Energy was high this morning for the kick-off of the first ever Inclusiv and CUNA Community Credit Union joint conference in Phoenix, AZ. Todd Spiczenksi, CUNA's Chief Products & Services Officer, highlighted the wide diversity of credit unions attendees and warmed things up with a getting to know you exercise. Inclusiv CEO Cathie Mahon reminded us all of the importance of collaboration, not just among credit unions, but also with banks and community partners in order to be successful in serving the underserved. The big news of the morning was the announcement of Bank of America's commitment to invest $10 million in a new Inclusiv secondary capital product that will be deployed in CDCUs around the country. The audience heard from Dan Latendre, Bank of America's CDFI Managing Director, who received an impromptu standing ovation from the crowd. We also learned about the first 3 credit unions to receive the new secondary capital product investments: Freedom First FCU in Roanoke, VA; IH Mississippi Valley CU in Moline, IL; and Suncoast Credit Union in Tampa, FL. A busy start to the day!
Welcome & How Credit Unions Build Communities Energy was high this morning for the kick-off of the first ever Inclusiv and CUNA Community Credit Union joint conference in Phoenix, AZ. Todd Spiczenksi, CUNA's Chief Products & Services Officer, highlighted the wide diversity of credit unions attendees and warmed things up with a getting to know you exercise. Inclusiv CEO Cathie Mahon reminded us all of the importance of collaboration, not just among credit unions, but also with banks and community partners in order to be successful in serving the underserved. The big news of the morning was the announcement of Bank of America's commitment to invest $10 million in a new Inclusiv secondary capital product that will be deployed in CDCUs around the country. The audience heard from Dan Latendre, Bank of America's CDFI Managing Director, who received an impromptu standing ovation from the crowd. We also learned about the first 3 credit unions to receive the new secondary capital product investments: Freedom First FCU in Roanoke, VA; IH Mississippi Valley CU in Moline, IL; and Suncoast Credit Union in Tampa, FL. A busy start to the day!
Young Professionals: Making Real Impact in Credit Union Communities Youth engagement in the credit union industry lags behind other generations that have grown up along with the movement. To inject new blood into the movement, both CUNA and Inclusiv have worked to promote more youth engagement leading to the creation of a ‘GAC Crashers’ group, as well as the Cooperative Finance Leaders of America (CFLA) program organized by Inclusiv to give youth the necessary training and leadership skills to make a difference at their credit unions. The breakout session highlighted these efforts and showcases how youth engagement in an ageing movement have worked and can work at all credit unions. James Marshall, the leader of GAC Crashers (now known as the Cooperative Trust) from Filene Research Institute served as a moderator for the breakout session and provided a recap of the genesis of the Crashers movement. The Crashers group has grown over the years and has become a fixture in the credit union industry. Marshall also introduced some of the Crashers that he’s met through the years, including Danielle Buscher of West Community Credit Union, Christopher Curry of Hawaii First Federal Credit Union, and Rachel Barker, of Holy Rosary Federal Credit Union and a Inclusiv CFLA 2013 Fellow. The most common theme mentioned by all panelists is that the youth want to be part of a genuine movement that makes difference in peoples’ lives. The idealism of the panelist led them to join the credit union movement; that same idealism carries on to fulfill a need to make a difference within the credit union industry. It was also great to hear from many of the older generation of credit union leaders on hand for the session, who open minds and ears to listen to what the youth had to say. It will be important to sustain this dialogue between different generations of credit union leaders as the retiring generation passes the baton to the next generation of leaders.
Establishing and Executing a Credit Union Foundation Two models for credit union giving were discussed in this session. Doug Olson of Royal Credit Union, explained how he leverages the experience of the credit unions staff to operate a foundation focused on youth, education and the betterment of community. Doug described projects funded, the selection process, and funding models for his foundation, including two cents from each visa check card swipe. Alan Branson of Hope Credit Union spoke about the innovative Hope Enterprise Corporation loan fund, a 501(cd) CDFI which preceded the creation on the credit union. Alan explained how combining the structure of a loan fund and credit union ultimately allows the organization to deepen its impact, and attract various types of capital, such as debt and equity. This hybrid structures allows a rate of growth greater than what would be possible by the CU on its own. The 501(c)3 also includes Hope Policy Institute to analyze policy decisions and issues. Attendees came away with deeper insights on how affiliated organizations can help credit unions better serve their communities and increase impact.
Writing Loans for the Credit Challenged Translating mission to business plans and strategies can be a difficult bridge to gap. Cindy Williams and Randy Thompson led a practical session outlining why lending to credit challenged members is not a matter of “can” or “should”, but how to do it right. Cindy started the session by walking through the compliance challenges of lending to the credit challenged. Making a difference is not about making exceptions - you must have standardized procedures. Your intention and mission may be on point, but without standards and incorporation of policies, you can put your credit union at risk. Document your exceptions - including your denials. Compliance, lending, risk appetite and markets must be aligned. Randy wrapped up the session by focusing on strategies for lending to the credit challenged, providing both a clear mission and business case for doing so. Risk based pricing should not be viewed as a prohibitive practice. Randy underlined the basics of risk based lending and pricing, encouraging attendees to re-read NCUA's Guidance Letter 174 on Risk Based Lending and the debunked assumptions for not lending to credit challenged members. Bad loans by definition are either 1) charge-offs or 2) priced below cost. He then walked through how to account for the true cost of a loan (cost of funds, loan operations, collections, charge-offs). In the current rate environment, margins on A + paper are minimal. Based on his firm's analysis, margins and impact can be larger on those with lower credit grades. By using strategies such as transformational rates (rewarding members paying on time by lowering rates after demonstrated performance), credit unions can strengthen member relations and loyalty, and your impact. Further, Randy's firm also conducted credit migration studies, demonstrating effective risk based pricing to the credit challenged can build the credit union's bottom line as well as impact as this member segment is able to (re)build credit.
The Future of Community Credit Unions It would be impossible to encapsulate Martin Eakes opening plenary on Thursday morning, which ranged from a recap of Self Help's amazing story of growth, in-depth quantitative analysis of the challenges of small credit unions, and moving personal stories of Martin's experience growing up in an African American community in North Carolina. The audience literally both laughed and cried. Martin gave three practical recommendations to small credit unions to survive and thrive: grow your assets per member; increase your mortgage lending to moderate income, non-conforming homebuyers; and develop a mobile banking platform, an essential element of the future of financial services. But the more important message that Martin delivered this morning is that "it is our duty and our privilege to fight for freedom and economic justice." Martin and Self Help have certainly led by example. Everyone here in Phoenix will be taking these motivational words back to their credit unions to carry on that fight.
Business Lending Within your Community Attendees in this session learned why credit Unions are increasingly expanding into business lending. The rooms was filled with a mix of credit unions staff with existing business lending operations and credit unions exploring the business lending model for the first time. Tristram Coffin of Alternatives, explained their credit union’s holistic approach to both product and services for business owners – including tax preparation and business lending training courses for entrepreneurs offered by full-time staff at the credit union. They are considering expanding their services to include a bundled suite of businesses services from local business owners at the credit union, such as website design and legal support at below-market prices. Dale Frankhouse of Sun Federal Credit Union described how business lending is an extension of the credit union’s philosophy of serving members. Dale urged each credit union looking to expand into business lending to fully understand how the credit union will differentiate itself from local competitors and take the time to understand what local businesses need most. He described the underwriting process and the importance of meeting the business on site to see their day to day operation, and also outlined methods for community outreach, such as working with sponsor groups and marketing in local business journals. Dale also urged attendees to consider the CUNA Lending Council for educational and resources for business lending.
Utilizing Data Analytics to Grow Your Membership and Serve Your Community Big data--two words, but daunting connotations. During this interactive session, Jason walked the audience through the meaning of big data, why credit unions should care and how we can use data to better serve our communities. Big data is the digital footprint each of us leaves when using the web or interacting with smart devices. The amount of information we leave behind for each transaction is immense and can be used to analyze behavior and consumer preferences. When used well big data can transform businesses and shift industries (ie Amazon's disruptive role in the online retail industry). In order to successfully leverage data your plan must include four key components: strategy, analytical capability, culture and processes, and technology support. Why develop a data plan? Data plans can benefit your entire team and all aspects of your business strategy and help answer the questions: What are we doing? Are we doing it well? Are we making progress towards achieving our mission? For marketing purposes, big data can lead to precision marketing to consumers, by which credit unions can use to increase cross selling and margins. For credit risk/ management: accurate risk estimations which will lower costs and increase operational efficiencies. For strategy/ finance/ IT: refine strategy development and growth focus. Implement fact based strategies and identify new opportunities. For customer service: proactively tailor member experiences, build loyalty and retain and grow members. For new product development: rapid and informed innovation which will promote revenue growth. The opportunities to increase your impact and credit union's business efficiencies exist regardless of whether you have access to big data. Start with what you have- your core processor output, member call logs. Identify what you have, strengths and places where your credit union may require more information. Maximize your resources and impact on community services and member user experiences.
Immigrant Financial Inclusion How credit unions can help immigrants integrate into the American financial mainstream is a frequently-discussed topic at Inclusiv’s annual conferences. However, this year’s session took on a renewed energy and a sense of optimism despite delays to comprehensive immigration reform. Perhaps energized by Inclusiv’s national launch of the Juntos Avanzamos program, the session was packed with attendees to a standing room only. James Alba of Citi Community Development, a key Inclusiv partner in efforts to integrate immigrants, opened up the session and brought up a key statistic-- over their lifetimes, immigrants can expect to pay about $250K in interest and other penalties while interacting with the US financial system. It is clear that a systematic approach to shepherding immigrants toward a better, fairer economic pathway is needed to combat scams and other ways of taking advantage of immigrants.
While many financial institutions continue to shy away from serving immigrants, the example of how Winona Nava at Guadalupe Federal Credit Union worked with the local Hispanic population to grow the credit union provided an eye-opening moment for many attendees new to Inclusiv. Guadalupe’s experience showed that their membership has increased and become younger as a result of their immigrant outreach efforts. Guadalupe’s overall assets have increased almost twofold to $139M since a branch in a predominantly Hispanic neighborhood has opened. Winona’s presentation made clear that when done the right way, outreach and working with immigrants can pay off handsomely in both financial and social terms.
Similarly, Miriam De Dios of Coopera Consulting demonstrated some of the key steps for credit unions to follow when assessing their capacity to serve immigrants, starting with access and product development. Through a pragmatic step-by-step framework, De Dios showed the types of IDs credit unions can accept from their members, including foreign-issued IDs that have photos on them. She further helped to de-mystify some of the past conventions when working with immigrants and made clear that immigrants, like all other members, can have interest-bearing accounts. In addition, she provided guidelines on how repackaging existing loan products to adapt to the immigration population can provide crucial next steps for both credit unions new and old to this arena. Immigration has been a focus for Inclusiv for the last few years, and it was great to see so many willing hearts and minds at the session. We hope the presentations gave credit unions new to immigration a framework to work with, and that our speakers rejuvenated credit unions that already work with immigrants on a daily basis.