High Performing Credit Unions - Cornerstone Credit Union League
High Performing Credit Unions
CEOs Share their Secrets to Success
Winner of the CUNA Marketing & Business
Development Council's 2007 Diamond Award.
Texas Credit Union League
Advertising Sales Director
& Account Executive
Chief Operations Officer
HOW TO REACH US
4455 LBJ Freeway, Suite 1100
Farmers Branch, TX 75244-5998
e-mail: [email protected]
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Main Office: (469) 385-6400
(800) 442-5762, Ext. 6400
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LoneStar Perspectives is a quarterly publication of
the Texas Credit Union League (TCUL) and is offered
to TCUL–affiliated credit unions as a dues-supported
service. If you are not an employee or volunteer of
a League- affiliated credit union and would like to
subscribe to this publication, an annual subscription
rate of $20 is available. LoneStar Perspectives is a
trademark used herein under license. Copyright 2006
by Texas Credit Union League. All rights reserved.
High Performing Credit Unions
by Linda Webb-Mañon
Differentiate, by Dick Ensweiler
New Year’s Resolutions, by Pamela Stephens
FOCUS ON THE ECONOMY: What Credit Unions Can Expect in 2012,
by Brian Turner
New Year Brings about New Opportunities, by Richard Grady
Leveraging Shared Branching, by Dylan Orrell
Build a Sales Environment, by Pierre Cardenas
Top Reasons to Attend Annual Meeting, by Tonya Farmer
Regulatory & Compliance
Compliance Matters, by Steve Gibbs
Don’t Forget Retrieve Your Unclaimed Property!, by Monte Robison
Philosophy in Action
Building Effective Relations through Communication, by Karen Houston-Johnson
The Policy Component: Where Credit Union Boards Cannot Delegate But Can
Initiate, by Dennis Dollar
Alleviate management ‘derailers’ to become a better manager
HR Q&A, by Kimberly Jones
310 East Interstate 30, Ste. B107
Garland, TX 75043
Small Credit Unions
Handling Big-Time Requirements with Small-Time Resources, by Allison Griffin
Determining Safety, Soundness – from the Examiner’s Perspective
Products & Services
The Three R’s of Private Student Lending, by Jim Holt
Spring is in the air – and so are tornadoes! Does your CU have a plan?,
by Tom Hodge
WINTER 2012 H TCUL
o differentiate is to see or show the differences between two or
more things. I believe the public – with the help of Bank Transfer
Day – now more clearly understands how the core values of credit
unions are distinctly different than those of for-profit banks.
Throughout 2012, that message will continue to be reinforced
as we join in the International Year of Cooperatives celebration. For
the first time ever, the United Nations – through this designation –
is recognizing the significant role that cooperatives play in society.
Without question, the cooperative business model is a solid
one. But we shouldn’t wait for events like Bank Transfer Day and
International Year of Cooperatives to get that message out to the
public. We must consistently and continually promote the credit
Differentiate is the theme that has been chosen for this year’s
Annual Meeting & Expo taking place April 17-20. As always, this
premiere event of the year offers the opportunity for credit union
executives, staff and volunteers alike to hear from industry experts
about the latest trends and developments and catch up on the critical issues that affect our industry.
For example, the League has lined up Jason Jennings to serve
as our opening presenter. Jennings is a recognized authority on
leadership, growth, innovation and differentiation. I am confident
you will come away with some great ideas on how to differentiate
yourself from the competition, as well as gain some solid techniques to help you strategically position your credit union for
In addition to three general sessions and 24 educational breakout sessions, other highlights from this year’s meeting include:
1. Expo Hall – This annual event affords credit union
executives and board members the opportunity to interact with hundreds of vendors and make valuable contacts
for future business needs.
2. Entertainment – For the first time ever, your League has
secured the Water Colors, a New York-based Broadway
group, to emcee this year’s event. This comedic group
is certain to liven’ things up! We’re at the beach in 2012,
so who better to entertain us during the Annual Meeting
party than the Surf City All Stars. Put on your best casual
wear and dance to the greatest hits of the Beach Boys and
Jan & Dean.
3. Awards Dinner – We’re trying something a little different this year. Instead of just having an awards ceremony,
we’re going to have an awards dinner, which will be held
in conjunction with the Annual Meeting party. Annual
meeting attendees don’t have to worry about registering
separately for the Annual Meeting party this year, as
the conference registration rate includes a ticket to the
Awards dinner and Annual Meeting party.
This year’s Annual Meeting is for those who dare to “differentiate,” so leave your suit and tie at home. No stiffs allowed!
See you there!
TCUL H WINTER 2012
By Dick Ensweiller
Texas Credit Union League
By Pamela Stephens
President and CEO
Security One FCU
ow! I can’t believe it – 2012 is already here. After a tumultuous
2011, I have to say I’m pretty happy to welcome in the New Year.
With confidence, I think this will be a great year for credit
unions – particularly when you consider that 2012 is International Year of Cooperatives. This designation gives us a rare
platform from which to build on the momentum generated by
Bank Transfer Day and to continue to deliver the message that
the presence of credit unions in the market space is good for the
consumer and good for society.
The New Year is a time when many of us resolve to make
significant improvements in our lives – perhaps exercise more,
lose weight, quit bad habits, become more savvy money managers – and generally make better choices than we did last year.
Let’s be honest. When we make our resolutions, we do so
with the best of intentions. However, by the end of the year,
many of us have to face the harsh reality that we failed to fulfill our lofty resolutions. Does that mean we should just toss
out the whole idea of coming up with a New Year’s resolution?
Say for example you committed to saving 20 percent more
of your income, but by the end of the year you had only saved
an additional 10 percent. Does that mean you failed? Not at all.
You identified an area of weakness – lack of savings – and you
made critical lifestyle changes to shed some of those not-so-great
spending habits. And you saved more. Maybe you didn’t save
as much as you had hoped to, but you made progress toward
As individuals, I believe it is important to begin every year
with goals and expectations.
While I’m quite certain I could benefit from a little more
exercise and some healthier eating habits, I’ve taken a little different direction with my New Year’s resolution. And I’ve committed to myself that it won’t just be another resolution that is
forgotten some three months into the New Year.
In 2011, I emphasized the importance of collaboration. So
it probably comes as no surprise that my 2012 New Year’s resolution is to explore every avenue and every potential opportunity
for collaboration among credit unions.
Success is best met when we work together, cooperatively
and collaboratively, to ensure the overall strength, health and
vitality of our credit union movement.
So, I say, make those resolutions with every expectation of
success! Draw on the support of others, revisit your resolutions
from time to time to ensure you’re staying on track, and celebrate your progress and milestones along the way. It will be a
WINTER 2012 H TCUL
By Brian Turner
Director, Advisory Services
Catalyst Strategic Solutions
FOCUS ON THE ECONOMY:
What Credit Unions Can Expect in 2012
ow the economy will perform going forward rests directly on
two factors – employment and consumer spending. Simply
put, members remain insecure about their jobs. They see
their household wealth being impacted by falling home values, and now, volatility in the stock markets is threatening
their 401(k). As a result, they have deferred their spending,
especially on big ticket items such as automobiles, homes and
appliance – all items for which credit unions extend credit.
Following is my “cautiously optimistic” outlook....
Employment….. A stable employment picture certainly
is the foundation for economic growth. It determines consumer spending behavior, facilitates demand, and spurs
construction and investment. Currently, the unemployment
rate is 9 percent with about 14 million workers still idle.
The number of long-term unemployed (those jobless for
27 weeks and more) is about 6.2 million, or about 44 percent
of that unemployed base. The so-called “underemployment”
rate stands at 16.2 percent and includes the unemployed and
those part-time workers who are seeking full-time employment as well as those not actively seeking work.
There is a direct correlation between disposable income
and credit union share growth; therefore, it becomes instrumental in credit-union growth strategies, as well as the ability to create stable and sustained net interest margins. Share
growth most likely mirroring 2011 with growth estimates
ranging between 6 to 8 percent.
Consumer Spending…..Comprising two-thirds of the
nation’s GDP, how and if our members spend their money
directly impacts overall economic growth. As noted, job insecurity and loss of household wealth have greatly impacted
spending which in turn has affected credit union balance
sheet sheets. It is anticipated that in order to spur spending to
the point that provides long-term economic stability and loan
growth exceeding 7 percent, the unemployment rate must fall
to no more than 8.1 percent.
Most economists are expecting the unemployment rate
to fall no lower than 8.9 percent in the coming year. Therefore, it would be reasonable to expect another year of modest
loan growth, most likely in the 1.5 to 2.5 percent range. For
most, this could require a greater dependence on investment
portfolio assets to replicate current revenue streams. Currently, for every $1 of loan principal received, it would require
$2.65 of redeployed investment principal.
Interest Rates……The Fed has already telegraphed its
intent to retain overnight rates at their current level until
mid-2013. Their actions under “Operation Twist” now
attempt to hold down longer-term rates. Combined, these
actions could create less steepness in the yield curve which
could impact marginal spreads. So far, industry net interest
spreads have remained stable as lower marginal asset yields
have been offset by improved delinquency rates.
This will continue in 2012 as modest loan growth and
improved delinquencies will enhance asset yields while
strong liquidity profiles should hold down cost of funds.
Profitability will then depend on the credit union’s ability to
hold operating costs in check. Others might consider further
de-leveraging of their capital formation by shrinking their
WINTER 2012 H TCUL
New Year Brings about
elcome to the New Year and the first quarter of 2012! This
past year was challenging, and probably many of us are
glad to leave it to the history books. But challenging does
not mean that is was a bad year. It really means we earned
The most recent data reveals that, year over year, Texas
credit unions did just fine. Assets grew by over $4.6 billion,
which was wonderful except for the fact that not all the
growth was in the flavor of assets we like. Consumers are
doing what we have been preaching for years; they are paying down debt (deleveraging as economists call it), reducing
their borrowing, and saving more.
Those activities have certainly brought in more capital,
but the lending side of the equation has not been as active as
we would have desired. Total loans only grew by $1.2 billion
while all savings and deposits grew by $4.6 billion, leaving
us with $3.4 billion in additional capital that might not earn
any income and certainly could create more expenses in the
way of dividends.
So the capital was placed in investments (about $1.5
billion more than 2010) and placed on deposit (nearly $1.7
billion) primarily because share draft accounts grew so rapidly. Overall, in a tough economy, members saw the equity in
their credit unions grow over 7.25 percent, which is certainly
significant in light of the number of industries that had no or
Where the demonstration of our non-profit, solid management work ethic really appeared was in the consolidated
income and expense statement. Overall credit unions were
really challenged to manage the operation, and they met
that challenge head on, producing a net income nearly 40.3
percent higher than one year ago. That income certainly did
not come totally from loans and other investments, as that
shrank by over 4.6 percent.
Where the work became visible was with improvements
in other operating income (not fees; that actually fell by
nearly two percent) and the holding of non-interest expenses
to less than a four percent increase. It also helped that the
immediate need for stabilization funds was significantly
lower than in past quarters.
So, from an operational and financial viewpoint, credit
unions did very well and it is one for the history books.
However, the question remains, what will 2012 be like? What
can we expect?
TCUL H WINTER 2012
Here are a few thoughts on the near future:
• From a labor market position do not expect to
see any significant increase in employment (or
decrease in unemployment). The economy is not
significantly growing at a pace to produce enough
jobs to re-employ those that have been out of
work and much less those that are entering the
work force. U.S. unemployment will remain around
nine percent and Texas will remain in the mideight range for nearly the entire year. For credit
unions this means members who are caught in
the situation will still struggle to free themselves,
while those who are employed will experience little
upward mobility. Basically, consumer budgets will
be just as tight in 2012 as they have been in the past
few years, and the need for financial counseling and
education will grow.
• With unemployment remaining high, stresses on
society will also remain, and therefore behaviors
will remain unchanged. The uncertainty will keep
savings rates by consumers high, the borrowing low, the spending in check, and the reduc-
By Richard Grady
Vice President, Research
Texas Credit Union League
tion of debts a certainty. Managing the financial aspects
of the credit union will be just as challenging in 2012 as
in previous years. Growing the credit union will mean
capturing all of the current members’ needs for loans and
other financial services, and building the primary financial
o On a statewide basis, all Texas credit unions combined
have about a 10 percent share of all consumer deposits
and 4.5 percent of all consumer loans.
o On a statewide basis, less than half of the members
name their credit union as their primary financial
o On a statewide basis, only 20 percent of credit union
members have their car loan with their credit union.
o On a statewide basis a significant portion of the credit
union members are baby boomers readying themselves
for life after 65 (notice I did not say retirement) with
significant deposits in the credit union, yet few credit
unions have a relationship with a firm to offer wealth
management and thus keep those deposits from flowing into investment companies.
The housing market in 2012 will remain in a state of flux.
Texas real estate prices will hold up better than the nation.
Texas’ economy will also draw migrations from other states
looking for employment which could cause an upward creep
in the unemployment numbers if employment is not secured.
The housing stock currently available, and the stock held by
financial institutions as it clears the foreclosure process, will
keep housing prices from increasing in many regions. There
are a few regions experiencing more rapid growth, and new
housing construction will be good in those areas.
• With a compression on home prices, property tax values will
remain low, which will cause further strains on municipalities and school districts as they budget from their primary
sources of revenue, property taxes, fees, and sales tax. For
credit unions this means potential opportunities for growth.
First mortgages in credit unions actually grew over 6.2 percent in the past year, second only to used car sales that grew
7.5 percent (new vehicle sales actually fell by nearly three
percent). Building and strengthening relationships with real
estate agents, title companies, and furniture and appliance
stores, and, in the case of used cars - dealerships, should be
a significant business development activity.
So, as we welcome in the New Year we should welcome in new
activities that ensure continued growth in our credit unions. Best
wishes for a prosperous New Year.
WINTER 2012 H TCUL
By Dylan Orrell
Resource One Credit Union
Leveraging Shared Branching
t can be a challenge trying to be available for our 40,000
members nationwide when we only feature eight branches
in the Dallas/Ft. Worth metroplex and two in the Houston area. Luckily with the constant growth in technology,
we have become more accessible to our members through
Shared branching is a network created by credit unions
who have joined together to share their branch locations so
that their members can conduct basic transactions at any of
these shared branches. Not only does this fit well with the
credit union philosophy of “people helping people,” but it also
ties in nicely with Resource One Credit Union’s own mission
statement, “Total Member Delight.”
We decided to sign on with shared branching initially
because we obtained a new field of membership through
a recent merger. Implementation of shared branching was
crucial for two reasons: The merged credit union already
participated in shared branching and we did not want to take
it away from their members, and shared branching would
allow us to better position ourselves in the new market now
made accessible to us by our merger.
Shared branching is a great selling point to potential
members who may be unconvinced that your financial
institution is right for them. Convenience is one of the deciding factors in many people’s minds when considering all
that their credit union has to offer. While our branch locations may not be in people’s normal everyday route, shared
branching allows us to still give our members access to their
accounts without causing them to be inconvenienced by a
Shared branching is also a great retention tool to keep
members that may be thinking of leaving the credit union
because of distance. We have many members who joined
Resource One Credit Union through our various Select
Employee Groups (SEGs) and live outside of Texas. In the
past, the only way to conduct a good portion of their business was either by phone, mail, or electronically through
Automated Clearing House (ACH) or wire remittance services. Shared branching allows us to retain those members by
giving them a closer location to perform necessary financial
transactions while still keeping them as a valued member.
While we are constantly looking for growth opportunities through increased locations and charter expansions,
shared branching is a cost-effective touch point for our existing and potential members. After all, it’s much cheaper and
quicker to participate in a program that utilizes pre-existing
financial institutions for your members’ needs than to try and
build brick-and-mortar locations and then staff them accord-
TCUL H WINTER 2012
ingly. Additionally, shared branching can assist our members
by offering an alternate location if any unexpected technical
or weather-related disasters occur at any of our branches.
Leveraging our shared branching participation is an
ongoing process that revolves almost exclusively around
communication. After all, not one member will take advantage of a service made available to them if they are not aware
it exists. In addition to the standard pieces of internal marketing that we will be using - statement messaging, newsletter,
in-branch materials - we will be relying most on word of
mouth and technology.
Our front-line staff is not only trained on how to
perform shared branching transactions, but they are also
the individuals who interact with our members on a daily
basis. They have developed personal relationships with our
members and can genuinely offer the products and services
that will help our members. By understanding and utilizing
shared branching as a part of doing business, they will be able
to communicate this enhancement to our membership.
Technology also plays a big key. Since the crux of shared
branching involves transactions that are done away from a
member’s regular branch, technology helps us bridge the gap
between a normal and a shared branch transaction. Our live
system updates our members’ accounts quickly and accurately, and most transactions performed at a shared branch
are reflected immediately. In addition, Resource One Credit
Union members can access locations of shared branches via
our website, www.r1cu.org, and check any account activity
through our mobile services.
Resource One Credit Union is proud to offer shared
branching to our members, just another way we provide
“Total Member Delight”!
To learn more about shared branching, please visit
By Pierre Cardenas
Credit Union Lending Advice, LLC
Build a Sales Environment
n the fall issue of LoneStar Perspectives, I talked about the
“7 Habits of Highly Successful Lending” the first being “Great
Underwriting.” Without an experienced, well-versed underwriting team/person you will not get very far. As a matter of
fact, many times you won’t even get off the starting blocks.
You need to hire, train, develop and continuously educate
your underwriters. That is where everything in lending starts.
One point I wish to clarify and get out of the way right
up front: “sales” is not a bad word. As a matter of fact it is
a very good word - a word that many credit unions fail
to embrace and ingrain into their culture. Consequently,
your members are being sold to, just not by your staff. As a
result they are financing autos and purchasing products and
services at higher costs elsewhere because no one ever told
them that the credit union could do it at a cheaper cost or at
a savings to them.
Poor service is when your employees fail to offer your
members a product or service or financing that would save
So what does it take to build your sales culture? A lot
of time, hard work and a core foundational commitment
to developing a program that teaches your employees how
to deliver a positive, retail experience for your members
through every touch point. To do this, you have to start
at the beginning by defining what “sales” means within
Define it properly and clearly for your staff to understand and fully comprehend what they are being asked to do.
Once they know the “why,” they will rally around the “how.”
The reason we are so jaded by this term is because we envision the used car salesman ready to pounce upon our unsuspecting, vulnerable and timid member. And it is up to us to
save them from themselves and all these vultures that seek to
prey upon the weak and frail members.
Well, while this may be true for approximately
2-3 percent of your members, the other 97-98 percent are
pretty sharp, well educated and know what they want. Consequently, we would do a much better job for both them and
ourselves to present viable options and allow them to choose
what fits best for them.
Over the years I have found three ideal definitions to
selling that you may want to consider incorporating into your
credit union’s sales program:
1. NBS – Needs Based Selling
Selling should always be based on the needs of
the member and not on the product to push
for the month. Pushing products could be
dangerous, especially if the member is working hard to get out of debt. That would be like
offering a recovering alcoholic a drink.
TCUL H WINTER 2012
b. The only way you can find out what the
member’s needs are is by asking questions. If
you ask the right questions you will be able to
clearly identify what the best solution would
be for the member at that time. If you strategically start by asking the question “why,” by
the fifth “why” you will fully understand the
root of the situation. Now you will be able to
properly offer the best product or service that
fits the need. There is a reason why God gave
us two ears and one mouth. So that we could
listen twice as much as we speak. If you train
your staff to do this they will become a great
2. Consulting Selling
a. Most people don’t necessarily want a loan
or another payment, but they do want and
relish good advice. This was taught to me in
commercial lending school. A business owner
wants a trusted adviser who can help them
make good financial decisions. If you are that
to them, they will seek you out when they need
a loan. This is true of your members. If they
are getting good consultation from your lending staff, either F2F, Online, or Call Center
they will go to you when they are ready for a
loan. The more knowledgeable your employees are about lending topics, the more confident your members are going to feel about
doing loan business with “only” you.
3. Follow up Sales
a. Sales is all about following up. If you are not
teaching your folks how to properly follow up
with every potential needs based sales conversation they have, you will never build a sales
program. This is a technique that has been
around since the beginning of time; however,
it seems as though we have lost our way. Back
in the day it was called “working your book of
business.” Just following up on your members
alone would increase opportunities if done
properly and purposefully by your staff.
Pretty simple stuff, huh? There are more pieces to the
puzzle like making sure your pay structure has a strong “pay
for performance” incentive piece to it and other crucial factors, but bottom line: start with the top three and go from
there. By the way, make sure you have a meaningful recognition program that promotes the behavior that will make you
a great sales and service organization.
By Tonya Farmer
Vice President of Training & Events
Texas Credit Union League
Top Reasons to Attend
ard to believe we are only a few months away from the kick
off of the Texas Credit Union League’s (TCUL) 78th Annual
Meeting & Expo in Galveston. At this point, the Training
and Events staff is busy attending to the final details of the
program and accepting registrations from credit union professionals and volunteers anxious to experience all that this
premiere event has to offer.
If you are questioning why you should attend this year’s
conference, I would challenge you to instead ask yourself,
“Why wouldn’t I attend?”
Every year, the League strives to introduce new events
and highly-relevant educational sessions, as well as to
enhance the Exhibit Hall and social activities. This year’s
conference is no exception.
Differentiate is the theme for the 2012 Annual Meeting
& Expo, and we’ve made lots of changes to fulfill our promise
of a “different” experience.
Check out these top 10 reasons for attending the 78th
Annual Meeting & Expo:
10. Location, Location, Location. This year’s conference is being held in Galveston and the hotel is on
the beach! Bring your swimsuit and bask in the
sunshine on the beach or pool side – when there are
no sessions going on, of course! The average April
temperature in Galveston is an ideal 75 degrees
during the day, cooling down to the mid-60s in
9. Discover what’s new. With more than 120 booths
in the Expo Hall, the Annual Meeting & Expo
affords attendees the opportunity to meet with
exhibitors and learn about innovative and highquality products, services and solutions that will
benefit your credit union and members.
8. Networking. TCUL’s Annual Meeting & Expo provides an exciting venue for engaging in networking
opportunities that foster personal and professional
development, as well as collaboration. Through
interact with our peers, we are able to build connections and share thoughts, ideas and best practices.
7. Become enlightened. Whether it’s through interactions with the vendors in the Expo Hall, skills
and information obtained by attending educational
sessions, or informal discussions with your peers,
this year’s conference offers an opportunity for
credit union professionals and volunteers to opti-
mize their leadership skills and challenge their
General Sessions. For our opening general session, we’ve got Jason Jennings, a well-respected
researcher and authority on leadership growth and
innovation, and for our closing session, we have
Erik Qualman, the highly-acclaimed and bestselling author of socialnomics. Both of this year’s
general session speakers will cover timely and critical issues and hone in on how to differentiate from
Educational Sessions. As with past annual meetings, attendees will be able to pick and choose
educational sessions that most apply to their needs.
In addition to three general sessions, TCUL is
offering 24 educational breakout sessions this year
led by top-notch presenters ready to challenge you
with fresh perspectives and insights. Whether you
are a seasoned professional or new volunteer, you
will find tremendous value in this year’s engaging,
interactive and hands-on educational sessions.
Continuing Professional Education (CPE) Credit. We are offering a strong line-up of educational
sessions that provide attendees ample opportunities to earn CPE credit. Aside from earning CPE
credits, TCUL’s Annual Meeting & Expo empowers
attendees to take charge of their personal and professional development.
WINTER 2012 H TCUL
Record number of “first-time evers.” We’ve never had
an emcee, and this year we’ve booked a New York-based
Broadway group (the Water Colors) to facilitate the event
and ensure the program flows smoothly without any snags.
We’ve also added an awards dinner, so that we may more
formally salute our accomplished leaders. And unlike past
years, attendees will not pay an additional fee for the Annual
Meeting party. The cost of the Annual Meeting party and
awards dinner (one event) is included in the conference registration fee. And for all those “tweeters” out there, TCUL
has created a Twitter hastag to help you keep up with the
conversation. The hashtag is #tculam12.
1. And the number one reason to attend TCUL’s Annual Meeting & Expo… Participate! TCUL’s Annual Meeting & Expo
isn’t just about networking, education and entertainment.
A very important event takes place at this conference, the
official business meeting of the League. Attending the business meeting will allow you to meet TCUL’s new board of
directors for 2012. If you recall, in 2010, the voting delegates
approved the restructuring of the League board, reducing
the number of directors elected to the board from 21 to 12.
So there you have it...my top 10 reasons to attend the 78th Annual Meeting & Expo April 17-20 in Galveston. See you there!
iPod, Android & Mobile Applications: For the tech geeks
or “enviro” friendly types, utilize a mobile application.
Organize your personalized conference schedule, download
speaker presentations, learn your way around Galveston’s
Sea Wall Boulevard and the Convention Center and even
meet new people through Twitter event conversation, by
downloading our Annual Meeting mobile application to
your smart phone or tablet.
TCUL H WINTER 2012
uring this period of time in which we have to worry about
“bottom lines,” an unsure market and growing salary and
benefit demands from staff, the fact remains that the issue
of regulatory compliance still matters and is beginning to
eclipse these other concerns.
Since 9/11, we’ve seen an emphasis on compliance and
regulations that has exponentially grown far beyond the
early days of Truth-In-Lending and Equal Credit Opportunity. Moreover, growing public and political discontent
over money landing in the pockets of Wall Street bankers
through questionable practices has caused an outcry to punish the whole financial services industry. As a result, the
Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank) has been the latest carrier for hundreds of
potential regulations yet to flood the industry.
Compliance has joined the ranks of “safety and soundness,” now affecting examination ratings, the type of business we engage in, institutional reputation and even the
Key Examination Priorities
Obviously, the onslaught of new compliance rules and
regulations has tipped the scale of examination reporting.
What was once a small section of the examination, now takes
up a significant portion of the report. As a primary example,
the Bank Secrecy Act (BSA) section of the report has grown
in size and importance since 2001. When joined with AntiMoney Laundering (AML) and Office of Foreign Assets
Control (OFAC) regulations they become a “triple threat.” If
there are problems with BSA, AML, OFAC or any combination of those items, in most cases the examination report will
hold an overall negative tone, affecting both management
and operations ratings.
The most significant regulatory enactment of the
last 30 years, Dodd-Frank may affect several major areas
of significant impact to financial institutions, primarily
through the Consumer Financial Protection Bureau (CFPB).
Although still in the fact-finding stage, the CFPB will eventually have authority to make new regulations, as well as
interpreting and supplementing those already in existence.
The Federal Reserve has turned over virtually all consumerrelated regulations to the CFPB, which is headquartered at
the Federal Reserve. NCUA, as well as state regulatory agencies, will examine and enforce those regulatory changes or
enactments made by CFPB.
Other areas include:
• Regulation Z – Truth-In-Lending Act
• Regulation B – Equal Credit Opportunity Act
• Truth-In-Savings Act
• Regulation CC – Expedited Funds Availability Act
• Concentration Risk - Examiners are closely looking at this area for mortgages, indirect lending,
member business loans or any major grouping of
asset types or underlying related characteristics (ie.,
• Secure and Fair Enforcement (SAFE) Mortgage
• Vendor Due Diligence
• Social Media and Online Networking Policies
Examinations also call for a compliance review of the
following crucial policy elements affecting the overall compliance program:
• Review of individual policies no less an annually;
• Documented training for all staff on policies
directly affecting their areas of responsibility;
• Maintenance of files and/or databases of changes
to law/regulations affecting policies; and
• Periodic (annual/semi-annual/quarterly) audits
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By Steve Gibbs
AVP/Director, Shared Compliance
Credit Union Resources, Inc.
Effect on Ongoing Business
Poor examination ratings and resulting regulatory actions can
adversely affect the ability to make new loans, begin new loan programs and limit the decision-making ability of management. Lowered
ratings leave examiners with discretional ability to limit or even prohibit activities such as:
• Engaging Vendors
• Handling and development of fixed assets (building)
As seen recently through the customer backlash and verbal
attacks on Bank of America, mishandling of any compliance issue
may result in a negative impact to reputation. In this case the exodus
deposits and accounts not only affected Bank of America but also
other large banking institutions. With government becoming more
“transparent,” the industry has been forced to take a more public position of this type.
The emphasis on consumerism, publicity given the “Occupy Wall
Street” groups, and the enactment of CFPB through Dodd-Frank has
increased reputation risk for most financial institutions that might
run afoul of compliance regulations.
The Bottom Line
In some cases, regulatory violations due to compliance issues can
affect earnings through sanctions and penalties.
As we’ve seen by past Department of Justice actions, penalties can
be devastating. Wachovia Bank, one of the largest banks in the United
States, entered into a deferred prosecution agreement with the U.S.
government to resolve charges that it willfully failed to comply with
various areas of BSA. Wachovia forfeited $110 million to the United
States in addition to separate Cease and Desist and Civil Money Penalty Orders issued by the Office of the Comptroller of the Currency,
which required an additional $50 million fine to the U.S. Treasury.
Penalties for some violations can range from $100 to $1 million per
day per violation.
Although these can sometimes be mitigated, they could be economically fatal for many credit unions.
Does Compliance Matter?
In the present and future environment, compliance matters.
Given the increasing impact and emphasis of regulation on all financial institutions, there is little choice but to embrace the changes and
develop a “compliance culture” as we’ve developed for lending, sales
and management. As we can see, the alternatives can be expensive,
unpleasant and unproductive.
WINTER 2012 H TCUL
By Monte Robison
Compliance and Research Specialist
Texas Credit Union League
Don’t Forget Retrieve Your
t may be hard to believe, but one in four Texans have
unclaimed property from forgotten bank accounts, uncashed
checks, security deposits and utility refunds. This could
You may surprised to find you’ve got some money held
by the Texas Comptroller for some old utility account from
your college years, or perhaps bequeathed to you by a long
Texas is currently holding more than $2.2 billion in cash
and other valuables waiting for the rightful owners to claim.
It’s never too late to make a claim. In 2010, the state returned
more than $163 million to its owners.
Find out what you may have been missing by searching the unclaimed property database on the Comptroller’s
website (http://www.window.state.tx.us). For residents outside of Texas, the National Association of Unclaimed Property Administrators (NAUPA) offers information and helpful
website links on how to retrieve property from state governments nationwide (http://unclaimed.org).
If that wasn’t exciting enough, you can also bid on
unclaimed property auctions hosted by the Texas Comptroller
on its Ebay website (http://myworld.ebay.com/tx.unclaimed.
property). The lots often include such items as rare coins,
gold, silver and jewelry.
In the future, the maximum timeframe periods in which
property is escheated to the State of Texas will decrease, as
New Changes to Texas’ Unclaimed Property Timeframes and Reporting
In the 2011 Session, the Texas Legislature passed HB 257
relating to unclaimed property that is presumed abandoned.
This revised law will affect state and federal credit unions and
includes effective dates of both Sept. 1, 2011 and Jan. 1, 2013
as explained below. Credit unions should ensure procedures
are updated accordingly and appropriate staff trained on the
changes in this New Year. In an effort to bring more money to the state of Texas,
the bill shortens the abandonment period for several types of
property to be escheated to the State and speeds up
the reporting deadline.
The bill adds a new section 73.101(c) that reduces the abandonment period of checking accounts,
savings accounts, and matured certificates from five
years to three years. This is effective Sept. 1, 2011.
The bill revises section 72.102(c) of the Property Code to reduce the abandonment period for
money orders from seven to three years. If a holder
imposes a service, maintenance, or other charges on
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a money order prior to the time of presumed abandonment,
such charges may not exceed $1 a month (up from 50 cents)
for each month the money order remains uncashed prior
to the month in which the money order is presumed abandoned. These provisions regarding money orders are effective
Sept. 1, 2011.
The bill also amends the reporting and notification dates
tied to abandoned property. Effective Jan. 1, 2013, a credit
union that holds abandoned property on March 1st must file
a report of that property on or before July 1st. [Previously
those dates were June 30th and November 1st respectively.]
The credit union must also send notice to the affected
member by May 1st [formerly August 1st] stating that the
credit union is holding abandoned property and that it might
be required to turn the property over to the comptroller on
July 1st [formerly November 1st]. The changes in reporting
dates are effective January 1, 2013.
For the notice requirement, credit unions can view
a sample due diligence letter which can be used for bank
accounts, safe deposit box contents and certificates of deposit,
at http://www.window.state.tx.us/up/98-903_Due_DiligenceFinancial_Inst.pdf). According to the Unclaimed Property
Section of the Comptroller’s office, here is how financial
institutions will be affected:
• Report due November 1st, 2011 – no changes
• Report due November 1st, 2012 – abandonment periods for money orders, checking/savings
accounts and matured CDs change to 3 years
• Beginning in 2013, a new due date of July 1st
becomes effective for property abandoned as of
You can read the bill text online from the Texas Legislature (http://www.capitol.state.tx.us).
Texas Comptroller Offers Ways to File Electronically
The Online Express Reporting system allows users to
enter unclaimed property reports directly into the Comptroller’s computer after setting up a password-protected account
with the Unclaimed Property Division.
Get started by applying for a User ID and password on
the Comptroller’s website: http://www.window.state.tx.us.
Holders with more than 25 owners to report should
continue to file electronically using the downloadable
software, or any commercial unclaimed property product, that creates a file in the format approved by the
National Association of Unclaimed Property Administrators (NAUPA).
Complete information regarding filing for holders is
available on the Comptroller’s website.
By Linda Webb-Mañon, I-CUDE
Vice President, Communications & PR
Texas Credit Union League
CEOs Share their Success Stories
Neches Federal Credit Union (FCU)
Neches FCU, which today boasts eight physical branches and
317 shared-branching locations [the credit union joined the shared
branching network in 2008], was founded in 1952 by a handful of
employees from the Jefferson chemical plant. After nearly 50 years of
successfully serving the financial services needs of just one select employer group (SEG), the now-$328 million credit union decided it was
time to expand its outreach.
The man that would lead Neches FCU through this transformation was Jason Landry, who had been CEO since 1991 when he assumed the helm at the tender age of 26.
Landry says management, as well as the board of directors,
were acutely aware of the risks associated with being a single-SEG
“All of our business was tied to the plant. As a SEG credit union,
our financials were strong; however, the reality is, if there were layoffs
or strikes, it would definitely impact the credit union,” notes Landry.
“Diversifying our membership became a top priority.”
The credit union received its community charter in 2000. At that
time, Neches FCU was serving just 5,500 members and had assets of
only $50 million. Today, about 35,000 people belong to the Port Neches-based credit union.
“Our membership growth had been stagnant for years, and
when we opened our doors to the community, we were amazed at
how many people wanted to take advantage of what we have to offer,”
Landry says mergers, including mergers with Neches FCU in
2004 and with Beaumont Telco FCU in 2006, also have contributed to
the growth of the credit union.
The credit union has always had a good mix of core products and
services, says Landry. The problem was, with a limited field of membership, the penetration just wasn’t there.
“Going community charter made us a stronger financial institution,” affirms Landry. “With more members using our products
and services, we had more resources to allocate toward technology
TCUL H WINTER 2012
Today, the credit union offers mobile banking, online bill pay and
24 hour telephone access to accounts. The number of branches has
increased from one to eight.
And when many financial institutions started raising fees to make
up for lost revenue, Neches FCU bucked the trend, instead keeping
fees low and even implementing a debit card reward program.
With a 13.55 percent capital ratio, Neches FCU is indeed
According to Landry, the credit union has on its books about
$200 million in loans. Going from SEG to a community charter did
require making some adjustments in its policies and procedures, but
one thing the credit union didn’t do was tighten its lending standards
to the point at which it would become too difficult for members to
“We serve people of lesser, greater and in-between means. And
our experience has been that many of what we consider ‘D’ paper
loans perform as well if not better than some of our ‘A’ paper loans,”
notes Landry. “Our philosophy has always been, if you aren’t lending you aren’t serving – and that didn’t change when we became a
Neches FCU is about 61 percent loaned out and its delinquencies are about .36 percent. During the economic recession when many
financial institutions quit lending, Neches FCU continued making responsible loans. Prior to the recession, Neches FCU saw an 8 to 10 percent loan growth annually. During the recession, loan growth dropped
just slightly – to about 6 to 8 percent annually.
Aggressive and consistent marketing of their loan products,
Landry says, has helped the credit union maintain a strong loan portfolio – even during the recession.
As a risk-based lender, Landry says credit scores are certainly
considered in every loan decision. However, the relationship the credit
union has with the member is also taken into account as a loan is under review.
“Our low delinquency rate can be attributed to several factors.
First is our members’ desire to honor their financial obligations with
their credit union that they know is here to serve them,” says Landry.
“Second is our strong lending and collection policies and processes.
“Finally – and perhaps most importantly – is the staff,”
Landry considers himself fortunate to have a staff of 120 people
who are vested in the success of the organization.
“The overall success of this credit union boils down to one thing:
our people,” observes Landry. “Employing great people who want to
grow themselves, as well as the organization, is critical to sustaining
the financial strength and health of the credit union.”
About four years ago, Neches FCU adopted a Service and
“Anyone can perform a transaction, but we’re here to create relationships,” stresses Landry. “We intentionally put service before sales
because we are in the business of getting to know our members so we
can match them with the financial products and services they need at
whatever life stage they are in.”
Of course training is critical to empowering staff to effectively
serve the members, Landry adds.
“If you concentrate on creating a positive work environment for
your staff, your staff will be more engaged and motivated to deliver
quality service to your members,” says Landry. “In turn your members will show their appreciation and loyalty by using your products
and services, thereby generating revenue that can be put back into the
Landry must be on to something, as readers of the local newspaper have voted Neches FCU as the best credit union in the area for five
years in a row.
“It may sound cliché, but doing business at Neches FCU is a
different experience,” says Landry. “Our employees are happy and it
shows. People like doing business with us because we offer such personalized service.”
United Heritage Credit Union (CU)
The story of United Heritage CU began in 1957, when eight active
duty military personnel at Bergstrom Air Force Base each purchased
one $5 share for a total deposit of $40 to charter Military FCU. After
one year of operation, the credit union had grown to $56,000 in assets.
Major Joseph B. Lowrance, Jr. would become the first president
of the Austin-based credit union that exclusively served active duty
military personnel stationed at Bergstrom Air Force Base.
Throughout much of its history, the credit union, which went
through several name changes, enjoyed great success in meeting the financial services needs of its original SEG. However, the directors and
management recognized the risks of being a single SEG credit union
and realized that diversification would be key to sustaining future
growth. Through a series of mergers and acquisitions, the credit union
indeed was able to expand its field of membership. This diversification
in membership worked in the credit union’s favor, when Bergstrom
Air Force Base shut down in 1993.
The late1990s marked the beginning of significant growth for
the credit union. By 1997, the credit union had completed its conversion from a federal charter to a state charter. Along with the charter
conversion came a name change. After 40 years of operating under
the name Military FCU, the credit union now called itself United
Leading the credit union through the charter conversion, field of
membership expansion and name change was Buddy Schroeder, who
joined the credit union’s management team in 1980 and became CEO
“The decision to convert to a state charter was driven by the opportunity to expand and solidify membership options,” recalls Schroeder. “The initial community basis for our charter was a 10 mile radius
from offices – that was changed to select counties in 2003.”
Schroeder says the opportunities derived from the conversion to
a community charter were significant – the most notable being the
opportunity to market to a wider, more diverse field of membership.
“Although marketing costs increased with the implementation of
mass marketing, the benefits derived from the enhanced member base
far exceeded those costs,” says Schroeder.
As the credit union has evolved, they’ve never drifted from their
intense, personalized, focus-on-the-membership approach.
From its humble origins as a single-SEG credit union serving
military personnel, United Heritage has grown to 13 branches serving
WINTER 2012 H TCUL
a strong perceived value to their lives – and we focus upon our ability to
convey that value,” stresses Schroeder. “Member satisfaction is a large
factor in determining the likelihood of success and performance.”
“When there is member loyalty, retention rates are high and business results tend to follow,” he concludes.
Texas Plains FCU
more than 55,000 members and maintains a strong presence in Central
and East Texas. The credit union’s newest branch was constructed by
Level 5 and opened last month in Southwest Austin.
To facilitate continued growth, Schroeder says the credit union
remains attentive to developing an aggressive, diverse range of loan
programs that are not only competitive, but also remain relevant to the
needs of its growing membership.
“The single factor facilitating our ability to reach and assist our
current and potential members with more individualized lending
needs is our loan sales staff, a concept implemented in 2003,” notes
Schroeder. “Our loan sales staff is empowered to work with members,
advocating for their individual needs and providing concrete solutions
to their lending problems, with a goal of improving their long-term
Since turbulence in the financial industry began in 2008, Schroeder says United Heritage has proactively adjusted, with changes in
loan and share products to maintain an overall low- to moderaterisk profile.
“We are fortunate that the economy in our market area has remained comparatively good, enabling us to take a proactive approach
toward addressing issues causing delinquency and working with those
members that are struggling,” says Schroeder.
“Confronting issues early creates the opportunity to go beyond
collecting, to assisting members with their collective debt and improving their chances for long term success,” he continues.
Credit unions, Schroeder believes, share a collective desire to provide value to their members – it’s the basis upon which credit unions
were founded and it is part of what makes credit unions unique.
“We have found that our members see long-term value in their
credit union relationship, and are willing to exert extra effort to protect
that relationship,” says Schroeder.
According to Schroeder, the ultimate measures of success for
United Heritage CU are similar to those of most credit unions.
“Whether it is loan or share programs, we focus extensive effort
upon providing programs that are relevant to our members’ needs, with
TCUL H WINTER 2012
Texas Plains FCU opened its first branch in 1940 to meet the financial services needs of Southwestern Bell employees. More than 70
years later, the credit union has grown to nearly $30 million in assets
and has expanded its outreach to serve the underserved areas of the
Recognizing that there was already significant competition for
prime borrowers, the credit union saw enormous potential among the
large unbanked population in its area and determined a community
charter was not in its best interest. Instead, it decided to go after this
largely untapped market.
Though reaching out to this segment of the population required
Texas Plains FCU to re-examine its product and service offerings and
re-think how it does business, CEO Terry McCormick is confident
this demographic group represents tremendous opportunity for the
“While some financial institutions may look at the unbanked and
underserved markets as ‘too risky,’ we see them as people who just need
to be given an opportunity to prove themselves as a good credit risk,”
says McCormick. “Treat people with respect, and they’ll be more likely
to honor their financial obligations.”
According to McCormick, many of their members have either no
or bad credit, but rather than see that as a barrier, McCormick sees it
as an opportunity.
“We work with our credit-challenged members and find ways to
lend to them, while minimizing the risk to the credit union,” he says.
For example, McCormick says the credit union works with auto
dealers to get their members in a vehicle at a price they can afford, but
limits the amount of loss to the credit union should the member default
on the loan. This may require that the member provide a down payment, additional collateral or a reliable cosigner.
“We feel we give our members an alternative to payday lending
or other shady lenders that take advantage of the member’s financial
position,” says McCormick. “But because we lend to those with bad
credit, our collection department and loan officers must stay on top
Between the credit union’s loan officers and collection department, he says they do a great job of underwriting the loans, monitoring
those loans and working with members to keep their loans current.
“As the saying goes, the squeaky wheel gets the grease. We definitely want to be that squeaky wheel,” McCormick chuckles.
McCormick says the credit union is fortunate to have a board of
directors that is receptive to new ideas and has supported management
in the changes they’ve recommended, especially with regard to their
“We have an amazing staff that works hard to serve our members
and knows them on a personal level,” says McCormick. “And we have a
board of directors committed to the growth and success of this institution and the unbanked market we serve.”
By Karen Houston-Johnson
Vice President, OnBalance
Credit Union Resources, Inc.
Building Effective Relations
Improving Communication between the Board of Directors and Employees
credit union’s CEO or other senior manager typically handles
communication between the directors and employees. However, there should be a clear plan in place that allows for open
communication between directors and employees.
Benefits of Effective Internal Communication
When your credit union is communicating effectively
with its internal “stakeholders,” whether they are employees,
management, or volunteers, it develops a cohesive culture
where everyone is focused on the same goals and has the
same objectives. By working within a cohesive culture,
everyone can work more efficiently together and collaborate
Some specific benefits that can result from effective
• Employees can make more decisions themselves since they have the tools and knowledge to
know the “right” decisions in line with the credit
• Staff can identify better with the goals, mission, and
procedures of the organization, which can result in
a sense of “making a difference” and increase effort
• Programs and departments share more resources
and information resulting in less duplication of
work and stronger impact as a whole; and
• Day-to-day conflict can be reduced since a lot of
conflict is the result of differing ideas on what
The directors should foster an open dialogue and remain
sensitive to being good listeners while responding in a factual
way to all questions and issues that may arise. This should
take the form of larger credit union questions, with care to
avoid specific matters related to the employee’s job, which are
best handled by the CEO or direct supervisor. This keeps the
lines of communication clearly drawn and avoids the possibility of ‘he said – she said’ interpretations that may end up
being harmful to all concerned.
Defined Communication Policy or Strategy
Credit unions should follow well-defined practices that
address next steps after an employee contacts a director. The
director should immediately inform the CEO to keep them
fully aware of all matters of concern. Conversely, this should
be done as a matter of course when a director wishes to
speak with an employee, which is typically the purview of the
TCUL H WINTER 2012
CEO or other senior staff. For matters having to do with an
employee’s concern about management, directors should perform their own due diligence, inform the full board and bring
it to the attention of the management member for resolution
at the appropriate time.
Internal communication within an organization is often
overlooked, yet it is vitally important. It is the communication that relates directly to the foundation of your credit
union – the people (including staff, management, and directors) that give your credit union its ability to function.
Developing sound internal communication processes and
evaluating these processes on a regular basis is the same as
making sure your car runs smoothly and is serviced regularly.
Your internal communication strategy should emerge
from, and be guided by, your credit union’s overall strategic
plan. This is because strategic internal communication is
simply a step towards helping your credit union achieve its
mission and vision more effectively.
Improving your internal communication requires careful thought, creativity and detailed planning. Monitoring and
evaluation must also be built into your plan.
Well-run credit unions have efficient and written procedures that involve regular channels of communication
regarding operational issues. These are not matters with
which the board actively inserts itself, as they are not generally the best use of a director’s skill or time. If the CEO
specifically requests the input of one or more board members, however, this often draws upon the director’s extensive
business experience that can be invaluable in confronting the
often complex issues that arise within today’s credit unions.
Credit Union Events
Credit union-sponsored events, such as conferences,
retreats, annual shareholders meetings, and all-day strategic planning sessions, can be ideal forums for interaction
between employees and their board of directors. Whether
informal or more structured, employees typically appreciate
the personal connection, which fosters a sense of working
toward the same goals for the benefit of all concerned. Such
occasions can increase employee motivation and satisfaction,
as well as the crucial feeling of being heard.
OnBalance, a service of Credit Union Resources, Inc.,
assists credit unions and their boards of directors with strategic
planning facilitation, board governance and leadership development assistance.
By Dennis Dollar
Former NCUA Chairman
Dollar Associates LLC
The Policy Component:
Where Credit Union Boards
Cannot Delegate But Can Initiate
hile the best credit union boards delegate the day to day
implementation of their established policies to a strong management team that they can trust, the one area where boards
cannot delegate is the policy making itself.
But they can initiate a policy evaluation process that
can contribute greatly to their credit union’s success. Here’s
Good management teams recommend strong policies
to their boards. Good boards evaluate and approve strong
policies recommended to them. But the approval process
of all credit union policies is a board fiduciary responsibility. Board members cannot hide behind any other part of
the credit union when it comes to responsibility for policies.
Policy making is the board’s primary responsibility,
plain and simple.
It is for that reason that regulators are looking more
closely at board minutes, travel, training and governance
structures than ever before. This level of scrutiny is likely to
continue for the foreseeable future in this post-Enron, postWall Street meltdown period in which we currently operate
as credit unions.
It is for this reason that we strongly recommend that
our client credit unions establish a regularly scheduled policy
review process that results in every written credit union
policy being reviewed and acted upon, whether changed or
not, at least bi-annually – if not each year.
Laws change. Regulations change. New guidance is
issued. Court decisions are rendered. Each one of these
actions can require a revision to an established credit
Credit unions should not wait until the examiner comes
in to require an update of a particular policy in order to
be compliant with a recent law or rule change. The board
is responsible for maintaining full compliance of all credit
union policies to applicable rules, regulations and statutes.
Because it cannot be delegated, many boards seek to
ensure that they stay on top of their responsibility for compliance with regulatory and legal changes with an established
formal policy review process. We strongly agree with the
need for such a process.
Many credit union boards divide their policies into
more manageable groups of three to five policies and biannually (or, preferably, annually) review those particular
policies in a monthly board meeting and take action on each
policy recorded in the minutes. By reviewing and acting on a
smaller number of policies each month, a credit union board
can avoid an unnecessarily long board meeting to accomplish
this purpose once a year or every two years.
It is a much better approach is to spread the review
process over one or two years with enough time to carefully
evaluate every policy and take action to either update the
policy or reaffirm it as presently written. The “divide and
conquer” strategy, as it relates to a fairly large policy manual,
works best for this purpose.
Does this mean there is no role for management in the
policy review process? Absolutely there is a key management role. Management should be the source of all necessary
update recommendations and guidance on changes in regulation, law, guidance or simply how a particular policy is working within the credit union. We would even recommend that
a Policy Review Committee consisting of management and
board members be created and charged with the responsibility of reviewing all policies, recommending any changes and
presenting those recommendations to the board for action at
each month’s meeting.
The fiduciary responsibility of policy making is the most
important role of a credit union board. Boards should not
allow the updating of policies to put them on the defensive
when an examiner comes in and lowers the management
component in CAMEL because their credit union policies
have not been looked at in several years, even though the laws
and regulations have changed significantly over that time.
Responsive credit union boards should take the offense
with the initiative of establishing a formal policy review process that ensures every policy is reviewed and acted upon on
a systematic basis by the board, either updating the policy or
reaffirming it as currently written. The board should incorporate management expertise and recommendations, but it
should be carried out under the board’s auspices on a regular
basis. No policy should ever go more than two years without
formal review and action recorded in the board’s minutes.
Again, if possible, one year would be preferable.
The result - one that the board can be proud of as it will
contribute to a better credit union - will be reflected in better
policies, enhanced compliance and higher CAMEL ratings.
WINTER 2012 H TCUL
Alleviate management ‘derailers’
to become a better manager
ecause managers carry more responsibility than any other
position in most offices, their personal development is
sometimes forgotten. Over time, procedures can become
routine, and managers can unconsciously begin to derail.
How can your leaders become effective managers?
There are three symptoms a derailing manager may
exist: resistance to change, inability to deliver expected
results, and inability to see beyond their own functional silos.
It is crucial to treat each of these symptoms immediately in
order to ensure that the manager and organization stay on
track and continue to be productive.
Derailer #1: Resisting change
A manager “at risk” of derailing due to resistance to
change may exhibit some of the following behaviors:
• Expresses frustration at the suggestion of change
• Is preoccupied with reminiscing about “what was”
versus “what will be”
• Continues to do things the same old way yet
expects new results
• Discomfort with ambiguity and lack of openness to
discovering better ways of doing things
• Team members complain about mixed messages
from leadership and their manager
TCUL H WINTER 2012
There are several ways to remedy this manager’s
resistance. The first step is to understand the manager’s
appetite for change. People are “wired” differently, and this
influences our appetite for risk and challenge.
A second way to assist a manager is to help the manager
understand his natural aversion to change. If a manager has
a natural tendency to resist change, then it is important to
make him aware of this tendency. This will enable him to
develop his own way of helping himself adapt to change.
Finally, when trying to develop a manager resistant
to change, ensure that the manager is focused on the new
priorities. There are many ways to communicate change, but
words are not enough. You need to translate this change into
meaningful actions and goals for the manager, and then you
need to inspect what you expect.
Derailer #2: Unable to deliver expected results
Another type of manager with potential to derail is one
who is unable to deliver expected results. If the manager in
question meets these symptoms, they are “at risk:”
• Results are consistently below goals, especially
those that are measurable
• Manager blames others or makes excuses for his
• Manager avoids discussions about
setting, tracking, and progressing
• Manager spends too much time,
energy, and resources on low-prior
• Team is unaware of how they con
tribute to the manager’s or organi
To “cure” this type of management,
first clarify the expected results and goals.
Next, you should attempt to understand
the manager. Not everyone is naturally
goal oriented. For those who aren’t, the
notion of setting, tracking, and achieving
goals can be extremely intimidating. This
is especially true of new managers in roles
where measurement is difficult.
Finally, inspect what you expect. Once
goals are clear and you have the manager’s
buy-in, establish a process for tracking the most important goals. Use
these goals to create a personal “dashboard” that helps the manager set
his own priorities that drive results. Require the manager to update his
goals weekly, and use his progress to facilitate a coaching discussion.
Finally, check back with the manager on a periodic basis to ensure that
his priorities are properly aligned.
Derailer #3: Missing the big picture
The final type of manager with potential to derail is a manager
who cannot see beyond their own functional silos. Symptoms of a
manager “at risk” of derailing include:
• Unwilling to communicate or collaborate with others
outside of his unit
• Makes decisions that benefit his unit but clearly hurt the
• Resists change that impacts him but clearly benefits
• Hoards information that might benefit others outside of
• Co-workers complain that the manager is out of touch with
the organization’s mission
The first step in developing a manager with high silos is to
establish clarity. Don’t assume that the manager understands how he
and his people fit in and interrelate with other units to achieve the
organization’s greater mission.
Be sure to include the manager in at least one cross-functional
team. Have the manager experience firsthand what it means to
contribute to a broader team and depend on others to achieve a
significant common objective. Ideally, he or she should work under
an experienced team leader who can provide both coaching and a
Finally, monitor the manager’s progress. This is more than
just an annual performance review; it’s about holding the manager
accountable, ensuring that he is aligned with the company’s priorities
and changing his behavior. This is done by monitoring his progress
and offering coaching and additional development. Input from
multiple sources such as the manager’s managers, peers on crossfunctional teams, and subordinates is valuable.
These three types of managers are more common than they
should be. And these symptoms don’t just occur in newly minted
managers or old and grizzled ones – they can surface at any time, so
monitor your people regularly. Encourage your leaders to know how
to be effective managers.
Reprinted with permission of Profiles International, a partner of
Credit Union Employment Resources. For more information, contact
Susan Looney, SPHR, at (800) 442-5762, ext. 6431.
WINTER 2012 H TCUL
By Kimberly Jones
Human Resources Consultant
Credit Union Employment Resources
TCUL H WINTER 2012
everal federal, state, and local laws require employers to post
notices in the workplace. Most of these laws indicate the information that must be posted and how it should be posted. Employers
who fail to comply with the posting requirements may be subject
to fines and other penalties.
Workplace poster requirements may vary according to federal, state, and local law, so employers should be sure to evaluate
which posters are required to be posted and then ensure that they
are posted correctly. Most required postings for Texas can be
downloaded for free on the Department of Labor’s website and/or
the Texas Workforce Commission’s website.
Below is a common question regarding workplace posters and
Q: What are some of the most common workplace poster compliance mistakes and how can we avoid them?
A: Some of the most common workplace poster compliance
• Not knowing which notices to post. It’s important to
review all federal, state, and local requirements to see
which, if any, apply to your workplace. For example,
even if your state minimum wage is higher than the
federal minimum wage requirement, by law you are
still required to post the federal minimum wage poster.
Please remember, some poster requirements apply to virtually all employers regardless of size, industry, state, etc.
• Failing to update posters. Laws can change regularly,
which may require employers to update their posters.
States may also make minor revisions to their laws.
You may check for revision dates on your notices
to determine if the most recent notice is posted in
• Not posting in conspicuous location. Workplace posters must be displayed in places where employees can
easily see them, such as break rooms or time clock areas.
Some notices, such as the Family and Medical Leave Act
and Equal Employment Opportunity laws, are required
to be posted where employees, as well as, applicants can
see them. In some instances, employers are required to
post certain notices where other notices are typically
provided to employees.
For example, if an employer typically posts rules and policies on the internet or intranet they may be required to post other
posters in that same manner in addition to a physical location in
If your credit union has a question about workplace poster
compliance or needs assistance with their HR needs, please contact
Kim Jones or Susan Looney with CUER at (800) 442-5762, extension
6432 or 6431. Also, visit us online at www.cuer.coop.
By Allison Griffin
Griffin Strategies, Inc.
Handling Big-Time Requirements
with Small-Time Resources
n the century since the founding of the credit union movement, the affection and loyalty Americans feel for their notfor-profit credit unions have been closely associated with small
A place where the teller knows your name. Where your
financial well being is a top priority. Where the ‘people helping people’ philosophy is tangible and observable.
Of course, the romanticized idea of life in a small credit
union is not necessarily the reality, given the flood of regulations and requirements and the “bigger is better” wave of
financial mergers and acquisitions.
In fact, adhering to big-time requirements with smalltime resources can be downright difficult.
Ward County Teachers Credit Union (Monahans) CEO
Kay Rankin-Swan acknowledges that compliance is the number one challenge for her $13 million credit union and others
“We know we have to be in compliance at all times,”
says Rankin-Swan. “What is not always so obvious is how to
Rankin-Swan says she and her credit union staff spend a
lot of time making sure they’re up to date on new regulations
and requirements. The Texas Credit Union League (TCUL)
provides important information and announcements, and
her credit union also contracts with TCUL’s compliance
team to help them write policies and procedures to address
“I find it’s a worthwhile expense because otherwise I’d
be spending all my time on that,” says Rankin-Swan. “Instead
I’m able to spend time with my members, which is far
Boosting the success of small credit unions has been
an important focus of TCUL and the Credit Union National
Association (CUNA), especially since a landmark report
was issued 12 years ago about the
obstacles facing small institutions.
In the wake of the persistent economic downturn that has
shrouded the nation, CUNA recently revisited the 12-year-old assumptions and found that the challenges
facing small credit unions also persist, although the nature of those
challenges has changed somewhat.
TCUL H WINTER 2012
In late 1999, small credit union CEOs told CUNA their
top concerns were 1) the need to offer a wider range of
services, and 2) staff and volunteer skills. Today, their top
concerns center around:
• Compliance and the volume of regulations
• Expense ratio associated with backoffice responsibilities
• Lack of succession planning
It appears Rankin-Swan’s top concerns are very much in
line with those of her peers nationwide.
“The challenge of providing products and services is
not quite as big a worry as it once was,” says Rankin-Swan.
“There are products out there that we can afford and that fit
the needs of our members and our credit union.”
Having just upgraded the website and bill pay and adding mobile banking, Rankin-Swan suggests that small credit
unions do their due diligence and talk with their peers when
looking to expand their products and services. And then
work a deal with recommended vendors. “You really have to
become a master negotiator,” she says.
On a daily basis, one of the current challenges facing
Ward County Teachers CU is loan demand.
“Here in the Permian Basin, people are doing pretty well.
However, they go home and see story after story on the evening news about the bad economy, so they’re not spending,”
“Personally, I am passionate about financial literacy.
Professionally, I want my members to save their money and
be in a good financial position,” she says. “But realistically, my
credit union needs loans to keep the lights on!”
Another industry challenge that hits small credit unions
especially hard: succession planning.
“Larger credit unions may have a well-qualified and
experienced person as their number two, who is being
groomed to take over down the road, but at small credit
unions, we don’t have that luxury,” says Rankin-Swan.
“As more small, credit union managers retire, it’s going
to be challenging to find new, qualified people to fill their
shoes,” she worries.
“I mean, I love what I do – I love to make a difference in
the lives of our members – but who is going to want to step
up to take the reins in 10 or 12 years as a wave of credit union
managers begin to retire?” Rankin-Swan explains.
“Small credit unions have to plan today to make sure
we’re here tomorrow,” she said.
from the Examiner’s Perspective
he examination of your credit union is about to commence. Although
this occurs annually, you may have apprehension. It is okay. The
examiner team does as well.
Typically, the examination process focuses on common areas
from one year to the next. However, new areas of focus emerge regularly based on national trends – and in many cases, trends developing
within each credit union’s distinct operations. The examiner’s focus
is safety and soundness, adherence to the regulatory environment,
and risk to the National Credit Union Administration Share Insurance Fund (NCUSIF). An examiner’s approach includes the idea that
adherence to regulation and safety and soundness are interrelated.
The examination process is a joint effort between NCUA examiners, State Supervisory Authorities and credit unions. The intent
is to ensure safe and sound operations to protect individual credit
unions and the industry from net worth loss due to controllable factors, and to minimize loss resulting from uncontrolled factors, such
as economic downturns.
Primary areas of focus that raise examiner’s cognizance to
safety and soundness concerns include, but are not limited to: Board
oversight of management, and staff accountability; consistency in
business or strategic plans, as compared to actual results; the state of
the internal control structure and internal audit department; areas of
high growth or abrupt changes in balance sheet accounts; operating
expense structure; level of due diligence and planning for new program implementation; reconciliations and outstanding items, particularly relative to corporate accounts; reliance on third parties for loan
origination and servicing; reliance on third parties for investment
decisions and analysis; and board and management assessments (or
lack thereof) of balance sheet risk exposures and financial trends.
Each of these areas of review, combined with credit union
responses, interpretations and written objectives, leads to an initial
determination of safe and sound operations.
From that point, examiners expand their reviews into perceived
areas of higher risk. Why? Because a credit union’s most controllable element is the effectiveness of management’s actions, decisions,
implementation and achievement of strategic objectives. Operations, objectives, goals and ultimately performance commence and
conclude with management (management includes the board and
Safety and soundness are more than just a report card of
past performance; they also ensure the organizational structure is
adequately built to proactively handle the strategies and future plans
for the credit union.
The examination process is not easy, but it also is not meant to
be confrontational. Instead, the process is intended to protect everybody – most importantly, your membership.
Reprinted by permission from the NCUA. An expanded version of
this article is available at www.lonestarperspectives.coop.
WINTER 2012 H TCUL
By Jim Holt
Vice President, Sales Operations
Credit Union Student Choice
The Three R’s of
Private Student Lending
ttributed to a toast given by British Parliament member Sir
William Curtis in 1825, the three R’s were long known as the
foundations of a basic skills-oriented education program.
While reading, ‘riting, and ‘rithmetic may be obsolete in
today’s era of standards-based education, this simple concept
can still be a valuable tool for credit unions when considering
the opportunity in private student lending.
We’ve all seen the headlines. Ever-increasing college costs
have left students and families searching more than ever for
affordable college financing options. According to one recent
survey, 46 percent of families borrowed money to help pay
for college*. The federal government’s Stafford and Perkins
student loan programs are the most widely-used student loans
and remain the best and cheapest way for students to borrow.
In addition, President Obama’s recently announced plan to
lower monthly payments for federal student loan borrowers is
another positive step during challenging economic times.
However, students and families also rely heavily on
private student loans to fill funding gaps, with 13 percent of
families utilizing them in 2010, versus just 8 percent two years
earlier. With the average cost of attending a four-year, in-state
public college at $17,131 per year (up 6 percent from 2010-11)
and the average cost of a private college at $38,589 per year (up
4.5 percent from 2010-11), it comes as no surprise that families
need additional financing options**.
Reality — Nearly $8 billion in private student loans
were originated in 2011 and remain a critical funding component for millions of people. While the ubiquitous “student loan”
moniker may mask the issue, it’s important to understand these
loans are a family decision, oftentimes with mom or dad playing
the role of co-borrower.
As any financial institution can attest, writing loans is a
risky business. Understanding that risk and employing proper
mitigation tactics are the keys to portfolio performance. While
private student lending is unique in many ways, it’s not unlike
mortgage or auto lending, in that there are important factors
that can be utilized to mitigate risk. Key factors include:
• Risk-based pricing with minimum credit score
requirements and criteria that strongly encourages
• Using school certification to verify enrollment, validate loan amount, and determine fund disbursement
• Restricting loans to students who are attending tra-
TCUL H WINTER 2012
ditional 4-year schools with a proven history of low
student loan defaults
• Lending “directly” to students and families within
your existing field of membership to establish an
opportunity for genuine, long-term relationships
For credit unions looking to eliminate risk completely,
it may seem easy to refer borrowers to another lender or
simply not make these loans at all. But is the answer really
• Reputation risk is inherent in any scenario where
the referring credit union has zero impact on the
value being delivered to the member.
• Competitive risk must also be considered. Referring loans to a bank that is aggressively pursuing
consumer deposit relationships should give pause
to credit unions.
Risk — Regardless of a credit union’s role in student
lending, risk is present in some shape or form. Understanding
that all student loans are not created equal and that aligning
that risk with a credit union’s business strategy is essential.
Delivering superior value to borrowers is an admirable
goal, but it’s only possible if value is also being returned to
the bottom line. In 2011, the average private student loan rate
on a national level was approximately 8.5 percent (variable
rate that resets quarterly based on index). The average rate
on private student loans issued by the 200+ credit unions
partnered with Credit Union Student Choice was just a shade
over 6 percent. Quite simply, these credit unions are doing
better for their members while simultaneously returning
value to their balance sheet and establishing a genuine foundation for a long-term member relationship.
Rewards — While the numbers have to make sense, the
rewards can be measured in more than just ROA. Fulfilling
a social role by delivering fair-value credit to those in need,
establishing new relationships with young adults and families,
and helping students achieve a critically important achievement in life are all part of the “mathematical” equation.
Credit Union Student Choice is the leading provider of higher education financing solutions to America’s credit unions, and
is a preferred product provider of Credit Union Resources, Inc.
*From Sallie Mae’s How America Pays for College Study, Aug 2010.
Conducted by Gallup.
** The College Board.
By Tom Hodge
SVP, Business Development & Sales
Credit Union Resources, Inc.
Spring is in the air – and so are tornadoes!
Does your CU have a plan?
t may seem a bit early to start thinking about the wind, hail and
storms that are as much a part of the Texas springtime as cowboy
boots and barbecue, but now is the time to start planning. Are
“Have a Plan to Recover – Put our Resources to Work for You!”
is a program we want you to embrace to keep from having to make
excuses after it’s too late. The percentage of small- to mediumsized businesses that never recover after a disaster is staggeringly
high, especially since the steps in putting together a recovery plan
are quite simple.
Credit Union Resources’ business continuity package includes
everything necessary for disaster recovery planning, with the
added bonus of a Business Continuity Preparedness Manual provided at no cost to your credit union. The manual contains information, worksheets and checklists to assist your credit union in
the areas of disaster recovery, communications, public relations,
exit strategies, and financial and technology plans. In addition,
experts are available to answer questions and assist you throughout
Credit Union Resources’ business continuity package includes:
• The Business Continuity Preparedness Manual at no
charge that includes:
Planning Information Workbook
Business Continuity Plan Worksheets
Emergency Plan Checklist & Quick Reference
Sample Communication Plan with Sample
➢ Sample Disaster Supply Kit List
➢ Contacts, Links and Resources
• Policy and procedure development through our
Shared Compliance team
• Technology consulting and security risk assessments
through Financial & Technology Resources
• Agility Recovery Solutions’ contingency planning
• Diebold’s contingency planning ATM equipment
• Ongoing Operations’ business continuity assistance
Don’t be caught unprepared when the storms begin to
strike - let Resources help you now. We have the tools and
expertise to tackle any situation and make building a strong
plan easier than you think.
Talk to your League Consultant or call Tom Hodge, SVP,
Business Development & Sales at (800) 442-5762, extension
6424, or email him at [email protected]
WINTER 2012 H TCUL