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4. Roundtable 3 – What Role Do CUSO's Play in Your Credit Union's Success?

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4. Roundtable 3 – What Role Do CUSO's Play in Your Credit Union's Success? 4. Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success? Participant Name(s): James Martens and Kyle Johnson Credit Union: Affinity Credit Union Des Moines IA 1. What services does a CUSO provide to your credit union? 2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? 3. What is your estimate of how much income your CUSO has earned and contributed to your credit union and over what period of time? 4. How important are CUSOs to the success of your credit union? 1. We use CBL- Community Business Lenders to originate and participate in Business Lending and we use a Premier Lending Alliance CUSO to originate our 1st Mortgages. We sell a majority of them to the secondary market, we are very particular when deciding which to keep in house, and the majority of them are 15 year terms. We also participate in the CUSN Shared Branching Network. 2. We do not know the actual dollar amount as of cost and savings this has created; however, the biggest savings would be the staffing cost. We do not have experienced Loan Officers to be able to meet the credentials and expertise required for business lending or mortgage lending. We feel that for our asset size utilizing these two CUSO’s provide us with the option of growing these portfolios as well as being able to serve the membership. We don’t have to worry about employee turnover as the effect it has on the program and the membership. We also use them as a tool for compliance training as well. We recently utilized PLA’s expertise for compliance training for home equity loans with the early disclosure requirements. 4. The income we have received from CBL and PLA has been invaluable. We do not have hard figures, but it has been very beneficial with both organizations. We own five shares of CBL which provides us with an annual patronage dividend as well as the interest we earn on participation loans. We have recently restructured our in-house origination fee to be more competitive which allows us to book more loans. This will provide earnings for years to come rather than the income we make for selling it to the secondary market. Again we are keeping the excellent credit, low loan to value and short term mortgages in-house to lessen our exposure to foreclosures and interest rate risk. 4. The biggest value the CUSO’s brings to the credit union is being able to offer services to our members that we otherwise would not be able to. We do not want to force our members to go elsewhere. We want to partner with them for their future and ours and a large part of that is by providing mortgage products for them. Being part of the Shared Branching Network has opened our doors up in over 3 thousand locations. This has helped us to be able to serve our members in more locations without having to more branches. This makes us more convenient and accessible. Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success? Participant Name(s): Daniel Smith Credit Union: Astera City/State: Lansing, MI 1. What services does a CUSO provide to your credit union? IT tech support through Member Driven Technologies. We are a 25% owner of this CUSO. 2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? We estimate a 10-15% savings in IT costs which includes our annual income from our joint ownership of the CUSO. 3. What is your estimate of how much income your CUSO has earned and contributed to your credit union and over what period of time? Various based on our percentage of profit and expense. 4. How important are CUSOs to the success of your credit union? Very important as they help create economies of scale. Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success? Participant Name(s): William (Bill) Collins Credit Union: Louisiana Federal City/State: La Place / Louisiana 1. What services does a CUSO provide to your credit union? It helps extend our services to our members on transactional items. And Business lending assistance. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? Prior to Business lending – almost no money saved. 2. What is your estimate of how much income your CUSO has earned and contributed to your credit union and over what period of time? ZERO income over a long period of time. It is not until we joined the Business Lending CUSO that we have seen any income from a CUSO. 3. How important are CUSOs to the success of your credit union? Moderately important as they allow our member the ability for remote transactions without fee if they are inside the facility. And they help connect our members Business needs with our willingness to have sound Business loans. Roundtable 3 – What Role Do CUSOs Play in Your Credit Union’s Success? Participant Name(s): R.W. Conley, Director Emeritus- B. Elbaum, S.V.P. Administration- F. Almeida, S.V.P. Operations- B. Karl, Certified Financial Planner® Credit Union: Financial Resources FCU City/State: Bridgewater, NJ 1. What services does a CUSO provide to your credit union? Answer: FRFCU established a CUSO in 2001 to provide financial planning and insurance/investment (I&I) services to members….individuals and businesses. The CUSO was dissolved in 2011 but I&I operations continue as a department of the credit union. CUSO Financial Services (CFS) provides broker dealer services to I&I and oversees the regulatory compliance and performance aspects of the I&I staff members. Presently the Credit Union participates in using the services of two separate CUSO’s. The first provides the Credit Union with Investment & Insurance services; furthermore, the Credit Union has an ownership interest in this CUSO for which we receive an annual dividend based on performance. We have also recently entered into an agreement with a different CUSO which is providing us with credit card services. This relationship will initially be centered on providing credit card services with the possibility for expanded card services in the future. 2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? Answer to #2 & #3: The Investment & Insurance (I&I) operations did not have a stellar beginning – the performance of the initial staff was less than acceptable and our primary corporate sponsor opposed the concept because of perceived potential liabilities to the corporation. The Board came close to terminating the operations before turning the management of the group over to CFS in 2006. The Board was convinced that I&I was necessary in order to provide a full range of financial services to our members. From conception through 2006, I&I operations lost approximately $775,000. As of June 2014, these losses have been recovered and the I&I operations are now an important contributor to the credit union’s bottom line. The group has 3 financial advisors, approximately $116 million in assets under management and 1,000 clients. I&I operations are projected to produce approximately $230,000 in net income in 2014. I would estimate our savings to be over $100,000 per year with the elimination of an executive compensation package including salary, commission and full benefits 3. (See Answer #2 & #3 above) What is your estimate of how much income your CUSO has earned and contributed to your credit union and over what period of time? We are on pace to contribute 23% to the bottom line from our investment and insurance program in 2014. We also have a penetration rate above our peers. 4. How important are CUSOs to the success of your credit union? Answer: At conception, the Board saw Insurance & Investments (I&I) as a necessary service if the credit union was to continue to be, or to become, a members’ primary financial institution. This underlying premise has been proven valid. In addition, the credit union has come to understand that I&I is also seen as an alternative source of financial planning and investment advice by our less sophisticated members/savers who prefer dealing with a familiar and trusted financial partner. • CUSOs help us access expertise and services that we do not have in-house • Cost Efficiency. We can access the expertise and services at a fraction of the cost of what it would take for us to hire or buy the same resources. • Flexibility. We can expand or contract what we need with the CUSOs as our business changes without the fixed investment in systems or people. • The CUSOs are experts in each technical area. o Investment Broker/Dealer o Investment Program Management o OSJ The CUSO provides simplicity for our staff. We are able to interface with one CUSO contact who manages all of the underlying personnel rather than us needing to manage all of the individual employees. The CUSO model plays a significant role in the success of our Credit Union today with the likelihood that our use of services via the CUSO model will increase to meet member needs. Without having established these existing relationships we would be hard pressed to deliver the current offered services directly and by all accounts would be turning our members away and likely see them move to a competitor to have access to these very same products and services.
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