OVERVIEW/INTRODUCTION – DAVE ADAMS

Hello and welcome to the January 2018 MCUL Priority Report.

The new year always brings change and opportunity — Beginning in late 2017, as part of our executive transition strategy, I moved more of my attention to the CUSG business side of our operation, while deferring to Ken Ross as President and COO of MCUL to manage the day-to-day of our association’s advocacy and information operations for member credit unions. Our boards have been supportive of these changes as we need to make sure that we have a solid executive succession plan, and the right allocation of management resources to avoid unnecessary duplication of effort.

As such, this MCUL Priority Report will reflect those management changes. Ken will now take on the role of chief spokesperson with our membership on most association matters. These changes will also position Ken to represent MCUL at chapter meetings and MCUL conferences and events, including our AC&E. He’ll also represent Michigan credit unions with the media and with the CUNA/League System. My association role will increasingly become more advisory to Ken and one of backup and support, while I focus the majority of my time and effort on leading and managing CU Solutions Group.

These changes will allow me to more fully focus on the CUSG operation that is now a $50 million operation with more than 150 employees. And as a company that offers technology, marketing and human resources solutions to thousands of credit unions across the country, it’s more important than ever that CUSG receive more executive management and senior team coordination by me and my excellent management team. My top priority in the years ahead will be to grow and strengthen CUSG for the benefit of all shareholders including MCUL and its member credit unions.

I’m very proud of the management team that we have at MCUL and CUSG, as well as every team member who contribute so much for our success.

Rest assured that my team and I are all committed to making MCUL the best state trade association for credit unions in the nation. That means top-notch advocacy, public relations and education services, in tandem with the CUNA/League System — and at the lowest possible dues cost to our member credit unions. I’m proud that 100 percent of Michigan credit unions choose to affiliate with MCUL, and Ken and I and our entire team will work hard to provide great value for your dues dollars in 2018 and beyond.

We realize that the success of CUSG not only provides the vast majority of funding for MCUL so that we can keep our dues very low, but the solutions offered by CUSG help credit unions succeed as well. So, both Ken and I have important leadership roles to make sure that this continues well into the future.

So, now, I’ll turn it over to MCUL President/COO Ken Ross for this January Priority Report on behalf of the MCUL and its member credit unions. I’ll be back after Ken’s report to offer an update on CUSG activities.

MCUL UPDATE – KEN ROSS

Thank you for the introduction, Dave, and I look forward to taking on these responsibilities on behalf of MCUL.

As we start a new year, I want to first take a look at some of the advocacy successes we achieved in 2017. Most importantly, Congress passed major tax relief legislation without touching the credit union not-for-profit status. Playing a role in this victory was MCUL’s ability to secure statements from each member of the Michigan congressional delegation supporting credit unions and the preservation of the CU not-for-profit status.

Last year, we also saw the House pass the Financial Choice Act and the Senate Banking Committee passed their regulatory reform bill. MCUL and credit union advocates across Michigan made significant progress toward achieving meaningful regulatory reform in 2017. The bill included several provisions beneficial to credit unions, including language that would make much needed structural changes to the CFPB and offer relief from certain HMDA requirements. One section would offer relief from some of the requirements of the so-called qualified mortgage rule for some lenders that hold mortgage loans in their portfolio. Another section changes HMDA reporting requirements by increasing the threshold for reporting to 500 closed-end and open-end loans in a calendar year. Following passage by the House, the Senate Banking Committee drafted its own bill which then passed in early December.

Lastly, on behalf of the advocacy efforts of the CUNA/league system, the CFPB’s Arbitration Rule was repealed. The rule would have forbid financial service providers, such as credit unions, from using pre-dispute resolution agreements to minimize class action lawsuits. For more information on our 2017 advocacy successes, be sure to check out the Q1 issue of Contact magazine.

This year, we’re working on a number of items, including Senate consideration of financial regulatory reform legislation. Currently, the CUNA/league system is working to seek clarity from the Department of Justice regarding ADA Website Accessibility. Many credit unions have been threatened with litigation as a result of ambiguities in ADA website compliance, and we want to resolve this matter as soon as possible in order to protect credit unions.

We really need your help as we talk to our Congressional delegation about the need for regulatory reform, ADA and other pressing issues to be discussed at the 2018 CUNA in Washington, D.C. and MCUL’s Hike the Hill, this fall. Your engagement is also requested with state lawmakers at the MCUL GAC this April in Lansing. Data breach, payday lending, e-notary and other important state legislation will be up for discussion at this important lobbying event. Effective advocacy includes contacting your member of congress in response to an MCUL action alert. Further, you can become a credit union advocate by engaging your local, state and federal elected officials by attending their events and educating them on our issues — building that relationship, so they can come to know you as someone they can count on for reliable financial service issue information.

Last November, then-CFPB Director Richard Cordray announced his resignation from the bureau. During his tenure, he refused to exercise his authority stated in the Community Financial Institution Exemption Act, which makes clear that the CFPB is able to exempt community financial institutions, like credit unions, from its regulations. Going forward, we will be asking that the CFPB’s new director use their authority to release credit unions from the unnecessary regulations of the agency. To help us advocate for common-sense regulation, credit unions can submit comments to the CFPB or MCUL in order to make your voice heard.

on to the Michigan Credit Union Foundation, it’s just wrapped up another successful year of helping credit unions thrive and serve Michigan communities through financial education, community reinvestment and professional development support. These initiatives are aimed at helping more people, families and communities in Michigan feel the credit union difference. The value of the Foundation’s programs to credit unions is evident by the continual increase in credit union support and engagement with the Foundation in recent years.

With the help of our 2017 annual donors, the Foundation helped improve Michigan communities through credit unions this year with 24 Community Reinvestment Grants, helping credit unions address community problems and increase financial education, 39 Financial Reality Fairs, which prepared more than 3,500 teens for financial independence, and 97 scholarships for financial counseling training, CUNA Management School, young professionals and new CEOs.

Your involvement helped MCUF reach an important milestone this year. Fifty-two percent of Michigan credit unions supported MCUF with an annual donation in 2017, passing the 50 percent mark for the first time! These donations are the engine that fuels MCUF programs and impact. This increased support shows us that your awareness-raising activities are helping, and that credit unions value the foundation’s support focus on social mission activities aimed at helping more people, families and communities feel the credit union difference. I encourage your credit union to engage with the Foundation in 2018, both as a participant in foundation programs and as a financial supporter.

Switching gears to Education, I would like to first thank everyone who helped make last year’s Annual Convention & Exposition such a success! The event boasted a 98 percent positive attendance expectation score. And the percentage of Michigan credit unions participating in the AC&E has grown steadily for five straight consecutive years. AC&E hosted 835 credit union attendees and their guests, 477 vendors filling 130 exhibitor booths and 70 speakers making presentations. We look forward to seeing you back at AC&E, this year, when we take it to Traverse City in June.

Looking ahead for the Education team, it all starts at Compliance Conference, coming February 21 and 22, in East Lansing. This year’s event features an extended agenda with additional choices and education topics. We hope to see you there.

Before I hand it back over to Dave, I quickly want to touch on Compliance. New in 2018, we’ve made updates to Destination Compliance, including an improved look and feel, a community discussion board and enhanced search features. The discussion board was a popular request of credit union users – it allows leaders to discuss experiences with one another and share best practices among peers. And the enhanced search function is a powerful tool that can search across multiple sites connected to the Destination Compliance portal. We hope these updates allow your one-stop compliance solution even easier and more effective for its users.

With that, thank you once again for joining us for this fourth quarter MCUL update.

Back to you, Dave.

CUSG UPDATE AND CONCLUSION – DAVE ADAMS

Thanks, Ken.

As CU Solutions Group transitions into the new year, I’d like to offer an update on our results from last year, as well as additional insights as we move into the first quarter of 2018. CUSG closed the year with revenue exceeding expectations. Net income surpassed budget, and CUSG declared a dividend for the seventh consecutive year. In short, year-end results were positive across the board and all divisions performed well in 2017. CUSG’s financial results were further strengthened by strong investment performance as most liquid capital is invested in a mix of high-grade debt and equity investments. Investors can obtain detailed quarterly financial statements upon request, along with the audited year-end financial statements that we will distribute in April.

As we shift into 2018, we’ll continue to position CUSG as a technology, marketing and HR performance solutions company, and our future product development and acquisitions will generally focus on those areas.

As it did in 2017, CUSG Technology Solutions will continue to take a mobile-first approach to the products and services offered to credit unions. As you know, CUSG acquired a majority share of CU Wallet in early 2017, later acquired complete ownership, and after a year of hard work and product reinvention, the first two buildouts of LifeSteps Wallet will make it into the hands of credit union members in just a few more weeks. As previously reported, LifeSteps Wallet buildouts moving forward will be branded and customized for each individual credit union. Custom LifeSteps Wallet apps will include the credit union’s current mobile banking services – regardless of provider – in addition to consumer resources built around home, auto, shopping and financial wellness. All functionality is designed for long-term engagement with the member, and ultimately leads them back to keep products and services offered by the credit union.

Late 2017 also brought widespread concern as credit unions across the country received letters threatening lawsuits — these were for failure to comply with ADA regulations pertaining to credit union websites. The firestorm created by the ADA regulations, the ambiguity around what compliance means and the unfortunate, opportunistic lawsuits all pointed to the need for service providers like Technology Solutions to lend a hand with auditing tools to reduce the risks associated with non-compliance. As such, we partnered with technology provider AudioEye to streamline and simplify ADA web compliance for credit unions. Through this new partnership, CUSG is offering its clients a comprehensive ADA solution at rates that are significantly reduced from AudioEye’s normal retail price.

Shifting to Marketing Solutions, passing the core solution milestone, Digital Advertising sales from FocusIQ grew to $1.3 million in 2017. While the team continues to focus on creating custom work for larger credit unions, it’s also working to develop new turnkey marketing materials that fit the budget of any size credit union. We have a phenomenal library of content from past years’ CU Link campaigns and our own CUBE TV Studios team is working with FocusIQ to repackage some of this material, and make it accessible in an easy-to-customize template format. Credit unions — especially small- and mid-sized credit unions — will be able to access these high-quality, professionally branded marketing materials at a fraction of the original production cost.

In addition to other custom projects, the CUBE TV Studios team is also working with GSTV to produce new digital video templates. We see great opportunities for alignment among CUBE TV, GSTV and FocusIQ, and bringing them together in a cooperative and advantageous way will be area an of emphasis in 2018.

Finally, Marketing Solutions added 41 new credit unions to its Save to Win program in 2017. Save to Win is now offered by 111 credit unions across 12 states. Since the beginning of the program, nearly 2.5 million members have saved more than $5.8 million. To seize upon this strong growth, the Save to Win team is working on a prize-linked loan program in 2018 that will promote smart borrowing by transferring high-yield loans to credit unions.

Concerning Membership Enhancements, with well over a half-million registered lines, CUSG’s Sprint Credit Union Member Cash Rewards program continues strong into 2018. The program generated major growth in 2017, increasing from 570 lines per day in January to more than 3,600 per day in December — that’s nearly 550 percent growth over the year! In total, more than $29 million has been deposited into 391,000 member accounts since the launch of the new program. As that number continues to grow, CUSG & Sprint are now gearing up to launch the program’s Credit Union Member Annual Loyalty Rewards.

Apart from our ongoing work with Sprint, our teams are also laying the groundwork for another strong year with Intuit TurboTax. Coming into 2018, CUSG is Intuit’s top affinity partner in the financial services industry and will be entering the fold with more than 1,500 credit unions.

A final area of emphasis for Membership Enhancements will be on finding new, valuable partners to add to the Love My Credit Union Rewards program. The team is doing this in conjunction with the LifeSteps Wallet team as it begins to transition toward a mobile-first, omnichannel approach. The team is seeking partners in all sectors, but especially looking for valuable additions in the areas of auto, travel and financial wellness.

And, shifting focus to the Performance Solutions division, CUSG launched a new partnership with the Angott Search Group in the final days of 2017. CUSG Executive Search, Powered by Angott, will help credit unions identify and retain mid- to senior-level talent that aligns with their unique culture and vision. This new service simplifies and expedites executive searches while helping to mitigate risks for clients.

Building upon strong core solutions — Performance Pro and Compease — the Performance Solutions team will also add two new solutions to the fold in 2018. CU PlanningPro will be delivered to the first Michigan credit unions with the help of our Michigan sales staff in the first quarter, and CU BoardNavigator will see finalized model board policies working toward a finalized product later in the year.

Finally, HR Performance Solutions is preparing to release its latest version of Performance Pro — Performance Pro 4.0. The software has been in development with Technology Solutions for 18 months and will improve an already great product by adding more power and new functionality to the application.

For more details about any of CUSG’s products or services, I invite you to watch the CU Solutions Group fourth quarter Shareholder Update on our YouTube channel. Our divisional leadership covers each of these topics in greater length. And of course, more information is always readily available on the CU Solutions Group website.

That’s all from CUSG for the fourth quarter of 2017, and that’ll conclude this fourth quarter MCUL Priority Report. As always, we hope that you found the information contained in this report to be insightful and worthwhile. It’s part of our continued effort to be transparent with our members and to communicate our priorities and focus, moving ahead.

We appreciate your support for all that MCUL, CUNA and CUSG do to help credit unions become stronger and more successful. Together, with your engagement in advocacy, your support for the CU Link cooperative advertising program, your usage of and feedback on our CUSG offerings and our MCUL education offerings, we’ll continue to work toward another strong and successful year for Michigan credit unions.

So, thank you once again for watching; we’ll see you next quarter.