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The Magazine of the League of Southeastern Credit Unions Summer 2012

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LSCU Action Center

One-Stop-Shop for Advocacy

Young Professionals Group

Connecting Young Credit Union Professionals

Members Communities

Secrets to Loan Activity Success

Leveraging Industry Knowledge Credit unions have more leverage through the cooperation of industry leaders that help streamline processes with identifying best practices, giving you peace-of-mind that your credit union is accomplishing more with less effort.

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“This system keeps us up-to-date on regulatory changes and helps us act on only those that affect our specific policies and procedures.” Richard Morris, VP of Administration Services Jefferson CU

“We are very pleased with our decision, the process, and the results!” Clarence Rivers, CEO FAMU CU

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Message from the President It took longer than expected, but the 2012 presidential race is all but set. President Obama will be the Democratic nominee and Mitt Romney secured the Republican nomination in May. The two have already begun campaigning against each other. This is a big election year, not just for the White House, but for many more federal and state seats up for grabs this November. With five months until Election Day, there is a lot we can do as credit unions before the polls open the first Tuesday of November. The presidential race is important on many levels; however, the races in the House and Senate, both state and federal, have more of an impact on the way we do business. With it not an election year in the Alabama legislature, only Florida has state seats up for election. I hope all credit unions will become involved in the election cycle to elect credit union friendly candidates to state and federal offices, not just in voting but, by being involved in PAC fundraising and the League’s grassroots activities. PAC fundraising is one way the League becomes involved in elections. With two state PACs (ACULAC and CUPAC) and a federal PAC (LSCU FedPAC), we raise money each year to support candidates we identify as understanding credit union issues of importance and how we serve our membership and communities. Last year we raised more than $437,000 for LSCU PACs. We hope to improve that amount during this year’s important election cycle. The more money we raise, the more candidates we can support. The LSCU Governmental Affairs team has ideas for credit unions to be more engaged in PAC fundraising and to meet PAC goals. Staff jeans days, deduct-a-buck, and payroll deduction are popular. As a movement we need a large percentage of credit unions participating in the PACs. The PAC makes contributions to the campaigns of candidates that our PAC trustees feel best support our issues. In the 2010 mid-term elections, more than 80 percent of the candidates supported by the LSCU PACs were elected. As we’ve done for past election cycles, we will be sending out (in the fall) our election guide that shows where candidates stand on our issues. Our candidate questionnaires have been sent out, and we will be gathering as much information as possible. Over the next few months, legislative breakfasts and legislative nights will happen across Alabama and Florida. This is true grassroots involvement at the local level. It’s imperative that chapters and individual credit unions host these events. We need large numbers to attend to get to know the candidates. Our credibility is hurt if a candidate shows up and only a few people meet them. Attending legislative nights is the first step to building a relationship with the candidates as well as educating them on the credit union difference and why our tax exemption is still relevant. Some of the best lobbying happens when credit unions have a solid relationship with their local lawmakers. We are constantly told that getting to know and hearing from credit unions is much more beneficial to them than just hearing from the League staff. So how does this all tie together? The League puts together a proactive legislative agenda each year. To pass issues, like member business lending or public deposits, it takes all of us working together doing our part. We have a “Plan to Win” strategy that we’ve shared with credit unions. The plan, which is posted in the LSCU Action Center (www.lscuactioncenter.com), spells out everyone’s roll. The League is only the tip of the spear. Many times we are only as successful as our collective efforts. The Power of One comes from all of us working together toward one common goal. If we each do our part over the next five months, we can ensure the candidates that understand the credit union philosophy will get elected. Credit unions have enormous untapped power. Let’s harness the “power of one” in 2012 and make it an election to remember.

Patrick La Pine President & CEO League of Southeastern Credit Unions

Table of Contents

Editor Amy Jowers

President’s Message

Trends Clouds on the Horizon?

Contributors Bill Berg Mike Bridges Jason Cochran Mary Elicia Del Santo Chris Dirmann Larry Rodriguez Brandy Norvell Laura Vann Blake Westbrook Adena Whitman

Production Detra White April Banta

Part two of last issue’s “Cloud Technology & Credit Unions” article. Brian Sommer, IT research analyst for Vital Analysis reveals considerations of CIOs and CEOs in regards to using cloud technology in their credit union.

Increase Loan Volume & Decrease Delinquencies Learn how two credit unions use their knowledge of their members and their community to increase their loan volume and keep their delinquencies down.

Advocacy Your One-Stop-Shop for Advocacy: LSCU Action Center 2012 Alabama Legislative Session Wrap Up

LSCU Legislator Profile

Letters to the editor may be submitted at submission@lscu.coop.

Coming Soon 2012 LSCU AC&E in Review

Sen. Bill Holtzclaw

Highlights 6 | Trends

Financial institutions, large or small, are looking for ways to make loans without the risk of them becoming delinquent. Find out how two credit unions are finding success in loan promotion.

Rep. Bill Posey

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SIGNAL: Vol. 3, Issue 2

10 | Advocacy

The LSCU Action Center is a one-stop-shop for credit union staff and volunteers to become more involved in the political process.

18 | Compliance

Find out a couple of key topics credit unions should be aware of in terms of regulatory compliance dealing with BSA and volunteer reimbursement.

Compliance BSA Reporting, Volunteer Reimbursement

Cooperative Initiatives Credit Union Mission Leads to Small Town Happy Ending LSCU Debuts Young Professional Group Credit Union Philosophy in Action Workshop

Foundation New SECUF Director Named SECUF Launches College Internship Program

Education The Case for Face-to-Face Learning LSCU Learning Opportunities for July-September

Communications Opportunities Too Great to Cut Marketing Budgets

Leonard Parkhurst, Jr.

When budget cuts happen, all too often, the marketing budget is one of the first ones to get cut. But it should really be one of the last ones to see the red pen.

League News Alabama State GAC Brings Credit Unions & Legislators Together Disaster Preparedness Workshops Provide Valuable Forum

Industry Timely Tips for Handling an Account Data Compromise

LEVERAGE Are You Effectively Utilizing Your CRM to Find Loan Opportunities? THINK 2012 Session Highlight: Credit Card Portfolio Management LEVERAGE Audit & Consulting Saves Credit Union on Audit Services

LSCU Staff Directory

Highlights 22 | Cooperative Initiatives

26 | Foundation

30 | Communication

Through the creation and support of a young professionals group, younger credit union professionals are connected through a structured network in a collaborative spirit.

SECUF creates a college internship pilot program to provide a learning environment for students interested in the credit union industry.

Due to the economic downturn, credit unions have been looking for ways to cut expenses. Read why a credit union marketing budget shouldnâ&#x20AC;&#x2122;t be the first one cut. SIGNAL: Vol. 3, Issue 2

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TREND

Clouds on the Horizon? Brian Sommer, IT research analyst, Vital Analysis

This is part two of the first-quarter Signal article “How cloud technology is improving the way credit unions do business.” This article reveals considerations of CIOs and CEOs in regards to using cloud technology in their credit union. I recently worked with consultants from Baker Tilly and Member Development Corporation (MDC) on a credit union study involving cloud computing. While not scientific, a number of credit union chief information officers (CIOs) were interviewed regarding their current and proposed use of cloud computing solutions. The CIOs were found to be quite informed about cloud solutions and their numerous variations. When compared the dialogue of the CIOs with CEOs from some of the same institutions, there were some interesting differences of opinion. For example, it was clear in the study that credit union CEOs saw cloud solutions in a limited context – they often saw “cloud solutions” as a place where one takes one’s applications to run on a computing service bureau. This movement of one’s applications and data to a third-party hosting service was viewed as a risky

How are CUs currently utilizing cloud?

Where diﬀerent cloud solutions fall: Innovators Event Technology

Early Adopters

Early Majority

Big Data

Oﬃce Automation

Late Majority CRM

Payroll Processing

Talent Management

Business Intelligence/ Analytics

In Memory Database Technology

Laggards

Social Media

Hosted Cloud

100%

What are MDC owners currently using?

80% 60% 40% 20% 0%

In Memory Database Innovators

Big Data

CRM & HR

Payroll Processing

Talent Majority

Laggard

Oﬃce Automation

Early Adopters

Early Majority

Source: December 2011 survey of MDC Owners and Cloud Advisory Team Meetings

endeavor. As a result, some CEOs had questions about liability risk for their organization. In contrast, CIOs saw cloud solutions in a more expansive light. They clearly understood that low-cost, low capital outlay solutions of all types can be requested through a

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cloud service and used by member credit unions. Risk, a key CEO concern, was not the top concern with the CIOs that participated in the study. For them, the question was one of availability. Specifically, they want to know when strong and robust cloud applications will be available for credit union operational systems. It was learned that CIOs had considerable knowledge of the available cloud-based applications market. Many had already implemented or were planning to implement cloud-based customer relationship management (CRM) software (e.g., Salesforce.com). Many were also considering the utilization of cloud-based office automation suites (e.g., Google Apps) and human resources applications (e.g., SilkRoad). Yet, while many are aware of options in the back office and front office parts of their entities, several CIOs expressed frustration on the lack of solid, multi-tenant operational systems for their credit unions. Why do these CIOs want cloud applications for credit unions? In a nutshell, these CIOs want to re-focus or realign their scarce IT personnel to work on more strategic initiatives and spend less time maintaining, patching, and upgrading application software. Maintenance work, while viewed as a necessary evil, is not a valueadded activity for most credit unions. It is a tactical, cost of doing business requirement that should be minimized as much as possible. CIOs also believe that application software companies will continue to shift more and more of their highly innovative development efforts to cloud-based platforms and products. In fact, evidence shows that some of the largest software providers to the credit union industry (e.g., FiServ) are already building add-on cloud applications that solve some specific credit union process needs. Cloud platforms are clearly the key destination focus of software firms today.

Observations throughout this project: • Credit unions are implementing cloud technologies consistent with the way the application software marketplace itself is maturing regarding cloud. CRM solutions were some of the first to be made available in a multi-tenant cloud fashion almost a decade ago. Large numbers of human resource applications have been designed and rolled out on multi-tenant cloud platforms. Many of these came of age between 2005 and 2008. Office automation technologies as well as financial accounting solutions have been moving steadily to the cloud in the last few years. • Across most industries, not just credit unions, software developers have been slower to build multi-tenant cloud solutions for operational systems. Granted some sectors like discrete manufacturing now have several choices from which to choose. Yet, for most industries, the availability of robust operational systems in true multi-tenant cloud fashion remains coveted. • CIOs are clearly asking credit union software vendors for multi-tenant applications. We believe that more and more credit union executives should echo these requests to ensure that your industry has the most modern technology available to it. • Credit union executives, not just IT executives, need to understand all of the security, data, and other protection standards that great cloud solutions providers adhere to. These include: SAS 70 Part II/SSAE 16/ISAE 3402 certification and ISO 27001 certification. These requirements, and how vendors meet these standards, should become a standard knowledge requirement of all IT and internal audit personnel in credit unions going forward. • Credit union CIOs were clearly aware of the differences between hosted, single tenant, and multitenant solutions. Their command of these differences was quite strong and will undoubtedly help their organizations make solid choices on future cloud deployments.

As the significance of offering members the best possible service increases, and credit unions look for more efficient ways to handle specific processes, cloud-based technology will become more important. Not only are IT executives understanding this reality, chief executives are as well. Just as technology allowed members to bank more conveniently, cloud technology will allow credit unions to expand on services and reliability. Cloud technology is close on the horizon for credit unions, how will you move toward it? ■ Brian Sommer is an IT research analyst with Vital Analysis. Previously, he was Accenture’s Worldwide Director for Software Intelligence. He writes also writes a blog for ZDNet. Any brand names used in this piece are for illustrative purposes only and not recommendations.

SIGNAL: Vol. 3, Issue 2

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TREND

INCREASE Loan Volume

DECREASE Delinquencies

Know Your Members & Your Community Amy Jowers, director, Information Services

Every financial institution is looking for a way to keep their loan volume up and their delinquency rate down. In fact, many are hard-pressed to get or make new loans. With the real estate market still iffy, the economy still somewhat in a crisis, and people still struggling to make ends meet or to keep a steady job, financial institutions, large or small, are looking for ways to make loans without the risk of them becoming delinquent. For two credit unions, Riverdale Credit Union in Selma, Ala. and Monroe County Teachers Federal Credit Union in Key West, Fla., success in loan volume promotion without a lot of delinquency comes down to two things: know your members and know the community in which you serve. In Selma, home to Riverdale Credit Union, $48 million in assets, there were pay day stores on every corner. “We had so many members that

ended up coming to us for help to pay off loans,” said Linda Walker, manager of the credit union and who has been with the credit union 28 years. “They come in and we’d provide financial counseling to help pay off those loans.” In addition to the credit union—and the pay day lenders—there was one bank in the town. The aftermath of the banking fiasco caused the bank to go through some unwelcome changes to its customers. According to Walker, it had gotten to the point the loan officers weren’t able to make decisions themselves. They had to get approval from higher up and this upset their customers. The bank also discontinued cashing social security checks without a fee. Soon, Selma residents realized that Riverdale was the only place that didn’t fee people to death. Through it all, Riverdale Credit Union remained a constant and membership grew substantially by 1,200 members due to the bank changes and fees. Monroe County Teachers Federal Credit Union saw its asset growth triple since 2007. Jerry Bolduc, CEO of the $15.1 million credit union, attributes the growth to a rebirth after the former manager stole $5.5 million from the credit union. The board wanted to survive rather than merge so they brought in Bolduc, a retired NCUA advisor who was enjoying retirement in the Keys. With one year to get it straightened out, the board wanted to be progressive rather than sit back. Bolduc partnered with the school system and college in the area, actively attracting business by offering excellent rates. The credit union opened up to the students with the goal of attracting those looking for stability. The money started coming in and within a year nearly all the funds that had been stolen were recovered.

Know Your Members Walker acknowledges that the need for loans doesn’t always work under the risk-based lending model. Currently the credit union offers vehicle, mobile home, home, and signature loans. She found that many of the credit union’s members lacked credit quality – had less than 600 credit score – so they helped council them. Most financial

institutions will not do a loan if a customer’s score is less than 500 but Riverdale did to “break the cycle” and get members on the right track. Walker found that delinquency improved in the last year; before it was 2.1 – 2.3 percent. This year it has been down to 1.4 - 1.6 percent. “People have responded responsively, paying for their own money,” said Walker. “And Selma hasn’t seen the industrial growth as other places.” The credit union offers a holiday loan as well. If a member’s signature loan has been maxed out, they can still get a holiday loan. As Linda Walker, Riverdale Credit Union long as they haven’t missed a payment on the signature loan, they are able to have the money from the holiday loan to help out during the holidays. “We’ve not had one loan to default,” said Walker. “Banks aren’t able to help, they [customers] have to go somewhere,” said Walker. “When money is tight, I’ve found if you help people they will come back.”

Know Your Community Bolduc said the credit union used to generate volume through real estate however as the housing market collapsed this channel quickly evaporated. Fortunately they weren’t stuck like all the other financial institutions around with real estate only being 20-25 percent of its portfolio. They decided to increase their new and used auto loans to generate the loan volume. To do that, Bolduc went to all the car dealers and promoted “buy local, finance local.” They matched any other local rate and offered a referral fee to the dealerships for new members, from $125 to $300 depending on the member’s credit. This, said Bolduc, helped the auto dealers because most banks around here aren’t in the auto market. Through the credit union’s partnerships with the auto dealers and by offering the best rate, the credit union brought in a quarter to half a million dollars per month in new loans. Currently the credit union has 60 percent in secured auto loans. Bolduc says they do have some delinquencies and charge-offs – and have had some repos – but they do have a strict

policy. “If members work with us, we’ll work with them,” said Bolduc. “If not, we’ll have the auto picked up after two months.” Bolduc says the credit union’s next opportunity is home equity loans. Right now, less than 10 percent is out in signature loans. Both credit unions have loan promotions going on and more planned for the future. Riverdale is currently 70 percent loaned out now. Walker’s goal is to be 90 percent. To do this, the credit union’s summer promotion is offering a lower interest rate for A, B, and C papers across the board and taking one percent off existing interest rate plus a $50 gas card as an incentive. In July, the credit union is offering a back-to-school loan - $500 for $50 a month at 10 percent interest. Monroe County Teachers Federal Credit Union doesn’t offer credit cards but they do special promotions on personal loans. One of their promotions is a disappearing interest rate loan which provides members an incentive to pay on time. No matter what a member qualifies for, the incentive to pay on time is a loan offered at eight percent. If all payments are made on time after a year, they take a half percent off the interest rate. Bolduc says it’s a win/win for the credit union and the membership. Another promotion Bolduc’s credit union offers is a debit card reward program. If a member uses their card eight times per month, the credit union reduces loan interest by 25 basis points right off the top. He says it pays for itself with interchange fees, and it rewards good behavior. All in all, both CEOs support, follow, and believe in the “people helping people” philosophy and believe taking action with and understanding their members and the community are keys to success. “Make a difference. Make it happen,” said Bolduc. “If you don’t, you’re asking what happened.” “We always want it to be about meeting members’ needs,” said Walker. “If we’re loyal to them, they will be loyal to us. It fits our credit union perfectly.” ■

LOAN ACTIVITY Monroe County Teachers FCU Loans to shares: 88.9 % Delinquencies: 0.78% Loan portfolio yield: 6.80%

Riverdale CU Loans to shares: 74.1% Delinquencies: 1.5% Loan portfolio yield: 7.31% Information from the December 2011 NCUA 5300 Call Report

Jerry Bolduc, Monroe County Teachers Federal Credit Union

SIGNAL: Vol. 3, Issue 2

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ADVOCACY

Your One-Stop-Shop for Advocacy: LSCU Action Center Blake Westbrook, grassroots & political action coordinator (AL), LSCU The LSCU Action Center (www.lscuactioncenter.com) is a onestop-shop for credit union CEOs, staff, and volunteers to become more involved in the political process. It contains several items such as information on current legislation supported by the league, a copy of LSCU’s “Plan to Win” advocacy strategy, a calendar of grassroots events, and information on why and how to give to the LSCU PACs. One of the most important pieces of the action center is the Federal Issues and State Issues sections. These sections give credit union members the ability to contact their lawmakers on federal and state issues that concern the credit union movement. This gives a voice to what our legislative team is telling lawmakers and shows that credit unions are engaged. Most importantly, a strong and loud voice from credit unions back home shows lawmakers the real support we have for our issues. If we are going to have legislative success, it is critical that we all contact our lawmakers. So, how does it work? Go to www.lscu.coop and mouse over the Governmental Affairs (GA) tab; click on the LSCU Action Center. You will be asked to log in. If you already have access to the LSCU website, log in using your username and password. If you don’t, click “sign up” and complete the form. The next step is to manage your account. Once you’ve logged in, click on the State Issue or Federal Issue link found on the LSCU Action Center homepage. You will be asked to enter your username and will then be asked to provide general information such as your home address with zip code and email. By supplying this information, you will be automatically matched up with your state and federal legislators. This also signs you up to receive GA communications such as updates or action alerts on certain legislation that affects credit unions. Finally, respond to the Action Alerts you receive via email. Once you receive an Action Alert that asks you to contact your lawmakers, click on the link in the email that asks you to take the appropriate action. You will be prompted to log in. Once logged in, you will be taken to a page containing more information about the issue and a link that allows you to take action.

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When you click on the Take Action link, choose which lawmaker to contact and the contact method you would like to use whether it is email, fax, phone, or letter. For each option, text will be provided but you will be able to edit it if you wish. There will also be a phone number and names of legislative staffers if you wish to call the lawmaker’s office. The appropriate mailing address is also provided should you choose to print the letter and mail to your legislator. If you would like more information on the LSCU Action Center, contact Grassroots and PAC Coordinators Blake Westbrook for Alabama at 866.231.0545 x2164 or blake.westbrook@lscu.coop and Andy Gonzalez for Florida at x1010 or andy.gonzalez@lscu.coop. ■

Step By Step... Step St ep 1

Step St ep 2

Step St ep 3

Step St ep 4

1. Go to www.lscu.coop and mouse over the Governmental Affairs (GA) tab; click on the LSCU Action Center. 2. If you already have access to the LSCU website, log in using your username and password. If you don’t, click “sign up.” 3. Click on the State Issue or Federal Issue link found on the LSCU Action Center homepage. You will then be asked to enter your username. 4. Provide general information such as your home address with zip code and email.

Step 5

Step St ep 6

Step St ep 7

5. Respond to the Action Alerts by clicking on the link in the email that asks you to take the appropriate action. You will be prompted to log in. 6. Once logged in, you will be taken to a page containing more information about the issue and a link that allows you to take action. 7. When you click on the Take Action link, choose which lawmaker to contact and the contact method you would like to use whether it is email, fax, phone, or letter.

SIGNAL: Vol. 3, Issue 2

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ADVOCACY

Alabama 2012 Alabama Legislative Session Wrap-Up Jason Cochran, director, Legislative Affairs (AL)

against any issue to better the credit union movement, our message When the 2012 Regular Session began in early February the of fairness, equality, and benefit to public entities was heard loud and Republican super-majority in the Alabama House of Representatives clear. Unfortunately, like many controversial pieces of legislation in their and Senate had goals of passing the state’s two operating budgets first year, we were not able to move SB 299 any further in committee without raising taxes, passing a series of economic development bills, but that should not discourage credit unions in Alabama. This creating charter schools for Alabama, and making changes to the legislation will be re-introduced in 2013 and the LSCU Governmental immigration law passed in 2011. These goals, along with redrawing Affairs team is already working on an aggressive off-season campaign the state’s House and Senate districts, proved much more difficult to see the public deposits legislation pushed forward. than originally thought and a few measures were defeated despite the In addition to public deposits, there were a number of other overwhelming number of votes the leadership controlled. Regardless pieces of legislation that LSCU monitored and lobbied for on behalf of a few setbacks, most notably the charter schools legislation, it was of Alabama’s credit unions. Many of these were highlighted in the a successful session for the Republican leadership with both budgets being sent to the governor, a number of economic development bills passed, and redistricting being disposed of in a special session that This was an important step to ensuring that credit lasted only six days. unions are treated fairly when it comes to the LSCU and Alabama’s credit unions experienced a successful security of public funds. legislative session as well. Legislation allowing credit unions to accept weekly eSignal updates on the legislative session. One piece of public deposits was introduced in the House, HB 315 by Rep. Mike legislation that should be familiar is the bill that specifically exempts Ball (R-Huntsville), and the Senate, SB 299 by Sen. Bill Holtzclaw credit unions from being licensed as a used motor vehicle dealer (R-Madison), for the first time. This was an important step to ensuring in Alabama, HB 213 by Rep. Dexter Grimsley (D-Newville). As you that credit unions are treated fairly when it comes to the security of public funds. Once introduced, all know, credit unions currently are not required to do this but the exemption Alabama credit unions began req comes from “financial companies” a strong grassroots effort to co language within the code. Adding “credit see this bill move this year. lan unions” gives greater security if there The opposition was strong, but un were to be a challenge to our exemption so were credit unions, and it we and it also gives weight to credit unions was noticed in the halls of the an Statehouse. The grassroots in tthe law, especially when other financial institutions are specifically mentioned in push aided in securing a ins hearing on SB 299 in the the code. HB 213 was passed out of the Senate on the last night of the Regular Senate Banking & Insurance Se Session and is expected to be signed by Committee with credit unions Se Gov. Bentley and become law. on one side of the room and Go HB 607 by Rep. Jim Barton (R-Mobile) banks on the other. Four testified in favor of SB 299 is oone piece of legislation that caught our attention early and it wasn’t long before including Steve Swofford, CEO att changes were made to appease a wide of Alabama Credit Union, and cha array of disgruntled state agencies. HB Mayor Steve Zerkis from Indiann arr 607 was the legislation that attempted to Springs Village. While the 60 divert money from 48 state entities to the opposition regurgitated the di Five Star CU CEO Bob Steensma traveled to Montgomery to talk with Rep. Paul Lee (R-Dothan) about public deposits. General Fund of Alabama for “accounting, same, tired lines that are used 12

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auditing, budgeting, and legal services.” The Alabama Credit Union Administration (ACUA) was among the 48 agencies named that HB 607 would affect. Since ACUA is funded by dollars credit unions are assessed on an annual basis, diverting these funds from ACUA to the General Fund was simply not an option. After working with the ACUA and Rep. Barton, we were able to have the ACUA removed from HB 607, and your dollars will be staying with the administration. HB 600 by Rep. Barry Moore (R-Enterprise) is another piece of legislation successfully amended by LSCU. HB 600 established the Alabama Small Business Lending Authority in order to aid small businesses sinesses in having access to capital. The Authority would have worked wor

Sen. Phil Williams (R-Gadsden) hosts Gadsden area credit unions in Montgomery. Credit unions talked about public deposits and the credit union tax-exemption.

under the Alabama Department of Economic Affairs and streamlined existing programs that are available to small businesses and provide for further state investment in the future. While this legislation establishes a very good program and the potential down the road for credit unions is great, the board that oversees the Authority did not have a credit union representative on it. In Senate committee, we were able to successfully amend the legislation to include a “representative from the credit union industry” serving on the board. Unfortunately, time ran out on this bill and it was not able to make it back to the House of Representatives after Senate passage for concurrence and died on the last day of the session. However, this bill should be back in 2013 and we plan on working with the sponsor to have our credit union language included before introduction. There were many other bills that LSCU played a vital role in amending or defeating during the 2012 Regular Session. Be on the lookout for a comprehensive list that will be emailed to all Alabama credit unions in the coming weeks. What’s on the horizon? LSCU Governmental Affairs staff is already working on an aggressive off-season campaign focusing on putting credit unions in front of elected officials in their districts, improvements to the public deposits legislation, and we are currently looking at improvements to the State Act for state chartered credit unions. If you have any questions or concerns, contact LSCU Director, Legislative Affairs (AL) Jason Cochran at 866.231.0545 x2159 or jason.cochran@lscu.coop. ■

LSCU Legislator Profile

Sen. Bill Holtzclaw

After serving 20 years as a U.S. Marine, Bill and his family settled in Madison, Alabama. In 2008 Bill successfully campaigned for local office as a city councilman where he served on the Madison City Council from 2008 - 2010, and as the city council president for 2010. He was elected to the Alabama State Senate in November 2010. In 2011, as a freshman legislator, Bill was recognized by The Century Council, a national not-for-profit organization funded by distillers, for his commitment to fighting drunk driving and underage drinking.

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How did you decide to get into politics and run for the Alabama Senate? Having spent most of my adult life as a U.S. Marine (from age 18 to age 38) I closely watched the impact of politics on the world around me. My last active duty assignment was at Redstone Arsenal in Huntsville, and we chose to live in the city of Madison. A few years after retirement I decided to become involved in local politics. I successfully ran for my first office on the Madison City Council in 2008, and the next year was elected to council president. Later in 2009, I was asked by several conservative groups to consider running for the Alabama State Senate. My family and I prayerfully considered the possible opportunities - and hardships - accompanying this position. We determined it was something we had been called to do, and in September 2009, we began a 14-month campaign for the Alabama Senate. As a side note: I was working as a government employee at NASAâ&#x20AC;&#x2122;s Marshall Space Flight Center in 2009. The Hatch Act, a federal law preventing federal employees from serving in or being a candidate for a partisan political office, forced me to make a hard decision. I had to resign from my government job in order to become a candidate for the state Senate. Talk about a leap of faith! What needs to happen in Alabama both to recover from the financial downturn and to move the state forward? What are our strengths we should capitalize on? Key to continued recovery from the financial downturn in Alabama is to enable pro-business legislation. I fully recognize that government does not create jobs; government enables opportunity for entrepreneurs to take risks. This is the bedrock from which Americaâ&#x20AC;&#x2122;s economy was built. We must continue to encourage large businesses to locate in Alabama. Those businesses will spawn small businesses and thus our economy will expand. Another key element is education. Alabama needs to continue to refine our education system, ensuring we are developing a highly-skilled work force which will serve to attract businesses of all sizes. We must also expand upon the two-year, career technology education opportunities. I believe our high-school dropout rates are directly attributed to 17-to-18-year-olds who

see no future in a traditional four-year university degree program. Expanding career tech opportunities will serve to empower this demographic, equipping them and helping them find long-term, skilled employment. You are the sponsor of legislation, SB 299, to allow state and municipal agencies to deposit money into credit unions. Why do you think this is good policy for Alabama? I support SB 299 because it is a win-win for the people of Alabama. We simply cannot lose sight of the fact that public deposits are the people’s money. I use the following analogy when explaining the legislation to others: Assume the mayor of an Alabama town decided to re-compete the holders of public deposits for their city. The mayor would issue a call for proposals and all the local banking institutions would arrive with their best proposal--only the credit unions would be left outside because current Alabama law prevents them from holding public deposits. This legislation simply allows credit unions to join other banking institutions, elbowing a spot out at the mayor’s conference table to present their best offer. In the end, it remains the same as today; the mayor will determine who provides the best offer, both in tangible terms and intangible terms such as service and relationships. SB 299 simply allows the credit unions to join the competition –

and increased competition is always a good thing. The people of the city – the true owners of the public deposits – win. SB 299 is not easy legislation, what are some of the challenges you, as the sponsor, face in moving such a bill forward through the legislative process? It is a simple fact that the only opposition to this legislation is from the banking associations who perceive this “leveling of the playing field” as a threat to their niche market. Under the current law, banks are only competing against themselves. How can credit unions help with the legislative process, especially as you work on bills such as the public deposits legislation? The best way for credit unions to assist in the legislative process is to develop a grassroots advocacy. However, I always caution groups to be very careful when developing a grassroots strategy where hundreds (perhaps thousands) contact their legislator. Speaking from experience, the worst form of communication is a “form letter email” – often this equates legislative spam. The best form of advocacy is to call, write a personal note, or visit with your legislator at a public forum or meeting. Also ensure advocates understand the bill and what passage is attempting to accomplish. ■

Sen. Holtzclaw spent time at the Alabama State GAC speaking to credit unions.

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LSCU Legislator Profile

Rep. Bill Posey

Bill was first elected to the Rockledge City Council in 1976, then to the Florida House in 1992, and served in the Florida Senate from 2001 to 2009, representing the 24th District. While in Tallahassee, Bill received numerous awards over the years including Legislator of the Year from a number of groups including the American Legislative Exchange Council. He is known nationwide for his innovation in bringing greater accountability to government, having authored the book Activity Based Total Accountability. In 2008, Bill was elected to the United States House of Representatives to serve Florida’s 15th District, which covers all of Indian River County and portions of Brevard, Osceola and Polk Counties. Bill currently serves on the House’s Standing Committee on Financial Services, and is a signer of the Taxpayer Protection Pledge.

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How and why did you become interested in public service and politics in particular; and what led you to run for Congress? The first elected office I held was serving on the Rockledge City Council in the mid 1970’s. At the time I owned a small real estate business, which still exists today, and I just got tired of watching disconnected politicians and government bureaucrats kick-around average folks trying to get by and play by the rules. What motivated me from the start was the clear lack of common sense that seems to plague so many government institutions with very little accountability. Later on I served in the Florida State House and Florida State Senate. In 2008 there was a vacancy in the Congressional seat and some friends approached me about running for it. I was getting ready to retire from public service so my first thought was “no way.” But after talking with my family, they convinced me to run. Transparency, accountability, and applying common sense to problem solving were the things that motivated me to run for city council, and they remain the driving principles for my work in the U.S. Congress. What are the most important issues you see facing Congress today? Without a doubt it is jobs and the economy. It is on the minds of every American. Washington needs to come up with better economic policies that make America more competitive, bring down the prices at the pump, and encourage more freedom while trying to come up with a long-term plan to control spending, eliminate wasteful spending, and ultimately balance the federal budget. Most Americans are very troubled about the debt loan that is being passed on to the next generation. It is immoral to do that to our children and grandchildren. That’s one of the main reasons I’m so passionate about moving toward a balanced budget. It’s our children and grandchildren that will inherit the bill for out-ofcontrol spending. We need to adopt serious solutions that brings our nation’s finances back into balance.

You co-sponsored H.R. 1418, legislation to give credit unions greater flexibility to make small business loans. How do you see the role of small businesses in the recovery, and what should credit unions be able to do to assist? Small businesses are the backbone of the American economy. Historically, small businesses have created most of the new jobs in America and right now they need stable and reliable sources of capital for business loans. The financial crisis and the federal government’s heavy-handed regulatory response have chokedoff access to loans for many small businesses. Without the necessary capital available, businesses cannot afford to expand and create new jobs. What role do you see for credit unions in serving the people of Florida and how do you see them as part of the economic recovery? Credit unions have always played a vital role in our local communities. Being able to lend to their members plays an important role in our economy. When small businesses are able to access loans, jobs are created. And I think that’s what many Americans are looking for – jobs.

What other major issues do you believe financial institutions such as credit unions should be watching? Without a doubt, over-regulation by federal regulators has been a key factor hampering the ability of small businesses to create new jobs. There are over 4,000 new federal rules being drafted today. More than 200 of these will have a significant cost to the economy. Not only are there costly new rules that federal agencies are demanding that businesses, including credit unions meet, but the regulators themselves, in my view, are being overly prescriptive. By refusing to exercise proper discretion, the regulators are making some situations worse, particularly when the financial institutions work with troubled borrowers. Regulators should not penalize a financial institution when they adjust loan repayment terms with a homeowner or borrower, but that is what too many regulators are doing to both credit unions and community banks. That just demonstrates a lack of common sense. Also, in some instances, the various federal regulatory agencies issue contradictory guidance and create “catch 22” situations that leave no room for a fair resolution. If you could give one piece of advice to grassroots advocates for credit unions, what would it be? Best way you can advocate for credit unions is talk with your friends and family about the benefits of being a member of a credit union. ■

Rep. Posey speaks to Florida credit unions at the CUNA GAC during Hill visits.

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Compliance Corner BSA Reporting, Volunteer Reimbursement Bill Berg, MBA, CCUE, CUCE, BSACS, vice president, Compliance Training & Information

There are a couple of key topics credit unions should be aware of in terms of regulatory compliance. Report filing to meet requirements for Bank Secrecy Act, as well as reimbursement of expenses for directors, has been issues that the League has been asked to address for credit unions. It is important that credit unions remain aware of the ever-changing regulatory compliance environment so that they can better serve members. Bank Secrecy Act (BSA) Reporting Requirements Effective July 1, 2012, all credit unions will be required to use electronic filing of Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). Only very small credit unions that have demonstrated unusual hardship are being given an extension on this requirement – which credit unions would have had to apply for this extension in April. The vast majority of credit unions throughout Alabama and Florida have already complied with this requirement for a variety of reasons. However, if your credit union is not filing these forms electronically, the clock is ticking. Most credit unions that use electronic filing appreciate that after several reports have been filed electronically they can actually complete the reports quicker and more accurately. Also, you have proof that your CTR has actually been filed. There have been several instances where a credit union filed a report with the IRS Detroit Computing Center, and, for whatever reason, the reports were never entered into the system. Such an “oversight” results in a credit union receiving a BSA Document of Resolution (DOR) or citation at the very least. If your credit union encounters problems with electronic filing, call the LSCU Compliance Help Line (866.231.0541) and ask to talk to Bill Berg or Scott Morris or contact your Cooperative Initiatives member relations specialist. Reimbursement of Expenses for Directors A recent question received by the League was: “Is it permissible for credit unions to provide health insurance for their volunteers without violating the prohibition on paying a volunteer?” There are several items that are of interest in the National Credit Union Administration’s (NCUA) Rules and Regulations (R & R). Both Alabama and Florida have statutes that permit the use of the federal standard if it is more expansive than state law. There are differences in how to obtain approval.

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The first point of interest concerns compensation for a board officer. The NCUA’s R & R 701.33 states that, “Only one board officer may be compensated …” Compensation excludes reimbursement for reasonable and proper costs incurred by an official carrying out their responsibilities. § 701.33 Reimbursement, insurance, and indemniﬁcation of ofﬁcials and employees. (b) Compensation. (1) Only one board officer, if a ny, may be compensated as an officer of the board board. The bylaws must specify the officer to be compensated, if any, as well as the specific duties of each of the board officers. No other official may receive compensation for performing the duties or responsibilities of the board or committee position to which the person has been elected or appointed.

“Is it permissible for credit unions to provide health insurance for their volunteers without violating the prohibition on paying a volunteer?”

(2) For purposes of this section, the term compensation specifically excludes: excludes (i) Payment (by reimbursement to an official or direct credit union payment to a third party) for reasonable and proper costs incurred by an official in carrying out the responsibilities of the position to which that person has been elected or appointed appointed, if the payment is determined by the board of directors to be necessary or appropriate in order to carry out the official business of the credit union, and is in accordance with written policies and procedures, including documentation requirements, established by the board of directors. Such payments may include the payment of travel costs for officials and one guest per official; However, the more interesting part of this regulation concerns reasonable health insurance. There are several factors that must be considered – the principal one being can the credit union afford this expense? Also, when a volunteer leaves that position, the coverage must cease immediately and the volunteer may be eligible to use COBRA insurance coverage and pay for the insurance on their own.

BSA Reporting, Volunteer Reimbursement (Continued) (ii) Provision of reasonable health, accident and related types of personal insurance protection, supplied for officials at the expense of the credit union union: Provided, that such insurance protection must exclude life insurance; must be limited to areas of risk, including accidental death and dismemberment, to which the official is exposed by reason of carrying out the duties or responsibilities of the official’s credit union position; must cease immediately upon the insured person’s leaving office, office without providing residual benefits other than

from pending claims, if any; except that a credit union must comply with federal and state laws providing departing officials the right to maintain health insurance coverage at their own expense expense. More BSA filing and guideline information can be found by visiting the League InfoSight Bank Secrecy Act channel at www.lscu.coop. More information about the NCUA’s Rules & Regulations may be found by visiting their website at www.ncua.org. ■

Director’s Resource Each quarter the League of Southeastern Credit Unions produces a newsletter geared toward credit union volunteers. The Director’s Resource Newsletter has information about upcoming events specifically for volunteers, stories that will give them a greater understanding of what the League and CUNA are doing for credit unions, as well as stories that will enrich their role as a volunteer. Articles in the Director’s Resource cover topics such as best practices for board members, issue updates on ongoing legislation affecting credit unions in both states, special highlights of conferences and workshops geared toward directors, key volunteer resources, and updates on the progress of the Cooperative Image Campaign. This is a good resource for volunteers to gain a greater understanding of what the League and CUNA are doing for credit unions and stories that will enrich their job as a volunteer.

to receive the LSCU Director’s Resource newsletter, created specifically for credit union volunteers, by sending a request to submissions@lscu.coop.

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INITIATIVES

Cooperative Initiatives Credit Union Mission Leads to Small-town Happy Ending Adena Whitman, director, Member Relations “People Helping People” is the social mission of every credit union. Credit unions exist to help people, not make a profit, and their overarching goal is to serve all of the members well, including those of modest means – because every member counts. Members know their credit union will be there for them in the tough times, as well as the good. The town of Cottonwood, Ala. and the story of how Five Star Credit Union came to have a branch there, is a shining example of how one credit union CAN make a difference. It was not that long ago that Cottonwood had two banks in town, Wachovia and BankSouth. A few years ago, Wells Fargo Bank (formerly Wachovia) closed their Cottonwood branch and late last year, BankSouth, the town’s only other financial institution, advised city officials that they would be closing their branch at the end of 2011. This closing would leave Cottonwood without any financial institutions to serve the town, local businesses and its 1,200 residents. In a move to bring essential financial services back into the town, Cottonwood’s mayor, chief of police, and a town council member approached the board of Five Star Credit Union, a $240 million credit union headquartered in Dothan, Ala., about opening a branch to serve the people of their town. “‘People Helping People,’ the credit union mission, was never more appropriate than in this case,” said Steve Brown, marketing director for Five Star Credit Union. “We agreed we needed to serve the town and moved the credit union branch into the Cottonwood Town Hall on November 28, 2011 as a temporary location, until a more permanent building could be built or obtained. “Expansion into Cottonwood was a great fit for our credit union,” said Five Star CU President/CEO Bob Steensma. “The financial options for Cottonwood residents were limited and we are confident the credit union will fill a void for financial services in the area.” On February 13, 2012, Five Star opened the credit union in its new location and, on March 23, celebrated a grand opening. In addition to bringing town residents into the credit union as new members, the Cottonwood branch has grown to have the highest percentage of members with checking accounts (of any Five Star branches), topping 88 percent, which seems to have proven the credit union answered a specific need for the town and its residents. In another nod to the community’s spirit and the roots the credit union is working to build, its employees are also from the

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Cottonwood area. Branch manager Tony Deal is a long time resident of Cottonwood with many years experience in the financial industry and member service representative Teresa Shaw Cochran has more than 26 years experience in customer service and has worked for more than 20 years in the community. y y

Five Star Credit Union’s Cottonwood branch

“Small communities, such as Cottonwood, feel more confident when someone that they know is handling their business,” said Deal. “After having two banks close their doors in six years, they were wary of trusting another institution coming into the area. Having local people that they know is important to them. The credit union is more like hometown banking used to be. Banks today are all about numbers, credit unions are about their members and the community.” Credit unions and their members are aware of many of the subtle and not so subtle differences between credit unions and banks. Serving communities that banks do not want to serve is just one of those “not so subtle” differences credit unions often champion just because it is the right thing to do. Five Star takes those differences to heart, serving a number of small- to mid-size communities in southeast Alabama and South Georgia (including two branches in their largest community of Dothan, Ala.), where they are the ONLY financial institution in three of the nine communities they serve. ■

LSCU Debuts Young Professionals Group Adena Whitman, director, Member Relations Edward A. Filene once said, “Progress is not the mere correction of evils. Progress is the constant replacing of the best there is with something still better.” The progress of our younger credit union staff are the future of our industry. Through the creation and support of a young professionals group, the League is working to provide younger credit union professionals with improved industry awareness, increased knowledge exchange and professional development, while strengthening the collaborative spirit of young credit union professionals in both states. “The purpose of the LSCU group is to bring together young professionals, in Alabama and Florida, who are working to positively impact the credit union movement and the communities they serve,” said Laura Vann, vice president of cooperative initiatives for the League. “We will enable this group to connect and fight for the future of socially-responsible finance through meet-ups, mentorship, and collective action. The goals of this program are to have LSCU affiliated credit unions, leagues, and CUSO employees under the age of 40 to participate and attend this initial meeting which will consist of structuring the program, gaining insight from the participants, and identifying the needs and interests of those involved.”

If you would like to attend the LSCU YPG meeting at the LSCU AC&E can register for the session at www.lscuconvention.com. For $195, the attendees will have access to the YPG meetings, lunch, and their choice of Council meetings.

The rise of youth-oriented groups is not a new concept. Young professionals have been busy lately, crashing conventions, forming networks, and making plans to put their footprint on the credit union movement. One of the most visible is Cooperative Trust, a national networking group for credit union young professionals which kicked off by “crashing” the CUNA Governmental Affairs Conference in Washington, DC a few years ago. This year, the group will make

a sanctioned appearance at this year’s America’s Credit Union Conference, cementing its impact on the credit union horizon. According to the Cooperative Trust, their purpose is to “educate and grow young talent in credit unions and cooperatives through development opportunities, mentorships, and peer idea-sharing.” Cooperative Trust created an online network where community members come together to share ideas and educate one another on credit union strategies and concerns. The momentum has been gaining as the online presence and appearance at national meetings has risen. “Having the opportunity through the Cooperative Trust to attend the CUNA GAC, I have been exposed to the larger credit union movement and momentum in our industry,” said Rob Lefkowitz, branch manager for Suncoast Schools Federal Credit Union in Tampa and one of the key players in the structure of the LSCU Young Professionals Group. “Providing young professionals an avenue to experience this same excitement through the league will benefit us all. The young professionals benefit by gaining industry knowledge, natural person credit unions by strengthening the knowledge base of their employees, and the league through collaboration and community investments.” So with the input of younger credit union staff members like Rob, the League is structuring a Young Professionals Group (YPG) which will bring together those who have a passion for furthering themselves and their careers. In order to bridge the distance between members, the LSCU YPG has created a LinkedIn discussion group and is recruiting new membership every week. The group will kick off its first in-person meeting at the League’s AC&E at 10 a.m. Wednesday, June 13. “We encourage the in-person meetings, but know it’s not feasible on a regular basis, and we are looking for ways to keep the discussions going and the participants engaged,” Vann continued. “As the program grows, we will create a mentorship program. However, we have already partnered with the LSCU Councils to provide educational sessions at our League meetings, which will provide focused study in the area of their choice.” LSCU encourages all credit union executives to really look at your staff and consider this group for those you feel have the passion for credit unions and have the desire to grow their careers within the industry. If you’d like additional information on the Young Professionals Group, contact LSCU Director, Member Relations Adena Whitman at 866.231.0545, x2134 or adena.whitman@lscu.coop. ■ Find us on LinkedIn under Groups, LSCU Young Professionals! SIGNAL: Vol. 3, Issue 2

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Common Purpose. Uncommon Commitment.

Credit Union Philosophy in Action Workshop Set for October 2-3 The League of Southeastern Credit Unions (LSCU) will present a Credit Union Philosophy in Action Workshop, October 2-3, in Orlando. Modeled after the National Credit Union Foundation’s very successful Credit Union Development Education (CUDE) program, the workshop will provide participants with a historical perspective on credit unions and cooperatives while focusing on how to implement the seven cooperative principles of credit unions in their day-to-day work activities. The day and a half workshop will be led by Lois Kitsch, national program manager for the National Credit Union Foundation and development education facilitator for the National Credit Union Foundation’s CUDE program, and Larry Blanchard, senior vice president and Washington representative for CUNA Mutual. “After completing the CUDE program last year, I saw the need to offer a similar program to our Alabama and Florida credit unions,” said Cassandra Grayson, association services chief of staff for the League of Southeastern Credit Unions. “Patrick La Pine [LSCU president/CEO] also recognized the need to educate new and upcoming credit union leaders on the credit union philosophy and cooperative principles, so we worked with the National Credit Union Foundation to develop a program incorporating the core concepts of the CUDE program.” With the retiring of many credit union CEOs and top management, new individuals are entering the credit union ranks at an unprecedented pace, noted Laura Vann, VP, Cooperative Initiatives. “We think that it is the perfect time to offer an intense training program on how to put the credit union philosophy into action on a day to day basis. The workshop is an appropriate learning experience for both seasoned credit union executives as well as the individuals new to the credit union movement. The program is designed to get them to think, individually and as a group, about new approaches to similar problems and concerns.”

While the CUDE program is an intensive, weeklong program, the October Philosophy in Action Workshop will offer a similar experience in a compressed format. According to Lois Kitsch, CUDE

This was an important step to ensuring that credit unions are treated fairly when it comes to the security of public funds training provides participants with critical lessons in cooperative principles and credit union philosophy while incorporating challenges credit unions face today. “At our workshop, we will aim at providing participants with the same critical lessons by incorporating both classroom instruction and group activities,” said Vann. “We want to energize, and re-energize, credit union leaders in Alabama and Florida about the credit union movement and the deep-seeded principles that make credit unions unique from other financial service providers. It is our hope that participants will take the lessons learned back to their own credit unions and share them throughout their organizations.” For additional information on the Credit Union Philosophy in Action Workshop, contact Laura Vann at 866.231.0545, x2181 or laura.vann@lscu.coop.

Credit Union Philosophy in Action Workshop October 2-3, 2012 Insight Credit Union Orlando, Florida

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FOUNDATION

Foundation SECUF Launches College Internship Program Laura Vann, vice president, Cooperative Initiatives The Southeastern Credit Union Foundation’s (SECUF) college internship program is now accepting applications from qualifying students and from credit unions interested in providing a learning environment for the students. Guidelines for students and credit unions are available on the SECUF website, www.supportourCUcommunity.org. The pilot program will fund 10 paid internships at selected credit unions. The selected applicants will work a minimum of 20 hours per week for the duration of 12 weeks and will receive up to $3,500 in pay for the internship. Internships are available for funding from June 1, 2012 through g December 31,, 2012.

Through the college internship program, students will have an opportunity to explore employment at a credit union as a possible profession while gaining valuable skills and experience to enhance their classroom learning. Credit unions will benefit from the fresh perspectives offered by the students and gain valuable assistance in their day-to-day operations. The students must meet basic eligibility requirements: attend a college or university in Alabama or Florida, be a junior or senior, have a 3.0 overall grade point average, and be majoring in finance/accounting, business, economics, marketing, communications or a related field. Students must complete the SECUF internship application form and submit at least one recommendation from a faculty member at their college or university. For consideration of internship placement, a credit union must establish and submit a job description for the internship position as well as submit written goals and objectives for the internship position. A template for developing the goals and objectives for the intern is provided. Templates for mid-point and final evaluations are also provided. If you have questions about the internship program, or need additional information, contact Laura Vann at 866.231.0545, x2181, or laura.vann@lscu.coop. ■

Parkhurst Named Director of Southeastern Credit Union Foundation Leonard Parkhurst, Jr. has joined the staff of the League of Southeastern Credit Unions as the director of the Southeastern Credit Union Foundation (SECUF). At the SECUF, Parkhurst will be responsible for fundraising, including working with chapters and credit unions to raise funds for the CU4Kids program that supports Children’s Miracle Network Hospitals. He will also oversee the educational scholarship program and the new college internship program. Most recently, Leonard served as director of major gifts for Tallahassee Memorial Healthcare Foundation. In this role, he was responsible for the identification, cultivation, solicitation, and stewardship of major gift prospects and donations for Tallahassee Memorial Healthcare and the Tallahassee Memorial Cancer Center.

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Prior to joining the TMH Foundation, Leonard was with the American Cancer Society, Florida Division in various Leonard Parkhurst, Jr. roles, including serving as its executive director for the Capital (Tallahassee) area as well as the director of Florida State University advancement and alumni affairs for Florida State University, focusing on major gift fundraising and alumni relations. “Leonard brings a wealth of foundation, program development, and fundraising experience to the SECUF,” said Patrick La Pine, president/CEO of the League of Southeastern Credit Unions. “We are excited to have him join the LSCU team.” ■

EDUCATION

League Education The Case for Face-to-Face Learning Brandy Norvell, events coordinator, LSCU Each year, the LSCU hosts many successful educational programs through a variety of delivery channels for convenient access by its members. Among these delivery channels, members will find both face-to-face and distance learning opportunities. While distance learning and virtual communications have their merits, face-to-face learning events have certain intrinsic benefits that are unequaled in other forums: • Face-to-face educational opportunities build trust and relationships • Education and training are more effective in a live setting • Live conferences and workshops result in a more effective exchange of ideas • Face-to-face education events provide the human connection that powers our credit unions • Face-to-face meetings create jobs and engage the economy which is directly in line with the credit union philosophy of “people helping people” With the economy, everyone has had to revisit their budgets and the rationale for choosing staff learning opportunities. The challenge for executives is to decide which format is most effective for important business outcomes. The difference between distance learning and face-to-face shouldn’t be a conflict but an understanding of the merits and limitations of each. Rather than rely on personal preferences or

currently popular approaches, the decision regarding meeting type is a strategic one. Articulate why you have chosen a particular delivery channel to further your objective. Distance learning can enhance faceto-face and vice versa.

Annual Convention & Exposition

Face-to-face is most likely to be the best approach in the following three learning situations: • To capture attention, particularly when you want to initiate something new or different • To inspire a positive emotional climate, as a way to catalyze collaboration, innovation, and performance • To build human networks and relationships, realizing that information can increasingly be shared virtually whereas the greater value is in people networks and relationships The League of Southeastern Credit Unions values the irreplaceable benefits of human interaction, networking, and relationship-building that may only be realized through face-toface educational offerings as well as the immediate convenience and budgetary flexibility that distance learning provides. Visit the LSCU Events Calendar on www.lscu.coop to view all the learning opportunities available from the League. ■

Disaster Recovery Conference

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Upcoming 3rd Quarter Learning Opportunities Download the complete 2012 LSCU Events Calendar at www.lscu.coop. July 10 11 17 18 19 24 25 25 26

2012 Wire Transfer Compliance Understanding & Navigating the ACH Rules for the ODFI Collection Managers: Managing Expectations & Getting Results 10 Lessons Learned on Deceased Accounts Director Series: Understanding Call Reports for Board Members Rule Review & Understanding Loan Documents for the New Mortgage Lender Required Compliance Series: Regulatory Compliance for Deposit/Operations LSCU BSA Training Workshop Tuscaloosa, AL Credit Reports & Scores: Using Them Legally & Effectively

August 2012 2 Security Officer Reports to the Board 5-9 LSCU Supervisory Committee Conference Destin, FL 7 Writing Effective HR & E-Policies to Manage Behavior, Maximize Compliance & Mitigate Risks 8 Supervisory Committee Audits: Best Practices 14 You Received a BSA Exam Request Memo, Now What? 15 Frontline Series: Signature Card Danger Zones: Account Titling, Ownership & Access 21 Garnishments, Subpoenas, Summonses, Levies: Getting It Right! 23 Improve Your Bottom Line: Tips for Auditing Income & Expenses 29 Director Series: Financial Literacy Fundamentals for New Directors: Financial Statements, Key Ratios, & How to Monitor Your Credit Union

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September 2012 5 The Legal Side of Dealing with Power-of-Attorney & Living Trust Documents 6 Opening Donation, Memorial & Other Accounts for Non-Profit Organizations 11 Preparing for Your FFIEC Authentication Guidance Regulatory Exam 11 LSCU Regulatory Compliance Update Tallahassee, FL 12 Required Compliance Series: Regulatory Compliance for All Staff, Including Red Flags for Identity Theft, Bribery & Consumer Privacy 13 LSCU Regulatory Compliance Update Birmingham, AL 18 Director Series: Advanced Financial Literacy Update for New & Experienced Directors: ALM Primer & New Financial, Accounting & Risk Issues 19 SAFE Act: Tracking, Renewing & Compliance 25 Notary Essentials & Legalities for Credit Unions 26 Reinvigorating the Bottom Line: Making Up for Lost Revenue *Bolded listings denote workshops and conferences. Non-bolded listings denote webinars.

LSCU Councils Provide Relevant Information & Great Ideas Attendees of the recent LSCU Council meetings experienced provocative sessions led by dynamic speakers. The councils were held in conjunction with the Alabama State GAC in Montgomery in March. The council meeting included sessions for credit union staff in the CFO; HR, training & development; lending; marketing & business development; operations, sales & service; and technology.

“Topics were on point and relevant to current issues in the credit union industry.” Attendees felt the information that they received during the sessions to be very useful in upcoming projects and that the speakers gave great ideas that they can use back in their credit unions.

LSCU Council attendees network during lunch.

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COMMUNICATIONS

Communications Opportunities too Great to Cut Marketing Budgets Mike Bridges, vice president, Communications & Marketing

When credit union marketing professionals get together the conversation will inevitably turn to budgets and how much they have had to cut. Since the economic downturn in 2008, credit unions have been looking for ways to cut expenses and operate at a leaner capacity. When budget cuts happen, all too often, the marketing budget is one of the first ones to get cut. But it should really be one of the last ones to see the red pen. The dichotomy of the marketing eting budget is that it’s not the work that is being done by the marketing department that causes the cuts, but the ability to show how marketing has increased credit union membership or how much new w business it has produced. Morriss Partee, founder of everythingcu.com, a marketingg website and forum, interacts with marketers every day and finds more are seeing their marketing dollars cut. “Credit unions are probablyy lucky if their marketing budgets ts have remained flat over the past ast several years,” says Partee. “Since marketing arketing effectiveness can be hard to track, rack, it’s easier to make cuts there than in areas as that deal in more tangible items such as IT infrastructure.” structure.” Partee says that because of economic conditions many credit unions don’t have a choice butt to cut across the board and that the marketing budget is one of many getting cut. He says that credit union senior management continues to face many tough decisions. “CEOs and CFOs are under pressure to cut all costs wherever they can, especially with continued competitive pressure on interest income and regulations that are putting pressure on non-interest income,” says Partee. With the opportunities credit unions have right now for consumers’ business, more credit unions should consider keeping the marketing budget flat or even increasing it. But, credit union marketing professionals also need to do their part. With the complexity of services provided by credit unions, raising awareness

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of the brand is important. However, drilling the marketing strategic plan down to individual products is just as important. Marketing your credit union’s lending products is a good bet right now. “Because of the last several years of recession, people have put off buying all kinds of things, whether it’s purchasing a new car or upgrading to a bigger house,” says Partee. “These are the things which they might finally now be ready to purchase with the help of a credit union-originated loan.” loan. To be able to put a return on investment for marketing might mig take some revamping of the way credit unions have reported results past, it’s important that credit in the pa remain flexible. union marketers m may take a little reworking the It ma duties of the department, but social dutie media provides great marketing med opportunities. Many credit unions opp say that they have good luck now with Facebook ads and more targeted online advertising. When targ talk of the bank fees came ta aaround again earlier this year, credit unions were served a cr golden opportunity to pour some gol dollars online. Finding consumers advertising dollar out and speaking directly to them where they hang ou will net results. One of Partee’s good friends has a very appropriate response to shrinking budgets at credit unions: “There are many line items in a credit union budget, but only one has the purpose solely dedicated to improving the top line and that, of course, is marketing.” One thing is for sure, marketing budget dollars may not return once the economy picks up; but it’s imperative that marketing departments are proactive about the budget and find new ways to show its worth. So maybe with a renewed purpose to report results, the next time credit union marketers get together, they won’t talk about budget cuts but about how their CEO loves the new business their credit union is enjoying. ■

NEWS

League News Alabama State GAC Brings Credit Unions & Legislators Together The LSCU Alabama State GAC was held on April 4-5 in downtown Montgomery. The GAC provided attendees the opportunity to understand the state and federal issues better while building relationships with lawmakers. The hot topics from the GAC included public deposits, member business lending, supplemental capital, and examination fairness.

Linda Cincula and Patrick La Pine present Cheaha Chapter President Danny Varnon with the 2011 Chapter PAC Fundraising Award.

A legislative reception was held with more than 30 lawmakers in attendance, providing a relaxed atmosphere for credit unions to build relationships and talk issues. The next day attendees went to the Alabama Statehouse and met with nearly 50 lawmakers over two days. Rep. Craig Ford (D-Etowah) and Sen. Bill Holtzclaw (R-Madison) addressed attendees about the State Legislature and how best to communicate with lawmakers. Sen. Holtzclaw, sponsor of SB 299 which would allow credit unions to accept public deposits, said that communicating with him through a handwritten note is best. Each gave examples of how much they appreciate credit unions. Credit unions spent an hour with Alabama Credit Union Administration Administrator Larry Morgan and NCUA Region III Director Herb Yolles. Morgan talked about how he sees credit unions improving this year. Yolles said that “whatever Alabama credit unions were doing, they need to continue doing it.” He also reiterated that the NCUA assessments this year will most likely be no more than 11 basis points. The PAC Fundraising awards were handed out with six credit unions being honored for their contributions to ACULAC, the Alabama State PAC, and six were honored with FedPAC awards, the LSCU’s Federal PAC. The Cheaha Chapter was honored for reaching 176 percent of its PAC goal. ■

Disaster Preparedness Workshops Provide Valuable Forum to Discuss Preparedness Plans, Learn from Each Other The League held two Disaster Preparedness Workshops in the month of April in Florida and Alabama. The goal of facilitator Don Stewart, director, professional services, Ongoing Operations LLC, was to provide information so that there is “continuity of service to your members no matter what happens!” Stewart presented a well-organized and comprehensive overview of disaster preparation, recovery, and business continuity planning. The attendees were encouraged to share their own plans and were able to review and discuss ways to improve upon them. The workshops provided an open forum where everyone could interact and learn from one another as well. Participants left with a better idea of exactly what is needed for comprehensive planning, ongoing monitoring of plans, and proper execution of the plans during and after a disaster. ■

Attendees introduce themselves before they get started with the workshop.

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INDUSTRY

Industry Timely Tips for Handling an Account Data Compromise Chris Dirmann, LEVERAGE director, card services Account data compromises come in many different forms, from a breach involving card numbers and expiration dates, to the dreaded full-track data compromise. Since a full-track data compromise may lead to magnetic stripe counterfeit, it’s far and away the most important compromise to address when it arrives in your inbox. There are a couple of things to consider when addressing compromised account data. First, evaluate the situation. Take a look at the accounts that are noted in the compromise to see how many are still open, and, of the accounts that are closed how many were due to fraud. Since you’re dealing with potential counterfeit, look for the closed accounts that experienced counterfeit fraud and if fraud patterns are noted in the alert see how many match that pattern. If you see a matching pattern between the closed accounts and the Compromised Account Management System (CAMS) details, you may want to consider blocking and re-issuing the active accounts to prevent further fraud losses. Any account that has been blocked, transferred to a new number, or re-issued due to expiration subsequent to the compromise window are no longer high risk. The change in expiration date causes a change to the Card Verification Value (CVV), which is a unique check value encoded on the magnetic stripe of a card to validate card information during the authorization process, therefore making counterfeit fraud far less likely to occur. Next, take a look at the accounts nearing expiration (those within 6 months). These present the highest immediate risk for counterfeit as the criminals purchasing the exposed account data tend to use these accounts first to get the most for their

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purchase. Consider early re-issue for these accounts to update expiration dates along with CVV. This puts less of a burden on your members as their accounts are not closed, so they retain the use of the card while only needing to update the expiration date with recurring service vendors when they get the new card – rather than being without a card during the block and re-issue process. You may also take a closer look at accounts with high-dollar limits (higher fraud loss potential), as well as those that tend to travel often (possible to overlook fraud if the cardholder happens to be travelling in the same area as the counterfeiter). Blocking and re-issuing accounts is not always the most prudent step. Carefully review the cost and/or benefit of listing the accounts on an association bulletin. Minimizing risk is always important, but in the end, you need to determine if the expense of doing so is justified. Take a look at the possibility of monitoring the compromised accounts using a fraud monitoring system. If you don’t have a fraud monitoring system housed on your back-office system, check with your data processor to see if he or she can put rules in place to more quickly identify, and block potential fraud on affected accounts. If your membership is concentrated to your local credit union area and the confirmed fraud seen in the alert is primarily occurring in another state, you may also want to consider a temporary block against swiped transactions in that state. If you decide to do this, it’s highly recommended that you communicate with your members about the restrictions so that it can be addressed if they should decide to travel outside the area. If your credit union carries counterfeit fraud insurance coverage, consider a review of your policy with the carrier to verify whether you are assuming more liability if you choose not to block and reissue cards proactively. If you opt not to block and re-issue all of the active accounts, remember that they may not expire for several years. Furthermore, the potential still exists down the road for the counterfeiters to begin trying to use them long after you’ve forgotten about the event. Just because you don’t see fraud when the alert comes out, doesn’t mean that you won’t see it at all. Let’s face it, no credit union wants their members’ account data being compromised. With the level of credit union membership growing rapidly, the number of counterfeiters is growing as well. Having a plan and a set of guidelines and procedures geared toward fraud prevention ensures member account data is further protected. ■

Save the date! 2012 League of Southeastern Credit Unions Supervisory Committee Conference s

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August 5 – 8, 2012 Whether you are a new supervisory committee or board member, or you are a ‘seasoned’ volunteer, attendance at this event will most definitely enrich your contributions to your credit union. This conference agenda includes the latest information and updates regarding credit union auditing, compliance, and fraud. With a wide variety of speakers and topics, attendees will better their knowledge to help keep your credit union secure and strong. Hilton Sandestin Beach Golf Resort & Spa, Destin, FL 4000 Sandestin Boulevard South, Destin, FL 32550 www.sandestinbeachhilton.com Visit the LSCU Events Calendar on www.lscu.coop for more information.

Are You Effectively Utilizing Your CRM to Find Loan Opportunities? Mary Elicia Del Santo, vice president, Business Development At a high level your Customer Relationship Management (CRM) system is designed to build better customer relationships and provide the process for building new relationships. By leveraging a CRM system you can do much more than collect contact information and report sales activities. If you are going to get the most out of your CRM system you need to move beyond the product-push sales activities and look deeper into the buying behavior of your member. This is particularly helpful if your focus is finding members who may be looking for a loan. There are three fundamental activities that will guide you in this process: collecting data, analyzing data, and utilizing data. Collecting the Data Is your system capturing existing information on secured auto loans, such as maturity dates, age of vehicles, and the existing lender? If your member has a mortgage application are you capturing all the gems of data that will give you an insight into the member’s life cycle such as retirement savings, college savings accounts, and credit card information? These gems will give you invaluable information into the lifecycle needs of your member. By capturing this full financial profile of your member, you can meet them where they are in their buying life cycle. Analyzing the Data Analyzing the data may be a bit trickier. A credit union should drill down beyond the products they are utilizing and determine how members are using the products. Does your member have certain spending habits that are consistent month-to-month? Credit unions should look at the account level to note behavior in order to cross-sell. Has there been a change in their spending habits when using debit and credit cards? Have there been changes in spending or payment activities that may signal and life cycle change? Utilizing the Data Once you’ve analyzed the information on a deeper level, you need to utilize your findings and take action. Look for correlations in buying

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behavior. For example, a member who has an older vehicle with no car loan maybe in the market for an auto loan and is just waiting for the right offering. But in order to utilize the data correctly and effectively, credit unions must determine the method of how to reach

Demand for consumer loans have increased somewhat, with auto loans showing the largest increase, according to the Federal Reserve’s April 2012 quarterly survey of loan officers. out to that member. One size does not fit all. If your capturing the right information about your member, you will be able to determine how best to communicate. For example members reluctant to give up their printed statements may be more open to direct mail campaigns. Members who are online bill payers may be engage by email offers. Members who have adopted mobile banking and use their smart phones may wish to be offered loan programs through a text messaging system. Using your CRM to look deeper into your members’ buying behavior is a valuable tool in driving loan volumes. Remembering to meet your members where they are in their buying and life cycle benefits both your member and your credit union. ■

“Led by student and auto loans, U.S. consumers pushed up borrowing by 8.6 percent in January to a level not seen since the second quarter of 2009, according to the latest credit update from the Federal Reserve.”

January

8.6%

LEVERAGE Audit & Consulting Saves Credit Union 56 Percent on Audit Services Serving credit unions for more than 35 years, LEVERAGE’s Audit & Consulting Services offers a comprehensive menu of financial and compliance audits performed by certified field experts. Florida A&M Federal Credit Union found that the certified audit field experts from LEVERAGE Audit & Consulting could provide them with the same audit services as their previous CPA firm at a much better price. “We decided to utilize LEVERAGE’s Audit & Consulting services for two reasons,” Debra S. Owens, VP, Finance & Accounting, Florida A&M FCU. “First, they provide the same audit services that the CPA firm we were utilizing provides at a more cost-effective rate. Second, their staff have credit union-specific certifications and experience while focusing solely on our industry.” The credit union-specific focused services help credit unions remain compliant and meet examiner requirements, all at competitive prices. “They are easy to work with and saved us 56 percent on our audit expenses,” said Owens. “I’m very pleased with our decision, the process, and the results!” For more information about how LEVERAGE Audit & Consulting can meet all your audit needs at a competitive price, contact a Business Development Consultant at consult@myleverage.com or visit www.cuace.com. ■

Leveraging System Resources Relationships & Industry Knowledge for Optimal Performance & Sustained Growth of Our Clients and Business Partners

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Card Services THINK 2012 Session Highlight: A Discussion about Credit Card Portfolio Management Larry Rodriguez, VP, transactional services, LEVERAGE The session, “Stats - Not Just for Baseball - Credit Card Portfolio Management: Knowing What’s Important,” provided many answers for credit unions on how to expand their credit card programs and customer base. According to Ondine Irving, owner, Card Analysis Solutions, internally, not many credit unions are managing their credit card program. Externally, not many credit unions are pushing their credit cards. Tim Kolk, owner, TRK Advisors, LLC, stated that credit unions need to develop more sophisticated metrics for their risk management, including more rigorous procedures and benchmarks. Risk scores can give you information about relative risk. Credit unions need to track additional signals: how people use their cards, changes in direct deposits and payoff amounts. And, Brian Scott, VP, sales, The Members Group, believes credit unions don’t take enough risks. The FICO score shouldn’t be a credit union’s only risk indicator; it needs to need to dig deeper. Someone will issue the consumer a credit card. A credit union’s job is to manage your own risk while taking risks.

Goals & Benchmarks When somebody is opening an account, there’s no better opportunity to offer a credit card. A credit union’s goal should be 35 percent of its checking account customers owning a credit card. The second hurdle is to get members to use their credit on a continuous basis. It was also stated that, when goals are established, credit unions need to base them on the percentage of its total loans. Up to 25 percent of a credit union’s loans should be in unsecured loans. Credit cards should be 10-15 percent of the overall loans.

How Should a Credit Union Manage its Credit Card Portfolio? The panel agreed that there are no influential champions for credit card programs in credit unions. Successful management of credit card portfolios is done top down, preferably led by the executive team. Credit card portfolio management was described as a legacy program and purely operational. It was recommended credit unions run these programs by people skilled in analytics and project management with a direct line to the executive team.

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What Is a Good Credit Card Pre-Approval Response Rate? In the end, it comes down to the cost for a net-converted account, not the response rate. The financial industry has a response rate of 0.40-0.50 percent; credit unions in general have a higher response of around one percent.

Should Credit Unions Consider Members with Low FICO Scores? Participants of the panel stated credit unions need to look beyond the credit score: employment history, payment history, etc. A total of 70 percent of the income should come from finance charges to run a profitable credit card program. While credit unions want to offer secured card programs, they can’t rely on them since these cards are not very profitable. Credit unions have to find ways to move members from secured to unsecured cards.

How Should Credit Unions React to Aggressive Rewards Programs by Banks? Rewards and offers don’t have to be exorbitant to get new customers. Aggressive rewards are best to get completely new customers. The opportunity for credit unions lies in getting current customers to add credit cards to their credit union portfolio. One of the best opportunities to develop stronger relationships with members is to offer rewards across all products and services. As an example, a credit union offered auto loans tied to 25,000 credit card points, allowing members to take a flight anywhere in the United States once the auto loan was approved.

What Are Other Ways of Driving Up Credit Card Usage? Credit unions can combat the zero percent balance transfer offered by banks through financial education, communicating the hidden fees. Credit card offerings should be more visible. Give members the opportunity to be educated and compare bank and credit union products. When people change their credit card usage, systems should be in place to discover those changes. These are the moments where you need to intercept members and reward to increase their usage again. For more information about LEVERAGE Card Services, contact a Business Development Consultant at consult@myleverage.com. ■

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