4. Roundtable 3 – What Role Do CUSO’s Play in Your ’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 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 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 (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 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. CUSOs in general afford credit unions of all sizes with unique market opportunities that may not be present without the CUSO model in place today. Whether credit unions are using the services of a CUSO to augment their operating budgets in the processing of traditional “back office banking operations” or to introduce new products and services beyond their in-house capacity and expertise, they realize a benefit that may not be afforded to them otherwise. CUSO’s provide the ability for credit unions to compete in today’s hyper-competitive landscape leveraging a shared pricing structure, industry best practices and niche expertise. Whether as a member using services, a partner-owner or as a wholly owned subsidiary, access to and the ability to own a CUSO provides opportunity. The bottom line to question #4 is that I&I operations generated a substantial portion of the FRFCUs net income in the recent and continuing low interest rate environment.

As information, I&I is not considered a CUSO or subsidiary/LLC. The financial information flows directly through the Credit Union as a department.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Georgean Smith(Chair) & Sharon Kemp(Vice Chair) Credit Union: Johns Hopkins Federal CU City/State: Baltimore, Maryland

1. What services does a CUSO provide to your credit union? JHFCU actively participates in Cuna Mutual Insurance Group, the world’s largest. We are also connected to Co‐op for ATM and debit transactions which increased our access and shared branching for members to over 30,000 devices nationwide.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? We feel we could get similar insurance savings elsewhere so the association with Cuna is not a particularly large estimate. Our association with Co‐op is the most valuable to JHFCU. Co‐op does a profit share with its members and that is roughly $40K per year. We believe this return could simply be re‐purposed into a better price for the services instead of the current two part arrangement.

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? The current annual income is $40K and has been on a slight increase over the past 5 years. Other CU’s use CUSO’s for investment and insurance services but CU’s of our size and others of similar size cannot make that work unless they have a terrific advisor and then farm out those services to make it more profitable.

4. How important are CUSOs to the success of your credit union? Currently we feel the CUSO is not so important to the success of our CU. Going forward the CUSO may be an avenue that can be explored to generate income that is not directly associated with interest rate margins. We are hoping some positive suggestions may be discussed or highlighted at this NACUC meeting by others who have already found CUSO opportunities to provide income and value to their members.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): John Tochko

Credit Union: APLFCU City/State:

1. What services does a CUSO provide to your credit union? None

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? N/A

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?

N/A

4. How important are CUSOs to the success of your credit union?

They are not important.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name: Jane Pipkin Credit Union: Knoxville TVA Employees Credit Union Knoxville, TN

1. What services does a CUSO provide to your credit union?

Currently None

2. What is your estimate of how much CUSOs have saved your credit union in operational costs an over what period of time?

The Credit Union had a CUSO many years ago to offer insurance services and other products that the Credit Union could not offer. Since then these services have been moved into the Credit Union’s operations.

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?

No estimate

4. How important are CUSOs to the success of your credit union?

Minimal importance. There is the possibility that the Credit Union along with other credit union may consider forming a CUSO to provide home banking services to participating credit unions in the CUSO plus other credit unions needing this service. No definite decision has been made yet. Time frame for this decision is five years.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Michael Palumbo and Howard Spencer Credit Union: Northland Area Federal CU City/State: Oscoda, MI

1. What services does a CUSO provide to your credit union?

We have an investment in a CUSO, CU Solutions Group, a wholly owned subsidiary of the Michigan Credit Union League. They provide many levels of service to our industry, but we only take advantage of a handful of them, including: technology services (our primary website); marketing services; and others. We also use CUSOs in other areas of our operations, including Business Lending, Card Services, etc.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time?

It would be nearly impossible to calculate the hours saved. But through size and scale, CUSOs bring costs down so even the smallest credit unions can take advantage and survive in a highly competitive environment.

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?

While important, it is not the primary measure of success, our CUSO investment in CU Solutions Group has paid us back more than 2-fold our initial investment. It is likely to continue to do so well into the next 5 to 10 years. In our case, we invested $50,000. We have already received in dividends, twice our initial investment.

4. How important are CUSOs to the success of your credit union?

These CUSOs are absolutely essential to our business and have helped us and many other credit unions to remain viable and competitive in the financial services industry.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): George J. Papaioannou Credit Union: NEFCU City/State: Westbury, NY

1. What services does a CUSO provide to your credit union? None as of now. We have internalized business loans.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? Some but not a significant amount.

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? N/A

4. How important are CUSOs to the success of your credit union? We have no CUSO now.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Denny Baumgartner & Jackie Ostrowski Credit Union: Partners 1st FCU City/State: Fort Wayne, IN

1. What services does a CUSO provide to your credit union?

We participate in two CUSOs, the CO-OP Network and the CU Service Centers. These two CUSOs provide our membership with fee-free ATM access as well as shared branching services (acquirer and issuer). It helps us to add member convenience for administering to our somewhat cumbersome footprint.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time?

Because we do not run our own CUSO, we cannot determine costs savings. We have been part of the CO-OP ATM network for years. Because of this CO-OP, we have the ability to provide fee- free ATM access across our large organizational footprint. Otherwise, we simply would not have the resources (monetarily or staffing) to provide our own ATMs. However, the real benefit or cost savings of the fee free ATM network is difficult to quantify…how many members might we have lost to another more-convenient financial institution had we not been part of the CO-OP? It certainly helps us to compete with the many much larger organizations in the marketplace.

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?

Because of our limited size and geographic footprint, the CO-OP ATM network is an expense proposition which provides great convenience.

We joined the shared branching network in February of this year. We are too new to the program to provide an accurate or fair answer here. Initially, we had only allowed a limited number of our branch offices to accept guest transactions, which generates fee income. However, as of July 1, all 28 of our locations are able to perform guest transactions. As of the first five months on shared branching, we were earning enough fee income to cover our fixed expenses. Thus, based on our early successes, we believe that within a short time frame, we will achieve a net income from this program.

4. How important are CUSOs to the success of your credit union?

Both of the CUSOs that we participate in are very important to the success of our credit union. They provide necessary convenience that we could not otherwise achieve.

In addition, we view the option of joining or running a CUSO as an important option for us in the future.

Roundtable 3 What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Rose Rangel & Paulette McClure/Neira White Credit Union: Generations FCU City/State: San Antonio, TX

1. What services does a CUSO provide to your credit union?

The CUSO that provides service to our Credit Union helps with recommendations for Member Business Lending. In addition to the recommendations for approval or decline on commercial loans (such as lines of credit, business credit cards, equipment lending), they provide packaging and servicing for SBA loans such as the 7A and 504 programs.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time?

It is hard to estimate the savings earned but they have been a real partner in the early development of having a specific line of business and in our case that would be in member business lending.

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?

Again, it is hard to estimate the actual income earned but they have been a real partner in the sense of having a “go to” source for a particular line of business that our Credit Union wanted to have a presence in for our buffet of products.

4. How important are CUSOs to the success of your credit union?

For our particular Credit Union, having a partnership with a CUSO has allowed us to have the ability to look at and book member business loans when we did not have that expertise. As we gather more experience in this area of lending, we will look to determine where the CUSO fits in regarding the partnership with the Credit Union. However, make no mistake, it has allowed us to have expertise in an area where we had been lacking.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Salvatore Schiano Credit Union: XCEL FCU City/State: Bloomfield, New Jersey

1. What services does a CUSO provide to your credit union?

Disaster Recovery, Student Loan Program, CO-OP, CUSC – Shared Service Centers and Medallion Loans.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time?

$100,000 per year in savings for offering these services to our members

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?

Our CUSO is less than a year, still in the red.

4. How important are CUSOs to the success of your credit union?

They have allowed us to offer products and services that we otherwise could not have provided. Interest income generated from Taxi Medallion and Student loans have helped XCEL’s achieve income projection.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Nicole Schulz Credit Union: Hometown Federal Credit City/State: Owatonna, MN Union

1. What services does a CUSO provide to your credit union? Currently we are participating in student lending with a portion being provided by a 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 don’t track this metric currently. We do rely on their expertise and consistency.

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? They are not critical at this point but provide a nice additional resource.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participants Name(s): Gordon Stankavage Credit Union: Rutgers Federal Credit Union City/State: New Brunswick, NJ

1. What services does a CUSO provide to your credit union?

Business analysis of NYC taxi medallion participation loans, first mortgages, and, student loans for college.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time?

These services are estimated to save us about $150-$200K per year.

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?

For us, this is more about saving money on staffing for research and compliance in the above-mentioned areas. We’ve been doing things this way for a few years.

4. How important are CUSOs to the success of your credit union?

These services are very important for our credit union, as they enable us to offer products our members desire and earning opportunities that we desire without having to bring on additional staff steeped in the details of each area with regards to analyzing the market or deciphering compliance details.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): William Carr Credit Union: Sun Federal City/State: Maumee, OH

1. What services does a CUSO provide to your credit union? ATMs and business lending. I also view shared branching as a sort of “super CUSO”.

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? Very. We view the CUSO business model as an extension of the Credit Union model.

Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Jack Toth Chairman; Al Flynn Vice Chairman Credit Union: U$X FCU City/State: Pittsburgh PA

1. What services does a CUSO provide to your credit union? Currently none

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? N/A

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? N/A

4. How important are CUSOs to the success of your credit union? Not applicable at this time. Our credit union has considered rejoining the shared service center network as a means to serve the credit union community and economically expand our service area footprint

Participant Name(s): Sue Iggulden Credit Union: Unitus Community CU City/State: Portland, OR

Discussion Guide: Roundtable 3 “What Role Do CUSO’s Play in Your Credit Union’s Success?

Credit unions evaluating whether to set up their own or participate in a Credit Union Service Organization (CUSO) often consider a number of factors. Some of those factors are integration with the credit union’s current products, how well-capitalized the CUSO is and does it have a solid business plan. The bottom line is how will a CUSO help the member make money, save money and save time.

1. What services does a CUSO provide to your credit union? Our Credit Union currently utilizes the services of seven CUSOs: i) CO-OP Financial Services: Shared Branching and ATM network and Contact Center Call Support ( peak times, meetings, and business continuity) ii) CUDL: Indirect lending platform, iii) Member Access Pacific (MAP): Debit and Credit card processing iv) WRG Services: , Mobile Banking, Bill Pay, Interface with Total Finance and Eascorp’s RDC solution v) Member Loyalty Group: Net Promoter Score program (Member Satisfaction) vi) CU Business Group: Commercial Lending Support vii) PSCU: Investment only at this time.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time? We are not able to give an estimate of savings; however, we do have a third party review our contract agreements/pricing on a periodic basis and the CUSO contracts are generally rated very favorable in pricing and investment income. Another critical aspect of a CUSO is the strategic positioning of an industry collaboration such as shared branching, CO-OP ATM network (now larger than Bank of America’s ATM network), unique competitive solutions, etc.

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? Not available.

4. How important are CUSOs to the success of your credit union? CUSOs allow a credit union to diversify its income, which is difficult for credit unions, and also allows a credit union to offer services to members that it otherwise couldn’t offer such as insurance and member financial services. We believe that CUSOs are strategically important in offering new products/services, diversifying sources of income, developing collaborations to reduce operational expenses, and in providing an opportunity to grow investment revenue. Roundtable 3 – What Role Do CUSO’s Play in Your Credit Union’s Success?

Participant Name(s): Dan Strandy, Erin Hass Credit Union: Verity Credit Union City/State: Seattle, WA

1. What services does a CUSO provide to your credit union?

We have a mortgage CUSO that provides origination, processing and servicing to Verity Credit Union and 13 other Washington State Credit Unions.

We are also co-owners of a debit and plastic card processing company. For us, they do the processing for our debit and prepaid Visa cards.

In addition we use CUSOs for commercial lending, indirect auto lending, shared branching and investment services.

2. What is your estimate of how much CUSOs have saved your credit union in operational costs and over what period of time?

The plastic card processing company saves us approximately $3,000/month.

It is more difficult to say how much money the commercial lending CUSO and the mortgage CUSO save Verity Credit Union. However, I strongly believe that the economies of scale that these CUSOs create definitely provide real savings to Verity Credit Union.

Without the shared branching and indirect auto lending we would not be able to offer lending at the dealer and shared branching services to our members.

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?

Our Mortgage CUSO has earned us approximately $3 million since it was formed. We bought shares in the investment services CUSO. Our $240,000 investment has returned $453,000 in dividends. The shares are currently valued at $750,000. The plastic processing company has returned approximately $100,000 in earnings.

4. How important are CUSOs to the success of your credit union?

Equally important as the income and expense reduction that CUSOs provide to our credit union, is the access to talent and industry knowledge. Through our ownership of the plastic card industry, we are able to access industry experts from Visa and Visa DPS that Verity CU would not have access to. In this era of the rapidly changing payments scene, this is invaluable. The CUSO was able to guide us through the confusing Dodd-Frank changes in a way that preserved the income we received from our debit cards.

In the mortgage arena, we are able to maintain talent able to respond to the increasing regulation by the CFPB. We are able to offer a broad menu of mortgages to our members as well.

We believe that collaboration with other credit unions and industry vendors is absolutely essential in order for Verity Credit Union to thrive in the future. CUSOs are a primary vehicle for facilitating collaboration.