Life-Changing Lending Economic Forecast

WINTER 2019

LIFE-CHANGING LENDING ECONOMIC FORECAST

Board governance

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GET CONNECTED CUDIRECT.COM/CUDLCONNECTED Contents Winter 2019 Volume 85 › Number 4 FEATURES

Life-changing lending Credit union lenders find new, innovative ways to reach 22 out to current and prospective members who have crucial needs.

Board insights A panel of directors reflects on board best 28 practices and the need for diversity in the board room.

Compliance meets technology Keeping up with compliance challenges now requires 34 an assist from technology—particularly compliance management systems.

The party’s over 40 Be ready for a general slowdown in loan demand as economic conditions deteriorate and consumer ‘We look at diversity confidence falls. in backgrounds, knowledge, Full coverage education, and experience.’ Insurance services can both provide a safety net 46 for members and boost financials with noninterest DOUG OLSON income.

7 tools to boost your card portfolio 52 Credit cards offer more options than ever to engage members. iStock

Cover, page 22 photo credit: Firefly Credit Union Contents

4 Credit Union Magazine | cuna.org/news Breaking down barriers to financial security for all

Together we’ll help more members achieve financial security

Is your wealth management program a core part of your business today?

There’s tremendous growth opportunity for credit unions within their investment services iStock programs. While fifty-two percent of members prefer accessing financial services at a credit union, member penetration is only three percent.1 By partnering with CUNA Brokerage Services Inc. (CBSI) to grow your program, you get a company with an unparalleled knowledge of credit unions and their members, plus game-changing innovation.

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1Making Wealth Management Core in Credit Unions, Kehrer Bielan, December 2018. Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CBSI is a registered broker/dealer in all fifty states of the United States of America. The representative may also be a financial institution employee that accepts deposits on behalf of the financialCredit institution. Union Magazine | Winter 2019 CBSI-2657542.2-0719-0821 © CUNA Mutual Group, 2019 All Rights Reserved.

pg_5_CMG.indd 5 11/5/19 9:26 AM 6 Contents Credit UnionMagazine POSTMASTER: Send address changes to Credit Union Magazine subscription department, P.O. Box 461, Annapolis Junction, MD MD Junction, P.O. 461, Box Annapolis 800-348-3646. department, call available; are subscription issues Magazine Single 20701-0461. Union Credit to changes unethical. and address illegal Send is Photocopying POSTMASTER: Association. National Union Credit 2019by Madison, at Copyright paid office. postage mailing Periodical additional and available.) Wis., discounts multiyear and (Multiple-copy 5710 53705. WI Madison, Association, Road, Point National Mineral Union Credit by year per $80 for quarterly published is 0011-1066) (ISSN Magazine Union Credit POSTAL INFORMATION 18 12 10 8 MUST READS

of Coopera. MiguelCorro, says Victor CEO serving theHispanicmarket, It takesdrivetogetstarted 12

Digital FeaturesDigital the baord.across momentum year,This enormous created we President’s Perspective line. product eco-friendly an provide “money the loans talk,” solar about and kids and parents between reveals disconnect BECU study Ideas & Inspiration union difference. credit the showcase programs loan Alternative Note Editor’s 2019. to in listened you podcasts and read you stories top the out Check Inspiration Inspiration Ideas & & Ideas | cuna.org/news

“ loan growth isslowing. weakening andcredit union economic conditionsare Certain signsindicate 40 dramatic. particularly has been lending in auto slowdown The Economics

62 58 56 20

“ puts members first. members puts that aculture developing Union Credit Federal atTruliant career his 25-year spent Schaefer Marc Q&A Index Advertiser times: Y2K. modern in nonevent biggest the for prepare to struggled unions Twenty ago, credit years Throwback have. you impact atthe you’ll amazed and be care, you that serve you communities the Show Chairman’s Corner for lendingin2020. Collins submitshispredictions Humor columnistJames 60

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Top stories you read this year

Johnson named 2019 Credit Union 4 steps to becoming a better Hero of the Year. Harlene Johnson, pres- manager. Being a great man- ident of Light Commerce Credit Union, ager—the kind who creates a demonstrates “selfless commitment to high-performing company—is helping people in her community.” exceptionally difficult, says David Deacon, author of “The Stepping up for members during government shut- Self-Determined Manager: A down. Low-rate loans, financial counseling, and more Manifesto for Exceptional People Managers.” ease financial burden for members affected by the continuing federal government shutdown. Create a culture that rocks. Business culture catalyst Jim Knight says “3C” team members—employees Highlights from the 2019 CUNA Governmental who are competent, have strong character, and are a Affairs Conference. culture fit—will amp up your corporate culture.

Top podcasts you listened to this year

Kristen Tatlock: Credit unions will James Collins: When O Bee Credit face advertising compliance chal- Union decided to serve marijua- lenges with the quick pace of social na-related businesses, it stood media platform development and behind the idea of serving the mem- adoption of those platforms. ber—not the business.

Brandi Stankovic: Strong leaders From compliance and advocacy to Credit recognize the impact emotional Union Rock Stars and industry leaders, intelligence has on their own com- listen to the CUNA News Podcast on munication and social capacity. Google Play, iTunes, Spotify, Stitcher, and at news.cuna.org/podcasts.

Where we’ll be in 2020 CUNA GAC 2020 FEBRUARY 23–27

CUNA Governmental CUNA Marketing & World Moving: A Joint Affairs Conference Business Development Credit Union Conference Feb. 23-27, Washington, D.C. Council Conference July 19-22, Los Angeles March 15-18, Orlando Visit us in the Exhibit Hall and

Digital Features get your picture on the cover of Credit Union Magazine.

8 Credit Union Magazine | cuna.org/news Loomis Managed Cash Services

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32892_Loomis_Financial_Services_Media_Creative_2018_PROD.indd 1 2/2/18 9:33 AM EDITOR’S NOTE

Giving members ‘a place to live, a child to love’ Alternative loan programs can be answers to members’ prayers.

Our lead story, “Life-changing lend- Program so members could secure Street Journal survey now predict a ing” (p. 22), takes you behind the a deposit on an apartment or a recession by year-end 2020. scenes of new loan programs that hotel room, replace prescriptions CUNA economists recently provide members funds in times of they lost, or buy baby formula. revised their lending forecasts for critical needs, such as: The Desert Valleys Employees 2019 and 2020, to 6.5% and 5.5%, ››Expanding their families. Firefly Foundation also made grants of respectively. Credit Union, Burnsville, Minn., $500 to $1,500 to assist members Jordan van Rijn, CUNA’s senior created a line of credit allowing with home repairs. economist, lays out the factors families to finance adoptions— ››Becoming U.S. citizens. Infinity behind the slowdown and where often costing as much as $40,000 Federal Credit Union, Westbrook, you might expect growth, in “The or more. Maine, designed a “Bridge to Citi- party’s over” (p. 40). While Firefly can’t remove all zenship” loan to cover the cost of And finally, for the 13th year, the barriers to adoption, it makes becoming a citizen, including the we’re honoring your Credit Union sure financing isn’t an issue for application fee, biometric screen- Heroes. Submit nominations at approved borrowers. Geoff Bullock, ing, legal fees and travel expenses. news.cuna.org/nominatehero. Firefly’s engagement officer, played The credit union also offers a an important role creating this small, no-interest loan to cover product after experiencing financial rental security deposits so asylum struggles adopting his daughters. seekers can get their first U.S. Ann Hayes Peterson ››Surviving natural disasters. apartment and build credit history. Editor-in-chief In the aftermath of back-to-back Innovations like these could Credit Union National Association earthquakes, Desert Valleys Feder- bolster your loan portfolios as [email protected] al Credit Union, Ridgecrest, Calif., the industry is facing a slowdown. 608-231-4211 developed an Earthquake Loan Nearly 50% of economists in a Wall

MANAGEMENT ADVERTISING EXECUTIVE COMMITTEE

BRETT MARTINEZ // chairman, Santa Rosa, Calif. ANN HAYES PETERSON // KARIN SAND // vice president • [email protected] TROY STANG // vice chairman, Seatac, Wash. vice president/editor-in-chief 920-460-7430 [email protected] • 608-231-4211 BRAD GREEN // secretary, Sheffield, Ala. MICHELLE DOSHER // [email protected] • 608-231-4006 TONY BUDET // treasurer, Austin, Texas EDITORIAL STAFF LISA GINTER // member-at-large, Lenexa, Kan. LISA DUSHACK // [email protected] • 608-231-4220 JIM NUSSLE // president/CEO, Washington D.C./Madison, Wis. BILL MERRICK // deputy editor • [email protected] MAURICE SMITH // director and immediate past chairman, 608-231-4076 EDITORIAL ADVISORY BOARD Raleigh, N.C. SCOTT SIMPSON // AACUL chairman, ex officio, Salt Lake BRAD BARNES // Air Academy Federal Credit Union, MICHELLE WILLITS // deputy editor • [email protected] City, Utah 608-231-4067 Colorado Springs, Colo. RON JOOSS // senior editor • [email protected] SANDI CARANGI // Mercer County Community Federal Credit DIRECTORS RON SMITH // Tennessee 608-231-4321 Union, Hermitage, Pa. DALLAS BERGL // Indiana STEPHANIE TEUBNER // PAT DRENNEN // Iowa Wyoming JENNIFER PLAGER // senior editor • [email protected] MICHELLE HUNTER // CU of Southern California, Anaheim JOE THOMAS // Virginia 608-231-4290 SCOTT EARL // Colorado KEVIN KESECKER // SECU, Linthicum, Md. CHARLES ELLIOTT // CAROLINE WILLARD // Texas Mississippi SCOTT WOODS // South DESIGN & PRODUCTION STEVEN LANGLEY // Schools Financial Credit Union, TERESA FREEBORN // Carolina Sacramento, Calif. BEN TENORIO // digital media design specialist California RICHARD S. MILLER // FeatherStone Planning and Consulting GARY FURTADO // Rhode LEADERSHIP CARRIE DOYLE // graphic designer Island JIM NUSSLE // JEAN PETERSON // Aberdeen (S.D.) Federal Credit Union TOM KANE // Illinois president/CEO SUBSCRIPTION SERVICE IDREES RAFIQ // Credit Union Resources, Texas DEBIE KEESEE // JILL TOMALIN // SUBSCRIPTION DEPARTMENT Washington chief operating officer P.O. Box 461 MAILING ADDRESS MARIA LAVELLE // RYAN DONOVAN // Annapolis Junction, MD Pennsylvania chief advocacy officer CREDIT UNION MAGAZINE 20701-0461 MARIA MARTINEZ // Texas GREG MICHLIG // P.O. Box 431 800-356-9655 PATRICK PIERCE // chief engagement officer Madison, WI 53701-0431 Minnesota TODD SPICZENSKI // FRED ROBINSON // chief products & Tennessee services officer SUBSCRIBE TODAY! JOHN SACKETT // Wisconsin Editor’s Note Editor’s // Call 800-348-3646 // Visit news.cuna.org/subscribe

10 Credit Union Magazine | cuna.org/news

12 Ideas & Inspiration DELIBERATE ACTION.’ YOU HAVE TOTAKE IN ORDERTOBE ‘IN ORDERTOBE Credit UnionMagazine experience willhavetheupperhandinserviceandcost savings. Technologically adeptbusinessesthatusechatbotsaspartofanomnichannel at theCUNARoundtableforBoard Leadership Victor MiguelCorro, CEO ofCoopera, InspirationIdeas & Artificial intelligencegainsavoice Artificial Source: Jupiter $7.3 2019

billion Retail sales

| $112 cuna.org/news 2023

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billion ‘Look forthemess’ drive and the impact your drive andtheimpactyour result inpeoplenoticingyour hasn’t beenconsidered before—will needs attention—andapproaching itinawaythat atEnronofficer from 1999to2002. says Olson,whowasthechiefhumanresources and beabletogointoitshowimprovement,” merely needto“lookforthemess.” on theirorganization andadvanceintheir careers ance, saysthosewhoare lookingtomakeamark strategist andco-founderofChoiceStrategicAlli Cindy Olson,chiefhumancapitaltransformation make itbetter.” And thenchangeitand else isnotwillingtodo. thing thatsomebody fix,” shesays.“Dothe make. efforts Taking theinitiativetotackleaproject that “I lovedtofindanarea thatwasnotgreat “Go find something to “Go findsomethingto

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- 5 steps to a first-rate culture The right culture creates engaged employees, says formance—including a monthly scorecard on credit Michelle Grabicki, senior vice president of corporate union performance. culture at $2.4 billion asset Numerica Credit Union in Employees also meet monthly with their leader Spokane Valley, Wash. and are empowered to set the agenda and drive the “Engagement comes when employees have an conversation. emotional commitment and connection to the orga- Communication and transparency. Provide nization,” says Grabicki, who is second vice chair of 4 avenues for staff communication. the CUNA HR & Organizational Development Council Numerica holds daily five-minute “huddles” to Executive Committee. “Engaged employees are excited discuss what’s happening and determine how staff and want to do more.” may support each other. It tries to distribute content Grabicki offers five steps to create a great culture: through engaging media, including a “Good Morning, Know who you are. Develop a “core purpose Numerica” video that shares updates. 1 statement” to serve as your focus that will The credit union also provides a channel where never change. employees can send questions anonymously to the Be who you are. Demonstrate your authenticity CEO, who partners with the pertinent subject matter 2 and bring your own core purpose to life. Cele- expert. brate what makes your credit union stand out. Have fun. Genuinely have fun together as a “Looking for staff is about more than who can do the 5 company. job,” says Grabicki. “It’s about hiring people who authen- From employee appreciation events— including tically embody your culture, creating a community of carpool karaoke with senior leadership and employee employees who share your purpose and vision.” performances—to impromptu dinosaurs roaming the Cultivate innovation and empowerment. Cre- halls, these happenings keep the atmosphere fun and 3 ate forums that allow for employee innovation engaging. and be transparent with your goals and objectives. “Culture is a strategic advantage,” Grabicki explains. For instance, every Numerica employee has access “When you take care of your employees, they take to the strategic plan as well as metrics that gauge per- care of members, which strengthens the community.”

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pg_13_QwickRate.indd 2 11/4/19 9:47 AM 14 Ideas & Inspiration Generation Z nearly fourdealershipsbefore makingavehiclepurchase, whilebabyboomersvisitjustovertwo. happen online,butthefeelofwheelisstillimportant.Forexample,membersGenerationZvisit,onaverage, Brick-and-mortar dealershipsare stillanimportantpartofthecar-buying experience.Prepurchase research may The testdrive Credit UnionMagazine Source: Ideas & InspirationIdeas & ORGANIZATION 3.8 UrbanScienceandHarrisPoll ‘THE CEOANDIARETHECONNECTORS OFTHE OF IT, BUT IWANT TOMAKESURETHE CEO IS

| cuna.org/news Young millennials 3.8 ALWAYS INTHELOOP. . HERUNSTHEOPERATIONAL ASPECT Older millennials 2.6 at theCUNARoundtableforBoard Leadership Unitus CommunityCredit Union, Frank Chinn,board chair, Generation X ’ 2.4

Baby boomers 2.1

iStock Pg_15_BOKF.indd 15 life’s challenges.Yet, showstheyseemto oursurvey budget” and“savingforemergencies.” moneylesson,followedby“howto create important a and 2010)noted“goodspendinghabits”asthemost Generation Zrespondents (thosebornbetween1995 percent found.Forty-four of cial health,thesurvey of finan next generationunderstandstheimportance the bestresource forteachingtheirkids. in fourparents believethatafinancialprofessional is should leadthe“moneytalk”withteens,nearlythree › themselves, are afraidofhavingtheconversation. finances withkids,butonly42%ofparents admitthey, › nances thansexwiththeirkids,only28%are doingso. › parents, children, andfinances.Itfoundthat: 1,000 U.S.adultstouncovertherelationship among aren’t havingthoseconversations. foundthatparents Finance andParents simply Survey to talkingwiththeirchildren aboutmoney, BECU’s management habitsasadults.However, whenitcomes an earlyagehelpspeopledevelopstronger money Research showsthatteachingfinancialeducationat BECU survey:Parents aren’t talkingtokidsaboutmoney Institutional Investments,BankofOklahomawhich operatesasaseparatelyidentifiabletradingdepartmentofBOKF, NA. Securities, insuranceandadvisoryservicesoffered byBOKFinancialSecurities,Inc.,memberFINRA/SIPCandasubsidiaryofBO › › › Even 82% While “Parents oftentalkwiththeirchildren aboutmanyof Despite parents avoidingtheconversation, BECU inTukwila, Wash., of commissionedasurvey accuracy toensurethatit’s areliable resource. customers. Letusconductareviewofyourmodeltoevaluateitsinterestrateriskandassess Your asset/liabilitymodeliscrucialtothesuccessofyourfinancialinstitution anditsabilitytohelp Leaving You OpenTo Risk? Is Your Asset/LiabilityModel www.bokfinancial.com/assetliability 866.440.6515

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- - becoming anadult.” help prepare theirkidsforthefinancial realities of resources theconversationand andadvicetostart our goalistohelpbuildtheirconfidencewiththeright credit union. Stacey Black,financialeducatoratthe$21billionasset topic:money,” important be neglectingonevery says “Whether parents are feelingafraidorunprepared, NOT FDICINSURED|NOBANKGUARANTEE |MAY LOSEVALUE

K Financial Corporation. Some services offered through our affiliate, K FinancialCorporation.Someservicesoffered throughouraffiliate, iStock Credit UnionMagazine

| Winter 2019 10/30/19 9:30AM 15 Ideas & Inspiration 16 Ideas & Inspiration Be apeacock,notparrot Credit UnionMagazine in our blog posts,” Kerner in ourblogposts,”Kerner Pelican before weputads “It tookusthree yearsat trust withtheiraudience. should taketimetobuild you get. › their ownwork. if theywouldwanttoread ers shouldaskthemselves they are.” wants anyonetoassumewho make assumptions.Nobody “When youwriteforothers, who writeforthemselves,”hesays. “The bestcontentcomesfrom people › Kerner says. unique colorcombinations. can onlycopywhatotherssay. Peacocksshowtheircolorsandhave of yourstoriesare different.” totellthan yours,” Kernersays.“All other bankshaveadifferent story › say something,”hesays. anywhere? IfIdidn’tpostthis,woulditbemissed? posting, marketersshouldthinkoftwoquestions:CanIgetthisfrom be 10timesbetterthanwhatconsumerscanfindonGoogle.When out ofobligation,oftenitwilllackpassion.Kernersayscontentshould › Through roundtable. ContentMarketing,”aCUNACouncilsvirtual when developingcontentmarketingduring“NextLevelCommitment lion assetPelicanStateCredit Union,offered adviceonwhattoavoid you’re supposedtomaster. toconsiderallthetasks standing whatnottodo,ratherthantrying Sometimes it’s easiertovisualizesuccesswithinadisciplinebyunder InspirationIdeas & trust first?”hesays. from acompanyyoudon’t “Would youbuysomething be opentoasalespitch. and goalsbefore itwill the provider’s mission must firstunderstand La., credit union. says oftheBatonRouge, › › › › Don’t sell every chance chance Don’t sellevery Don’t writewhatyouthinkotherswant. Don’t copyothers’content. Don’t postcontentforthesakeofposting. He sayscontentdevelop “Great contentisn’tfoundwithinquotationmarks,” His advice:Don’tbeaparrot; beapeacock.Parrots talk,butthey “Post becauseyouhavesomethingtosay, notbecauseyouhaveto With thatinmind,FrankKerner, with$367mil marketingsupervisor He says the audience He saystheaudience Contentcreators

| cuna.org/news - “Othercredit unions,otherblogs,and

When you post content Whenyoupostcontent - - equal cohesion Handshakes culture.” strong cohesion you haveavery Charleston. “That’s when youknow na FederalCredit UnioninNorth for $1.8billionassetSouthCaroli Dr. Troy Hall,chiefstrategyofficer people intheorganization,” says people are acknowledgingother credit union’s culture. shakes cantellyoualotaboutyour Greetings, laughter, andhand systems.” others’ values of others,feeding ing tothesuccess actually contribut ideas, buttheyare clinging totheirown individuals are not ment,” Hallsays.“Thismeans fives betweenindividuals. of laughter, handshakes,orhigh not just“howare you?”—moments there are meaningfulgreetings— zation,” hesays. individual andthenontheorgani where youare firstfocusedonthe ate value,andcreate commitment ples toRetainYour Top Talent.” “Cohesion Culture: Proven Princi ant,” saysHall,authorofthebook cohesion culture iswhat’s import committed toemployees. where theorganization remains purpose. It’s alsoanenvironment and are valuedbecausetheyhave individuals feelliketheybelong “You wanttolookforhowother “It’s thatpointofacknowledge A cohesionculture existswhen “Create asenseofbelonging,cre “The frameworkaround the A cohesionculture isonewhere news.cuna.org/podcasts work culture at Dr. Hallexpandson -

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Pg_17_Mercury_mech.indd 2 tax credits. unique solarprogram incentivessuchasrebates and home equityproduct. Consumerscanbenefitfrom great fitforus.” out there ontheconsumerlendingside,sothiswasa in Hadley, Mass.“There’s notalotofnewproducts of $500millionassetUMassFiveFederalCredit Union generate business,”saysRichKump,president/CEO suchproducts.unions thatoffer ulation, according torepresentatives from twocredit erences ofagrowing segmentoftheconsumerpop product linethatfitstheeconomicandlifestylepref credit loansoffer Solar-power unionsaneco-friendly Solar loansaddshineasnewproduct line Many credit unionsmakesolarloansasatypeof “We were lookingforanewassetclass,wayto - - to us.” ofthis,andthey’vereferredpart newmembers “Local installershavecalledusandaskedtobea consumer lendingatProvident Credit Union: are, andhowtheincentivesare applied.” the dynamicsofhowsolarworks,whatregulations a lotofworkwithinstallers,”hesays.“Understand credit fortheirsolarsystempurchase. Members canborrow upto$35,000andreceive atax it’s theequivalentofprepaying fordecadesofpower. Loan asa“win-winscenario”formembersbecause in RedwoodCity, Calif.,toutsitsSolarAdvantage Adds ScottPellegrini,associatevicepresident of advisesKump:“WeExpect alearningcurve, do Provident Credit Union,with$2.6billioninassets, news.cuna.org/podcasts into eco-friendlylendingat Kump andPellegrinidivedeeper Credit UnionMagazine

iStock

| Winter 2019

11/1/19 9:46 AM 17 Ideas & Inspiration 18

President’s Perspective PRESIDENT’S PERSPECTIVE Credit UnionMagazine From shutdownassistancetoembracingDEI,credit unionsshowcasedourdifference. Together, wecreated enormousmomentumin2019 unions willbeready tohelp. face anothershutdown,credit tance duringtheshutdown. Ifwe joined credit unionsforassis alone, more than3,000people associated feeswaived. other modifications,oftenwith received loanextensionsand › or no-interest loans. vided nearly$100millioninlow- › support. turned totheircredit unionfor › vided: the knownscopeofaidwepro than 500credit unionsrevealed ofmoresurvey greater, aCUNA waslikelyfar port shutdown sup with empathy. financial support loans, andoffering providing 0% payment periods, bers, extending mem affected unions stoodby weeks, credit no payandendinsight.For sands ofworkershomewith down senthundreds ofthou difference. the spotlightandshowcasedour year, credit unionsstepped into 2019. From thebeginningof just had. reflect ontheamazingyearwe challenges andopportunities. about howtotakeontomorrow’s sequently, we’re alwaysthinking credit Con movementforward. At CUNA,ourjobistotakethe › › › America’s credit unions America’s credit than79,000Americans More More than26,000members More On theheelsofshutdown, respondentsFrom oursurvey While actual The federalgovernmentshut It really isafondfarewell to But it’s to alsoimportant - -

| cuna.org/news FIRSTS. MOMENTOUS SAW SOME THIS YEAR pro ------

CUNA GovernmentalAffairs on fulldisplayduringthe2019 in thearbitrationcourts. of membershipgainedabigwin aler legislation,pushedfora dard, promoted nuancedauto-di data securityandprivacystan providers, called for anationwide fromunions standapart allother lative priorities. mission andstructure, andlegis es focusedonourcredit union advocacy approach, themessag of ourCUNA/league360-degree credit uniondifference. Apart member ofCongress aboutthe at educatingandinformingevery tegic messagingcampaignaimed intoastra rounding ourindustry CUNA translatedthebuzzsur Eyes toaCredit Union the much-anticipatedOpen Your momentous firsts. We launched movement. inspire, empower, andleadour explored newwaystoinnovate, Union Conference, where we right intotheAmerica’s Credit keynote speakers,andnetwork. Capitol Hill,hearfrom inspiring gathered inWashington to hike than 5,200credit unionpeople Conference (GAC),where more Our 360-degree advocacywas We introduced howcredit This yearalsosawsome The successfrom GACflowed our fightonfield And san support. with hugebiparti through theHouse nabis bankingbill usher thefirstcan results. We helped gained important ently bydesign. are taxeddiffer how credit unions bill, andexplained cannabis banking Our efforts Our efforts ® cam ------in ourcommunities,”p.20). tive principle(“Makinganimpact a shared credit unioncoopera and prominently establishDEIas passed aresolution toclearly and inclusion(DEI).Theboard critical area: diversity, equity, tors pushedustodomore ina week. board every and newcontributorscomeon fundraising exceeded$45million, states throughout theyear. Our and welaunchedin13more paign inMinnesotaJanuary, has instore. union cooperativeprinciples. with ourothershared credit ofourmovementalong the heart tive willgrow, andDEIwillbeat conference. OurAwareness Initia July, aCUNA/World Counciljoint andWorldin February Movingin ning afantastic2020CUNAGAC union difference, andwe’re plan will continuetobethecredit us into2020.Ouradvocacyfocus to 2019,we’lltakealotofitwith anyone. achieve more inayearthanmost as onlycredit unionscan,we superpowers. Comingtogether, possible withoutourcooperative 2020 andbeyond. focus ontangibleprogress in our DEIjourney, andCUNAwill resolutions. Thisisabigstepin Plus, theCUNABoard ofDirec I can’twaittoseewhat2020 While wewaveafondfarewell wouldbe None oftheseefforts But it’s aboutmore thanjust 202-508-6745 [email protected] Credit UnionNationalAssociation Pre JIM NUSSLE sident/CEO

- - - - CUNA GAC

CUNA Governmental 2020 Affairs FEBRUARY 23–27 Conference

GAC20_PROMO_CM.indd 1 11/4/19 1:42 PM 20

Chairman’s Corner CHAIRMAN’S CORNER Credit UnionMagazine ‘Show yourcommunitiesyoucare andyou’llbeamazedattheimpactyoucanhave.’ Making animpactinourcommunities the NorthBayfires. Brett Martinez,farright,talkstothepress abouthowRedwoodCredit Unionprovided relief forpeople affected by tion. › › › › › (DEI). › values intopractice. by whichcredit unionsputour erative principlesare guidelines credit unionsare trulydifferent. toshowpeoplehow opportunity ties inuniqueways,givingusthe ourcommuni allow ustoserve union cooperativeprinciples institutions. what differentiates usfrom other our communitiestounderstand know it’s challengingforpeoplein difference” allthetime.But we We talkabout“thecredit union › › › › › › Education Autonomy Member Democratic Voluntary Diversity They are: The shared credit unioncoop Fortunately, ourshared credit economicparticipation. , equity, andinclusion andopenmembership. , training,andinforma andindependence. membercontrol.

| cuna.org/news - - - DEI—to runforboard seatswhere ifications—including embodying leaders whomeetallofourqual tee toencouragecredit union approved arecruitment commit advance ourmovement. to encourageactionsthatwill beginning, andweare working better embraceDEI. about howourmovementcan years ofthoughtfuldiscussion union cooperativeprinciple. recognize DEIasashared credit the CUNABoard ofDirectors— unions—through theactionsof day.in ourcommunitiesevery strate thecredit uniondifference › tives. › › › Concern Cooperation For example,theCUNABoard We knowthisisjustthe We madethisdecisionafter As ofSeptember, credit These principleshelpusdemon forcommunity. amongcoopera - - - - institutions isthrough concernfor fromwe differ otherfinancial exampleofhow Another primary for community Concern tiator forcredit unions. journey. ourDEI our movementfurthers the board istakingtoensure dates aswell.Thisisoneaction self-nominatedcandi to support ocratic control, wewillcontinue there isnoincumbent. up byproviding disasterloans, recent years,credit unionsstep frequencyhas withunfortunate in right thingtodo. it’s required butbecauseit’s the ofourbusiness—notbecause part events andnonprofits asa regular community. Embracing DEIisakeydifferen Of course,inthespiritofdem And whendisasterstrikes,asit Credit local unionssupport - - - payment deferrals, and other bers to improve their credit, avoid schools across three counties to financial assistance to affected predatory lending practices, and help students learn essential mon- members. better their financial situation. ey skills through Bite of Reality. We also volunteer in our com- Many credit unions offer out- Not only did this day of impact munities and provide support to reach programs to educate people bring vital financial education to local nonprofits. in underserved neighborhoods, 3,000 students as they prepare for In addition, credit unions look senior centers, youth groups, and adulthood, it also provided a pos- after each other nonprofits about itive and empowering team-build- in times of disas- financial issues. ing opportunity to energize our ter. CUAid, the Providing our staff about making a difference. National Credit communities Cooperation among coopera- Union Founda- with free finan- tives also makes credit unions tion’s disaster cial education unique. By sharing knowledge and relief fund, for EMBRACING also aligns with best practices with leaders and example, is dedi- DEI IS A KEY our principles employees at other credit unions, cated specifically and creates we strengthen our industry and to helping credit DIFFERENTIATOR positive money improve our services. union people FOR CREDIT habits which Few industries embrace the recover from UNIONS. can dramatically concept of cooperation to the disasters. change people’s degree credit unions do, and while During the lives. Many it might not be readily apparent government credit unions to our members, it absolutely shutdown, many host seminars in benefits them. Regardless of your credit unions their branches or credit union’s size, we can all learn provided direct deposit coverage, post educational content on their from each other. advancing funds to government websites or social media channels Credit unions honestly care workers to help them get by until on important topics such as how about the people in our communi- their paychecks finally came credit works, preventing fraud ties, and we want to help. People through. and scams, and preparing for don’t expect that from financial And during the Great Recession, retirement. institutions, so they often find it credit unions worked with mem- hard to believe. bers to find creative solutions to ‘Bite of Reality’ But that’s what makes us their financial challenges, allow- Credit unions have access to many unique. Our “people helping peo- ing them to keep their cars and financial education resources. ple” philosophy is powerful, and homes so they could regain or One is the Bite of Reality program, we live it every day. Show your maintain their financial well-being. developed by the Richard J. Myles communities you care and you’ll Cooperatives are voluntary Foundation and funded by the be amazed at the impact you can organizations, open to all people National Credit Union Foundation. have. able to use our services and will- It teaches teens how to deal with Thank you for all you do for ing to accept the responsibilities real-world financial challenges. your members, your communities, of membership without gender, Redwood Credit Union, where and the credit union movement. social, racial, political, or religious I’m president/CEO, has offered discrimination. As such, credit Bite of Reality events at local unions are willing and able to schools and youth groups for the serve the underserved. past six years. But this year we did BRETT MARTINEZ Our focus on people instead of something a little different with it. CUNA Board Chair profit means we’re uniquely posi- On Oct. 14—when many finan- President/CEO tioned to serve people of modest cial institutions were closed for Redwood Credit Union means who may traditionally be the federal holiday—Redwood’s [email protected] unbanked or underbanked. Credit entire workforce of 700 employ- 707-576-5101 unions willingly work with mem- ees deployed to nearly 15 high

Credit Union Magazine | Winter 2019 21 (Photo: Firefly Credit Union)

Financing for New Families After adopting two daughters and realizing how much adoption can cost, Geoff Bullock, the engagement officer for $1.4 billion asset Firefly Credit Union, played an instrumental role in the creation of an adoption loan. Cannabis banking

22 Credit Union Magazine | cuna.org/news Life- changing lending DARLA DERNOVSEK

Alternative lending programs serve members’ unmet needs.

A place to live. A child to love. A health need met. Its pledge to provide $100,000 for loan administra- A problem solved. tion is guaranteed by a fund from ProsperityME, a nonprofit organization that asked the credit union to Credit union lenders are finding new ways to reach develop the program. ProsperityME provides financial out to current and prospective members who have education, which includes conducting the loan eligibil- crucial needs at a challenging moment. Whether ity interview and coaching immigrants on how to be people are coping with an earthquake, adopting a good tenants. child, or fixing a failing foundation on their home, Infinity FCU also offers a “Bridge to Citizenship” loan these loans provide a timely link to the funds they to cover the cost of becoming a citizen, including the need. $725 fee that covers the application, biometric screen- For credit unions and their members alike, these ing, legal fees, travel, and other expenses. alternative loans offer opportunities to demonstrate The loans help Infinity FCU fulfill its goal of putting the credit union difference. its community and its members “in a better place,” Moreau says. Finding a place in America “There’s no better feeling in the world than going People who come to the U.S. for asylum often leave home from your job every day knowing you have behind successful careers that would have made them attractive borrowers. Yet, they often lack both the resources to get their first apartment and the credit history required for a loan. Focus Infinity Federal Credit Union in Westbrook, Maine, offers a no-interest loan for up to $1,500 to cover ››Identify the financial needs your members have rental security deposits so asylum seekers can get that aren’t being met. their first U.S. apartment. Borrowers have up to 10 ››Look at available programs to see what existing months to begin repaying the loans, which have a models you can adapt to meet those needs. 12-month repayment period, says Kandy Moreau, chief ››Board focus: Alternative ways to provide loans to lending officer at the $340 million asset credit union. meet members’ financial needs are opportunities Infinity FCU made 21 loans in the program’s first 15 to demonstrate the credit union difference.

months. Alternative lending

Credit Union Magazine | Winter 2019 23 24 Alternative lending

Credit UnionMagazine children. Kohl says.“We else soithappens.” stopeverything because theyare pickingupthebabyintwohours,” an issueforapproved borrowers. the barrierstoadoption,itmakessure financingisnot holidays andweekends.WhileFirefly can’t remove all ber relationship who officer remains availableon rowers torepay 1.5%oftheirbalanceeachmonth. rate andnocollateralrequirements, andrequires bor the adoptionprocess. Theloanhasa6.49%interest that allowsfamiliestoaccessfundsastheygothrough adoption canafford topursue it. learned thatonlyoneinfivefamiliesinterested in ability topayforit. the gapbetweenfamilies’desire toadoptandtheir mental inthecreation ofanadoptionloantobridge Firefly Credit UnioninBurnsville,Minn.,wasinstru their hometopayforthemountingcosts. a babycantop$40,000.Heandhiswifehadtosell 6 and9,hewassurprisedtolearnthecostofadopting Bullockadoptedtwodaughters,nowages When Geoff Growing adoptivefamilies helped someonerealize theirdreams,” shesays. and Emmett. Edison sons, two their adopt to Union Credit Firefly from loan adoption an used Andrist Amy and Derrick Seventeen families have used the loan to adopt Seventeen familieshaveused theloantoadopt “Sometimes theycallandneed $20,000more Adoptive familiesworkwithMandiKohl,themem In response, thecredit unioncreated alineofcredit withtwoadoptionagencies,Firefly While partnering for$1.4billionasset Bullock, engagementofficer | cuna.org/news -

- struggles.” to grow theirfamilies,”Amysays. “the bestavenueforsomany people fly loantoadoptEdisonandEmmettas over aholidaytomeettheirsons. the loanastheytraveledoutofstate contact tohelpthemdrawfundsfrom union inBurnsville,Minn.,stayed officer atthe$1.4billionassetcredit approval. They quicklyappliedandreceived fly’s program from another credit union. wouldn’t havehaditanyother way.” family meanstheworldtousandwe two children,” Amysays. “Having our the process twiceandbe the parents of made itpossibleforustogothrough $100,000. tions—with atotalcostofmore than 16 daysapartintwoseparateadop it possibletoadopttwosons,born Unique circumstances suddenlymade planning, andwaitingtoadoptachild. Derrick andAmyAndristwere hoping, FAMILY EXPANDING A “It’s worthallthehappinessand The AndristfamilyviewsusingaFire Mandi Kohl,memberrelationship The AndristfamilylearnedaboutFire “Firefly Credit Union’s adoption loan - - - 80,000 aftershocksin30days.More than40people calmed thecommunity, whichexperiencedmore than repairs. in credit uniondonations—toassistmemberswith tion madegrantsof$500to$1,500—fundedby$75,000 Valleys TheDesert earthquakes. EmployeesFounda the communityofTrona, whichwashithard bythe branch alsodelivered water, food,andtoiletriesto five days.Desert Valleys Federal’s mobile disaster criteria, andfocusedongettingloansout.” used basicscoringcriteriaandliberaldebt-ratio they lost,orbuybabyformula,”Bruensays.“We ment, getahotelroom, replace theprescriptions hands sotheycouldputadepositonanapart 90-day term. a$1,000loanwith5%interestoffer rateanda board created LoanProgram theEarthquake to union. president/CEO atthe$41millionassetcredit asking yourself,‘WhatdoIdo?’”saysEricBruen, you’re waitingforyournextpayday, andyou’re this is,youhave$2.22inyourcheckingaccount, into thecommunity’s income. was closeddueto$5billionindamage,cutting damaged. ChinaLakeNavalAirWeapons Station homes, whichwere more likelytobeseverely than outsideagenciescouldrespond. knew its4,400membersneededhelpsooner Valleys FederalCredit UnioninRidgecrest, Calif., inCalifornia.LeadersatDesert Mojave Desert damaged homesandbusinessesintheeastern onJuly4-5,2019, Back-to-back earthquakes Understanding theaftershocks a loan,”Bullocksays. grow theirfamiliesbecausewehelpedthemget Bruen believesthecredit union’s quickresponse The credit unionissued81loansfor$81,000in “The ideawastogetmoneyintoresidents’ ValleysOn July6,BruenandDesert Federal’s “The firstproblem afteranemergency like Many membersliveinmobileormanufactured “It’s remarkable tothinkwecanhelpmembers STEPHEN BASCOURT STEPHEN expenses.” unexpected expected and way tohandle prospects a members and “It gives

- - funds in one to two days so they can quickly begin funds inonetotwodaysso theycanquicklybegin loans andcompetitiverates onotherlifestyleloans. 0%interesttain Americaoffers ratesforsomesmall thepoint-of-sale loanandtheborrowers.offer Moun to newmembers. credit union’s with75%ofloans going loanportfolio, ager atthe$9billionassetcredit union. lifestylelendingman trust,” saysStephenBascourt, and competitiveloansfrom alocalinstitutiontheycan expected andunexpectedexpensestogetinstant 2013. It hasusedOnSpotFinancingfrom CUDirect since meet unexpectedcostsandmakelifestylepurchases. offered “lifestylelending”since2004tohelpmembers other needs. for dentalcare, vehiclerepair, homerenovations, and Credit unionsare movinglendingtothepointofsale Point-of-sale lending the credit uniondifference standout,”Bruensays. praiseandsay“thanks.” used socialmediatooffer Businesses payasetfeefor eachloanandreceive OnSpot Financingbenefits boththebusinessesthat Lifestyle lendingaccountsforabout10%ofthe “It givesmembersandprospects awaytohandle Mountain AmericaCredit UnioninSandy, Utah,has “These typesofloans,thesespecificmoments,make lines will pass If inspection. lines will not, we have to hire gas, and sketchy. can be our electric house Our have knowing peace that ifor it, Ineed when I with these earthquakes. Wewith these have no water, no “I’m inTrona and we have hard hit very been someone to come inandthe find problems. I has structural damagehas structural and Ipray that my gas 33 can count on you to lend ahelping hand.” Like 43 Desert Valleys FCU. B ridgette KendallCunninghamrecommends mins •

Comment Credit UnionMagazine

| Winter 2019 Share ... - - 25 Alternative lending 26 Alternative lending businesses justbyfinancingthrougha usratherthan providing services. Credit UnionMagazine “It is shocking to hear how much money we save the “It isshockingtohearhowmuchmoneywesavethe merchant.” And westilltookcare ofthe has more than$150,000inloans. saving money. Thecredit union understands hiscredit betterandis Larson explains.“Themember the homerepairs. est. Thenewloanalsocovered in paymentsandthousandsinter ber, savinghim$500amonth than $150,000indebtforthemem Centris Federalrestructured more After Larsoncalledtolearnmore, home repairs butfailedto qualify. asked fora$10,000loan reaches outtolearnwhy. $774 millionassetcredit union, ident ofmerchant lending atthe Neb., Tracy R.Larson,vicepres Federal Credit UnioninOmaha, for OnSpotFinancingfrom Centris When anapplicantfailstoqualify $150,000 INDEBT MORE THAN RESTRUCTURING “This isawinforeverybody,” One applicant,forexample, | cuna.org/news TRACY R. LARSON R. TRACY around us.” change all be partofthe “We wantto

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foundation andconcrete repair. CentrisFederaloffers withitslargest providing partner ovation services, markets. untapped competitive, anddigitalwaytoserve OnSpot Financingin2015becauseit’s a convenient, ofthechangeallaround want tobepart us.” identify whatourcommunityneeds,”Larsonsays.“We merchant lending. tive members,saysTracy R.Larson,vicepresident of Omaha, Neb.,tostayrelevant tocurrent andprospec Financing allowsCentrisFederalCredit Unionin Indirect lendingatmerchant locationsthrough OnSpot Changing withmembers larger, says. conventionalalternative,”Bascourt Most business partners offer homerepair offer Most businesspartners orren The $774millionassetcredit unionbeganoffering “We’re alwayslookingforwaystounderstandor

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iStock a term loan product for up to 72 months. Because the credit union processes loan applications around the clock, businesses can operate with- ANSWERED PRAYERS out being limited by Centris Federal’s business hours. “This program is great for home repair contractors Despite a successful career in her native because the decisioning is so quick,” Larson says. Rwanda, Claudine Mukarurangwa strug- “It’s easy for them to explain to their customers. Their gled to find funding for a security deposit customers know our name and there’s a comfort level so she could get her first apartment in that comes with that.” Maine. Centris Federal is acutely aware that business “I was a businesswoman for 15 years partners represent the credit union, so it finds part- before I came to the U.S.,” she says. “As ners that combine a positive reputation with ethical a Christian, I prayed for God to put me in business practices. Larson says it’s exciting to watch touch with people who would guide me.” small-business members use the program to grow. Mukarurangwa used $340 million asset “This technology gives us the ability to evolve with Infinity Federal Credit Union’s no-interest what we see our competitors doing,” Larson says. loan to pay her security deposit for an apartment. Today, she makes it her mis- Serving doctors, dentists, and fellows sion to tell other asylum seekers about the Offering loans that resonate with health care audi- credit union in Westbrook, Maine. ences, including doctors, dentists, technicians, and research trainees, allows NIH Federal Credit Union in Washington, D.C., to serve members in a highly contested marketplace. The $660 million asset credit union serves employees of the National Institutes of Health (NIH) and the health care community in the nation’s capital and the mid-Atlantic region. Miglena G. Doncheva, vice president of lending, says the student loan refinance program allows doctors and dentists to refinance student loans up to $250,000 with terms up to 15 years with no prepayment penalty. Nurses and other health professionals can refinance up to $125,000. iStock “When we see a need, we see an opportunity to help.” says. The credit union collects information through MIGLENA DONCHEVA surveys and feedback from employees and staff. Consistent two-way communication with designated leaders at NIH helped the credit union develop the NIH Federal currently has student loan balances of Fellows Advantage Program, which continues to grow $6.7 million. through member referrals. It also offers the Fellows Advantage Program for “When we see a need, we see an opportunity to international trainees, known as “fellows.” These help,” Doncheva says. “We think how we can best professionals are scientists, researchers, or highly address the need at the lowest possible cost for the skilled workers conducting health-related research member. The alternative products result from the at NIH facilities. Fellows have time-limited, renewable specific needs of our members.” appointments. “Many, if not most, of these trainees come to the U.S. without a credit history, making it challenging to support their financial needs while here,” Doncheva says. Resources The Fellows Advantage Program offers unique terms for mortgages, personal loans, credit cards, and auto ››CUNA: cuna.org/lending loans. NIH Federal has granted more than $9 million in ››CUNA Lending Council: cunacouncils.org mortgages to fellows so far. ››CU Direct: cudirect.com

Members guide the product development, Doncheva Alternative lending

Credit Union Magazine | Winter 2019 27 BOARD INSIGHTS INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD BOARD INSIGHTS INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD INSIGHTS BOARD

28 Board insights Credit UnionMagazine Lincoln. University ofNebraskaFederal Credit Unionin › Credit Union inEauClaire, Wis. › Upward Credit UnioninBurlingame, Calif. › top issuesboards face: members todiscusstheirinsightsontheseandother wrestle. issues withwhichcredit unionboard members anddiversity are Governance twoofthebiggest Directors explore governance,diversity, andothertopissues. › › › Kim Phelps, Doug Olson, Annie Miller, Credit UnionMagazine vice chair at $106 million asset vicechairat$106millionasset board chairat$2.6billionassetRoyal board chairat$77 million asset | cuna.org/news satdownwiththree board JENNIFER PLAGER

management. focusing onyourjob,andunderstanding therole of to keepaneyeonthem.It’s aboutknowingyour job, numbers andthattheyalwaysneed most important manage versuswhatweshould really keepaneyeon. because wewalkafinelinebetweenhowmuch board membersasense oftheirresponsibilities walks afineline.Iwouldadvisemanagementtogive Annie Miller: governance? practices yourboard followswhenitcomesto Credit Union Magazine: I makesure newboard members understandthe Theboard, especially avolunteerboard, Whatare somebest

iStock Doug Olson: We’ve become a lot more sophisticated views and rotate through the audit committee. and our operations are a lot more complex. From a They’re not hands-on, but they’re knowledgeable in governance standpoint, a lot of it is education. The a lot of areas. › CEO and I sit down a couple of times a year and set a continued schedule for topics we want the board educated on at meetings, and then we bring in speakers. It allows the Focus board to be knowledgeable as they’re overseeing the operation of the credit union. ››Boards are placing an emphasis on diversity. We operate at 20,000 to 40,000 feet. None of the ››Financial health and growth are among the top board members are counting [teller] drawers like they challenges boards face. did 50 years ago. It’s about policy governance and ››Board focus: Continue to learn and ask questions ensuring the management team is operating within in the boardroom. those policies.

All our board members sit in on exam exit inter- insights Board

Credit Union Magazine | Winter 2019 29 30 Board insights Credit UnionMagazine stay aheadofthecurve. Members are countingonustostayinformedand payattention. as acomplianceperson,wecertainly If informationcomesfrom such someone onstaff, may nothavebeenenactedyet. nature thatare beingdiscussed—eventhoughthey when wegetanupdateaboutitemsofaregulatory have ahalf-daystrategysessioninthefall.That’s meet, atminimum,onceamonth,andweusually Kim Phelps: A lot of it has to do with education and being alert. A lotofithastodowitheducationandbeingalert. 1 2 5 3 4 to thesetrends: Jeff Rendel,president ofRisingAboveEnterprises,sayscredit unionboards shouldpayattention 5 TRENDSTOWATCH

one memberatatime;relationship atatime.” a bigmarketandtheneedlemovesslow, sochipawayatit,”Rendelsays.“Remember, it’s goals. and ensuringyouhavethe correct strategicplaninplaceforyourcredit unionandits growth, andratesservice—allofwhichare credit uniontraits,Rendelsays. a solutionsmindset,face-to-faceservice,flexibility, long-term relationships focused on unions provide. Smallbusinesseslookforseveralfactorsinafinancialinstitution,suchas much different. Membersstillexpect somekindofphysicalpresence.” personalized marketingefforts, Rendelsays. of transactionstakingplaceinabranchhasdeclinedandconsumersare expectingmore only toreplace the current CEObuttodeveloppotential leaders.Investtimeonstrategy The board isshiftingitsfocustostrategyandsuccession.Developasuccessionplan,not Board focus multimillion-dollar linesofcredit andcouldbenefitfrom thefinancialservices credit The U.S.has28millionsmallbusinesses,thevastmajority ofwhichdon’t require Small businesses institutions tooffer dozensofproducts, manynowoffer 10to20.Plus,thepercentage consumers’ changingexpectations.Forexample,whileitusedtobecommonforfinancial New entrantstothefinancialservicesmarkethaveanewbusinessmodel,onethat reflects Disrupters hub isnowthedigitaldevice,”Rendelsays.“Thebranchisn’t goingaway, but itlooks In thepast,hubofcredit unionwasthebranch.Butthat’s nolongerthecase.“The The digitalcredit union typically startwithaloan.Getthemintoloanandthenotherproducts andservices.“It’s There are plentyofchancesforcredit unionstogrow. Today, relationships withmembers Opportunities exist You musthaveaneducatedboard. We | cuna.org/news have pods.It’s ofaninnovative,for funbeingpart Store. We gotridofthegianttellerwall,andwe refresh anditreminds meofwalkingintoanApple don’t thinkmanysmallercredit unionsoffer. andtechnologiesI products,but weoffer services, being innovative.We don’tjumponthelatestfad, is No.1,butwealsohavealotoffuninterms Annie Miller: Q: For example,wejustwentthrough abranch Whatbigissuesare youpayingattentionto? Thefinancialhealthofthecredit union - ward-thinking little credit union.

Doug Olson: What keeps me awake at night are things like security breaches. Everybody worries It’s fun being about those and you do everything you can to pre- vent them, but you still can get attacked. part of an On the state level, the biggest topic that keeps us up at night is the number of states—and Iowa came innovative, very close—trying to tax credit unions. If that hap- pens in one state, it’ll be a house of cards and that forward-thinking little won’t be good for the industry. On the positive side, issues for us include what credit union. banking will look like in five or 10 years, and where we should put our resources. What will the business ANNIE MILLER look like, how do we stay relevant, and what needs do younger people have and how will they view banking?

Kim Phelps: When you have a confined field of membership as we do, it’s hard to continue on an We’re very intentional. Our CEO, Linda White, acts upward growth path. We serve a university campus with surgical precision in terms of finding board in Kearney, a smaller town about 120 miles west. We members with different backgrounds and different just opened a branch there with the idea that we’re experiences to give us a more complete view of our going to be able to grow within our field-of-member- membership. ship constraints. That’s always No. 1 in our minds: How do we continue to serve the existing members Doug Olson: Diversity means a lot of things: getting and at the same time think about what other fields young people, men, women, and people of color on we should try to harvest. the board. How do you serve the membership? A lot of it is We’re working on diversifying age and gender on determined by demographics. Who is in your mem- the board. Our nominating committee doesn’t nec- bership and what appeals to them? We try to find essarily go out looking for people to challenge the that sweet spot where the membership will be best current board members. We generally always have served. contested elections, which is a little unusual for Everyone is worried about cybersecurity, but credit unions. we also discuss physical security because of the We look at diversity in backgrounds, knowledge, nature of society today. The mobile platform doesn’t education, and experience. seem to slow down, and neither does the amount of change and technology that’s available. How will Kim Phelps: We do our best to diversify through we serve members who are accustomed to doing our nomination committee. It’s made up of people practically everything online? That’s the next step, in senior management roles who have relationships and it’s a question mark as to whether you need as with some ethnic groups that many people don’t much of a physical presence, brick and mortar, when have. the competition is mobile. We also have term limits. A board member can serve three, two-year terms and then they must Q: How does your board address diversity? leave the board. We have tackled diversity with mandatory turnover of board members and the nom- Annie Miller: We are probably one of the most inating committee with its broader periscope when diverse boards I’ve seen in terms of age and ethnic- it comes to the availability of diverse board candi- ity, and we’re working toward diversity in career and dates. And we work extra hard to make sure we’re background. balanced gender-wise. For the past couple of years we’ve had a junior, nonvoting board member who’s typically a high Q: What challenges is your board facing? school student who comes to meetings, participates,

and gives us feedback. Annie Miller: We have a problem that might be a insights Board

Credit Union Magazine | Winter 2019 31 32 Board insights Credit UnionMagazine but thenthere’s theproblem ofhowmuchcapital wellsincethefinancialcrisissubsided, has donevery members andnotbeexcessively risky. responsible waythatwon’tendangertheexisting money. There’s noeasywayout of that. a membershipthatislessdependentonborrowing That’s theproblem toappeal whenyou’re trying loan side. deposit andinvestmentsidenotasmuchonthe are muchmore their needsforservices tunedintothe Kim Phelps: we do?” scenarios insteadofsaying,“ohshoot,nowwhatdo handle it.Thisprocess helpsusprepare forcertain the impactsoncredit union,andhowwewould We’ll runascenariotofindoutwhat itwilllooklike, risk, low-benefit,high-risk,andhigh-benefitscenarios. scenario planning.We useaquadrant matrix oflow- Doug Olson: credit union,especiallyoneofoursize. burdenregulatory is tough. That’s areality forany the day-to-dayoperationsofasmallinstitution, believe inthemassivebanksbeingregulated, butin challenge. That’sour loanportfolio. ourbiggest watching always Asa don’t doatonoffirstmortgages. result, we’re be afirst-timehomeownerintheBayArea. Sowe foranyone—myselfincluded—to It’s difficult very little different ofthecountry. thaninotherparts We ratio.It alsostruggle alittlewithournet-worth We’re togrow theloan-to-share trying ratioina Our loan-to-share ratioisaround 52%rightnow. Regulation isanotherchallenge.Philosophically, I and experience. knowledge, education, Our membership is graying. That means Ourmembershipisgraying.Thatmeans A large part of our strategic planning is Alarge ofourstrategicplanningis part | cuna.org/news backgrounds, diversity in We lookat DOUG OLSON direction. what tolookoutforwhenthey’re turninginanother to havethebasicunderstandingof[financials]and You toeveryone. don’t havetobeeverything justneed nance ofthecredit unionthatyou’re interested in.You questions. You havetofindsomethinginthegover be committed.You havetoshowup.You havetoask Annie Miller: Q: the waythey’vebeenaccustomed. themin long-term interests weserve andmakecertain membership. You havetolookatwhat’s inmembers’ to makethecallandbegoodrepresentatives ofthe should wehave. mouthpiece for a lot of other people. mouthpiece foralotofotherpeople. interested inknowingwhattheanswersare. You’re the not theonlyoneonboard whowouldbevery You’ve gottoaskquestionsbecauseyou’re probably bashful.” Findoutwhywedothingsthewaydo. members? into anorganization that’s there forthebenefitofall translate theexperienceyoualready haveandputit checks forwhichthere aren’t anyfunds.Howdoyou hold. You havetobalancethebooks.You can’twrite different orfive-memberhouse thanmanagingafour- based onyourpractices. theanswersyou’recertain gettingare consistent Kim Phelps: involved. tomakethemaware ofwhat’s butwetry them off, with attractingyoungpeople.We toscare don’t try teer tocommit,andthat’s thehardest especially part, they’re sadlymistaken.It’s atonoftimeforvolun going toread theboard packetwhentheygetthere, andthey’re meeting amonthforanhour-and-a-half Doug Olson: Those itemsare somewhatrelated. Theboard needs That’s “Don’tbe whyItellpeoplewhentheystart: Being aboard member, conceptually, isnotmuch › › › › Resources What advice would you offer newboardWhat advicewouldyouoffer members? › › › › Credit UnionDirectors Newsletter: CUNA Environmental Scan: 19-22, 2020,SanJosedelCabo, Mexico: CUNA Credit UnionBoard ofDirectors Conference, Jan. CUNA board andcommitteeresources: Don’tbeshy, askquestions,andmake Iftheythinkthey’re comingtooneboard To beagoodboard member, youmust

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CU_Mag_Hero20_Ad.indd 1 11/1/19 3:15 PM 34 Compliance supervisory authorities,”hesays.“Thecreation of supervisory agenciesand, oftentimes,state federal regulatory says Jared Ihrig,CUNA’s chief complianceofficer. arena change intheregulatory overthepast10years, it leaveslesstimetofocusonmembers. of resources onexcessivecompliancerequirements, As credit unionsspendadisproportionate amount Credit UnionMagazine “Credit unions are subjecttotherulesof multiple Credit unions haveseenatremendous amount of particularly compliancemanagementsystems. particularly Keeping up with compliance challenges now Keeping upwithcompliancechallengesnow | cuna.org/news requires anassistfrom technology, ance, at$16billionassetSchoolsFirst FederalCredit disregarded,” saysTony Diaz,vicepresident, compli and reputation riskyoucanincurwhencomplianceis may be,“it’s muchlessofaburden thanthefinancial says. changessinceitsformationin2011,Ihrig of regulatory brought more attentiontocompliance.” the ConsumerFinancialProtection Bureau [CFPB]has As burdensome ascomplyingwiththeseregulations The agencyhasintroduced more than5,000pages

iStock have implementingregulations from theattorney 2019westilldonot quarter Jan. 1,2020,asoffourth Act, whichhasstringentdata privacyrules. example, issubjecttotheCalifornia ConsumerPrivacy scape proves challenging. SchoolsFirstFederal,for says. “You needriskassessmentsforeverything.” to yourpoliciesandcompleteriskassessments,”she with regulations, butthatyoualsotieprocedures back managing allofitsdifferent facets. Williamson says herbiggestcompliancechallengeis Meeting thechallenge “Tools are availabletoassistyou.” Bayer HeritageFederalCredit UnioninProctor, W.Va. at$513millionasset manager andcomplianceofficer you manageit,”addsLisaWilliamson, riskmitigation financial institutions.” andlegalstandardsregulatory asbanksandother forget thatweare, inmostinstances,heldtothesame philosophy,member-centric credit unionscaneasily our branddifferentiator. However, asaresult ofthat Diaz says.“It’s embedded inourDNA,andit’s truly selves ondoingwhat’s rightformembers,headds. profit financialcooperatives, credit unionspridethem not-for- Union inSantaAna,Calif.Asmember-owned, “Although the law is slated to go into effect on on “Although thelawisslated togointoeffect land oftheregulatory Diaz saystheuncertainty “You notonlyneedtoensure yourpoliciescomply “Compliance canbeburdensome, butit’s allinhow “My credit uniontakesthismantraseriously,” meets technology meets Compliance - - › › and governance. › › assessment thatexamines: more compliancerequirements are likelycoming.” which youbuildyourcomplianceprogram “because rule.” enforcement, the CFPB hasnevertrulydefinedits Dodd-Frank Act,Diazadds.“Otherthanthrough Abusive ActsorPracticesstandard required bythe nightmare.” general,” hesays.“Thisisacomplianceofficer’s worst › › › › Monitoring Communication Board Compliance Doing so involves conducting a compliance risk Doing soinvolvesconductingacompliancerisk Ihrig suggestscreating aculture ofcompliancefrom The sameholdstruefortheUnfair, Deceptive,or Focus › › › › › › management’s riskappetitestoachievefocus. Board focus: requirements. enhance credit unions’abilitytomeetcompliance Compliance management systems responsibility. increasingly difficult andtime-consuming Regulatory burden andseniormanagementprogram oversight

andtestingprocedures, includingmis andethicalprocedures andstandards. Reconciletheboard’s and andtraining. LUCY HARR has made compliance an hasmadecompliancean Credit UnionMagazine greatly

Winter 2019 - 35 Compliance 36 Compliance Credit UnionMagazine dures of the Servicemembers CivilReliefAct. dures oftheServicemembers sessing vehicleswithoutproperly followingtheproce fines from ofJusticefor theU.S.Department repos cial andreputational liability.” only takesonemembertoinitiateasignificantfinan tices undertheFairDebtCollectionPracticesAct.It ‘high-dollar’itemssuchascollectionsprac certain surprised tolearnsomepoliciesexcludecoveragefor ity insurancepolicy,” Diazcontinues.“You maybe orasaclassaction. by anindividualplaintiff “This meansyoucouldbesuedforaviolation,either have a‘privatecauseofaction’asremedy,” hesays. penalties doesn’tmeanthatitcan’thappen. credit unionissmallorhasneverincurred regulatory › processes. plinary › conduct reporting processes. › › Responsiveness Compliance incentives, He citesthecasesofsomecredit unionsreceiving “Check yourmanagementandprofessional liabil “Many, ifnotmost,consumerprotection regulations Diaz warnsagainstcomplacency. Justbecauseyour materials asnecessary. › › and meettheirlegalrequirements. unions carryouttheirresponsibilities › business processes. requirements andinternalpoliciesinto rates responsibilities formeetinglegal › to employees. › operations. requirements applicabletoitsbusiness bilities bydeterminingtheregulatory › Jared Ihrig,ishowanentity: ing toCUNAChiefComplianceOfficer A contentmanagementsystem,accord SYSTEM? MANAGEMENT COMPLIANCE WHAT’S A › › › › › › Updates Takes Reviews Ensures Communicates Establishes corrective action. theorganization incorpo operationstoensure credit tools, systems, training, and tools,systems,training, and tomisconduct. itscomplianceresponsi | cuna.org/news thoseresponsibilities enforcement, anddisci

------sense ofsecurity.” Diaz says.“Bottomline:Don’tgetlulledintoafalse whosecarhadbeenrepossessed,” servicemember to ahotlinefrom thespouseofanactivelydeployed of risk,Diazsays.“We havecomplianceinvolvement that takesa360-degree approach tomanagingallareas with arobust compliance management system(CMS) mitigating risk.” ity comesmore attentiontohowyourcredit unionis prescriptive,” hesays.“Butwiththisenhancedflexibil process. “It’s becomemore principle-basedandless points offailure.” “Examiners frown onmanualprocesses andsingle based compliancemanagementsystem,”Diazsays. with yourregulator withouthavingarobust, software- member complaints.“It’s topassmuster difficult to managerisk—from compliancetooperations operations andrisktolerance.” down dependingonthecomplexityofacredit union’s forms are onthemarketthatcanbescaledupor riskmanagementsoftwareago. Manyeffective plat Diaz says.“Thiswasthenormuntiljustafewyears have placedonspreadsheets andmanualprocesses,” an assistfrom technology. Keeping upwithcompliancechallengesnowrequires Beyond thespreadsheet ing handwiththeseissues. sions,” hesays. covered loan,youhavetocomplywiththeact’s provi extends consumercredit toacovered borrower fora in theirfieldofmembership.“Ifyourcredit union a significantnumberofactive-dutyservicemembers LendingActappliesonlytocredit unionswith Military “ “In one instance, it started with a single phone call withasinglephone call “In oneinstance,itstarted SchoolsFirst Federaladdresses complianceissues Ihrig notesthere’s beenashiftinthesupervision SchoolsFirst Federalemploysseveralplatforms “It amazesmehowmuchdependencecredit unions Fortunately, ahelp technologyisavailabletooffer Ihrig saysthere’s acommonmisconceptionthe everything.” ments for risk assess- You LISA WILLIAMSON

need

- - - -

but usingathird-party platformdoeshaveitsadvan ate intervals.” milestone emailstorelevant stakeholdersatappropri tions, Diazsays.“Ideally, it’s setuptosendautomated mentations andthestatusofnewrulesregula issues andare movingintherightdirection.” levelthatyouare zation willbringacomfort ontopof tem dailyandworkoutofit,Williamson adds.“Utili value ofwhatyouare payingfor.” technology—you’re state-of-the-art notmaximizingthe reading theowner’s manualonyournewcarwithits out ofthegate.“Notdoingsoistantamounttonot up theCMStomaximizeitscapacityandbenefitsright pieces are addinguptobigresults.” easy togetburnedout.You needtoknowthe little making progress. is peaceofmind.Icanseewhere Iamandthat when itemsare comingdue.Thebiggestbenefittome tinues. “Icansetupatimelineandgetemailreminders and whatwestillneedtocomplete,”Williamson con management system?”p.36). and performriskassessments(“What’s acompliance others, organize thechangeprocess, create training, a workflowprocess,” shesays.“Icanassigntasksto and theCMSallowsmetoplanforchangethrough issues, Williamson says. with compliancechangesandtrackauditexam work ontheback-end,headds. prevents of products surprisesandextra andservices ful forus.” committees. Thatapproach hasproven tobesuccess at alllevelsthrough bothboard andmanagementrisk “ This issomethingcredit unionscandointernally, imple A goodCMSautomaticallytracksregulatory Once youunderstandthecapabilities,usesys Diaz recommends time insetting investingsufficient “It’s withcompliance.It’s easytogetoverwhelmed “This allowsmetoseewhere weare intheprocess whenchangesare “I getemailalerts onthehorizon, Bayer HeritageFederalusesaCMStostaycurrent Plus, addressing complianceduringtheideaphase engaged.” must befully The CEO JARED IHRIG

------review process,” hesays.“Forthisreason, exam- months, ifnotyears,usingastandard regulatory gapsthatmaynothavebeenfoundfor regulatory member complaints,Diazadvises. system, youalsoneedtotrack,manage,andaddress Whether combinedintooneplatformoraseparate gap the Mind in-house.” eliminating theneedtospendtimecreating them provided changes, executivesummariesforregulatory in yourcompliancearea byincorporatingvendor- tages, headds.“You cangreatly increase efficiencies process forallofthistohappen?” pliance committeefordiscussion? Isthere aformal empowered totakethematteryourrisk orcom tion process todetermine riskacceptance?Are you whether apracticeispermissible, isthere anescala you haveadisagreement withabusinessarea asto lenges arisewhere therubbermeetsroad. When course webelieveinbeingcompliant.’Butthechal organization,” Diazcontinues.“It’s easytosay‘yes,of ance program istoobtainbuy-inatalllevelsofthe union. and drillingintohowthisismanagedinthecredit iners are focusingonthemembercomplaintpiece “The CMS is an excellent channel for identifying “The CMSisanexcellentchannelforidentifying If theanswerstothosequestions are “no,”your ofasuccessful compli part “The mostimportant them toachievefocus. have differing riskappetites. Reconcile do sothebetterprepared youare. about risksorcompliance,themore you lines—full engagementisrequired. Ihrig offers fivecompliancetruths: CUNA ChiefComplianceOfficer Jared TRUTHS 5 COMPLIANCE faster andbetterdecisions. compliance frameworkcanresult in execution. 4. Documentation 3. Theboard andmanagement 2. Whilepeople 1. TheCEO 5. Implementedcorrectly, can’t sitontheside Credit UnionMagazine don’t liketotalk is critical, but so is iscritical,butso a good agood -

may may | Winter 2019

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37 Compliance pg_23_MidwestLoan.indd 1 pg_38_MidWest.indd 38 38 Compliance Credit UnionMagazine mentoring program.” noting “ifyouare a newtocompliance,CUNAoffers and signingupforCUNA’s ComplianceCommunity, sionals are abletoassistwhenneeded.” other tools,”shesays.“CUNA’s knowledgeableprofes community, blogs, trainings, schools, conferences, and ofcomplianceprofessionalssupporter through its the topofhercompliancegame.“CUNAisagreat Williamson turnstoCUNA’s resources tostayat Need help? says. “There’s nosittingonthesidelines.” achievable withproper buy-inatthetop.” andriskmitigation,butit’s between memberservice needtowalkafineline says. “Complianceofficers commensurate withtheboard’s risktolerance,Diaz credit unionisexposingitselftoriskthatmaynotbe In thecomingmonths,CUNAwillbringacompre Williamson recommends reaching outforassistance Ihrig concurs.“TheCEOmustbefullyengaged,”he there’s Midwest support. There’s support.Andthen midwestloanservices.com Call 800.229.5417,andlet’s getstarted. service. Together, we create MembersforLife compliance, highlycompetitivepricingandfriendly, responsive you asone,providing industry-leadingtechnology, seamless private labelsubservicing.Aslendingpartners,we workwith and brand.That’s whycredit tousfor unionsandCUSOsturn Mortgage loanservicingisvitaltoyourmember satisfaction – | cuna.org/news NMLS #715685 - - ® . tive nature ofthesoftware.” had goodexperienceswiththecontentandintui Bayer Heritage. solution thisfall,includingSchoolsFirstFederaland software. class provider ofgovernance,risk,andcompliance will bebuiltontechnologybyQuantivate,abest-in- change.Thissolution unions manageregulatory hensive compliancesolutiontomarkethelpcredit “I’m impressed withthesolution,”Diazsays.“I’ve Ten credit unionscompleted betatestingforthe Resources › › › › Leadership Conference: CUNA Governance,RiskManagement&Compliance CUNA complianceresources:

cuna.org/grc

cuna.org/compliance

- 10/4/18 9:04AM 11/1/19 1:59 PM CUNA News has you covered

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CUNANews19_FL.indd 1 11/4/19 3:42 PM 2020 lending outlook the party’s over JORDAN VAN RIJN iStock

Be ready for a general slowdown in loan demand as economic conditions deteriorate and consumer confidence falls.

From 2014 to 2018, credit unions experienced just 6.6% year over year—well below last year’s average annual loan growth of 10.1%—the fastest annual rate of 8.9% and the slowest midyear figure five-year period since the mid-1990s and well above since 2013. the long-run average of 7.5%. Driving this downward trend: A steep decline in auto loans and first mortgages. Nonetheless, lower interest Yet, this rapid expansion was atypical and due to rates and confident consumers have helped boost several transitory factors, including extremely low unsecured loans and second mortgages. interest rates, fast job growth, and a swell of pent-up Nearly 50% of economists expect a recession by the demand left over from the Great Recession. end of 2020, according to a survey by The Wall Street Now, certain signs indicate economic conditions Journal, and more than 80% expect a recession by the are weakening and credit union loan growth is slowing. end of 2021. Whether a textbook recession, in fact,

Economics As of June 2019, credit union loan balances grew occurs, credit unions should be ready for a general

40 Credit Union Magazine | cuna.org/news slowdown in loan demand, as economic conditions Still, the average 30-year fixed mortgage rate has deteriorate and consumer confidence falls. fallen from a recent high of 4.9% in November 2018 to just 3.6% as of September 2019 which, combined with Housing market higher home values, has given second mortgages a Roughly half of credit union loan portfolios consist boost. of mortgages, including 40% from first mortgages. So Credit union what occurs in the housing market significantly affects home equity lines credit unions. of credit and

Many in the credit union movement recall the chal- second mortgages THE lenges of the Great Recession, when in 2010—shortly have grown 7.7% after the housing bubble burst—second mortgages over the past year SLOWDOWN outstanding fell 12.4% and first mortgages grew just as of June 2019, the IN AUTO “ 2.7%. This led to overall credit union loan growth of fastest pace since LENDING just 0.6% for the year. 2007. “ Today, the housing market has largely recovered. HAS BEEN But housing prices are rising much faster than infla- Auto loans PARTICULARLY tion, making the average home unaffordable for many While auto loans segments of the population. make up a con- DRAMATIC. According to the National Association of Realtors, siderably smaller the median price of an existing single-family home proportion of increased from $235,500 in 2016 to $279,600 as of credit union loan June 2019, and many millennials saddled with record portfolios (about one-third of existing loan balances), student loan debt are forced to delay purchasing their roughly 40% of the growth in credit union loan port- first home. folios over the past five years has been due to auto Coupled with uncertainty regarding economic con- lending. ditions and lower consumer confidence, credit union In fact, since 2012, credit unions have experienced first mortgages grew just 2.6% during the first six six straight years of double-digit auto loan growth. months of 2019, the slowest midyear pace since 2011. But the slowdown in auto lending has been partic-

Annual loan growth and forecast 12-month credit union loan growth

10.4 10.5 10.6 10 8.9 7.8 7.3 6.5% 6.7 6.6 6.5 5.5% 4.8

1.2 1.2 -1.2

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19Q1 '19Q2 '19F* '20F*

*Forecast Economics Sources: CUNA and NCUA

Credit Union Magazine | Winter 2019 41 ularly dramatic: As of June 2019, auto loans had risen At the 2019 midyear mark, these loan categories had just 1.1% for the year, well below the 5.8% figure at this grown slightly faster than last year. Credit cards grew point last year. Used-auto loans rose 2.7%, but new- 7.7% over the past 12 months versus 7.5% in 2018, and auto loans declined 1.3%. other unsecured debt rose 8.3% versus 6.9% last year. Year-over-year, auto loans are up just 5.3% and are On one hand, this indicates consumers remain on pace for the slowest year of growth since 2011. confident and continue to spend. But it also could This trend reflects a general slowdown in auto sales, signal that borrowers face liquidity challenges and are which have been flat since early 2016—growing just spending beyond their means. 0.45% in 2018. Typically during economic downturns, consumers Because consumers finance most new-vehicle increase savings and decrease spending, lowering purchases, auto sales are a good indicator of whether unsecured debt. Therefore, we expect that as eco- they’re confident enough to take out a five-, six- or nomic conditions deteriorate, growth in unsecured seven-year loan. debt will likely slow as well. According to this data, consumer confidence may be waning. A positive note One positive aspect of a slowing economy is that Unsecured loans credit union savings growth tends to pick up. Besides mortgages and auto loans—which together That has been the case this year: During the first make up about 85% of credit union loan portfolios— six months of 2019, credit union savings balances another 10% or so consists of credit card debt and grew 4.68%, significantly faster than loan balances other unsecured loans. (2.76%).

Loan growth by product 12-month credit union loan growth 20.9

2014 2015 2016 2017 2018 June '19 16.8 16.0 14.4 14.0 13.1 12.9 12.7 12.4 12.4 12.4 12.0 11.7 11.3% 10.3 10.1 10.2 10.0 9.8 9.2 9.1 9.1 9.1 8.5 8.5 8.3 7.9% 7.9 7.7 7.7 7.5 7.3 7.0 7.0 6.9 6.7 6.1 5.4 5.2 3.5 3.5 1.3

Credit cards Other New auto Used auto 1st mortgage HEL/2nd Commercial unsecured mortgage

Economics Sources: CUNA and NCUA

42 Credit Union Magazine | cuna.org/news 4 REASONS THE NEXT RECESSION WON’T BE AS SEVERE While opinions differ over when the next recession will occur, the next downturn will be shorter and less severe than the previous one, according to the research firm Raddon. Here are four reasons why, per Raddon: 1. Home sales volume. The volume of home sales in 2019 is 30% lower than at its peak in 2005. Although home sales have increased since the lowest recent level (2008), homebuying behavior has not come close to matching that in the previous recession. The previous recession was a result, in large part, of excessive activity in home sales, fueled partly by exotic mortgages and lending behavior. Today’s marketplace is very different. 2. Debt service ratio. The debt service ratio (the ratio of minimum loan payments to dispos- able income) is at its lowest level in four decades and is significantly lower than it was at its peak during the previous recession. That’s due to historically low interest rates, which result in lower loan payments. As a result, consumers aren’t burdened by the same level of debt as they were during the last recession. When a recession does come, fewer consumers will struggle with debt payments, and fewer will be pushed into default. 3. Consumer debt levels which, other than student loan debt, are much lower than those during the last recession. Most consumers aren’t overburdened by debt. Millennials, however, carry the majority of student loan debt, and when a recession does occur they may feel the brunt of its impact. 4. Savings rate. The average consumer is saving a much higher percentage of income today than before the previous recession (8.2% today versus 3.2% in 2005).

This is the first time savings growth has outpaced port economic expansion, having just lowered rates loan growth during the first half of the calendar year for the third time in the past year as of October 2019. since 2013. To the extent the Fed continues these accommoda- Faster savings growth alleviates liquidity con- tive policies, it may alleviate some of the worsening straints, which have grown rapidly in recent years. conditions and help counteract the declining trend In 2018, credit unions’ overall loan-to-share ratio in credit union loan growth. reached 85.8%, the highest level since 1979. Still, much of what’s affecting the U.S. economy But it’s important to note this mostly reflects is outside the Fed’s purview, including uncertainty conditions at the largest credit unions. Credit unions surrounding the trade war with China, slower Euro- with more than $1 billion in assets had a combined pean growth, the potential ramifications of Brexit, loan-to-share ratio of 89.6%, whereas credit unions and long-term declining trends in productivity and with less than $100 million in assets had a loan-to- population growth. share ratio of just 65.2%. Thus, while we should celebrate the past five years Thus, the declining loan growth frees up liquidity of rapid loan growth, it was certainly not the norm. for larger credit unions but may harm smaller credit Credit unions should prepare for significantly slower unions that have plenty of liquidity but struggle to loan growth going forward. lend out those deposits. 2020 outlook CUNA economists recently updated our 2019 and 2020 credit union savings growth forecasts to 7.0% and 8.0%, respectively, and our loan growth fore- JORDAN VAN RIJN casts to 6.5% and 5.5%. Senior Economist In particular, we expect a continued downward Credit Union National Association trend in auto loan and first mortgage growth. [email protected] However, the Federal Reserve has demonstrated it 608-231-4286

is willing to reduce interest rates to continue to sup- Economics

Credit Union Magazine | Winter 2019 43 Resources to help your credit union stay relevant with a changing economy The operating environment can turn on a dime, and we want credit unions to remain nimble and relevant. With your CUNA membership, you receive complimentary forecasts, analysis, research and reports on the economic issues affecting credit Credit unions unions’ performance. collectively provided

$12 AS A MEMBER OF CUNA YOU HAVE ACCESS TO: BILLION // Fully Customized Complimentary Peer Profile Report in member financial benefits // Monthly Economic Update Video in 2018 // Monthly Credit Union Estimates Report

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cuna.org/economics

Econ_RS19_CM.indd 1 11/7/19 10:39 AM Training matters. Do it right with CPD Online.

CUNA PROFESSIONAL DEVELOPMENT ONLINE

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46 Noninterest income Credit UnionMagazine coverage | cuna.org/news RON JOOSS

iStock Insurance services benefit members and the bottom line.

Offering insurance is a natural extension of nearly Community Credit Union in Eugene, Ore. “This allows every credit union’s delivery strategy. you to build recurring revenue over time. Even if sales drop, revenue stays fairly consistent. “Our core purpose is to improve the daily lives of “It also makes budgeting and growing your business our members,” says Robert Lockett, chief strategy at a sustained pace predictable,” he continues. “You officer and senior vice president of diversified services just need to do a good job of retaining the business.” at $1.8 billion asset Workers Credit Union in Fitchburg, Bonnie Ciuffo, president of South Carolina Financial Mass. “One way we do that is to focus on financial Solutions LLC, adds: “People need to have insurance, health. A key aspect of financial health is helping mem- especially if they finance a car or a home. Noninterest bers protect their blindside by ensuring significant income is important to South Carolina Federal Credit assets are appropriately secured.” Union, so we decided to get into the insurance busi- Insurance offers protection to consumers and is ness because it complemented our considered to be the next step—along with brokerage financial business.” products—in completing members’ financial services With $1.8 billion in assets, portfolios. South Carolina Federal in North “When the pioneers founded credit unions, they Charleston, S.C., offers insur- said the debt should die with the debtor,” says Brian ance through its CUSO, South Werger, director of CUNA Mutual Group’s TruStage Carolina Financial Solutions Insurance Program. “Fundamental for us is protecting LLC. members and their families. Virtually all credit unions Insurance services are have some type of mission statement about creating more complex than many financial security. Insurance is fundamental to that.” other products. Credit unions While insurance fits from a product and member are in effect entering a new line service perspective, it also can offer a great financial of business when offering insurance benefit: noninterest income. Most of that income is services. realized as recurring revenue. “It’s not something you do without under- “With property and casualty insurance you make a standing how you’re going to do it, why you’re renewal commission every year, so long as the policy getting into it, what the initial investment is going to stays on the book,” says Nick Bloxham, vice president be, and your expectation of return on investment,” of the SELCO Group Inc., a credit union service orga- says Bloxham. nization (CUSO) owned by $1.6 billion asset SELCO 3 choices Credit unions looking to get into the insurance business have three basic choices: build from the ground up, purchase an insurance agency, or partner with an insurance provider. Each has its own benefits and predicaments. SELCO Community developed its insurance program from the ground up, starting in the late 1980s. continued › Focus

››Consider insurance to be an extension of the financial services you offer. ››Several options exist for credit unions to get into the insurance business. ››Board focus: Insurance services boost the bottom line. Noninterest income Noninterest

Credit Union Magazine | Winter 2019 47 48 Noninterest income Credit UnionMagazine their expectations for their first five to seven years. their expectationsfor firstfivetosevenyears. credit unions shoulddevelopfinancialforecasts on Bloxham saysitcantakeyears toturnaprofit, and Meeting expectations investing more moneythantheyinitiallythought.” or theyrethink theirinvestmentstrategy. Theyendup withsomeonewho’spartner already gotthescale ham says.“Whatendsuphappeningisthey’lleither too bigfortheagencytheybuildorpurchase,” Blox member demand. oneofitsown—itcan meet chases anagencyorstarts gets intotheinsurancebusiness—whetheritpur Bloxham saysit’s thatwhenacredit important union insurance agenciestobuildonitsexistingbusiness. credit union’s core system. Bloxham says.Thisalsoincludesintegratingwiththe so theypassdataandworktogetherseamlessly, to itaswell.” downloaded intoit,sothere’s anaccountingfunction which isessentiallyadatabase.Commissionsalsoare change onthatpolicy, goesinthe system, everything and activities,”Bloxhamsays.“Anytimeyoumakea tem, whichalsoiswhere youputyourcustomernotes tion isdownloadedintoanagencymanagementsys lenges withinsuranceismanagingtechnology. licensed bytheirstate. at leastoneinsurancecompany, inadditiontobeing its behalfasanagent.Agentsmustbeappointedby company givinganagencytheauthoritytoacton ments. Thisisanauthorizationfrom aninsurance compensation, marketing,andsales. process includeslicensing,compliance,accounting, whounderstandtheinsuranceprocess.staff That environment,” Bloxhamsays. toadaptthecreditsometimes difficult union tocreate apartnered relationshiptrying that is is thatyou’re notsharingrevenues andyou’re not “ “Some credit unionsthatgetintothisspaceare Along theway, SELCOalsohaspurchased four Another challengeisintegratingvariousplatforms “When yousellapolicytomember, theinforma onethebiggestchal As withfinancialservices, Among thefirsttasksissettingupcarrierappoint fromHe saysstarting scratchrequires bringingin “The upsidetoowningyourowninsuranceagency right people. and youneedtohavethe It takestimeandpatience, NICK BLOXHAM | cuna.org/news

- -

- - - - “ be loyal to an agent or the staff oftheagency.be loyaltoanagentorthestaff Make a littledifferent,” explains.“Customerstendto Ciuffo tionally andculturally. independentagency is “Every credit unionrequires atransitionplan,bothopera more carriers.” volume, whichopenedthedoorforustoworkwith were abletocommitsignificantlymore premium “With thecredit unionasourparent company, we had accesstoawidevarietyofcarriers,”shesays. to insurancecarriers,according toCiuffo. ance. The CUSO purchased the agencies to gain access sonal, life,property, andcommercial linesofinsur per insurance agenciesin2015and2016,offers need tohavetherightpeople.” for ourselves.Butittakestimeandpatience,you a goodbookofbusinessandestablishedmarket ahead oftime,sothere aren’t anysurprises. Bloxham says.“You havetosetyourexpectations recurring revenue onrenewals, butthattakestime,” carriers, theagencyprovides afullrangeofcommer Insurance Group in2017.Representing more than30 members through theacquisition ofBraleyWellington Workers Credit insurancetoits Unionbeganoffering The ‘jumpstart’approach involved.” everyone closingprocess. first-mortgage “Itisawin-winfor rate onhomeownersinsuranceoffered duringthe team toprocess loansmore efficiently. quickly providing ratequotes,allowingthemortgage The insuranceteamcanassisttheloanprocessor by asasuccessstory. department team andmortgage members’ needs.” discussing allthewayscredit unioncanmeet “Employees aren’t justtalkingaboutaloan,theyare “Doing More Together.” intoitsculture through services aninitiativecalled auto insurance.Theybecameourbiggestadvocates.” saved ouremployees$2,000ayearbetweenhomeand betterpoliciesfortheirneeds.Insomecases,we offer insurance tous,letusreview it,andseeifwecould weencouragedthemtobringtheirown new offering, says.“Tous,” Ciuffo helpemployeesunderstandthe sales culture foralongtime,sothatwasn’tanissue CUSO. “SouthCarolina Federalhashadaneeds-based institution isaddinganewlineofbusinessthrough a your credit union.” agency’s workingwith customersfeel comfortable purchasing, atleastforatransitionperiod,sothe sure youhavesomecontinuityintheagencyare She says integrating an agency into a CUSO and a She saysintegratinganagencyintoaCUSOand “By buyingtwoindependentagencies,weinstantly South Carolina FinancialSolutionsacquired two “For usit’s it,”heexplains.“We’ve beenworth built “You really makingmoneywhenyouearn start As aresult, saysherteamhasa67%close Ciuffo She citestheteamworkbetweeninsurance “It speakstoallthesolutionsweoffer,” says. Ciuffo South Carolina Federalintegratesafullarrayof Credit unionemployeesalsohavetounderstandthe - - - - cial and personal insurance products. compete in the acquisition arena, credit unions need

Among the acquisition criteria for the credit union to offer potential sellers something beyond dollars. In was the strong desire to acquire a platform agency, our case there was good cultural fit, logistical support, one that had the infrastructure, management, and and strong growth potential.” systems to sustain itself without additional input from The credit union’s next hurdle was addressing regu- the credit union, says Lockett. latory issues related to insurance sales. “In Massachu- This allowed the credit union to “jumpstart” its insurance services with a full suite of services, he says. “As an independent agency, Workers Insurance “ Agency can find the best value based on the individual member’s unique situation. Sometimes we can save members a little money, other times we can save sev- Fundamental for us is eral hundred dollars. But we always find a policy that’s the right fit for our members’ insurance needs.” protecting members and Financial considerations also played a role in the acquisition, Lockett says. “You have Wall Street “ their families. players making these acquisitions at unreasonable multiples of cash flow,” he says. “As a credit union, we BRIAN WERGER need to be fiscally prudent with members’ money. To

NONINTEREST INCOME AT ‘RELATIVELY COMFORTABLE’ LEVELS On a historical basis, credit unions are realizing a “relatively comfortable” level of noninterest income, CUNA economists say. Fee income has steadily declined since the start of the Great Recession, from 0.86% of average assets at year-end 2008 to an annualized 0.56% of average assets in the first quarter of 2019. “The trend in lower levels of fee income is a reflection of economic and labor market improve- ment” says Mike Schenk, CUNA’s deputy chief advocacy officer and chief economist. “The economy gained momentum over most of the past decade. When the economy is strong, employ- ment and income gains are obvious so people are less likely to overdraft their checking accounts or miss loan payments, and therefore are less likely to incur charges for doing so.” However, the drop in fee income has been almost completely offset by increases in other sources of noninterest income, which rose primarily as a result of sales of fixed-rate mortgages to the secondary market, Schenk says. These sources of noninterest income have increased from 0.50% in 2008 to an annualized rate of 0.82% in the first quarter of 2019. “Most credit unions are careful about adding long-term, fixed-rate mortgages on their books, so they sell them into the secondary market, Schenk says. “Of course, many that do so maintain relationships with their members on the servicing side but they realize a gain on those sales.” The general rise in other (non-fee) income produced two results, Schenk says: It helped credit unions maintain healthy earnings overall and it reduced the need to charge new fees or impose higher fees to build capital. Looking forward, CUNA economists foresee fewer gains on mortgage sales and expect a slowing economy to put downward pressure on interchange income. At the same time, fee income is unlikely to increase significantly, Schenk says. “So this, combined with interest margin pressure, is apt to squeeze bottom-line results a bit.” iStock Noninterest income Noninterest

Credit Union Magazine | Winter 2019 49 50 Noninterest income Sources: Credit UnionMagazine market totheirmembers.” they sendustheirmembership fileallowingusto Werger says.“Oncewecontractwithacredit union, of thecredit union’s businessmodel. for theprogram, andalsogainabetterunderstanding to determinethecredit union’s objectivesandgoals vices, aTruStage representative schedulesameeting are designedformiddle-incomeAmerica.” Werger saysits“simpleeasy andaffordable products through more than3,600credit unions.Trustage’s memberment; auto;home;health;andlifeinsurance through accidentaldeathand dis whichitoffers Program. insurancethroughoffering itsTruStage Insurance CUNA MutualGroup provides aseamlessoptionfor The importanceofmarketing element offinancialwellness.” essential guard againstsetbacksandanimportant as theirneedschangeovertime.Insuranceisan not transactionoriented.We workwith ourmembers strategy,all delivery headds.“We are member-centric, time thanweanticipated.” todoitright,butdidtakealot more was important lot ofways,wewere territory. workinginuncharted It “Most ofthemare doneonastockacquisition.Soin the frameworkofanassetacquisition,”Lockettsays. setts, there hadnotbeenanacquisitionmadeunder (basis pointsofaverageassets) Trends innoninterest income **Noninterest otherincomeincludesallfeeincome,suchasgainsonsalesofmortgagesintothesecondarymarketandinterchange income *Noninterest feeincomeincludesfeesonloansanddepositaccounts,suchasloanoriginationfees,latepaymentNSF/ODPearlywithdrawal 86.7 48.6 '07 bp Although Werger doesn’tconsidertheprogram a The credit unionearnsincomeoneachsale. Implementing theprogram takes60to120days, When acredit insuranceser unionwantstooffer TruStage isCUNAMutualGroup’s consumerbrand insuranceisanevolutionofWorkers’Offering over bp CUNA andNCUA 50.2 86.2 '08 82.2 40.9 | '09 cuna.org/news 78.5 54.7 '10 56.7 74.1 '11 73.7 '12 71.3 -

- - 71.4 68.2 '13 that member.” product tocanrefer themtousandwe’llworkwith have amemberwhomayneedfinancialprotection they canandcan’tdo.We askthecredit unionifthey have tobeupspeedonalltheregulations andwhat do thatontheirbehalf,”Werger says.“Theydon’t ask themtoselltheprogram becausewe’re goingto territory. cross-selling from tricky thetellerlineorloanoffice experience.” world today. Ourprogram isdesignedaround that using herdevice.That’s howpeopleconnectwiththe I thinkofmydaughtersittingonthecouchatnight media. “Direct mailisaliveandwell,”hesays,“but digital andsocialmediaspace,”Werger says. rience thatissimple,andmakingsure you’re inthe through multiplechannels,creating amemberexpe program successfultodayismarketingtheprogram where youjustbuilditandtheycome.” “heavy lift,”hesays“aninsuranceprogram isn’tone “We toprotect credit typicallytry unions,anddon’t Insurance isalsohighlyregulated, whichmakes The TruStage program isdesignedaround multi- That’s whymarketing issovital.“Whatmakesa Resources › › › › › › CUNA MutualGroup: Council: CUNA Operations&Member Experience CUNA Environmental Scan: 65.7 Noninterest feeincome* 68.5 '14 cunacouncils.org 64.7 71.1 '15

63.9 74.8 '16 cunamutual.com 62.0 72.6 cuna.org/escan Noninterest otherincome** '17 61.8 77.4 '18

Jun 19 79.3 58.0 bp bp

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tools to boost your card portfolio iStock iStock 7 MARK CRAWFORD Credit cards Credit

52 Credit Union Magazine | cuna.org/news

Credit cards offer more options than ever” to engage members.

The best way to grow your credit card business and improve the member experience is to offer “ creative, innovative, and practical card services members want—especially millennials and other The play here is younger demographics. faster fulfillment Here are seven tools credit unions can use to bolster their credit card portfolios. times. DAVID BRYDUN Contactless/dual-interface cards These cards enable tap-and-go transactions. Making a purchase with a contactless card 1. is much faster than with a chip card, which takes several seconds or more. the U.S. According to CreditCards.com, less than 1% of A tap-and-go transaction takes only a second, which point-of-sale transactions in the U.S. are contactless. improves the point-of-sale experience for consumers. But this is starting to change. “Once consumers realize their purchasing experi- “American Express and Capital One were among ences can be enhanced and quickened through con- the early leaders in sending contactless cards to their tactless cards, they will naturally start to opt for these customers, typically for new cardholders after existing cards at all locations that accept them,” says Jeremiah cards expire,” the website states. “Wells Fargo joined Lotz, managing vice president of digital experience the bandwagon earlier this year, and Bank of America and payment products for PSCU, a CUNA associate recently initiated a pilot program in New York, San business member at the premier level. “Contactless cards also will drive mobile adoption as more consumers experience the ease and speed of tap-and-go payment methods for themselves.” Focus Before credit unions can move to contactless cards, their processors must certify new card profiles and ››Technology and member preferences drive work with manufacturers to produce cards with successful credit card programs. embedded near-field communication/contactless ››Data analytics and artificial intelligence are chips. After successful testing, credit unions can then poised to drive future growth. issue contactless cards to their members. ››Board focus: Credit cards are a key element of Contactless and dual-interface cards are well estab- every loan portfolio. Credit Cards Credit lished in European countries but are still quite new in cards Credit

Credit Union Magazine | Winter 2019 53 54 Credit cards credit union members.” cardholder card managementappthatisusedbyour an API[applicationprogramming interface]inthe ity. later this yearvia PSCUislaunchingthisservice other issuershavejustannounced thisfunctional card replacement,” saysLotz. “Severalbigbanksand transactions asperusual,whileawaitingthephysical cards are lostorstolen. that consumerswillswitchtoadifferent card iftheir tions through digitalissuancealsomakesitlesslikely says Brydun. their plasticcards to beprocessed anddelivered,” after approval insteadofwaitingfiveto10daysfor the digitalform-factoroftheircard. approval, applicantsare grantedimmediateaccessto card sioning,” alsoknownasvirtual issuance.Upon for $3.6billionassetBCUinVernon Hills,Ill. delivery,” vicepresident oflending saysDavidBrydun, from sevento10daysthree tofivedaysforcard is quicklydelivered. sioned usingprebuilt rulesand,ifapproved, thecard a digitalchannel.Therequest isautomaticallydeci Francisco, andBoston.” Source: . Common card rewards Credit UnionMagazine 2. This way, theycan“continuetomakepurchases and Allowing formobileandcard-not-present transac usingtheircards “This allowsthemtostart seconds An evenfasterapproach is“instantdigitalprovi “The playhere isfasterfulfillmenttimes,moving Ideally, anapplicantappliesforacredit card through PSCU members. credit card fulfillmentexperiencesfortheir Credit unionsare eagertocreate end-to-end Digital issuance | Annual fee waiver 42% cuna.org/news 9% Cash back Cash - - - - 3. channels,” saysLotz. practices are membersand best-suitedforparticular decisionsregardingter-informed whatauthentication which helpscredit unionmanagementmakebet security, they alsoprovide more dataforanalysis, improve thememberexperience anddeliveradded technologies. biometrics,and experimentingwithblockchain to strengthen authentication.Thisincludesexpanding other channels.PSCU,forexample,isexploringways to translatethistypeofsecurityacallcenteror recognition foraccess.Questionsremain abouthow secure, usingthemember’s fingerprintorfacial useful foraccessingmobileappsandisconsidered ber experience. authentication across channelstoimprove themem unions are toexplore starting howtopassbiometric continue toadvanceinthecomingyears.Credit card fortheirneeds.” willrecommend themostsuitable ond, thisservice if theyformallyapplyfortheproduct,” hesays.“Sec says. learn twothings,Brydun applications) and,viaasoftpulloftheircredit history, mation aboutthemselves(lessthanforothercredit for acredit card. Membersprovide somebasicinfor “Not only do enhanced authentication techniques “Not onlydoenhancedauthenticationtechniques Currently, biometricauthenticationisespecially “First, theywilllearnwhetherbeapproved Another usefulapplicationisdigitalprequalification improved authenticationtechnologieswill methods are availabletocredit unions, authentication Although manyeffective Enhanced authentication 17% Low interest rate Points for travel rewards 7%

- - - Metal contactless cards Card reward and loyalty programs Credit unions are beginning to offer cards A shift is under way across the industry as it made of materials that are associated with relates to reward and loyalty program offer- 4. different loyalty or rewards programs. 6. ings and perks members want from their Consumers view metal cards in particular as high- credit unions. Overall, members want choice in how er-end cards that reflect a member’s success and afflu- they use their rewards, according to Lotz. ence—and differentiate an issuer’s brand. Such cards A trend allows consumers to redeem points for a are made from actual metal, or with a tungsten insert purchase they’ve already made—essentially elimi- with plastic as the outer layers. nating the transaction from their balance, or at least “The benefit is that they feel heavy and, with attrac- reducing the overall cost of the purchase in exchange tive designs printed on their surfaces, present a look for loyalty points. of prestige,” says Lotz. “All such cards are manufac- Say, for example, a member purchases a $1,000 tured under standard ISO guidelines and work prop- television. The member accesses the credit card app, erly as contactless, contact EMV, or mag swipe cards.” which says, “Would you like to use your points to pay for that TV?” The member taps “yes,” and the app Installment payments deducts 100,000 points from the member’s balance Credit unions are exploring the ability to offer and credits back $1,000. consumers a chance to turn a high-dollar- 5. amount transaction on their credit card into a Advanced technology lower rate or fixed-installment plan “loan” versus the Data and analytics will be the key to the future traditional revolving balance option. growth of credit card services. As the industry “The unbundling of larger credit card purchases 7. continues to deepen its expertise with collect- allows the member to convert the purchase into a ing and analyzing “big data,” credit unions use these closed-end installment loan at a different interest insights to personalize and improve the cardholder’s rate,” Brydun explains. experience. “We’re now using the data we’ve been collecting and analyzing to create experiences based on what we know, leading up to certain events or specific times,” says Lotz. “For example, if a member purchases a flight and rents a car, the credit union can reach out to Enhanced authentication the cardholder and suggest turning on the card con- trols through their mobile app so transactions aren’t improves the member denied while traveling.” Artificial intelligence (AI) and robotic process auto- mation (RPA) will continue to improve the member experience and delivers experience. Data and technology offered through AI and RPA will ensure members receive offers for the added security. JEREMIAH LOTZ card programs and other financial services that are most relevant to their needs. “Although these technologies will not change how the payments themselves are made, they will give credit unions, issuers, and other financial institutions This service deepens member loyalty by offering a way to improve the customer experience,” says Lotz. members the ability to pay off an expensive pur- “Whether it is the dispute of a fraudulent transaction chase over a certain amount of time for a small fee or expertly serving members when they call in to the versus paying a high interest rate for revolving the bal- contact center, AI, RPA, and other technologies will ance. Some larger issuers—such as American Express provide the predictive analytics credit unions need to and Chase—offer similar programs. These programs enhance credit card services for their members.” give consumers more control over their finances and allow them to choose how and when they pay for their items. Offering installment payments is another way card Resources issuers create value so cardholders use the card more often for purchases and transactions, according to ››CUNA Lending Council: cunacouncils.org Brydun. This generates more revenue for the credit ››PSCU: pscu.com

card provider. cards Credit

Credit Union Magazine | Winter 2019 55 THROWBACKTHROWBAACK

Y2K watching Rarely have so many worried so much about so little.

Twenty years ago, Credit Union Magazine’s cover One credit union called the changeover to a story addressed one of the biggest nonevents in four-digit code “the biggest project we’ll ever have to modern times: The Y2K scare transpired when tackle.” computer users and programmers feared computers Ultimately, little happened when the calendar would stop working due to the use of two-digit codes turned to Jan. 1, 2000—other than the expense of to represent the year. conquering the “Millennium Bug.” Throwback

56 Credit Union Magazine | cuna.org/news 5 0 Y E A R S O F S E RV I C E

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Statement of Ownership, Management, and Circulation Average No. Copies No. Copies of Single Each Issue During Issue Published Preceding 12 Months Nearest to Filing Date TITLE OF PUBLICATION: Credit Union Magazine 15A.Total printed (Net press run) 12,272 11,350 FREQUENCY OF ISSUE: Quarterly B1. Paid: outside-county 10,261 9,791 B2. Paid: in-county 0 0 LOCATION OF OFFICE OF PUBLICATION: 5710 Mineral Point Road, B3. Sales through dealers, Madison, WI 53705-4454 vendors and counter sales 0 0 B4. Other classes mailed 356 337 LOCATION OF THE HEADQUARTERS OR GENERAL C. Total paid distribution 10,617 10,128 BUSINESS OFFICE OF THE PUBLISHER: 5710 Mineral Point Road, Madison, WI 53705-4454 D1. Free: outside-county 0 0 D2. Free: in-county 0 0 PUBLISHER: Ann Hayes Peterson, Credit Union National Association, D3. Other classes mailed 0 0 5710 Mineral Point Road, Madison, WI 53705-4454 D4. Free: outside the mail 1,227 705 EDITOR-IN-CHIEF: Ann Hayes Peterson, 5710 Mineral Point Road, E. Total free distribution 1,227 705 Madison, WI 53705-4454 F. Total distribution 11,843 10,833 G. Copies not distributed 429 517 OWNER: Credit Union National Association Inc., 5710 Mineral Point H. TOTAL 12,272 11,350 Road, Madison, WI 53705-4454 I. Percent paid 89.64% 93.49% KNOWN BONDHOLDERS, MORTGAGEES, AND OTHER 16A.Paid Electronic 200 207 SECURITY HOLDERS OWNING OR HOLDING 1% OR MORE OF B. Total paid print copies TOTAL AMOUNT OF BONDS, MORTGAGES, OR OTHER +paid electronic copies 10,817 10,335 SECURITIES: None C. Total print distribution + paid electronic copies 12,043 11,040 D. Percent paid 89.8% 93.6% I certify the above statements are true and complete— Ann Hayes Peterson, Editor-in-chief, 10/1/19 Ad Index

58 Credit Union Magazine | cuna.org/news CUNA Schools & Conferences

BOARD & COMMITTEE LENDING & COLLECTIONS (Continued) CUNA Credit Union Board of Directors Conference CUNA Fair Lending Workshop January 19-22, 2020 // San Jose del Cabo, Mexico November 4-5, 2020 // San Diego, CA CUNA Credit Union Board Certification School CUNA Lending Council Conference May 4-8, 2020 // New Orleans, LA 2020 dates & location to be announced CUNA Strategic Planning Roundtable MANAGEMENT & LEADERSHIP August 17-18, 2020 // Nashville, TN CUNA Governmental Affairs Conference CUNA Roundtable for Board Leadership February 23-27, 2020 // Washington, D.C. September 25-26, 2020 // Toronto, Canada CUNA National Young Professionals Conference CUNA Supervisory Committee & Internal Audit Conference June 11-12, 2020 // Madison, WI 2020 dates & location to be announced CUNA Management School COMPLIANCE July 12-22, 2020 // Madison, WI CUNA & ACUIA Internal Audit Certification School World Moving: A Joint Credit Union Conference March 9-12, 2020 // Tempe, AZ July 19-22, 2020 // Los Angeles, CA Fall 2020 dates & location to be announced CUNA CEO Council Conference CUNA Regulatory Compliance Certification School* 2020 dates & location to be announced April 20-24, 2020 // Clearwater Beach, FL CUNA Coaching Leadership School September 13-18, 2020 // Phoenix, AZ 2020 dates & location to be announced CUNA Attorney’s Conference CUNA Small Credit Union Conference October 26-28, 2020 // Jackson Hole, WY 2020 dates & location to be announced CUNA BSA/AML Certification Conference with NASCUS* CUNA Young Professionals Advocacy Workshop November 9-12, 2020 // Fort Lauderdale, FL 2020 dates & location to be announced FINANCE & ECONOMICS CUNA Emerging Leader Institute CUNA Financial Management School* 2020 dates & location to be announced April 20-23, 2020 // Dallas, TX MARKETING & BUSINESS DEVELOPMENT CUNA Finance Council Conference CUNA Marketing & Business Development May 17-20, 2020 // Anaheim, CA Council Conference CUNA Investment Certification Schools* March 15-18, 2020 // Orlando, FL August 10-14, 2020 // Chicago, IL CUNA Digital Marketing School CUNA Governance, Risk Management & Compliance June 1-4, 2020 // Seattle, WA Leadership Conference CUNA Marketing & Business 2020 dates & location to be announced Development Certification Schools CUNA Enterprise Risk Management Certification School October 5 - 8, 2020 // Las Vegas, NV 2020 dates & location to be announced OPERATIONS & MEMBER EXPERIENCE HR & TRAINING CUNA World-Class Service Leadership School CUNA HR & Organizational Development June 10-12, 2020 // Seattle, WA Council Conference CUNA Member Experience, Sales & Service School April 19-22, 2020 // Orlando, FL August 17-19, 2020 // Las Vegas, NV CUNA HR Compliance Certification School CUNA Operations & Member Experience July 26-29, 2020 // San Antonio, TX Council Conference CUNA Experience Learning Live! September 30-October 3, 2020 // Las Vegas, NV October 18-21, 2020 // Denver, CO SECURITY & TECHNOLOGY LENDING & COLLECTIONS CUNA Cybersecurity Conference with NASCUS* CUNA Business Lending Roundtable June 1-3, 2020 // San Diego, CA January 28-29, 2020 // Tampa, FL CUNA Technology Council Security Summit CUNA Consumer & Residential Mortgage Lending School September 29-30, 2020 // Las Vegas, NV April 6-9, 2020 // Miami, FL CUNA Technology Council Conference CUNA Business Lending Certification School September 30-October 3, 2020 // Las Vegas, NV July 20-23, 2020 // Madison, WI CUNA Collections & Bankruptcy School September 21-24, 2020 // San Antonio, TX

*eSchool is available. Please note: All dates and locations are subject to change.

OverallTraining_FL_Dec.indd 1 10/31/19 1:30 PM BRANCHING OUT

Lending horoscope What’s in store for 2020?

An economist, says author Lau- rence J. Peter, is an expert who will know tomorrow why what he predicted yesterday didn’t happen today. Today’s headlines about lending show a similar pattern: ››Mortgage lending will either soar with low rates and improving supply—or die faster than a poinsettia after Christmas as long-term rates rise, reducing affordability. boom of the past few years is even higher. Growth rating: D ››Auto lending will accelerate probably out of the question, but as peoples’ clunkers die off—or opportunities will pop up. Growth Member business lending the sales slowdown will continue rating: C+ The alarm bells are going off about as consumers move toward ride a downward economic cycle in share and other alternatives. HELOCs 2020. In fact, CUNA cut its forecast ››Credit cards and other consumer Unless home prices fall, demand for GDP growth from 1.8% to 1.5%. loans will continue to increase due for home equity lines of credit The commercial market is more to low unemployment and strong should be strong as rates remain sensitive to economic fluctuations. demand—or drop off dramatically low and equity rises naturally. That That said, growth should still be as the much-anticipated recession said, enough people remember the positive, but the emphasis will be nears. bludgeoning of the last real estate on more strategic loans rather than While it’s daunting to make bubble that we probably won’t see those driven by business growth. predictions, especially about the the 125% loan-to-value instruments Growth rating: C future, I have correctly predicted of yesteryear. Growth rating: B+ 20 of the last two recessions. Personal loans So here we go. Credit cards Personal (aka “other”) loans are While the big banks have seen a credit union specialty. This is New mortgages strong growth in credit cards in where the banks fail and smaller, The big question here isn’t if there 2019, the question is twofold: Will nimble credit unions prosper. With will be opportunities in the mar- this continue in 2020, and how loan purposes as varied as a new ket, but rather where they will be. much of a bump will credit unions motor for an old farm truck to pay- Rates will probably stay low, and see? ing off bills, knowing your member supply should improve as more Lending in this area has slowed, gives the edge to credit unions. builders take the plunge and try to and that should continue. To add Growth rating: B+ cash in on the boom. to this picture, much of the growth In sum, lending in 2020 will be The biggest issue—and the one has been with rewards-branded much like going to your local diner: that may change the market the cards, which come with significant lots of specials, some things you most—is Government Sponsored costs. Growth rating: C don’t want to touch, and the kitch- Enterprise (GSE) reform. This may en closes in 30 minutes. Good luck. change some regulatory issues, Auto loans capital requirements for GSEs, and Auto loan growth has been drop- pricing. This should lower the cost ping in 2019. That will probably of mortgages in general. Growth continue as new-car prices are JAMES COLLINS rating: B quite high, and many people in President/CEO urban settings view a car as an ex- O Bee Credit Union Refinanced mortgages pensive lawn ornament. Dealership [email protected] Is there anyone left with a rate consolidation is inevitable, and 360-943-0740 over 5% and good credit? That’s increased competition for business

Branching Out the question of the day. The grand will drive cost for credit unions

60 Credit Union Magazine | cuna.org/news The essential professional communities for credit union executives.

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with Truliant N.C. FederalCredit Union,Winston-Salem, - - -

- Marc Schaefer Marc ourselves from otherinstitutions. stitutions. We havetodifferentiate running safeandsoundfinancial in improve consumers’lives while Our missionisto better. that do we’re here todo,andhowwecan we are andwhowe’re not,what A: do youhaveforfuture leaders? ness Initiative.We havetomake they want. as longwecanprovide what alternatives likecredit unions Consumers are more opento what acredit unionis. A: during yourcareer? union movementchanged Q: we do. ones whocontrol what recognizing they’re the who thememberis,and member, understanding keeping thefocuson ourselves accountablefor one ofthewayswehold come onboard thatthisis tell peoplewhenthey the mission. why we’re here. They’re bers andthattheyare countable toourmem Now wehavetheCUNAAware But it’s alsousefulto Continue torecognize who More peopleknow How hasthecredit Q: Q: them. viable optionfor be aware we’re a People haveto give usachance. why theyshould different, and union is,whyit’s of whatacredit consumers, aware ticularly younger consumers, par What advice -

- - - we makesomebody’s lifebetter? filling. It’s whatit’s allabout:Did have takenitelsewhere. That’s ful experienced theculture andmight who haveworkedforTruliant who outcomes. with betterguidanceand at lowerratesandfees improve peoples’liveswe’vedone we’vedoneto live. Everything build wealthandhaveaplaceto home loansthathelpedpeople that gotpeopletoworkandthe Just thinkofallthecarloans lives overthe25yearsIwasCEO. You doitasateam. member. Nobodydoesthisalone. A: remembered? how wouldyouliketobe Q: Then there are allthepeople We improved atonofpeoples’ It’s notaboutus.It’s aboutthe Looking backonyourcareer, news.cuna.org/podcasts member-first focusat Schaefer discussesTruliant’s

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