Listserv Update: January-February, 2005

CUNA CFO Council
February 25, 2005

The Listserv is a centralized list of e-mail addresses that is used for group discussions by members of the CFO Council. Posting a question on the Listserv is a great way to get immediate feedback from other CFOs on just about any question. In case you don’t check the Listserv regularly at http://www.cunacfocouncil.org/listserv/idx_listserv.html, here are some interesting subjects that have appeared over the last two months.

ALM Speaker Our board has asked to have an outside speaker on the topic of ALM. I'mlooking for someone with broad industry experience who is a greatspeaker and can make ALM enjoyable enough to keep the interest of agroup of high functioning professionals. A tall order, I know, for sucha dry topic. Any suggestions?

Bump Certificates We are looking at doing a bump rate certificate. I understand the concept, but have a problem with marketing telling me what the "bump" option rate would be for the members. For those offering bump rate certificates, what is the rate or index the member can use to change his rate?

Back Office Staffing I am doing an analysis of back office operations and would like to know what other credit unions have for staffing levels. We are $140 million, three branches, and 14,000 members. Would you provide the number of back office personnel, titles, and a brief summary of their responsibilities?

Tracking the Indirect Portfolio Can anyone share the methods you use to determine if your indirect portfolio is profitable as a whole, and how much profit it generates? I also would like to know how you determine the rate you pay your dealers. How do you determine if the interest rate, dealer fee, charge-offs, and other expenses generate a profitable loan, especially if you are tiering the paper for risk? Presently, we pay a flat 1% for all paper grades, but want to go to a tiering system of paying.

A/P Purchase Orders We currently do not have a purchasing procedure in place other than supervisors approving what is purchased. I am trying to formalize this process to maintain expenses, inventory and our budget. We would like to have accounting approve purchase orders before orders are placed. Would enjoy feedback and/or procedures and guidelines regarding other CUs.

Weekend Management Coverage Trying to swallow a new policy from my CEO. All management has been put on weekend duty on a rotating basis (by branch). Some have duty once every five-six weeks and others have it every three weeks according to the branch. Our drive-through is the only operation that is open and only does deposits and withdrawals. I've never heard anyone doing this before and it was presented as a norm. We have eight service points and are $100 million in assets. Have any of you heard of such a policy or am I out of touch with reality?

Indirect Auto Losses We have been offering indirect auto loans in earnest for about two years and our loss ratios by risk category are as follows: A-49%, B-1.03%, C-1.31%, and D-2.33%; Overall, 1.09%. Are these levels similar to what you are seeing in your own portfolios?

Large Deposits/Collateral We have several large depositors with balancing exceeding the NCUA insurance maximum. Does anyone have a process for providing these types of members with additional security? I have thought about assigning Agency securities as collateral. Can you think of any issues that might be created by doing this?

New Employee Training We are in the process of developing a new employee training or orientation. This will give all new employees an understanding of all aspects of the credit union, from IT to accounting to lending to ALM and to operations. Our goal is to create awareness for all employees, and to see how a teller or back-office administrative assistant can impact the bottom line. Does anyone else do something like this? If so, please share your outline or agenda.

Board Travel / 1099 Reporting When board members travel with their spouse/partner, we have been reporting the value of the spouse's travel (if over $600) via a 1099 MISC. However, our board members have been told by other credit unions that they have a way of getting around this requirement. I'm wondering if there is an interpretation of the tax code that I am not aware of. Or is this just the case of some liberal interpretation which I don't want to get involved with! Any comments?

Visa’s ISA Fee For those of you who issue Visa cards, have you seen Visa's change of the 1% foreign transaction currency conversion fee into an International Service Assessment (ISA) fee? The ISA fee will be charged to us in our settlement but will not be automatically included in the transaction debit to our members' accounts as was the case, previously. We have to decide whether we are going to pass the 1% fee on to the member or not and, either way, Visa requires us to disclose this change to our members by April 2, 2005. Is there anybody else out there dealing with this decision?

Financial Goals for 2005 If you’re willing, would you please share three or four of your financial objectives for 2005? For example, are you tracking COF, ROA, percent increase on loans and/or deposits? Do you receive an incentive bonus on these objectives?

Rising Rates Member Certificates Our CEO asked about what strategies are being employed to encourage members to invest in longer-term certificates in this rising rate environment. I am asking this purely from an ALM perspective as it relates to extending the maturities on the liability side. The majority of our members are staying short. Are you being more aggressive with your longer-term rates?