The Year Ahead

How long can CUs’ Tackling the growing Is there a lending bubble Using technology to 10 hot streak last? 11 fraud threat 12 on the horizon? 14 leverage new FOM rule

CUJOURNAL.COM • @CUJOURNAL THE RESOURCE FOR GROWTH-ORIENTED CREDIT UNIONS

VOL. 21 | NO. 1 | JANUARY 2017

lending growth strategies

payments technology

compliance

Credit unions have enjoyed a multiyear run of solid growth in THE YEAR membership and originations. Rising rates and the potential for regulatory overhaul could mean new competition — just AHEAD as reﬁ volumes are set to fall

marketing human resources

economy branching

CUJ_Cover_FINAL.indd 1 1/12/17 8:54 AM 002_CUJ011617 2 1/9/2017 4:55:37 PM CONTENTS JANUARY 2017 / VOL. 21 NO. 01

06 A Very Good Year CUs saw double-digit loan growth in the 12-month period that ended in Q3 2016, including more than $847 billion in total loans. Here are some highlights: Overall loan growth 10.1% New auto loans 15.8% 08 MBLs 14% New student loans 10% Total real estate loans 8.2% Source: NCUA 10

Compliance Technology Lending

09 HOUSE BANKING PANEL 11 TARGETED ATTACKS 12 WILL LONG-AWAITED SHAKES UP LEADERSHIP COULD BE BIGGER RISK BUBBLE MATERIALIZE IN 2017? The House Financial Services Com- Massive data breaches grab the The data shows an increase in de- mittee will see a shuffling of deck headlines—and have happened so linquency rates for consumers with chairs among the leadership of its often that consumers, bleary-eyed poor credit, but the bulk of troubled subcommittees in the new Con- from breach fatigue, hardly notice subprime loans aren’t coming from gress as it also welcomes ten new them anymore—but the smaller, credit unions—for now, at least. Republican members. But some more strategic hacks may take a Experts share a mixed bag of data things predictably stay the same. greater toll on credit unions and that suggests CUs can’t ignore the other organizations in 2017. potential danger.

Opinion 14 GROWTH IS GOOD, BUT IT COMES AT A COST Growth Strategies 07 WHY BANKS AREN’T The potential for growth as a result LINING UP TO CONVERT of the National Credit Union Admin- 16 CREDIT UNIONS ON It’s one of credit union advocates’ istration’s revised field-of-member- FOREFRONT OF WAGE WAR favorite arguments: if the tax ship rule could be dwarfed by the Call it the $15 question: will more exemption is so great, why don’t costs of the technology upgrades states raise their minimum wage more banks change charters? Here needed to leverage this opportuni- levels, and will the federal govern- to answer that question is Keith ty—as well as to deal with the kind ment jump in? A number of credit Leggett, a former American Banker of stuff CUs don’t want to see grow, unions have already joined the Association lobbyist. such as collections and complaints cause—here’s why.

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003_CUJ011617 3 1/12/2017 5:48:56 PM EDITOR’S NOTE www.cujournal.com One State Street Plaza, 27th floor, New York, NY 10004 Tel 212.803.8200 Fax 646.264.6800

Lisa Freeman Editor in Chief Editor in Chief Lisa Freeman 561.429.6107 [email protected] Assistant Managing Editor Aaron Passman 785.979.4218 Resolve to check out the [email protected] West Coast Correspondent Michael Bartlett 702.256.8252 new Credit Union Journal [email protected] Reporter Palash Ghosh WELCOME TO THE NEW CREDIT UNION JOURNAL. unions can leverage the hidden opportunities and 212.803.8711 [email protected] After much thought, research and preparation, we mitigate the challenges that abound in the market Technology Correspondent are starting o the new year with a newly inspired today. W.B. King 914.671.6421 [email protected] monthly magazine, as well as a totally reimagined On the digital side, the new CreditUnionJour- Associate Art Director website all designed with our deep commitment to nal.com o ers a fully responsive site that delivers Neesha Haughton 212.803.8815 the credit union community in mind. an enhanced cross-platform user experience with [email protected] Our goal: bring you even more of the in-depth a modern design o ering easier navigation, stron- analysis, intelligence and commentary you’ve come ger graphics and better overall access to content, Group Editorial Director, Banking & Capital Markets to depend on Credit Union Journal for in a crisp, such as the continuous scrolling page load func- Richard Melville compelling format, both online and in print. tionality. VP, Research Dana Jackson In each issue of the print publication, you can What hasn’t changed? Our dedication to the VP, Content Operations and expect to see beneath-the-surface insight into the credit union community. Building on our 20 years Creative Services Paul Vogel things that matter most to credit unions: lending, of covering this cooperative industry, our goal is to Director of Creative Operations technology, growth strategies, compliance issues provide you with the intelligence and resources you Michael Chu and more, teamed up with visuals that not only grab need to continue thriving in an increasingly compet- Director of Content Operations Theresa Hambel the eye but inform. itive marketplace. Moreover, longer-form stories o er the opportu- Publisher John Wiley nity to dig deeper. We don’t just report what hap- Editor in Chief Lisa Freeman can be reached at lisa. 626.765.1256 pened—we examine what it means and how credit [email protected]. [email protected] Vice President of Sales, Banking & Payments Dennis Strong 212-803-8372 CALENDAR 2017 [email protected] Classified Advertising Director of Sales JoAnne Kao JANUARY FEBRUARY 26-MARCH 2 APRIL 10-14 212.803.8325 [email protected] CUNA Government Affairs Conference, Wash- NAFCU CEOs and Senior Executives Confer- JANUARY 15-18 ington Convention Center, Washington. ence, Fontainebleau Miami Beach, Miami, Fla. Customer Service CUNA Volunteer Conference, Montego Bay, for info: 800-356-9655, Ext. 5700 for info: http://www.nafcu.org/conferences/ [email protected] or (212) 803-8500 Jamaica. Venue: TBA For more information about reprints and for info: www.cuna.org APRIL 11-13 licensing content from Credit Union Journal, MARCH Cornerstone CU League Annual Meeting, please visit www.SourceMediaReprints.com or JANUARY 29-FEBRUARY 2 Omni Hotel, Fort Worth, Texas. contact PARS International Corp. CUES Symposium: A CEO/Chairman Ex- MARCH 27-30 for info: Tamra Fairbrother, 800-442-5762, (212) 221-9595 change, Frenchman’s Reef and Morning Star CUNA & Association of Credit Union Internal X 6632 Marriott Beach Resort, St. Thomas, VI. Auditors Internal Audit Certification School, Group Marketing Director for info: www.cues.org Orlando, Fla. Venue: TBA. APRIL 12-14 Jeannie Nguyen for info: www.cuna.org Mountain West 2017 Annual Convention, Marketing Manager Fairmont, Scottsdale, Ariz. Raquel J. Lucas FEBRUARY for info: Nicole Brusewitz, 720-479-3200 APRIL FEBRUARY 7-8 APRIL 17-19 CUNA Business Lending Roundtable, Tempe, APRIL 6-8 Ohio Credit Union League and Affiliates Annual Chief Executive Officer: Douglas J. Manoni Ariz. Venue: TBA. Hawaii Credit Union League Annual Meeting, Meeting, Hilton Downtown, Columbus, Ohio. for info: www.cuna.org Grand Hyatt Kauai Resort & Spa, Kauai. for info: (800) 486-2917, ext. 2447 Chief Financial Officer: Michael P. Caruso for info: (808) 941-0556 Chief Revenue Officer: Marianne Collins FEBRUARY 21-23 APRIL 20-21 EVP & Chief Content Officer: David Longobardi NAFCU Strategic Growth Conference, Francis APRIL 6–8 Michigan Credit Union League Annual Chief Marketing & Digital Officer: Minna Rhee Marion Hotel, Charleston, S.C. Illinois CU League Annual Meeting, Renais- Meeting, Amway Grand Plaza Hotel, Grand SVP, Conferences & Events: John DelMauro for info: http://www.nafcu.org/conferences/ sance Schaumburg Hotel & Convention Rapids, Mich. SVP, Human Resources: Ying Wong Center for info: (800) 262-6285, ext. 231 for info: Melanie J. Murphy 800-942-7124

4 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

004_CUJ011617 4 1/12/2017 5:48:57 PM GAC17_speakerad_10.5x12.5_PRINT_PDFX1a.pdf 1 1/3/17 11:51 AM

GEN. COLIN POWELL, USA (RET.) FORMER UNITED STATES SECRETARY OF STATE

CY DERRECK KAYONGO BUSINESS INNOVATOR AND CEO FOR CIVIL CMY AND HUMAN RIGHTS K

KAT COLE GROUP PRESIDENT, FOCUS BRANDS

The 2017 CUNA Governmental Affairs Conference is the premier conference for political impact, credit union networking, and industry insights. BOB SCHIEFFER FORMER MODERATOR OF FACE THE NATION AND FORMER CBS NEWS CHIEF WASHINGTON CORRESPONDENT

005_CUJ011617 5 1/9/2017 4:55:38 PM VIEWS & OPINIONS

New year, new name, same mission as NAFCU marks 50th anniversary As the new Congress and administration are beginning to take shape, the credit union trade association is ramping up lobbying eorts even as it celebrates a major milestone. BY RICHARD L. HARRIS

IN 2017, NAFCU signed to address bad actors on Wall marks its 50th — Street. Housing nance reform will golden — anniver- also be a major focus. Reform that sary, and we are guarantees access to the secondary kicking it o in mortgage market for credit unions high gear! and ensures fair pricing based on As a new Con- loan quality, not just volume. NAF- gress and administration take shape, CU will also continue to advance the NAFCU has hit the ground running, adoption of national data security urging the newly elected as well as standards for all that hold consum- returning lawmakers for critical reg- ers’ personal nancial data (similar ulatory relief for our industry. The to the Gramm-Leach-Bliley Act stan- association also has been front and dards credit unions already adhere center working with the incoming to). Another top priority is the inter- administration and continuing its ef- change issue; NAFCU will continue forts with our regulators to improve to push to repeal the failed Durbin the business environment for credit amendment and ght against any Bloomberg News unions’ growth and future prosperity. eorts to expand interchange price As NAFCU celebrates its 50th anniversary, the trade group is also gearing up to NAFCU seamlessly adopted its caps to credit cards. It will also con- lobby a new Congress and administration. Above, U.S. Rep. Paul Ryan is sworn is as name change to more accurately re- tinue to press the Federal Reserve Speaker of the House for the 115th Congress. ect a membership that welcomes all to lessen the negative burden of the ty debt collection. they know us, their constituents. federally insured credit unions. The Durbin price caps. Undoubtedly, the new year will We should invite lawmakers to visit association maintains its focus on The association has also actively have its share of challenges. Top our credit unions or we should visit issues aecting credit unions at the engaged with NCUA as the agency among them will be the new regula- them in their district oces as well federal level. Our mission is unwav- continues to develop its cybersecu- tions pertaining to prepaid accounts, as Washington. Our rst 50 years of ering: To provide the best in federal rity examinations. NAFCU has joined mortgage servicing, the Home Mort- success have been built on a solid advocacy, education and compliance with CUNA to defend credit unions’ gage Disclosure Act (HMDA), and the foundation of advocacy at the feder- assistance to our members, and to interests against the pending bank- credit card element of the Military al and grassroots level. Today, with advance our goals for advocacy. Spe- ers’ lawsuit over NCUA’s member Lending Act (MLA). I am condent, so many competing interests on the cically, NAFCU intends to leverage business lending rule. NAFCU has with NAFCU’s exceptional sta and regulatory and legislative front, we 2016’s legislative successes especially been particularly vocal in its con- services, we will have an outstanding must redouble our eorts to advance those improvements related to the cerns about potential NCUSIF premi- array of resources available to help the credit union dierence to ensure Dodd-Frank Act to help alleviate the um charges and in urging the NCUA credit unions deftly navigate these a prosperous future for our industry. unnecessary burden placed on cred- to work to ensure a TCCUSF refund new regulations. With all of us working together, we it unions. for credit unions as soon as possi- Ultimately, as part of their ded- are sure to make our golden year an Going forward, NAFCU will keep ble. In fact, NAFCU launched a new icated advocacy eorts, NAFCU outstanding triumph! the protection of credit unions’ NCUA Money Watch page to analyze sta has laid critical groundwork Richard L. Harris is president tax-exempt status as its top prior- NCUA’s budget and nances. NAFCU for us. But as they say, all politics is and CEO of Caltech Employees FCU ity. We will urge the CFPB to use is also in constant contact with CFPB local. To leverage the true value of and chairman of the National Asso- its statutory authority to exempt regarding its anticipated rulemakings credit unions among lawmakers, ciation of Federally-Insured Credit credit unions from regulations de- on overdraft programs and rst-par- it is incumbent on us to make sure Unions.

6 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

006_CUJ011617 6 1/12/2017 5:36:37 PM OPINIONS Why banks aren’t lining up to convert to credit unions

BY KEITH LEGGETT this could make it di cult to On top of that, bank bal- credit unions. Most banks are sumer lenders. A bank con- convert from a stock entity to ance sheets are in general commercial lenders, while verting to a credit union would CREDIT a credit union. fundamentally di erent from most credit unions are con- CONTINUED ON PAGE 17 union advocates argue that if the credit union charter and its tax exemption o er such a big competitive advantage, why aren’t banks lining up to convert? Let me begin by saying I believe in charter choice. A nancial institution should have the freedom to select the charter that best aligns with its business model. However, a conversion of a bank to a credit union is extremely rare. I know of only two instances where such a conversion took place in the last two decades – ESL Federal Credit Union and Thrivent Federal Credit Union. In both instances, the banks that converted to credit unions were mutual banks, which are similar to credit unions in structure. The rarity of a bank con- GOOD FOR YOUR MEMBERS verting to a credit union points out the di culty – if not impos- AND GOOD FOR YOU. sibility – of this event, especially for a stock-owned bank. Member satisfaction and financial security are critical to members at the right time, in the right place and with the First of all, credit unions are your success. That’s why we continually invest in every right message. Our customer sales and service experts offer aspect of the TruStage™ Insurance Program. knowledgeable guidance to products that fit. nancial cooperatives owned by their members, while most Our integrated portfolio includes auto, home, life, And it all adds up. With more than 16 million members 1 banks are owned by stockhold- accidental death & dismemberment and health insurance protected and over 11% year over year non-interest income to help your members build financial security for their growth for participating credit unions,2 you can feel very ers (my following comments families. Our multimedia marketing intercepts your good about making TruStage available to your members. will be focused on banks owned by shareholders). Contact your CUNA Mutual Group representative at 800.356.2644 or visit www.cunamutual.com/TruStage A stock banking organization converting to a credit union would have to rst com- pensate its shareholders for 1 TruStage Insurance Policyholder Analysis, July 2015 their ownership interests. This 2 TruStage Insurance Program Analysis of 2015 non-interest income median growth rates for credit unions with >$1B in assets could e ectively wipe out the TruStage® Life Insurance is offered by TruStage Insurance Agency, LLC and underwritten by CMFG Life Insurance Company. The insurance offered is not a deposit, and is not federally insured, sold or guaranteed by your credit union. CUNA Mutual Group Proprietary and Confidential. Further Reproduction, Adaptation, or Distribution Prohibited. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a capital of the entity that is con- mutual insurance holding company, its subsidiaries and affiliates. TSIP-1422586.1-0216-0318 CUNA Mutual Group, 2016 All Rights Reserved. verting to a credit union. Thus, the proposed credit union convert would not have enough capital to operate safely. So,

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 7

007_CUJ011617 7 1/12/2017 5:36:41 PM WASHINGTON WATCH

Senate banking panel takes shape BY IAN MCKENDRY

WASHINGTON THE SENATE BANKiNG Joining the ranks are Sens. Brian Schatz, Committee will have six fresh faces in D-Hawaii, Chris Van Hollen, D-Md., and the new Congress as Republicans grap- Catherine Cortez Masto, D-Nev. ple with a slimmer majority. But Washington observers said the dy- The panel roster includes Sens. David namics will likely be similar to that of the Perdue, R-Ga., Thom Tillis, R-N.C., and previous Congress, with policymaking like- John Kennedy, R-La. ly up to Sen. Mike Crapo, R-Idaho, who is In a statement, Perdue said he will car- chairing the committee, and Sen. Sherrod ry the GOP torch to reduce regulations on Brown, D-Ohio, the top panel Democrat. nancial institutions. “We need to disman- However, there are high hopes for a bet- Bloomberg News tle the regulatory regime of Dodd-Frank, ter working relationship between Brown “We need to dismantle the regulatory regime of Dodd-Frank, encourage entrepre- encourage entrepreneurial innovation, and Crapo. The committee may also be neurial innovation, and unleash economic growth to get Americans working again,” and unleash economic growth to get Amer- more active under Crapo. said Sen. David Perdue, R-Ga., one of the new members of the Senate Banking icans working again,” said Perdue. Of note is that Nevada will now have Committee. Democrats, meanwhile, benet from both its Senators on the panel while New ocratic leader, Sen. Charles Schumer will to be active in any debate over housing an additional seat on the panel. They now York — the nancial center of the U.S. — will carry signicant weight, observers said. nance reform, given that the Silver State have 11 seats, compared to Republicans’ 12. have none. Still, in his role as Senate Dem- But the Nevada senators could prove was ground zero for the mortgage crisis.

PEOPLE Direct Federal Credit Union, Need- ham, Mass., has named Brian Me- deiros as VP-information technology. Financial Center First Credit BRIAN MEDEIROS MICKEY KINDER JIM HUNSANGER ROB JOHNSON WILLIAM TONG MISTY MCQUAID Union, Indianapolis, has hired Mickey Direct FCU Financial Center First MSUFCU MSUFCU Vantage West CU Catholic FCU Kinder as VP of operations. Michigan State University Fed- eral Credit Union, East Lansing, Mich., promoted Jim Hunsanger to chief risk officer andRob Johnson to chief internal auditor. Vantage West Credit Union, Tuc- son, Ariz., has named William Tong as senior relationship manager. SAYLA EISNER-MIX GEOFF BULLOCK TY MATLOCK SARAH SOMMERS PAULA WYGONIK CATHY VACANTI ALM Misty McQuaid, member contact First New York FCU Firefly CU United FCU United FCU United FCU Veridian CU center supervisor at Catholic Federal Credit Union, Saginaw, Mich., was Minn., hired Geoff Bullock as its finan- Sommers as an associate director on its branch manager of its upcoming location chosen as the 2016 Deborah L. Frisch cial education specialist. board of directors. in Papillion, Neb. Employee of the Year. United Federal Credit Union, St. United Federal Credit Union, St. IBM Southeast Employees’ First New York Federal Credit Joseph, Mich., has named Ty Matlock Joseph, Mich., has named Paula Wygo- Credit Union, Delray Beach, Fla., said Union, Albany, N.Y. named Sayla Eis- as an associate director on its board of nik as an associate director on its board its president/CEO Michael Miller was ner-Mix as its school banking program directors. of directors. named to the South Florida Business and marketing coordinator. United Federal Credit Union, Veridian Credit Union, Waterloo, Journal’s Top 100 Power Leaders in Firefly Credit Union, Burnsville, St. Joseph, Mich., has named Sarah Iowa, hired Cathy Vacanti Alm as Banking & Finance.

8 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

008_CUJ011617 8 1/12/2017 5:36:47 PM WASHINGTON WATCH

House banking panel sees shuffle BY IAN MCKENDRY

WASHINGTON THE HOUSE FINANCIAL “I actually think in some ways this re- Services Committee will see a shuing designation of the GSEs to the housing and of the leadership of its subcommittees insurance subcommittees is a back to the in the new Congress as it welcomes 10 future move. It probably puts them back new Republican members. where they belong,” said Rep. French Hill, The shake-up on the GOP side is largely R-Ark., in an interview. Hill will serve as the due to eight committee members from the Republican committee whip. “I do believe previous Congress either retiring or losing the priorities of the committee will start elections. with a review of the Financial Choice Act.” Rep. Bill Huizenga, R-Mich., will suc- Rep. Blaine Leutkemeyer, R-Mo., will be Bloomberg News ceed Garrett as chairman of the capital chairman of the nancial institutions and U.S. Rep. Jeb Hensarling, R-Texas, begins his final two years as House Financial markets subcommittee, but oversight of consumer credit subcommittee. Services Committee chairman, due to term limits on such leadership posts. the government-sponsored enterprises, The monetary policy and trade sub- which had previously been with that pan- committee, previously chaired by Huiz- chaired by Rep. Steve Pearce, R-N.M. Rep. with Rep. Jeb Hensarling, R-Texas, as chair- el, will now shift to the subcommittee on enga, will be led by Rep. Andy Barr, R-Ky., Ann Wagner, R-Mo., will chair the oversight man of the committee. Rep. Maxine Wa- housing and insurance, which will be over- and the task force to investigate terrorism and investigation subcommittee. ters, D-Calif., top Democrat and Rep. Pat- seen by Rep. Sean Duy, R-Wis. nancing will be a separate subcommittee The top three spots remained the same rick McHenry, R-N.C., as vice chairman.

PEOPLE Beach Municipal Federal Credit Union, Virginia Beach, Va., elected Nianza E. Wallace II, Robert W. Hall, Beach and Joelle Talbot to its NIANZA WALLACE II ROBERT W. HALL JOELLE TALBOT LORI LUNDY EDDIE HEPPES ARIEL RIVERA board of directors. Beach Municipal FCU Beach Municipal FCU Beach Municipal FCU Crane CU DeLeon & Stang CU of America Crane Credit Union, Odon, Ind., promoted Lori Lundy, to asset recovery manager, named Danielle Combs as AVP–risk management officer and promoted Tim Lukomski to senior vice president and chief financial officer DeLeon & Stang Certified Pub- lic Accountants promoted Eddie Heppes to supervisor. DANIELLE COMBS BRAD CALHOUN KENNETH P. LEVY JAMES CARROLL GEORGE NAHODIL CHUCK PURVIS Credit Union of America, Wichita, Crane CU First Tech FCU CorePlus FCU Suffolk FCU Members 1st FCU Coastal FCU Kan., hired Ariel Rivera as branch manager. Suffolk Federal Credit Union, 2016 Executivee Management Awards. Paso, Texas, was selected as one of the First Tech Federal Credit Medford, N.Y., promoted James Car- Chuck Purvis, president and CEO six “Women of Impact” by El Paso Inc. Union, Mountain View, Calif., promot- roll to VP of facilities and services. of Coastal Federal Credit Union, Local Government Federal ed Brad Calhoun to chief retail and George Nahodil, EVP of retail Raleigh, N.C., was named 2016 Busi- Credit Union, Raleigh, N.C., said marketing officer. delivery, public relations and marketing at nessperson of the Year by the Triangle Dayatra Matthews, senior vice presi- CorePlus Federal Credit Union, Members 1st Federal Credit Union, Business Journal. dent-legal and compliance, was named Norwich, Conn., appointed Kenneth Mechanicsburg, Pa., was named a winner Marcela Navarrete, a board mem- to the Consumer Financial Protection P. Levy to its supervisory committee. of the Central Penn Business Journal’s ber of evolve Federal Credit Union, El Bureau’s Credit Union Advisory Council.

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 9

009_CUJ011617 9 1/12/2017 5:36:55 PM GROWTH STRATEGIES

After several strong years, how long can credit unions’ hot streak last? 2016 was another year of record growth for credit unions, but with several interest rate increases expected next year and in©ation on the rise, will the good times keep rolling? BY PALASH GHOSH

2016 WAS A GOOD YEAR FOR CREDIT past few years that it makes it hard- unions, continuing a run that has er and harder to keep up such pow- lasted for several years. But just how erful momentum from an ever-ele- A Very Good Year long can the industry’s hot streak vating base. CUs saw double-digit loan growth in the 12-month period last? “Our biggest challenges for loan that ended in Q3 2016, including more than $847 billion in According to data from the Na- growth over the next year will be total loans. Here are some highlights: tional Credit Union Administration, whether we can sustain the origi- total loans outstanding at federally nation volumes we have seen over Overall loan growth 10.1% insured credit unions reached $847.1 the past [two to three] years as rates billion at the end of the third quarter start to rise and competition for New auto loans 15.8% of 2016, a 10.1% jump from one year loan volume from both traditional earlier. On a year-over-year basis, and non-traditional lenders increas- MBLs 14% loans climbed in every major cate- es,” suggested Bob Stroup, consum- gory, including a 15.8% lift for new er loan product strategy director at New student loans 10% auto loans, a 14% rise in net member the $15.7 billion Boeing Employees business loan balances, more than Credit Union (BECU) of Tukwila, Total real estate loans 8.2% 10% growth in new student loans Wash. Source: NCUA and an 8.2% increase in total real Kam Wong, president and CEO estate lending. Credit union mem- of the $2.4 billion Municipal Cred- bership also surpassed the 106.2 it Union of New York City, noted “We must be cognizant of the fact look into credit union membership million-member mark during Q3, that while he anticipates continued that we will not only experience a in order to take advantage of their equating to approximately one-third growth in Municipal’s membership change in rates next year…but also superior rates,” he said. “Loan of the entire U.S. population. and loan portfolios in 2017, the im- a change in the regulatory environ- growth will depend largely on eco- Still, large CUs continue to post pending Fed rate hike may limit loan ment that we have learned to work nomic and ¥nancial conditions – we the biggest gains, outpacing their growth, particularly compared to with since Dodd-Frank became may see slowing in some important smaller peers. Indeed, some smaller 2016. But higher interest rates could law,” he explained. areas as the auto market looks to institutions (below $100 million in also help. In addition, market and consum- have plateaued and re¥nances will assets) actually lost membership. “The macro-economic changes er conditions may become more likely taper in 2017 if mortgage rates predicted in 2017 will undoubtedly volatile in 2017, Wong warned, continue to rise.” DARK CLOUDS AHEAD? bring new members through our which could lead to lower levels of Perc Pineda, senior economist at In spite of this year’s solid results, doors due to the fact that big banks consumer spending and the need the Credit Union National Associa- the normally sanguine NCUA Chair- will likely make more immediate for credit union members to have tion, believes loan growth and mem- man Rick Metsger warned of some and broader adjustments to the access to ¥nancing or credit. bership growth at credit unions will headwinds ahead. “Credit unions rate change, which could ‘price out’ remain positive in 2017, as house- must guard against risks on the many individuals from banking with HOMES, CARS AND DEPOSITS hold balance sheets continue to im- horizon like rising interest rates and them,” he explained. For the industry as a whole, Curt prove and the housing market stays regional economic downturns, par- Wong predicted that the great- Long, chief economist at the Na- in “recovery mode.” In particular, ticularly in [the] energy-producing est challenge for credit unions as a tional Association of Federal Credit Pineda said that auto lending at states,” he cautioned. whole next year will be facing the Unions, expects membership and credit unions will continue to grow, Ironically, growth has been so “challenge of change”—even when loan growth to remain strong. “As but at a weaker pace than in recent strong for credit unions over the the change could be positive. interest rates rise, more people will years.

10 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

010_CUJ011617 10 1/12/2017 11:58:51 AM TECHNOLOGY

Massive data breaches make news, but targeted attacks are bigger issue The number of headline-making hacks may have led consumers to stop taking notice, but credit unions need to remain vigilant as some warn of still more attacks ahead. BY W.B. KING

NEWS OF MASSIVE DATA BREACHES ARE and detection. so common now it’s easy for consumers Shoop noted that examples of popular to stop noticing, but credit unions cannot vendors include FICO Falcon Fraud Man- a ord to take such an approach, as some ager and Veran. The latter’s FRAMLx is a experts are expecting an increase in 2017. cloud-based fraud detection and anti-mon- According to a 2015 Deposit Account ey laundering software that reports in re- Fraud Survey, there was a 74% increase in al-time and is utilized by $3.7 billion-asset fraud attempts over 2014, and news head- University of Iowa Community CU. lines reect this trend. Throughout the For UICCU, which supports 146,000 year, many CUs experienced high levels of members at 15 branches, the lack of a sub- debit card fraud due to malware that was stantial fraud solution hindered the CU’s designed to extract member card data. ability to track fraudulent trends. According to Michelle Shoop, director “We had no BSA or fraud software, so of payments at Cornerstone Advisors, re- we were extremely limited in what infor- tailer data breaches can be on a grand scale mation we could access easily,” said Bank like Target or Home Depot, or be targeted Secrecy Act (BSA) Ocer Kris Ockenfels, strikes at the local convenience store. CU adding that the CU was unaware of poten- executives, she added, should be on the tial ATM and debit card fraud risks until lookout for “common-point-of-purchase” after deposits were returned via the Fed. and was split from the security side of op- adopting the solution there was eight to 10 fraud and “card-not-present” fraud, both “We now have ready access to transac- erations,” he said. “We were seeing a lot hours per day of work per investigator on of which she thinks will increase in 2017. tions data in ways we never dreamed of be- so new account fraud through the online these reports. “We needed to reduce the “Standard fraud solutions look at an in- fore. I can nd and tag high-risk accounts channel, check fraud and a little bit of card false positives and put a behavioral piece dividual card holder and the way that they based on multiple criteria,” said Ockenfels. fraud at the time.” behind it,” said Overin. spend, and try to identify an anomaly, but “Now, instead of thousands of dollars of Due to increasing fraud attacks, the de- When looking for fraud solutions, they don’t do is necessarily identify which new account ATM fraud losses, we can partment today has four analysts, an inves- Ockenfels, who said the CU vetted three merchant it is coming from or the loca- often pinpoint accounts at the highest risk tigator and Overin. Card fraud has grown vendors before selecting Veran, said ex- tion of that merchant or the device,” said for that type of fraud and drastically reduce signicantly in the last year, so now one ecutives shouldn’t look at costs alone, but Shoop. “Sometimes these alerts are a little our losses, sometimes even to zero.” employee is assigned specically to those rather at the potential savings. “We are too little and little too late.” Logix FCU in Burbank, Calif. has also cases, he noted. On average, there are ve now proactive rather than simply reactive To protect against fraud, she said, CUs adopted Veran’s solution, and Matt Over- card fraud reports each week. and the solution is a raging success,” said must have risk management processes con- in, manager of fraud risk management, Overin said the manual data reports Ockenfels. solidated across all product lines. “There said that the credit union avoided more became cumbersome and costly, espe- Shoop said organizations that can’t af- should be a formal or informal information than $10,000 in fraud losses within just a cially with the number of false positives, ford a fraud/risk department should still sharing forum so that the people who han- few weeks of launching FRAMLx. which led the credit union to implement a have one point person who can work with dle check fraud and the people who handle Overin explained that he was hired in fraud solution. “The reports were doing a the vendor on fraud-based issues and con- account opening fraud and card fraud are 2013 after Lockheed Federal Credit Union good job and keeping losses down, but it cerns. “Not every credit union needs to all talking to each other,” she said. was rebranded as Logix FCU. As a result was taking a lot of our day going through write their own rules and many vendors While there are plenty of fraud solu- of the name change and open member- these false positives,” said Overin about don’t let credit unions have access to these tions on the market, there is not yet a silver ship enrollment, the CU realized an uptick the need of Veran. “We couldn’t always systems,” said Shoop. “But credit unions bullet. But that can’t stop CUs from always in fraud attacks. “In 2013, the Fraud Risk follow up with real fraud reports with law need to know what is going on so that they rening their approach to fraud prevention Management department was founded enforcement.” He estimated that prior to have oversight over these vendors.”

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 11

011_CUJ011617 11 1/12/2017 5:36:57 PM LENDING

Could the dreaded subprime auto lending bubble materialize in 2017? The data shows an increase in delinquency rates for consumers with poor credit, but the bulk of troubled subprime loans aren’t coming from credit unions — for now, at least. BY PALASH GHOSH

THROUGHOUT 2016, ECONOMISTS the health of the overall subprime auto warned of a catastrophic bubble de- loan market. Bubble Trouble? veloping in the nation’s $1 trillion-plus “Subprime and overall auto loan orig- Financial institutions overall have tapped the brakes on sub- subprime auto loan market that didn’t inations remained strong and auto loan prime auto loans. materialize — but what does 2017 hold? delinquency rates were low and relatively Experian’s State of the Automotive Fi- at,” the NY Fed wrote. “Yet disaggregat- how much the number of loans nance Market report suggests while auto ing results by credit score revealed sig- offered to subprime consumers loans are ourishing, nancial institutions nicantly higher, and rising, delinquency 4.5% have oered fewer loans to subprime con- rates among subprime auto loans.” fell from prior year sumers. Indeed, the credit bureau said loans oered to subprime consumers AN INCREASE, BUT NO SPIKE (those with credit scores below 620) fell Jason Laky, Senior Vice President-Au- how much the number of loans by 4.5% from the prior year, and loans to tomotive & Consumer Lending Busi- offered to deep-subprime deep-subprime consumers (credit scores ness at TransUnion, said while the 2.8% between 300 and 500) declined by 2.8% subprime auto loan market has wit- consumers fell from prior year to their lowest level since 2011. nessed an increase in delinquencies, Source: Experian Meanwhile, newly originated loans he would not characterize it as a spike, to prime borrowers increased by 2% to rejecting the notion that the market account for almost 60% of all auto loans nds itself on the cusp of a bubble. vember to early May this year when aver- League of Southeastern Credit Unions nanced in the third quarter of 2016. “First, the economy is in pretty good age prices fell as low as $24 per barrel,” he and A«liates, said there are some “For anyone making doomsday pre- shape,” he said. “GDP is growing mod- said, which led to a brief period of layos concerns about a potential bubble in dictions about a subprime bubble in the erately and we continue to see healthy that had an impact on consumer wages for the subprime auto loan market. auto industry, [the third quarter of 2016] increases in employment each month. It about nine months. This was further com- Citing recent data from Edmunds. provides a stark reality check,” said Me- is hard to see a scenario of mass defaults plicated, he said, by the rising volume of com, Hopkins noted that car buyers who linda Zabritski, Experian’s senior director as long as this is the case.” Secondly, he sub-B paper [loans] that [were] issued in are “upside down”have hit a new record, of automotive nance. “This quarter’s asserted, autos are a necessity for most 2014 and 2015 by many [nancial institu- rising to 32%, or an increase of nearly 20 report shows lenders are reducing the Americans; without a car, it is di«cult tions]—including credit unions—thirsting percentage points from 2009. The previ- percentage of loans to the subprime and to get to work. “As a result, people pri- for loan demand. ous high was 29.2%, in 2006. deep-subprime risk tiers while increasing oritize their auto payments,” he stated. In fact, Turner noted, between the “If the economy goes into a decline the percentage to consumers with good “TransUnion has performed a number of third quarter of 2015 and the second quar- this will be the biggest single factor caus- credit.” studies on this subject, and we found that, ter of 2016, nearly 60% of newly originat- ing defaults to increase,” Hopkins said, Moreover, credit unions have made even during the last recession, auto de- ed subprime vehicle loans turned delin- noting he’s not expecting “a total eco- some gains in market share. “Credit linquency remained low relative to other quent within the rst 60 days of issuance. nomic collapse will occur in this sector.” unions typically have the most competi- credit products.” “Subsequently, oil prices have rebounded Still, Hopkins cautions that if the economy tive interest rates, so any time rates jump However, Brian Turner, president to $48 to $50 per barrel, but the impact heads back into recession it could cause overall, it’s a natural reaction for credit and chief economist at Meridian Eco- will take a little longer for the consumer increases in subprime auto loan delin- unions to see a rise in their market share,” nomics LLC, warns that defaults and to recover until job and wage growth re- quencies and net charge-os. Even so, Zabritski added. However, a recent quar- delinquencies among subprime loans turn.” Hopkins believes subprime auto loans still terly report on household debt and cred- have escalated throughout 2016. Keith Hopkins, vice president of oer a good growth opportunity for credit it from the Federal Reserve Bank of New “Much of the increase is attributable product support for LEVERAGE, unions — as long as these loans are “prop- York raises some potential alarms about to [the] collapse in oil prices from last No- a wholly owned subsidiary of the erly vetted.”

12 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

012_CUJ011617 12 1/12/2017 5:36:58 PM DOWNLOAD THE

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013_CUJ011617 13 1/9/2017 4:55:41 PM TECHNOLOGY FEATURED COMPANY

How much will credit unions spend to make the most of FOM expansion? The potential for growth as a result of NCUA’s revised eld-of-membership rule could be dwarfed by the costs of the technolo¡y needed to make the most of the opportunity. BY PALASH GHOSH

EVEN POSITIVE CHANGES HAVE A COST. Additionally, he said, CUs may That may well be the case with the need systems upgrades to support National Credit Union Administra- fulllment of an uptick in transactions tion’s proposed updates to the eld from lending and collections to service of membership rules. Though credit requests such as lost cards and disput- FEATURED COMPANY unions are largely pleased with the ed transactions, not to mention com- Visit changes, gearing up to leverage them plaints. may require costly technological up- “Implementing the right technolo- grades, experts are predicting. gy (including automated workow and CUJournal.com Ted Bilke, the Dallas-based pres- task queuing, integrated third-party ident of Symitar, a San Diego-based services and data sources, and robust for the latest core processing and technology ven- reporting) to help streamline process- dor, said one concern technology can es will allow the credit union to eec- address is risk related to not knowing tively scale to the new volumes with- breaking news, just who these new members really out needing to signicantly expand are, for example. sta,” Frantzen explained. white papers, “Credit unions should upgrade “Finally, credit unions will need to those systems that help the sta stay be cognizant of unique regulatory re- Tech providers including Ted Bilke of Symitar and Theresa Benevidez, above, said CUs will need to invest in upgrades to leverage the new field of membership rules. updated on the risks associated with quirements of newly supported areas and interactive serving unknown and riskier mem- and any unique characteristics of a bers,” he said. “Some of the risk could newly accessible member base. Con- cost? According to Frantzen, it’s often “clear, achievable” return on invest- eMarketplace. be mitigated through better analytics, gurable technology that allows for more expensive for credit unions to re- ment. “This ROI is often fueled by understanding the risks upfront and unique data capture, workow, valida- main on legacy systems, constrained the credit union’s ability to gain ef- developing strategies to mitigate those tion rules, and decisioning and pricing by fewer capabilities. ciencies such as supporting more risks.” guidelines for dierent geographic ar- “Credit unions [which] cannot oer members with the same number of Kris Frantzen, Malvern-Pa.-based eas and member groups will be key to robust omni-channel access to mem- employees. If you nd yourself adding senior product manager at Temenos, successful expansion.” bers run the very real risk of alienating employees to support growth, it may a company that creates software for - Theresa Benavidez, president of existing members — let alone trying to be time to look at new technology.” nancial institutions, noted issues from San Diego-based Corelation Inc., sug- add new members,” he said. “Using CU*Answers CEO Randy Karnes self-service options to compliance. gested CUs also should ensure their manual or segmented technology in added that upgrades are cheaper “Robust omni-channel applications core systems can easily integrate with the back-oce for origination, mem- than most think — if CUs are willing will allow consumers to carry out their today’s — and tomorrow’s — third-par- ber service, or collections activities to do the due dilligence. “Do your re- nancial transactions — such as orig- ty solutions. “Technology changes oc- can mean losing new business, low search, but do not think about build- inating new accounts, loans or credit cur so fast today that it is mandatory member satisfaction ratings, nancial ing it once; You will need multiple cards — when and how they wish,” he your credit union maintain pace,” Be- losses and higher expenses.” online approaches that are easy to observed. “For many new members, navidez explained. “Having a core that Benavidez agreed, summing it up update, easy to replicate and easy to this will be a matter of preference. In can enable this pace is a huge feather this way: “Is there a nancial institu- retire. Do not settle for a single app many cases, expansion will mean new in your cap. It allows you to freely… tion that solely relies on the branch – nd a platform and approach that members will not have an existing look at new apps that will serve your visit?” she asked. ”Perhaps, but are can generate virtual oerings and branch easily accessible to them—mak- members’ evolving needs.” they destined to grow? Probably not.” support system quickly, cheaply, and ing virtual interaction a necessity.” But just how much will all of this The key, Bilke said, is to look for over and over.”

14 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

014_CUJ011617 14 1/12/2017 5:37:01 PM GRANDSTAND FEATURED COMPANY CUs push CFPB reform as new Congress starts

BY AARON PASSMAN

REGULATORY REFORM AND SIGNIFICANT CHANGES CFPB reforms and accountability, including replacing to the Consumer Financial Protection Bureau the director with a commission” — CUNA proposed are at the top of the must-do list for the new Con- changes to how the bureau is funded and suggested gress, according to the two major credit union increasing the threshold for CFPB supervision from trade associations, both of which have released $10 billion to $50 billion, along with urging Congress their priorities for the coming year. to repeal the bureau’s UDAAP authority and more. Along with protecting the In its letter, CUNA primarily stuck to CFPB mat- tax exemption, both the Credit ters — including proposals from the bureau on pay- Union National Association and day lending and arbitration — while NAFCU hit on a the National Association of Fed- number of other credit union priorities, including FEATURED COMPANY erally-Insured Credit Unions are repeal of the Durbin amendment, Visit urging lawmakers to exempt cred- protecting recent changes to NC- DAN BERGER it unions from CFPB rulemaking, UA’s eld-of-membership rule, NAFCU with NAFCU citing Section 1022 of clarifying Military Lending Act re- CUJournal.com the Dodd-Frank Act as the vehicle quirements, national data security through which the bureau can make CUs exempt. standards for retailers (a matter for the latest “As presently structured, the CFPB is an anomaly JIM NUSSLE where the two groups have largely CUNA in the federal government,” CUNA President and CEO been in sync). Jim Nussle wrote in a letter to legislators. “The CFPB’s “For both new and returning breaking news, extraordinary authority is vested in a single person members of Congress, it is vital they understand the absent of appropriate levels of Congressional over- unique value of credit unions — not-for-prot, mem- white papers, sight. Conforming the CFPB to include a multi-member-focused nancial institutions — in America’s nan- ber commission would enhance consumer protection cial landscape,” NAFCU President and CEO Dan Berg- by ensuring that diverse perspectives are included in er wrote. “We welcome the opportunity to work with and interactive nal rules and prevent disruptions and market uncer- Congress and the Trump administration to promote tainty caused by personnel changes.” a positive business environment that will allow credit eMarketplace. While NAFCU’s wording regarding CFPB-related unions to succeed and help our nation’s economy to priorities was broad — promising to “seek greater prosper.”

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 15

015_CUJ011617 15 1/12/2017 5:37:04 PM GROWTH STRATEGIES

The $15 question: will minimum wages at CUs continue to rise in 2017? A number of CUs have already begun to raise their minimum wage but it remains to be seen whether legislative action or market pressures will spread the trend more widely. BY PALASH GHOSH

THE FEDERAL MINIMUM WAGE STANDS account fee schedule – thereby foregoing at $7.25 per hour, but recent credit about $600,000 in annual revenue. Far above the minimum union actions—along with a broader Mecca said the fee eliminations will Some CUs are betting that starting wages far above the federal mini- national movement—are helping to have the “larger impact” than the minimum – in some cases more than double – will pay off with a higher push that gure higher. mum wage increase. “We expect it to be caliber of employee and less turnover. Here’s a look at the federal Earlier this year, Coastal Federal Cred- another decision point that will help us minimum wage for the last two decades. it Union, a $2.8 billion institution based continue to attract new business and gen- per hour (Current federal minimum wage, in Raleigh, N.C., announced that it will erate revenue to oset whatever we’d lose $7.25 established 2012) hike its minimum wage for employees to from not charging those fees,” he added. $12.50 per hour, whether they work full- Looking ahead, Mecca doubts that the $6.55 (established 2008) time, part-time or on a temporary basis. state of North Carolina will boost its min- “The living wage rate for a single per- imum wage in 2017. “It doesn’t seem to $5.85 (established 2007) son in our marketplace [Wake County] be a high priority for our General Assem- (established 1997) to avoid poverty is $11.09 per hour,” said bly,” he said. “And while our new gov- $5.15 Coastal FCU’s president and CEO, Chuck ernor [Democrat Roy Cooper] is more $4.75 (established 1996) Purvis. “As a responsible corporate citi- likely than his predecessor [Republican zen, we felt it was time for Coastal to take Pat McCrory] to push for it, he’ll have dif- Source: U.S. Department of Labor the initiative to help our employees.” culty getting his own agenda [passed].” Joseph Mecca, Coastal’s manager of aried and management employees. California also recently passed legislation marketing strategy and communications, MORE UNIVERSITY CUS SIGN ON “This change represents a signicant to increase the minimum wage to $15 per explained the CU sought to “ensure that Coastal follows in the footsteps of Uni- compensation improvement for our part- hour by Jan. 1, 2022, for organizations even our newest and lowest-paid em- versity of Wisconsin Credit Union, a ners,” said Notre Dame FCU President that employ 26 or more people; For those ployees could aord to live comfortably. $2.3 billion institution based in Mad- and CEO Thomas J. Gryp. “This wage and employers with 25 or fewer workers, the While we based our number on Wake ison, Wis., which announced last PTO adjustment simply acknowledges minimum wage will reach $15 per hour County statistics, many of our employees summer that by September 2017, it how invaluable our [employees] are to by Jan. 1, 2023. And voters in Arizona, live in [other North Carolina] counties will boost the minimum wage paid to our members and to the overall success Colorado, Maine and Washington have with [even] lower living wages, so they’re its employees to $15 per hour, a move of our credit union.” also passed measures to raise their re- able to stretch a paycheck even further.” that will impact about one quarter of spective minimum wages. Arizona, Colo- But Mecca concedes that the new the credit union’s more than 500 em- NATIONAL MOVEMENT rado, and Maine will incrementally raise policy will only impact a handful of its ployee-strong workforce. Meanwhile, across the nation, activ- their minimum wages to $12 an hour by employees. “It primarily helps tellers Another university credit union, No- ists are seeking to raise the minimum 2020. Washington’s minimum wage will who came to Coastal as part of our merg- tre Dame Federal Credit Union, a $488 wage to $15 per hour, more than be increased incrementally to $13.50 an er with Freedom Credit Union,” he ex- million institution based in Notre Dame, double the current federal minimum hour by 2020. plained. “This move gives them a raise Ind., just hiked its minimum wage to wage. But some action is already tak- Questions remain, however, about and formalizes our commitment to start- $13.50 per hour. That increase will go ing place at the state level. how President-elect Donald Trump and ing wages over the local living wage.” into eect in February 2017, and along During 2016, New York passed a law the GOP-controlled Congress will prior- Moreover, moving up the lowest lev- with that the credit union is set to elim- that calls for raising the minimum wage itize raising the federal minimum wage. els of the pay scale will not lead to higher inate its two-tier system for paid time o to $15 per hour by the end of 2018. Wash- Coastal FCU’s Mecca noted that, for wages for everyone else, he noted. (PTO) for exempt and non-exempt part- ington D.C. then enacted a law to raise the moment, 29 states have minimum In addition, as of Jan. 1, Coastal FCU ners. Consequently, hourly workers will the minimum wage in the District of Co- wages that are already higher than the eliminated almost half (20) of its member accrue the same PTO benets as their sal- lumbia to $15 per hour by July 1, 2020. CONTINUED ON PAGE 17

16 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

016_CUJ011617 16 1/12/2017 5:37:05 PM GROWTH STRATEGIES

Some CUs are on the salary frontier CONTINUED FROM PAGE 16 federal minimum. “And several of those informed,” Bratsakis added. Brian Turner, president and chief other level appropriate to the markets [states] have auto- Paul Guppy, vice president for re- economist at Meridian Economics they serve? matic adjustments search at the Washington Policy Center, LLC, believes it would be an “uphill Andrew Downin, managing director in place, so I don’t a Seattle-based think tank, also does battle” to achieve a $15 per hour min- of research at the Filene Research Insti- think a Trump not think Trump’s presidency will have imum wage, but $10 per hour is “very tute, thinks they will. “This ts into the presidency will in- much eect on whether states raise their reasonable” to expect—something credit union movement’s philosophy of uence much on a own minimum wag- that President-elect Trump has sup- ‘people before pro ts,’” he said. “Also, it state-by-state ba- es. “That policy ported in the recent past. is becoming increasingly critical for cred- CHUCK PURVIS sis,” he added. change is usually de- “One of the alternatives that Mr. it unions to attract, develop and retain Coastal FCU John Bratsakis, termined by in-state Trump has suggested is an expansion of top talent. From a purely competitive president and CEO political dynamics,” the Earned Income Tax Credit to include standpoint, many credit unions may look of the MD|DC CU Association, said there he observed, add- a provision that osets child-care expens- to higher pay and bene ts as a way to is “clearly a national trend” toward es- ing that the power es,” Turner said. “That would most bene t stand out from other employers.” ANDREW DOWNIN tablishing a $15 minimum wage. “Here in Filene Research Institute labor unions wield the single-family parent households that Notre Dame FCU’s Gryp said that he the Washington metro area, credit union in various state leg- the Democrats have hopes more nancial institutions reeval- employees working full time, generally islatures can have a signi cant impact on targeted with their uate how important their lowest paid speaking, are already making above the minimum wage discussions. minimum-wage employees are to the success of their or- current minimum wage,” he said. “As the Guppy suggested two factors are message. It’s also ganizations. District [of Columbia] continues to phase in play when considering which states favored by a large “Wouldn’t it be nice if more private in its $15 minimum wage, credit unions might hike their minimum wages. “First, number of econ- sector businesses were proactive in tak- will be looking at any potential impact I think a state is more likely to raise its omists, because it ing care of their employees?” he asked. and the possibility that some salaries will minimum wage if it is a ‘blue’ state, ac- BRIAN TURNER would be based on “If that was the case, the minimum wage have to be re-aligned to correspond with cording to the results of the last [pres- Meridian Economics LLC a family’s income, would be irrelevant, regardless of where a higher minimum wage.” idential] election,” he said. “Second, not tax liability. It it was set. Hopefully the trend of busi- MDDCCUA is “closely watching” the states that are not ‘right-to-work’ states also shifts the boost in pay to the tax code nesses raising the minimum wage for developments in other states and met- are more likely to raise their minimum instead of [upon] the employer.” their employees will continue, creating ropolitan areas on the minimum wage wage because unions are much more But will more credit unions enact a the market pressure to improve wages issue “to keep our member credit unions powerful in these states.” minimum wage – either for $15 or some without government intervention.” Why banks aren’t lining up to convert

CONTINUED FROM PAGE 7 probably exceed the aggregate member not put prepayment penalties in their While a small bank in a limited geo- customers as members. But this would business loan cap of 12.25% of assets and loans. This could force a bank converting graphic area may be able to meet the just make a mockery out of the eld of would need to shrink its business loan to a credit union to modify its loan terms eld of membership requirement, a membership requirements. portfolio – most likely by shedding these and once again possibly divest loans that larger bank would have diculties. In summary, the process for a bank loans (possibly at a loss) to comply with do not conform to legal requirements. Another common bond operational converting to a credit union is extremely the law. Another complication deals with issue may require the converting bank dicult. A bank faces numerous hurdles Furthermore, banks hold assets that common bond or eld of membership. to divest part of its customer base to ranging from capital to balance sheet credit unions are not allowed to hold. Banks are open to the public, while cred- comply with the eld of membership to eld of membership issues that must Once again, a requirement to divest it unions have a de ned eld of member- requirements. be cleared for this conversion to occur. these assets could mean that the bank ship. I suspect there are ways around the It is my opinion, such conversions will could be selling these assets in an unfa- A bank converting to a credit union eld of membership quagmire. A con- remain very rare. vorable environment at re sale prices. would need to consider whether its pro- verting bank could form an association Keith Leggett is a retired economist for In addition, federal credit unions are posed eld of membership meets legal or become a partner of the American the American Bankers Association and a subject to a national usury cap and may requirements. Consumer Council so as to qualify all its frequent blogger on credit union issues.

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 17

017_CUJ011617 17 1/12/2017 5:48:59 PM CLASSIFIEDSCLASSIFIED // MARKETPLACEMARKETPLACE MARKETPLACE

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019_CUJ011617 19 1/12/2017 4:43:08 PM TECHNOLOGY

Mission 2017: shore up cybersecurity, improve analytics, go digital first CU IT executives and analysts suggest the industry must collaborate to work on three primary areas: cybersecurity, data and business intelligence and digital-rst strategies. BY PALASH GHOSH

KEEPING UP WITH TECHNOLOGICAL AD larly targeted by criminals. vances is only going to get harder in Given the devastating data breaches The cost of security 2017, but to try to cut that challenge that have hit across multiple industries, IT research ﬁrm Gartner Inc. said it expects the highest growth in down to size, experts suggest focusing governments and organizations, credit tech spending to come from security testing, outsourcing and on three primary areas: cybersecurity, unions will surely be joining this ght. data loss prevention, at least until the end of 2020. data and business intelligence and dig- David Townsend, security risk manag- ital-rst strategies. er at Anity Plus, a $1.9-billion institution 100 inSt. Paul, Minn., said his credit union will 80 CYBER SECURITY maintain a sharp focus on hacking and se- NCUA has indicated it is keeping its col- curity risks. 60 lective eyes peeled for credit unions that “Our priority is to strengthen our secu- aren’t doing enough to protect their—and rity awareness program,” he said. “Securi- 40 $75.6 $81.6 their members’—data safe, so IT executives ty initiatives frequently focus on a fortress Million Million are working overtime on these issues. mentality, strengthening the perimeter de- 20 “As the safety and security of our mem- fenses. That is important, but sometimes 0 bers’ funds and the credit union’s assets insucient as most modern data breaches 2015 2016 are our No. 1 priority, we’ll be making ad- begin with the introduction of malware ditional investments in the maturity of our into the environment, generally via phish- cyber-security policies, programs and pro- ing.” cedures,” said George Rudolph, senior vice While credit unions are working indi- DIGITAL FIRST STRATEGIES and turn it into actionable business in- president of operations and technology at vidually to shore up lines of defense, there The digital rst philosophy is about telligence, Rudolph noted. Alliant Credit Union, a $9.4-billion institu- are also some cooperative eorts to this transferring as much activity as possi- To that end, Alliant CU is continuing tion based in Chicago. end, as well. The National Credit Union In- ble to online and mobile platforms in with its multi-year investment in restruc- Rick Cranston, vice president of inno- formation Sharing and Analysis Organiza- order to increase eciency and ease- turing its existing data warehouse and vation and product development at the tion (www.ncuisao.org) has been created of-use and to cut costs. “adding the tools and structures necessary Mountain West Credit Union Association, to aid in this eort. “In 2017, we’ll continue to make signi- to leverage business insights enabling more agreed. “The goal of this national organization cant investments in our digital platforms,” fact-based decisioning, increases in pro- “Growing areas of risk include security is to get proactive help to credit unions Rudolph said. “With the successful launch ductivity, and a more customized member patches, mobile malware, ransomware, regarding intelligence, operational guid- of our new proprietary mobile banking ap- experience,” Rudolph explained. and ID theft and fraud, especially involving ance and information sharing,” Cranston plication in 2016, we’ll be looking to further The bad news: technology infrastruc- new payment methods,” he elaborated. explained. “The intent of the [NCU-ISAO] this investment with additional enhance- ture costs will likely increase as CUs make To battle this growing menace, Crans- is to create real cyber-resistance for credit ments, features and functionality. Other these types of upgrades. The mission, he ton said credit unions are all “pushing for unions across the country. 2017 digital priorities include a full revamp said, is to “look for ways to leverage that in- increased awareness of the risks that drive Collaborative eorts are also under- of our existing new member application, frastructure for improvements in ecien- companies to invest heavily in both pre- way to to nd new technologies to reduce lending, and online banking platforms, cy and revenue generating capacity.” vention and countermeasures—however, fraud, such as CULedger, a credit union- with a particular focus on streamlining the Alliant, he added, like other nancial in- much of that investment goes to waste.” backed team that is working to use distrib- member experience.” stitutions will also “continue to standardize In general terms, cybersecurity, data uted ledger technologies, to “proactively technology practices and platforms, move breaches, malware and hacking present prevent fraud instead of just reacting to it DATA AND BUSINESS INTELLIGENCE services to the cloud where it makes sense, monumental challenges for all organiza- after a cybersecurity challenge occurs at a The key to leveraging technology is be- and negotiate with our partners to opti- tions – but nancial institutions are particu- credit union,” Cranston added. ing able to parse and analyze the data mize technology operating costs.”

20 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

020_CUJ011617 20 1/12/2017 5:27:15 PM GROWTH STRATEGIES

Top 100 credit unions by asset size Data as of Q3 2016

CU NUMBER CU NAME Total Assets CU NUMBER CU NAME Total Assets 5536 NAVY FEDERAL CREDIT UNION $78,497,777,646 60269 UNIVERSITY OF IOWA COMMUNITY $3,707,410,877 66310 STATE EMPLOYEES' $34,299,745,411 17429 VISIONS $3,580,476,957 227 PENTAGON $20,655,673,088 24524 TINKER $3,564,132,650 62604 BOEING EMPLOYEES $15,661,804,757 68095 EASTMAN $3,543,739,763 24212 SCHOOLSFIRST $12,681,464,479 66328 WRIGHT-PATT $3,429,400,985 61650 THE GOLDEN 1 $10,355,821,921 66703 WESCOM CENTRAL $3,371,820,128 67955 ALLIANT $9,381,605,265 23279 MICHIGAN STATE UNIVERSITY $3,299,073,900 11065 SECURITY SERVICE $9,351,334,067 6694 MEMBERS 1ST $3,296,889,863 19976 FIRST TECHNOLOGY $9,293,562,403 51 STATE EMPLOYEES $3,264,847,420 68465 STAR ONE $8,622,088,909 66330 STATE EMPLOYEES CU OF MARYLAND, INC $3,204,959,024 24694 AMERICA FIRST $8,038,838,454 66751 LANDMARK $3,204,329,761 68645 SUNCOAST $7,851,978,881 60793 REDWOOD $3,146,360,817 61004 SAN DIEGO COUNTY $7,731,130,433 66836 VIRGINIA CREDIT UNION, INC., $3,145,599,318 8111 RANDOLPH-BROOKS $7,594,074,111 14384 MISSION $3,140,700,483 23521 DIGITAL $7,377,234,493 5500 NORTHWEST $3,110,280,112 4735 BETHPAGE $6,843,088,257 64418 VERIDIAN $3,023,224,412 68490 VYSTAR $6,504,277,851 68375 SERVICE $3,012,471,197 5913 ALASKA USA $6,469,718,930 60060 TEACHERS $2,972,191,317 23957 AMERICAN AIRLINES $6,265,501,182 24326 CHEVRON $2,970,008,914 24563 ESL $5,965,627,533 60705 TEXAS DOW EMPLOYEES $2,962,811,506 24692 MOUNTAIN AMERICA $5,901,279,678 24382 SAN ANTONIO $2,892,418,872 68448 CITIZENS EQUITY FIRST $5,512,459,498 8333 TOWER $2,878,348,019 8116 TEACHERS $5,431,147,171 18297 COASTAL $2,793,248,987 68579 PATELCO $5,355,193,317 62728 APCO EMPLOYEES $2,737,384,832 66357 DELTA COMMUNITY $5,235,401,749 2099 CITADEL $2,734,884,999 1999 LOGIX $4,830,168,225 63194 IDAHO CENTRAL $2,711,161,567 68671 ENT $4,744,695,248 60520 EDUCATIONAL EMPLOYEES $2,705,245,290 64131 PENNSYLVANIA STATE EMPLOYEES $4,701,075,696 68429 TRAVIS $2,654,583,532 5588 UNITED NATIONS $4,670,257,206 857 AFFINITY $2,650,196,269 62514 LAKE MICHIGAN $4,661,961,585 68600 MIDFLORIDA $2,646,831,298 2551 POLICE & FIRE $4,544,349,514 67190 SUMMIT $2,645,611,942 15802 HUDSON VALLEY $4,493,187,043 68574 GENERAL ELECTRIC $2,602,161,486 7544 REDSTONE $4,490,837,655 60042 WASHINGTON STATE EMPLOYEES $2,580,869,867 62745 ONPOINT COMMUNITY $4,441,734,622 68187 BAXTER $2,577,349,158 5582 BANK FUND STAFF $4,431,430,875 66642 COMMUNITY FIRST $2,554,001,971 68601 WINGS FINANCIAL $4,374,774,387 2760 NASSAU EDUCATORS $2,534,690,996 61844 DFCU FINANCIAL $4,302,474,773 68615 NAVY ARMY COMMUNITY $2,480,773,540 3238 DESERT SCHOOLS $4,029,752,014 68366 SAFE $2,470,589,818 1273 STATE FARM $3,996,947,879 60058 GECU $2,457,963,088 68437 BELLCO $3,982,130,295 5561 KEESLER $2,452,797,249 4142 KINECTA $3,973,161,816 67297 SPACE COAST $3,781,665,164 Source: National Credit Union Administration

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021_CUJ011617 21 1/12/2017 5:37:07 PM GROWTH STRATEGIES

Top 100 credit unions by membership Data as of Q3 2016

CU NUMBER CU NAME Number of Current Number of Current Members CU NUMBER CU NAME Members 5536 NAVY FEDERAL CREDIT UNION 6,721,669 66538 CONNEXUS 271,315 66310 STATE EMPLOYEES' 2,175,972 67619 FIRST COMMUNITY 269,424 227 PENTAGON 1,464,400 8116 TEACHERS 269,162 62604 BOEING EMPLOYEES 988,691 23957 AMERICAN AIRLINES 266,312 61650 THE GOLDEN 1 817,041 60520 EDUCATIONAL EMPLOYEES 257,146 24694 AMERICA FIRST 800,889 66836 VIRGINIA CREDIT UNION, INC., 254,813 11065 SECURITY SERVICE 737,528 1261 LANGLEY 250,974 24212 SCHOOLSFIRST 718,314 60042 WASHINGTON STATE EMPLOYEES 247,720 68645 SUNCOAST 686,670 2551 POLICE & FIRE 247,715 8111 RANDOLPH-BROOKS 664,295 60705 TEXAS DOW EMPLOYEES 247,202 24692 MOUNTAIN AMERICA 618,909 196 GTE 246,574 23521 DIGITAL 603,484 68600 MIDFLORIDA 244,460 5913 ALASKA USA 595,961 63194 IDAHO CENTRAL 244,272 68490 VYSTAR 536,069 66330 STATE EMPLOYEES CU OF 242,381 19976 FIRST TECHNOLOGY 457,100 MARYLAND, INC 64131 PENNSYLVANIA STATE EMPLOYEES 425,440 24382 SAN ANTONIO 237,521 60153 MUNICIPAL 403,236 68375 SERVICE 233,915 7544 REDSTONE 391,252 23279 MICHIGAN STATE UNIVERSITY 229,511 67297 SPACE COAST 354,843 18297 COASTAL 228,676 60058 GECU 351,692 60793 REDWOOD 221,634 51 STATE EMPLOYEES 346,630 61844 DFCU FINANCIAL 221,189 66357 DELTA COMMUNITY 345,937 66492 UNIVERSITY OF WISCONSIN 220,304 24524 TINKER 337,616 5500 NORTHWEST 219,617 6694 MEMBERS 1ST 337,591 1367 UNIVERSITY 213,268 67955 ALLIANT 336,416 67664 COMMUNITYAMERICA 212,759 24563 ESL 334,182 68601 WINGS FINANCIAL 212,003 61004 SAN DIEGO COUNTY 330,833 24063 FOUNDERS 209,537 66328 WRIGHT-PATT 328,722 7840 TRULIANT 209,418 68448 CITIZENS EQUITY FIRST 319,754 64418 VERIDIAN 202,568 3238 DESERT SCHOOLS 317,683 68366 SAFE 201,762 62745 ONPOINT COMMUNITY 310,697 14384 MISSION 200,528 68579 PATELCO 305,421 5561 KEESLER 200,325 4735 BETHPAGE 300,256 15732 UNIFY FINANCIAL 198,003 62514 LAKE MICHIGAN 289,588 64778 PUBLIC SERVICE EMPLOYEES 197,742 4142 KINECTA 289,515 9976 GROW FINANCIAL 194,372 24003 LOCAL GOVERNMENT 288,208 68187 BAXTER 192,945 66751 LANDMARK 285,986 66364 METRO 192,265 60060 TEACHERS 285,445 66703 WESCOM CENTRAL 190,126 68437 BELLCO 277,293 67390 GEORGIA'S OWN 188,179 68671 ENT 276,877 15802 HUDSON VALLEY 274,074 Source: National Credit Union Administration

22 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

022_CUJ011617 22 1/12/2017 5:37:09 PM Anchorage-based WHO’S NEWS Alaska USA FCU opened a new branch in Wasilla for a total of four branches in the Mat-Su Valley and 36 branches statewide. Align CU, Lowell, Mass., delivered school supplies donated by members and the community to Catie’s Closet, which collects new and gently used clothing, and new toiletries, socks, underwear and school supplies for students pre-K through 12th grade who are in need of assistance. It also supported Habitat for Humanity MetroWest/ Greater Worcester’s Operation Playhouse Build. Andrews FCU, Suitland, Md., donated $1,000 to Malcolm Elementary School for classroom supplies. Separately, the CU awarded a school supplies shopping spree to member Ronda Mozie for her two children, donated new clothes to Franconia School, sponsored a Senior Non-Commis- sioned Officer Induction Ceremony, and participated in 2 Walks to End Alzheimer’s. Vantage CU, Bridgeton, Mo., awarded $1,000 toward the purchase of a new computer to Ben Shepherd and Nathanial Marsters, both winners of the CU’s third Dream Big contest.

Each year, New England FCU, Willis- Phoenix-based Desert Schools FCU the downtown Arlington community. Park View FCU, Harrisonburg, Va., ton, Vt., hosts free, open-to-the-public partnered with Brass MEDIA Inc., to was awarded first place in the state for Shred Fest events at its main branch to subsidize the use of The Money Side The Shelbyville, Ind., branch of Har- the Dora Maxwell Social Responsibility help people protect themselves against of Life website – a new digital platform vester Financial CU, Indianapolis, Award. identity theft. that offers personal finance curriculum kicked off the 6th annual Cancer Associ- for young adults. ation of Shelby County’s Rock-A-Thon, Member One FCU, Roanoke, Va., Empower FCU, Syracuse, N.Y., raising $850 for the cause. reached its 100,000th member. The completed Phase One of a two-phase In Bettendorf, Iowa, Ascentra CU’s CU awarded Paula Lockett a $100 branch renovation project at its Erie Blvd Foundation awarded $17,000 in Lead- America First CU, Riverdale, Utah, deposit into her Member One account West branch. ership Grants to 36 organizations and took home the “Best Credit Union in honor of the occasion, and Member charities throughout Eastern Iowa and Website” award from the 2016 Web One donated $100 to the Montgomery Del Norte CU, Santa Fe, N.M., held Western Illinois. Marketing Association’s WebAward County Humane Society, the nonprofit of several Shred Days events at its six competition. Lockett’s choice. branches. Texas Trust CU, Arlington, Texas, helped present the inaugural Dream Donations from NCUA staff to the Builder Award from the Downtown Ar- Please Send Announcements or CU Journal’s annual Feds Feed Families food drive lington Management Corporation to Tom Community News to will provide 57,308 meals throughout Cravens. The award recognizes individu- [email protected] this year. als who have had a significant impact on

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 23

023_CUJ0117 23 1/12/2017 5:18:33 PM WHO’S NEWS In Tukwila, Wash., The BECU Foundation awarded 80 BECU student-members with $3,000 scholarships toward their college educations.

Consumers CU, Waukegan, Ill., CU, Waukegan, Ill., had an active summer of community outreach and support for local not-for-profit organizations. This year’s outreach extended to more than a dozen community festivals and events, plus cash donations exceeding $20,000.

First City CU, Los Angeles, raised and donated $6,000 to various area hospitals through its FirstStart Piggy Bank promotion. The CU’s donation of $3,540 to Children’s Hospital of Los Angeles was matched by CO-OP Financial Services’ Miracle Match program.

Virginia Beach, Va.-based Chartway FCU’s We Promise Foundation raised $526,900 during its 11th Annual Diamonds in the Sky Gala to make dreams come true for local children battling life-threatening illnesses.

Del-One FCU, Dover, Del., contributed $500,000 to Delaware Technical Community College for naming rights to the conference center at the Terry Campus in Dover. Royal CU, Eau Claire, Wis., hosted a ribbon cutting and grand re-opening celebration at its newly remodeled North High School student-run office. The high school branch has been operating since 2005, and has employed 33 students over the years.

24 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

024_CUJ0117 24 1/12/2017 5:18:54 PM Montgomery County Employees FCU, WHO’S NEWS Germantown, Md., is supporting the Maryland Hispanic Achievement Scholarship program. Two area students were direct benefi- ciaries of MC EFCU scholarships, which were awarded at the County Executive’s Hispanic Gala.

In preparation for the opening of Burnsville, Minn.-based Firefly CU’s first high school branch location in early 2017, three Burnsville High School students spent their summer acclimating themselves to the credit union atmosphere. Firefly also donated 64,728 crayons to local schools.

Vermont FCU, Burlington, Vt., staff raised $1,000 and volunteered at the Great Strides Walk to benefit the Cystic Fibro- sis Foundation.

Voyage FCU broke ground on its newest location on the eastern side of Sioux Falls, S.D. The branch, currently housed in a Lewis Drug Store, will move into the Dawley Farms development on the eastern edge of the city for an opening in spring 2017.

In Oklahoma City, WEOKIE CU’s Money Talks financial literacy program hit a milestone by presenting to its 50,000th student since 2007. Tabatha Thurman, financial education specialist, was recognized by the National Youth Involvement Board as the U.S. CU employee with highest number of students reached Army Aviation Center FCU, Daleville, Ala., (10,948) and presentations partnered with three local Boys and Girls Clubs to provide a Bee the Boss given (384) in a school year. Program. The program teaches elementary and middle school students business principles and how they can be their own boss.

cujournal.com CREDIT UNION JOURNAL JANUARY 2017 25

025_CUJ0117 25 1/12/2017 5:19:12 PM TopLine FCU, Maple Grove, Minn., WHO’S NEWS held its 13th Annual Back-to-School Supply Drive, collecting 1,100 items and $1,000 to help students. Sepa- rately, TopLine hosted a summer youth intern through the Brook- lyn Bridge Alliance for Youth BrookLynk Program.

Each month, employees of Commonwealth Credit Union, Frankfort, Ky., volunteer their time at the Serenity Center, helping package food items for needy families in the community. Separately, the credit union hosted a Movie Night at Georgetown College, as well as a week-long series of grand opening festivities at its Campus Branch at the University of Louisville.

Credit Union of America, Wichita, Kan., awarded a $250 gift certificate for Bed, Bath and Beyond to Amber Fischer, a Wichita State senior majoring in Aerospace Engineering, who was the winner of the CU’s #deckyourdorm Instagram contest. Each student received a door-hanger with contest info as part of a welcome packet when checking in to their dorms.

Raleigh, N.C.-based State Employees’ CU, in conjunction with credit unions in North Carolina and South Carolina, supported Victory Junction’s REACH program with a $125,000 check for the camp’s outreach program. SECU also sponsored 2016 Governor’s Awards for Excellence.

Robins Financial CU, Warner Robins, Ga., sponsored Team 4941 RoboBibb by contributing $1,000 to FIRST Robotics. School students from all Bibb County high schools competed in a robotics Several employees from Fall River, Mass.-based St. Anne’s CU’s New contest. Bedford branch took part in the 2016 Boston Marathon Jimmy Fund Walk. They raised more than $4,000 for the Dana-Farber Cancer Institute.

26 JANUARY 2017 CREDIT UNION JOURNAL cujournal.com

026_CUJ0117 26 1/12/2017 5:19:30 PM 027_CUJ011617 27 1/9/2017 4:55:50 PM HERB WEGNER AWARD WINNERS for Outstanding Individual Achievement 2017

WHEN: February 27, 2017 WHERE: the Marriott Marquis, Washington, DC, in Stan Hollen Maria Martinez conjunction with the Retired President/CEO of President/CEO of CUNA Governmental CO-OP Financial Services Border Federal Credit Union Affairs Conference (GAC) HERB WEGNER AWARD WINNER for Outstanding Program 2017 Attend the National Credit Union Foundation Dinner Presenting the Herb Wegner Memorial Awards.

Sponsorships & The Cooperative Trust Tickets available at from Filene Research Institute ncuf.coop/wegnerdinner

Get inspired at the credit union movement’s highest national awards!

Wegner028_CUJ011617 Awards Ad_CU 28 Journal_2017.indd 1 1/12/201712/9/16 6:01:11 4:07 PM PM