ESSENTIALS IS NOW AVAILABLE ON-LINE!

If you are reading a paper copy of this newsletter, we would like to let you know that this publication is now available on our web page at www.dcul.org.  Just click on “Small Credit Unions” and you can read the ESSENTIALS anytime you’d like to.  You may also print it and distribute it to anyone you think may benefit from reading it.  Each quarter when the ESSENTIALS is produced, we will send you an e-mail to let you know that a new edition has been posted.  The message will also contain a link to take you directly to the on-line version.  All you have to do is provide us with your e-mail address.  Send it to me, Jane Bailey, at jane@dcul.org.  Indicate that you would like to read the ESSENTIALS on-line.  We will not use, sell or publish your address for any other reason without your permission.    Providing resources to you via the Internet is a strategic goal of the Delaware League.  Your support and assistance in this endeavor is greatly appreciated.

Directors’ Digest:
“Other Board Responsibilities”

Depository – The board designates a depository where the liquid assets (e.g., cash and securities) of the credit union are deposited.
Loans to Officials – The board of a federal credit union must approve all loans to directors, exceeding a combination of $10,000 plus pledged shares.
Bylaws and Charter – The board can amend the bylaws and charter of a federal credit union by a two-thirds vote. But such amendments become effective only after approval by the National Credit Union Administration.
Security – The board is responsible for the overall security of the credit union, and to this end directors should appoint a security officer. Credit union security encompasses equipment such as alarm systems, locks, and night lights. It also covers procedures for routine activities such as the handling and transportation of cash, and for unusual events such as robbery or theft.
Records – The board of a federally insured credit union must maintain duplicate records of vital documents at a site separate from the day-to-day operations of the credit union. The purpose is to minimize the loss and confusion that might result from fire or other catastrophe.
Compensation – The board authorizes a salary program that should be fair and competitive. The Board of Directors hires and terminates the president/manager. Specific terms of employment should be described in your credit union’s policy manual. The board authorizes the payment of a credit union audit conducted by an outside firm at the Supervisory Committee’s request. 

Introducing…
Marketing Planning Services from Delaware League Services

Start the New Year off with a new marketing program with help from the League.  We can help you formulate a marketing program specifically to fit the business needs of your credit union.  With the help of our consultant, Valerie Hughley, we can offer the following planning services to get your credit union on the marketing path. 

Marketing planning session – we will help your management and staff identify your marketing capabilities, assess your marketing strengths and weaknesses and zero in on the best “marketing hits” for your credit union. 

Marketing strategic plan – once we have identified the best course of action for your credit union, we will put together a plan to help you achieve your business goals within your budget.  Our goal is to maximize your budget with the best and most efficient marketing plan available.

Calendar – this will be a month-by-month action plan of marketing steps your credit union will take to work the strategic plan.

The cost of these planning services is only $500* for a credit union of $10M in assets or smaller. Take advantage of these low costs and get marketing expertise delivered to your front door.  We are excited to offer these services to you to help your credit union thrive in this highly competitive financial services environment.   

* Cost includes planning services only; plan implementation costs are not included. 

Call Jane Bailey or Valerie Hughley at the League office at (302) 322-9341 to schedule your marketing planning session as soon as possible.

Supervisory Specifics
Annual Audit Work Program-part 2

The Supervisory Committee’s Report

          The report should summarize the financial condition of the credit union and present the committee’s recommendations for improving operations and services. Notes kept by committee members are the basis for this report.
             Generally, committee members submit their report to the board of directors and present a summary to the members at the annual meeting. The committee must also follow up on its report to see that any exceptions that existed during the audit have been corrected. If the legal violations are not appropriately addressed by the board and management, they must be reported to the regulatory agent by the committee.
             The treasurer or manager should correct any discrepancies identified by the report. Records should be maintained of the follow up assignments and their results. Copies of the reports should be kept in a credit union file for review by federal examiners.

This article is from the Supervisory Committee:  Duties and Responsibilities module of the Volunteer Achievement Program. 

 YOUR MOST VALUABLE ASSET –
THE BOARD OF DIRECTORS
Reprinted with permission from the Credit Union Affiliates of New Jersey

Small credit unions have Board of Directors that may have only one employee and in some cases, no employee.  It is therefore critical that the Board of Directors of small credit unions become aware of the following areas that must be addressed on an on-going basis:

Continuing Education – The Board of Directors must make it a priority to attend high quality educational sessions.  Changes in running and managing a financial institution have become the norm.  There are compliance regulations that directly affect the credit union such as REG-FLEX, OFAC, PCA, etc.  Many sources of education are available through Webcasts and Webinars that are very cost-effective for the boards of small credit unions.  Also, registration and tuition assistance is available for small credit unions for training sessions and schools through scholarships from your League.

Responsibility – Board of Directors have a fiduciary responsibility to conduct business in compliance with sound business decisions along with a host of state and federal laws and regulations.  Privacy, for example, is an issue that must be addressed.  Courts will not take into consideration the “we didn’t know” defense. 

Crisis Management/Disaster Planning - Boards must take into consideration the dangers of doing business in these uncertain times.  The board needs to ensure that a disaster recovery program is developed and “tested” each year.  This is especially critical when you think that often it is a PC at a small credit union that contains the information necessary to conduct business.  Without that PC, an effective disaster recovery plan could mean the difference of staying in business or not.  Your members rely upon the board to make sure that, in the event of a disaster, their needs continue to be met.

Succession Planning – In addition to having an established plan for succession of the CEO/Manager, the board must have a plan in place for board succession.  One approach is to use associate board members as a training ground for the time when they actually join the board with voting rights.  It is becoming increasingly difficult to attract and retain qualified board members.  It is equally difficult to ignore the possibility that some day your dedicated board may not be willing or able to serve.  A disruption in leadership at the board level can be devastating to a small credit union.

TO MERGE OR NOT TO MERGE

                For small credit unions the idea of merging with another credit union always seems to be looming in the background.  There are several reasons for this.  Often when a long-term manager retires or leaves the credit union for some reason, there is no succession plan for a replacement.  Small credit unions have a limited volunteer pool from which to draw when board members retire from the board.  Also, with competition among credit unions increasing, the struggle to provide more services for  members becomes an issue.

To some, the word “merger” is a taboo topic.  It is often seen as being gobbled up by a large, ambitious credit union.  But, large credit unions should not necessarily be viewed as the enemy.  For this reason, it is important that small credit unions understand the myths and facts about merging. 

MYTH:   Every time a large credit union offers to help a small credit union, they really want to merge.
FACT:    Although this may be true in some cases, it is not always the case. Large credit unions often help small credit unions because they truly believe in the “people helping people” philosophy.   We have seen this over and over among our own Delaware credit unions.

MYTH:   The NCUA would rather see small credit unions merge out of existence.
FACT:    NCUA has dedicated staff to specialize in preserving the small credit unions.  They continuously run seminars around the territory especially designed to help small credit unions.  (One was held here at the League this month.)   They work together with leagues to support and strengthen small credit unions.

MYTH:   The League and CUNA are really only representing the interests of the larger credit unions.
FACT:    Your League and CUNA work diligently to provide resources, scholarship funds, education and other assistance for the small credit unions.

MYTH:   Small credit unions provide better member service.
FACT:    Mergers serve a useful purpose in the credit union industry.  A large credit union may be better suited to serve the particular needs of members. 

If you are considering a merger or if another credit union has approached you about merging, what should you do?  Here is some direction.

      o Don’t automatically reject any offer.  It will cost you nothing to listen to the proposal.
o Find out if there is true value in the merger for BOTH PARTIES.
o Seek input from your board, NCUA, the League, and legal counsel.
o Do not merge with the first merger partner to come knocking on your door.  Have a Request for Proposal process distributed to other credit unions, (the League can help you), to insure that you are getting the best deal for your members.
o Perform an extensive due diligence on your potential merger partner.  Scrutinize products, services, fees and financial stability.

Remember, not all mergers are necessary.  However, to achieve the goals of the acquired credit union, it may be a good solution.  The League and NCUA are more than willing to assist you to understand your options.

Credit Committee Conversation 

Eligibility For Credit Union Loans- part 2

              Special Cases – Loan applications submitted by credit union directors, committee persons, and staff must be reviewed by the appropriate credit union authority. Federal and state regulations, along with credit union bylaws, should be consulted to assure proper review of loan applications completed by credit union officials. In many cases, officials of the credit union are not allowed to co-sign a loan made by another credit union member. Strict federal laws prohibit business loans to officials. The increased concern about insider dealings and losses due to officials’ loans has resulted in the prohibitions.
           Minors – Members under eighteen years of age are minors. Minors are unable to enter into a legally binding contract. Loans for necessities, as the term is defined by local law, may be contractually binding, whereas loans for other items may not. For this reason, give applications from minors careful consideration, and perhaps require tangible security or co-signers as protection against loss. Properly made loans can help minors develop a responsible attitude toward credit.
            In the next issue we will look at “loans to organizations” and “special risks.”

For more information, see the Credit Committee:  Duties and Responsibilities module of the Volunteer Achievement Program.

                        August 2002 New Releases

V415 Asset-Liability Management for Directors
This course provides an overview of credit union asset-liability management for directors. This course is also useful to management staff or volunteers who serve on an asset-liability management committee, or on supervisory and audit committees. Chapters cover:
·         the basics of asset-liability management and financial analysis;
·         gap analysis;
·         net income simulation;
·         credit union capital requirements;
·         the CAMEL system;
·         the impact of changing interest rates on capital;
·         net economic value;
·         liquidity risk.
Appendices include a policy checklist, key definitions, resources on the topic of ALM.

V416 Understanding Regulations
This course provides a broad overview of the regulations that affect your credit union’s daily operations.  Specific topics include:
·         an overview of credit union laws and regulations;
·         definitions of the roles of the board, other volunteers, management, staff, and regulators;
·         general operating regulations;
·         lending regulations;
·         miscellaneous regulations (regulations that affect only some credit unions);
·         credit union compliance programs.
Appendices include a sample compliance program, a compliance self-assessment guide, and a volunteer checklist.

The cost for each module, which includes one book and one test, is $35 plus $7.50 shipping and handling
To order call Bernadette Hines at (302) 322-9341 or (800) 292-7875 or E-mail: bernadette@dcul.org

Remember, scholarship funds are available for small credit unions to use to purchase modules.  Contact the education department at the League to see if your credit union qualifies.