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2012: CUs' year in review

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MADISON, Wis. (1/2/13)--History will note 2012 as the International Year of the Cooperatives. Credit unions took advantage of that by reminding anyone they could about their cooperative structure, collaborative nature, member orientation and people-helping-people philosophy.

As a result, 2012 was a milestone year in terms of new members, assets, and more.  As 2013 opens, more people than ever know what a credit union is and have chosen credit unions as their financial service provider.

Credit unions benefited from a range of efforts that shone spotlights on the good work they do. Their continued growth, their low or no fees and better rates, their assistance to people struggling to get businesses started in a tough economy, their push to get Congress to raise member business lending rates, and advocacy on behalf of the consumer on the interchange fees all led to a year of positive press that re-emphasized the credit union difference.

Here are a few milestones and other highlights of the year.

  • Record membership joined credit unions. The phenomenal growth in membership credit unions experienced in 2011 did not end with Bank Transfer Day that year. It continued through 2012. In November, the Credit Union National Association (CUNA) counted a nearly 2.1 million growth in membership from June 2011 to June 2012--double the average growth for similar periods in the past decade.  Members opened nearly 2.9 million new checking accounts (News Now Nov. 2).
  • Credit union assets surpassed the $1 trillion mark.  Credit unions in the U.S. reached the $1.02 trillion assets milestone in March--one of the most significant developments CUNA's surveys have reported. Assets grew 4.1% during the past year, CUNA reported in May (News Now May 4).  CUNA economists reported the asset growth was a direct reflection of the fact that consumers increasing recognize and embrace the credit union difference.
  • Mortgage business took off at credit unions.  For the first time in history, credit unions were on track to surpass $100 billion in mortgage loan originations, said the American Credit Union Mortgage Association (News Now Dec. 17). As housing construction began to slowly improve, and mortgage rates remained low, more members originated or refinanced their mortgages at a credit union.
  • Credit unions continued to top big banks on consumer satisfaction. As consumers became discontented with bank fees and lousy service, credit unions stood out in survey after survey. They were found to have the most loyal members and most satisfied member/customers, were noted as providing the most trustworthy services and the most safe and sound financial services and more. They topped big banks in surveys that received wide national press and were conducted by these independent research organizations: 2012 ath Power Ideal Banking Study, American Customer Satisfaction Index, Chicago Booth/Kellogg School Financial Trust Index, Prime Performance survey, a second Prime Performance survey on call center representatives, Tempkin Customer Service Ratings, and National Cooperative Business Association/Consumer Federation of America. CUNA surveys also noted that credit unions outshone banks in consumers' perceptions of safety and soundness, and that credit unions were perceived by consumers as the best place to keep their savings and checking accounts.
  • Credit unions worked together to provide aid in disaster recovery efforts.  In true collaborative efforts, credit unions helped each other out whenever nature had the upper hand, be it wildfires in Colorado, floods in Vermont, tornados, hurricanes or superstorms. In October credit unions along the eastern U.S. seacoast were hit with a once-in-a-century superstorm. Hurricane Sandy--responsible for 125 deaths in the U.S. and 70 in the Caribbean--affected hundreds of credit unions with closures due to power outages, wind and water damage and more. Its high winds, high waters and storm surges created havoc in an 800-mile swath along the eastern U.S. seacoast, hitting credit unions in New York and New Jersey hard. Shared branches--something that banks don't have--kept credit unions working for their members. The superstorm became the second costliest storm in U.S. history, after Hurricane Katrina in 2005. The movement collected more than $140,000 to assist credit unions, their employees, volunteer directors and members.
  • Credit unions and credit union organizations consolidated more. While new corporate credit unions were getting their footing after restructuring and combining services across states or regions, credit union leagues and foundations found new ways to collaborate.  They, like many credit unions who merged in 2012, had learned they can offer better services by collaborating and working together, than each might offer individually.  The latest announcements came from several leagues last month.  The Arkansas Credit Union League, Credit Union Association of Oklahoma and the Texas Credit Union League announced they would pursue consolidation into a single regional league, the Cornerstone Credit Union League. The North Carolina Credit Union League and South Carolina League boards announced they would move to a formal process to consider consolidating.  Some collaborations were unusual, with credit unions moving to acquire banks, or credit unions deciding to share back office operations to take advantage of economies of scales.
  • Mobile banking took hold in credit unions. Nothing has changed credit union's interactions with members more than online banking, and just when credit unions were getting used to that, along came the smartphone.  During 2012, many credit unions introduced mobile banking channels to help attract new, younger members. Those who did so are ahead of the pack. Aite research group projects that the number of U.S. consumers who will use a mobile device to access their bank account will increase to 96 million by 2016 from today's 33 million (American Banker Dec. 20). That's a compound annual growth rate of 30%.
Later this week, watch for other News Now stories marking the year's change, including News Now's Top 20 stories of 2012, a review of banking technological trends,  the top legislative and regulatory issues and what credit unions can expect for 2013.

The new year starts with 101 insights from Filene

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MADISON, Wis. (1/2/13)--A new report, "101 Things: Credit Union Insights from the Filene Research Institute," offers "easy-to-digest" highlights from 12 months of Filene reports--an easy way for credit unions to begin the new year armed with strategic insight.

Among the highlights from each of the nine areas covered in the report:

  • Strategy and policy: Credit unions could improve organizational performance by diversifying their noninterest revenue streams, decreasing the variety of deposit products offered, and questioning the effectiveness of a diversified loan product strategy.
  • Credit unions as cooperatives: Patronage refunds are the necessary tool that demonstrates to members that the cooperative is socially and fiscally responsible with the member's money.
  • Lending: The average American household lives in the same home for only seven years. That implies that most Americans, or a very large swath of Americans, could do better with a shorter-term fixed interest rate, which would result in lower monthly interest payments
  • People: High-performing middle managers want to be given the vision and the mission, participate in goal development, and then be allowed to do their thing.
  • Consumer behavior: Consumers, especially low-income consumers, are much more likely to cycle in and out of debit and credit cards and the institutions that issue them than to give up on cash.
  • Marketing: Credit unions that dedicate eight or more hours per week to social media report the highest success rates.
  • Credit union profitability: Research shows that the top 30% of members contribute 110% to the bottom line, while the bottom 10% don't merely fail to contribute, they actually destroy profits. On average, members who connect with the credit union through online channels are 35% more profitable than those who have only an offline relationship.
  • Innovation: Only 27% of executives responding to a McKinsey Global Survey said that their companies are effective at holding leaders accountable for executing tactics that support innovation.
  • Governance:  Good governance in both corporations and credit unions is, in essence, the leadership structure and the complex system of incentives, checks and balances that makes sure that the organization creates long-term, sustainable value.
To download the report, use the link.

CU System briefs (01/02/2013)

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  • WACO, Texas (1/2/13)--A Texas man has pleaded guilty to the Aug. 8 robbery of the Lacy Lakeview branch of Waco, Texas-based Genco FCU ( Dec. 20). Bradley Kilmer, 33, of Fort Worth is scheduled for sentencing in the U.S. District Court in Waco in February.  In addition to the Genco FCU case, Kilmer is also a suspect in the Aug. 30 robbery of Fort Worth Community CU in Weatherford, Texas, and a bank robbery in Alvarado.  In the Genco robbery, a man entered the credit union and handed a note to a teller that said he would shoot her if she didn't give him money. The robber fled with an undisclosed amount of cash.  In the other credit union robbery, the robber also handed a note threatening harm to a teller if she did not give him money …

Michigan CU Foundation made a difference in 2012

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LANSING, Mich. (1/2/13)--The Michigan Credit Union Foundation (MCUF) last year provided $90,000 in support to Michigan credit unions through scholarships for employee educational development and grants for community outreach projects.

Donors to the foundation in 2012 included 73 credit unions, 10 chapters, 10 credit union business partners and the Michigan Credit Union League (MCUL) (Michigan Monitor Dec. 17).

MCUF assisted 100 credit unions and 249 credit union employees with grants and scholarships in 2012.

A new option will allow 2013 donations to be made along with payment of MCUL membership dues, the league said.

New era in expense management: CFO Council paper

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MADISON, Wis. (1/2/13)--The role of the chief financial officer (CFO) has evolved from bean counter to communicator and collaborator, according to a new CUNA CFO Council white paper.

"A New Era in Expense Management" is based on information gathered from credit union CFOs, other financial executives and consultants. The white paper delves into expense management practices, which go beyond budgeting to encompass strategic planning, process improvement and revenue generation. In the paper, credit union leaders stress that expense management should focus on adding value to operations.

While traditional accounting is still essential, the CFO's greatest contributions typically result from monitoring and measuring financial performance, the paper said. Rather than focusing solely on cost, the CFO and other senior members of the finance team examine whether the credit union is using effective, efficient operations to serve members and generate revenue. This effort requires the CFO to become a strong communicator who collaborates with all departments to share ideas and streamline operations.

CFOs rely on data and analysis to monitor expenses, identify trends and compare their credit unions' spending to peers' spending. Expense ratios, efficiency ratios and benchmarking can provide perspective and give the CFO an objective measurement of appropriate expense levels, said the council paper. CFOs are also an integral part of credit unions' ongoing efforts to manage risk and improve operations.

Throughout the white paper, CFOs and consultants share their strategies for managing expenses, creating a culture of continuous improvement and pursuing new opportunities to attract members and enhance revenue. As economic conditions improve, these experts say credit unions will be tempted to relax their focus on expense management. Instead, they recommend that credit unions create a "new normal" marked by the use of analysis to determine whether expenses are justified based on their ability to generate revenue or enhance operations.

Strategic plans: Focus on your goals for 2013

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MADISON, Wis. (1/2/13)--The calendar has flipped to a new year. Credit unions have spent hours and dollars preparing their strategic plans, but daily tasks and to-do lists are likely distracting credit unions from their plan. In 2013, credit unions will need to stay focused on those plans to make sure their plan works.

Mark Arnold of the Louisiana-based On the Mark Strategies offered four tips to assist credit unions in meeting their strategic planning goals for the new year. At least two leagues--Texas and Delaware--have noted his tips in their newsletters (Lone Star Leaguer Dec. 21 and Together Dec. 31).

His advice:

  • Stay focused. "Don't start the new year chasing wild geese," Arnold said.  Although strategic plans have flexibility built into them so the credit union can pursue worthy projects, credit unions must stay true to their plan. "The question shouldn't be 'Can you do this project?' but 'Should you do this project?'" Does the new project fit into your plans and goals?  Arnold also cautioned against managing by crisis; putting out little fires diminishes accomplishing the goals.
  • Commit budget dollars. Allocate sufficient resources--both dollars and manpower--to the goals. Don't expect great results without realistic funding.
  • Follow up and measure.  Review the strategic plan and goals at least monthly, if not more often. Review important data like timetables and who is responsible for what action items. Update the status of each goal to determine overall progress. "One cardinal rule of strategic planning is 'What is not measured is not accomplished,'" said Arnold. "Follow up on your strategic plan, or it will die," much like a neglected houseplant in the office.
  • Motivate staff. Strategic plans are not just for the executive management or board level. They will be driven by the credit union's staff, especially the front-line staff.  Staff not only have to buy into the plan; they have to live it. Some credit unions provide all staff with a laminated index card "cheat sheet" with the top three to five strategic goals so staff can refer back to it often. Use staff meetings to remind employees of the importance of the strategic plan, and provide updates on the goals' progress. "Your front-line staff will help make or break the strategic plan, so keep them accountable by keeping them updated and involved," said Arnold.