“the project” scms class of 2018 core manual it’s your ... · . • a self-addressed,...

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Developing Credit Union Leaders at the Speed of Change

• Advocacy • ALM • Innovation • Leadership • Strategic Planning/Thinking

“The Project” SCMS Class of 2018

Core Manual

It’s Your Story. Tell It!

John Vardallas Deborah Rightmire

Lily Newfarmer Shawn Temple

Janine McBee, CUDE, CMM

And their future.Supporting your success.

CORP-1384152.1-0116-0218 © CUNA Mutual Group, 2016 All Rights Reserved.CORP-1384135.1-0116-0218 © CUNA Mutual Group, 2016 All Rights Reserved.

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and af� liates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company. Property and casualty insurance products are issued by CUMIS Insurance Society, Inc. Each insurer is solely responsible for the � nancial obligations under the policies and contracts it issues. Corporate headquarters are located in Madison, Wis.

Every moment of every day, a credit union makes a difference in a member’s life. We’re proud to play

a role, with insurance and investment products that help plan, protect and invest for your future,

while strengthening the financial future of your members — and their trust in you.

Learn how our approach puts you at the center of everything we do at cunamutual.com.

CORP-1384135.1-0116-0218_CorporateMotorcyle_ColorFP.indd 1 1/13/16 4:55 PM

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Core Manual Table of Contents

Welcome to Southwest CUNA Management School (SCMS)

• Successful Completion of SCMS Requirements 6

• Curriculum 6

• “The Project” – A Two-Year Strategic Business Plan (Year of Graduation plus the Following Year) 6-9

• Submitting Project Submissions 6

• Sequence for Final Submission of the Project 7

• How Many Copies of the Final Project Do I Need? 8

• When There are Two or More First Year Students from the Same Credit Union 8

• Work from Previous Students at Your Credit Union 8

• Honors Recognition 8

• General Information & Tips 9

• Need to Skip a Year? 9

• Strategic Contacts 10

• Class of 2017 Project Completion Deadlines 11

Developing the Credit Union’s Two-Year Strategic Business Plan

• Project Minimum Requirement Check List (HINT: Year of Graduation Plus One Year) 12

• Student Feedback Form 13-14

• Table of Contents 15

• History Highlights 15-20

• Mission & Vision Statements 21-23

• SCOT List 24-32

• External Analysis 33-40

• Outline 41-45

• Strategic Initiatives (SIs) 46-86

• Strategic Initiative Ideas to Get You Started 46-48

• One Internal Analysis for each SI 49

• One Two-Year, Measurable, Objective Statement for each SI 49

• Two Strategies to support each Objective Statement 50 This is a Test! Objective or Strategy, That is the Question! 50

• One Tactical Action Plan (TAP) for each Strategy 51-52 Tactical Action Plan Format 53

Sample Strategic Initiative Summaries from Previous Projects 54-57

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• Cost-Benefit Analysis (CBA) 58-82

Basic Information Needed for Cost-Benefit Analysis 60 Cost-Benefit Analysis Format 60-62

• Tactical Action Plans and Cost-Benefit Analysis Case Study 63-66

• Cost-Benefit Illustration/Sample Strategic Initiative 67-82

• Executive Summary ________________________________________________________ 83-86

• Optional Project Elements 87-90

• Core Values 87

• Guiding Principles 87

• Code of Ethics 88

• Governance 88-90

• Student Presentation of CU Strategic Issues 91

The Final SI – Financial Management

• Developing the Financial Management (5th) SI 92-138

• Develping the Financial Projections 120-138

• Balance Sheet 121

• Statement of Income and Expense 122

• ALM Ratios 123

• Eleven Key Ratios Every Credit Union Professional Should Know 124-130

• Additional References for Accounting, Budgeting & Finance 131

• Example Financial Projections 133-138

• Financial Management (5th) Strategic Initiative Evaluation Form 139

• Student Project: Two-Year Strategic Business Plan Progress & Feedback Form 140-141

Confidentiality and Delicate Issues If a student wishes to include confidential issues in the project, please speak directly with the school director or project evaluators for guidance. If there are concerns about dorm or mentor/counselor assignments, please discuss these concerns with the school director.

A good strategist knows the why of things. John Vardallas

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Welcome to Southwest CUNA Management School (SCMS)!

The faculty and staff wish you much success during the three years you are with us at the

school and in the many years beyond!

Successful Completion of SCMS Requires

1) Attending three summer sessions (eight days, each July) and two mid-year sessions (two days each February or March) for a minimum of 162 classroom hours,

2) Living “on-campus” during the summer sessions (unless student lives within a reasonable commuting distance),

3) Attending school sponsored courses and activities,

4) Completing each phase of the project by the deadline,

5) Giving an oral presentation related to the project.

Curriculum

Curriculum is designed to:

• Expand credit union knowledge,

• Develop strategic thinking and leadership skills,

• Help students with the development of a detailed strategic business plan, also known as “the project”.

“The Project” – a Professional Report, is A Two Year Strategic Business Plan

(Year of Graduation plus the Following Year)

• Have someone else read and proof your work!

• Always perform spell check and grammar check.

• Check usage of capitalization and bolding. Is it consistent? To make it easier on the reader, keep capitalization and bolding to a minimum.

• Graphics (charts/tables/figures) should be incorporated throughout the business plan to add to the reader’s understanding of the information being discussed. Students should be able to explain any graphics that are used.

• Make sure pages are numbered.

Submitting Project Sections Upon completion, thoroughly check your project for errors. If you do not, it may be returned marked “redo” or “refer to core manual” if you did not follow school format.

If a submission does not meet minimum requirements, you have two weeks from date

of receipt to return for evaluator review. Test: Would you send your submission to

your CEO or Board Chairman? Mail (do not fax or email) printed section submissions with page numbers to the project evaluator. Allow enough time to mail submissions by regular, first class, or priority mail to project evaluators. Do not use FedEx, DHL, or UPS for sending projects to John Vardallas. If submission timing is cut too close to the deadline and the project is sent via Special Delivery, do not request a signature for receipt. Doing so may result in the submission being returned because the evaluator is out of town. If emailing communications, please help project reviewers by putting your credit union name and class in the subject line of your email. Always include with each submission:

• A copy of your student feedback grid (also, keep one copy for your records), available at www.scms.coop.

• A self-addressed, postage-paid, return envelope. Do not use dated meter postage.

Computers crash! Back up, back up, back up. Documents get lost in transit. Save copies of all submitted work and feedback updates until successful completion of SCMS. For submission of the Financial Management Strategic Initiative, include: • A copy of an updated outline

• Projections (should reflect impact of each SI)

E-mail the projections to Debbie Rightmire: ([email protected]).

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Final Project Submission The final submission is a copy of the complete project in hard copy form:

Sequence for Final Submission of the Project The final submisison to the project evaluator needs to be bound in some fashion, (i.e. binder, brads, spiral, etc.). This copy is returned to you at school. The 5th SI and Executive Summary must be approved before the submission of the entire project for a final review. Cover

Name of the Credit Union 2017 - 2018 Strategic Business Plan Your Name

Optional – dedication, aknowledgements, or thank you page

Table of Contents Executive Summary History Mission Statement Vision Statement Optional – core values, ethics, governance,

etc. SCOT List (add details if something

significantly impacted the direction of your credit union)

External Factors Outline Strategic Initiatives Optional – Appendix (might include policies

or other support material)

Include a cover page noting changes (if significant) to previous work submitted. Bring the history highlights, SCOT list, and External Analysis forward to cover areas with significant impact since the time these sections were approved. Update charts and graphs to reflect the most recent year-end numbers. Include a copy of evaluator’s approval of the Financial Management SI. The closer you cut the deadline for the Financial Management SI, the less time you have for the final polish and submission of your complete project. For the purposes of the school, you do not need to update SIs once they have been approved. You may want to do so for the credit union’s purposes. No more submissions or changes are accepted after the final project submission deadline. Evaluators will notify you of final approvals.

Student Feedback Form (Progress Report) Always include the feedback form with project submissions. Review the feedback form first to see if requirements have been met. Unless a submission is marked “re-do”, “resubmit”, or “refer to core manual”, it is up to you whether or not to address comments. The feedback form is referred to if there are any questions regarding progress or pass/fail status. Keep a copy for your records. If it appears that the school’s requirements are not being met, SCMS administration may contact your credit union’s CEO or Chairman to determine if anything can be done to help. Feedback scores are not public information.

Expect “Redo” If… 1) Format provided in core manual is not

followed. 2) Submission is obviously not proofed. 3) Strategic initiatives are incomplete. 4) The majority of Tactical Actions Plans

• Start the year of graduation or earlier, • End the year of graduation, • Are assigned to the same person.

5) The majority of cost-benefit analyses: • Do not require any additional resources, • Have no risks, • Have no implementation costs, • Result in zero additional

expense/income to credit union. If submitted work is returned marked “redo”, “resubmit”, or “refer to core manual” – students will have two weeks to revise and resubmit.

Late Submission Guidelines A written letter must be sent to the school director from the student, explaining the extenuating circumstances, including a supporting letter from the CEO or Chairman of the credit union, detailing the exceptional nature of the circumstances that prevented the submission from meeting school deadlines and why the student should be allowed to continue with his or her class. Acceptance of late submissions is at the discretion of the evaluator and SCMS administration. Any student that misses the final project submission deadline may be given the opportunity to complete SCMS the following school year.

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How Many Copies of the Final Project Do I Need?

At a minimum: 1) The final project sent to the project evaluator

(this copy is returned during the summer session of school.),

2) A complete copy of the project sent to the group leader for the “Strategic Issue(s)” presentation on or before the specified date (this copy will be returned at school.),

3) A copy for your reference during your “Strategic Issue(s)” presentation.

Students are expected to provide at least: 1) One complete copy to the credit union. 2) One copy for you to display during the

summer session for first and second year students to view. The third year class determines where and when to display. Please be mindful if the project includes sensitive information.

If you are considering seeking college credit, we recommend you share your project with the appropriate campus representative. If comfortable, and with credit union permission, provide the school director with a copy of your project, via CD or email, for school reference as we look for samples. Nothing will be used as a sample without approval from you and your credit union.

When There are Two or More First Year Students from the Same Credit Union

Students work independently on the entire project to get the maximum benefit from the school.

Work from Previous Students at Your Credit Union

Just because a previous student’s work from your credit union has been approved, do not expect to re-submit the same work and receive the same results. Students are expected to build on previous students’ work, follow the current core manual instructions, and use their own words.

Cite previous student’s work, noting name and SCMS Class of *Class Year*.

Honors Recognition

There are two levels or recognition for students performing above and beyond expectations:

• Award of Excellence, recognizes the top one or two graduates.

• Honors, recognizes students for consistent performance above and beyond minimum standards.

There is no correlation between the number of pages in the project or the amount of money spent to pretty it up and the quality of the project. Content and reasonableness are the most important factors, as well as the growth of the individual student during the school experience.

What Constitutes an Honors Project? Students completing SCMS in three consecutive years are eligible for the Award of Excellence. All other students are eligible for Honor Graduate status.

• The project submissions must be in approved form by deadlines.

• The project goes beyond the minimum requirements.

The following additional factors are considered for each student when reviewing a project for honors:

• Individual progress from day one to completion of the project.

• The level of strategic planning currently in place at the credit union.

• Position/job function in the credit union.

• Educational background/experience.

• Class mentoring/leadership.

• When there are a large number of students in review for honors, the third year oral presentation is also considered.

Automatic Elimination from Honors Consideration

• Miss the final project deadline.

• Failure to provide project presentation facilitator with a copy of finished project in a timely manner.

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General Information & Tips

There are many approaches and terms used for planning. For school purposes, it is

important to follow the instructions, sequence, and terms provided in this guide. Refer to this core manual when developing

each section of the project. When in Doubt … Refer to this core manual!

Approach the project from the perspective of a CEO. Consider the school experience an opportunity to take advantage of exploring new opportunities and addressing challenges. The planning process involves a future focus as opposed to reactive decision making. It requires the examination of a wide variety of opportunities and challenges, and, at times, making a best guess or estimate. Communicate at your credit union. Share expectations and project requirements. Solicit ideas. Help solve challenges. Involve people strategically along the way to create a viable, working plan. When working with others to generate fresh approaches and perspectives, consider the positive side of suggestions, while being careful of negative or critical thoughts. Instead of saying or thinking, ‘It could never be done,' try asking, ‘what if it is possible, how might it be done?’

Network! Faculty, staff, and mentors are an email, phone call, Tweet, or LinkedIn connection away. Let someone know if you need assistance or would like to discuss any aspect of your project. If you are not sure who to contact, contact the school director.

Reality Check Don’t expect to be able to work on your project at work, during office hours. The greatest percentage of students work on their project after office hours, on their own time.

Need to Skip a Year?

Eligible students that miss a year of school must re-submit any previously approved portions of the project and meet the minimum requirements of the class they are joining. Potential students that miss more than one year of school need to petition the SCMS Oversite Committee to determine their status.

Practice Applying “What If” Thinking • What if I were the CEO? What changes

would I make?

• What if the future holds revolutionary, unforeseen, opportunities or challenges for the financial industry? Will my credit union be ready? Remain viable?

• What if our credit union did not exist in five years? Would anyone notice?

• What if money or technology were not an issue?

• What if we could do something that no one else is doing? Or do something better than anyone else to serve our members?

• What if one of our select employee groups (SEGs) went out of business?

• What if our members became our best promoters?

• What if everyone became skilled at managing his or her finances?

• What if our top five members were to take their finances elsewhere?

• What if we grew our loan volume by 25%?

• What if what got us here won’t get us there?

• What if ….. Strategic Resources

• Watch the SCMS group on LinkedIn for periodic references to articles which may help you with your project.

• Take advantage of your class networking site.

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Strategic ContactsAdministrative Team

• Janine McBee, CCUE, CUDE Director & Synergist 800.442.5762 x6634 469.385.6634 Direct Phone & FAX [email protected] Twitter @SCMSJanine www.linkedin.com/in/janinemcbee

• Cookie Dorsey On-site Logistics & Student Ambassador 800.442.5762 x6635 469.385.6635 Direct Phone & FAX [email protected]

• Cristina Lau, CEM Logistics & Student Ambassador 800.442.5762 x6639 469.385.6639 Direct Phone & FAX [email protected]

Senior Faculty/Project Evaluators

• John Vardallas – Overall Project 608.577.8707 [email protected]

• Deborah Rightmire – Financial SI (Financial Management SI) 800.442.57692 x6496 469.385.6496 Direct Phone & FAX [email protected]

Additional Resources for Project Assistance

• Lily Newfarmer – Overall Project [email protected] 817.884.1470 x125

• Shawn Temple – Overall Project [email protected] 318.212.6111

Additional resources, including project samples and forms, are available at www.scms.coop.

The school has a LinkedIn group under the name of Southwest CUNA Management School. The group site is for students, faculty, alumni and friends of SCMS. Resources and discussions are posted here to help with the development of business plans and strategies. Individual classes may also have group sites.

Mailing Addresses • General School Mail

SCMS c/o Cornerstone CUL Attn: Janine McBee 6801 Parkwood Blvd Ste 300 Plano TX 75024

• All Project Submissions (Waive Signature) – Include self-addressed return envelope and project evaluation form.

John Vardallas c/o The American BoomeR Group PO Box 8486 Madison, WI 53708

• Financial Management SI Submission Deborah Rightmire SCMS c/o ALM Resources 6801 Parkwood Blvd Ste 300 Plano TX 75024

The majority of communication is handled through the school’s website and email.

Wondering what John Vardallas meant when he wrote or said, “more cow bells”? That’s Wisconsin speak for embellish, expand, or provide more details.

Tentative Dates to Help with Scheduling • 2017 SCMS Mid-Year Classes

Late February to Mid-March • 2017 SCMS Summer Classes

July 9-19 – dates finalized by early 2017 • 2018 SCMS Mid-Year Classes

Late February to Mid-March • 2018 SCMS Summer Classes

July 8-18 – dates finalized by early 2018 SCMS Challenge

What is within your power, right now, to help position your credit union forward? Take this opportunity to stretch and dream! This manual is a constantly evolving process. We welcome any input on how we might clarify instructions or recommendations on samples and resources we might provide to help students successfully create real-life working plans. Send recommendations to the school director.

mailto:[email protected]

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Class of 2018 Project Completion Deadlines

If feedback indicates minimum requirements have been met, it is your choice whether or not to address evaluator comments. The comments are there for thought and incorporation as you see fit.

Deadline (for section to have been

submitted AND approved by) SUBMIT PROJECT SECTIONS IN THIS ORDER: ⇒ If submission does not meet minimum requirements, make noted changes and

RESUBMIT WITHIN TWO WEEKS of receiving your feedback. ⇒ Always include the student progress and feedback form (personal information

completed) with each submission.

Submission must at least meet SCMS Minimum

Requirements and be in Evaluator’s Possession by this Date to continue to the

next school session. History Highlights, Mission Statement & Vision Statement 10/14/16 SCOT & External Analysis 11/18/16 Outline of Strategic Initiatives (SIs): SI name, objective statements, strategy heading, objective statement, and tactical action plan headings. ⇒ Bring your outline with you to Mid-Year Classes. You do not have to include the

Financial Management SI (5th SI) in this submission. o Submitting the 5th SI portion of the outline as this time is noted, but not

evaluated. o Students receive one-on-one counseling and guidance to help with the

development of the Financial Management SI during the second Mid-Year Classes.

⇒ Bring a self-addressed, postage paid envelope to Mid-Year with you in the event you chose to submit the outline at that time.

⇒ Once approved – email a copy of the outline to [email protected] (prefer Microsoft Word format).

⇒ Your outline will likely change as SIs are developed. This is normal. Once the initial outline has been approved, it does not need to be resubmitted until the final project submission. If you are uncertain about a change in direction, please discuss with project evaluators or school director.

2017 SCMS Mid-Year Session (Date TBD - Late

February/Early March)

John Vardallas will be available to

discuss the outline onsite.

EMAIL your outline to John by March 17, 2017.

Strategic Initiative 1 (Recommend starting with membership as this tends to be an easier SI to develop.) Miss this deadline or submit work not meeting minimum requirements and the school director will discuss with your CEO, supervisor, or Board Chair (as appropriate for your position) whether or not you are eligible to attend the next summer session.

04/21/2017

Strategic Initiatives 2-4 (Recommend Innovation as one of the SIs) 12/08/2017 Financial Management (last strategic initiative, typically 5th SI) • Incorporates year end-financial results for 2016. • Includes actions steps starting in 2018. Submit this section to Deborah Rightmire, including projections and an updated outline.

04/06/2018

Executive Summary - Do not wait for the Financial Management SI to be approved. The executive summary may be updated if needed before final project submission. 04/27/2018 The entire project is due - in one complete submission - for final review, in order to be considered for July graduation. Before final submission, update: • Outline to reflect approved SIs • All charts/graphs in the History to reflect previous year-end numbers • SCOT/External Analysis if something significant occurred since approval. The SIs do not have to be updated. Place the Executive Summary after the Table of Contents, all other elements should be in sequence of this form. NO MORE SUBMISSIONS OR CHANGES ACCEPTED AFTER THIS DATE. The evaluator will contact you regarding final project approval. The project submitted is returned to students on campus. Students missing this deadline, or who have incomplete work at this time, may be given the opportunity to complete SCMS the following school year.

05/11/2018 With approval of CU, send

school director email copies of sections marked excellent.

After the final project deadline has been met, the complete project has been reviewed, and your school application with full tuition has been received,

students may email their request for presentation groups and time slot. Send a printed copy of the complete project to your Strategic Issues Presentation class leader as instructed.

Failure to do so is an automatic elimination from honors consideration. Your feedback is appreciated. Core manual instructions and project samples are updated on a regular

basis. Additional resources to help those who come behind you are also welcome. Let the school director know if something could use clarification or was particularly helpful.

mailto:[email protected]

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Developing the Credit Union’s Two-year Strategic Business Plan (Year of Graduation Plus the Following Year) Project Minimum Requirements Check List

Prepare a written two-year strategic business plan (project) covering the following areas:

Optional - A “dedication” or “thank you page” - before or after the Table of Contents, on the final submission. Think in terms of how books are printed.

Table of Contents

Executive Summary

History Highlights

Mission Statement

Vision Statement

Optional Elements if Created (Core Values, Ethics, Governance, etc.)

SCOT List detailing:

o Five Strengths o Five Challenges o Five Opportunities o Five Threats

Five External Factors

For each factor, include:

Factor Assumption Impact Response

An Outline of all Strategic Initiatives through the Tactical Action Plan headings.

Once a strategic business plan is created, it is a living and breathing document. Schedule regular reviews: Has something changed to materially impact

direction of the plan? Are action plans on track? Any updates for the cost-benefit analysis? Does the objective statement need to be

revised?

Five Strategic Initiatives (SIs)

For each SI develop:

o A brief Internal Analysis with appropriate charts and graphs.

o One, two-year, (MEASURABLE) Objective – the what (this is the goal of the SI).

o Two Strategies for each Objective – the how.

o One Tactical Action Plan for each Strategy – the who and what.

o A Cost-Benefit Analysis (including implementation costs, assumptions, and risks) for each Tactical Action Plan.

Individual Student Presentation of Strategic Issues (also known as the “Oral Presentation”)

Planning is planning. There is a past, present, and future…FOLLOW THE SCHOOL DEFINITIONS, FORMAT, AND SEQUENCE.

This is a two-year, strategic plan. The majority of action steps should begin late the year of graduation and into the following year.

The table of contents and executive summary are the last sections to submit and the first sections of the final product.

Optional elements may be submitted at any time. They are graded on a pass/fail basis.

The entire project is submitted at the end for final approval. For that submisison:

In History, SCOT, and External Analysis, bring charts and graphs forward a year.

If something of key significance has occurred, update the History, SCOT, and External Analysis accordingly.

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Student Project: Two-Year Strategic Business Plan Progress and Feedback form

Submit this form with each project submission. Student to Complete Contact Information. Important – please print legibly. Always keep updated copies for yourself. Work not following project format will be returned as ‘redo’. You have two weeks to resubmit. Always include return pre-paid shipment envelope

– Do Not request signature on receipt when mailing project work. Contact Information Name Class of

Credit Union Name

CU Website

Credit Union Job Title

Preferred Project Street Mailing Address

Class of

City, State, Zip Asset Size in Millions

CU Main Phone CU Toll-Free Number

Student Direct Phone Student Cell Number

CU Fax Number Student Email Address

Best time(s) to call:

Project Feedback

Date of 1st Submission

Date Sent Back to Student

Date of 2nd Submission (if needed)


Date Approved Comments

History

Mission Statement

Vision Statement

Optional - Code of Conduct, Ethics Statement, Value Statement, Etc.

SCOT Analysis

*Optional items may be submitted at any time.

If work is returned marked “re-do”, “see core-manual”, “follow school format”, or a submission date is entered, but the date approved is blank – student has two weeks to update and resubmit work.

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Student Name Credit Union Name

Date of 1st Submission


Date of 2nd Submission (if needed)

Date Returned to Student

Date Approved Comments

External Analysis

Outline (Headings – SIs through TAPs)

SI 1

SI 2

SI 3

SI 4

Financial Mgmt SI Typically the 5th SI – reviewed by and feedback from Debbie Rightmire.

The Financial Management SI must be approved by Debbie Rightmire prior to sending it to John Vardallas. Executive Summary

Complete Project

Additional Project Notes: 1 = Exceeded

Requirements

2 = Met Requirements

3 = Resubmit within 2 business weeks.

A = “More Cowbells” – Embellish, expand thoughts B = Could improve on clarity by making more concise. C = Did you “forget” to run spell check? D = Need to refer to graph or charts within the body of the work. F = Action steps/Cost-Benefit analysis all finish in one year – Redo

– this is a 2-year strategic plan!

• Important: Make sure this grid reflects each time a portion of your project has been approved. If there is ever a question about your project status, this form is referenced.

• It is ok to email or call John if you cannot read his comments.

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SCMS Minimum Project Requirements

Table of Contents This portion of the project is due out of sequence. It is one of the last parts of the project to be completed.

Develop a comprehensive table of contents. The table of contents continues to change as the two-year strategic business plan is changed, updated, and fine-tuned. Be detailed. Use the table of contents as a tool to enhance the value of the strategic plan to the reader.

History Highlights History lays the foundation for where the credit union is today.

Briefly tell your credit union’s story. Your challenge – tell the story in two or three pages, plus the required charts. How has history positioned the credit union to face challenges and take advantage of opportunities? Explain how the credit union has grown and evolved, highlighting events influencing the current state and future direction of the credit union.

Consider creating the credit union’s story in the form of a timeline or benchmarks, making it easy to identify the highlights. Include: 1) The date of origination (year chartered). 2) Milestone moments from the last three to

five years. If there was a problem or challenge with a sponsor company, management, or other areas of the credit union, cover it here. Do not mention specific names of individuals. Problems or challenges should also be addressed in the SCOT listing.

3) Charts covering the annual change over the last five years (using year-end numbers):

• Assets • Membership • Loans to Assets • Net Worth Ratio Bring these charts forward a year for the

final, complete project submisison.

Example Annie Federal Credit Union History Highlights The Early Years of AMC Federal Credit Union August 15, 1964, is the Chartering date for the AQ Federal Credit Union. AQ Federal Credit Union (AQ FCU) was established by employees of Annie’s Quilting Company (now known as Annie Industries) to encourage saving on a regular basis. The first meeting had just over one hundred people present who listened to Maggie McPhee explaining the purposes and operations of a Credit Union. A question and answer period followed with the nominations and elections of seven members of the Board of Directors and three members of the Credit Committee for AQ Credit Union. A Credit Union was born in the Robin’s Corner of Sherwood Texas. The following days consisted of sending letters of appreciation to Annie’s Quilting Company for allowing the Credit Union to have office space on the company’s property. The Credit Union was housed in a white frame building across the street from the main office and remained there until November 1977. A field of membership was developed to service all employees of Annie’s Quilting Company and to provide an opportunity to accumulate their savings, and create a source of credit. Hours of operation were established; every Friday 2:00 p.m. to 5:00 p.m. and Saturdays 8:00 a.m. to 10:00 a.m. In less than a month, AQ FCU had 189 members with share deposits reaching $2,355.00 and seven (7) loans totaling $1,010.00. The rate of interest on loans was 1 % a month on the unpaid balance. Diego Everton was the first member and he served as Manager of AQ FCU until retirement in July 1985.

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For the next several years, AQ FCU enjoyed growth in all areas. The Credit Union assets had multiplied since a payroll deduction plan was instituted in 1966, and members demonstrated that they knew how to save for the future. At the end of December, 1969, membership totaled 977, with Share deposits of $264,160.93 and Loan balances of $258,458.36. 1970’s Awards and New Location Brandon Webb, from NCUA, awarded AQ FCU the Thrift Award in 1973; only 10% of Credit Unions receive the award. The following two years proved to be rewarding as well. AQ FCU took the Thrift Award in 1974 and again in 1975. Share and loan balances reached a mile stone of $1,000,000 for the credit union in 1975. The credit union joined Southwest Corporate Federal Credit Union in 1977. By 1977, membership had grown to 1,700 and credit union assets totaled $1,729,176 while paying a 7% dividend on share accounts. The Credit Union’s Board of Directors recommended, and the membership approved, the building of a new office near the Quilt Factory that we could call our own. November 1977 was the Grand Opening of the new office located at 6 Sigma Street. The next couple of years involved settling in the building and purchasing the needed equipment. Louisa Alcott, current CEO, was hired full time and AQ FCU received its first computer in 1978. The statistical data by the end of the 1970’s was; membership totaled 2023, share balances totaled $2,771,480 and loan balances totaled $2,495,020. 1980’s Change of Command The 1980’s brought new products for the members. Real Estate Loans were introduced along with Individual Retirement Accounts (IRA). Proposals were adopted on CUNA Mutual’s Credit Disability Group Insurance and Retirement Benefit plan for the employees. After 21years of service to AQ FCU, Diego Everton, founding member, stepped down and retired in July, 1985. Supervisory Committee member, Mickey Cardman, was appointed to the Board of Directors until his election at the next annual meeting and named Manager on July 1, 1985. The end of December 1989 statistical data was: Members 3023, Share balance 9,926,839 and loan balance $9,557,639. 1990’s – New Management The 1990’s had some trying times for the Credit Union. Due to Annie Industries layoffs, AQ FCU had to change its loan policies to include the member’s seniority with the company for consideration on all signature loans. Delinquencies were high and were always a challenge for the staff. While preparing for the new millennium, the Board of Directors decided to take the Credit Union in a new direction. Loan procedures changed again putting more emphasis on a member’s credit report and credit history. Expanding the Field of Membership to include more of the “family tree” and possibly taking in another company were suggested and planned for the future. Offering credit cards or a share draft in the future would also be looked into. Lines of Credit for the members were introduced at this time. Mickey Cardman retired from his position of Manager in 1998, after serving the credit union for thirteen years. He also served on the Board of Directors for the Texas Credit Union League for many years before his retirement.

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Maggie Marshall was named as Cardman’s replacement and remains in this position as of the writing of this in 2010. At the time, Maggie had 20 years of experience at AQ FCU, and, along with the Board of Directors, was preparing for the new millennium. Amendments to the Charter and the adoption to become a Multiple Common Bond Credit Union kept the new Manager and staff busy. The addition of small companies as SEGS, along with adding an Underserved area of Annie, opened up a new field of membership for AQ FCU. Due to the positive response to a Youth Week program, AQ FCU tapped into a new market and allowed anyone who was eligible, under age eighteen (18) years old, a free membership to encourage young members. The credit union ended the 1990’s with membership share balances totaling $14,369,540.00 and loan balance totals of $7,096,821.87. The 2000’s - New Building, New Name Share Certificates, Christmas Club accounts, and Involuntary Unemployment Insurance (IUI) were all added as new products in the early years of the new decade to serve our members with their financial needs. The addition of Share Draft accounts made one of the biggest changes in the products and services offered by the credit union. Share drafts changed which days the credit union were open, hours of operations, withdrawal fees from shares and the foot traffic in the lobby. Debit cards and money orders were just side products of the share draft program. Many different loan promotions were introduced along with a Loan “Skip a pay” program that members still look forward to every year. With growth came the need for more office space. The 6 Sigma Street office building was evaluated to see if a drive though window could be added to it for the convenience of the members. It was decided that the building, even with a drive through, would not offer the additional space needed to service the membership in the future. After a planning session with the Board of Directors it was decided that Retail Design would begin the search for suitable property for the relocation of AQ FCU. The Annual Meeting held March 28, 2004 at Annie Civic Center was the site of the celebration of the Credit Union’s 40th Anniversary. The members present enjoyed food, fellowship and cake. along with cash door prizes for the celebration. While work behind the scenes was being done, the new building project was not announced until the meeting in 2005, closer to the completion of the new building. Land of 1.75 acres was purchased for the site of the new location of AQ FCU. By July 21, 2004 Retail Design presented the Board with a floor plan, exterior design and interior color palette for the new building. In preparation of the new building other changes were being discussed and made, the titles of the Board and key staff were changed as follows, Board President became Chairman of the Board, Manager became Credit Union President, and Assistant Manager became Chief Financial Officer. AQ Federal Credit Union received a name change itself. The original sponsor company changed their name in 1970 and now it was time for the Credit Union to make that change as well. AQ Federal Credit Union became Annie Federal Credit Union before moving into the new location at 221 Baker Street. The new name was announced at the 2005 annual meeting. The Grand Opening of the building was held on July 20, 2005 featuring the three drive-in lanes along with an ATM for the members’ convenience. All was well with the Credit Union in 2005. New Building, new equipment, new personnel, net income remained good even with depreciation of the building increasing along with other expenses. Capital Ratio at the time of the move was 18.03%. Members increased by 755 and loans increased 1.2 million in just one year. Then reality hit, not all of the new loans were quality loans. The Vice President of Lending resigned and delinquencies started to rise. By the end of 2007 loans were reduced to 18.6 million and the delinquent loan ratio was 3.57%. This was the time that many loans had to be charged off and funding for the allowance for loan and lease loss (ALLL) was taking all available income. Net income took a direct hit but the Credit Union still maintained a positive result by year end 2007. While the year of 2008 rocked on delinquencies were reduced but also reduced were loan balances, thus still leaving loan ratios larger than management desired. Loans balances dropped to a level of 15.9 million at the end of 2008 while shares showed 20.1 million.

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A scholarship for You Study College was presented to a member for the first time in 2007 and every year since. Three hurricanes, Katrina, Rita and Ike all made their mark on Sherman Texas and surrounding areas. Disaster preparedness took on a whole new meaning and it took a higher priory on everyone’s mind. The economic downturn in 2009 hit Sherman Texas. Annie Quilting announced a lay off and short work weeks for those who remained. This again showed to be a time for Annie Federal Credit Union to prove “We are here if you need us!” Working with the members to keep their loans current and helping them file for the involuntary unemployment insurance helped in keeping control of the delinquencies this time around. Natural Insurance informed the Credit Union that because of the economic condition they could no longer underwrite the insurance. The 2010’s – Facing Challenges, New Opportunities One of the challenges with having a majority of the membership base employed at the original sponsor company, Annie Industries, is the reoccurring layoff- rehire environment. In the past, Credit Union Management has tried to attract different SEGs and has done so successfully but not many members from the SEGs seemed to join. Annie Federal Credit Union would be adversely affected if Annie’s Quilting closed or relocated tomorrow. Debbie Rightmire from the Texas Credit Union League and Management explored the idea of becoming a Community Charter Credit Union in a planning session in 2009. NCUA approved the request of a community charter and as of July 1, 2010 anyone who lives, works, worships or attends school in Summer County is eligible to be a member. Debbie also spoke to the Board about the health of the Credit Union’s Capital, earnings, and the structure of the credit union are all in good shape. Suggestions were made to offer a credit card program, increase real estate loans, and seek a bigger slice of used auto loans. While preparing for the Community Charter a marketing plan and community involvement plan was developed. Television commercial, radio, newspaper blitz all presenting the Credit Union as a “Local choice” “Local decision” Credit Union. Community Involvement and name branding is to be continued through out 2010. The credit union ended the month of June 2010 with membership share balances totaling $20,508,847.09 and loan balances totals of $14,954,502.44. In Summary The last five years have brought some major changes and challenges for Annie Federal Credit Union. Having a strong capital to asset ratio aided with the Southwest Corporate write down of capital and the NCUA assessments for the NCUIF fund. Income from membership fees and investment income along with the tight control on expenses has helped with the loss of loan income. A 29.8% increase of real estate loans in the last year has improved the total loan value of the credit union. Management is looking forward to the future with the community charter complete and the thoughts of E Statements, mobile banking and a recreated website to attract younger membership base. Thanks to the hard work of the Board of Directors and the sound financial leadership from management with the support from the membership Annie Federal Credit Union is and will be “Here if you need us.”

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01000200030004000500060007000

2005 2006 2007 2008 2009 6/30/2010

Membership 2005 - June 2010

Membership

15

16

17

18

19

20

2005 2006 2007 2008 2009 6/30/2010

Net Worth Ratio

Net Worth Ratio

20

Assets

27.4

26.3

24.925.4

24.7

25.5

23

24

25

26

27

28

2005 2006 2007 2008 2009 6/30/2010

Mill

ions

Assets

81.18 80.3270.88 64.41 57.15 58.68

0

20

40

60

80

100

2005 2006 2007 2008 2009 6/30/2010

Total Loans / Total Assets

Total Loans / Total Assets

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Mission & Vision Statements “Mission statements define the organization's purpose and primary objectives. These statements are set in the present tense, and they are designed to clarify why you exist as a business, both to members of the organization and to the external community. Mission statements tend to be short, clear and powerful.

Vision statements also define your organization's purpose, but they focus on its goals and aspirations. These statements are designed to be uplifting and to inspire members of an organization. They're also timeless: even if the organization changes its strategy, the vision statement can often stay the same.”

“Mission and Vision Statements: Unleashing the Power of Purpose”

MindTools

Provide a mission and vision statement for the credit union. Include for each:

• Source (board, self, prior SCMS student/graduate)

• Status (adopted, submitted, never reviewed)

• Date

If using existing statements, for each:

• Write a couple of sentences explaining your position on why you feel this is or is not a good mission or vision statement.

• If you feel existing statements are not good mission or vision statements, rewrite the statements, including a couple of sentences on why you feel the proposed statements would be better for the credit union.

Example One Mission Statement Current Mission Statement ABC Credit Union will provide the highest quality financial service to our members for generations to come.

Adopted by the Board on June 14, 2011

Critique I understand the mission statement in principle but find it lacking. In today’s competitive financial services environment “highest quality financial service” is an expectation not a differentiator. You can go to any consumer bank or credit union and find pretty much the same products and services and comparable service levels, what sets credit unions apart is the personal service we provide on a regular basis. What is going to set ABC Credit Union apart from the credit union down the street? In the past 18 months ABC Credit Union has made a true commitment to education both financial education for members and continuing education for employees, and to “Making the difference, one Member at a time”. I think our mission statement needs to reflect these two ideals.

Proposed Mission Statement ABC Credit Union will make a difference, one member at a time. Providing exceptional service, education, and a full line of products and services to fit our members need at each stage of life.

Thoughts This statement incorporates ABC Credit Union’s tag line and also provides actionable items on how to achieve that mission. This mission statement is less vague and does not leave much room for interpretation on what should be done. This statement has not been reviewed by anyone in the organization. I will present my idea at the appropriate time to others in Senior Management. Strategic planning sessions time, or just before is often a good time to bring such ideas to the others for consideration.

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Vision Statement Current Vision Statement To be the highest quality financial institution in all of our communities.

Adopted by the Board on June 14, 2011

Critique I find this statement to be too similar to the Mission Statement and could easily cause confusion between the two. This Vision Statement is also too vague in its use of the term “highest quality financial institution”. Quality can be defined in many ways and doesn’t mean the same from one person the next. This statement also does not differentiate ABC Credit Union in any way from any other financial institution out there. A Vision Statement should provide a clearer vision of where your organization wants to go which in turn provides direction on how to get there.

Proposed Vision Statement ABC Credit Union will be our Member/Owners trusted source for financial knowledge and products to meet their needs throughout their life.

Thoughts This statement provides a clear direction of where we want ABC Credit Union to get to and how we plan on getting there. This statement provides a lofty goal meant to inspire and guide decision making as to how to achieve this goal. This statement has never been reviewed by anyone in the organization but once I am more confident in its clarity and purpose through an internal review process it will be proposed to management.

Example Two OB1ECU’s Mission Statement “Credit Unions fought hard for the right to provide all Americans access to cooperative financial services.e

Our mission is to provide that hard-won access to selected Texas communities where deep relationships, highly responsive retail service, and financial value are needed and appreciated”.

(Developed by Student Name, Date. To be presented to the Board of Directors for approval.)

Evaluation I appreciate the fact that our new mission statement incorporates the ongoing battle the Credit Union industry faces as a whole. However the current mission statement needs an introduction, and the majority of our member base may not understand the battle, therefore they may get lost in the meaning.

I would re-word the statement to say:

• Our mission is to provide cooperative financial services to select Texas communities where deep relationships, highly responsive retail service, and financial value are needed.

Conclusion I feel by consolidating the mission statement we can still address the Credit Union industry’s battle without the need for an introduction. Additionally, by simply removing the word appreciated at the end, it allows the Credit Union to grow into communities that have a need for our services and it removes the subjectivity of a community’s perceived appreciation. I feel removing the appreciation factor is very important as it is virtually impossible to measure the potential for a community’s appreciation of a financial institution prior to its arrival.

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Example Three Mission Statement The mission of Holmes Credit Union is to be the primary financial institution of its members, providing a wide range of competitively priced and conveniently delivered services, designed to enhance the financial well being of our members while maintaining the long term financial security of the credit union. (Board Approved January 23, 2003) The mission statement that is in place at East Texas Professional Credit Union captures the institution’s true mission. I believe the mission statement may lose some people because of the length. In order to have a mission statement that is effective and meaningful, we must make sure we can present it to anyone. We must also make sure that all the employees understand the meaning of the mission statement. Understanding the mission statement is a big deal. If you don’t understand the mission statement then you don’t understand what Holmes Credit Union stands for. I personally believe weoffer a variety of services in a convenient manor. The stability of all financial institutions is a major concern for people now days. We must make sure we instill the stability of the credit union in every member. As times change, our members need to be confident in the well being of their financial institution. As we go into the future it will be difficult to stay ahead of the technology. We will change the way we provide competitively priced services. We need to make sure we can do that so we can stay true to the mission statement. My main concern with the current mission statement is that it is to long. People get lost in it. A mission statement should be a summary that gives an overall plan for an organization. I recommend changing the mission statement to the following: The mission of Holmes Credit Union is to provide excellent service and a variety of services in a convenient manor, while providing a strong financial well being.

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SCOT List Provides a framework for reviewing and establishing strategy, position, and direction of the credit union. It helps organizations focus on key challenges and opportunities.

According to SWOT Expert, a joint development of the Strategy Planning Institute and Kinetic Wisdom, “Smart organizations know how to find opportunities - but successful organizations know how to go after the right opportunities. They know how to leverage their strengths and allocate their resources in a way that produces results…. SWOT [SCOT] analysis helps you find new opportunities and fend off competitive threats.”

Strengths and Challenges are internal factors that have an impact, either positively or negatively, on the credit union. These factors are usually within the control of the credit union.

Opportunities and Threats are factors in the environment that affect the credit union. Opportunities have yet to be explored and have a potentially positive impact on the credit union.

Threats are not within the control of the credit union and could have a negative impact on the credit union.

Develop a SCOT list for the credit union: Strengths – build on Challenges – identify and address Opportunities – capitalize on Threats – minimize

Identify at least five areas in each category, including a minimum of one sentence explaining how the factor relates to the credit union.

Yes, something may appear in more than one SCOT factor. It’s all in how you explain your SCOT list. Consider this - a strength can be a challenge:

• Strength – Free Office Space

• Challenge – Only Open During Sponsor Business Hours

Graphic compliments of Dean Borland, OnBalance. Variation of SWOT Analysis – Strength, Weakness, Opportunity and Threat http://harshvardhanrai.com/?p=50

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Sample SCOT Factors to Consider

Strength – Build On

According to Webster: • Power to withstand strain, force, or stress: toughness. • Power to sustain or resist attack: impregnability. • Legal, intellectual, or moral force. • The power or capability of generating a reaction or effect: operative potency. • Degree of concentration, distillation, or saturation: potency. • Numerical force or supportive personnel measured as to concentration.

Strengths are areas with positive impact on the credit union and are specifically within the control of the credit union. Leverage strengths to capitalize on opportunities and minimize challenges.

What factors directly contribute to the success of your credit union? At what core competencies does your team excel? What are your credit union’s major competitive strengths?

• Brand/Identity • Community Charter • Competent Board & Staff • Competitive Products & Services • Delivery Channels • Educated Board & Staff • Excellent Members • Financial Position • Innovative • Location • Member Demographics • Member Satisfaction

• Member Service • Memership • Partnerships, Alliances, or Collaborations • Strong Net Worth • Strong Sponsor Relations • Technology A strength can also be a weakness. For example:

• Strength – Free office space. • Weakness – Only open during sponsor

business hours.

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Challenge – Identify & Address

According to Webster:

• To take a stand against. • To confront boldly and courageously. • To call on another to do something requiring boldness. • To call or engage in a contest or fight. • A demand for an explanation. • Requirement for full use of one’s abilities or resources. • To call to engage in a contest or fight.

Internal factors that have a negative impact on the credit union. These factors could reasonably be within the control of the credit union.

• A Major Financial Institution Has Lured Away Two Employees in the Last Six Months With Offers of Better Pay and Benefits.

• Aging Membership • Bankruptcies • Board Composition – Expertise, Education or Involvement • Branch Trends • Brand Identity • Changing Labor Market • Changing Technology • Charter - conversion, type • Competition • Data Security Threats • Declining Loans • Delivery or Marketing Channels • Delinquency & Charge-Off Trends • Deposit Growth • Employee Development • Environment • Facilities • Information Security (in-house) • Lack of ….Marketing, Political Involvement, Training, etc. • Location • Mergers • Name • New Regulations • Package of Products/Services • Rate Responsiveness • Single Sponsor SEG • Staff Engagement • Staffing Succession Plan • Word of Mouth Product/Service Statements

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Opportunity – Capitalize On


• Favorable or promising combination of circumstances. • A chance for advancement or improvement.

What factors outside of the credit union control offer potential opportunities? • Business Accounts • Business Development • Changing Board Member Demographics to Better Reflect Membership • Community Outreach • CUSOs • Delete, Stop, or Consolidate Services • Delivery Channels • Employee Development • Employee Incentive Programs • Expand Field of Membership (FOM) • Facilities • Financial Planning/Investment Services • Home Banking • Increasing Community Awareness • Lending • Marketing Channels • Mergers • Mobile • Non-Member Education • Outsourcing • Partnerships/Alliances/Collaborations • Product Enhancements • Shared Branching • Small Business Services • Streamline Procedures, Products, or Services Technology • Untapped/underserved Markets

• Website

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Threat – Minimize


• An expression of an intention to do something harmful. • An indication of impending danger or harm. • One regarded as a possible danger: menace.

What factors outside of the credit union control could have a negative impact on the credit union? • Banker Attacks • Bankruptcies • Changing Labor Market • Company Layoffs affecting significant percentage of membership • Competition • Credit Union Charter Conversions • Customer Loyalty • Declining Mortgage Values • Disaster • Disruption of Business • Economy • Fraud • Identity Theft • Increased Competition • Increasing Legislation/Regulation • Information Security (external – i.e. Department Store records) • Natural Disaster • Online Financial Service Providers • Over the last 18 months, three major financial institutions have started operations within a five mile

radius. They have actively advertised no or low fee products and services to attract customers. • Politics • Potential for CU Taxation • Regulations • Technology • Terrorism • Unemployment

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Example Outstanding Credit Union Class of 2014

SCOT ANALYSIS Strengths Capital Level The capital level for the credit union is currently over 12%. This is true even after paying for corporate assessments over the past two years. This allows the credit union to build new branches in the future. The credit union is positioned to take advantage of possible merger or acquisition partners should a favorable opportunity be presented. Products and Services Due to the financial success of the credit union over the past ten years, Outstanding has been able to purchase and offer newer products and services to the membership. Examples of this include on-line banking, on-line bill pay and a mobile banking application. Other services including on-line account opening and a member rewards program tied to debit card usage have also been evaluated and will be introduced with the next twelve months. Location The credit union is primarily located in the Scotland-MSA. All nine branch offices are located within this boundary. The Scotland-area has not suffered the economic downturn over the past few years as much as other areas of the country, especially in regards to unemployment and declining home values. This has allowed the credit union to see minimal change in loan delinquency and charge off rates which directly impact profitability. The unemployment rate in Scotland is 5.6% as of August 2011 compared to the national unemployment rate of 9.1%. In a study by Local Market Monitor in late 2010, Scotland was named the safest real estate market for investors out 315 metro areas in the United States. According to the analysis, home prices are expected to rise an average of 1% through 2013. Tenure of Executive Management The Chief Executive Officer and the Chief Financial Officer have been employed by the credit union for over 20 years. They have both been in their current positions for over 10 years. This has enabled the credit union to maintain consistency in strategic goals and programs. Long term initiatives such as a senior management succession plan and a comprehensive branching strategy have not been interrupted or changed due to the consistent leadership at the top of the organization. “Hands Off” Board of Directors Although the Board is quite active in regards to defining the over-all strategy of the credit union they have chosen to remain at arm’s length in regards to most of the operational decisions of the credit union. The management team of the credit union has been allowed to determine pricing, investment, staffing and branching strategies with little to no pushback from the board. Most members of the Board of Directors are active in the monthly meetings and annual strategy planning session, acting only in an advisory role and leaving the fine details of most decisions in the hands of credit union management.

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Challenges Gross Loan Mix The gross loan mix for the credit union is 49%. The average for the PEER group is 61.3%. This places extra pressure on the credit union to achieve a higher rate of return on investments. Additionally it forces the credit union to control operating expenses. Limiting operating costs could limit the ability of the credit union to add branches in the future. Aging Membership The credit union has witnessed a gradual increase in the average age of members over the past four years. The percentage of members in the age group 51-64 years has grown from 32% of the total membership to 36%. Members in the age group 65-70 years have increased from 7% to 9% of total membership. All other age groups have remained flat or have declined. The average age of the membership is 49 in 2011 compared to the Scotland MSA which has a median age of 37. As the membership age has increased, it has become increasingly harder to find lending opportunities - especially in regards to first mortgages. The credit union began offering HELOC products to meet this challenge. Other products related to retirement planning may be added. The credit union may also need a new capital spend in order to offer products and services aimed at younger potential members. Tenure of Executive Management As noted above in the two most senior executives have been with the credit union for over 20 years each. Although this has allowed for minimal changes in direction over the years it has also created the need to address a succession plan for the credit union. The credit union has also grown from $96 million to $336 million in assets during their tenure as executive leaders. As the credit union grows, decisions previously made at the upper levels need to be relegated to other management due to the increasing complexity of the organization and the number of decisions and actions now required. Brand Identity The credit union has been in the Scotland community for over 60 years. However, during a recent focus group it was determine that the name “Outstanding” does not have a specific identity related to it in regards to financial services. Several in the focus group were even unaware that Outstanding was a credit union at all. Even those who were somewhat aware that Outstanding was a credit union, they were not entirely sure if they would qualify for membership or not. The credit union must do a better job of explaining exactly what Outstanding is and why those who are eligible should join. Membership Turnover The credit union averages about 200 new members each month. However, the same amount of members close accounts each month. As a result the active membership for Outstanding has remained basically unchanged over the past three years at 32,000 members. In fact, without mergers and acquisitions the credit union has had a difficult time in attracting new members throughout its history. Members close their accounts for a variety of reasons. Two of the most often cited reasons are convenience and consolidating financial services. Both of these reasons can be addressed. We can continue to increase online services and improve shared branching awareness to address convenience issues. For those closing a membership for consolidation reasons we need to make sure the case for credit unions, and in particular Outstanding, is made so the consolidation favors us.

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Opportunities Generation Y Consumers This group of the population is an important part of the future of the credit union. This group has a higher level of service that credit unions should be able to exploit as opposed to banks. Some might view the willingness of this group to switch service providers as a threat. However, credit unions have traditionally offered personalized service and should be able to address this group’s financial needs. Delivery Channels New technologies are going to continue to increase the number of delivery channels that the credit union can offer. Since the credit union is well positioned financially we will be able to afford these new technologies once a careful determination is made regarding the need for the service. This will also allow the credit union to reach a different demographic than currently served by the existing delivery mechanisms. Newer delivery channels should help to attract newer, younger members within the field of membership. Indirect Auto Lending Outstanding currently has a limited participation in an indirect auto lending program. The participation is limited in the following two ways:

• Only fifteen auto dealerships are currently approved by the credit union for indirect lending, even though over one hundred dealers are enrolled for the program.

• Only current members in good standing are allowed to close their auto loans at approved dealers. The credit union could increase auto lending through this program is it approves more dealers for participation or allows non-members to apply for membership at the dealership at the time of loan application. This is an opportunity that must be studied in depth to insure any further involvement in the program does not adversely impact productivity levels of lobby staff or delinquency and charge off levels. Mergers Over the past few years many smaller credit unions under the $50 million asset level have found it more difficult to maintain a positive return. These credit unions have been particularly hard hit by corporate assessments, higher loan losses and the need to incorporate new delivery technologies at a high capital investment level. As a result, these credit unions may have a fundamentally sound balance sheet under normal circumstances and a profitable membership base but need to find a merger partner in order to maintain a competitive level of service. Outstanding has been particularly adept at growing through mergers throughout its history and these current opportunities may provide an avenue of new growth. Member Business Services The credit union is currently active in member business lending on a limited scale. The current business lending loan portfolio is approximately $16 million. However, an additional $24 million could be loaned and still remain under the business lending cap at the current asset size. An increased business lending loan portfolio would help to improve the gross loan mix improving net income as business loans currently have a 1% to 2% better return than the typical investment option. Additionally, enhanced deposit product offerings could aid in improving the amount of fee income generated.

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Threats Awareness Level of Credit Unions Large percentages of the population still are unaware of the services credit unions can offer. This is primarily due to:

• Consumers not knowing that credit unions exist. • Consumers underestimating the services that credit unions offer.

Credit unions need to continue awareness and education efforts moving forward. This is not an easy task and requires substantial resources and effort. New Competition Over the past two years, two large credit unions based in Dublin have decided to establish a presence in the Scotland area. These two credit unions are well-known in the state and have a small membership base already established in Scotland from which they can build upon. Both credit unions have a reputation of offering the best possible loan and deposit rates by leveraging their over-all size and economies of scale. Outstanding may have to be more proactive in pricing decisions in order to not lose market share. Corporate Policies of SEGs Over the past two years our business development group has found it increasingly difficult to reach employees of our SEG base. Many companies have adopted a “no solicitation” policy in regards to allowing outside firms to directly interact with employees. These policies have limited the credit union’s ability to:

• Host financial education programs on company SEG property • Place marketing literature at SEG offices. • Include marketing literature in paycheck or paystub envelopes. • Place marketing materials in company newsletters or emails.

As a result, the ability of Outstanding to attract new members that might be younger and more profitable is severely impacted. SEG Composition The existing Select Employee Groups served by Outstanding tend to be older established companies within the Tulsa area. Many of these companies are related to the ABC industry or are production based. Many of these companies are at a stage in their business lifecycle where large percentages of the employees are nearing retirement age. This raises several issues for the credit union. First the average age of the field of membership is elevated. Secondly, it keeps possible new younger members from joining as these companies are essentially waiting on retirements. Finally, it may cause an uncertainty in regards to the relationship as new employees may not see the importance of remaining affiliated with a credit union. Legislation Several new pieces of legislation have had an adverse impact on the profitability of the credit union. First, the opt-in/opt-out provision of the Dodd-Frank Financial Reform Act reduced the credit union’s non-interest income beginning in 2010. Even though the credit union embarked on an intensive program to opt members in the final opt-in level still resulted in a 20% decline in overdraft fee income. Additionally, the credit union was forced to hire a full-time compliance specialist in order to effectively deal with all of the new regulations. In the past this responsibility was included in another full-time employee’s responsibilities but the sheer volume of new rules and regulations required a dedicated employee. This employee’s salary directly adds to the non-interest expense of Outstanding.

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External Analysis: Provides focus by examining factors which have potential to strategically impact your credit union.

Identify and analyze at least five external factors that affect (or could affect) the credit union.

• Consider local, regional, and national factors over which the credit union has little or no control.

Think in terms of:

• Operating environment • Business strategy • Trends

• Be specific, listing single events or trends; not broad topics.

• Draw conclusions about how the factor may impact the credit union.

• Cite your sources.

Follow the FAIR Format 1) Factor

Write a couple of sentences about the factor.

2) Assumptions Make assumptions as to the future course of the trends related to the factor.

3) Impact on the credit union Relate the trend’s probable impact on the demand or supply for the product or services and the expected affect on the credit union.

4) Response Determine what are the probable responses the credit union can make based on potential impact.

Potential driving or key factors to consider:

1) Political/legislative/regulatory/legal

2) Population Dynamics - Social/cultural/ demographic/psychographic

• How and why people live and behave as they do?

• What are the demographic trends of o your existing membership? o potential membership? o labor pool?

3) Economic

• Significant interest rate swings • Value of the dollar • Interest rate environment • Price of gas • Sponsor perspective • Consumer confidence • Regional, state, national perspective

4) Technology & Delivery Channels

• Skills/equipment • New products/new

processes/innovations (ways of doing things)

5) Competitive

• Has anything changed in this area? • Emerging Markets

6) Physical Environment

• The physical surroundings of the credit union facilities and operations

• Location/proximity to suppliers, transportation, members

• Risk for natural disasters/pandemics

Tips from the Evaluator’s Corner • Tie the factor back as it specifically relates

to the credit union. • Number of pages does not equal excellence.

Concise writing, pictures, images, and charts can be powerful.

• Be thoughtful and creative here and your plan will go from “Good to Great”.

Not sure where to start? • See if your credit union or a classmate has a

copy of CUNA’s Environmental Scan to share with you. Visit www.cuna.org – Research & Strategy for more information.

http://www.cuna.org/

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External Analysis - Factors from Previous Projects Competitive • Brand Position • Business Accounts & Services • Check Cashing/Payday Lending • Credit Unions, Community Banks, and Non-

traditional Financial Service Providers • Deposit & Payment Innovations • Field of Membership Expansion • Fraud/Identity Theft • Lending Trends • Mergers & Acquisitions • Service Quality • Stagnation - Any key CU stats below peer? • Wallet Share Economic • Bankruptcy Rules, Regs & Trends • Consumer Trends and Confidence • Credit Union Field of Membership Expansions • Growth, Stagnation, or Decline • Housing • Inflation • Interchange • Interest Rates • Overdraft Services • Small Credit Union Survival Financial Products and Services • Branch Traffic • Business Accounts • Financial Listeracy • Financial Management • Lending • Life Style Accounts • Payment Options • Person to Person Transactions • Personal Account Management Human Resources/Talent Management A category or part of Social/Cultural/Demographic? It’s all in how you approach factor. • Employment Law • Hiring and Training to Serve Ethnic Markets • Managing Remote Teams • Salary & Fringe • Staffing for Changing and Member Expectations • Succession Planning/Staffing Levels • Training & Development

Political/Legislative/Regulatory/Legal • Bank Attack • Bankruptcy Trends • Fraud • Governance, Accountability & Responsibility • Interchange • Interest Rates • Member Business Lending • Political Stability • Specific Rules & Regulations • Tax Exemption/Tax Policy • Voters/Voting Social/Cultural/Demographic • Aging Field of Membership/US Population • Generation Trends • Career Attitudes • Financial Literacy • Gender Trends • Growing Ethnic Population • Health and Environmental Consciousness • Home Ownership Trends • Identity Theft • Market Share in the Tech Based Society • Population Trends • Savings/Borrowing Trends • Transparency, Trust , and Ethics • Unbanked Consumers Technological/Technology • Branch Design Innovations • Consumer Demand/Expectations – Member

Experience • Consumers’ Rising Comfort Level • Contactless Payments • Data Security • Electronic Fraud • Evolution of Online Banking • Evolving Technology • Expansion of Electronic Deposits/Payment/Debit

Cards • Fraud/Identity Theft • Multi-Channel Delivery • Payment Methods • Personal Identification Trends • RFID • Security Policies and Procedures • Types of Delivery Channels

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Example – External Analysis Political / Legislative / Regulatory / Legal Factor 1: The New Credit Impaired Borrower – A Casualty of the Recession Assumption: As the effects of the recession press down on borrowers, consumer credit scores are

drifting downward. The CUNA’s 2010 – 2011 Environmental Scan reports that recession weary borrowers have seen their credit scores fall from the highest band to the lowest band between the second quarter of 2008 and the second quarter of 2009. These once credit-savvy borrowers desperate to have access to credit may fall victim to “Credit Repair” scams. According to a September 2010 article published in the Washington Post, the Federal Trade Commission recently settled a claim in Florida against a company claiming to erase all evidence of derogatory credit and, using fake testimonials, lured consumers into believing that the “file scrubbing” would result in the credit scores ranging from 650 to 700.

Impact: Members and potential members that have struggled during the recession could be further victimized as they are desperate to have their credit repaired. Credit unions could see further losses from victimized members if these scams force members into bankruptcy or if members are involved in negotiating fraudulent instruments or engaging the credit union in fraudulent transactions.

Response: Dynamic Federal should take an aggressive and proactive role in combating this and other types of fraud for which our members and potential members may fall victim to in desperate times. We should develop awareness campaigns of the various types of fraud scams that members may face, including check scams and wire scams. This campaign could also include debit card fraud via skimming devices strategically placed on unmanned and loosely controlled terminals or machines. Education and information are the keys to guiding our membership towards fiscal responsibility and becoming a prudent and vigilant consumer. Credit Unions have a responsibility to educate and inform, guide and direct. As much as we want to help our members protect themselves, we must be vigilant in our efforts to protect credit union assets against members that do not act with diligence, behaving loosely with plastics or pins, or fall victim to a fraud and maybe trying to involve the credit union in some way. Additionally Dynamic should consider developing underwriting standards for this newly credit challenged borrower, standards that look beyond the credit score to provide service to this group of stressed borrowers. With disciplined underwriting and risk-appropriate pricing structures, Dynamic Federal could see significant lending opportunities.

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Economy / Financial Products and Services Factor 2: Consumer Trends - The Deleveraging Consumer Assumption: Consumers are changing their saving and borrowing habits and paying down debt.

According to the Bureau of Economic Analysis, the personal savings rate as a percent of disposable personal income rose in 2009 to 5.9% from a nine-year low in 2005 of 1.4%. At the same time, Federal Reserve data reveals household debt service and financial obligations dropped to 12.68% in 2009, down from a nine-year high in 2007 of 13.90%. This trend is further supported by consumer borrowing trends. Other data released by the Federal Reserve reveals debt growth of -4.4%, down from a nine-year high of 11.4% in 2000. In summary, the recession-weary consumer will be using disposable income in two ways: 1) build reserves through savings and, 2) paying down debt.

Impact: As a more fiscally responsible consumer evolves coupled with waning consumer confidence and a reluctance to borrow, Dynamic Federal may find loan demand waning as well. Additionally, with personal savings on the rise, we may find ourselves challenged to manage excess share growth. Dynamic Federal may also see loan pay downs accelerate as members work to eliminate debt. Early pay-down of loans, decreased loan demand and increased shares may result in thinning margins as loans reprice at lower rates and excess deposits will be invested at historically low rates.

Response: In order to retain market share, Dynamic Federal will need to embrace the changing share and credit demands of our membership as members navigate through the aftermath of the recession. Research shows that credit unions are in a great position to communicate the message about fiscal responsibility, but this will take a strategic effort on our part. A February 2010 study performed by the Filene Institute on customer experience revealed that credit unions scored a satisfaction rating of 8.98 out of 10, far exceeding scores of banks. In fact, the study revealed that banks have experienced the largest loss (19 basis point drop) in customer satisfaction from 2006 to 2009 when compared to other service-related sectors. Furthermore, according the 2010-2011 CUNA Environmental Scan (“E-Scan”), the consumer is growing more and more despondent with the banking industry because of excessive fees, credit card term trickery, unreasonable credit standards, and taking bailouts while paying top executives outrageous bonuses. Yet, according to Dr. Charles Idol in his presentation at the Southwest Corporate Economic Forum (October 2010), credit unions have been losing market share of non-revolving credit to banks both before and after the onset of the recession.

Credit unions have a unique opportunity to communicate the benefits of credit union membership to those we mean to serve. To that end, Dynamic Federal should develop awareness campaigns designed to communicate the credit union message and our commitment to the credit union core principles of thrift and the wise use of credit. Dynamic Federal must ensure that our loan and deposit products are meaningful to the new savings and borrowing demands of our members. At the same time, Dynamic Federal must constantly evaluate the operational efficiencies of our products and delivery channels with the value to the member in mind. Dynamic Federal should develop specialized talent through certification programs offered within the credit union industry, such as CUNA’s Certified Financial Counselor Program and other financial literacy programs. By doing so, Dynamic Federal will be developing the expertise needed to guide our members through both the tough times ahead and the brighter days to come.

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Economy Factor 3: NCUA Corporate Stabilization Program and National Credit Union Share Insurance Fund Assumption: As detailed in the NCUA Brochure, “Corporate System Resolution”, the NCUA has

reported that, at least for the next five years, natural person credit unions can expect annual assessments to repay the Temporary Corporate Credit Union Stabilization Fund (“Stabilization Fund”). It is unknown what the actual impact to credit unions may be; however, current estimates released by the NCUA are $8.3 billion to $10.5 billion, net of member capital. This could change based on the performance of the underlying securities, which are mortgage and other asset backed securities. According to the Bureau of Labor and Statistics, the unemployment rate in October 2010 was 9.6%. With the unemployment rate hovering at record levels, the underlying securities may go into default, increasing the corporate loss burden on natural person credit unions.

Impact: As the NCUA relies on the collective capital of natural person credit unions to repay the Stabilization Fund, more and more credit unions may fall into troubled territory. As a result, the number of credit unions will be reduced through mergers or liquidations, thus creating additional assessments for the remaining credit unions.

Response: In addition to the assessments imposed by the NCUA, one does not have to look far to see other pressures on profitability, including increased charge-offs and provision for loan loss funding requirements, declining loan demand, losses from fraud, etc. All of which are pressing down on the profits of credit unions. Mary Ann Woodson, CFO of the NCUA, presented the September 2010 Report of the Share Insurance Fund to the NCUA board. Ms. Woodson’s report revealed that, in September 2010, 374 credit unions were graded at CAMEL 4 and 5, up from August 2010 at 360 and 25 credit unions have failed this year. The current equity position of the share insurance fund is 1.18%.

Realizing that the assessments are a new reality for the foreseeable future, we must include the NCUA projections, expected to be is