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The Single Must-have Attribute of a Successful Team

Posted by Scott Butterfield on January 8, 2018 at 3:40 PM Comments comments (1)

Sometimes it feels odd to contemplate the lack of trust that exists in the credit union space. Pre-hire criminal background checks, credit checks, references, and the required insurance bonding – one might assume anyone who could pass these “trust” tests would naturally add to an abundance of trust. But there are different dimensions of trustworthiness. The bottom line: “your trustworthiness is your commitment to fulfill another’s trust in you.”

Leaders, do you trust your team?

Not sure if lack of trust is a problem for your team? Honestly ask yourself how well your team, individually or collectively, follows through on commitments. Generally, does your team come through on time as planned? Or do your initiatives frequently come in late or somehow lacking? When members of a team consistently fail to deliver on their commitments, they undermine trust at the team level, and if it’s the senior management, at the institutional level. If left to fester over time, the credit union’s culture becomes sluggish, slow to act, lacks confidence, and becomes very inefficient, with low morale.

Leaders, does your team trust you?

If you are the leader of your team, I believe the success of your career is determined by how much your team trusts you. The attribute of trust is what makes leaders great. It’s the ability to rally a team in good times and bad. It’s that thing that motivates people to work harder and stretch for more. Here are a few examples of mistrust to consider:

Leaders who don’t walk the talk. They are good talkers, but they fail to deliver on promises. Whether it’s on the next promotion or it’s the commitment to resources for the department. Leaders lose trust when they don’t do what they say.

Team members don’t trust their leader’s temperament. Leaders who consistently send mixed messages or display a wide range of moods lose trust fast. Nothing says, “I don’t want to be bothered” more than a slammed office door first thing in the morning!

Trust is lost when you don’t have your team’s back. Success comes from having the right people on our team, taking the right risks. We are in the risk business. Teams that lack a trustworthy leader will be slow to take certain risks or to stretch themselves if they think they’ll be tossed under the proverbial bus if something goes sideways.

Trustworthiness enhances cooperation and results

Dysfunctional cultures are absent trust. As outlined in the national bestseller, “The Five Dysfunctions of a Team,” the absence of trust is the number-one dysfunction (a fear of being vulnerable prevents the building of trust) and it is built upon four other dysfunctions: Fear of Conflict (the desire to preserve artificial harmony stifles the occurrence of productive ideological conflict); a Lack of Commitment (the lack of clarity or buy-in prevents team members from making decisions they will stick to); Avoidance of Accountability (the need to avoid interpersonal discomfort prevents team members from holding one another accountable); and Inattention to Results (the pursuit of individual goals and personal status erodes the focus on the collective success.

Why it matters

If you believe that your team has a trust issue, deal with it now before it destroys your culture or your charter. It’s a bold statement, but I mean it. I know of credit unions that have merged as a result of a poor culture of trust that held the credit union back and prevented it from making desperately needed changes. These credit unions missed key moments, and their ships sailed.

Trust doesn’t survive without accountability. If you’re a member of a dysfunctional team that lacks trust, start by holding yourself accountable for each of the commitments you make, and holding your teammates accountable for their commitments.

If you’re a team leader, you must follow through on your commitments. Your team must trust your temperament and direction. Finally, you must hold your people accountable. If you fail to do this, it’s a downhill spiral that will cost your team time, money, success, and fulfillment. Remember, good people don’t usually leave because of pay – they leave because of poor leadership.

The Top 3 Direct Loan Growth Strategies for 2018

Posted by Scott Butterfield on December 7, 2017 at 1:45 PM Comments comments (0)

The 2017 strategic planning season is ending. During the year, we facilitated dozens of strategic-planning sessions with credit unions of all shapes and sizes: small and large, rural and urban, community and single-sponsor charters. We were exposed to a wide range of unique credit union opportunities and challenges. We also took note of several reoccurring themes. The most common? Credit union desire to focus LESS on indirect member and loan growth and MORE on direct member and loan growth strategies.

The reason for less indirect, more direct

We heard many leaders of large credit unions say they intend to pull back (but not stop) indirect lending during the coming year. Common reasons for the shift in strategy include:

  • Seeing lower indirect portfolio profitability
  • Reducing indirect loan concentration risk
  • Avoiding high and increasing indirect loan-to-collateral values
  • Challenges of cross-selling other products and services to indirect members
  • Stiff competition for indirect loan purchases, including a growing number of out-of-market paper buyers

It makes sense that these credit union leaders want to attract new members and borrowers who are more likely to use additional products and services. They want to build meaningful relationships and they want to earn higher interest yields from other types of loans.

Given the chance, most credit union leaders would increase their pursuit of direct member and borrower growth if they believed they could be consistently successful. So what are the keys to success?

Three tools for your direct growth play

Besides facilitation, our clients ask us to come prepared with ideas on how they might better achieve their strategic goals.

The following are three specific strategies we shared during the year specifically focused on member and borrower growth.

It starts with the right prescreen approach. Leverage prescreen tools to qualify and segment your potential member/borrower list according to your own unique criteria, zeroing in on those individuals most likely to respond to your offers. First, gather the internal intel you need based on your most profitable members/borrowers. Once you have a good understanding of the characteristics that make up your most profitable members, work with your credit provider to leverage that intel to identify new potential members/borrowers located within your field of membership. This isn’t a one-and-done strategy. Credit unions that are consistently successful will tell you that success comes from adjusting, testing, and monitoring criteria to find the best approach. For those of you concerned with the cost associated with regular prescreen marketing activities, consider the high dealer reserve cost associated with indirect loan purchases. Once perfected, the cost per new member could actually be a lot less than indirect. Another word on prescreening: if you’ve tried before and been less than successful, don’t give up! Work with your data provider to dig deeper, and consider the hundreds (thousands) of potential criteria that might lead to success. Ask your data provider to give you specific credit union best practices to consider. DON’T, just buy a standard prescreen. My experience is that they rarely generate the response you’re looking for.

Anticipate who is “In the Market.” Utilize “In the Market” models to identify members/borrowers who will be in the market for a specific type of product in the next one to four months. Add an extra layer of data analytics to focus your time and money on consumers who need a financial product now, or in the near future. Propensity models and estimated interest rates are great tools for identifying consumers most likely to respond. Who doesn’t want a lower interest rate, or to be delivered the right credit offer when shopping for an auto, personal, or home loan?

Determine which individuals are open to a deeper relationship with a credit union. Focus your marketing efforts on consumers most likely to open a credit union account versus a bank account. Experian has recently developed “Relationship Clusters” that assist credit unions in filtering potential members/borrowers who have a greater propensity to select a credit union over a bank. The cluster filter can be applied over most credit union products, and it increases the likelihood of targeting consumers open to credit unions product offerings. Initial results are remarkable, with triple-digit increases in consumer response rates based on these clusters.

“By listening to our clients, we’ve researched and proven a way for credit unions to layer a variable into these efforts of helping them identify who is most likely to do business with a credit union,” said Marshall Abercrombie, Experian strategic account executive. “This type of tool is often referred to as a net-down tool where credit unions can drill down on a list of names that pass their criteria when making decisions before they advertise. Ultimately, this tool impacts the overall campaign performance by improving response rates while reducing unnecessary marketing spend.”

Why it matters

I’m not opposed to successful indirect auto-loan programs. I believe they are an important part of our growth and service strategies. I have managed several successful portfolios myself. However, indirect lending does come with the challenges that have been expressed in this article. There are many credit unions that simply could not grow members or loans without their indirect channel. I always ask credit union leaders in this situation for their plan B. How will they survive if they are no longer able to compete in the indirect market? All credit unions need to have the ability to directly attract new members and borrowers to achieve long-term relevance and sustainability. The good news is there are a lot of credit unions that excel at direct-channel growth, and we can all learn from them.

We operate in an intensely competitive world. To consistently win, we must find the right members, with the right product, at the right price, with the right delivery channel – before anyone else does. Leverage quality data and intel to help you find the right members and ensure your place in the market.

Is Your Brand a Line in the Sand?

Posted by Scott Butterfield on December 7, 2017 at 1:45 PM Comments comments (0)

Your brand consists of the perceptions and images that represent your credit union. Many credit union leaders think of their brand only as a logo or tagline, but a meaningful brand is so much more. Your brand is the promise of what you’ll deliver, your members’ experience, and most importantly, what your organization stands for.

Where do you draw the line?

The line in the sand metaphor denotes a point (physical, decisional, etc.) beyond which one will proceed no further. Its origin is commonly accepted as a reference to the action of William B. Travis, who, in 1836, while commanding the defenders of the Alamo and contemplating a demand for surrender, drew a line in the sand and asked those willing to remain and defend the Alamo to their deaths to step across.

Operating in a hyper-competitive financial services market is extremely challenging, and not for the faint of heart. Whether you like it or not, you have a credit union brand, and it exists somewhere along a continuum of “different shades of the same boring thing” to a very bold brand committed to something that forces your organization to take a stand, i.e. financial inclusion or social justice. The more your brand image blends in with the tens of thousands of financial competitors, the less you’ll stand out. But, if your organization can rally around a theme, cause or belief that is meaningful and bold, you’ll stand out and attract people to your cause – and they become your loyal advocates.

At YCUP, we get to rub shoulders with the best and brightest credit union leaders. We get to experience bold brands, behaviors and beliefs that inspire action, amazing results and advocacy. One of these amazing examples is Bank Australia. Earlier this year, The World Council of Credit Unions invited us to moderate a presentation by Rowan Dowland, General Manager of Corporate Development at Bank Australia. Don’t let the “b” word mislead you; Australian credit unions are called banks and Bank Australia is a credit union in every sense of the word. Bank Australia’s brand is “values-based banking.” As an organization, Bank Australia’s brand has boldly drawn a line in the sand. Its target market is millennial-aged, globally social-conscious consumers, and its leaders know firsthand this target market trusts and supports businesses committed to a social purpose and positive environmental change. Bank Australia takes bold stands where other financials dare not tread. It draws a line in the sand and takes affirmative positions on issues such as financial inclusion, immigration, marriage equality, and the environment. Its leaders don’t shy away from declaring their position; they embrace it. They strongly believe that standing on the sidelines is no longer an option for them. The brand is bold, it stands out, and most importantly, it inspires action. Bank Australia’s outcomes are as dramatic as its brand in bank awareness, target market support, community impact, corporate culture, growth, and revenue. Bank Australia does very well by doing good.

“People don’t buy what you do, they buy why you do it”

Far too many of our credit union brands are focused on what we do (low-rate loans and low-fee transactions) and how we do it (seamless delivery channels, happy tellers), and very few of us focus enough on why we do what we do. In his “How Great Leaders Inspire Action” video, Simon Sinek suggests that people are not attracted to what or how we do something as much as they are attracted to why we do it. When our “why” has real purpose and meaning, e.g. financial inclusion for the working class, or an end to predatory lending in our communities, we will attract people who support that cause and they will then advocate for our cause and make it their own. Simon challenges leaders to identify and share their causes and beliefs. Ask yourself if your team’s current beliefs or causes are aligned with the target market you need to attract for the next 20 years. If the answer is no, you’ll want to refocus to find something meaningful enough that the desired target market will listen to and follow you.

Common day causes worth fighting for

If you’re not sure what you’re fighting for, there are many issues facing the target markets we want to serve. Issues and causes that really matter in the lives of millions of consumers. Some of these causes have a natural connection to credit unions, such as financial inclusion for the underserved, action against poverty, affordable housing, relief from predatory lending, and high student loan debt. Other causes not as directly linked to credit unions, but no less inspiring to the people we hope to serve, include equality issues and climate change – to name a few. Consider one of Bank Australia’s very unique brand messages: “A bank that carbon-offsets every car loan is the Bank Australia needs.”

Why it matters

Brand boldness is needed now more than ever. I don’t believe creative-looking logos, snappy taglines, funky names, and run-of-the-mill products and services are enough to maximize attention in our crowded and competitive space. My experience has been that the clearer the credit union’s purpose (why) and the strength of their commitment to it result in extraordinary outcomes for the members they serve.

If you haven’t already, find something that really matters, both to you and to your target market, then take on the cause and make it your own. Draw a line in the sand and make it your rallying cry. Sure, you’re likely to anger some, but you’ll become a hero to thousands. The world needs more heroes.

Who Needs You Today?

Posted by Scott Butterfield on December 7, 2017 at 1:40 PM Comments comments (0)

The credit union movement was founded on the principle of service.

We’ve all heard the phrases:

  • Not for profit, not for charity, but for service.
  • People helping people.
  • The real job of a credit union is to prove, in modest measure, the practicality of the brotherhood of man.

Credit union history teaches us that the ideal of service means more than better rates, lower fees, and friendly service. My experience as a credit union employee for more than 25 years, and as a strategic consultant for past seven years, has taught me that credit union service was founded on a little bit more.

“It was the best of times, it was the worst of times…”

Like the fictional world depicted in Charles Dickens’s “A Tale of Two Cities,” the world around us is full of hope and despair. It’s a time of the haves and the have-nots; it’s a time of peace and a time of war; it’s a time of prosperity and it’s a time of poverty. While times and the world have changed drastically since the beginning of the credit union movement, the need for meaningful service is higher than ever. There are a lot of people who need financial help today, and that involves more than a lower interest rate, a smile, and a cool mobile app. They need you.

Most of us (but not all) get it

I talk to a very diverse group of credit union people every single day. It’s what I do. Many of these conversations are focused on why their credit union exists, what makes their credit union uniquely stand out, and how they can remain relevant in a changing world. The most successful conversations (and strategies) are centered on a deeper definition of service. By deeper, I mean these credit union leaders will tell you that they exist to help people who are experiencing financial challenges. They do this by truly listening, then offering good financial advice, flexible products (and underwriting), and second chances. Their teams trip over each other trying to find ways to help those members experiencing the greatest need. They are less judgmental of people and the financial challenges they are faced with, they have empathy, and they spend more time looking at situations from the member’s perspective. I get to work with a host of credit unions strongly engaged in their local communities, taking on tough community and consumer challenges. These leaders are investing (financially and in Human Resources) to help overlooked consumers attain affordable housing, reliable transportation, and micro small-business loans to help create wealth and lift families out of poverty. Ask these credit union folks and they will tell you they have a very strong and clear cause, and it resonates with their people and the communities they serve.

They love to share amazing stories of how they helped members through a difficult challenge. Their measurement of success is deeper than earnings, capital, and growth. Examples of what they measure and track include credit migration scores to see how borrowers who had less than prime credit at the time of the loan have improved their overall credit score over time; the number of jobs created (through new micro-business lending); first-time account holders (previously unbanked); the number of first-time homeowners; and the number of consumers they helped achieve citizenship. This list isn’t all encompassing, but it provides good examples of a deeper level of service and impact.

I love to talk to these CU people. Whether it’s their boards, management or their staff, these people light up whenever they get the opportunity to tell you about the special services they provide to their membership and their communities. And their stories aren’t one-offs; they happen frequently, and are common themes between branches.

Why it matters

There are a lot of people and communities struggling today. If you take a moment to look closely around you, you will find people who need you. Sick family members, discouraged friends, stressed-out coworkers, and struggling credit-union members. They need someone to notice and help them. Your help – whether it’s a word of comfort or encouragement, removing an obstacle, financial help, advice, or just active listening – could have a meaningful, positive impact. Today, you could make a meaningful difference in someone’s life.

From a personal perspective, giving service gives us a stronger sense of purpose and fulfillment. I believe there is a difference between fulfillment and happiness. Fulfillment is more important to me, as it’s deeper and more long-lasting than happiness. I’m happy when I get to go fly fishing, but that happiness isn’t long-lasting. However, the fulfillment I receive from helping someone is deeper: I become a better person, and it is long-lasting. We all want to be happier, but I would recommend pursuing those things that provide greater fulfillment and personal growth.

From a credit union’s perspective, the more our people help one another, our members and our communities at large, the greater the fulfillment for the individual and the culture. This will lead to a stronger brand, and greater growth and financial results. I believe that culture eats strategy for breakfast: greater growth and financial success will follow a stronger credit union service culture. A helpful culture will make us employers of choice, and we will attract community partners that share our values and purpose.

From a credit union movement’s perspective, doubling down on our legacy of selfless service is all that will separate us from the rest of the mainstream financial services. I know that our cooperative structure is different, but I honestly don’t think it matters much to consumers en masse. If I’m like most average consumers, I don’t think the world needs more for-profit banks or “bank light” credit unions. There are plenty available to take care of those who are in good financial shape. My research and experience with best-practice community development credit unions has taught me that there is high need for not-for-profit credit unions that will help people with financial challenges and address real challenges in the communities they serve. I also know that these service models are sustainable, and among the fastest-growing and most profitable. It’s true, credit unions can do very well by doing good.

If you haven’t yet done so today, I encourage you to take a moment, look around you, identify someone in need, and go make a positive difference. If you are in leadership, I ask you to take an extra moment to consider your membership and the communities you serve. Who needs your help the most, and how can you marshal the resources needed to make a remarkable difference? Now, get after it.

Credit Union Soup for the Soul

Posted by Scott Butterfield on September 11, 2017 at 7:40 PM Comments comments (0)

I was in Connecticut last week to join friends at Members Credit Union and Nutmeg State Financial Credit Union in celebrating their recent National Juntos Avanzamos (Together We Advance) Award (more on that in a minute). I couldn’t help but smile when I noticed via a lobby directory that Members Credit Union shares a building with the famous Chicken Soup for the Soul authors. I immediately thought about how credit union work could be considered food for the soul.

For those who don’t know, Chicken Soup for the Soul is a publishing company predominately known for its Chicken Soup for the Soul series of books. The first book, like most subsequent titles in the series, consists of inspirational true stories about ordinary people’s lives. The book became a major bestseller in 1993, and remains something of a social phenomenon.

Credit unions rule

When it comes to finding inspirational true stories about companies committed to helping the financial lives of ordinary people, credit unions rule! I hear inspirational stories of how credit unions find ways to serve people who are struggling, overlooked, and under-appreciated almost every single day.

Trust me when I say that the happiest people in all of credit union land are those who are engaged in helping people – especially people who really need their help. It’s this service and outreach that, like chicken soup, nourishes the soul. It inspires the busiest of people to double down and do more, and inspires those around them to jump in, roll up their sleeves, and get to work. I believe that pursuing purpose is more rewarding than pursuing profit, and I know that I’m not alone.

Consider the world we live in today, and how credit unions are clearly different and better:

At a time when Wells Fargo hoped the $142-million settlement of a class-action lawsuit over its agents creating up to 2.1 million unwanted checking, savings, and credit-card accounts between 2011 and 2015 would end the iconic company’s headaches, a new report emerged of a similar scandal involving auto loans and insurance. At the time, I was engaged in conversations with the first-year class at the CUNA Management School specifically focused on credit-union best practices for serving underserved markets’ financial needs that remain unmet by most banks and targeted by tens of thousands of predatory lenders. These credit union leaders identified creative and impactful ways to respond to the underserved case studies I presented. I left that group inspired by their credit union spirit!

At a time when income inequality is growing rapidly and wages have been stagnating, creating qualify-of-life challenges for millions of people in the United States and billions of people abroad, credit unions have significantly increased their efforts to reach out to and serve the underserved and overlooked. In the United States, the number of Low Income Designated credit unions has exceeded 2,300. These special credit unions are committed to serving low-income consumers and their families. In my 30-year career, I don’t believe awareness of and commitment to lower-income consumers has ever been higher. Thanks to the NCUA, National Federation of Community Development Credit Unions, CUNA, National Credit Union Foundation, CDFI Fund, Leagues, and other trade associations, awareness and advocacy have never been higher. Today, more credit unions are engaging each other and their communities to identify educational and product opportunities to help lower-income consumers make better decisions, build financial assets and better credit – all focused on creating a better quality of life for the person, family, and community. When it comes to people helping lower-income people financially, credit unions stand alone. I just completed a full-day Community Development Workshop sponsored by the Wisconsin Credit Union League and the Wisconsin Credit Union Foundation. It was cool: the workshop was at full capacity, with credit union leaders driving across the state to be part of the event. The audience included small, large, urban, and rural credit unions, each eager to find new ways to seek out and serve lower-income and underserved markets. The stories I heard from credit unions in attendance were certainly “soup for the soul.”

At time when talking heads are arguing for a 700-mile-long, 30-foot wall to keep people away (from a better quality of life for themselves and their families), credit unions across the country are actively engaged in building bridges to warmly welcome Latino immigrants with affordable financial services, regardless of citizenship status. These credit unions are making meaningful investments in providing this group of overlooked consumers with access to low-cost accounts, credit-building, and affordable access to transportation, housing, and even small businesses. Today, more than 70 credit unions have received the national Juntos Avanzamos designation, recognized for having the purpose, people, and products needed to successfully serve this market. How can one adequately measure the quality-of-life impact that accompanies citizenship and financial inclusion? It’s high, and very desirable.

Why it matters

I don’t know about you, but I desire chicken soup most when I’m a little under the weather. Like the chicken soup analogy, credit unions work best when they serve those who need them the most. It’s in our DNA, and for more than 100 years, credit unions have been helping those who need us the most: the overlooked and underserved.

At a time when the world seems to be heading down a path of greed, fraud, and deeper inequalities between the haves and the have-nots, credit unions can gain strides by seeking out and serving those who need us the most. When credit unions do this, they are relevant, and serving as the “soup” for struggling souls.

The Road Less Travelled to Membership Growth

Posted by Scott Butterfield on September 11, 2017 at 7:40 PM Comments comments (0)

It’s strategic planning season for many of us; a time for reassessing our environment and revisiting our strategic themes to ensure we are heading down the right road.

The competition is fierce. Most of us prefer an uncontested market space, but the reality is that many of us operate in hyper-competitive markets, fighting for dominance. But the payday for those credit unions that take the right road and find their niche is deeper consumer demand, greater organic growth, and shrinking competitive relevance.

Are your current strategies enough to reach your goal?

If your organization has a growth strategy, I encourage you to consider this strategic question: will your strategy help you locate the road less traveled to target the right consumer with the right product offer at the right time? If you can confidently answer “yes,” carry on. But if you operate in tough markets, with dozens or more local or remote organizations competing for the same potential members, I challenge you to revisit your strategy and consider other options. In a market filled with equally skilled and resourced competitors, can your organization afford to have the second-best strategy for matching the right person with the right product at the right time? It’s great if you find the right person, but what if you don’t get to them in time? What if your offer is wrong?

The road less traveled

In my strategic planning travels, I’m exposed to hundreds of potential credit-union growth strategies. As excited as some leadership teams are about their growth strategies, I have to say most are very similar. It’s tough to dominate a market or gain measurable market share when similar competitors are slugging it out using the same old strategies.

One reason we see so many of the same strategies is that credit unions tend to 1) follow what has worked for others, and 2) select the best strategies they perceive they can afford. If any of this reflects how you determined your strategy, I hope you will revisit your strategy with the following considerations:

If you’re following strategies that have worked for others, what can you do to give your strategy an edge over the competition?

If your strategy is limited by what you think you can afford, consider what happens if you invest less than what’s needed to make sure you get to the right person with the right product at the right time. Invest too little and you might be better off making no investment at all. Why throw good money after the probability of poor results?

Case in point

Most credit unions, especially large ones, use customized consumer target lists to find and reach new potential members. These strategies have been around for a long time. Success is mixed, and I believe that one reason is because so many credit unions and banks located in the same markets use similar lists, targeting the same people at the same time.

There is a road less traveled for target marketers. Today, we have access to data that can be used to help us realize deeper segmentation to find consumers that may be overlooked by the competition, and give a credit union the edge at getting to the right person first. But to realize this deeper level of segmentation, one must be committed to spending the time with their internal and external data managers to look deeper and further for those consumers. Here are a few examples:

Thin-file borrowers. On the surface these thin-file consumers look less attractive. However, alternative risk scores can help target these specific populations that will likely drive growth for years to come.

Relationship preferences. What if you could identify those potential consumers who are more likely to work with a credit union over a bank, and what if you could invest more of your marketing dollars attracting this group?

In the market consumers. Most consumers are not in the market at a given point in time. Leveraging propensity models can help identify those who are, and significantly increase response rates and campaign ROI.

The road less traveled is so much more than a custom data dump with saturated data points. This strategic road looks deeper and wider to find overlooked, high-quality new members.

“It can seem counter-intuitive at first, but making a move toward a more focused marketing effort can actually lead a credit union to a broader audience, a larger membership, and improve their member service capabilities,” said Jason Dietrich, an Experian consultant. “When I work with credit unions to design more targeted campaigns, the increased efficiency and ROI allows the credit union to invest in new areas they otherwise couldn’t – like digital- and mobile-friendly channels, and overall member services.” 

Why it matters

Your relevance and long-term sustainability rely on your team’s ability to out-compete your competitors. If you want to win, make sure that you have the right strategies. Find a way to be clearly different and better. You can do this by targeting the right consumer with the right product at the right time. This is possible with an all-in commitment, smart thinking and wise use of data.

Is Your Heart Really In it?

Posted by Scott Butterfield on September 11, 2017 at 7:35 PM Comments comments (0)

Last month, former Yahoo CEO Marissa Mayer resigned after running the company for about five years. She resigned because Verizon’s $4.48 billion acquisition of Yahoo officially closed, netting her a $23-million payout.

At a conference in London, Mayer said that one of the things she was looking forward to in her post-Yahoo life was “using Gmail again.” Presumably, as CEO of Yahoo, she had to use Yahoo Mail. She was widely criticized for the remark. In tweets sent after the story published, Mayer said she would continue to “use the excellent Yahoo Mail, too.”

Perhaps her initial comment can be chalked up to bitter grapes over the loss of her annual bonus and stock award resulting from an investigation that found two security breaches at the company were mishandled by senior executives. Who knows?

My first thought when the story broke was, “Wow, I guess her heart wasn’t really in it at Yahoo.”

Check your pulse

At work, is your heart really in it? Are you doing what you do, just because it’s a job and the pay is decent? Or are you doing it because it’s

something you really believe in and find great satisfaction from? Personally, I’ve experienced both scenarios as a leader, and I’ve worked for both types of leaders. I definitely contributed more and achieved more whenever I had my own heart in it and whenever I worked for someone who had their heart in it. When your heart is fully in it, you really care. You care more about the quality of the work, you take things personally, and you’re not afraid to do whatever it takes to fulfil the vision of what you are working towards. You look forward to the work, your miss it when you are away from it, and, given any extra time, it fills your thoughts and actions. You take great care because it’s important.

It’s boring and tedious when you’re committed to things your heart really isn’t in. You’re not as focused on the goal because, frankly, it just isn’t that important to you. Perhaps this is what happened at Yahoo. A probe by an independent board found that Yahoo senior executives failed to properly comprehend or investigate a security breach that led to the compromise of billions of accounts. Performance will be mediocre when people spend more time looking at the clock or thinking about things they’d rather be doing. Working toward something that isn’t important to you can be very stressful; working toward something you really care about is called passion.

When your heart needs a defibrillator

Whether you are the team leader or a member of the team, your team will perform better if your heart is in the game. If you are reading this and find your heart in need of a jolt, here are a few things to consider:

Focus on meaning – try refocusing on why the work should matter more to you. Consider the big picture, and try to look beyond the paycheck. You’re fortunate if you’re working in the credit-union space. Not everything we do in credit union land really matters, but there is a lot that does really matter. We do meaningful work when our organizations teach people how to better manage their finances; we help working-class families get an affordable vehicle or purchase a home; we help small business grow and create new jobs; and we engage in our communities, making them a better place. Regardless of your role in the organization, you can be part of this, and perhaps you may find some personal meaning.

Mentor someone – For some, few things are more rewarding than helping others develop and grow. If you’re in a position to, offer your help and encouragement to others. Share your skills, knowledge, and expertise. Demonstrate a positive attitude and act as a positive role model. This level of service may be just enough to help you regain a meaningful pulse.

Refocus on your own development – Whatever your position, focus on becoming the very best that you can be. Take extra pride in your work and set new goals for yourself, goals that will help you grow. Change and development isn’t easy, but there is a great amount of joy and satisfaction to be had from making the effort. Who knows, perhaps your efforts here will motivate someone else to care a little more and become more engaged.

Make a change – If you’ve really tried, but find that your heart isn’t in whatever it is that you’re doing, I challenge you to move on to something that provides more meaning for you. Personally, I don’t believe we ever become our very best or make the greatest contribution when our heart isn’t really in it. Making a career change can be difficult and very stressful. I’ve been through this transition. For me, the stress of making the change turned out to be less stressful than remaining in the situation would have been.

Why it matters

Most of us spend a significant portion of our lives working. Having our heart in what we do will motivate us to stretch and reach for more. It will add meaning and joy to our lives. It will make our organizations stronger, and inspire others to be the best that they can be. We will make our greatest contributions.

Someone who is omniscient has said that where your treasure is, there your heart will be also. I couldn’t agree more.

CUs Trapped in the Thick of Thin Things

Posted by Scott Butterfield on September 11, 2017 at 7:30 PM Comments comments (0)

Spend as much time with credit union boards and management teams as I do and you’ll learn that far too many credit union leaders spend too much time focused on the “thin” operational things and not enough time and thought on the “thick” strategic things.

The thick important things are the mission, vision, and values that define us. The thick is the bold strategies that inspire us to move forward and motivate meaningful engagement. It’s a fuller understanding of how the world is changing around us, and a constant desire to evolve, adapt, change, grow, and affect others in a meaningful way.

The thin, less-important things are operational and tactical. The business we’re in requires a high degree of compliance and exactness, whether it’s timely reporting to examiners, accurate transactions for members, or monitoring internal controls. These things are all very important. However, if we’re not careful, these operational details can easily become all that we regularly focus on, and we become trapped in the thick of thin things.


It’s usually easy to spot credit unions trapped in the thin of things. Growth and revenue are weaker at these credit unions. Culturally, they reward good operational results, but don’t reward new ideas or risk-taking at the same level. Ask these leaders where they are headed and they give you a capital, asset, or revenue ratio. It’s sad when the “people helping people” movement is defined first by numbers and ratios. They are thin on strategic plans and thick with every possible operational procedure you can imagine. They are compliant – meaning the only rules they follow are the ones spelled out in a rule or regulation or based on whatever the broader credit union herd is grazing on at the moment (yes, I just compared some credit unions to a herd of sheep). It’s not uncommon to find credit unions that celebrate immaculate exams, audits, and ridiculously low delinquency numbers – all the while, they have failed to keep up with technology, and growth and revenue is weak because they have failed to invest for tomorrow. Review the board minutes or management team minutes of these organizations and you’ll see mention after mention of thin operational issues and very little strategic content. Credit unions must excel both operationally and strategically to survive.


Credit union leadership (board and management) determine the level of strategic thought and action that will occur. Leaders must have the discipline to invest time. For some, it’s easy to drift from strategic to operational – especially if operational is their default comfort zone. Your team will follow your lead and respond to what you recognize and reward.

Once you have your priorities straight, make sure you have the right people in place to handle all (or most) of the operational issues. Having the right people in place and delegating the right things will allow you to spend less time on operational issues and more time on strategic issues. I realize this is challenging for smaller credit unions. However, I believe that even though smaller credit union leaders are forced to spend more time on operational things, it’s possible to carve out extra time for strategic thought and action. I work with a lot of best-practice smaller credit unions with very busy leaders who still make strategic action a priority – even though they are still reviewing loans and dealing with examiners. Ask these credit union leaders where they’re headed and you’re sure to get a meaningful answer, and their credit union’s performance and culture reflect their strategic thinking.

Management and boards can do a better job structuring board meeting agendas. Everything operational that can be moved to a consent agenda should be. Next, move strategic business to the top of the agenda to be sure you don’t run out of time. I’d rather run out of time on the operational items at the end of the meeting. Each short-term and long-term strategy should have goals and milestones that management regularly reports on. Results on these strategies should be the focus of the board conversation – not budget line items that could easily be addressed offline, or waste-of-time conversations explaining why the number of delinquent loans increased from 25 to 27 during the month.

Invest the time in developing the right strategies for your credit union. Spend less time focused on what the credit union down the street is doing and more time looking at the issues that are influencing your members, and the future members you want to attract. You want to anticipate and plan for what their needs will be five years from now, and make sure you are prepared to meet them. Spend as much time considering external opportunities as you do external threats, less time complaining over regulatory uncertainty and more time addressing opportunities to differentiate and evolve.

Why it matters

Strategic Planning for Dummies points out that “a strategic plan is a critical management tool that guides an organization to do a better job because a plan focuses the energy, resources, and time of everyone in the organization in the same direction.” Understanding that is easy; constantly doing it is the hard part. You and your team’s ability to think and act strategically will determine the long-term viability and success of your organization. If you’re not sure where your organization is headed or you feel stuck in the thick of thin things, act now. Even if you have to start small, begin now to make strategic thinking and action a priority.

Change the Complexion of Your Board

Posted by Scott Butterfield on September 11, 2017 at 7:20 PM Comments comments (0)

Diversity among your directors provides a competitive advantage.

Democratic membership representation is a hallmark of the credit union movement. Common-bond groups long have elected people from among their ranks to serve as their voice in credit union decisions.

These volunteers understood first-hand their constituency’s needs because they were part of the same socioeconomic demographic.

But the makeup of many credit union boards hasn’t kept pace with the changing face of membership demographics. Statistics indicate—and first-hand experience confirms—that older, white men continue to predominate boards.

These volunteers provide valuable service to their credit unions, but may lack a personal understanding of many current and prospective members’ needs and preferences. Increasingly, credit unions view board diversity as a competitive advantage. Diversity reflects more than just race or ethnicity.

Emerging demographic trends

Consider the demographic landscape of the U.S. as it stands today, and as it will evolve in coming years and decades.

A record 40% of all households with children under the age of 18 include mothers who are either the sole or primary source of income for the family, according to a new Pew Research Center analysis of data from the U.S. Census Bureau. The share was just 11% in 1960.

These “breadwinner moms” are made up of two very different groups: 5.1 million (37%) are married mothers who have a higher income than their husbands, and 8.6 million (63%) are single mothers.

Millennials (born between 1982 and 2004) have surpassed baby boomers (born between 1946 and 1964) as the largest U.S. generation, and differ significantly from their elders in many ways.

They are the most ethnically diverse generation in American history: 43% of millennial adults are nonwhite, the highest share of any generation. And they are on track to be the most educated generation to date.

Americans are more racially and ethnically diverse than in the past, and the U.S. is projected to be even more diverse in the coming decades.

By 2055, the country won’t have a single racial or ethnic majority. Much of this change has been (and will be) driven by immigration. Nearly 59 million immigrants have arrived in the country during the past 50 years, mostly from Latin America and Asia.

Today, a near-record 14% of the country’s population is foreign-born, compared with just 5% in 1965. During the next five decades, the majority of U.S. population growth is projected to be linked to new Asian and Hispanic immigration.

The share of Americans who live in middle-class households is shrinking. The number of adults living in middle-income households fell to 50% during 2015 after more than four decades during which those households served as the nation’s economic majority.

And the financial gaps between middle- and upper-income Americans have widened, with upper-income households holding 49% of U.S. aggregate household income (up from 29% in 1970) and seven times as much wealth as middle-income households (up from three times as much in 1983).

Diversification of diversity

Does your credit union currently serve these groups, and/or do they represent a market you would like to serve better? If you answered yes, does the diversity of your board reflect that group?

When pondering that question, consider all of these groups:

  • Gender diversity. According to retail analysts Mintel, 84% of women influence financial decisions compared with just 49% of men, and that influence extends to everything from family holidays to technology. Consider the importance of having a representative number of working women and mothers on your board.
  • Age diversity. Millennials sometimes don’t make a lot of sense to those in the baby boomer generation. For example, despite being the most educated generation ever, why are nearly half comfortable with alternative financial services such as check-cashing and payday loans?

And at a time when credit unions are catching up with remote deposit capture, younger people are focused on digital-first platforms. Technology decisions made in boardrooms today will have lasting impact.

  • Race and ethnic diversity. Many credit unions have recognized not just the moral obligation to serve ethnic communities, but also the business opportunities.

Without appropriate representation on the board, the impact of community service projects to these groups will be limited.

  • Income diversity. More than one-third of credit unions have received NCUA’s low-income designation.


More than half of all consumers have less than prime credit, and predatory lending is growing unchecked.

Consider how important it would be to have someone on the board who has experienced living on lower wages, or who has experienced credit setbacks. Credit union boards that truly understand these situations tend to judge less and more openly support credit union programs directed at credit-challenged consumers.

Take action today

If your board’s representation already reflects your unique membership, congratulations. Remember to assess your board’s makeup as your membership changes.

If you need to make changes, consider these three ideas on how to form a diverse board:

  • Define your commitment to serving the group you’ve identified. For example, any decision to serve a new ethnic group should be strategic and long-term, which will make it easier to recruit volunteer nominees.
  • Identify groups who believe what you believe. If the credit union’s intent is to actively serve the local Latino market, you’ll likely find potential volunteers from like-minded groups within that community.

To target millennials, consider contacting local colleges, and reach out to past recipients of your scholarships. Candidates will view activity on a credit union board as a way to represent and serve the people they care about.

  • Consider gender in each demographic. Women should hold roughly 50% of seats on your board, supervisory committee, and other volunteer groups. When male board members look to their friends and colleagues for “recruits,” they likely will nominate male candidates.

Credit unions should mine for female members looking for an opportunity to serve, and could recruit someone serving on the board of a kindred organization.

Albert Einstein said the definition of insanity is doing something over and over again and expecting different results. This holds true for board diversity. If your past activities have yielded low diversity, you’ll need to do something different to get a better response.

Improving board diversity isn’t an option—it’s a necessity. Without democratically elected volunteers, we’d cease to fulfill the credit union mission. Without governance diversity, we cease to be relevant to our members, potential members, and communities.

Capitalizing on Credit Card Growth

Posted by Scott Butterfield on June 4, 2017 at 10:40 PM Comments comments (1)

The opportunities for credit union loan growth haven’t been this good for a very long time. According to the CUNA Mutual March 2017 Trends Report[1] (January 2017 data), overall, credit union loan balances rose 0.9 percent in January (better than the 0.4-percent pace reported in January 2016) and 11.5 percent during the past 12 months. Credit union seasonally-adjusted annualized loan growth reached 12.8 percent in January of 2017 – the fastest pace since January of 2000.

For many credit unions, loan growth opportunities are found in abundance among existing members and a record number of new credit union members. CUNA reported in its 2016 year-end report[2] that membership in U.S. credit unions increased by 4.1 percent in 2016 overall. When compared to previous calendar year results, this is the fastest growth seen since 1986. U.S. credit unions now report 108.2 million members – a total which is equal to slightly more than a third (33.5 percent) of the country’s population.

Growing credit union loan balances reflect an abundance of opportunity in the market today – is your team making the most of these opportunities and finding the optimum amount of success? For those of you looking to make more of these market opportunities (while they last), I offer the following thoughts.

Be prepared, and take advance of peak credit card spend time

Overall, credit card spends increases from lows during the first quarter and then peaks annually during the fourth quarter. The chart below illustrates this trend back to 2014.

Smart credit unions are preparing now to make the most of this strong opportunity in fourth-quarter 2017. Here are a few suggestions to help you capitalize on what will likely be a very strong year of credit-card activity.

First, don’t rely on best guesses, or what you believe others are doing. Use trustworthy data that is relevant to your membership and target market. Trusted sources like Experian have created powerful card spend[1] algorithms, built from credit data, to help credit unions find the best opportunities. This data can help your team:

  • Target high-spending members with your very best offer
  • Assign the credit limit your members need and want
  • Assign the right APR to make sure you maximize interest and interchange income
  • Retain profitable cards and identify those members who provide new opportunity

My experience is that many credit unions miss the boat when it comes to capturing the larger credit-card opportunity. High-performing credit unions are using the best-trended data to have a better understanding of their members, and customizing the product features and offer. Successful card programs are built upon a lot more than a low rate and reward program. Smart credit-union marketers know which members are likely to be Rate Surfers, Balance Revolvers, Transactors, Consolidators, Non-active, or Seasonal users. Card experts know how to present the right card product to the right member at the right time.

Why it matters

Portfolio expert and Director Jason Dietrich of Experian’s Global Consulting Practice reports that year-over-year growth for national banks in credit cards is at a higher clip than credit unions: 12 percent for national banks versus 9 percent for credit unions (balance growth). National banks are credit unions’ primary card competitor in the market. This identifies an opportunity to revisit the way credit unions approach their card portfolios, and to take steps to maintain and grow their card share versus national banks.

When asked to identify one thing credit unions should be focused on when it comes to managing their card portfolio, Mr. Dietrich replied, “retention.” Good retention activity requires a view toward retaining both spend and balance, aligned toward the needs of individual members. It’s very important that on the balance retention side, credit unions stay in touch with members who are showing the need or desire to consolidate debt, or who have significant revolving balance elsewhere at rates higher than the credit union can offer. Getting an offer for a balance transfer to them in a timely manner is important for balance capture and retention. And for retaining spend, the foundation for effective retention comes from identifying which members use credit cards primarily for spend rather than to revolve. For these members, ensure that proactive steps are taken to make your card product the most attractive one for that purpose. Several tactics are proven effective in achieving these goals, but it all starts with proper and timely identification of member needs.


Who knows what tomorrow’s loan-growth opportunities will be. Let’s each win as many of these opportunities as we can TODAY. Be assured that your toughest competitors are using the best data, analytics, and marketing strategies to beat YOU in the market. You can take that to the bank.

You’re strongly encouraged to assess your credit-card portfolio strategies. Make sure you are using the very best tools to make the most of today’s opportunities while they exist.


The Three Most Important Strategic Questions

Posted by Scott Butterfield on June 4, 2017 at 10:35 PM Comments comments (0)

It’s that time of year again when many of us are finalizing arrangements for annual strategic planning meetings. Besides nailing down the right venue and getting calendar confirmations from each of our board members, our thoughts turn to weightier matters and questions, such as “where do we go from here?”

In preparation of the event, questions are asked, challenges considered, and opportunities identified in order to determine the best mix of content and focus. Agenda content designed to engage the group, challenge ideas, and encourage strategic plays an important role in the execution of a productive meeting, however, having facilitated hundreds of strategic planning meetings for credit unions of all sizes and in all manner of venues ranging from scenic Caribbean oceanfront resorts to dilapidated board rooms that could barely fit 10 people, I can tell you that the most successful planning sessions (and credit unions) take time at the planning meeting to answer the following three critical questions.

Three critical questions that must be answered

Strategic thinking, according to Peter Drucker, is knowing the right questions to ask. He taught that the three most important strategic questions each company must answer are:

  • What is our business? (Mission)
  • What will our business be? (The changing environment that we are certain about)
  • What should our business be? (Vision)

The best answers to these questions are elusive to many credit unions. Answering these questions isn’t as easy as you might think, especially in the ever-changing environment that we operate in. Consider for a moment our movement’s hallmark mission of “people helping people.” It sounds great, and it has inspired people for a very long time. But the blanket saying isn’t enough for individual credit unions. How we define “people” and “helping” in this statement can be as different as each unique credit union that embraces it.

To more fully understand what business we are in (our mission), we must have a pretty clear idea of whom, specifically, we serve. Most credit union leaders will acknowledge that they can’t be all things to all people. But sticking to that statement is challenging. The best alignment of people helping people it to find people who have a desperate need for a particular something. Real success comes when we find that specific something and consistently deliver it better than anyone else. Back in the old days, the people and the something were very clear to everyone. Credit unions were the people providing affordable access to credit to people the banks wouldn’t lend to. Everyone understood it, it worked, and credit unions experienced phenomenal growth.

But understanding what our business should be in the changing environment can be a bit more complicated. Whom, specifically, are the members we serve (and want to)? What generation do they spring from, and what is their economic status? What is their ethnicity? Are they high-touch or high-tech? Are they well-educated or working-class? What do they value? What do they need help with, specifically? Do they need help with basic financial matters, or complex retirement, or business ownership-related matters? Are they seeking their first auto loans, or do they just need someone to “buy” the loan paper from the car dealership to complete their purchase? What do they consistently need most, deposits or loans? Are they rate-shoppers, or seeking someone who will listen and give them a second chance? So many questions to answer. The most successful credit unions have a very firm understanding of whom they want to serve, and they know specifically what type of help is needed.

Once we can answer whom it is that we want to help, it’s time to align this mission to the opportunities in the environment. This will help us set our sights on what our business should be (vision) three, five, or 10 years from now. This is where so many of us try to be all things to all people, and it gets a lot of us into trouble. The competitive landscape we operate in has never been more competitive, and it’s only going to get more so. To be the most successful, we need to align our strengths with those consumer needs that we are in the best position to deliver.

For example, if it’s our intent to serve tech-centric consumers, we had better have the internal expertise, infrastructure, and innovative culture to be the best at consistently delivering the latest and the greatest. It’s difficult to “win” this consumer with last month’s technology. If we desire to serve platinum-credit rate shoppers, then we must have the scale to offer consistently rock bottom loan rates. Frankly, given the operating expenses at many smaller credit unions, it’s impossible to regularly have the lowest rates in town. They try, and they have the marginal or negative promotional Return on Investment ratios to prove it. If you desire to serve the lower-income, credit-challenged working class, you’ll need to have higher loan yield and fee income to offset higher operating and loan loss expenses. You’ll also need to have staff with higher empathy and skill sets to educate, serve, and develop this unique member group.

For best results, align your mission (of who you want to help), with the people who need your help the most. Remember, the field of potential lenders lined up at your local auto dealership is already pretty deep.

Why it matters

Any planning meeting – regardless of the venue quality, food, free branded gear, bar, or fancy-pants facilitator – that doesn’t facilitate your answers to these three questions isn’t strategic.

Your organization’s long-term viability is dependent on how well you’ve answered these questions. For better planning results, spend more time focused on them and less time on the “meet and greet” hors d’oeuvres.

Wisdom and The Island of Misfit Toys

Posted by Scott Butterfield on June 4, 2017 at 10:25 PM Comments comments (2)

Those of you from my generation are sure to remember the 1964 animated TV special, “Rudolph The Red-Nosed Reindeer.”

In this classic tale, Sam the Snowman narrates the story of Rudolph, a reindeer who is born with a glowing red nose. His father – Santa’s lead reindeer, Donner – feels ashamed, and uses a special cover to hide Rudolph’s nose so that he can join in the Reindeer Games. During some horseplay, the cover on Rudolph’s nose pops off; after seeing his glowing nose, the other young bucks begin ridiculing Rudolph. Rudolph is banned from the rest of the games. Rudolph runs off into the woods and meets up with Hermey, an elf who had been forced out of his job because he was more interested in dentistry than toymaking and singing. The two bond, singing “We’re a Couple of Misfits” after they discover they each have something that makes them unique. Later, they meet a prospector named Yukon Cornelius. The trio manages to flee to the Island of Misfit Toys, an island populated by abandoned toys with idiosyncrasies. Working together, the three save the day by rescuing Christmas, Rudolph and Hermey are no longer ridiculed, and the lead elf finally allows Hermey to open a dentist’s office the week after Christmas.

Wisdom is gained through challenges

I’ve always enjoyed this tale, and I can relate to its powerful message. The morale of the story is that, despite perceived flaws or differences, we are all valuable. Some of my most meaningful work was accomplished alongside folks who, like me, might be considered inhabitants of the Island of Misfit Toys.

Most of us aim for a positive and progressive career path. Unfortunately, that rarely occurs. Life is never as expected, and challenges are needed to facilitate our growth.

I was reminded of this fact during my recent attendance of the CUNA Governmental Affairs Conference in Washington, DC. The conference provides lots of opportunities to reconnect with credit union colleagues from around the country. It’s enjoyable to see people you know who are doing well and growing professionally. It’s even better to see colleagues who’ve had some sort of professional setback (unplanned job change, poor work alignment, bad boss, etc.) and overcome the challenge to shine brightly again. I look at these folks with admiration, and I know firsthand just how difficult those situations can be.

I experienced a professional setback during my 33-year career. It was a painful and challenging experience. While I would never want to go through it again, I can look back and see the wisdom gained, and how it fueled the next level of my personal and professional growth. Simply put, I’m a lot stronger and more successful today because of that experience.

Don’t feel like damaged goods!

If you’re the one going through challenges today, or still smarting from challenges that occurred in your past, don’t let these experiences make you feel like damaged goods! You’re not! I believe one day you’ll look back and be grateful for the challenges you’ve overcome. It’s these challenges that bring out and refine our strengths. You’ll gain wisdom through overcoming these challenges, and that wisdom makes you a better candidate for the right team – a team that will value your experiences and the stronger you.

The value of wisdom on a team

Some of the most amazing professionals I’ve ever worked for have had experiences that made them feel like misfit toys. Get to know them well enough to hear their stories and you’ll most likely hear that those experiences shaped their character, determination, focus, and values.

It’s been said that “knowledge” is the facts and ideas we acquire through study, research, investigation, observation, or experience. “Wisdom” is the ability to discern and judge which aspects of that knowledge are true, right, lasting, and applicable to your life. Life’s experiences give us the ability to discern, judge, and make better decisions. When I’m looking for the right people to collaborate with, I prefer wisdom over knowledge.

Why it matters

Whether we are individually working to become our very best selves or trying to build the very best team, let’s remember the Island of Misfit Toys. In ourselves and others, let’s value those life experiences that strengthen, and human uniqueness that allows people to look at things differently.

CUs are doubling down on the Latino and immigrant market

Posted by Scott Butterfield on February 23, 2017 at 6:15 PM Comments comments (0)

I’m writing this article in response to a recent announcement titled, “Anti-immigration proposals work against economic growth goals” posted by Cathie Mahon, President/CEO, National Federation of Community Development Credit Unions (the Federation), Maria J. Martinez, President, NLCUP and CEO, Border Federal Credit Union, and Miriam De Dios, CEO, Coopera.

First, I’d like to recognize all three of the authors and their organizations for the great work they do in credit-union focused, purpose-driven financial inclusion for underserved and Latino markets. They represent the “who’s who” in credit-union consumer impact and quality of life community development.

Latino-focused credit unions are more relevant

For six years, I’ve been working with credit unions focused on serving the Latino community, partnering to build out Latino-focused community development programs. I can tell you, without exception, these credit unions are among the most relevant financial institutions in the communities they serve. Truly, without these credit unions, their underserved Latino consumers would have no other “non-predatory” alternative. These credit unions are the very definition of relevance – the state of being closely connected or appropriate. Isn’t that what we’re all after? Relevance in the lives of our members and the communities we serve?

In the wake of the recent and tumultuous rhetoric we’ve all heard regarding immigration and the Latino market, we are seeing more credit unions step up and double down on their intent to serve Latino and immigrant communities.

Below are three recent credit-union examples of how a few of our friends are embracing their Latino and immigrant communities at a critical time, a time when their attention is needed most.

Each of these credit unions are recipients of the Juntos Avanzamos (Together We Advance) designation. This award recognizes credit unions committed to serving and empowering Latino consumers. Credit union leaders from the Cornerstone Credit Union League, the Federation, Coopera, and six other credit union leagues are working with 70 credit unions across the country to meet the tremendous demand in the Hispanic and immigrant markets, and to demonstrate that serving these demographics is both a sustainable business strategy and vital to fulfilling credit unions’ collective goal of helping people of modest means achieve financial independence.

Lower Valley Credit Union ($110 million, Sunnyside, WA) – Yesterday, LVCU unveiled its new full-service Kiosk in a local Mexican food store. In partnership with Fiesta Foods, LVCU will be leveraging the Kiosk to serve Latino consumers, many of whom are unbanked, non-citizens. Besides offering ITIN loans and financial education at the interactive Kiosk, the credit union will be helping lower-income immigrant consumers pursue a path to citizenship. Since 2014, the credit union has helped more than 1,000 consumers obtain citizenship. LVCU received its Juntos Avanzamos designation in January of 2016.

LVCU’s new Kiosk is designed to provide Latino and immigrant-focused access to financial products and services.

Seattle Metropolitan Credit Union ($750 million, Seattle, WA) – On Feb. 14, 2017, SMCU was recognized with the Juntos Avanzamos (Together We Advance) designation. In addition to their recognition, SMCU formally opened its Beacon Hill branch in the heart of its Latino and immigrant community. Through this new location and as part of its partnership with the City of Seattle’s Office of Immigrant and Refugee Affairs and El Centro De La Raza, SMCU will grow its new Citizenship Loan program to help new immigrants finance their path to U.S. citizenship, and to increase financial inclusion through affordable products and services to Latinos and immigrant consumers.


SMCU CEO Richard Romero was presented with the Juntos Avanzamos award at SMCU’s new Beacon Hill Branch. LTR: NWCUA CEO Troy Stang,Pablo DeFilippi VP of the Federation, and SMCU EVP Tonita Webb.

Point West Credit Union ($100 million, Portland, OR) – On Jan. 25, 2017, PWCU and the Consulate of Mexico in Portland announced their new partnership to promote financial education to the Mexican community in the Portland metro area. The partnership was formalized at a signing ceremony at the Consulate of Mexico. Through this partnership, PWCU provides workshops and assistance in Spanish on financial issues, including credit, budgeting, and savings. This outreach is part of its vision of providing its community “banking without borders.” Besides financial education, PWCU provides much-needed lending to its underserved Latino and immigrant community. PWCU received its Juntos Avanzamos designation in August of 2016.

PWCU Amy Nelson and Stephen Pagenstecher ink their partnership with the Portland based Mexican Consulate.

Try thinking of serving the Latino/immigrant market this way


Imagine that a new, large potential credit-union sponsor moved into your community. This new “group” employs thousands of young millennial workers – each in need of affordable products and services. The group doesn’t have any relationships with any other financial institutions. It needs a non-predatory financial institution in the community to meet its growing needs. Seriously, how many of us would jump on this opportunity – nearly all of us! If you have an emerging Latino and/or immigrant market in your potential field of membership today, this is the scenario you are faced with!

Why it matters

I believe our relevance as credit unions corresponds directly to the level of need found in the communities or groups we serve.

The Latino community needs us and we need them. We need young, loyal borrowers and members, and they need affordable access to credit and services. This vibrant demographic is growing, and will be the source of organic credit union growth and improved profitability for years to come. Affordable access to credit and other services offered by credit unions will help these individuals create stronger credit profiles, build assets, and enjoy a better quality of life. It’s a win-win relationship. The credit union movement was created for beneficial scenarios like this.

Today, millions of people living within our communities live in fear and they lack non-predatory financial resources. If ever there was a time for the credit union community to step up and embrace this community, it’s now. The exciting news is that in spite of the fearful rhetoric, more credit unions are stepping up, taking a stand, and demonstrating the true credit-union difference.

Make your voice heard

This week, thousands of us will be making our annual pilgrimage to Washington, D.C. to advocate the credit union difference with our legislative representatives. If you or a member of your team will be making the Hill visit, and you serve a Latino/immigrant market, I hope you will share a story of impact that demonstrates how your credit union is making a difference in your Latino/immigrant community. I encourage you to join Juntos Avanzamos. For more information about this initiative please click here.


Zen, The art of credit union leadership

Posted by Scott Butterfield on February 23, 2017 at 6:10 PM Comments comments (0)

It can be exhausting to review a credit union’s to-do list. I’m talking about that long laundry list of everything a credit union team has committed to for the year. It’s interesting to review these lists alongside their owners. All too frequently some items have little to do with the credit union’s key strategic priorities. I see this conflict all the time.


Sometimes there is debate over whether or not something on the list will have a material impact on the organization’s key strategic priorities. In these cases, the potential impact of the debatable action is minimal. Far too many items on far too many to-do lists are low-level operational and compliance-related. Important tasks, but tasks that at the end of the year contribute very little to key strategic priorities such as loan, revenue, and membership growth. It’s frustrating: teams spend the year chasing low-impact initiatives, and end it without any significant impact on loan growth, membership growth, service delivery, or revenue.


My experience is that the most successful credit unions do a better job at prioritizing focus and activities. They know how to say “no” to the right things. These leaders understand that they lack enough resources to do everything, and they want to commit their teams to those activities that will have the greatest impact on their key strategic priorities, such as growth, profitability, and member service. The to-do lists of these teams are shorter, and more focused. True, they may lack some products and services, or some of the latest technological bells and whistles, but they succeed because their team has a clearer focus and more energy to pursue activities that have the greatest opportunity for impact.


Zen leaders create Zen environments


Zen leaders understand how to focus energies and resources to those tasks that best fit the requirement of strategic success. Besides leveraging focus and resources more clearly, this approach avoids a great deal of frustration and dissatisfaction for themselves and their teams.


I call this “Zen leadership” because it emphasizes rigorous self-control, reflection, practice, insight, and commitment to the benefit of the organization and team. The problem is that many of today’s leaders are so focused on that long list of to-dos that they fail to think strategically – above the day-to-day minutiae – and consequently they spend less time developing their people and removing obstacles for their team. The pursuit of Zen credit union leadership includes mastery over conflicting priorities.


Prioritizing means you consistently think strategically, with long-range vision and knowledge of your organization’s highest priorities to see and determine which tasks are more important at each moment. Zen leaders give those tasks more of their attention, energy, and time. They help others focus on what is important at the expense of lower-value activities. Prioritization is about making choices about what to do and what not to do. To prioritize effectively, you need to be able to recognize what is important, as well as to see the difference between urgent and important. Here are a few ideas on how to improve your Zen focus:


Clearly identify strategic priorities. Keep this list high-level and short. This is the organization’s “come hell or high water” list of results that have to be reached. Examples might include profitable loan growth, deeper member relationships, or organic membership growth. Focus the team’s activities on these high-value strategic priorities. These activities should dominate the team’s focus and conversations.

  • Expeditiously finish all the highest-impact, key strategic activities first.
  • Consider the net strategic impact of an item – what’s the worst that could happen if a low-level priority doesn’t get accomplished right away?
  • Ask for specific deadlines and quantify how activities specifically support the agreed-upon key strategic priorities.
  • If you report to multiple leaders and feel unsure how to prioritize, ask the group to decide the order of priority. Zen leadership requires honest assessment and feedback on what the team can realistically accomplish and whether or not something should be pursued.
  • Set aside time to frequently discuss and review progress toward the key strategic priorities. Time should be allocated and used in board meetings and team meetings across the organization to review and focus on key strategic priorities. Otherwise, focus will fade, as people tend to drift back to their operational comfort zones.
  • Hold yourself and others accountable for maintaining a strategic focus and accomplishing those “come hell or high water” commitments first.

If you consistently practice Zen leadership, you just may find Nirvana. What is Nirvana? Spiritually speaking, Nirvana is a state in which suffering has been “extinguished.” Credit union Nirvana exists when your organization is consistently achieving strategic objectives, and team members feel successful, having accomplished more and felt less pressure to spend time chasing an endlessly long, lower-impact to-do list.


Why it matters


There are a lot of credit unions that I deem “safe and stuck.” They’re well-capitalized, but they aren’t growing or generating the earnings they will need to keep up. Unless they change, they will be left behind at some point. The world we operate in is rapidly evolving. Successful credit union leaders have the discipline to focus first on key strategic issues and spend less time hanging onto actions that generate mediocre returns. They have the courage to limit exhaustive to-do lists. They have the courage to say “no” to many things, and find more time to focus on those things that are the most critical to their survival. While many chase long to-do lists, successful leaders chase the strategies that really matter for their members, the credit union, their team, and their community. There’s only so much time. For what will you be known? Focus on that and get after it.

Small Credit Unions, The Silent Majority

Posted by Scott Butterfield on February 23, 2017 at 6:10 PM Comments comments (0)

In many ways, today’s small credit unions resemble the “little guy” the credit union movement fights so hard to recognize and serve. As of September, 71.9 percent of our 5,966 credit unions are considered “small,” with assets of less than $100 million. Last year, I personally visited more than 35 small credit union boards and management teams for strategic planning sessions, credit unions located across the country in both urban and rural environments, and representative of all types of membership charters. My travels put me in a unique position to listen to and observe needs, wants – and, increasingly, frustrations.


Frustration is high (and growing)


Smaller credit unions are frustrated over a host of issues. The regulatory burden remains a huge frustration, of course, but I often find it’s more than that. Two other big frustrations include:


Competition. This comes naturally from market forces. Everyone agrees, especially the little guys, that it’s harder to compete in today’s financial landscape. Small credit union leaders know that to be relevant long-term, they must be able to grow and generate sustainable income. In most cases, I find the apex competitor smaller credit unions face are the large credit unions located in their market. In some markets, there are three or four very large credit unions competing with an open field of membership, and – like it or not – this hurts the smaller (and even mid-sized) credit unions in that market.


Please understand, I don’t want to do anything to limit any of our credit unions, regardless of size – they all matter. But, I think we must at least look at, understand, and talk about the big elephant in the room. One best practice I see from time to time is a large credit union stepping up to help the smaller credit unions in the area. There are no strings attached; the larger credit union isn’t interested in merging the smaller credit union. It just wants to help, and sees it as another way to support the community at a different level. It’s a smart idea: a little bit of assistance can help smaller credit unions carve out their own unique niches, and smaller credit unions can sometimes help consumers the larger credit union can’t (or doesn’t want to).


Feeling left out. I’ve also found there’s latent frustration over the perception that many credit union trades and many vendors don’t care about small credit unions anymore. Small credit union leaders see all the attention the large credit unions get and believe it’s due to commensurate contributions of dues and fee income. The feeling is compounded by the volume of credit-union related content targeted to and/or about large credit unions.


I’ve written about this before, and believe me when I say that innovation at small credit unions is not dead. There are scores of small credit unions innovating, and many are among the movement’s fastest growing and most profitable. I encourage our trade associations and vendors to consider the amount of attention paid to smaller credit union issues. Like any good relationship, the more you invest, the more you get back. Make small credit union leadership feel respected and important, and their level of loyalty and participation will increase.


Next month, many of us will gather in Washington D.C. to Hike the Hill and advocate for credit unions. We have very enthusiastic and professional advocates in Washington, but they need our support. I agree with Jim Nussle and others that the current political climate presents a huge opportunity for credit-union regulatory relief. None of us, small or large, can afford to miss this opportunity, and we all must get engaged if we want to be successful.


Small credit unions are a very big part of our advocacy picture. Because small credit union leadership is “closer” to their membership, the member stories they share with legislators may be more authentic, more clearly articulate the credit union’s role in serving the middle class, and their collective voice more closely represents our majority. I believe that in today’s political climate, the more authentic we can be, the better our chances to effect change.


Small credit union accountability


It’s not only the trades and vendors that need to challenge the status quo. We need to see more small credit union leaders sitting on state- and national-level boards and committees to make sure their unique voices are heard. This is easier said than done; it’s a big investment in time for small credit union leaders who are up to their eyeballs in operations and compliance duties. Regardless, they need to make the investment if they want their voices heard. To influence change, you need to be at the table.


Small credit union leaders also need to support those programs and services that are currently available to them. Several leagues have already recognized the need to create forums for smaller credit unions – not just to “network,” but to provide strategic educational sessions unique to the challenges faced by small to mid-sized credit unions. Nothing is more frustrating for our trade associations than creating valuable, small-credit-union-focused events and not having enough people participate to justify the effort. I am privileged to work with credit union leagues and other trade associations that provide excellent education opportunities for smaller credit unions. I can tell you that many of the credit unions engaged in these small credit union programs are thriving and among the most successful credit unions in the country. Smaller credit unions can and do succeed, but they must get involved.


Gut check


We need to ask ourselves how much small credit unions matter to the credit union movement. Personally, I believe they are the heart and soul of our space. I’m not discrediting all the good work done by larger credit unions, and I know I will be criticized for saying it, but it is what I believe. Our “movement” becomes an “industry” without a healthy population of smaller credit unions.


If we believe small credit unions are vitally important to our space, I hope we can do more to collectively make serving and supporting them a higher priority. Our movement is stronger when we are all on the same page. It hurts our collective when portions feel unimportant or irrelevant. I believe there is opportunity to increase engagement through better inclusion and support.

Politics, credit unions, and my dad's hands

Posted by Scott Butterfield on December 7, 2016 at 10:25 PM Comments comments (0)

It’s been a month since the election, and like many people I’m still shaking my head, trying to make sense of what it will all mean. Before I get into this too deeply, I should state for the record that I supported neither candidate and spent Election Day knowing full well I was going to be disappointed, regardless of the outcome. I’ve never been a straight party-ticket person, as I tend to see many different sides to an argument, but it’s become even more challenging as the political landscape continues to polarize.

I’m not blue or red – I’m a credit-union man

I grew up in Utah, the reddest of states. But before you judge, I also grew up in the bluest of lower-middle-class working families. My dad worked two jobs, just so we could scrape by. It was my dad who first introduced me to credit unions, via his tiny $3-million-asset-size Copper Mine Employees Credit Union. Dad personally took me to the credit union to help me qualify for membership and to get my first auto loan. The branch was located near the mine. Dad met me after his work shift wearing overalls, black steel toed boots, and sporting greasy hands – hands I knew had been washed but would never be “clean,” no matter how many times my dad washed them. Together, we walked in to the credit union.

In spite of how my dad was dressed, he was treated warmly, made to feel very important, and treated with a lot of respect. The loan officer proceeded to explain to me what a not-for-profit, financial cooperative was, and how it was through my dad’s savings that I could borrow the money. The experience was priceless. The loan officer explained why it was so important to pay the loan back. I had no credit, and the credit union, my dad, and the co-op were taking a chance on me. If I failed to pay, I would let them all down. Of course, the best financial advice happened after we left the credit union office when my Dad told me that if I didn’t pay the loan on time, he would “kick my ass.” Did I mention my dad was a Navy man, too?

My dad and I didn’t always see eye-to-eye – especially about politics. He was always making the argument in favor of the “little guy” – the person who worked long hours for mediocre pay, people whom nobody seemed to care much about anymore. Frequently, I made the opposing argument for progress and business. Of course, that led to my mock-banishment, having been told to never again mention the name of Ronald Reagan in my father’s house (and, of course, it was over Thanksgiving dinner). I know my dad was very proud of me, but sometimes he had a hard time trying to understand my desire for what he perceived as a “pencil-pushing” job. His perception of business people was that they were non-caring, profit-before-people “management.” My dad’s experience with business people, or political “know it alls,” was mostly negative, as it usually seemed to lead to closed plants and negative consequences for the “little guy.” The one saving grace for me was that I had found my way (career) into credit union land – and he knew that credit unions existed to help the little guy. That helped, and my dad was happy to see me focused serving through my activities at the credit union.

My dad isn’t here anymore, but I know he’d be happy to know that I’ve found even more ways to help the little guy. Today, I spend a good part of my time dedicated to helping hardworking people with low- and moderate-incomes who are credit-challenged, immigrant, or otherwise completely overlooked by banks (and even some credit unions). There are ongoing efforts across the country focused on helping hardworking non-citizens gain affordable access to credit and citizenship status, helping single mothers receive financial education and access to non-predatory financial services, helping blue collar families living in the rust belt who have lost higher-income wage jobs to offshore relocations. These are good people who live in states neatly defined as either “blue” or “red,” but our efforts to help them should be “purple.”

Why it matters

Unfortunately, it’s human nature to judge others. This judgement gets in our way of helping good people who may not see the world through “our” lens. Regardless of who we are, our lives and our beliefs have been shaped by our experiences. It doesn’t mean we have the right perception, but it becomes our perception, none the less. I see it too frequently in credit union land, where judgement gets in the way of helping immigrant consumers who are viewed first as “illegal” and not worthy of a credit union helping hand. I see it when lower-income and credit-challenged consumers are unfairly judged for poor financial decisions they have made, and even their “redneck” lifestyle. Unfortunately, it’s become acceptable to make fun of the lower-class “Walmart shoppers.” Again, I see and hear unfair judgements all the time in credit union land. The more it’s directed at the “undesirables,” the more we risk losing our claim that we’re here for the little guy.

There are many lessons we’ll gain from the outcome of this election. For me, I hope it was a wakeup call for anyone in our space content to judge the millions of consumers who need the financial assistance of a credit union, including immigrants who don’t speak our language, low-income people in urban cities who could not live without some form of public assistance, and blue collar “rednecks” who are trying to cling to what they have – even though it isn’t very much. It includes the proud, hardworking common laborer who lost a better life when the plant or coal mine closed. It includes the people of low means and single working mothers who count on low-cost access to food and supplies at Walmart.

I’m not red or blue – I’m a credit union guy. Call me old fashioned, but I believe that credit unions exist to help underserved consumers wherever they live or work. Regardless of blue collar or white collar, urban or rural, citizenship status, income status, educational, credit status, race, religion, or sexual orientation. There are great credit unions in our country that serve each of the categories I just listed, and because of their commitment they are more relevant than ever. Just like learning to understand my father (and he me), we must understand that our members (and potential members) are a sum of their life’s experiences. We may not understand their frame of reference, but the bottom line is that we need to remember to recognize, listen to, and value them. We need to stay aware of their needs and not take them for granted. We need to be more careful with judgement.

So many people today feel underserved and overlooked. I think we would all be wise to rethink our roots and remember why credit unions were chartered. If you believe that credit unions are most relevant when they serve underserved and overlooked populations, I hope you’ll reexamine your perspective on what you believe to be true about those underserved groups. Find ways to reach out and understand what makes them tick. Find out what they find important. If you want to serve them, make sure they know that you recognize them, hear them, and above all value them – even if they don’t share the same life experiences and beliefs that you do.

When it comes to serving underserved and overlooked communities, credit unions have an abundance of opportunities to make measurable impacts for the little guy, measurable growth and profitably impacts for the credit union, improved differentiation in a hyper-competitive market – even political advocacy leverage – all while finding more ways to seek out, understand and serve the little guy.

If I could sit down one more time with my dad, you can bet we wouldn’t waste any time arguing politics. But I would definitely take time to report back on my efforts to serve and respect the little guy. I would thank him for the greatest advice I could have ever received.


To Err Is Human; To Innovate, Divine

Posted by Scott Butterfield on December 7, 2016 at 10:20 PM Comments comments (0)

Late last month at University of Phoenix Stadium in Glendale, Ariz., a much-anticipated NFL matchup between the Seattle Seahawks and Arizona Cardinals left football fans across the country shaking their heads – some in amazement, some in disgust. The game was a defensive masterpiece between division rivals, neither team having scored a single touchdown when it went into overtime tied at six.

For those who don't follow football, overtime scoring is confusing and merciless. A coin toss determines which team will try first. An opening touchdown wins the game. An opening field goal affords the competing team a chance to score. An unsuccessful scoring attempt followed by a score of any kind by the competition loses the game. The stakes are high and there is zero room for error. Teams rely heavily on their kickers to get the job done. Imagine the pressure.

The Cardinals won the coin toss and began moving downfield. When a touchdown seemed unlikely, kicker Chandler Catanzaro set up for a routine 25-yard field goal. Inconceivably, he missed, the ball boinking off the upright and sailing back onto the field.

The Seahawks had a chance to win with minutes left, moving the ball to within range on the other side of the field. Seahawks kicker Steven Hauschka set up for the 28-yard attempt. Hauschka, who has career accuracy of almost 90% and is able to kick successfully from more than 50 yards, had not missed a field goal all season. But he missed that one, his face watching the trajectory of the ball as it swung wide, a mirror of heartbreaking anguish.

The overtime clock expired and the game ended in a rare tie. Players left the field stunned, with some defensive linemen hooked up to IVs after playing more than 90 snaps in the desert heat to give their team a chance to win. Within minutes, as was expected of them, the coaches stood separately in front of assembled media to answer questions and help make sense of the evening's grueling and bizarre efforts. When a reporter asked Cardinals coach Bruce Arians what he planned to say to Catanzaro when they next spoke, Arians didn't hold back: “Make it. He's a professional. This ain't high school, baby. You get paid to make it.”

Seahawks coach Pete Carroll took a different approach when asked about Hauschka's state of mind after the game: “Just checked in with him. He's been making kicks for us for years, and I love him, and he's our guy.”

Football is just a game, I know, but sports often mirror the triumphs and tribulations of everyday life: The elation of a successful endeavor and the agony of failure rolled into one 60-minute (or 75, in this case) package. Expectations, stress and extreme emotion can bring out the best in us, or the worst, and these coaches demonstrated two very different leadership reactions. Who would you rather work for?

Leaders, how do you handle the mistakes of others?

No one purposefully screws up. We’re not talking about constant mistakes that may reflect a careless attitude or lack of training, which are different issues. Most people have good intentions, and they feel badly when mistakes happen.

When people in your care make mistakes, how do you respond? Do you use it as a coaching opportunity or do you fly off the handle and act like a bully? Your pattern of responding to these issues when they occur often reflects the current foundation of your company's culture. How is your organization when it comes to taking risks, stretching and growing? If you react badly to a routine mistake, do you really expect your employees to be willing to step outside of their comfort zones?

Take a moment and reflect on how frequently your team members take risks, stretch and try new things. Are they allowed to make mistakes? Having worked in poor, fair and great cultures, I can tell you that great cultures are innovative: Leaders see consistent ideas put forth and are willing to try new things. People at these organizations know they have the support of their leader. They stretch without fear of failing. These organizations are thriving and great places to build a career. Poor cultures rarely see new ideas put forward, and people there rarely do more than what is spelled out and will not stick their neck out for anyone. When they make a mistake, they know they’re on the chopping block and the thought consumes them. These credit unions aren't going anywhere and it's hell to work there.

People who love their jobs play better than those who fear their boss.

Why it Matters

Credit union leaders who respond poorly when mistakes are made create very risk-adverse cultures. Employees in these cultures avoid mistakes at all costs and therefore will never stretch and grow. They won't try new things or innovate and the credit union becomes irrelevant.

Credit union cultures that are not consistently stretching and growing are doomed to fail. These organizations will never innovate or change enough to remain relevant. Persistence and determination prevail. Successful leaders know that persistence always wins.

As Winston Churchill said, “Success is stumbling from failure to failure with no loss of enthusiasm.” Catanzaro and Hauschka were back at it during the following week's game and your employees will be back at it too. Show them that stretching, growing and, yes, mistakes, are all part of the credit union game.


NCUA: Thy right hand dost not know thy left

Posted by Scott Butterfield on December 7, 2016 at 10:20 PM Comments comments (0)

Disorganization and contrary schools of thought are not uncommon within organizations, especially large ones. The idiom “the right hand doesn’t know what the left hand is doing” is often used to describe these situations. Sometimes these occurrences are harmless, easily corrected, and don’t create much harm. In other situations, great harm can occur to the people subjected to the disorganization, as well as to the organization that is disorganized.

I believe there is cause for concern with mixed messages about the NCUA Low Income Designation (LID). On one hand, the NCUA recognizes and addresses the uniqueness and importance of the LID credit unions in the space. On the other, there are examiners in the field who do not seem to understand these differences, and try to lump all credit unions, regardless of designation, into the same mold.

Our team spends a great deal of time working with LID credit unions. Small, medium and large, urban and rural, from Hawaii to New York and South Dakota to New Orleans, creating strategies and addressing issues that face these unique credit-union charters.

Among these LIDs are some of the best-run, high-impact, thriving credit unions. They serve many consumers that mainstream financial institutions will not serve (including some credit unions). Their business model is different. These credit unions price effectively for the higher cost and risk associated with serving low-moderate income consumers. Higher loan yields and fee income more than compensate for higher operating and provision expenses.

The LID credit union group is large and growing. Our team is contacted regularly by emerging LID credit unions and leagues to address the needs and identify potential strategies for this unique group. Today, there are 2,292 LID credit unions (38.1 percent of all credit unions). Their potential impact and success is vital for our movement as a whole.

The right hand

On the positive side, our Federal regulator promotes LID credit unions, making it easier for more credit unions to be so designated, and supports valuable regulatory relief for these credit unions. Thanks to regulatory relief, LID credit unions have been able to access hundreds of millions of dollars in secondary capital to fund outreach to lower-income communities – funding growth, expanding business lending, and providing capacity building grants – and provide Economic Development Specialists to help smaller credit unions (many of these great people are my friends).

In 2010, the NCUA issued the supervisory letter.[i] The letter was incorporated into Chapter 23 of the NCUA Examiners Manual – the chapter on LID credit unions. The guidance discusses the characteristics, benefits, and unique challenges of LID credit unions and it further states: “Examiners should remember; however, all federal credit unions have a continuing obligation to meet the financial service needs of people of modest means…Examiners should consider these member characteristics and take them into account when they evaluate LICU loan portfolios as well as the products and services these credit unions offer.”

During her tenure, NCUA Board Chairman Debbie Matz was credited for saying, “LID credit unions are lending more than other types of financial institutions and growing stronger.” She also noted that low-income credit unions are “national trendsetters” and that “the collective success of low-income credit unions demonstrates that credit unions can do well while serving people of modest means.”

On the right hand, the NCUA has made significant and impactful resources available for credit unions intentionally serving lower-income consumers. I, for one, sincerely appreciate the NCUA’s efforts in supporting low-income credit unions!

Meanwhile, on the left hand…

I’ve heard repeatedly from many credit union leaders that their examiners don’t seem to understand LID – and don’t care to. They don’t seem to understand the business model. An examiner once said to me, “Why would a credit union ever want to lend to someone with bad credit, someone who has obviously demonstrated they don’t care to pay their bills on time.” I suggested to this examiner they go back and read the 2010 NCUA letter to get a better understanding of the lower-income target market these credit unions were chartered to serve.

The most prevalent is the lack of understanding of how the low-income business model works. LID credit unions tend to have higher operating and provision expense ratios. It’s a fact of life: serving a lower-income (and credit-challenged) consumer costs more. It’s a high-touch business. It has to be to provide the right skill development and manage risk. It shouldn’t be a shocker that provision expenses are higher as well.

However, these credit unions also tend to have a much higher average loan yield and fee/other income, which compensates for the higher operating and provision expenses. I frequently see credit unions that have to run the gauntlet with their examiners because their operating expenses or provision expenses are higher than their NCUA peer group – even though they have a higher ROA and net worth than their peer. I don’t believe you can fairly compare functioning LID credit unions with their NCUA non-LID asset peer group.

Now, I believe there is fair criticism for LID credit unions who have higher expenses, but don’t have the higher loan deployment, loan yields, or fee income – which would be an unsustainable business model. These credit unions have a problem that needs to be fixed, or they won’t remain sustainable for long. I find that many of these credit unions don’t have an expense problem as much as they do a pricing problem. Yet, they are “told” to focus on the expense problem.

Why it matters

It’s important for field examiners to understand the differences and uniqueness of the LID model. These credit unions can’t always be pigeonholed with non-LID asset sized peers. If an examiner tells a low-income designated credit union not to underwrite any higher-risk loans (I hear this from credit unions frequently), they might as well say find a merger partner and an exit strategy. Being an LID credit union isn’t easy, and sometimes it’s not for the faint of heart. But like any other risk we take (we are in the risk business), it must be accompanied with a solid business plan, sustainable pricing, and strong risk management – not risk avoidance.

Credit unions have an important role to play in this as well. Some receive very fair scrutiny from examiners when they lack an appropriate understanding of their own model, and lack the business plan needed for higher risk-management. They need to understand their business model well enough to defend it.

As a movement, I believe our single biggest differentiator (bigger than the cooperative structure) is that we have thousands of institutions specifically designated to serve millions of lower- to moderate-income underserved markets. If these goes away, the power of our collective voice is diminished.


Your legacy, and the changing of the credit union guard

Posted by Scott Butterfield on December 7, 2016 at 10:15 PM Comments comments (0)

I don’t know about you, but I’m having a difficult time seeing credit union friends nearing the end of their career and heading off into retirement. Over the years, I’ve been blessed to work with some remarkable credit union people, amazing people who helped me and set a great example for me to follow. Friends like Bob Schumacher. I had a difficult time seeing Bob retire (although it’s great to still see his mug on some of the CUDE workshop posts). Bob, or “Schu” as he is affectionately known, has helped a lot of credit union people, including me. It was Bob who reached out to me many years ago and encouraged me to become a credit union consultant. He believed in me at a time when I really needed it. Bob was our very first client. It was also Bob who encouraged me (incessantly) to complete the CUDE program. I did, and it definitely left a lasting impact on me that has shaped the type of work we do on behalf of underserved communities here at Your Credit Union Partner. Simply put, Bob helped me help others.

Another I’m going to have a hard time with is the retirement of Richard Cooper, President/CEO at Mendo Lake Credit Union. Don’t get me wrong: I’m happy for him and he definitely deserves a great retirement! It’s just that it’s been so fun to collaborate with him and his team. They’re passionate and have impacted tens of thousands of underserved consumers, had remarkable growth, and received more than $5 million in CDFI grants.

I’ve just listed two that are top-of-mind, but a good chunk of our colleagues will retire in the next few years. Thinking about Bob and Richard led me to reflect on their legacy and my own.

What is your legacy?

If you are or have been a leader in the credit union movement, you’ve created a legacy. Hopefully, it’s a legacy you can be proud of. We all have different talents and pursue a wide range of different things that are important to us. From my perspective, here are a few examples of the types of accomplishments worthy of a legacy:

Inspired and developed people. In a movement built on “people helping people,” this should be a top priority. Did your example inspire others to develop, grow, and become better people? Or did you support a toxic culture that churned through talent and burned out really good people? Did you encourage and challenge those around you to stretch and try new things? Or did you take most of the credit for yourself? As Sir Richard Branson has said, “have you trained people well enough so they can leave, but treat them well enough so they don’t want to?” Or have you withheld training opportunities because they cost money, or because staff may become more educated than yourself?

Developed a thriving credit union (or department) that will be relevant for the next 10 years. Every now and then, I’ll hear “the CU just needs to make it for another three or four years until I retire.” This is always disappointing, and it’s very self-serving. This isn’t people helping people – it’s people helping you, and it’s not right. Is your credit union well-capitalized, profitable, and growing? Or is it just floating along, treading water? Has your credit union carved out its unique niche; has it become number one or number two in your local market? Do you have the right people in place to fill your shoes, and do they have the skill sets needed to take the credit union forward? Or will the next leader have to make broad staff changes when they arrive to get the talent they need?

Made a significant mark on the community. We serve many different communities that can be defined by geography, employers, and associations. Regardless of how you define community, have you made a positive mark for the good? Has your credit union made a meaningful and material difference in the lives of your membership and your community? Are people better off because you were there? Of course any credit union can probably say that it benefited members with lower fees and better rates. In this regard, we are the gold standard. However, I challenge you to look a little deeper. During your tenure, were you able to help people that others didn’t want to? Did you encourage your team to help people who were experiencing challenges and may not have had anywhere else to turn? Did your organization work with other organizations to fight a community problem, like hunger, homelessness, or poverty? When you are gone, how long will your community remember your name or impact?

Why your legacy matters

I’m one of those old-timers who believes the credit union space is a movement. A hundred-year movement that is still worthy of great effort and lofty goals. To me, credit union service is so much more than a job, and I believe that under the right leadership, others will see it that way also. It’s a movement that has improved the lives of millions of people and thousands of communities. More than ever, great leadership is needed to carry our torch forward for the next 100 years. We need great leaders who place people (including staff) before profits, build strong and viable organizations and fight for better communities, and who will champion the underserved.

I have a long list of credit union leaders and friends I admire, people who have positively impacted my life: Filene, Bergengren, Herring, Mikkelson, Moody, Earl, DeFilippi, Schumacher, Schillios, Cooper, Fonseca, and dozens of other amazing people. I can’t imagine where I’d be without their leadership and examples.

The torch is being past to many of our young and up and coming leaders. To these new leaders, I issue a challenge to build upon our movements great legacy and take it to the next level. You’re our great hope. It’s in your hands to make a lasting mark on our movement and sustain us for the next 100 years. We believe in you!


Are you ready to protect and grow your loan portfolio in 2017?

Posted by Scott Butterfield on December 7, 2016 at 7:55 PM Comments comments (0)

As many of us enter peak strategic planning season, now is the time to assess our loan portfolios and field of membership to identify the greatest opportunities for growth and profitability. One key driver? The world of new and used auto loans.

Recent Q2 2016 trend reports indicate the space continues to be a strong source of loan growth for credit unions. In fact, the data reveals:

1. Credit Unions experienced the largest year-over-year growth of outstanding loan balances (Q2 2016 vs. Q2 2015)

2. Credit Unions gained used car loan financing, reaching 24.9 percent of all loans

3. Both 30- and 60-day delinquencies remain flat to previous year

One of the biggest trends highlighted in a new Experian report is the shift to used vehicles by customers with excellent credit, thanks in part to the wave of off-lease vehicles coming back into the market.

So what are the implications for your credit union?

Take a moment to consider your vehicle loan growth during the past two years – your results during a peak vehicle sales period. How did you perform versus your peers? Did you meet your expectations? Who did you lend to – prime, subprime? How are you positioned versus the competition? Now consider how you would feel if you were to lose even a part of that growth in 2017. Now is a good time to ask a few questions:

• How might a more competitive lending environment impact your goals and bottom-line next year?

• What if more non-traditional lenders took a share of your auto loans?

• What is your lending plan for riskier borrowers? Is any potential impact enough to start thinking about a “Plan B”?

• What is your Plan B?

Most credit unions, especially smaller credit unions of less than $100 million (which 74.1 percent of us are), had to work hard, during a “peak vehicle selling” period to have fair-to-middling earnings. Nobody believes competition for vehicle loans will be easier in 2017. Credit unions will find even more competition for vehicle loans from traditional and non-traditional sources including the buy here/pay here lenders.

Work smarter and have a “Plan B”

With it being strategic planning season, where we will be looking at environmental reviews and considering potential threats and opportunities, it’s a natural time to continue our loan growth conversations and consider viable Plan B’s.

Our team will be facilitating more than 30 strategic planning sessions, presenting in small, medium, and large credit unions, coast-to-coast. Here are some of the Plan B’s we will be discussing:

Utilize data to find more opportunities with existing members. Successful execution of this plan runs deeper than just counting on the member-facing staff to cross-sell loan recaptures as they see them (probably every other financial institution your members utilize will be doing this also). All credit unions should look deeper and seek professional guidance. Strategic partners like Experian help credit unions improve their ability to differentiate Members. They have unique data that can help you offer-up products that will resonate with the Member, through the channel they prefer to use. Specific to loan-recapture, the key is knowing you will save the Member interest or payment size. Experian’s auto loan tools bring you this so you to make firm offers of credit to the members you seek.

Use data to identify people who are most likely prepared to buy. Chances are your loan rates and terms are very similar to most of your competitors. Don’t forget the four “P’s” of marketing: price, promotion, product, and place. If your product and price are not unique in a very competitive market, consider improving the “place” and “promotion” components for success. One way to do this is to have your promotion ready and waiting when the consumer makes the decision to buy. This could include using data to identify potential clues that one of your members will soon be in the market to buy. Be the first to recognize this and respond, and you may have a better chance at winning the business. Experian has developed models specifically for this purpose, identifying the likelihood the Member is “in the market” for specific products. These tools can help reduce marketing costs and improve performance.

Increase your focus to other loan pools. Outstanding credit card debt has increased since 2011, with the average household carrying $16,048. Now may be a good time to dust off a credit card balance transfer program focused on revolving debt consumers. Expansion into other loan products brings your credit union the benefit of a more diverse loan portfolio.

Lend deeper for near-prime and subprime vehicle loans. In today’s competitive market, prime credit consumers nearly walk on water. Picking up some new business is more likely to come in the near- and subprime space. Like any other loan type in your book of business, there are associated risks, but there are also tools out there to help lenders select the right loans, then monitor and manage the risk. Sure, delinquencies will be a little higher, but so will your loan yield and fee income. If your shop is a small fish in a very big pond, you have to look to the subprime market for future growth. Beyond traditional risk scores, Experian can bring you additional pieces of data that can indicate risk to the low and sub-prime market, and help you manage risk. This includes non-traditional risk scores that draw on data beyond the typical credit file, as well as credit bureau attributes that indicate payment stress or recent balance and utilization spikes.

Why it matters

The strategic decisions you make now will determine your results during 2017 and beyond. Consider all of your options, and select carefully. Commit, but remember that you should always have a “Plan B” – especially at a time of tough and increasing competition.

We get to work with so many credit unions we consider best practices for loan growth, deployment, yield, efficiency, and net margin. There is one important thing these best-practice credit unions have in common: they are relentless at investigating a better way, always measuring their environment and adapting quickly as needed.