Developing Members from Indirect Borrowers: Lessons Learned” provides insights into how 13 pilot credit unions built multi-product relationships with members through a dedicated call center staffed with trained, full-time outbound-call representatives. Results of the four-month pilot were presented at CUNA Mutual’s Discovery Conference this week. “By investing resources to help credit unions deepen relationships with indirect borrowers, CUNA Mutual sought to address one of the industry’s biggest lending challenges,” said Heather Thiltgen, vice president, consumer programs, CUNA Mutual. “The pilot identified ways credit unions could engage indirect borrowers by introducing other credit-related products to meet their needs and save them money.” The most successful product offered to indirect borrowers in the pilot was a line of credit, which had a 28% sales rate. Credit cards netted a 17% sales rate and auto refinances had a 15% rate. The average line of credit was $2,098; credit cards, $5,005, and auto loan refinance, $16,140. Key findings from the pilot included:
* Members welcome phone calls from their credit union. Outbound call representatives received positive responses from members when they identified themselves as representatives of the credit union; * The phone call has a relationship-building effect even if the initial call doesn’t deepen the relationship; * The pilot’s pre-screening process enabled credit unions to obtain a member profile with data that helped match products to member needs; and * Credit unions can find success with outbound calling in indirect auto lending. New members view it as a personal touch.
Amplify CU, the pilot’s early adopter, derives 50% of its new membership through indirect borrowers. The Austin, Texas-based credit union has $465 million in assets and 42,000 members. “The pilot was very well done in that CUNA Mutual devoted proper resources, time and energy that delivered a program from which we could all benefit,” said Pierre Cardenas, Amplify’s senior vice president--retail. “The most interesting outcome for us was that call center personnel who weren’t our employees were just as effective as our employees. Our members responded very positively, which indicates outsourcing this in the future might be worth considering.” To deepen relationships with indirect borrowers, Thiltgen recommended credit unions implement some of the best practices CUNA Mutual incorporated into the pilot, including:
* Dedicating resources to make the program successful; * Verifying regulatory compliance surrounding use of credit data; * Obtaining necessary technology/systems support; * Tracking results; * Pricing for the relationship; and * Remembering that auto loans are seasonal and considering other outbound opportunities such as new-member onboarding programs.
“The pilot produced some interesting results on what appealed to indirect borrowers, such as, the success of an auto-loan closing was best when the member saved at least $20 a month,” said Thiltgen. “Also, those with higher credit scores were least likely to accept card offers, and line of credit offers were the most successful, which might be related to the sense of security it creates ‘just in case’ something happens.” “Above all, the pilot validated that our outbound-calling strategy to rein in these new members was on the right track,” added Cardenas. “This proactive approach to onboarding indirect borrowers is the wave of the future. Credit unions can’t afford not to engage these members or any other new members coming from other channels, for that matter.”

CU fin educators receive Virginia league awards

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LYNCHBURG, Va. (6/23/08)--The Virginia Credit Union League presented awards to a credit union and two credit union professionals for their financial literacy efforts.
Click to view larger image Arlington Virginia CU staff (from left) David Romney, Diane Reed, Patty Browne and CEO Brenda Turner received the Virginia Credit Union League’s Visionary Award from and Dawn Lindley, league director of marketing and financial literacy.
Click to view larger image Cherry Hedges (left), financial education director at Virginia CU, received the Class Act award from Dawn Lindley, Virginia Credit Union League director of marketing and financial literacy.
Click to view larger image Kristina Benson (left), Fore Lee FCU, received the Credit Union Youth Advocate of the Year award from Dawn Lindley, Virginia Credit Union League director of marketing and financial literacy. (Photos provided by the Virginia Credit Union League)
Arlington Virginia FCU received the Visionary Award for its work in providing personal finance education in the community. During the past year, the credit union created three programs to address the needs of Latino youth, adults striving to attain or regain self-sufficiency and students lacking basic finance skills. The credit union partnered with two school clubs--Latinas Leading Tomorrow and Latinos en Accion--teaching their members about savings accounts, interests, deposits, withdrawals and checks. More than 50 students participated in the after-school programs, the league said. Arlington Virginia CU also partnered with Vanguard Services UnLtd., a community organization that helps adults overcome substance abuse. About 15 “Financial Recovery” workshops were offered to 57 individuals. The credit union opened a new student-run branch, bringing its student-run branch total to five. Cherry Hedges, financial education director, Virginia CU, Richmond, received the league’s Class Act award. The award recognizes a credit union professional for achievement as a financial literacy educator, including school and community outreach. Hedges taught more than 20 financial education courses at Virginia Commonwealth University and at three community colleges. She also was recognized for creating a personal finance curriculum for high school students, Smart Start, which incorporates the state’s learning standards with financial education. Kristina Benson, Fort Lee (Va.) FCU, received the Credit Union Youth Advocate of the Year award. The award recognizes a credit union professional or volunteer for outstanding individual contributions to the credit union movement, specifically in promoting legislation for personal finance education in schools, and the sharing of cooperative resources to further financial education and community outreach. Benson taught more than 850 students during the 2007-2008 school year. She contacted all local school superintendents and offered to assist teaching personal finance basics. She also volunteered at Fort Lee’s “Jump In and Save” campaign, launched last year to encourage savings and the development of personal budgets.