LSCU Director's Resource Newsletter 3Q 2012

Director’s Resource League of Southeastern Credit Unions

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October 2012 | Vol. 2, Issue No. 3

President’s Message The Presidential Election is Tuesday, Nov. 6. Every election – either local, state or federal - is important because we as Americans are free to make a choice. This year’s election is particularly interesting due to redistricting which occurs once a decade. Many lawmakers are facing tougher than normal re-elections because they are running in new districts. In Alabama and Florida, all congressional districts are up for re-election. In Florida, all seats in the state House and Senate will be on the ballot. There will be no state lawmaker elections in Alabama.

The League’s Voter Guide for Florida and the Congressional Report Cards have been emailed to all of our affiliated credit union CEOs. We also have all three guides posted in the LSCU Action Center. These guides are great resources that show how state lawmakers feel about our issues and how well our federal delegation has worked with credit unions on the major issues. These voter guides are unbiased looks at what is important to all of us – how they voted on issues important to credit unions.

I hope to see many of you at the Leadership Development Conference (LDC) in November at Point Clear, AL. We’ve rebranded the LSCU Development Conference because we felt it’s important to concentrate this event on issues and discussions centered around how CEOs, senior management and directors can work together cooperatively to “lead” credit unions forward. The conference features Bank Transfer Day founder Kristen Christian, Congressman Jo Bonner, CUNA Chief Economist Bill Hampel, and demographer Ken Gronbach, as well as many more excellent speakers. We’re excited about the lineup and the great information you can take back to your credit unions.

Enjoy the Director’s Resource and I hope to see you soon.

Board, Management Should Agree On Risk Oversight Policy Imagine your board of directors and your senior executive team in separate rooms so they can’t hear one another. Ask both groups to list the top three risks of financial loss facing your credit union today. Could the individual groups easily agree on the top three risks? Would the final lists coming from the two rooms match?

Alignment between the board and management on risk tolerance, prioritization of risk concerns, and mitigation plans drives focus to critical issues that have the most impact.

Establishing a Risk Oversight Policy No universal template exists for a risk oversight policy; the concept is still developing. However, here are some general guidelines to use in creating a policy in the form of a written directive from the board to the credit union management: Develop Risk Appetite Statement. State the board’s tolerance for accepting risk. Risk obviously can’t be eliminated, so it’s up to the board to set parameters for management’s ability to accept risk. Risk beyond these parameters requires board approval.

For example, management can’t have indirect loans exceed five percent of total loans. (continued on page 2)

Save the Date Collections & Bankruptcy School Oct. 9-10, 2012 Tuesday-Wednesday Birmingham, AL Click here for more information Bank Secrecy Act Training Workshop Oct. 17, 2012 Wednesday (Morning & Afternoon) Muscle Shoals, AL Click here for more information 2012 Leadership Development Conference Nov. 7-9, 2012 Wednesday - Friday Point Clear, AL Click here for more information

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Create Information Loop. The board must establish the type of information it needs from management about ongoing risk and changes in key risk factors. Be sure to include how often the information should be delivered. A regular cycle of reporting not only keeps the board informed, it compels the credit union to regularly reassess risk exposures.

Rank Risk Exposures. Develop a process for identifying and ranking risk and reporting these top risks to the board, such as with a risk “heat map.” The board should provide feedback.

Create Risk Dashboard. A risk oversight policy needs a visual point of focus to give the board and management a snapshot of the credit union’s current risk profile. A “dashboard” might be a way to accomplish this.

One format for a dashboard is a heat map that organizes risks according to their potential severity and frequency. Seek expert assistance, where necessary, to assign values to frequency and severity. For example, you may need a third party to produce an interest rate risk forecast for your market.

It’s important to regularly reassess and update whichever tools your credit union uses as part of a risk oversight policy. These policies must be living documents that drive strategy while keeping your board and executive team on the same page—even when they’re not in the same room.

For more information on Risk Oversight Policy, contact LSCU VP, Cooperative Initiatives Laura Vann at 866.231.0545 ext. 2181.

NCUA Designate for Low-Income Federal Credit Unions The NCUA designated 553 federal credit unions as low-income (LICU) designates in September. That means that the credit unions now have access to benefits such as loans and grants from the NCUA’s Office of Small Credit Union Initiatives. Lowincome designated credit unions also have no cap on member business loans. Plus, low-income credit unions may accept supplemental capital, if their net worth is at or near seven percent of assets.

The NCUA is making a second push for federal credit unions to become LICUs. On Sept. 12, the NCUA sent a second eligibility letter notifying federal credit unions that they qualify for the low-income designation. They will have 30 days to opt-in to accept the designation.

There are currently 1,740 low-income designated credit unions in the country. Read more about becoming an LICU on the NCUA’s website.

2012 LSCU Leadership Development Conference Join the LSCU at this year’s Leadership Development Conference (LDC). The rebranded LDC is designed to provide the tools needed to enrich the leadership, education, achievement, and development of credit union staff and volunteers. The LDC features Bank Transfer Day founder Kristen Christian, Rep. Jo Bonner (R-AL), CUNA Chief Economist Bill Hampel and demographer Ken Gronbach.

Nov. 7-9 Grand Hotel Marriott Resort - Point Clear, AL Visit the LDC website to register

NCUA Regulatory Relief Proposals After its Sept. 20 open meeting, the NCUA is proposing ideas to bring regulatory relief to some credit unions. The four proposals came directly from the NCUA Listening Sessions from earlier this year.

The NCUA is proposing a rule to change the definition of a small asset size credit union from $10 million to $30 million in assets. This would provide regulatory relief to 1,600 credit unions. If finalized, the proposed rule would provide regulatory relief by excluding more credit unions from riskbased net worth requirements.

The NCUA board is looking at the sustainability of federal credit unions in rural areas. The board is proposing a rule to change the definition of a “rural district” if the population does not exceed the greater of 200,000 or three percent of the population of the state in which it is located. Currently 43 federal credit unions have a rural district charter. The new definition would open opportunities for federal credit unions seeking community charters based around a rural district in the 13 states with populations greater than 6.67 million.

The NCUA is looking at a proposal to improve the regulation of low-cost, consumer-friendly federal credit union alternatives to predatory payday loans. The NCUA’s goals are to increase the number of federal credit unions that offer these loans while retaining the responsible nature of payday alternative loans, to increase access to consumers who want and need them, and to protect the safety and soundness of credit unions that make them.

The board issued a proposed rule to allow federal credit unions to invest in the variable-rate instruments known as TIPS. If the rule is finalized, federal credit unions could use TIPS to protect against inflation risk. Additionally, TIPS could be a valuable part of an effective risk-management program. One thing the board noted is that TIPS may not be appropriate for all federal credit unions, and the decision to use them should be based on sound due diligence and a demonstrated effectiveness at managing risk.

All four proposals come with a comment period of 30 or 60 days. Learn more on the NCUA’s website.

All Children’s Service Project After five months of planning, fundraising and building, the $300,000 therapeutic playground at All Children’s Hospital officially opened Wednesday, Aug. 29. The ribbon cutting was held by the League, CUNA, the National Journal, and the Republican National Committee.

Ann Romney, wife of Republican presidential candidate Mitt Romney, attended the ribbon cutting, toured the playground, and spoke. Mrs. Romney said that therapy has been a part of her life as she was diagnosed with multiple sclerosis at age 49. Just like in her speech during the Republican National Convention, Mrs. Romney talked about how a playground can be a joyous place for kids and their families.

Ann Romney, pink dress, wife of Republican presidential

The Southeastern candidate Mitt Romney, helped cut the ribbon along with LSCU President/CEO Patrick La Pine, pink tie, at All Children’s Credit Union Foundation (SECUF) Hospital in St. Petersburg. took the lead in fundraising for the project. The $300,000 was raised from credit unions in Alabama and Florida, their staff, state leagues from across the country, and system partners. Following the ribbon cutting, one of the patients proclaimed the playground open. For the next 30 minutes various kids from All Children’s Hospital tried out the new equipment.

LSCU President/CEO Patrick La Pine said the culmination of the project was rewarding.

2012 LSCU ‘Hike the Hill’ Shows Successful for Credit Unions On Sept. 13-14, credit union advocates traveled to Washington, D.C. to bring their message to lawmakers. Many directors from Alabama and Florida joined the League and credit union executives on the trip. It’s important that directors attend lobby sessions. The credit union difference is highlighted by the fact that unpaid volunteers give their time to help their credit union succeed. Lawmakers enjoy seeing this first hand.

Member Business Lending (MBL) was one of the hot topics during the visits. Credit unions reminded lawmakers that this was not a credit union issue, rather it is a small business issue.

CUNA has estimated that lifting the MBL cap to 27.5 percent of assets, from 12.25 percent, would create 140,000 jobs and inject $13 billion in new funds into the economy during the first year after enactment.

CUNA organized an event to highlight the need to raise the MBL cap and show how credit unions can help the recovering economy. The event featured credit union CEOs and legislation co-sponsors from the House and Senate talking about the importance of passing the bill. Also attending were Washington think-tanks and small business owners. Two panels of credit unions, lawmakers, and business owners spoke.

Other topics discussed during lawmaker visits were supplemental capital, the ATM Fee Disclosure legislation that has stalled in the Senate, and the credit union tax exemption. The Alabama and Florida delegation also met with the Consumer Financial Protection Bureau to discuss credit union issues.

“This playground is just one example of the work credit unions do in their community. To see the project go from an idea five months ago to the ribbon cutting today was amazing. Seeing the kids on the equipment shows how much this playground is needed and will be used,” said La Pine.

Voter Resource Guide Each election cycle, the LSCU produces a voter’s guide for credit unions. The guides are a good way to show how state and federal lawmakers and candidates feel about credit union issues and how they have worked with credit unions in the past.

Family Savings FCU Director Ronnie Reed (red tie) in the meeting with House Financial Services Committee Chairman Spencer Bachus.

The State Legislative Guide for Florida, Alabama does not have state elections that the LSCU is involved in, shows incumbents and candidates answers to five key credit union questions.

The Congressional Scorecard for Alabama and Florida show how the federal delegation worked with credit unions on major issues.

Each guide should be shared with credit union staff and members.

It’s a great resource ahead of the Nov. 6 election. You can find the guides on the LSCU Action Center webpage.

L to R: LSCU President/CEO Patrick La Pine; Rep. Ted Deutch (D-FL); City County CU Director Mack MacVicar; and SUN CU CEO Pat Mason.

Access to RateMap, PolicyPro Helps Credit Unions Better Serve Members Compare & Monitor Interest Rate Movement As a value of membership, LSCU member credit unions now have free access to RateMap. Powered by RateWatch, RateMap is a unique mapping tool that provides users with access to key interest rates for a selection of the most commonly offered deposit and loan rates in a credit union’s backyard and across the country.

With access to RateWatch’s national database of more than 90,000 branches for deposit data and more than 40,000 branches for loan data, competitive analysis is now only a click away. Credit unions can research by address, zip code, or city and state and narrow search results by filtering by institution type, product type, and rate.

Some of the features include: • Rates for a selection of the most commonly offered deposit, loan products • Rate coverage of all the institutions/branches monitored by RateWatch • Zoom or scroll the map to change your view • Hide the customization tools to view full map • Detail such as address, phone number, website, number of locations and bank deposit balances Some of the benefits include: • Compare your rates to those in your local area • Monitor interest rate movement and identify opportunities to promote products as “best rate” • Analyze offerings locally, regionally, and nationwide • Research new market potential • Understand area saturation Policy Management Made Easy Also, as a value of membership, LSCU member credit unions now have free access to PolicyPro. PolicyPro provides credit unions a comprehensive suite of more than 200 model policies that have been researched, developed, and written specifically for credit unions by regulatory experts. This online operations policy manual system means no paperwork to manage, and it can be accessed via any computer.

Authorized staff are able to securely access, view, print, and update policies from any Internet connection. Because policies change, PolicyPro continually researches relevant developments to keep you current.

Some features include: • Secure, web-based platform • Easily add new sections • Archive capability • Easy insertion of semi-annual updated information • Library access that includes an archived history of all changes made To find out more about RateMap and PolicyPro or to use either tool, visit the InfoSight/RateMap/PolicyPro page under Regulatory Advocacy on www.lscu.coop.

Supervisory Committee Conference The 2012 LSCU Supervisory Committee Conference, held in August, had a record attendance of 149 attendees and guests representing 48 credit unions. Attendees heard from Tim Harrington, CPA, president of TEAM Resources, as he broke down the roles of the board of directors, supervisory committee, and CEO and described how the three entities work together to keep the credit union afloat and good standing.

Steven Rick, Catherine Bruder, and Robin Hoag also presented in depth, highly-evaluated sessions covering the state of the economy, IT risk, and ERM. NCUA Economic Development Specialist Lisa Terrell and attendees discussed practices that NCUA examiners wish every supervisory committee had in place. For the newer supervisory committee members, two in depth sessions were offered, covering the fundamentals of the supervisory committee and how best to carry out the duties of the position as well as required annual BSA training.

Eugene Johnston, secretary of the supervisory committee at Azalea City CU commented, “I had a great time and got a number of good ideas. We had our meeting last week and I gave our CEO a long list of things I think we can do or improve upon in the future. Thank you again for a wonderful and informative conference.”

LSCU Member Relations Specialist David Lenoir and VP, Cooperative Initiatives Laura Vann lead a workshop on the fundamentals of the Supervisory Committee.

Get Educated and Get Credit The Leadership Development Conference, Nov. 6-9 in Point Clear, AL, offers directors a series of educational opportunities to earn credit toward a Certified Credit Union Volunteer designation. Earn credits through the VAP series by attending the Board Policies, Financial Management or Strategic Credit Union Leadership education sessions on Nov. 7.

The League makes sure you are credited following the session. You can learn more about each topic and register by visiting the LSCU Leadership Development Conference website.

To receive the latest news from the LSCU, CUNA, and the NCUA, sign up for the League’s weekly newsletter, eSignal, at www.lscu.coop. Director’s Resource publisher – Joseph Davis (joseph.davis@lscu.coop)