CUES Skybox

For Most Americans, Convenience Trumps Better Rates and Fees

2009-07-16T13:50:00-05:00

By Christian Mullins

Last month on CUES Skybox, Shari Storm made a brief yet effective statement regarding the credit union industry’s obsession with total market share. In short, she opined that there is no surefire correlation between size and long-term success. It was a small part of a larger conversation, but it was a reminder that credit unions remain a small, yet significant, alternative when selecting a financial institution.

Credit unions, on average, offer more favorable savings and lending rates and lower and/or fewer fees. These results are widely available in news publications, as well as on the Internet, for anyone looking to maximize their banking dollar. But this knowledge hasn’t translated to results. For many Americans, location continues to be the deciding factor when selecting a financial institution, leaving credit unions an inconvenient choice in many markets.

Currently, America’s almost 8,000 credit unions claim about 90 million members. This represents just over 29 percent of the United States’ estimated population in 2008, assuming that every member is an individual (which they aren’t) and there are no duplicates (which there are). Credit union membership growth rates do exceed that of the nation’s population, but even with generous statistical massaging, national membership penetration will likely hover around 32 percent in 2020.

The reason for this is simple: At the end of 2008, bank branches outnumbered credit union branches almost 5:1. Potential and even current members cannot help but notice the potential benefit of having a banking option near home as well as work. While credit unions may retort that online and mobile banking deemphasize the need for brick and mortar, the proof is in the pudding; when everything else is similar, location, and the convenience that comes with it, is the differentiator. Sometimes this favors credit unions, but most of the time it does not. Someday, shared branching may level the brick-and-mortar playing field, but that will likely require a standardization of primary signage at every location, a rebranding effort that will meet with widespread resistance.

There is one positive that can be inferred from all of this--members who cannot list convenience as the reason for banking with you want to be there. They are your core members, the foundation from which you will build future growth, and their belief trumps location; they won’t jump to another financial institution as soon as it’s convenient to do so. There is still a corner of the financial institution industry that enjoys brand loyalty, and credit unions are fortunate to occupy much of it.

Christian Mullins is a strategic analyst for the credit union industry and author of the CU Potential Blog.

Also read "Competitive Differentiation: From 'as is' to 'Will Be'

Learning is a Lifelong Occupation

2009-07-16T10:11:00-05:00

By Lisa Hochgraf

This famous painting done by Paul Gauguin in 1897 visually illustrates the three questions that comprise the painting's title: Where do we come from? Where are we? Where are we going?

When I waxed philosophical during the speech I gave at my high school graduation, I answered all of these questions with one word: learning.

We come to the present knowing what we do because we have learned. In the present, we are learning every day how to better manage our personal lives and our work. And as we move into the future, we will keep learning. We have to, or we'll get left behind.

In my high school speech, I told my fellow graduates: "Because the possibilities for learning are endless, we cannot predict exactly what each of us will learn. Still, we must prepare ourselves to learn. We must challenge ourselves to learn."

What have you challenged yourself to learn lately? What has been your most important learning experience to date?

Lisa Hochgraf is board/operations editor for CUES' Credit Union Management magazine and edits the CUES Tech Port e-newsletter, News to Go. (See a photo of Lisa at her graduate school graduation in this post.)

Professional Development Tidbit: 2009 CIO Curriculum

2009-07-15T09:04:24-05:00

Posted by Lisa Hochgraf

I'm a bit remiss in pointing out that one of my favorite annual articles by the fine folks over at Cornerstone Advisors ran in late June on the irreverent, but always insightful, GonzoBanker. (The illustration on this post--taken right from the article--should give you an idea of the fun the GonzoBankers have even while addressing serious topics!)

"2009 CIO Curriculum" talks about one of my favorite things: what CU executives (in this case information technology executives) might want to be learning. Specifically, author Quintin S. Sykes names five main areas of recommended study for CIOs this year--communication, information management, imaging/workflow, payments, and software as a service/cloud computing--as well as where CIOs might look for such training. Do these suggestions match your plans?

If you're a CUES or CUES Supplier member and want to check out what's changed since last year's recommendations, log in to "Survival Skills for CIOs 2008 and Beyond" on CUES Tech Port, the e-newsletter published by CUES and Cornerstone (that I edit). For password assistance, please e-mail cues@cues.org.

Full disclosure: You can also find out about Cornerstone's business and technology services via the CUES Web site.

Lisa Hochgraf is a CUES editor.

Zombie Attack: Are you Ready?

2009-07-13T09:51:00-05:00

By Lisa Hochgraf

Nothing like a discussion of zombies to get my attention. On a recent drive back from one of my early morning lap swims, NPR was talking about the new Norwegian flick about Nazi zombies, Dead Snow, and how the undead are back in vogue.

Still, I never thought "Zombie Attack" would be the title of an article in my catch-up reading today of Continuity Insights magazine's May/June issue.

"A real risk?" the article starts. "Maybe not, but there are actual lessons to learn from this fictional threat. And using a zombie attack as an exercise scenario or the kick-off for a brainstorming session might help make business continuity cool (gasp!) or even fun for a change."

The inspiration for the article was "Zombie Attack: Applying Business Continuity Professional Practices to Attacks by the Undead," a session at the magazine's recent conference based on the book World War Z, a New York Times bestseller about a zombie outbreak caused by a virus.

I'll let you read the details of how a zombie attack makes a great continuity planning case study in the article. However, I have one more thought to share before I sign off. That is this: Zombies may have gotten my attention, but there's a lot of real business continuity work to be done. The same issue of Continuity Insights also includes articles about threats from being on Twitter and the swine flu, as well as a discussion of "how many continuity plans do you need and what are the different kinds."

Here are some resources from CUES on continuity planning:

Credit Union Management's business continuity planning archive
CUES Tech Port's disaster recovery articles
Playback of the Webinar "Increased Urgency: Finalizing and Activating Pandemic Plans"
CUES members can access sample disaster recovery plans and "immediate" disaster plans on CUES Members Share (For password help, please e-mail cues@cues.org.)

Lisa Hochgraf is board/operations editor for CUES' Credit Union Management magazine and edits the CUES Tech Port e-newsletter, News to Go.

Shared Appreciation Mortgage: Help or Hindrance?

2009-07-09T09:30:00-05:00

Posted by Lisa Hochgraf

In late May, NCUA issued a legal opinion letter stating that credit unions are permitted to offer shared appreciation loan modifications for members struggling to make their mortgage payments so long as these modifications are conducted in a safe and sound manner.

A shared appreciation mortgage is a home loan offered with a very low interest rate, or that forgives some principal, in exchange for a share in the home's profit at its sale. In other words, with a shared appreciation mortgage, homeowners are offered the chance to write down a portion of their mortgage debt but, at the same time, they are required to share future appreciation gains with those who helped them out.

In the current economy, anything that helps CUs help struggling members is probably worth a good look. (Read "Responsible Debt Relief" from Credit Union Management magazine, which describes RIT Professor Robert Manning's take on why forgiving some debt may well be worth it.) On the other hand, shared appreciation mortgages are not without their drawbacks.

For example, as I read up on SAMs, I found it likely they could face the same problem faced by another kind of specialty mortgage--the reverse mortgage: a high potential for backlash.

Some people charge that the fees associated with reverse mortgages are too costly for borrowers--and that the children of seniors who take out a reverse will be disappointed when they find out that all the equity in their parents' home has been mined before they could inherit that stored wealth. (CUES members can download our reverse mortgage briefing here; non-members can download the briefing's executive summary. Also read Christian Mullins' Skybox post about reverses.)

In similar fashion, consumers could be disappointed when it actually comes time to give their shared appreciation mortgage lender a portion of the proceeds from their home sale.

But I don't consider myself a true lending expert. So I also checked in about SAMs with someone who is: CUES member Bill Vogeney, SVP/chief lending officer at $2.8 billion Ent, Colorado Springs. (Read my recent post about Vogeney.) Here are his thoughts on the matter:

"We're not in one of the ground zero states, so shared appreciation mortgages are not on our front burner as they might be for one of the credit unions in Florida, California, Arizona or Nevada.

"Still, I'd be concerned about what kind of incentive the borrower would have to keep their house in tip-top condition. Would they invest $7,500 in a new roof in three years? Would they change the carpeting if they knew the credit union would get half the increase in the value of their home by doing so?

"Better yet, does this seem like a good idea, but one that few consumers would agree to? Foreclosures today are happening to people:

"1. Who lost their job. A SAM might not allow them to stay in the house anyway, if they have no income.

"2. Who bought way too much home to begin with, hoping to flip it. When they can't afford the mortgage even being fully employed, and the allure of the big profit goes away, will they be willing to stay in the home for the long haul?

"3. Who are only looking at today's value, that they're upside down. It's always happened with auto loans: People wake up one day, try to trade, and find out they're $5,000 upside down. They make a very short-sighted decision. Not sure that the short-sighted thinkers will look to shared appreciation as a solution.

"I could be way wrong," Vogeney concludes. "It could be the solution for many credit unions. It probably is worth considering for those credit unions in the worst-hit areas."

What's your take on shared appreciation mortgages? Help or hindrance?

Lisa Hochgraf is board/operations editor for CUES' Credit Union Management magazine and edits the CUES Tech Port e-newsletter, News to Go.