Acquisitions vs. AlliancesTeller Turnover – Why It Happens & What to Do About It?

Summer 2010

ContentsWinner of the CUNA Marketing & BusinessDevelopment Council's 2007 Diamond Award.

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14Texas Credit Union League

EDITORIALManaging Editor

Linda Webb-MañonContributing Writers

Alex SchitterWinter Prosapio

Mark FennerBob Mellinger

ADVERTISINGAdvertising Sales Director

Vickey MorrisAccount Executive

Tom Hodge

BUSINESSChief Operations Officer

Bob GallmanSubscription Coordinator

Linda Webb-Mañon

HOW TO REACH US4455 LBJ Freeway, Suite 1100

Farmers Branch, TX 75244-5998e-mail: lwebb-manon@tcul.coop

Web site: www.tcul.coop

Main Office: (469) 385-6400(800) 442-5762, Ext. 6400

Editorial: (469) 385-6486Advertising Sales: (469) 385-6424

Advertising Design: (469) 385-6473Subscriptions: (469) 385-6486

Letters to the Editor: lwebb-manon@tcul.coop

LoneStar Perspectives is a quarterly publication of the Texas Credit Union League (TCUL) and is offered to TCUL–affiliated credit unions as a dues-supported service. If you are not an employee or volunteer of a League- affiliated credit union and would like to sub scribe to this publication, an annual subscription rate of $20 is available. LoneStar Perspectives is a trade-mark used herein under license. Copyright 2006 by Texas Credit Union League. All rights reserved.

WES Publishing310 East Interstate 30, Ste. B107

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PublisherWilliam Strunk

Associate PublisherSaundra S. Brown

Graphic DesignerMarlina Rahman

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Feature14 ‘Juntos Avanzamos’ CUs Not Deterred by Slow Progress in Attracting Hispanics, by Linda Webb-Mañon

DEPARTMENTS

3 Products & Services Best Practices for Acquiring Cardholders through the Branch, by Mark Fenner Responding to the Demand for Better Automotive Title Solutions, by Larry Highbloom

5 News Acquisitions vs. Alliances, by Ed Rigsbee The Housing Market in Texas, by Linda Clampitt Economy: What's on the Horizon?, by Brian Turner

10 Philosophy in Action Smart Strategies to Create a Cohesive Board and Staff, by Susan Fletcher, Ph.D. Answering the Call: The Importance of Political Involvement for CUs, by Jim Phelps Believing the Brand, by Alex Schitter

20 Professional Development Got Trust?, by Bob Prosen Training as the Nurturer of Your Organization's Big Picture, by Hank Moore Teller Turnover – Why It Happens & What to Do About It?, by Mary White

26 Small Credit Unions Small CU Manager ‘Pays it Forward’, by Linda Webb-Mañon Succession Planning, by Howard Bufe

28 Regulatory & Compliance Concentration Risk, by Steve Gibbs ‘Pay us $1,000 and we’ll save your home!’, by Monte Robison

31 HR Corner Using Employment Assessments to Find the Right Employees, by Susan Looney HR Q&A, by Kim Jones

ProductsandServices

Best Practicesfor Acquiring Cardholders through the Branch

By Mark FennerSenior Vice President and

National Sales ManagerTNB Card Services

Increasing cardholder numbers is as easy as motivating employees to cross-sell. With the right marketing tools, training, incentives, and promotion, along with a commitment from the top, credit unions can turn their branches into high-performance sales channels for their credit card programs.

The following best practices have helped Texas credit unions turn their credit union branches into high-performing sales channels for their credit card products.

1. Commitment from the top. Success starts at the top with executives who are fully committed and engaged in making their card program a star performer.

2. Investment in employee training. Employees that understand the value of your card products will be more excited to talk with members about them, which will drive growth in the number of card accounts, as well as an increase in balances.

3. Setting specific goals and objectives. Defined goals enable everyone to measure their individual and group success. Make it a team effort by setting individual and branch goals and turning it into a friendly competition.

4. Motivating employees to sell with incentives. Whether it is a small cash award or contest with a chance for an extra day off, incentives motivate employees to talk about your cards with members and go a long way in acquiring new cardholders.

5. Focused promotional effort. Creating a specific promotion and time period allows credit unions to keenly focus their efforts on promoting their card products.

For Complex Community CU in Odessa, these best practices lead the credit union to grow its card portfolio by 13 percent. Complementing the training, the credit union initiated an incentive program designed to motivate and reward employees to sell the card. Incentives were offered for three months, with an overall goal of doubling the number of new cardholders from 18 to 36 each month. The credit union more than tripled the target of 120, adding more than 350 new card accounts.

Lisa Wyman, vice president of marketing for Complex CU, says “The success of our promotion

efforts was threefold: our employees’ increased level of understanding of the value of our card, the incentives we offered, and the engagement of our senior management team. Our CEO was actively involved during the entire process, including training.”

The $230 million United San Antonio Community FCU (United SA) has been strategically using its seven branches to market and grow its card portfolio since 2007. Over the past two years, United SA has implemented quarterly in-branch promotions that have resulted in a 58 percent increase in the number of cardholders on file and nearly doubled outstanding balances from $6.5 million to $12.3 million.

Vice president of operations for United SA David Roque commented, “Training is a key component of the success of our in-branch promotions. We provide ongoing training to ensure employees are comfortable selling our cards. We also instituted a scorecard, to track performance at the individual and branch level, and we reward employees accordingly.”

Smaller credit unions also benefit from these best practices. For example, Space City CU, a $27 million credit union based in Houston, used an in-branch promotion to double its monthly average of new card accounts. Through training and cash incentive, and within 30 days, employees brought in nearly six times as many new card accounts as the typical monthly average.

To turn your branch into a powerful sales channel, contact TNB Card Services’ client support team at (800) 422-0733.

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By Larry HighbloomPresident

VINtek

Responding to the Demand for Better Automotive Title Solutions

redit unions share at least one fundamental goal when it comes to automotive lending: growth. But in the current financial climate, many credit unions are looking for methods to grow without adding staff and resources to the program. Automating the title process through electronic lien and title (ELT) technology is one way Texas credit unions can expand their auto lending channels while reducing costs.

ELT is a cost-effective, environmentally friendly digital alternative to paper-based titles. When a consumer obtains an auto loan from a credit union participating in ELT, the state DMV sends an electronic title to the lender instead of a paper title. The paperless process reduces postage, storage and supply costs, as well as reduces exceptions and the chances of a title being lost. The Texas DMV initiated a statewide ELT program in November 2009, joining 13 other states in adopting the technology.

For nearly 20 years, Philadelphia-based VINtek has helped credit unions and other automotive lenders increase their efficiency and lower costs tied to automotive collateral management. By adopting ELT as “Software as a Service” (SaaS), credit unions do not need to put the time and money into developing their own in-house system. The solution also complies with each state’s specific ELT guidelines, ensuring that the credit union is processing every transaction correctly. An ELT solution from VINtek simplifies the way a credit union manages auto liens, freeing up more time to focus on members’ needs.

In addition to ELT technology, VINtek furnishes several solutions to streamline and automate title management. VINtek offers direct auto financing through two websites: TaxAndTags.com and TitleMyCar.com. Respectively, these sites allow consumers to estimate the amount of taxes, registration fees and title fees that may be due for a transaction, tailored to their particular locale, and to electronically receive and sign auto loan disclosures through their credit union.

Another technology solution, the company’s VINtekTIME, records and stores title data, providing the information credit unions need to detect and fix lien exceptions. And through VINaudit, the company’s comprehensive decoding software, credit unions and banks can integrate VIN decoding in their in-house systems to effectively put a stop to errors on title liens and enhance risk management.

Easy, innovative and cost-effective are a rare cluster of traits to find in a single service provider, but as VINtek responds and adapts to industry changes, it remains a consistent, responsive model of all three. As a result, VINtek has been chosen as a Preferred Product Provider of ELT services by Credit Union Resources.

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n your effort to decide between acquisitions vs. alliances there are several important considerations. While the benefits to your organization might greatly differ between the two, so goes for the cost of failure. To help you succeed, first defining the terms might prove extremely helpful to you in your decision process.Acquisitions

Acquisitions and mergers are effectively the same thing. Most mergers are really one company acquiring the other. In this acquisition process, the acquiring company receives the good and bad, the positive and the negative resources, liabilities, and reputation. The acquiring organization receives all assets and liabilities of the acquired organization.Alliances

Alliances, generally strategic to an organization’s short or long-term plans, are contractual relationships wherein both organizations remain independent while collaborating to develop a mutually-beneficial result within a specific scope outlined in the contractual agreement. A very simple example would be the cross promotion efforts that are regularly employed by Hollywood’s movie producers and various companies that sell their products or services directly to consumers.Value in Acquisition

Value can come to an acquiring company through: intellectual capital, real estate, equipment, resources, market share and an extensive list of other considerations. However, the reverse is also possible (think Daimler-Benz & Chrysler). One of the insidious pitfalls of acquisitions is when the company being acquired successfully, and

deceptively, hides liabilities from their suitor. Generally the strategy of acquiring organizations is to somewhat dismantle an acquired organization, keeping the targeted valuable components and assimilating them into the acquiring organization while disposing of the unwanted, underperforming, or potentially damaging elements. If the acquiring company has a bad reputation (think Cingular) as an example, and the company they acquired has a good one (think AT&T), then value is delivered. Value in Alliances

Value can come from alliances in a myriad of ways: immediate market penetration, immediate distribution of a product or service, cost sharing, new product development and the list continues. The down side might be: loss of complete control, divulging of proprietary information, ownership conflict of mutually developed products or services, time and resource distraction, and underperforming partners—just to mention a few possible negative elements.Alliance Benefit

The important alliance benefit in the area of determining acquisitions vs. alliances is the ability that alliance first provides in looking before leaping. While there are countless stories of failed alliances, there are more of failed mergers and acquisitions. The price of a failed acquisition is almost always multiplied many times as compared to the price of a failed alliance. An alliance first, gives you the opportunity to “closely study your prey before the actual hunt is under way.”My Advice

From my two decades of helping companies to develop mutually beneficial collaborative relationships, I would advise any organization or groups of organizations that are considering acquisition or merger to first develop a strategic alliance, or a few alliances, with one another to better understand the core strengths, weakness, capabilities, and cultures of all organizations involved. This process will assist in developing a working knowledge of the other, the process will help in identifying under which rocks company secrets are buried, and will expand the vision of possibilities. Remember, you deserve the partner you select; synergistic or antagonistic.

News

Acquisitions vs. Alliances:the Basics

By Ed Rigsbee, CSPCertified Speaking Professional

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News

With the news in the media, many people in Texas are anxious to know how the state has been affected in the midst of the larger, national recession. Is it a good time to buy? How difficult is it to secure a mortgage loan?

I’m happy to report positive news for Texas credit unions and their members in terms of the real estate market.

According to a recent report released by the Real Estate Center at Texas A&M, home sales in Texas saw higher-than-usual activity in March of 2010, perhaps signaling that the traditional spring and summer selling season got under way early this year.

Sales volume for existing single-family homes was 42,682 for the first three months of 2010, up 4 percent from the same period in 2009. In addition, the median home price jumped 3.13 percent from $137,200 in the first quarter of last year to $141,500 in the first quarter of this year

Jim Gaines, Ph.D., economist with the Real Estate Center at Texas A&M, notes that the positive year-over-year gain was due solely to significant March sales being strong enough to bring up the whole quarter. I think we can attribute a portion of these numbers to the first time homebuyers’ tax credit, which expired on April 30, 2010. At CU Members Mortgage we saw big push in terms of first time home buyers looking to close their loans in order to receive the tax credit.

It will be interesting to see how volume responds in the coming months. As Gaines states in his report, while the March uptick is positive, the next two quarters will better determine the real strength of the Texas real estate market for 2010.

  “We are seeing gradual improvement in the Texas housing market and managing our foreclosure rates well compared to national rates,” Gaines said. “Other states, such as California and Florida, are seeing significant foreclosure increases due to high unemployment rates in combination with exotic mortgage-financing options such as option ARMs. Texas is not experiencing the same levels of pressure in these areas.”

As Gaines explains, Texas has not seen the drop in home values that East Coast or West Coast has seen, but we also didn’t have the appreciation in home values that

California and Florida had a few years ago. Texas has remained more stable in that regard.

What does this mean for your members, and is it a good time to buy? Yes. It is absolutely a good time to buy as rates are at historic lows.

Tracking rates back to last summer, we see that rates are only about a quarter of a percentage point different. This means your members can still buy a lot of house for relatively little money.

And while last year was significant in terms of the refinancing market, we’re seeing that shift. At present, about 60 percent of the loans that are in the pipeline at CU Members Mortgage are purchase loans –that signifies a shift from a refinance market to a buyers' market.

While many consumers worry that it is impossible to secure a mortgage, it’s important for credit unions to reassure their members that if they are a responsible consumer and can document employment, they will

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The Housing Market in Texas

be able to get a mortgage loan. If you’re a responsible consumer, you’ll get a loan at a good rate. Typically, we need to see debt ratio under 40 percent and credit scores have to be roughly 660 or above.

Despite the tightened restrictions on underwriting mortgage loan, I think there are huge opportunities for credit unions to expand market share. People prefer to do business with people they trust, and a mortgage is the best thing a credit union can offer to position itself as the member’s primary financial institution (PFI).

When you’re getting into a purchase market, as we are now in Texas, it’s much more competitive. You have to market to your members in order to get that loan.

At some point the rates are going to go up. That means it’s a good time for credit unions to get into the market, and put themselves in position to be known in their community as a mortgage provider. A good place to start is to establish relationships with your local Realtors – so they can recommend credit unions to their buyers.

By Linda ClampittSenior Vice President

CU Members Mortgage

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News

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By Brian TurnerDirector, Advisory ServicesSouthwest Corporate FCU

Economy: What's on the Horizon?

hen the movie sequel to “Jaws,” promoters used the tagline “Just when you thought it was safe to go back into the water……” many analysts are starting to feel the same way about today’s economy. Although reports on the two most volatile parts of the economy have shown improvements in recent months, housing and employment, there are still dark clouds manifesting over the horizon.Housing

With data through February 2010, the S&P/Case-Shiller national home price index, the leading measure of U.S. home prices, showed vast improvements in their 20-city composite measure. For the first time since December 2006, the annual rate of change was positive, having increased 0.8 percent versus this time last year. It was the fourth consecutive month year-over-year prices had improved. Certainly, as the inventory of foreclosed properties rose, the average home price took a licking – especially if you lived on the West Coast, the Deep South or the Upper Midwest. These regions now represent areas of best improvement.

But there are some ominous signs. First, the percentage of current or performing mortgages declined for the eighth consecutive quarter to 86.4 percent. Second, seriously delinquent mortgages, those greater than 90-days, were most pronounced among prime borrowers – which grew 16.5 percent. Thirdly, the number of foreclosures in the first part of 2010 increased more than 35 percent - meaning that 1 in every 138 homes in the U.S. was in some form of foreclosure proceeding. Shockingly, the re-default rate on mortgage loans modified only nine-months ago reached 51.5 percent.

The delinquency rate on member business loans is not all that rosy either. Delinquencies on multi-family loans have risen 283 basis points to 12.2 percent while the rate on office properties has reached 4.1 percent. Employment

We’ve seen some improvement in the employment picture which lost close to 8.5-million jobs during the latest recession. Over the past three months,

approximately 559-thousand have returned to the fold. This has helped to sustain consumer sentiment and caused many to re-enter the workforce. Encouraging signs like this would certainly help to spark consumer spending – two-thirds of the nation’s GDP.

But more than half of the increase in jobs was associated with temporary census workers which will eventually grow to more than 1.2-million. The total number of unemployed stands at 14.8-million and the number of long-term unemployed (those unemployed for 27 weeks or more) is around 6.5-million. That means that the percentage of long-term unemployed is about 44 percent of the unemployment base.So What?

Now the good news….Data for the State of Texas is very encouraging. Whereas the national unemployment rate stands at 9.9 percent, Texas’ rate is 8.3 percent. With national foreclosure rates ranging from 9.8 percent to 20.4 percent, Texas’ foreclosure rate is closer to 5.9 percent. Unlike Nevada, where one in every 76 homes is in foreclosure proceeding, the rate is one in every 617 in Texas.

Seven of the top 20 strongest economic metropolitan areas are located in Texas. Wages are rising in the Lone Star State and there is pent-up demand which most likely will surface later this year and possibly spur short-term loan demand.

But the economy needs stability more than it needs short-term stimulus. Otherwise we will continue to see volatility in loan demand, interest rates and CEO blood pressure.

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PhilosophyinAction

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Smart Strategiesto Create a Cohesive Board and Staff

ggshells…We all hate walking on them. When interacting with different personalities it can be difficult to be diplomatic in our communication with executive staff and the board of directors.    Early in my career I worked with "Bill" (not his real name). Bill was introverted and preferred structure. I tended to be more outgoing and creative. Initially I thought Bill was rude because he didn’t seem to want to talk to me. Bill later confessed to me that he thought I was rude because I always tried to change the way things were done. Bill’s introversion meant he didn’t enjoy a lot of chit chat and my creativity meant I enjoyed less structure. It was a clear case of personality difference.

The cohesion of the executive staff and board of directors is based on the culture, style and personality they adopt. The fact that board members tend to have diverse backgrounds means that there will be a variety of personalities represented.

“Different personalities help us be more effective and efficient,” says Family 1st of Texas FCU president Sandra Szymanski.

“Even with our diverse backgrounds we are all focused on the same goal,” adds American Airlines FCU board member Milton Whitehurst.

Good relationships and a common goal are the glue that holds the board together and will encourage board and staff members to challenge one another in a productive way without feelings of threat or fear.

There are some common threads throughout the different personality types that will help maintain cohesion within your staff and board. Here are Smart Strategies for how to maintain a cohesive executive staff and board of directors:• Hug the Tree. This is the concept of sticking to

the main point in a conversation. Think of the tree representing the topic and the tree branches other tangents. When having group discussions don't allow the conversation to go off point by discussing an old issue or something unrelated. Avoid “war stories” from the past that can get a discussion off track.

• Recognize high emotions. Regardless of personality type, as long as a person is communicating with high emotion, he or she does not feel understood. And before someone can trust others he/she must first feel understood. Without trust among staff and board members there will be suspicion within the group and less cohesion.

• Know the two parts of trust. According to the Deming Center of Quality Management 50 percent of time is business is wasted because of lack of trust. Trust is a function of character and competence. Character is your motive and integrity with people. Competence includes your skills, capabilities and your track record.

• Focus on what is right rather than who is wrong when dealing with confrontational issues. Address issues, not personalities. Ask “What” and “How” questions instead of “Why” questions. Ideally the

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By Susan Fletcher, Ph.D.Psychologist, Author and Speaker

conversation style should be open with quick and honest communication that engenders constructive feedback.

• Recognize that people will behave differently in a group setting than they behave one-on-one. Peer pressure and intimidation affect how people interact in a group. New board members may be afraid to ask questions that could benefit everyone. New executive staff members may be afraid to challenge a seasoned board of directors.

• Generational differences can be misinterpreted as personality differences. It’s not uncommon for a board of director to be more senior in age than the executive staff. The younger generation (Generation Y/Millennials born after 1980) will embrace new technology, emailing and communicating online whereas an older generation (Baby Boomers born 1944-1960) may resist technology and prefer more face-to-face interaction. These are the same generational differences you see within your credit union with members and their needs. Recognize motivators for the different generational groups to improve board and staff cohesion.

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Susan Fletcher, Ph.D. is a psychologist, author and speaker who specializes in helping individuals, professionals and organizations apply strategies for fast  improvement.  Her Smart Zone™ strategies provide ways to be a top performer at work and home. To learn more about how to be in the Smart Zone please visit www.FletcherPhD.com.

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By Jim PhelpsPolitical & Grassroots Director

Texas Credit Union League

Answering the Call:The Importance of Political Involvement for Credit Unions

he intensity of the legislative battles faced by credit unions over the past 18 months has been unlike any since H.R. 1151 a dozen years ago.

In the wake of the worst economic crisis of the past 80 years, the U.S. Congress has pursued an aggressive legislative agenda to reign in excesses on Wall Street and “too big to fail” financial institutions in order to mitigate excessive risk to our financial system, and prevent the need for future taxpayer-funded bailouts.

Unfortunately, credit unions have found themselves included in many of the proposed “solutions” intended for large financial institutions. This has resulted in a flurry of legislative activity concerning such issues as interchange fees, courtesy pay/overdraft protection programs, and sweeping financial regulatory restructuring. Clearly, the issues that Members of Congress are debating today have the potential to impact the credit union movement for decades to come.

While lobbying and political contributions are extremely important to a successful advocacy program, it is essential that credit unions also be prepared to “answer the call” with grassroots advocacy in defense of the products and services that our members rely upon.

There are several ways that your credit union can effectively participate at a grassroots level. First, if you have not already done so, appoint a legislative coordinator (LC) in your credit union. The LC is the person responsible for generating grassroots activity in response to critical regulatory or legislative calls to action. Grassroots activity may consist of emails, faxed letters, or phone calls to the offices of elected officials.

If you are a small credit union and have limited staff, you may wish to consider assigning someone from your board of directors as your LC.

Second, be ready, willing and able to engage your most powerful resource: your credit union members. After all,

they have the most to lose in these legislative battles; if Congress passes harmful interchange legislation that makes it more costly to offer debit and credit cards, or takes away courtesy pay programs, our members pay the price.

There are a number of ways that you can engage your membership in grassroots. One tool is web stickers. The stickers can be posted on your credit union’s website and members can click thru to send messages to their elected officials or learn more about the top legislative issues impacting credit unions.

You can even engage your membership at the branch level. This may include handing out talking points on critical issues at the teller line, directing members to computers in your lobby where they can send messages to elected officials, or, asking members to take a moment to make a phone call to their representative’s local office.

Another very effective technique for engaging credit union members are e-blasts. This involves targeted emails to members requesting action – for example, members who use courtesy pay, have business accounts, or carry debit cards. The email contains a letter from the CEO outlining the issue, the potential impact on the credit union, and a request to contact their elected official. The response rate on these types of communications is typically 5-9 percent, so the potential is good for generating a significant amount of grassroots noise.

Finally, lawmakers remember their friends. The mid-term elections are in November, and one of the most effective ways of building influence with an elected official is to volunteer in their campaign. What better way to build or strengthen an existing key contact relationship than to block walk or put out yard signs for a candidate?

Credit unions will ultimately prevail over the challenges we now face, as we have numerous times over the past 100 years. If in the course of fighting these battles we can build our political influence and recapture the grassroots “muscle” that helped us win H.R. 1151, it will benefit us for the inevitable future battles that we will someday have to wage.

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PhilosophyinAction

IBelieving the Brand

n a logo-centric society, brand identification is extremely important. People feel compelled to qualify their favor of a particular brand and while it is important to attract new customers, equally essential is the goal of retaining those customers and earning their loyalty. That loyalty comes shining through a consistently exemplary level of good old-fashion customer service and a recognizable brand that displays familiarity and a reminder of the quality of the services provided. Arlene Gauthier and Alisha Wade concur, and both go to great lengths to emphasize as much to their members.

Gauthier, nicknamed the “brand police,” is the marketing manager of generations federal credit union in San Antonio. She, like Wade, vice president of business development of Houston-based First Service CU, believes that their members recognize and can certainly identify their credit union logo but branding goes far beyond a logo.

Wade adds, “I don’t think a member ever thinks ‘Wow – what a great brand they have!’ but I do believe they appreciate the brand without being conscious of it.”

Gauthier echoes this sentiment: “One of the things we found through the process of changing our name is branding consistency across the organization actually makes serving members easier. What is important to them is the kind of service they receive, the environment they spend time in, and all the experiences they have when interacting with the credit union in person, over the phone or on line.”

Customers can sometimes be a bit reticent when it comes to personal touches and nuanced customer service but in maintaining balance to these opinions, customers can also be quite vocal over the absence of service or feeling “invisible.”

Both Gauthier and Wade stress the importance of their members’ perception and subsequent endorsement of their particular credit union brand. “Today, the brand development continues daily and helps keep us recognizable in the sea of financial institutions potential members see everyday within the market we target,” notes Wade. “Plus, various surveys we conduct show our members will refer us to other friends and family which tells us part of our brand strategy is working.”

At First Service CU and generations federal credit union, the branding is unmistakable and consistent

across all mediums. The logo appears prominently on all brochures, forms, correspondence and newsletters, on the website and in the lobbies. Gauthier and Wade stress the importance of consistency and that everyone in their organization adheres to the standards and brand-specific expectations.

“I can’t say enough about having a written, thought-out brand guideline that you share with everyone,” says Gauthier. “It doesn’t have to be much but it forces everyone to think about the brand before embarking on any project.”

Creating, developing and marketing a specific brand are not a simple undertaking. It is more than an insignia or palette of coordinating colors – it must be original, command attention and represent an institution on a number of levels.

Gauthier and Wade advise other institutions to have in place specific criteria to define critical goals, expectations, subsequent action plans, and ways to monitor performance.

“A strong, consistent brand delivers on the members’ expectations and exceeds them,” confirms Gauthier.

Wade observes, “To be a brand advocate, we have to be willing to question anything we see that we do not believe best represents First Service. Brand consistency and management can certainly apply to any asset-sized institution no matter how many components there are to your brand strategy – but always, always monitor and be consistent.” 

By Alex SchitterWriter

Texas Credit Union League

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By Linda Webb-Mañon, CUDEPublic Relations Director

Texas Credit Union League

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“Jose” gets paid every two weeks at the local meat packing plant. With check in hand, he clocks out for the day and heads to the local check cashing outlet where he pays a 3 percent fee

to cash his check. He then pays $11.99 to send $300 to his mother in Mexico via Western Union. Because he paid extra, his mother will be able to pick up the money at the neighborhood pharmacy in as little as 30 minutes. He has several bills due so while at the check casher he purchases four money orders at a cost of 79 cents each. What’s left of his paycheck is divided into two, with half going into his wallet and the other half put in a sock tucked under his mattress earning zero percent interest.

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A growing portion of unbanked America is comprised of Hispanics like “Jose.” According to data from the FDIC, Hispanics are considerably more unbanked and underbanked when compared to the general population. In fact, 43 percent, or more than 5.7 million Hispanic households are either unbanked or underbanked.

Unfortunately, consumers like “Jose” continue to bank out of their back pockets and are oblivious to the fact that credit unions like Amarillo Community FCU are eager to serve them.

“The biggest hurdle we’ve encountered is getting Hispanics in the door,” says Arna Reynolds, president and CEO of the Amarillo-based credit union. Sentiments echoed by Gary Williams, president and CEO of Unity One CU in Fort Worth.

In 2007, Amarillo Community FCU earned TCUL’s Juntos Avanzamos, or “Together we Advance” designation – signifying its compassion and capacity to serve its emerging Hispanic market as well as the bottom line importance it is placing on this community. Reynolds says the credit union has remained committed to Hispanic outreach, but has lacked the “know how” to make real progress.

“I’m sure there are a lot of companies who go into a particular market thinking their mere presence will draw customers in. We aren’t that naïve. When we embarked on this journey to become a Juntos Avanzamos credit union we knew not to expect immediate results. However, as the years have passed, we had to get honest with ourselves – we simply weren’t making significant progress,” admitted Reynolds.

Unity One CU is an early “adopter” of TCUL’s Juntos Avanamos program, receiving their designation in 2006. On paper, it seems they’ve done everything right. They opened a branch in an old Burger King restaurant in the north side of Fort Worth – a predominately Hispanic and Spanish-speaking community. They built a community center inside the branch, closely aligned themselves with local churches, schools and community leaders. They teach financial education to young people and adults alike.

Each year, they host a widely-attended back-to-school back-pack drive where they serve food, beverages, and most importantly, provide school supplies to the underprivileged. They also offer a host of transaction based products and services, including check cashing, payday lending alternatives and remittances.

While this former railroad credit union has made significant progress with their precise and well-thought out

strategies, Williams says he’s confident they can and should be doing better.

“Changing habits isn’t easy. Many of the Hispanics we are trying to serve are Spanish-language dominant and have had little or no experience with traditional financial institutions,” observes Williams. “They are comfortable using the check cashers and payday lenders, and getting them to see that there is a better way to manage their personal finances has been challenging.”

To help empower credit unions like Amarillo Community FCU and Unity One CU be more successful in bringing the unbanked and underserved into financial mainstream, TCUL initiated a partnership with Coopera Consulting. The Iowa-based credit union organization created a product called the Hispanic Opportunity Navigator (HON), a comprehensive assessment tool that identifies the opportunities and challenges in Hispanic outreach that are unique to a credit union. TCUL believes the HON assessment and the Juntos Avanzamos program are a natural fit to strengthen the Hispanic outreach efforts of Texas credit unions. Juntos Avanzamos essentially identifies what it takes to meet the needs of the Hispanic community, and the HON provides the roadmap.

Amarillo Community FCU and Unity One CU were among the first Texas credit unions to go through the HON, and what Reynolds learned was that her $118 million in assets credit union has a long way to go toward being a best practice credit union for service to Hispanics.

The road to becoming a best practice credit union in Hispanic outreach is long and challenging. Warren Morrow, president and CEO of Coopera Consulting, says a credit union experiences three distinguishable stages along the journey:• Discovery, which is the stage in which a credit

union doesn’t know where to start, but has a growth mentality and will to succeed;

• Emerging, which is the stage in which as a whole the credit union recognizes the philosophical and business imperative of serving Hispanics, and

• Best Practices, which is the stage in which the credit union has captured more than their proportional market share of the Hispanic members.Although Amarillo Community FCU has surpassed

the Discovery stage, with only 44 percent of best practice tactics in place, it hasn’t quite reached the Emerging stage. Reynolds is not discouraged, and is in fact determined to get there.

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Upon completing the HON, Amarillo Community FCU received a comprehensive and detailed 68-page report. Among other things, the report found that the credit union is only serving about 3.8 percent of the Hispanic market share for the market – indicating that despite their tenacity, they’ve made little progress in breaking down barriers.

“We are reaching out to a segment of our population that for the most part has avoided the financial mainstream. Perhaps a negative experience with the banking system in their homeland has created mistrust, and so they are just more comfortable dealing with cash. Regardless of the reason, we remain focused on becoming the preferred financial service provider for our Hispanic community,” assured Reynolds.

Coopera Consulting has advised Amarillo Community FCU to conduct additional market research to gain greater insight into the habits, nuances and specific needs of their Hispanic community. Specifically, Morrow suggests that the credit union learn:• Language preferences and level of language isolation

within their Hispanic market• Number of years living in the U.S.• Major employers• Number of Hispanic-owned businesses• Number of Hispanic homeowners

• Schools with high Hispanic enrollment• Hispanic-serving agencies• Amount paid in fees to fringe financial

service providers• Financial needs of the local Hispanic community• The offerings of competitors in the marketplace• Potential partners trusted by the community• Origin of the local immigrant Hispanic community

“We were able to learn a lot about the Amarillo Hispanic community through the HON; however, the more we learn and the more nuanced our understanding is, the better we can serve this membership,” says Mexican-born Morrow.

Additionally, Morrow recommends that the credit union closely align themselves with like-minded organizations within the Hispanic community that have already developed solution-oriented programs and services to meet the needs of the low-and-moderate income communities.

Unity One CU is further along in the process of becoming a best practice credit union than Amarillo Community FCU. Currently in the Emerging stage, Morrow says Unity One CU is well-positioned to dominate their market space.

”We are very pleased to see the level of commitment that Unity One has placed on this ever more important market. They have such a strong foundation, that really their attention needs to be on how to build upon that foundation,”

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suggested Morrow. “They’ve got the members, the loyalty, and the awareness, and now we’ll turn our attention to how to make them even more productive members as Unity One meets more and more of this community’s needs.”

Among other things, the HON revealed the need for Unity One to:• Integrate the initiative among staff and branches;• Measure progress on a consistent and ongoing basis;• Overcome lending challenges;• Revisit and build upon community partnership and

outreach strategy;• Strengthen member education, and• Better understand and diversify membership.

While every credit union approaches Hispanic outreach differently, TCUL has identified three critical success factors:• Institutional commitment. Board and staff must be

committed to understanding why Hispanics are unbanked or underbanked, and be willing to devote resources to the initiative. As most Juntos Avanzamos credit unions will tell you, success will not be immediate and in fact, it requires a long-term commitment.

• Right product/service mix. Hispanics are anything but homogenous, and recognizing the diversity within the Hispanic community is essential for your success. For example, if your market is foreign-born, you will need to offer low-fee, low-risk starter products that bring them into the institution. If the level of penetration among Hispanic members is low, you should review your fee structures, support materials and features, as well as marketing efforts.

• Outreach strategy. Your outreach strategy will depend greatly on the market you are trying to serve. Your first step should be to conduct research to determine the demographic make-up of your Hispanic market. Are they U.S. born or foreign-born? First, second or third generation? Spanish or English dominant? Keep in mind that any and all outreach strategies need to educate and build trust in the community.There are currently 13 Juntos Avanzamos credit

unions and at least four have already gone through the HON. Going forward, any Texas credit union interested in becoming a Juntos Avanzamos credit union must first complete the HON.

To learn more about Juntos Avanzamos and how you can participate, visit the “Outreach” section of TCUL’s web site at www.tcul.coop.

t’s the Golden Rule: Do unto others, as you would have them do unto you. In other words, to inspire loyalty and trust in others, a leader actually must be trustworthy and loyal. Okay – seems simple enough. But given the many hidden political agendas that dwell in most companies and organizations today, this is easier said than done. Our culture seems to follow an agenda that says that we must win at “all costs,” and people are merely a “means to and end” in achieving profitability and success.

However, in looking at the 100 Best Companies to Work For, we see quite the opposite is true. Among these 100 Best, each maintains a culture of putting people first. In fact, they have figured out what others would be wise to consider -- that a “people-focused” business culture creates energized and invested employees and it is this that most often supports a positive bottom-line. In fact, Robert Levering, founder of the Great Places to Work Institute and co-author of Fortune magazine’s annual list of the 100 Best Companies to Work for in America, uncovered that “trust and especially its sub-dimensions Respect, Credibility and Fairness, and Pride and Camaraderie appeared as the set of values that often makes the difference between business success and failure.”

Not sure how to inspire loyalty and trust? Sometimes, simplicity works best. Below are a few practical ideas on how you can begin to develop a trusting environment inside your credit union:• Demonstrate uncompromising integrity.

Remember that everything you say and do as a

leader is constantly being evaluated by your employees and external constituencies. Therefore, you must continuously demonstrate uncompromising integrity in all your actions and communications, including those that are nonverbal. Case in point - Blake Nordstrom, president of Nordstrom. About two-thirds of his total compensation is based on company performance. If the company doesn't perform, he isn’t rewarded. In fact, he realized a 60 percent decrease in compensation last year while many of his peers from lower performing retailer competitors continued to benefit. In a national arena where we’ve seen top executives receive hefty compensation packages from the floundering and debt-ridden companies they oversee, it is Blake

Nordstrom’s “integrity in practice that breeds the intense loyalty that Nordstrom experiences among its employees” (Great Places to Work).

• Make and meet commitments. Seems simple, right? Yet you’d be surprised how many struggle to deliver. Organizations that treat commitments as promises and deliver results without follow-up build deep bonds and tremendous esprit de corps. At W.L. Gore & Associates this concept is capitalized. Employees are given the freedom to create their scope of responsibility by selecting projects on which to work. Working in tandem is a cycle for growth and development that not only reflects Gore’s core business belief of believing in the individual but also “aims to help associates find the sweet spot in which individual interest and motivation meets up with skills and experience to satisfy a business need.”

• Be direct and forthright. An effective leader is direct and forthright with people in every

ProfessionalDevelopment

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By Bob Prosen Best-selling author

Kiss Theory Good Bye – Five Proven Ways to Get Extraordinary Results in

Any Company

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Got Trust?

conversation, letting them know where they stand, as well as what and when things are needed. A first-rate leader must clearly communicate and integrate company objectives with the culture, delegate responsibly and have a low tolerance for missed commitments. Micromanagement is often evidence of the need to delegate more effectively and strengthen trust and accountability.

• Slow Down. When you make a request of someone, take a little extra time to explain why you are making it. Put it in context and explain why it’s important to the goals of the organization. Ask what the person needs to complete the task. When your employees understand the purpose and how the information will be used, it empowers them to provide solutions that are more robust. This approach removes excuses, reduces rework, and is a great way to build relationships. It’s also a great way to develop future leaders by increasing responsibility and encouraging decision-making and creativity.

• Open the Door. The old “open door” policy goes a long way toward helping leaders and workers clarify information so that people can do their jobs and meet their objectives. And there’s no quicker way to lose touch with the organization than to close your door to write memos and send e-mail. Trust is built one-on-one, eye-to-eye, not in electronic relationships. Employees come up with the strangest stories about what’s going on behind closed doors, but it’s all because of fear. With the exception of confidential discussions, full visibility and disclosure are always good rules to follow.When you follow an accountability-based leadership model that is

based on respect and clear objectives and measurements, it exposes the effectiveness—and ineffectiveness—of your organization at all levels. Results speak for themselves, and they speak volumes.

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T

Training as the Nurturerof Your Organization's Big Picture

(Includes excerpts from "The Business Tree," published internationally by Career Press)

raining is a vital ingredient in corporate development. As a corporate strategist, I always enlighten top management and boards of directors as to the essential value of training. Purveyors of training do not get boardroom access. I know its importance and often tout its virtues as essential to the organization's big picture.

My latest book is "The Business Tree," an original model of five key branches, plus trunk and roots. The tree symbolizes the company as a whole, and all parts are examined as they relate to the whole. Branch 4 (people) is the largest (28 percent of the total company), most important, and most under-nourished branch on The Business Tree. 

People can make or break a company. Disgruntled employees leaving with inside secrets can take that intelligence elsewhere. The care and nurturing of employees into constant, stable contributors to company success should be the major emphasis of every company.

Organizations cannot operate without people, yet employees often tend to be misused. There are so many problems associated with the handling of people in an

organization that it is impossible to identify only one major illness threatening this branch. Employees who look only at their niche jobs and their tasks at hand do not see themselves as part of the overall company strategy. If kept in a myopic focus, they produce products and market without the skills or enthusiasm necessary to lead their companies.

Employees need lots of professional attention, grooming, mentoring, training, and administrative support. Research shows the current workforce needs three times the amount of training than they are currently getting to remain competitive and productive. Too many companies give technical training but do not offer instructions into critical thinking skills, people empowerment skills, customer focus, leadership reasoning abilities, and the insights needed to project each person's job toward the greater company goals.

Most managers need to refine their people skills and evolve into leaders. They must embrace empowerment, teambuilding, and open communication, among other concepts, to relate better to human beings.

Teambuilding must be part of the corporate vision first, not as a series of exercises delegated to trainers. Organizations of all sizes must have the think tank, which delineates future operations, including education and training. Training is unfairly blamed for pieces of the organizational mosaic that strategic planning and cohesive corporate vision should have addressed early on. 

Companies owe it to themselves to think and plan…before launching piecemeal training programs. After carefully articulating and understanding direction, training needs (including teambuilding and empowerment) will stand a chance of being successful.

Following are the seven greatest benefits of training: 1. Measurements. Test scores, grades, class rankings,

GPA, SAT, professional certifications, licensing examinations, and juried awards. Whether in school or business, we are all measured. 

2. Thinking-Reasoning Skills. What we learn is important. Further, what we do with lessons, how facts are interpreted, how we approach problems

ProfessionalDevelopment

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and the faculties of common sense are vital to economic, social, and self-betterment success.

3. Socialization-People Skills. Through trial-and-error, success-and-failure, and the observation of other people's strengths-and-weaknesses, we learn how to live and work with others. Mastering people skills makes for win-win propositions.

4. Professional Development. Education does not stop after the highest degree completed…it merely begins. Training, professional enrichment, membership in associations, and constructive business interaction are vital for career longevity and economic independence.

5. Mentorship. Learning from others takes a higher plateau when under the wings of experts. Mentorship (which has seven levels) is a stair-step process of bettering all participants. Meaningful lessons, paying dues, and developing relationships empower those who make the effort to "go the distance." Learning from different, unusual, and informed sources is the art of mentorship.

6. Earning Power. Education (formal schooling, professional development and enhanced-relationship study) has a direct relationship to financial rewards. It

begins with school but bears fruit in the willingness to learn, change, and grow professionally.

7. Future Life. A truly successful person commits to mentoring others, giving back, mastering change, and never failing to learn. Education is more than confirming one's held beliefs. It plants knowledge roots, which sprout in ideas and lifelong insights.

By Hank MooreCorporate Strategist

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I

By Mary WhitePartner

WTC Performance Group

Teller TurnoverWhy It Happens & What to Do About It?

s teller turnover a fact of life that we can’t do anything about? No it’s not! Are the answers simple? No they’re not but managing teller turnover should be a strategic initiative, and here’s why:1. According to the Workforce

Research Institute the cost of turnover is 150 percent of a person’s annual salary!

2. As substantial as this 150 percent cost is, the impact to the delivery of service to our members is immeasurable.Tellers are the credit union

to the members. Tellers may be the only credit union person a member regularly sees. Tellers are the ones who members turn to for advice, to listen to their needs as well as their complaints. Members want to see the same faces and hear the same voices when they need service from the credit union. New tellers can’t be expected to know the names let alone the idiosyncrasies of members, but members expect and want them to.

What are some of the causes of teller turnover?• Lack of genuine

acknowledgement by the credit union of the importance of their roles;

• Lack of consistent, quality training;

• Typically lowest position organizationally, and almost any other position in the credit union is considered a promotion;

• Lack of feedback and coaching from their boss;

• Bosses who don’t ‘walk the talk;’

• Limited career options;• Fear of robbery; • Team conflicts;• Low salary; • Poor performance, and• Returning to college.

Of course, all teller turnover isn’t necessarily bad. To be an outstanding teller takes the right blend of relationship building skills and task oriented behaviors, and not all tellers have this blend. When that’s the case then as Jim Collins says in his book, Good to Great, we need to get the ‘right people on the bus and in the right seats.’ Does your credit union have the right people in the right seats on the bus when it comes to your teller line? If you don’t, then those tellers who are in the right seat may just be waiting to leave because of their frustration with the credit union allowing non-performing tellers to stay. They rightfully ask “Why am I working so hard to do a great job when others are being allowed not to?”

Realizing reducing teller turnover should be a strategic initiative, what can a credit union do to reduce this rate of teller turnover? • Redefine teller roles • Conduct “stay” interviews• Offer flexible hours• Enhance training

opportunities• Conduct employee surveys

Check out the online version of LoneStar Perspectives, at http://www.lonestarperspectives.coop to learn more about ways to reduce teller turnover.

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Executive Profile:Small CU Manager ‘Pays it Forward’

By Linda Webb-Mañon, CUDEPublic Relations Director

Texas Credit Union LeagueSmallCreditUnions

W hen Mary Dunagan graduated high school in the late 1960s, she hadn’t quite decided what her next move was going to be. So when a family friend suggested she apply for a position at a local credit union, she jumped at the opportunity. She spent her first two years out of high school working in the file room at San Antonio-based Lackland Air Force Base FCU.

Any fears Dunagan might have had about her future, and her ability to earn a decent living, were quickly put to rest. She worked hard, enhanced her skills and took on greater responsibilities – first as a bookkeeper with the credit union, and then in 1971, she went to work for Citicorp Information Resources in the credit union data processing division, solidifying her exceptional attention to detail in all her work for the next 20 years before retiring.

“Although I never planned a credit union career, it makes sense that I would end up working at one. Credit unions are the only financial institutions my family uses,” notes Dunagan. “When I was growing up, my mom volunteered with the Montgomery Wards CU and my dad was a member of Lackland FCU.”

“So it seems credit unions just might have chosen me,” continued Dunagan.

Over the years, Dunagan’s professional, as well as personal life has taken many turns. In 1998, after volunteering for several years at the Texas Workforce CU (San Antonio), the board of directors asked Dunagan if she’d be interested in serving as manager. Her best friend’s mother had managed the credit union for a number of years and was ready to retire.

Dunagan, after having taken early retirement eight years before to care for her ailing mother, returned to the workforce. When she took over the credit union in 1998, the credit union had just $1.7 million in assets and 550 members. Today, the credit union has grown to $8 million in assets with nearly 1,000 members.

As if running a small credit union isn’t challenging enough, Dunagan always finds time to help out other credit unions whenever her services are needed, whether it’s reviewing and/or sharing policies and procedures, or printing business cards.

“Credit unions are about ‘people helping people.’ If there is a credit union that needs my assistance and I’m in a position to help, then I will help,” said Dunagan. “I’m sure someone, at one time or another had to help our credit union, so this is just my way of paying it forward.”

Dunagan says her board is very supportive of her role outside of the credit union.

“Our board of directors believes strongly in the credit union movement, and they are proud of our ability to help other credit unions,” assured Dunagan. “I am very lucky to have a board interested in not just showing up for meetings, but being involved in the ‘movement’.”

Although Dunagan’s primary job is to represent Texas Workforce CU and run the credit union as directed by the board, she also firmly believes that she has a responsibility toward ensuring the growth and success of the entire movement.

Asked how she balances her professional, personal and volunteer life, Dunagan responds, “It really doesn't take much balancing. In fact, I think all of the activities I’m involved in helps make me a more rounded person.”

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SmallCreditUnions

T

Succession Planning:Small Credit Union Perspective

ypically one of the last things to be addressed on a credit union’s to-do list is formulating an adequate succession plan. Two-thirds of CEOs and boards admit they do not give it the attention it deserves, yet it is one of the three top functions of every board.

Succession planning is a process of forward thinking about the various courses of action needed to maintain strong credit union management and volunteer leadership. The board needs to anticipate the future needs of credit union management as it relates to the entire strategic planning process. Many times when we discuss succession planning our thoughts turn to someone retiring, although there are a number of additional factors that could engage the need for a succession plan such as illness, disability, death, accident or a decision on the part of a current key individual to pursue other opportunities.

Smaller credit unions can find themselves saddled with additional challenges when it comes to succession planning. One significant challenge is the potential for sticker shock when faced with filling a CEO position from outside sources and limited resources to fill the position from within. Today many CEOs of smaller credit unions have been with the organization for a number of years and have a deep loyalty and passion for the credit union and their members. An additional component to this scenario is that many have performed their duties for a compensation package that is typically less than market (i.e. a low salary, the lack of a benefit package or combination of both).

Another significant challenge will be the market pool of capable candidates to meet the needs of the credit union. Where will the new leader come from? Will it be from a similar sized financial institution or senior staff of a larger institution? Keeping in mind experience comes with a price tag and lesser experience will come with a learning curve. Which will be the best strategic decision for the credit union? With the constant increase in rules and regulations of unprecedented proportion, the burden being placed on staff to meet those regulatory requirements has become daunting and couple that with limited resources of a small credit union you will need a CEO with passion for the credit union movement and a solid foundation of knowledge on all aspects of a credit union’s operation.

When evaluating potential successors we must first evaluate and identify the needs of the credit union and how those will best be met. Then we must identify and evaluate the knowledge and foundation of the potential candidates and how can we align their professional goals and objectives with the goals and objectives of the credit union.

A comprehensive succession plan helps ensure:• Member services continue without interruption;• The board is prepared to fill the CEO and/or board vacancies in a timely manner;• Leadership depth is being created;• The credit union is prepared to develop

new services;• Key staff are retained;• The credit union ties succession planning and management to strategic planning;• Employee morale remains constant or improves;• The concerns of regulators and examiners are anticipated, and• The credit union movement benefits.

All the various components of a succession plan must be added and blended for every individual credit union as a unique organization with specific needs, goals and objectives. It doesn’t matter the size of the credit union, the ultimate success or failure often lies in the hands of those at the helm. Achieving success requires a team effort.

The ultimate goal for any credit union is for the board and management working together toward the common goal of serving their member-owners in the true cooperative spirit.

By Howard BufeVice President

OnBalance

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on’t put all your eggs in one basket. That’s basically what the people formulating Basel II were telling us. It’s no longer about just one ‘basket’ and those ‘eggs’ represent billions of dollars in loans, investments and deposits circulating through the U.S. financial system. We’ve come to recognize that concentration risk is our ‘basket’ and seen as the culprit in numerous financial industry fiascos in the last 30 years.

However, is the basket to blame when all of the eggs are broken, or is it those hands carrying the basket? Effective management of this risk is the only way to protect our financial institutions and industry from concentration risk scenarios that occurred during the 1980s with the savings and loan crisis as well as the recent erosion of value experienced in the mortgage-backed securities market due to poorly underwritten underlying mortgages. Only through recognizing, measuring and managing concentration risk can we avoid history repeating these costly disasters.

Any significant grouping of like or similar asset and/or liabilities can result in a “concentration.” Concentrations increase in risk proportional to their size. For example, if I have evenly distributed groups of assets, then it is more likely that my risk is also evenly distributed. The greater I increase any one of those asset groups, the greater risk I must assume for that group. Where can you typically find concentrations? Everywhere:• Loans:

○ Type of collateral - residential real estate; member business; automobile (new or used)○ Lien – residential real estate○ Payment feature or term – member business○ Location – residential real estate;

member business○ Exotic or non-traditional terms – residential real estate○ Rates (fixed or variable) – residential

real estate○ Substandard – residential real estate ○ Loan-to-Value (LTV) – residential real estate; ○ member business○ Indirect – automobile ○ To one borrower○ Participations – residential real estate; member business; automobile

■ Lender originating

■ Geographic area• Deposits - term shares• Callable borrowings• Investments

○ Type – Treasuries; CDs; Mortgage-backed (MBS)○ Underlying collateral – mortgages

Even third-party providers and services offered should not escape review for concentrations.

Once concentration risk has been determined, it must be measured or quantified. The first step is to determine how much of our portfolio is dependent on this single concentration. How volatile is this concentration? In the current environment, mortgages and mortgage backed securities are viewed as extremely volatile due to the shaky real estate market. We may also consider placing more weight on any area that has historically demonstrated higher loss than other areas. Much of this information may be obtained through the internal information system. The value of this information is only as good as the detail and accuracy of that system. All of these factors merge to provide a risk rating system. Ideally, that system should be:• Objective;• Sensitive to change (borrow and loan

characteristics), and• Validated by independent review.

Ultimately, the success or failure of our program is determined by how well it is managed. The process of review for concentration risk is ongoing, requires far-reaching knowledge of all operations and the ability to look beneath the surface to determine areas that are less noticeable. Management must implement an effective program consisting of:• Comprehensive board policy that addresses

the issue of concentration risk; sets limits; demonstrates its cohesiveness with the strategic plan;

• Monitoring and due diligence, and• Testing to include scenario and sensitivity

analysis to determine the potential results of changing economic conditions on asset quality, earnings, and net worth.

For more details on concentration risks, please refer to NCUA Supervisory Letter 10-CU-03 and its attachment, at www.ncua.gov.

Regulatory&Compliance

DConcentration Risk

By Steve GibbsAssistant Vice President

Shared Compliance Resources

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ortgage Modification – an Advance Fee Fraud ofEpidemic Proportions

Given the state of the economic crisis and falling real estate prices, “mortgage modification” has become one of the most popular mortgage related scams. Such schemes entice desperate homeowners and can cost them not only thousands of dollars, but also the deed to their house in some instances.

While a few companies that offer such “mortgage modifications services” may be legitimate, the vast majority of these alleged “companies” are straight up scams. In fact, many are run by the same individuals that operated shady subprime mortgage companies during the real estate boom. So, yes, the same people that sold “toxic loans” are now “helping” fix the “defective” products they sold.

Homeowners may have seen flyers in the mail, ads on TV, Internet and newspapers promoting such services. These fraudsters utilize deceptive tactics to market their mortgage modification and home foreclosure relief services, often by giving the false impression they are affiliated with the federal government. They will often use misleading advertisements that contain potentially deceptive claims, touting “guaranteed results” and claiming false affiliation with homeowners’ lenders.

These mortgage modification scams are “advance fee” based frauds. To induce the victim, the fraudsters will falsely tell homeowners that they will renegotiate their mortgages, reduce monthly payments, and transfer any delinquent loan amounts to the renegotiated principle. The fraudster will then demand an up-front fee, ranging from $1,500 to $5,000, to participate in the loan-modification program.

The fraudsters may also instruct the victims to stop any mortgage payments or communications with their lender, claiming they would interfere with the “company’s efforts” to negotiate the loan modification.

These phony companies often never take any action on a homeowner’s behalf. It’s all about extracting as much money out of the victim as possible and hitting the road. If you Google “mortgage modification”

there are hundreds of these allegedly suspect websites with legitimate sounding names such as National Foreclosure Relief, Inc., Hope Now Modifications LLC, and Federal Loan Modification Law Center, all of which have been subject to Federal Trade Commission (FTC) enforcement actions. In some cases, these are not even bona fide corporate entities – they are nothing more than a website, email address and telephone number.

This fraud epidemic has grown rapidly in the past couple years. The FTC, U.S. Treasury Department, Department of Housing and Urban Development, along with many state Attorney Generals, have already filed lawsuits against dozens of these alleged companies and the individuals behind them. However, it’s a “whack-a-mole” kind of problem, so fraud awareness campaigns targeting homeowners are essential.

To avoid getting scammed, the best way for a homeowner to attempt to modify a mortgage loan is to contact the lender directly, or via the services of a qualified attorney, or a government/lender approved organization such as the Hope Now Alliance, at www.hopenow.com.

If your credit union members have become victims, they should notify the FTC, IC3-FBI, at www.ic3.gov, Texas Attorney General, at www.oag.state.tx.us, as well as file a SAR with FinCen, at www.fincen.gov.

Regulatory&Compliance

M

Regulatory Q&A ‘Pay us $1,000 and we’ll save your home!’

Monte Robison CFE, CUCE, BSACS

Compliance & Resource Specialist Texas Credit Union League

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mployers consider many factors in a hiring decision, including education, experience, aptitude, etc. But too often, employers neglect to consider whether or not the individual’s personality, for example, is a good match for the job.

Let’s face it; even the most seasoned HR professional can make a hiring mistake. That is where tools like employment assessments can help. Employment assessments provide employers with more in-depth information about prospective employees. This additional insight can greatly assist the HR professional in making smarter hiring and job fit decisions. Information obtained from assessments allows the organization to rely less on “gut feelings” and more on objective results.

Consider this…the Society of Human Resource Management (SHRM) reports that 53 percent of resumes have false information. It is not uncommon for job seekers to inflate past titles, job responsibilities, knowledge, even salaries.

Employment assessments can help solidify a candidate’s suitability for a particular position. There are many types of assessments managers can use including:• Knowledge and Skill Assessments. These assess

knowledge and skills of a candidate. Common examples of these include a test that assesses a persons knowledge of accounting guidelines, abilities to use specific software programs or the ability to solve math problems. These types of assessments will mimic things that people will actually perform in the job.

• Company or Cultural Fit assessments. These predict the retention and satisfaction that a candidate

will have on the job. These will look at the types of values and attitudes that a person has compared to those of the organization.

• Aptitude Test. These measure a candidate’s cognitive reasoning and problem solving abilities; and therefore, their potential to master the skill and knowledge required of the job.

• Personality Tests. Provides insight into a candidate’s attitude, experiences, interests, dependability, and other personality traits for a certain job.

• Integrity and Reliability. These are designed to measure activities such as dependability, theft, violence, and unsafe behavior.Many credit unions will focus on the skills and

knowledge when selecting candidates, but seldom seem to look at a candidate’s behavior traits. This is unfortunate as a candidate may possess the “hard skills” needed to perform well in a particular position; however, if they lack the proper personal style and behavior traits it could easily lead to job dissatisfaction.

Organizations should determine what type of test is best for each position. One size does not fit all in the case of assessments. Different jobs require different skills, behavior traits, etc., so design the tools to fit your specific needs.

Make sure that after you select the appropriate assessment tool that you learn how to use it correctly. Refrain from using the assessment as a “pass/fail,” and keep it mind that the assessment should not be used for more than 1/3 of the total hiring decision.

You also need to be careful when using assessments to ensure that they are not discriminatory. For example, make sure they measure things directly related to the performance of the job. In addition, they should measure only what they are supposed to measure, and should not have a disparate impact on certain groups of people. Utilize an assessment from a reputable company, and be sure and ask for validity and reliability studies to ensure that they have done their homework.

Valid assessments can uncover truthful information about the employee in a very cost-and time-effective manner. A combination of solid interviewing techniques, reliable assessments, and a thorough background check can help you avoid hiring mishaps.

HRCorner

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By Susan LooneyVice President of HR

Credit Union Employment Resources

Using Employment Assessmentsto Find the Right Employees

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ith the recent updates to federal laws surrounding discrimination, such as GINA, it’s very important for human resources professionals to remain knowledgeable and updated on EEO laws to ensure their credit union is in compliance. The most minor change could mean the difference between your credit union being in compliance with the law or possibly not.

Below are two common yet important questions regarding EEO laws that all credit unions should be aware of and their answers:

Q: What are the federal laws prohibiting job discrimination?

A: The federal laws prohibiting discrimination are:

• Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits employment discrimination based on race, color, religion, sex, or national origin;

• The Equal Pay Act of 1963 (EPA), which protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination;

• The Age Discrimination in Employment Act of 1967 (ADEA), which protects individuals who are 40 years of age or older;

• Title I and Title V of the Americans with Disabilities Act of 1990, as amended (ADA), which prohibit employment discrimination against qualified individuals with disabilities in the private sector, and in state and local governments;

• Sections 501 and 505 of the Rehabilitation Act of 1973, which prohibit discrimination against qualified individuals with disabilities who work in the federal government;

• Title II of the Genetic Information Nondiscrimination Act of 2008 (GINA), which prohibits employment discrimination based on genetic information about an applicant, employee, or former employee; and

• The Civil Rights Act of 1991, which, among other things, provides monetary damages in cases of intentional employment discrimination.

• Other federal laws, not enforced by the EEOC, also prohibit discrimination and reprisal against federal employees and applicants, such as the Civil Service Reform Act of 1978 (CSRA).

Q: What discriminatory practices are prohibited by these laws?

A: It is illegal to discriminate in any aspect of employment, including:• hiring and firing; • compensation, assignment, or classification of

employees; • transfer, promotion, layoff, or recall; • job advertisements; • recruitment; • testing; • use of company facilities; • training and apprenticeship programs; • fringe benefits; • pay, retirement plans, and disability leave, or • other terms and conditions of employment.

Discriminatory practices under these laws also include:• harassment on the basis of race, color, religion, sex,

national origin, disability, genetic information, or age;

• retaliation against an individual for filing a charge of discrimination, participating in an investigation, or opposing discriminatory practices;

• employment decisions based on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain sex, race, age, religion, or ethnic group, or individuals with disabilities, or based on myths or assumptions about an individual's genetic information, and

• denying employment opportunities to a person because of marriage to, or association with, an individual of a particular race, religion, national origin, or an individual with a disability. Title VII also prohibits discrimination because of participation in schools or places of worship associated with a particular racial, ethnic, or religious group.

If your credit union has a question or needs assistance with their HR needs, please contact Kim Jones or Susan Looney with Credit Union Employment Resources (CUER), at (800) 442-5762, extension 6432 or 6431. Also, visit us online at www.cuer.coop.

By Kim JonesHuman Resources Consultant

Credit Union Employment Resources

WHR Q&A

HRCorner

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