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Capitalizing on Credit Card Growth

Posted by Scott Butterfield on June 4, 2017 at 10:40 PM Comments comments (0)

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 (0)

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!