Posted by Amanda Atcheson, VP, Marketing and Brand Strategy, CO-OP Financial Services on 9/17/2019

Rapid changes in consumer, fintech and payments trends make this a critical moment for the credit union industry. Staying ahead of the opportunities and challenges requires us all to refresh our thinking and collaborate on strategies that will accelerate growth and transformation.

CO-OP’s complimentary Roadshows provide an ideal opportunity for credit union executives and their teams to escape the routine and spark new ideas in an energizing, supportive environment.

CO-OP will be hosting an upcoming Roadshow on October 10th at the Marriot Marquis in Houston, Texas. If you haven’t attended one of our Roadshows yet this year, here are five great reasons to put one on your calendar:

  1. Download the Latest Industry Updates

CO-OP’s leadership team and industry experts will share insights on the latest consumer and fintech trends impacting your credit union. At the Houston Roadshow, The Filene Research Institute will present their landmark research report, “The Credit Union of the 21st Century” uncovering the future of consumer finance that is being shaped by changes in membership needs, economic challenges and emerging technologies. It will provide a strategic planning guide on how to develop a more proactive and insights-based approach to your organizational strategy.

  1. Take a Master Class on Data Strategy

The right data strategy can help you identify and solve your members’ current challenges and future needs. The Houston Roadshow will feature a 90-minute Master Class on Data Quality, focused on the key questions, terms and learning related to data management and data quality. You’ll have an opportunity to assess your data-centricity, then learn how to build and activate your own data quality plans.

Here’s what one attendee had to say about the Roadshow Master Class:


  1. Get a Behind-the-Scenes Look at CO-OP’s 2019-2020 Product Roadmap

Get a closer look at the latest products CO-OP is delivering to credit unions specifically for their digital transformation strategy. You’ll see live demonstrations and sneak peeks of products we are developing, including MyCO-OP, CardNav and the new Developer Portal.


  1. Build Relationships with Industry Peers and CO-OP Executives Over Breakfast and Lunch

Collaboration is the lifeblood of our industry. Connect with other forward-thinking credit union professionals from the Houston area during our free networking breakfast and lunch. Members of CO-OP’s Executive and Product team will also be on hand to talk to you directly about your credit union’s unique challenges and opportunities.

  1. It’s Free!

CO-OP Roadshow attendance, breakfast and lunch, is complimentary for credit union professionals! And since it’s in downtown Houston, it’s easy to bring colleagues or your whole team. This is your opportunity to escape the day-to-day and contemplate the trends and strategies you want to inform and inspire your 2020 planning.

Click here to learn more and register. We look forward to seeing you there!

Categories: Business Partners, Education & Training
Posted by Mr. Bill Meyer, Communications/Public Relations, Credit Union Direct Lending on 9/9/2019

Credit unions are coming full circle in the current business climate that favors those who drill deep into niche markets, rather than casting a wide but shallow net. Technology has enabled businesses to locate ideal customers, reach them where they live, and speak their language.


That’s good news for credit unions like the $260 million Eagle Community Credit Union, located in Foothill Ranch, California. The credit union can’t compete head-to-head against the billion-dollar financial institutions in its market, but because of its success in niche lending, Eagle Community is enjoying double-digit loan growth and membership growth that is more than twice the peer average.


How did Eagle Community do it? The short answer is an untapped market -- mobile home loans.


However, the ability to capitalize on that market required the credit union to first build a strong technological foundation. At the top of the list was the need to consolidate loan origination systems.


“We needed one system that was not only user friendly, but powerful,” recalls Vice President of Lending, Bob Thompson. “Our short-term goal was to improve efficiency and production by simplifying the user experience for both members and staff.”


Thompson found what he was looking for – and then some – in the Lending 360 consumer loan origination system. He said his initial expectation was that the LOS would be easier to use and an integrated system would reduce errors and further increase efficiencies.


The system quickly surpassed his expectations when Eagle Community implemented Lending 360’s automatic decisioning, cross-selling and digital membership applications.


When Thompson arrived at Eagle Community in 2016, indirect auto lending was driving loan growth, and the credit union was already using Lending 360 to process indirect loans. As of year-end 2016, Eagle Community had respectable financials: ROAA on target with peers, 5.40% loan growth and a $1.1 million net profit.


However, the credit union was losing members. That wasn’t a good trend for a credit union with 75% of its loan portfolio in indirect autos.


Then, Eagle Community launched its mobile home consumer loan program. The resulting financials were pretty dramatic. By year-end 2017, loan growth had climbed above 30% and membership growth grew to 8.25%.


However, that growth rate was unsustainable on its previous LOS. Even though mobile home loans are processed like consumer loans, the platform made it very inefficient. Approval, processing and funding were manual and laborious processes that required loan officers to go back and forth with borrowers to relay loan stipulations and rates. Staff also had to create loan documents manually by enter information into PDFs.


Eagle Community fully converted to Lending 360 in June 2018. Now, top tier borrowers receive automatic approval, the system automatically populates rate, term and stipulation fields, credit reports can be shared between apps, and members can sign loan documents using DocuSign integration. Plus, once loans are ready to fund, loan documents are automatically generated by the system.


Eagle Community is now processing as much as seven mobile home loans a day, compared to just one or two on the old system.


“That’s a lot,” Thompson stressed. “It wouldn’t have been possible with our current staffing using our old processing method.”


“There was a learning curve, as our previous lending platform handled queues, documents and processing differently,” Thompson added. “But once some important decisioning changes were implemented, and key staff members began understanding the system, the resulting effect in all areas was noticeable.”


The new consumer loan origination system also allows the credit union to better manage its balance sheet and underwriting. Most controls to manage loan portfolios are outside lending systems, but with Lending 360, Eagle Community management can change parameters quickly and easily across all applications.


“It’s very user friendly on the back end,” Thompson said. “We can make adjustments as we go, instead of needing outside help.”


The stereotypical mobile home resident might sound like a risky prospect, but consider that as of Q4 2018, the median home price in Orange County, California was $799,000 and required a minimum qualifying annual income of $173,230. That limits many responsible, six-figure earners from entering the home mortgage market.


“There’s more mobile home business here than people realize,” Thompson said. “We have 180 parks in Orange County, representing more than 20,000 units. It’s an untapped market for credit unions. The average interest rate is about 6.5%, so there’s a lot of income potential.”


And when it comes to underwriting, mobile homes have another benefit: they appreciate in value. Because Eagle Community limits mobile home loans to a maximum of 80% LTV, losses are rare.


“We have about 320 mobile home loans with no delinquencies,” Thompson said. As of March 31, 2019, overall delinquencies were just 0.17% and charge offs were 0.44%.


Lending 360’s ability to populate fields automatically not only boosted efficiency, it also reduced underwriting errors that have helped maintain high loan quality.  The system also helps Eagle Community analyze the performance of each loan product category.  This includes the ability to run reports on products such as holiday loans, and separating them out from other personal loans.


“It’s helped us diversify that product, and others, because we know exactly how each is performing. That way, we know whether to change the rate or adjust underwriting,” Thompson explained.


Thompson notes that “we had our NCUA exit interview yesterday and they were pretty complimentary.  Our lending findings were very minimal compared to our last exam a year and a half ago.”


The system’s automatic document generation abilities have also allowed Eagle Community to grow another niche market -- energy loans -- safely and efficiently. The credit union offers loans to fund solar power, energy efficient window installation and roof replacement.


Shane Llinas, Lending Project Manager, who led the Lending 360 conversion effort for the credit union and manages the system, noted that they were able to create specialized forms within the system to manage the nuances of the niche energy loan market.


For example, Llinas programmed Lending 360 to automatically generate a UCC-1 form when finalizing an energy loan. That’s a legal document lenders file that gives them interest in the personal property of the borrower, which prevents them from selling the home upgraded by the loan without first paying it off.


“That process used to be manual, but now that the system automatically pushes documents, we get a huge improvement in efficiency and reduced risk of error,” Thompson said.


In January 2019, Eagle Community launched Lending 360’s new account origination tool, driving membership growth. Previously, members were required to print out a PDF of a membership application and mail it or bring it into a branch to establish membership before qualifying for a loan.


“Nobody wants to use snail mail or go to a branch anymore,” Thompson said. “It’s been a huge plus for us.”


Also in Q1 2019, the credit union began focusing on using the LOS’ cross-selling tools to increase credit card penetration and capture vehicle refinance business.


”We’re trying to take advantage of what the system can do for us, and train our staff to recognize that if the system presents an opportunity, it’s easy to generate approvals,” Thompson explained.


Lending 360 also produces reports on when staff cross-sells after the system presents the opportunity, which helps track performance and success rate.


“We can coach staff afterwards to improve their cross-selling, because we truly do have great products for our members,” he said. “We’re fairly new into cross-selling using the system, but if we speak again in six months, I expect we’ll see some huge numbers in credit card growth as well.”


Categories: Business Partners, Strategic Planning & Consulting, Technology Consulting & Compliance
Posted by Al Schiliro, Senior Investment Officer, Catalyst Corporate FCU on 8/22/2019

Many credit union investment managers cannot justify purchasing a bond for more than its principal amount, believing that buying a bond at its original price (par $100) or at a discount (paying less than par value) is always the best “deal.” However, in many instances, buying a bond at a premium (paying more than par value) can be more advantageous to the investor.

Premium bonds can provide:

  • Higher yields. Premium bonds tend to yield more than comparable issues selling at discounts.
  • Potentially better pricingfor the simple reason that many investors avoid them. Some dealers will offer these bonds at a slightly better price in an effort to sell them.
  • Greater cash flow and reinvestment opportunityAlthough purchasing a premium bond requires a greater initial investment, the higher initial cost can be offset by higher cash inflows throughout the life of the bond. This can be an appropriate tactical response in a low interest rate environment. The greater cash flow provides more funds to reinvest, creating a compounding effect.
  • Reduced price volatilityGreater cash inflow resulting from the premium bond reduces the bond’s duration, which is a measure of the price sensitivity. Generally, the lower the duration, the lower the interest rate risk of the bond price.
  • More income in a falling interest rate environment. With rates falling, income and cash flow become harder to generate.  

It’s important that investors understand how premium bonds work and the benefits they provide. Bonds bought at a premium can actually help reduce volatility, generate greater cash flow and even provide higher yields.

Premium bonds, those that sell for a price above par value, have a coupon rate above current market yields. The premium paid at the time of purchase is recouped through higher coupon payments, which makes these bonds potentially more defensive against a possible rise infinancing-2379782_640 interest rates. Historically, these bonds have also offered higher yields than those that trade closer to par or at a discount. The investor receives high-current cash flows, and these securities are, therefore, potentially less sensitive to price changes due to interest rate moves. All other variables being equal, bonds with higher coupons should be less price sensitive than those with lower coupons.

Another type of premium bond, a “cushion bond,” is a callable bond that trades at a premium and often offers higher yields than its non-callable counterparts. This is done to compensate an investor for the potential of a call. In a rising interest rate environment when the potential of a call typically diminishes, these bonds also provide a bit of cushion, as they tend to remain relatively stable and depreciate less in price than comparable non-callable bonds with lower coupons.

Ultimately, bonds selling at a premium are more “defensive” in nature than their discount counterparts and should decline less in price than a similar bond selling at a discount. Investors pay more for premium bonds because they receive an above-market coupon rate, higher income and cash flow. And although often avoided, these securities offer several benefits including: lower price sensitivity (duration) than similar discount bonds, high coupon cash flow, and the opportunity to reinvest these larger cash flows, creating a compounding effect.

Catalyst Corporate’s highly-skilled team of investment officers offer an extensive wealth of knowledge on a wide range of brokerage services, including premium bonds. As trusted partners, they are ready to help credit unions attain their goals by creating individualized solutions.

All securities are offered through CU Investment Solutions, LLC. (ISI). The home office is located at 8500 W 110th St, Suite 650, Overland Park KS 66210.  ISI is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934. ISI also is registered in the state of Kansas as an investment advisor. Member of FINRA and SIPC. All investments carry risk; please speak with your representative to gain a full understanding of said risks. Securities offered by ISI are not insured by the FDIC or NCUSIF and may lose value. All opinions, prices and yields are subject to change without notice.

Categories: Education & Training, Financial & Auditing, Sales & Service, Strategic Planning & Consulting
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