Spring 2011
FINDING SUCCESS BY ‘DOING GOOD’
Contents
Winner of the CUNA Marketing & Business Development Council's 2007 Diamond Award. Texas Credit Union League EDITORIAL Managing Editor Linda Webb-Mañon Contributing Writers Barri Hamilton Karen Houston-Johnson Kim Jones Susan Looney Suzanne Yashewski ADVERTISING Advertising Sales Director & Account Executive Tracy Florida BUSINESS Chief Operations Officer Bob Gallman Subscription Coordinator Linda Webb-Mañon HOW TO REACH US 4455 LBJ Freeway, Suite 1100 Farmers Branch, TX 75244-5998 e-mail: lwebb-manon@tcul.coop Web site: www.tcul.coop Main Office: (469) 385-6400 (800) 442-5762, Ext. 6400 Editorial: (469) 385-6486 Advertising Sales: (469) 385-6424 Advertising Design: (469) 385-6473 Subscriptions: (469) 385-6486 Letters to the Editor: lwebb-manon@tcul.coop LoneStar Perspectives is a quarterly publication of the Texas Credit Union League (TCUL) and is offered to TCUL–affiliated credit unions as a dues-supported service. If you are not an employee or volunteer of a League- affiliated credit union and would like to sub scribe to this publication, an annual subscription rate of $20 is available. LoneStar Perspectives is a trademark used herein under license. Copyright 2006 by Texas Credit Union League. All rights reserved.
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Finding Success by Doing Good
by Linda Webb-Mañon
DEPARTMENTS 2
President’s Message
Focusing on the Future, by Dick Ensweiler
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Chairman’s Forum
The Power of TEAM, by Pamela Stephens
5 News
Rebranding Juntos Avanzamos, by Gary Williams Socializing With Your Credit Union Members…, by Allison Griffin
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Professional Development
When the examiners arrive, will your plan pass the test? by Bob Mellinger Practical Steps for Professional Development, by Tonya Farmer
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Regulatory & Compliance
Maintaining Compliance in a Complex Regulatory Environment, by Steve Gibbs Regulatory Q&A with TCUL Information Central
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WES Publishing
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Philosophy in Action
Is Your Board ‘Financially Literate’? by David A. Reed Marty Ochsner Inducted into Texas Credit Union Hall of Fame, by Christa Hollier
310 East Interstate 30, Ste. B107 Garland, TX 75043 469-429-9300
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HR Corner
Using Assessments for Staff Development, by Steve Bookout HR Q&A, by Kim Jones
Publisher William Strunk
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Small Credit Unions
Financial Literacy Training Requirement for Directors
Associate Publisher Saundra S. Brown
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Products & Services
Evolving Mortgage Practices Amidst Regulatory Change, by Linda Clampitt Why CU’s Shouldn’t Wait to Move to Electronic Liens, Titles, by Robert Christini
Graphic Designer Marlina Rahman
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PresidentMessage
By Dick Ensweiller President/CEO Texas Credit Union League
Focusing on the Future
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ll things considered, 2010 was a pretty successful year for the Texas credit union movement. In fact, Texas credit unions experienced notable market share growth in credit cards, unsecured loans, used automobiles, first mortgages, and share draft accounts. Savings growth also remained strong in 2010, at 7 percent - significantly higher than prerecession levels. While other financial institutions struggled to stay out of the red, Texas credit unions overall remained well capitalized at 9.8 percent. While impressive, we cannot put our attention on past successes, as success belongs to those who are constantly looking ahead. In less than favorable market conditions, some companies put so much effort into surviving through what’s in the here and now, that they neglect to look beyond the present and seize the opportunities ahead. Going forward I believe it will be critical that credit unions: • Continue to build on the unique culture and traditions of our movement; • Recognize that one of our greatest strengths is our ability to mobilize and our willingness to collaborate; • Think ahead and always keep our focus on the future; and • Be willing to change, adapt and reinvent in order to remain relevant in the market space. Just as your League was by your side in 2010, we are committed to being with you going forward: • Your League continues to provide quality professional development opportunities for your staff and volunteers. • Understanding that credit unions are operating in a much more complex regulatory and legislative environment, your League continues to provide valuable support in the areas of compliance, legislative and political advocacy. • Keeping pace with rapid change can be a challenge, and your League is committed to providing support in critical areas of operation, including ALM, lending and strategic planning. • Collaboration is critical to the future growth of any organization, and with that in mind, your League will continue to promote and encourage
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credit union participation in our Chapter and Council programs, as these programs provide an ideal forum for the sharing of ideas, strategies and best practices. • As consumer demands change, you need to be properly positioned to anticipate what financial solutions they’ll expect from you and be able to deliver the appropriate product mix. Your League is committed to keeping you informed and updated on the latest products, services and strategic alliances available through Credit Union Resources, Inc. Credit unions are like no other financial institution in the market space. I never cease to be impressed by the willingness of credit unions to work together for a common cause. Together we have built a solid foundation that I believe will sustain the credit union movement for generations to come.
Chairman'sForum
By Pamela Stephens President and CEO Security One FCU
The Power of TEAM
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eam - the word conjures up images not only of sports figures but also surgical personnel, a fire department, and a staff of educators all dedicated to the promise of tomorrow. Four little letters, when assembled correctly, have an energizing and potentially life-changing impact. Have you ever looked up the words “team” and “company” in the Webster’s dictionary? I did, and they both mean “a number of persons united for joint action.” Think about it, the credit union movement wasn’t built by a single individual trying to accomplish a single goal to benefit him or herself. It was built by a collective group of talented individuals with vast experiences and abilities focused on a common goal that would benefit all of society. Working together is the only way we as credit unions can effectively meet the needs of our members. For example, a member service representative without guidance from the credit union’s management team and board of directors who determine what suite of products and services the credit union will provide would have nothing to offer the membership. Without the League, could we possibly provide our staff and board members with the appropriate training necessary to stay abreast of current and emerging market trends, as well as improve critical thinking skills? Could we have built the level of political influence necessary to protect and preserve our movement? Working effectively as a team doesn’t happen instantaneously. I’m pretty sure the pioneers of our movement struggled at times. After all, building a cohesive team takes a tremendous amount of time, commitment, passion, right attitude, strong leadership, effort and compromise. Clearly the pioneers of our movement understood that without teamwork, the concept of a cooperative credit union movement would never take root. They understood that through collaboration they could enhance their productivity and achieve amazing results. Over the course of our history, the credit union movement has been challenged, but never defeated. We’ve been tested, but we’ve never wavered. On the contrary, we pull ourselves up by our bootstraps; dig in to fight the good fight. There will always be financial reforms and regulations. There will always be market pressures, and competition. But the credit union movement will always come out ahead. Why? Because we believe in the TEAM acronym: Together, Everyone Achieves More. It is who we are.
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News
By Gary Williams CEO, Unity One CU Chair, TCUL International Relationships Committee
Rebranding Juntos Avanzamos: More Than Just Creating a Cool Logo Design
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n 2010, the Texas Credit Union League (TCUL) advanced Texas credit unions’ Hispanic outreach efforts by partnering with Iowa-based Coopera Consulting. “This collaboration means Texas credit unions now have additional tools, resources and know how to bring Texas’ emerging Hispanic population into financial mainstream,” says TCUL president and CEO Dick Ensweiler. Coopera and TCUL Collaborate to Improve Program Several years ago, TCUL launched the Juntos Avanzamos – or “Together We Advance” initiative. Geared toward the Spanish-speaking population, this program was created to empower Texas credit unions to more effectively address the unique needs of this market. Within the first few years, 12 Texas credit unions received the Juntos designation. However, the International Relationship Committee realized that just obtaining a designation wasn’t enough. After extensive analysis, the committee determined that TCUL’s Juntos Avanzamos program and Coopera Consulting’s Hispanic Opportunity Navigator (HON) were a natural fit. The New Process for Obtaining a Juntos Avanzamos Designation In order to become a Juntos-designated credit union, credit unions must first complete the HON, which has become the industry standard assessment tool. It was created to provide credit unions with a customized strategic plan for growing through this market. The HON is the most comprehensive credit union assessment available to define unique opportunities and challenges in Hispanic outreach. While there is a cost for the HON, grants from the Richard L. Ensweiler Fund are available to cover one third of the cost. After completing the assessment, the credit union will either receive the Juntos designation or be given a prioritized list of steps to take in order to become a Juntos-designated financial institution. Most importantly, they will know what resources are available to advance their efforts. A Broader View, A Fresh New Look and On-Going Support In 2010, Juntos Avanzamos went through a rebranding process that would better reinforce and unify the brand. Collaboration between the International Relationship Committee, TCUL staff and Coopera resulted in the creation of a new logo that mirrors the evolving Juntos vision. While unbanked Spanish-speaking Hispanics are still the focus, all materials are bilingual such that other underserved segments can be reached as well.
Next, bilingual turn-key materials were developed in order to save each credit union the expense of creating materials on their own. These customizable offerings also help reinforce a unified Juntos brand among the certified credit unions and create brand awareness among the Hispanic audience. The ready-to-use materials were created in both English and Spanish to inspire and convey the new brand. They include: • Print (postcards, flyers, posters, teller tents, window cling, brochure) • Advertisements (billboard, print advertisements, radio scripts, talent release form) • Media Relations (press release, newsletter articles) • In-house Assistance (on-hold message script) • Hispanic Advisory Group Toolkit • Focus Group Toolkit In addition, TCUL and Coopera have committed to providing on-going support. Aside from a series of free webinars and informational forums available to designated credit unions, the International Relationship Committee ensured additional support to Texas credit unions by securing a 10 percent discount off any CUNA/Coopera product related to Hispanic outreach and a 20 percent discount for all Juntos designated credit unions. “Hispanics represent a disproportional number of the unbanked and underserved segment of the population. Without the benefits of a credit union relationship, these consumers are forced into a fringe economy that preys upon the working class,” adds Ensweiler. “The credit union movement is committed to ensuring all consumers, whether affluent or impoverished, have access to affordable financial services.” For more information on Juntos Avanzamos, please visit www.tcul.coop. Coopera Consulting is owned by the Iowa Credit Union League and is a strategic partner of the Credit Union National Association (CUNA).
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News Socializing With Your Credit Union Members: The value of social media
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arlier this spring, after actor Charlie Sheen’s wheels-off behavior led to his firing from a popular CBS sitcom, news outlets reported he had found a new money-making venture: Twitter. Yes, Charlie Sheen hoped to capitalize on his fame – well, infamy – by tweeting for big brands who would pay him big money to plug their products to his big list of followers. Esquire magazine’s Anna Peele even developed a “Twitter Value” formula and calculated that Charlie Sheen’s tweets are valued at more than $50,000 each. Now back to our reality. For those in credit union land who are not yet big-name celebrities, what value can Twitter and other social media channels provide and how can we quantify it? Even though it’s all the buzz, the value of social media is still somewhat nebulous when it comes to applications in the business world. Marketers know they need to include social media as an element of their plans, but how to measure its effectiveness is not quite so obvious. Here are a few ways to ensure your credit union’s social media program provides value:
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The Five Cs of Social Media Customer Focus. It’s tempting to use social media channels for overt marketing or advertising. Instead of focusing on what consumers can bring to you, focus on the value your credit union can offer the consumer. Social media users are far more likely to pay attention to the message, “We’ll help you reduce your loan payment by $300 a month,” than the message, “We have the best loan rates in town!” Creativity. Plain promotional messages aren’t likely to grab the attention of social media junkies. Look for ways to engage your audience through quick surveys, contests, games or clever video messages and drive them to a special splash page on your website where you can measure your conversion rate and capture additional information. Cross Promotion. Use a variety of channels – social media and traditional marketing alike – to cross promote your messages. For example, your credit union might drive a new college savings account with:
By Allison Griffin President Griffin Strategies
1. A series of You Tube videos using a college-age spokesman talking about the account has changed his or her life; 2. A series of hyperlinked Tweets to promote the You Tube videos and gain Twitter followers (NOTE: Be sure to look for and “follow” other Twitter accounts related to your target audience, such campus groups, internship or summer job resources, financial literacy organizations, etc. Many of those Twitter accounts will return the favor and “follow” you, as long as your messaging is not too “salesy” and offers value for their followers); 3. A series of hyperlinked Facebook wall posts that promote the videos and drive people to a targeted splash page on your website to share their stories about how the account has changed their lives; 4. A photo diary on Flickr that captures photos from your credit union’s promotional events (and invites st udents to add their photos) that is hyperlinked in Tweets and Facebook posts and also is posted on the credit union’s website; 5. Traditional marketing tools to promote the social media campaign, including banner ads on the website, direct mail, signage in the credit union, and targeted print or broadcast advertising that invites college students to pay attention and become engaged.
Consistency. So you’ve followed the steps above, have managed to attract 500 people who “like” your credit union’s Facebook page and/ or are “following” your Tweets. But that’s not the end. It’s just the beginning. Ongoing, consistent outreach to your social media base – without being annoying – is essential to keeping your base engaged and willing to share your branded messages within their own circles of influence. Calculation. Now the hard part – calculating the value. First, realize you are no Charlie Sheen. As you look to justify the value of your social media campaign, be cautious about relying on simple ROI measures, such as new memberships or increased sales. A good social media effort has longer-term, more subtle benefits that must also be calculated and evaluated, such as an improvement in the credit union’s brand recognition and reputation. In today’s world, where young Americans are tuning out traditional one-way advertising and marketing, it makes good sense to invest in a smart, interactive social media program. Weave it into the credit union’s larger marketing plan, set realistic and tangible goals that can be measured against pre-campaign baseline markers, and let your creativity flow. Socializing with your members will solidify their trust, build loyalty and help you gain visibility in the communities you target. That’s a true value proposition for your credit union.
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ProfessionalDevelopment
By Bob Mellinger President Attainium Corp
When the examiners arrive, will your plan pass the test?
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s you know, examiners have a standard by which they judge whether your disaster preparedness and response efforts meet the required criteria. The standard is NCUA’s AIRES Disaster Preparedness & Response Questionnaire. There are seven elements that are examined and, since the examiners use these, you also should use the questionnaire to guide your efforts. The seven areas can be viewed at http://www.ncua.gov/news/ express/xfiles/06-CU-12.pdf. Check them out and then determine how your plan stacks up against the standard in the following areas. Do you have a plan? And does it work? The bottom line here is that you are able to continue to provide services to your members. It makes sense, therefore, that the first thing examiners want to know is whether you have a plan. It may come as a surprise, however, that the second question is whether the plan includes testing. Look at the questionnaire and make sure your plan can answer every applicable question – and, in every case, know where the answers are located so you can point them out easily when the examiners ask. People, Money and Time: Are your resources organized and allocated? It’s popularly accepted that people, money and time are the resources you have and that you must allocate them wisely in order to carry out any task. Do you know exactly what your resources are? Identify them, make a list and then make sure your plan covers how each resource will be used. Remember that supplies and facility use have to be taken into account. Do your plans and sub-plans pass the use test? If you had to use your plan today, would it work? The answer probably would be yes if you regularly test the plans for your critical systems and test plans for other systems at least once or twice a year. When you test, do you use the results to inform your plans and update them accordingly? People – Are they ready? It’s critical that everyone knows the plan and understands their role in it. Have they actually practiced their roles in a simulated exercise? Do you have a disaster recovery team and do they know their responsibilities? Most important, are
your emergency contact lists up to date, and do everyone have a way to report in? Getting along with others What/who are your essential alliances and what role do they play in your plans? Are their roles written down somewhere in the plan (they should be)? Are they at a sufficient distance so they won’t likely be affected by the same disaster and can support your needs in an emergency? Are they included in your testing scenarios? What can you learn from them? Make sure you can check off all the questionnaire’s line items in the Alliances section. What’s your review process? Is your plan regularly reviewed by relevant officials and updated as necessary? If you’ve had to use your plan at any time, either a disaster or a test, do you have a review session to see what worked and what needs work? This is one of the easiest ways to keep your plan updated, because you’ve just used it and have a good idea of what’s strong and what’s weak. Do this as soon as possible after each event requiring use of the plan. “Experience keeps a dear school, but a fool will learn in no other.” (Ben Franklin) Do you learn from your own experiences and those of others by incorporating those lessons into your own plan? Has anyone reviewed the plans of vendors and other critical parties to see whether your organization can benefit from they have done or are doing? Have they thought of things you haven’t? In summary, developing a comprehensive plan, testing it on a regular basis, keeping it updated, and informing all parties are critical to your survival if your business continuity plan is called into play. Use all the resources you can find to ensure your plan will be the best it can be. One such resource is the Federal Financial Institutions Examination Council (FFIEC) InfoBase at http://ithandbook.ffiec.gov/. Bob Mellinger is the president of Attainium Corp, which delivers business continuity, disaster recovery and crisis management services. He can be reached at (571) 248-8200 or via email at bmellinger@attainium.net or on the web at www.attainium.net.
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ProfessionalDevelopment
By Tonya Farmer Vice President of Training & Events Texas Credit Union League
Practical Steps for Professional Development
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n today’s competitive employment market, ongoing professional development isn’t an option – it’s a necessity. It is a way in which professionals, as well as volunteers really, can ensure they have the appropriate skill sets to perform the tasks and responsibilities set forth by the organization they serve. Recognizing how rapidly things change, more and more companies are requiring employees to complete a certain number of training hours per year to ensure they are keeping abreast of new trends; expanding their knowledge, and increasing their skills and abilities. Those that aren’t requiring are certainly encouraging, and some in fact offer incentives to encourage life long learning. It’s just good business practice. Additionally, given the increased responsibilities volunteers have taken on – particularly those in the credit union movement, many companies are also requiring that their volunteers record a certain number of training hours per year so as to ensure they are adequately prepared to carry out their volunteering role as effectively as possible. As most credit unions are aware, the National Credit Union Administration (NCUA) has adopted regulations that require board members to understand their credit union’s balance sheet and income statement, and “be able to ask appropriate, substantive questions of management.” The bottom line is training provides working professionals and active volunteers with the tools and strategies to carry forth their duties and responsibilities to the credit unions and members they serve. Professional development is not something that should be dreaded; nor does your professional growth plan need to be complicated. And while you should certainly work in partnership with your employer, your professional development is your responsibility. Your ambition, your motivation, your abilities and your interests will drive your success.
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Following are a handful of practical steps for professional development:
1. Take charge of your professional growth Remember, it’s your responsibility, so don’t rely on others to detail your professional growth plan. This of course does not mean that you cannot turn to your manager or perhaps a mentor for guidance, but ultimately, you need to take charge. 2. Document areas of strengths and weaknesses and proceed accordingly - If you wish to continue being an asset to your organization, you need to be honest with yourself about areas in which you need improvement and focus your growth plan on these areas. Refer back to your performance reviews and seek feedback from management and peers. Input garnered from these sources will help reveal your strengths and weakness. Be sure not to overwhelm yourself. Focus on one or two areas on improving at one time. 3. Explore your available professional development opportunities – Do your research and identify those training opportunities that will help you to grow personally and professionally. Time management, leadership development and team building skills are usually areas of training we could all benefit from. Be sure and visit the Training & Events section of your League’s web site at www.tcul.coop, as we offer an abundance of educational programs to benefit professionals and volunteers alike. 4. Identify training options that fit your unique needs and learning style - Each one of us is unique. We all learn in different ways at different pace. For example, some of us learn best in a more structured face-to-face training environment where we can interact with the instructor and our peers. While others prefer accessing their training program online. Fortunately, your League offers an array of training methods to fit your learning style. 5. Don’t procrastinate - The single biggest and the most common barrier to professional development is procrastination. It’s easy to talk about our professional development plan, but unfortunately too many of us are guilty of failing to execute our plans. So start now. Visit the Training & Events section of our web site to learn what programs best suit your needs.
Regulatory&Compliance
Maintaining Compliance in a Complex Regulatory Environment
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n July of this year, the Consumer Financial Protection Bureau (CFPB) will join the “bull pen” of the numerous regulatory agencies already in existence. What does this mean for credit unions? In addition to the avalanche of regulatory requirements issued by NCUA, the Wall Street Reform and Consumer Protection Act, the ADA and a variety of financial institution – related regulators, there’s a another “new sheriff ” in town promising even more regulation (or related changes). You can blame it on the volatile economy, financial institution failures, abuse of consumers by credit card and mortgage companies but the changes aren’t abating and the regulations keep coming. There’s no escaping the fact that we must learn to function in an environment of new and changing regulations. There are a myriad of tools available to management and compliance professionals to aid in coping with this environment. Our challenge will be to find those that best complement our individual compliance programs in the most efficient way. The following represent some methodologies and avenues open in attempting to manage these seemingly overwhelming obstacles: • Create a compliance culture. We’ve spent years developing marketing, sales and lending cultures. How do we develop a “compliance culture”? Primarily, this requires education of staff and management. Everyone must “buyin” to establish the importance of the program. Once this is accomplished, it’s much easier to solicit information, cooperation and assistance in sorting, gathering and collecting necessary information and data. • Persistence. Once the compliance culture is created, it must be maintained. This means ongoing training, interaction, and supplying up-to-date information. The compliance officer, and compliance area, must be a visible function of operations and establish communications and relationships with other credit union departments. • Research. Dedicating time to researching new and potential regulations and laws is an absolute necessity to being proactive. Ideally,
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a stand-alone person to perform research functions. In the present environment, this is not always possible. Subscribing to services such as LexisNexis Research as well as Sheshunoff provides in-depth legal and regulatory facts and data. Often overlooked are the research services provided by state and national trade associations. Additionally, agency websites (NCUA, Federal Reserve, FDIC, IRS and U.S. Treasury) are a goldmine of historical and numeric data. Agency issuances. Maintaining a database of agency issuances provides an excellent foundation on which to build research and proactively plan compliance strategies. Don’t rely on one resource. Concentration Risk Assessment has taught us that “putting all our eggs in one basket” centralizes risk and leaves us vulnerable to anything that might compromise that single resource. Regulatory web sites, industry periodicals and digests, nationally-recognized business and financial industry news sources as well as attorneys and consultants can provide information that can be compared and contrasted to make intelligent judgments and decisions. A very good rule is to always obtain at least three resources when assembling facts and figures.
By Steve Gibbs Assistant Vice President Shared Compliance Resources
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Active communication with your examiner. Your primary regulator can be an excellent source of guidance and information. Many of us are hesitant to contact the regulator, afraid that we will “red flag” a problem area by asking about it. Examiners and Field Supervisors have become more open to taking questions and providing information that will allow the inquiring credit union the opportunity to become less apprehensive in sharing operations information. Networks. Compliance networks can be found through national and state trade associations, online and local groups. TCUL, for example, has a Compliance Council, that offers an excellent forum for exchanging information and sharing best practice. In addition, Chapters may provide networking opportunities through meetings as well as committees. Schools/Conferences. We’ve established that “networks” are very important and many are originated through industry schools, seminars and conferences. Trade association’s schools and conferences are abundant
during the calendar year. Visit the Training & Events section of TCUL’s web site at www.tcul.coop to learn what professional development opportunities are available. • Outside Support. Outsourcing has become an effective tool in dealing with the onslaught of required policies, procedures and training. “Having sufficient time” seems to be the main complaint of credit unions in dealing with the regulatory avalanche. Whether writing policies and procedures or performing training, outsourcing has proven to take much of the increased burden off of management and officers. Is it possible to accomplish all of the items discussed in controlling our compliance position in the current regulatory environment? Probably not. Some items are important, but they don’t work for everyone. The smart compliance officer will use what’s reasonable and comfortable for the type of credit union which that person serves. Aside from all the areas mentioned, key to success here is establishing a compliance program. Only through creating that structure or entity can the subject of compliance be regarded as a serious component of credit union operations.
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Regulatory&Compliance
Regulatory Q&A
Q:
Our credit union received notification that Regulation CC, “Expedited Funds Availability Act,” is changing and we will be required to make the first $200 available to members, versus the current $100. Can you provide more details and any other requirements of this change?
A:
The current Reg CC Funds Availability Act provides that if a financial institution has a “delayed” availability policy, the first $100 of a deposit must be available on the first business day after the day of deposit. If the financial institution has a “next-day” availability policy but delays availability on a case-by-case basis, they also must make the first $100 available on the first business day after the day of deposit. As a result of Section 1086(e) of Dodd-Frank, the $100 rule is being increased to $200. This change is effective on July 21, 2011, although institutions may implement the change before the compliance deadline. Credit unions are required to revise their account opening disclosures by July 21, 2011 and are required to send change in terms notices to their existing members by August 20, 2011. (Since this is a positive change for the consumer, the change in terms notice may be sent out as late as 30 days after the compliance deadline – or by August 20, 2011.) The Reg CC change in terms notice to business members is not required, but strongly suggested. On March 4, the Fed issued a ‘Comment Call’ and published proposed amendments to Regulation CC to encourage financial institutions to clear and return checks electronically, and shorten the “exception” hold periods on deposited funds. Per the Dodd-Frank Act, the proposal would increase the next day availability requirement for certain check deposits to $200 as of July 21, eliminate all references to “non-local” checks and make other substantive changes to Regulation CC. Comments are due by June 3, 2011. The Press Release may be found at: http://www. federalreserve.gov/newsevents/press/bcreg/20110303a.htm
Q: I read in a trade magazine that FinCEN has published an Advisory to help thwart “elder abuse.” Can you provide 14
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more details about the Advisory and tell us if there are any other Elder Abuse laws that we must comply with?
A: You are correct. The Financial Crimes Enforcement Network released a new advisory to help financial institutions spot and report on activities involving elder financial exploitation. The “Advisory to F.I.s on Filing SARs Regarding Elder Abuse Exploitation” contains red flags/indicators that abuse may be occurring and specifically asks financial institutions to include the term "Elder Financial Exploitation" on filings of suspicious activity reports (SARs). FinCEN requests that financial institutions select the appropriate characterization of suspicious activity in the Suspicious Activity Information section of the SAR form and include the term "elder financial exploitation" in the narrative portion of all relevant SARs filed. Explicit mention of a particular term in the SAR greatly assists investigators in quickly identifying possible illicit activity. The red flags noted in the advisory include both activity that may come to financial institution personnel attention through monitoring transaction activity and through interactions with members/customers or their caregivers: • Frequent large withdrawals, including daily maximum currency withdrawals from an ATM, debit transactions that are inconsistent for an elder, or sudden non-sufficient fund activity. • A caregiver or other individual shows excessive interest in the elder's finances or assets, does not allow the elder to speak for him or herself, or is reluctant to leave the elder's side during conversations. The advisory contains a more complete listing of various indicators of elder financial exploitation. To access FinCEN’s Advisory, go to: http://www.fincen.gov/statutes_ regs/guidance/html/fin-2011-a003.html In addition to FinCEN’s advisory and new requirement to file a SAR in the case of Elder Abuse, Section 48.051 of the Texas Human Resource Code also requires Texas businesses to report elder abuse to Adult Protective Services. Details in the HR Code may be found at: http://www.statutes.legis. state.tx.us/Docs/HR/htm/HR.48.htm#48.051
By Linda Webb-Mañon Vice President of Communications & Public Relations Texas Credit Union League
FINDING SUCCESS BY ‘DOING GOOD’
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n 2009, Shell FCU (Deer Park) received the Business of the Year award from the Deer Park Chamber of Commerce. In 2011, the Pasadena Chamber of Commerce followed suit. The awards were presented to the credit union for their extraordinary efforts to make their community a better place. When the credit union identifies a need in their community, marketing manager Traci Archer says they don’t hesitate to get involved. “Community outreach is an integral part of our organization. In fact, the creation of the Furthering Community Unity (FCU) Team in 2008 further solidified our commitment to helping our members, employees and neighborhoods through local involvement and volunteerism,” notes Archer. The FCU Team is comprised of 25 Shell FCU staff members. The team meets on a monthly basis, and is responsible for determining which community outreach activities the credit union will support. At a minimum, the credit union sponsors four major fundraising activities a year, and participates in two to four community outreach activities a month. While the FCU team might select which activities the credit union will participate in, all Shell FCU staff has the opportunity to suggest activities and causes, as well as volunteer.
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The FCU team began tracking the credit union’s volunteer activities in 2008, and over the last three years, participation has continued to climb. In 2008, the FCU Team with the support of Shell FCU’s 180 employees, raised $8,900 and donated 347 hours while participating in blood drives, Habitat for Humanity, walks, Toys for Tots & invitational basketball tournaments. In 2009, the FCU Team donated 1,286 hours and raised $10,090. In 2010, the amount raised jumped to $17,477, and hours volunteered leaped to 1,867. First quarter 2011 numbers indicate that the credit union will continue its upward trend. Thus far, the FCU team has donated 103 volunteer hours and raised well over $2,000. “We see involvement in community outreach as a critical component to the success and growth of our credit union,” says Archer. “We believe working side-by-side on community projects such as Cody’s Field of Dreams, park and bayou clean-ups, Smiles on Wheels, and others helps our staff feel more connected to their co-workers, the credit union and the community.” The credit union, Archer says, allocates about 1 percent of its marketing budget to support its volunteer team. The costs that are paid for by the credit union are typically associated with registration fees or for the purchase of the red FCU team shirts, which are given to employees as a token of appreciation for participating in their first volunteer event.
The credit union works with many different organizations, and offers Shell FCU employees a variety of volunteer opportunities. For example, Archer happened to come across an article in the Houston Chronicle once about an organization collecting blankets for infants. It struck a chord with Archer and she presented the idea to the FCU team. The group fully embraced the idea, and they were able to donate about 50 “no sew” blankets to a local children’s rehabilitation hospital. This particular fundraiser was such a hit that this year the FCU team has decided to make “no sew” blankets for residents at a local nursing home. Other noteworthy causes that Shell FCU volunteers have been involved with include: • Wreaths across America • Relay for Life • Cell Phones for Soldiers • Cheer Teams • Boys’ & Girls’ Harbor • Mobile mammograms • Telethons • Toys for Tots The credit union also encourages friendly competition between its branches to inspire, motivate and drive fundraising efforts. “Corporate citizenship is very much a part of our culture,” affirms Archer. “All new hires must go through an employee orientation, and from the start we instill in our staff that volunteerism as a way of life at Shell FCU.” Without question, community service is good business and credit unions across the state make the point of giving back. The Austin Chapter of Credit Unions, for example, raises hundreds of thousands of dollars a year for the Children’s Miracle Network Credit Union for Kids program. They are also a strong supporter of the Capital Area Food Bank of Texas and the SafePlace, a comprehensive shelter and service provider for survivors of domestic and sexual violence.
“The Austin Chapter of Credit Unions believes strongly in supporting our local community. Alongside the credit union philosophy of ‘people helping people’, the Austin Chapter's mission is to unite Austin area credit unions toward community involvement,” says chapter president Brandy Logan. “Through donations to local non-profits, we are able to accomplish this mission.” The Austin Chapter of Credit Unions understands how important credit unions are to the social fabric of our society. As not-for-profit financial cooperatives built on the spirit of doing “good” for others, credit unions play a critical role in maintaining the strength and vitality of the communities they serve. “Without local community donations and sponsorships, ‘Austinites’ and surrounding area citizens simply would not have the tools readily available to them to make their lives a little easier,” continues Logan. The Fort Worth Chapter of Credit Unions also understands that community outreach isn’t just about making a good impression. It’s about being a good community partner. It’s about doing the right thing. For years, the chapter has made the holidays special for underprivileged children at Sam Rosen Elementary in Fort Worth and Webb Elementary in Arlington. Not only does the chapter throw a party for these children that includes games, toys and the opportunity to have their photo taken with Santa Claus, but they also conduct a coat and uniform drive, and donate these coats and uniforms to the children in most need at these two elementary schools. “We believe volunteering is a fundamental credit union value,” notes chapter president Scott Ward. “By getting involved, we not only raise awareness of the needs in our community, but we also draw attention to the fact that credit unions really are about people and not profit.” Indeed, corporate volunteerism is a way to not only demonstrate the core values of your organization, but it’s also a way in which companies can enhance their image and reputation, affirms Natasha McAdoo, program director for TCUL’s REAL Solutions initiative.
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“A well-planned and executed community outreach initiative is a chance for organizations to present themselves in a positive light and build credibility in the community,” assures McAdoo. “When credit unions reach out into their communities in philanthropic ways, they are allowing themselves to be seen as an organization that truly cares about people. You can’t buy that kind of positive attention.” Volunteerism, McAdoo points out, can most definitely help pave the way for future growth. “The benefits surrounding community outreach extend well beyond personal gratification. Volunteering is a powerful tool in building your brand equity, attracting positive attention, and strengthening your relationships in the community in which you serve,” continues McAddo. In fact, Dr. Susan Fletcher, a licensed psychologist in private practice, published author and national speaker, says there is an entire field dedicated to cause marketing, which examines how organizations can build their image and brand by being socially responsible. Dr. Fletcher points to a study conducted by Research International (UK), Ltd., which finds 86 percent of consumers are more likely to buy a product associated with a cause or issue. “Of course this doesn’t mean that people are necessarily inclined to do business with your credit union just because you are doing good in the community; however, it certainly makes your current members feel much better about their choice,” says Dr. Fletcher. “And no doubt it makes current members more loyal and more passionate about doing business with you.” McAdoo notes that community outreach initiatives can also make a difference internally.
The Fort Worth Chapter of Credit Unions help make the holidays special for underprivileged kids
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Shell FCU staff help build a Habitat for Humanity home
“I believe most credit unions that have a clearly defined and well-structured community outreach program will tell you that this type of program fosters teamwork, builds employee morale and increases job satisfaction,” suspects McAdoo. “Additionally, with greater emphasis being placed on professional development, volunteering is incredibly effective in developing ones professional and interpersonal skills - skills that will benefit the credit union in immeasurable ways.” If your credit union is in the process of designing a community outreach program, Dr. Fletcher says there are considerations that should be addressed from the onset: • When deciding how to enhance your credit union’s image, you must be careful to select a strategic cause that aligns with your membership base. • You must understand what causes your members are interested in supporting. • It’s important to have clearly defined expectations. Do you want more media exposure, better name recognition, more members, or all of the above? • If you are partnering with a nonprofit agency, it’s important to determine what you want for your credit union from the relationship. “Remember, it is a business relationship designed to be a win for both parties and you must be intentional about achieving the end results,” stresses Dr. Fletcher. Additionally, Archer recommends: • Starting out small – not every organization can handle multiple projects in a year. Consider smaller-scale events like a food drive. • Identify your core group (internal staff charged with leading the initiative) and make sure they are engaged. • Keep staff informed and involved in the process. Buy-in from top down is critical to your success. • Be careful when selecting community partners. Avoid controversial organizations, and chose appropriate community partners whose missions align with your own. “When done correctly and sincerely, everybody benefits from volunteerism,” asserts McAdoo. “Just remember, you can’t fake it. If you aren’t passionate about what you’re doing, the community will sense it right away.”
PhilosophyinAction
By David A. Reed, Esq. Reed & Jolly, PLLC
Is Your Board ‘Financially Literate’?
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he existence of a voluntary board of directors elected from among the membership is one of the most essential elements of the credit union movement. But, the time honored tradition of that service is getting tougher all the time. From balance sheet irregularities to the basics of corporate financial literacy, today's boards are faced with increasing pressure to stay informed of the complex regulatory and business realities of the financial services marketplace. The addition of Part 701.4 to the NCUA Regulations highlights the increased expectations of your Board. The Rule contains six key provisions: 1. The board is responsible for the general direction and control of affairs of the federal credit union. 2. Each director must place the welfare of the members first upon exercising due care and reasonable inquiry into each matter brought before the board. 3. Each director must have at least a working familiarity with basic finance and accounting practices, including the ability to read and understand the credit union’s balance sheet and income statement and the ability to ask, as appropriate, substantive questions. 4. Each director may rely on information prepared or presented by employees or consultants. 5. Each director must administer the affairs of the credit union fairly and impartially and without discrimination in favor of, or against, any particular member. 6. Each director must direct the operations of the federal credit union in conformity with all applicable laws, rules and regulations as well as sound business practices. Put simply, the “new” fiduciary requirements are merely a restatement of existing board responsibilities and expectations. The intent is clarification and standardization of key federal credit union director duties. The purpose is to provide NCUA greater latitude in ensuring all directors fully understand and maintain these standards. So, why all the excitement? The new Rule implies monitoring of these old responsibilities by NCUA. So, you
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must now ensure, and it is now recommended by most, that you document this understanding. The essential elements of understanding for each director are to: • understand line items on financial statements, • understand seven types of risk faced by all depository institutions, and • understand internal controls over these risks. • In other words, each director must understand the specific activities in which their credit union engages and the revenue and risks associated with each. The NCUA provided guidance on the new Rule through its NCUA Letter 11-FCU-02 issued in January. However, instead of providing a safe harbor for training requirements, the NCUA has mandated that every federal credit union develop a Volunteer Training Policy that ensures the proper opportunities and resources are available to the board based on the unique needs of their credit union’s size and complexity. Now what? Given that this will be the primary examination point for the new director regulatory requirements, great care should be taken to create an appropriate policy. The examiner will determine if the policy meets all the suggested requirements and confirm that the credit union and the directors are following the policy. The NCUA has repeatedly stated this is not a game of “gotcha,” and there will be no quizzing of volunteers. Rather, examiners will evaluate whether the credit union has such a policy in place. BUT, if the examiner has reason to question a volunteer’s actions or abilities, they will dig further. Directors who do not have the necessary financial literacy at the time of election will have six months to obtain the necessary training. Initial compliance is required by July 27, 2011. While the Rule only applies to federal credit union directors, it is not a stretch to believe that state regulators will begin to look at a similar standard. Even if they do not, a best practice would be to hold every board member, as well as supervisory committee members to this standard. Don’t over think this issue. There have been no significant changes to the expectations of a board member. The new rule merely provides an opportunity for all credit unions to fortify their director training programs. Your credit union needs to: • Draft an appropriate Volunteer Training Policy • Develop a Volunteer Training Program • Ensure compliance with the policy • Create a paper trail for board compliance that includes training attendance.
PhilosophyinAction
By Christa Hollier President and CEO Golden Triangle FCU
Marty Ochsner Inducted into Texas Credit Union Hall of Fame
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read once that life was not about the day you were born or the date of your passing. It was more about the dash (-) and what happened between the dates. This is so true of my friend Marty Ochsner. I met Marty in 1989 when I went to work for Smiths Bluff Texas FCU. I had no idea of what a lasting impression she would make on my life. Marty’s career began in 1975, when she Marty Ochsner accepted the position of manager at Baptist Hospital FCU. Over the next 27 years, she served at the helm of a number of credit unions, including First Industrial FCU, Southeast Texas FCU, Smith’s Bluff Texas FCU and Goodrich Employees FCU. Marty worked hard, but with a passion. She had a passion for life. Her service to credit unions included serving on the board of the Sabine Chapter of Credit Unions and the Credit Union Managers Association of Southeast Texas. Marty also served on the board of directors for TCUL and CUNA. She was secretary of Southwest Corporate FCU and served as vice chair on the board of TCUL Services, Inc., which is now Credit Union Resources, Inc. In 1983, Marty graduated with honors from Southwest CUNA Management School. Five years later, she was awarded the Certified Credit Union Executive (CCUE) designation. The list of contributions Marty has made to the credit union movement is endless. It was Marty who conceived the idea and made the motion, that the League board authorized the creation of a public awareness campaign to rally support for credit unions, as the banks were engaging us in litigation and aggressively battling credit unions in Congress. The initiative was called the FACTS, which stood for Financial Alternatives for Consumers in Today’s Society campaign. Marty was the first chair of FACTS, which eventually became the FORCE committee. For her undying commitment and passion or credit unions, TCUL has inducted the late Marty Ochsner into the Texas Credit Union Hall of Fame. The award was presented to Marty’s family during a special awards ceremony at TCUL’s Annual Meeting & Expo April 26 in Austin. TCUL’s Awards & Recognition committee, chaired by Debbie Blackshear, president and CEO of Cy-Fair FCU in Houston, is responsible for reviewing all nominations for this award. When reviewing nominations, the committee considers among other things: • tenure of service; • contributions at the local, state and national levels; • extraordinary achievements; and • impacts the individual has made at their respective credit union(s) and also on the industry. Marty was loving, compassionate and courageous. She had a heart of gold, and truly believed in others. She took people under her wing and groomed them for life’s opportunities. Marty was quoted once as saying, “I’m a people person…the credit union profession is right for me.” Induction in the Texas Credit Union Hall of Fame - I can think of no better way to honor Marty for all that she did to protect and preserve the credit union movement.
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HRCorner
Using Assessments for Staff Development
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asy to assemble and no tools required.” This promise comes with many items. The word “easy” is used often but when it comes to developing employees, it rarely applies. Hopefully, in your organization it does. Perhaps your employees are perfectly matched to their jobs. You get maximum productivity with no complaining. Everyone understands and relates to one another. No one is high maintenance, and everyone loves working together! Effective communication is rampant. Well, for most of us, this is not the case. Employee development is not “easy” but it is possible to “assemble” a good process for major results with the right tools. In fact, all organizations are striving to improve employee productivity. The tool we most often use to improve performance –the performance review-really isn’t capable of helping us reach our overall goal. Its biggest flaw is that it is the equivalent of looking in the rearview mirror to see where the employee has been. Why not look ahead, through the windshield, to see where the employee can successfully go? Most performance reviews occur once a year, if at all. Therefore, we are looking back over a long period of time. Any corrective solutions are too late to do any good. This is where coaching can be one of the most effective ways to help employees achieve their career goals and improve overall performance for the whole organization. Coaching helps identify realistic goals in the context of the employee’s job. Good coaches understand the current reality of the employee’s world, and are aware of issues that might prevent someone from reaching their goals. Studies show that coaching delivers major results, offering 150 percent greater return on investment than performance appraisals. With that number in mind, coupled with the dread almost everyone feels regarding performance appraisals, why isn’t everyone coaching? Perhaps because they are not clear about how or when to do it. A proven way to help managers to be more effective in coaching their employees is by using occupational assessments. Assessment tools gather accurate and objective information about job-relevant characteristics. They help assess the fit or match between people and jobs. They can help identify those employees who might benefit from either remedial or advanced training. Assessments help you design or modify training programs and identify which self-development activities would be useful. Assessments
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can give the coach a much better insight and understanding of the individual with whom they are working. Bersin & Associates, experts in educating organizations about talent management, found that these seven factors ensure the best performance development for employees. 1. Goal-setting 2. Alignment of performance goals with organizational goals 3. Employee self-assessments 4. 360-degree assessments 5. Manager appraisals 6. Competency assessments 7. Development planning Do you see the common threads of coaching, development and the use of occupational assessments in this approach? Occupational assessments help managers become better coaches. A job fit assessment may show that an employee is a better fit in another position in the organization. Thus creating an opportunity for that employee to achieve a more productive and rewarding career. Personality assessments help managers have a better understanding of an employee’s behavioral style and help identify the best way to manage that person. Assessments also help create more effective training programs tailored to how the employee learns best.
By Steve Bookout Regional Director Profiles International
The 360-competency feedback system, can give managers and supervisors a balanced picture of their strengths and developmental areas for improvement. Instead of continuing to manage people with blinders on, they are now able to see how they look as a manager from other people’s perspective, not only their direct employees but also their boss and peers within the organization. Recently I listened to an interview with David Brooks, the author of “The Social Animal.” He commented on how important strong relationships are to learning. According to Brooks, our degree of learning is based on how good of a relationship we have with the person teaching us. Brooks goes on to say that emotion, empathy, fairness are more important to learning than reason. Although he is speaking mainly about education, I think this also applies to our working relationships. The beauty of using occupational assessments is that they not only provide us with objective and measurable data about a person, but they also can be the vehicle for opening up meaningful dialogue. They can help the manager and employee develop a stronger business relationship based on better communication and understanding. In many organizations, this is the weakest link between high and low productivity. Employees need to know their manager is supportive and will help them achieve their full potential. When you find employees are not meeting your expectations it is time to consider new approaches to support their development.
Include assessment tools in your training and development programs. Assessments will help your manager/coach recognize the unique characteristics and potential in each employee and in turn, your employees will reap the benefits. Employee development is not “easy” but it is possible with the right assessment tools to “assemble” a good process for successful results.
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By Kimberly Jones Human Resources Consultant Credit Union Employment Resources
HRCorner
HR Q&A
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he Fair Labor Standards Act (FLSA) is a federal law that governs minimum wage and overtime, as well as other wage and hour issues. It applies to almost every employer, including credit unions, no matter how small or large. The Department of Labor (DOL) and other government agencies are increasing their focus on its enforcement. Below is a commonly asked question regarding the FLSA that all credit unions should be aware of and its answer.
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Q: What are some of the most common FLSA mistakes and what can my credit union do to avoid them?
A: Below is a summary of some of the more common FLSA mistakes and how credit unions can avoid them: • Improperly applying an exemption. In order for employees to qualify for an FLSA exemption, very specific requirements must be met. One’s job title alone is not enough to make an exemption determination. The employee’s actual job duties and salary must be considered. • Misclassifying individuals as unpaid interns. In order to be classified as an intern according to FLSA regulations, certain factors must be met: (1) the internship is similar to training which would be given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern does not displace regular employees, but works under supervision of existing staff; (4) the employer derives no immediate advantage from the activities of the intern; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. • Misclassifying an employee as an independent contractor. Employers must carefully examine the employment relationship before classifying an individual as an independent contractor. Employers should consider the amount of control, financial control, and the type of relationship between the employer and the individual. IRS Form SS-8 can help with this determination. • Failure to adhere to state requirements. Generally, where federal and state law conflict, the law that more generously benefits the employee should be enforced. Be sure to check your state law before making any type of pay-related decision, such as calculating
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•
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overtime, making a pay deduction, or determining hours worked, etc. Making improper deductions (nonexempt employees). Employers are not permitted to make certain deductions if it brings a non-exempt employee’s pay below the minimum wage. Employers should also be familiar with and adhere to their state law requirements before making any deductions. Making improper deductions (exempt employees). In general, exempt employees must receive their full salary for any week in which they perform any work. There are very specific instances for which an employer may deduct from an exempt employee’s pay. These include (1) absences of one or more full work days for personal reasons other than sickness or disability; (2) to offset any amount received for jury or witness fees, or military pay; (3) for penalties imposed in good faith for infractions of safety rules of major significance; (4) for unpaid disciplinary suspensions of one day or more imposed in good faith for serious work infractions; (5) unpaid leave due to FMLA; (6) absences from work for one or more full days due to sickness or disability if deductions are made under a bona fide plan, policy or practice of providing wage replacement benefits; or (7) in the employee’s first or last week of employment if full week not worked. Failing to pay for all time spent working. Non-exempt employees must be paid for all hours worked. This includes traditional work time, short rest breaks (less than 15 minutes), or in some instances, time spent traveling, as well as many other situations. Neglecting recordkeeping requirements. The FLSA requires that certain records for nonexempt employees be kept for at least three years. These include total hours worked each day and workweek; total straighttime earnings; total overtime pay for the workweek, etc. In addition, records that explain the basis for wage calculations (e.g., time cards) must be retained for two years. Permitting “off the clock” work. Employers are not permitted to ask or require nonexempt employees to work “off the clock.” Even if an employee works overtime without prior authorization, it must be paid.
If your credit union has a question or needs assistance with their HR needs, please contact Kim Jones or Susan Looney with CUER at (800) 442-5762, extension 6432 or 6431. Also, visit us online at www.cuer.coop.
SmallCreditUnions
Small CU Leaders Weigh in on Financial Literacy Training Requirement for Directors
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redit union operations have become far more complex; prompting the NCUA to adopt regulations that require board members to understand their credit union’s balance sheet and income statement, and “be able to ask appropriate, substantive questions of management.” NCUA Chair Debbie Matz is quick to point out that this new regulation in no way implies that credit union boards of directors lack the competency to be effective stewards. Rather the rule solidifies the critical role boards of director’s play, and helps to instill trust and confidence in the movement. Below, three small credit union leaders weigh in on the issue. Lynda Milton CEO, Team Financial FCU Long before NCUA required board members to understand their credit union’s balance sheet and income statement our board had established a directorship policy. It was felt by our chairman at the time that training/education, involvement in the movement and understanding key ratios and their meaning played a key role in being an effective board member. The directorship policy included but not limited to: • Qualifications • Attendance & Participation
• Compliance Awareness • Member Connection • Education • Leadership • Internal Control In addition to requiring at least four educational training sessions during the calendar year, listed are some in-house tools used to assist the board members with better understanding of the financials. These are documents published or designed by: • CUNA & Affiliates - Understanding Financials, 1995 • Ratio Calculation Guide - Debbie Rightmire, 2004 • Management – A scheduled monthly financial report that listed annual comparison of key ratios; and •
A quarterly financial & statistical review and evaluation on the credit union’s budget to actual position Using these tools and formal training has helped new and current board members better understand the credit union, key ratios, and how ratio changes affect the overall financial status of the credit union. The monthly financial report review keeps them updated on the various ratio changes. To ensure that the board remains involved and updated, we will continue to use current resources, but will engage in any additional financial literacy training programs offered. Having an informed board not only helps your operation but is well received by the examiners. Cindy Hester CEO, Union Fidelity FCU We all knew it was coming – mandatory financial literacy education for credit union volunteers. As CEO of a small credit union, we struggle with a limited budget for training. Most volunteers that serve on our boards or supervisory committees have full time jobs and are not available on a week day for training. But we do have a very valuable training asset – our-
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selves. Every month, we compile financial reports reflecting all aspects of our credit union. Why not use our knowledge and expertise to train our volunteers. Best of all, it’s at no cost to the credit union. The board of directors for Union Fidelity FCU acknowledges their fiduciary responsibilities including the ability to read and understand the credit union’s balance and income sheets. Early in 2010, I asked the board if I could have 15 minutes at every board meeting to dissect one aspect of the balance sheet and other financial reports that reflect the credit union’s current financial picture. We started with reviewing key ratios. The board compared previous quarters and discussed factors that could determine changes in the ratios. Each month, I spend the allotted time reviewing and answering questions about different line items on our balance sheet. I make sure to document all discussions in the Board minutes and training log. We also use other avenues for volunteer financial education. Often board or supervisory committee members accompany me to monthly chapter dinners for additional training. I have encouraged them to attend the upcoming NCUA small credit union workshop, where the volunteer session will examine the financial literacy rule and provide an overview of the financial areas required to better understand balance sheets. Attendees will receive a Certificate of Attendance. I am appreciative that the board and other volunteers are very receptive to continuing financial education as they work to understand and better control all types of risks while approving sound business policies. Mary Dunagan President Texas Workforce CU Our credit union is truly lucky to have the board of directors that it does. It is the belief of the board of directors that the better informed they are, the better decisions that they will make. They have a policy in place that each board member must participate in the local Chapter meetings and educational events put on by TCUL, NCUA and CUNA. We also have been doing mini-training sessions at each board meeting. Ten to 15 minutes of each meeting is allocated for education of the board members. One meeting might cover how to read a credit report and how a credit score is calculated. Another meeting will review specific income and expense accounts and the impact on our ROA. Does everyone understand depreciation and why we use it? What happens if our deposits grow so fast our loan demand cannot keep up, what is the impact on our capital? Compliance seems to be brought up at every meeting as well. These are the type of questions and answers that are addressed during our board of directors meetings. The board is responsible for establishing rates on deposits and loan products and unless they understand the short term and long term effect it has on your income statement and financial statement, how can they make a prudent decision? Education of the board of directors is the only way to be sure. Policies are reviewed at every meeting as well. With the overwhelming number of policies required these days, I want to be sure they are paying attention, so we review three to four policies each month, so by the end of the year, we have gone through every policy.
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ProductsandServices
By Linda Clampitt Senior Vice President CU Members Mortgage
Evolving Mortgage Practices Amidst Regulatory Change
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n the last few years, mortgage lenders have wrestled with dozens of regulation changes - each of them a wake-up call to the cold reality of the need for financial institutions to adapt if they are to survive and thrive. The challenge is to power through the changes and come out the other side with a profitable mortgage program and an excellent member experience. For CU Members Mortgage, it has taken time, patience, a very skilled team of professionals, and a dedication to making mortgage lending work for each of our credit union partners. There has been no shortage of frustrating moments, but with each step we’re more prepared for the next change ahead. Here is a brief look at some recent mortgage regulations and what CU Members Mortgage did to ensure compliance for our partners and our company: Appraiser Independence – The Home Valuation Code of Conduct rules that have been in place for the past couple of years morphed and expanded into the Appraiser Independence Requirement (AIR), which went into effect October 2010. This rule fundamentally changed how lenders interact with real estate appraisers. At CU Members Mortgage, we implemented a strict policy relying on independent appraisal management companies. We also provided assistance and support to our wholesale and correspondent clients to establish their own policies to ensure compliance. MDIA – The Mortgage Disclosure Improvement Act established consumer protection safeguards for both mortgage applications and settlement. To comply, we changed the way we collected up-front application fees and the disclosure process to make sure credit unions were in complete sync with the new rules. We also put safeguards in place such as technology lock-outs to prevent credit union clients from accidentally missing a required waiting period or trigger for re-disclosure. RESPA – The Real Estate Settlement Procedures Act of January 1, 2010 brought significant changes to the Good Faith Estimate (GFE). Lenders are now held to a much higher standard of accuracy in their disclosures and are liable for a ‘cost to cure’ if they underestimate settlement costs. Behind the scenes at CU Members Mortgage, we implemented new technology updates, new forms, new tracking systems and extensive staff training. For our wholesale and correspondent partners, we conducted multiple training webinars and coaching on a loan level basis to get our credit unions up to speed on the complicated new rules. LQI – Fannie Mae’s Loan Quality Initiative began implementation June 1, 2010, and brought together policy identification and implementation, process and technology to improve
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compliance with underwriting and eligibility guidelines. The ultimate goal is to mitigate repurchases and support market stability by reducing investor and lender risk. Combined with the new 90-day credit policy, the net effect is more quality control in the credit approval process and up-to-date information when credit decisions are made. FHA Correspondents – The end of 2010 also brought the end to FHA approval of correspondent lenders. We converted several hundred credit unions to the new Sponsored Originator approval status and made FHA loans possible for thousands of members across the country. Don’t expect changes to slow down in 2011. The Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act) is looming. The Dodd-Frank Act will change the way mortgage professionals are compensated and we anticipate more changes as the new Consumer Financial Protection Agency is shaped. We appreciate that as the industry changes, we must change too, and that includes almost every aspect of the way we do business. For CU Members Mortgage, this meant consolidating our operational functions in our Dallas office and expanding our regional employee presence to more personally serve all of our partners. This structure will support our mantra of accountability and solid delivery as we navigate the twists and turns of today’s mortgage industry. As we find our way through this “new world” of mortgage lending, CU Members Mortgage is here to guide you through all the regulatory changes. What hasn’t changed is our focus on bringing credit unions opportunities for new income, loan growth, member retention and new member recruitment. Our pledge and commitment to you is to do the right thing for your members and your credit union.
ProductsandServices
Robert Christini Vice President of Sales VINtek, Inc.
Why CU’s Shouldn’t Wait to Move to Electronic Liens, Titles
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n November 2009 the Texas Department of Motor Vehicles (TxDMV) implemented an electronic lien and title (ELT) program, assisting automotive lenders in the state with automating the title process. Texas handles the second highest vehicle title volume in the country. As states look at ways to reduce costs to remain in line with tightened budgets, the TxDMV launched ELT as an alternative to expensive, cumbersome paper-based titles in the government’s most paper intensive department – the DMV. An ELT program provides lien holders with electronic vehicle titles instead of traditional paper titles from the DMV. VINtek, a provider of automotive collateral management and ELT solutions helped 50 financial institutions in Texas make the switch to electronic titles in 2010. Credit unions such as Texans and Amplify have both developed ELT programs with VINtek. Overall, VINtek manages ELT for more than 400 credit unions nationwide. As state governments and automotive lenders realize the benefits of paperless titles, several states, including nearby Louisiana and Arizona, have followed the trend of mandating ELT. With an ELT mandate, lenders are required to institute the use of electronic titles as the DMV no longer produces paper versions. Credit unions in Texas can anticipate more states,
possibly even Texas, will pass legislation in the near future requiring automotive financiers to utilize ELT. Although Texas currently supports a voluntary program, credit unions in the state would be well served by implementing the technology in advance of any legislation in order to ensure compliance with all state guidelines and mandates. VINtekTIME is a nationwide system that incorporates the ELT business rules of each state thereby offering its Texas-based clients nationwide coverage, which is important when you consider your borrower, can relocate to another state at any time. “As reflected in the numbers of Texas lenders proactively joining the ELT program during 2010, lenders in the state are readily embracing and adapting to a paperless process,” said Larry Highbloom, president of VINtek. “Among the largest states for automotive lenders, Texas has shown great interest in ELT because it gives lien holders access to an innovative technology that helps dramatically lower auto lender costs and increase customer satisfaction.” ELT, a cost-effective, “green” alternative to paper-based titles, eliminates postage, storage and supply costs, as well as reduces exceptions and the chances of a title being lost. VINtek is a preferred product provider of CU Resources, Inc. To learn more, please visit www.curesources.coop.
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