Challenges and Opportunities for Small Credit Unions Office of Small Credit Union Initiatives Martha Ninichuk, Deputy Director

Presentation Title 2 Many small credit unions are struggling to survive and thrive

Challenges Presentation Title 3 StrategicOperationalRegulatory

Challenges Presentation Title 4 Shrinking fields of membership Loss of income (loan, investment and fees) Inability to obtain and maintain credit union staff Retiring CEOs/Managers Lack of Succession Plans Strategic

Challenges Presentation Title 5 Failure to update computer systems Ability to offer relevant products and services Or try to offer products and services when the credit union isnt ready Operational

Challenges Presentation Title 6 New Small Credit Union Exam Program Fraud, Fraud, Fraud Call report – Late filing penalties – Electronic filing requirement Home Credit Union Rule Regulatory

Impact on Small Credit Unions Challenges and Opportunities 7

Credit Unions by Asset Class Challenges and Opportunities vs 2013

9 2, , Challenges and Opportunities

Membership Trends at Small CUs Challenges and Opportunities CUs with less than $10MM in AssetsCUs with less than $50MM in Assets

Net Worth Growth Challenges and Opportunities 11

How it Shakes Out Challenges and Opportunities 12

13 What can be done to stop the decline? Challenges and Opportunities

Lets Look at the Facts 14 Small credit unions need to update their current business model. Define the credit unions niche market. Who has the need? How does your credit union become relevant in your community? What do they need? Check Cashing, small loans, financial education In other words, how do you plan to survive? Who can assist you? Challenges and Opportunities

What about Collaboration? 15 Not merging, partnering. Challenges and Opportunities

Benefits to Collaboration Presentation Title 16 Small Asset Credit Unions Ability to provide a product or service not otherwise able to Assistance in HR, Compliance/Regulation, Back Office, etc. Large Credit Unions Fee income opportunity Mission Oriented Small credit unions ARE needed to continue tax exemption

Awarded NCUAs First Collaboration Grant in April, 2013 NCUA Awards $50,000 Collaboration Grant to South Carolina Credit Unions Group Will Create Talent Management Project for Small Credit Unions ALEXANDRIA, Va. (April 16, 2013) – A group of South Carolina credit unions are collaborating on a groundbreaking project to improve talent management with the support of a $50,000 National Credit Administration (NCUA) collaboration grant. Health Facilities Federal Credit Union, a low-income credit union located in Florence, will collaborate with South Carolina Federal Credit Union, located in North Charleston, and its credit union service organization (CUSO), Optimal Talent Solutions, to provide free talent management consulting and training in areas including succession management, recruitment, performance management, and diversity and inclusion. Two other credit unions, Greenwood Municipal Credit Union, Greenwood, and Spartan Federal Credit Union, Spartanburg, will also participate. NCUAs Office of Small Credit Union Initiatives (OSCUI) manages the process used by the agency to award the grant. Collaboration at Work Challenges and Opportunities $50,000

Participating Partners South Carolina Federal Credit Union Health Facilities Federal Credit Union Greenwood Municipal Credit Union Spartan Federal Credit Union Assets$1,306,358,502$24,905,031$35,955,714$11,800,377 #of Members151,3578,6805,8252,769 # of Staff FT; 3PT Field of Membership CommunityMultiple common bond - primarily health care Multiple common bond - primarily federal, state, local government Community credit unions Low Income Designation? No Yes No Optimal Talent Solutions Purpose: Focus on the Human Resource Needs of 3 small credit unions Challenges and Opportunities

Why HR? Typically, small credit unions do not have the resources and means to support a human resource staff, leaving the credit union at a major disadvantage. Challenges and Opportunities

The Collaboration Corporate Culture Human Resources Performance and Development Succession Planning Challenges and Opportunities

Collaboration Makes Sense Uses the services and expertise of a larger credit union to provide HR services to 3 very small credit unions. The larger credit union has the HR professionals already familiar with a credit union and the associated HR challenges. These professionals have the resources to provide the needed analytics and training the small credit unions could not afford- in either costs or time. Robert Harris, CEO of Health Facilities FCU in Florence, SC Challenges and Opportunities

Why Collaborate? The larger credit union uses the capacity of its staff to provide services for a small credit union which could not afford the services. The larger credit union helps to offset its costs with fee income paid by the small credit union for the services. Challenges and Opportunities

Obstacles? Small credit unions fear large credit unions will take-over opportunity. Part of due diligence is to investigate and become comfortable with any partner. Challenges and Opportunities

Building the Collaboration Look for partner credit unions – Attend League functions, Chapter Events – What are commonalities of need? – Determine Collaborative effort Find larger credit union that may be a good potential partner – Look at websites and call reports. – Ask your peer credit unions. Get to know the CEO. See if they have extra capacity. Be open with your needs and wants. Challenges and Opportunities

Collaboration Opportunities Back office Collections Marketing Products & Services Training Shared executive officers Challenges and Opportunities

Think of Alternatives What may be an expense for you may be an opportunity for someone else or, the expense for one may be an opportunity for you. Look at every aspect of your operation. What is draining your desire to better serve your members? How can you release yourself of that burden? Challenges and Opportunities

Presentation Title 27 Available Assistance

28 Are you a Low Income Designated Credit Union? Challenges and Opportunities

Low-Income Designation 29 NCUA Designation A federal credit union qualifies for LID when a majority of its membership (50% + one member) qualifies as Low-Income Low income members are those who earn 80 percent or less than the median family income for the metropolitan area where they live or the national metropolitan area, whichever is greater. State chartered credit unions must work through their SSA Challenges and Opportunities

BENEFITS OF LID 1.Non Member Deposits 2.Office of Small CU Initiatives 1.Loans 2.Grants 3.Consulting Services 3.Transactional services to potential members 4.Member Business Loans (MBL) 5.Secondary Capital Accounts 30 Challenges and Opportunities

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Grants and Loans Challenges and Opportunities 32

2014 Grant Round 1 Grants and Loans 33 InitiativeApplicantsAmount Requested CDFI Certification108$270,000 Student Internship167$646,640 New Product247$1,673,000 $2,589,640 Requested from 320 Applicants! Next Grant Round June 14

Consulting Enrollment 34 Nomination cut offs are May 31 (for consulting in the third and fourth quarters of each year) and November 30 (for consulting in the first two quarters). Challenges and Opportunities

FOCUS Sign Up 35 Challenges and Opportunities

Other Grant Programs Many low-income credit unions also obtain assistance from the Treasury by qualifying as Community Development Financial Institutions. 36 As of December 15, 2013, there are 808 certified CDFIs; 177 are credit unions Challenges and Opportunities : 38 cus received an aggregate $26,322, : 25 cus received an aggregate $17,191,358 OSCUI will be releasing CDFI information videos in May.

Other Resources 37 State Leagues/Associations National Federation of Community Development Credit Unions National Credit Union Foundation Filene Research Institute Challenges and Opportunities

NCUA OSCUI Contact Page 38 Feel free to contact our office with questions: Consulting Grants & Loans Partnerships & Outreach Training Challenges and Opportunities