An E-publication from the Delaware League Services
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An E-publication from the Delaware League Services |
Third Quarter 2008
Green is More than the Color of Money
By Denny Kanuck, VP Marketing
Overton & Associates LLC
Going green can be as good for your bottom line as it is for the environment--and this isn’t just hype. When a credit union leads in the stewardship of the environment, it also adds value to its brand. Savvy consumers are increasingly aware of environmental issues as seen in the demand for eco-friendly products and food. A green building can put your credit union ahead of the competition. As rivalry for wallet share increases, an organization that is more environmentally responsible will usually be selected over one that is less responsible, when both are otherwise equal.
Green design or sustainable design is the art of designing physical objects and the built environment to comply with the principles of economic, social and ecological sustainability. Green buildings are intended to be environmentally responsible, economical to operate and healthy places to work. Sustainable design also offers benefits beyond savings in operating costs. It improves occupants’ health, comfort and productivity. And all of these add up to increasing the bottom line.
The need for green design is becoming more urgent for all of us. In the United States alone, buildings account for:
• 65% of electricity consumption,
• 36% of energy use,
• 39% of greenhouse gas emissions,
• 30% of raw materials use,
• 30% of waste output (136 million tons annually), and
• 12% of potable water consumption. 1
These statistics are hard to ignore. What steps can your credit union take on the path of green design? The U.S. Green Building Council (www.usbgc.org) has established guidelines and criteria known as LEED—Leadership in Energy and Environmental Design to assist organizations in their pursuit of green buildings. It has established a rating system for certifying facilities on a variety of levels. PNC Bank now has more LEED certified buildings than any other organization in the world. The bank has benchmarked its green branches against traditional branch offices and is seeing 25- 35% in energy savings. 2
The LEED certification process is lengthy and a building can be green without being LEED certified. Other programs have also been developed to support environmental and energy initiatives. Energy Star® (www.energystar.gov), established by the Environmental Protection Agency, focuses on lowering energy consumption through a variety of products, appliances, heating and cooling systems and lighting. Energy Star® also offers a rating system to evaluate energy consumption in your existing buildings. This customized energy analysis is meant to assist organizations in making the right investments in its existing facilities.
The process of going green is an evolution, not a revolution. Even small steps over time can produce a positive impact on our environment. Your credit union can start down the green path by incorporating some of the following suggestions:
Going green is not a trend or a just a future promise. Green is here to stay. A proactive approach in developing green facilities can bring rewards to your credit union’s members, staff, community and your ROA.
Editor’s Note: Overton & Associates is a design/build firm that specializes in designing facilities that will meet your credit union’s growing needs. For more information, go to www.overtondesignbuild.com.
CUNA Mutual Expands Distribution of Its 401(K) Retirement Program
Nationally Recognized Program Will Help CUs Grow and Better Serve SEGs, Small Businesses
MADISON, Wis. – CUNA Mutual Group is expanding its nationally recognized and top-ranked 401(k) retirement program beyond credit unions to include select employee groups, business members and other local businesses.
The expansion will enable credit unions with a business services strategy to grow and enjoy the other benefits of entering the institutional retirement plan market, said CUNA Mutual President & CEO Jeff Post.
“This is much more than just offering a new product. It’s about helping credit unions develop a new business model that can provide them with sustainable growth in income and membership for many years,” Post said. “This is part of CUNA Mutual’s ‘Win/Win’ strategy and one more way we can demonstrate our commitment and innovation to the credit union marketplace,” he said.
Many credit unions are excellent at helping individual members prepare for retirement on a retail product basis through CDs, mutual funds and annuities, and it’s a natural progression for them to also help members with their "institutional" retirement plans at work, said Kevin Thompson, CUNA Mutual vice president of asset accumulation products.
The expanded 401(k) sales program is already in place at more than 60 credit unions nationwide and is targeted for credit unions that already have a financial advisor serving members’ retirement and investment needs. “More than 97 percent of all 401(k) plans in the industry are sold through an advisor or broker, which is why it makes sense to build resources and a distribution channel based on an advisory model,” Thompson said.
Thompson said offering a 401(k) program as part of a business services strategy can help credit unions:
Since 1996, CUNA Mutual has been a top-ranked provider of retirement plans by organizations such as 401kExchange and the Boston Research Group. CUNA Mutual currently has 60 percent of the 401(k) marketplace in credit unions, representing approximately 4,500 plans and 125,000 plan participants.
CUNA Mutual is using its experience as a successful provider of top-ranked retirement plans to teach credit unions how to be successful in this business. “We’ve built an experienced wholesaling team to help financial advisors sell plans through strategic marketing programs, training, sales support and face-to-face client meetings,” Thompson said.
To help kick off its expanded 401(k) program, CUNA Mutual hosted approximately 60 financial advisors June 2-4, at its Retirement Plan Services Symposium in Boston.
As an additional sign of commitment to this product, Thompson said CUNA Mutual is seeking to acquire businesses in the 401(k) provider space and has hired an investment banker to find such opportunities.
CUNA Mutual Group is a leading provider of financial services to cooperatives, credit unions, their members and valued customers worldwide. With more than 70 years of market commitment, CUNA Mutual’s vision is unwavering: to be a trusted business partner who delivers service excellence and customer-focused, best-in-class products and market-driven innovation. More information on the company is available on the company’s Web site at www.cunamutual.com.
A More Thorough, Responsive Claims Program Emerges
from CUNA Mutual’s Transformation
CUNA Mutual Group’s extensive review of its claims handling process is one piece of an overall three-year transformation focused on improving the delivery of claim services. The company’s goal is to improve customer service, increase payment accuracy, and enhance claim processes to improve efficiency.
Shortly after joining the company in 2005, Sr. Vice President of Claims Larry Holweger oversaw a review of the company’s closed claim files. CUNA Mutual also sought customer feedback through its Voice of the Customer program and other channels.
The overall results were positive, but Holweger saw a clear need for more active investigation of claims, especially in the credit disability and credit union bond arenas.
“We’re investigating claims more thoroughly than in the past, so we get the information we need to pay claims faster. We pay what we owe—no more, no less,” Holweger says. “Paying only for covered losses contains costs for all of our customers and improves credit unions’ loss histories, leading to lower premiums.”
Overall claims payments increase, while length of disability payments decreases
CUNA Mutual’s goal in transforming its claim operation wasn’t to pay less in overall claims—that often has less to do with internal processes than it does with external factors, such as natural disasters or crime trends. In fact, the company paid $1.78 billion in total benefits to policyholders in 2007, an increase of 8.1 percent over 2006 and 16 percent over 2005.
Credit disability claim results in 2007 reflect the company’s more active claim-management approach, Holweger says. CUNA Mutual paid virtually the same percentage of credit disability claims reported in 2007 (91.2 percent) as its average over the last seven years (91.35 percent). However, the average duration of a disability claim was 7.49 months, compared with the seven-year average of 8.08 months.
Credit disability claims had been handled mostly via mail prior to transformation, Holweger notes. Claims specialists make more phone calls now, establishing a channel of communication with customers and medical providers.
“Instead of sending forms out to be completed and waiting for a response, we’re typically making phone calls on claims where we don’t have all the necessary information, so we can get it directly from the member and process it more quickly,” Holweger says. “At the same time, we’re managing the expectations of the member.”
CUNA Mutual increased credit insurance revenues almost $2 million from 2005 through 2007, while credit insurance claim payments decreased almost $30 million.
The company’s commercial insurance claims payments also dropped from $199 million in 2006 to $183 million in 2007, mainly because plastic card losses fell by $25 million.
Part of larger Customer Operations transformation
Claims processing is no longer run by separate product areas; it is part of Customer Operations, the area of the company primarily responsible for providing services to credit unions and members.
The claims transformation was part of Customer Operations three-year transformation.
Quick resolution of claims was a key customer concern addressed in this effort, Holweger says. For a company that, on an average day, pays claims totaling $1.2 million to credit unions and employees and $1.8 million to members, upgrading the claims service standard was critical, he adds.
Even more critical is not to stop with the progress achieved so far, says Holweger: “The Voice of the Customer program will become an even bigger driver, and we continue to get feedback through our field employees. We’re on a path of continuous improvement.”
Mobile Banking
A recent study by Callahan & Associates reveals that those 39 and younger are approximately 20% more likely than those in their 40s and nearly twice as likely as those 50 or over to use their mobile phones for Internet use. Mobile banking, we would conclude, is the future of banking.
FIS Mobile Banking allows members to perform transactions whenever and from wherever they choose and doesn't require extended hours or additional employees. You increase member access to your financial institution, increasing your market share and loyalty.
When you partner with FIS, you will also receive marketing support—including product launch marketing materials, Webinars and newsletters—training support and customer service support.
Click here to learn more about the benefits and features of FIS Mobile Banking.
FIS Commercial Card:
Gain Control over Your Expenses
The key to the success of FIS’ Commercial Card program is its flexibility. This program allows business members of all sizes to be competitive and offers each the kind of choices that meet their needs. The business card, corporate card, purchasing card and fleet card all contain optional features that can be combined into a single Commercial Card program.
Your members can make choices in the following areas:
• billing, selecting their desired frequency and their statement delivery format
• their account type, deciding whether their purchasing and payment processes should be organized individually or centrally, or even choosing the option of setting up diversion or ghost accounts
• payment options, electing to make payments at your institution, though a lockbox or via ACH
• reporting, indicating the degree of detail, types of reports available and delivery method and frequency
• authorization, opting for comprehensive authorization controls on a company, division/department or cardholder level
Because your members can choose options in these areas, they retain better management of their costs. You maintain the competitive edge by offering a program that is completely customizable.
For more information on the FIS Commercial card, contact your FIS representative or Jane Bailey at the League, (302) 322-9341, jane@dcul.org.
Sluggish Lending, High Liquidity and Low Investment Rates…
Is this your Life?
Bruce A. Six, Senior Vice President, Asset & Liability Management
Mid-Atlantic Corporate Federal Credit Union
Uncle Sam was nice enough to give us some money back in an effort to help spur spending by consumers, and invigorate the economy. At the individual level this is a good thing, and from the government's perspective, it represents a direct stimulus initiative with the potential for a more immediate shot in the economic arm. But for credit unions that are already flush with liquidity and struggling to make loans, the extra money flowing into member accounts could become a drag on earnings for years to come if strategic decisions are not made now.
When making strategic decisions, credit union managers need to consider a number of factors:
Until the stock market turns around, members will continue to direct their investment dollars to the credit union. Managers can expect this trend to continue until the quarterly IRA and 401k statements stop showing negative returns. The credit union may not be paying “high” rates, but at least the entire amount of money the member deposited is still there at the end of the month. The “stimulus” money is being delivered to members the same way their 2007 tax returns were delivered. This is a departure from the prior stimulus payments which were always mailed to taxpayers. It also means credit unions are seeing a mini tax return season in May and June. At the same time this is occurring, the Federal Reserve is signaling that at least for now, interest rates will not be going down any further.
Credit union managers need to view this as an opportunity to lower dividend expense and restructure the term liabilities. Lowering the regular share rate is never popular, so consider taking this opportunity to lower the rate with minimal member reaction. Managers can soften the message by offering comparatively high, longer term (three through five year) certificate of deposit (CD) rates. Steepening the CD curve will attract member deposits into longer fixed CD’s, which will prove to be cheap liabilities when rates begin to rise.
If loan demand is flat or declining, be cautious with the urge to lower rates to spur loan demand. The numbers can vary widely depending on the loan product. But for most intermediate term loans like autos, a 25 basis point rate decrease requires a greater than 30% in loan volume to replace the lower cash flows from the new loans. Further, since most loans credit unions offer are fixed rate, lowering the loan rates to aggressive levels will constrain the credit union's earning ability in the future when rates increase. This doesn’t mean loans are bad in this environment, but we need to insure we are covering our cost now and in the future when making loan pricing decisions.
Investments represent the quickest means to adjusting the balance sheet when deposits are flowing in, but loans are not flowing out. The temptation to “reach” for yield by purchasing longer maturity investments can be hard to resist. Consider purchasing floating rate investments or amortizing mortgage backed securities as a way to earn a respectable yield with some protection against a rising interest rate environment. (One note of caution – mortgage backed securities are marketed on average life, and that means only half the principal will be paid back by that average life date, if the models are correct. The rest of the principal will come back to the credit union over the remaining term to maturity.) If your credit union can afford to stay short with investment maturities, this could be a good time to build a one to two year investment ladder.
The ultimate solution for credit union managers to maximize the performance of their balance sheet is to utilize their Asset and Liability models to determine “what if” strategies. These “what if” models should be done over a range of interest scenarios to quantify the interest rate risk and rewards of any ideas management has on the table.
In the end, it’s always important to remember that the credit union needs to remain competitive for the members both today and in the future. Care needs to be taken to navigate today’s choppy seas to insure smooth sailing in the future.
For more information on asset and liability services available through Mid-Atlantic Corporate, please contact your Corporate Account Manager.
If You Do Vehicle Loans for
Members in PA,
Please Read This.
The Pennsylvania Electronic Lien Titling Law, which goes into effect July 10, 2008, mandates that any lender wishing to become a lien holder on a vehicle financed for a PA resident must be an ELT (Electronic Lien and Title) participant as Pennsylvania will no longer issue paper titles to lien holders.
As a result of this mandate, the Pennsylvania Credit Union Association (PCUA) has entered into an agreement with an ELT provider, FDI, to offer an ELT program to their PA credit unions. Because of their volume of credit unions/members, PCUA was able to get discounted pricing from FDI for this service.
The Delaware League has negotiated with PCUA to allow our Delaware credit unions that do vehicle loans in Pennsylvania to participate in their program at the same discounted rate. In our program, there are no monthly minimums. If you do not file any PA liens during the month, you pay nothing. The Delaware League will provide training for those credit unions signing onto this program.
Remember: If your credit union does vehicle loans for PA members, you must file those liens electronically after July 10, 2008.
To date, 15 of our Delaware credit unions have inquired about the program and six have already submitted agreements and scheduled training.
Here are some questions we have received so far regarding the program:
If you wish more information on the ELT program, contact Jane Bailey at 800-292-7875 or jane@dcul.org.
Thank you for reading Service Issues!
Jane Bailey, Editor
Delaware Credit Union League
www.jane@dcul.org
1 U.S. Green Building Council
2 ABA Journal, August 2007