Priority Report — January 2019

Welcome to the January 2019 edition of Priority Report where we’ll offer you an expanded update on Michigan Credit Union League and CU Solutions Group’s year-end progress and 2019 priorities.

Every quarter, MCUL and CUNA provide our membership with an economic and statistical update drawn from NCUA call report data. This full report is available on the MCUL website in the industry resources tab. The report shows that Michigan credit union memberships rose by more than 3.2 percent in the twelve months ending with Q3 of last year. This is well above the state’s 0.2 percent population growth and brings total Michigan memberships to 5.4 million. That means that roughly 550 net new consumers join a Michigan credit union every day. That’s impressive growth and a strong validation of the popularity of credit unions. The summary also reflects continued strong growth in lending, checking accounts, deposits and small business loans.

2018 Financial Results

For MCUL & Affiliates, let us provide you with a brief summary of our preliminary financial results for 2018. Of course, the goal for the MCUL is to maintain and grow CUSG financial results in order to keep MCUL dues low while providing top-notch association services for our membership. We’re fortunate to have 100 percent affiliation with our 224 credit unions and we take service excellence seriously.

For MCUL, due to a volatile stock market last year, especially in December, on a consolidated basis, the MCUL’s capital or members net assets (MNA) went down by approximately $5 million and yet, the total MNA balance ended the year at a phenomenally healthy $72 million. CUSG earnings were also affected by the investment markets but it ended the year with approximately $4.8 million in net income on $43.7 million in revenue, enabling the company to pay a shareholder dividend again this year. Both revenue and earnings were also affected by forces that we feel will reverse to a more positive position in 2019. Like MCUL, CUSG ended the year with a very strong balance sheet that includes almost $70 million in equity and $52 million in investable funds.

For 2019, we are optimistic about CUSG’s growth and earnings opportunities and we’re confident that the value proposition of this model for Michigan credit unions will continue into 2019 and beyond.

Changing Faces of Legislative and Regulatory Offices

Now shifting to the MCUL’s core function of advocacy. As you know, our state has a new governor, secretary of state, attorney general, four new members of our 16 member Congressional delegation, and a lot of turnover in our state legislature. And on the regulatory side, with the retirement of DIFS Director Pat McPharlin and the departure of Credit Union Division Director John Kohloff, as well as a new NCUA Regional Director Jane Walters and new NCUA Board Members expected this year, it goes without saying that this was a year of change.

So, the MCUL’s top 2019 priority will be to build relationships with all of these new players and we will need your engagement and help with this important facet of our advocacy efforts.

MCUL’s 2019 Priorities

The MCUL board also approved our top 2019 priorities which are:

1. Emphasize advocacy relationship building and issue agenda post-election.
2. Improve CU Link awareness campaign in cooperation with CUNA.
3. Improve education and information services alignment with credit union priorities.
4. Partner for comprehensive risk management and compliance services.
5. Implement a Future Vision Task Force for structure, voting and services input.

Advocacy Agenda

Our team is currently working on meeting all of the new legislators and regulators. A significant part of the first part of the year will be spent educating them on the credit union difference and building relationships, with an increased focus on members of our key committees in the House and Senate. We’ll also be working on our advocacy issue agenda for 2019, including data breach standards, CUSO capital requirements and e-recording process amendments to get about 30 counties up to speed on electronic recordings that are currently lagging. And at the federal level, preserving our tax status, updates to the Federal Credit Union Act, reducing regulatory burden, safeguarding credit interests in the face of housing reform, data breach standards and cannabis banking are among the issues we will work on with CUNA and state leagues.

As for events in 2019, we encourage your participation in the CUNA GAC in March as well as the MCUL GAC in April, as well as chapter events and Fall events in Lansing and Washington, D.C. Your participation in these events is critically important.

PAC fundraising also remains a high priority for us, and after a record-setting Grand Raffle in 2018, the team is now planning the A Stronger Financial Michigan Defense Fund Golf Outing. The outing will be on July 18 in East Lansing and is the premier fundraiser for the ASFM Michele Myrick Scholarship Fund, which provides financial assistance to participants of Hike the Hill and the CUNA GAC. You will also be receiving an ASFM fundraising packet in the coming weeks. It is critical that we keep building this fund as needed to launch media buys and counter-attacks to claims of banks as well as to support important lawmakers.

Changes at DIFS

In Regulatory Affairs, the Michigan credit union community looks forward to welcoming Denice L. Schultheiss as the new Director of the Department of Insurance and Financial Services (DIFS) Office of Credit Unions. She replaces John Kolhoff, who resigned after 24 years with DIFS to serve as commissioner of the Texas Credit Union Commission.

Schultheiss has been with the DIFS Office of Credit Unions since 1996 and, in 2004, was promoted to Regional Supervisor. MCUL enjoys a strong relationship with DIFS and we look forward to working with Denise in her new role.

Likewise, we look forward to meeting with Anita Fox, the new DIFS director. Ms. Fox was appointed late December by Gov. Whitmer to replace Pat McPharlin, who retired at the end of the year. Ms. Fox is a Lansing based attorney with a lot of experience on the insurance side. Our team will be setting up a meet-and-greet with her to talk about the MCUL agenda and outlook for 2019.

ADA Lawsuit Victory and Looking Ahead

Related to ADA lawsuits, our industry recently received good news as the Fourth Circuit Court of Appeals dismissed an ADA website accessibility case against the Department of Labor Federal Credit Union based in Washington, D.C.

MCUL, together with CUNA, is hopeful this decision will be another step to ending the frivolous ADA website compliance lawsuits that have affected hundreds of credit unions, many of which are in Michigan, in recent years.

On the regulatory advocacy front, our Regulatory Affairs team is currently going through the recently issued 2019 rulemaking agendas from the CFPB and NCUA. The CFPB has indicated they will be re-opening and re-evaluating the HMDA rule as well as the Payday Lending rule effective January 2019. We will continue to monitor the agency agendas, advocate on your behalf and report updates in the coming issues. Your input on all of these issues is really important for an effective process here.

CU Link in 2019

In addition to advocacy, as you know, another high priority for the MCUL and CUNA is the promotion of credit unions through formal awareness campaigns such as the MCUL CU Link program. This month, MCUL and FocusIQ are working in tandem to develop new creative for the 2019 CU Link campaign. Our 2019 focus will be a research-based effort to dispel misperceptions that credit unions are not as full-service or tech-sophisticated as banks.

We will also communicate the pricing advantages, the fee-free ATM networks and the local community commitment of credit unions as well as the trust that is tied to the credit union brand. We are in ongoing discussions with CUNA to try and sync up with their “Open Your Eyes” campaign if possible. Whether that happens or not, we will have an expanded and improved Michigan campaign that encourages consumers do save more as they do more business with credit unions.

We want to help communicate the brand promises of credit unions including trust, value, convenience, security and commitment to community and the financially challenged. Look for more information in the coming months ahead on the CU Link Campaign.

Michigan Credit Union Foundation

Another important facet of the MCUL is it’s nonprofit Michigan Credit Union Foundation. The Foundation plans to elevate the credit union difference through existing successful projects, as well as new ones that focus on credit union social mission activities.

To do so, the Foundation seeks to raise and distribute $220,000 in community grants for credit unions and education scholarships towards those activities. We encourage credit unions and chapters to provide support with annual donations, which are the primary source of MCUF’s funding.

The Foundation will also spend time and efforts this year on supporting young professional development and their commitment to the industry, starting with a new young professional networking group, which launched in January. The group is called “FUEL MI” (Fueling, Uplifting, Educating Leaders). FUEL will help expand opportunities for young professionals with increased focus on networking, professional development and cooperative social mission outreach.

2019 MCUL Education Events

Turning to our important education role, The Lansing team is currently getting ready to host their first event of the year, the Compliance Conference, this February. Hosted in Bay City, this conference features presentations on security and fraud, Cannabis banking specialty accounts and other topics.

Our education events in 2019 are focused on your credit union priorities – brand promise delivery, improving consumer experience, omni-channel technology, and talent and risk management. We would love to hear from you if there are any educational needs you see missing from our 2019 calendar.

We are also preparing for the 2019 MCUL/CUSG Annual Convention & Exposition, this June in downtown Detroit. This year’s event will mark a strong educational focus on the priorities just mentioned and will provide great opportunities for networking and celebrating our industry’s success.

We are also excited to bring back the Water Coolers to host the awards ceremony for another year, and we can’t wait to see what they come up with for our winners.

CU Solutions Group

On the CUSG side, the value proposition for Michigan credit unions is built on a combination of great solutions and financial success that helps keep MCUL dues low. In that regard, the financial success of CU Solutions Group is important since MCUL owns approximately two-thirds of CUSG. Those earnings help fund MCUL and are at the foundation of our uniquely low reliance on member dues. As mentioned previously, our financial results were strong in 2018 and we’re focused on keeping the company growing in the future.

Let us give you a snapshot view of some of our CUSG activities and priorities.

LifeSteps Wallet

In our Technology Solutions division, the LifeSteps Wallet mobile banking enhancement suite has now been in the hands of credit unions and their members for a full year. After successfully onboarding several credit unions in Q1, we expanded the product line with the release of LifeSteps Wallet Lite, which is geared toward smaller asset-size credit unions.

The LifeSteps Wallet product line ended 2018 with 13 clients and dozens more in the pipeline. As we move into 2019, the team will continue to enhance the application’s user experience and interface. Plans are in place to routinely update feature sets, options for customization, provide more partner deals for consumers and develop new methods of data point collection and reporting. For instance, we plan to introduce a new feature that will replace the Zillow feature due to its entry into mortgage lending. The new partnership platform will not only give credit unions protection from unwanted mortgage competition, but it will also provide a loan referral mechanism.

QCash Financial

In keeping with our emphasis on a mobile-first approach, late in 2018 we finalized a key partnership agreement with QCash Financial. The product, which offers affordable short-term loans to credit union members, is slated for release in early first quarter with an integration into LifeSteps Wallet targeted soon after. While initially this feature is geared more toward larger credit unions, it is another example of how CUSG is innovating to help credit unions compete with Payday loan stores and other lending competitors.

AudioEye

Additionally, our partnership with AudioEye and resulting services in ADA web accessibility are meeting an important need in the industry. Our number of ADA-related web clients, currently at 169, continues to grow as credit unions see the value of both protecting themselves and increasing the accessibility of their websites for members of all abilities. We’re proud that CUSG added an additional 100 clients on this platform in 2018.

Rewards Programs – Sprint, LMCUR & Save to Win

The Marketing Solutions division has seen consistent month-over-month growth of CUSG’s Sprint Credit Union Member Cash Rewards program. Through 2018, credit union members activated roughly 317,000 new lines compared to 191,000 at this period last year — a year-over-year growth rate of more than 65 percent! And total registered lines surpassed 1.5 million this past quarter. This program is promoted by thousands of credit unions nationally and our Michigan credit union community has been at the nucleus from the beginning. There is tremendous value for credit union members here and we appreciate your marketing support.

The Love My Credit Union Rewards (LMCUR) program will also share a focus on evolution and transformation in 2019, including a wide-scale reinvention of the LMCUR platform, further integration with LifeSteps Wallet and the addition of valuable core partners.

Speaking of partners, GSTV continues to be an integral one for us. The second year of their International Credit Union Day promotion nationwide was a success that paid out in a big way for credit unions. Showcasing the credit union difference to consumers, the promotion was advertised at 16,000 gas retailers spanning 39 states and delivered 33 million impressions — all at no cost to credit unions or leagues. We’re proud of the role that CUSG played, along with GSTV to promote credit unions on this platform. You can do the same by promoting your services at local stations within your target markets.

Thanks to new prize-linked savings legislation passed in states like Texas and California, Save to Win continued to expand in 2018. To date, the program has helped members save $180 million and is now offered at 122 credit unions spanning 14 states. But we need more Michigan credit unions to get on board and help us provide this catalyst for smart saving to more Michiganders.

And of course, FocusIQ , our full-service marketing agency has generated growth throughout the year. A new partnership with Valassis added to the suite of offerings by helping FocusIQ deliver scalable, turnkey marketing resources for search engine and email marketing, dynamic mobile, digital display and direct mail. If you’re looking for a marketing partner, we hope you’ll think of us.

Performance Solutions – Performance Pro, Compease & Governease

Moving on to HR Performance Solutions, the division had an outstanding 2018, built on a strong foundation with core solutions Performance Pro and Compease. With a focus on both onboarding new clients and retaining current ones, 2018 revenue closed roughly 20 percent higher than in 2017 and total revenue for Performance Pro and Compease is on track to double over the five-year period ending in 2020, much of this coming from outside the credit union sector.

To expand that strong base even further, the team launched Planning Pro, a product to help plan and measure plan metrics, in late 2018, and will launch Governease, a governance policy library tool, early this year. Both of these resources will be part of a soon-to-be released suite of CEO and Board focused tools called Governance 360 that will also include a cloud-based training suite for boards.

Strategic Advisory Services

And finally, in 2018, CU Solutions Group launched its new Strategic Advisory Services division. The team has been tasked with rolling out solutions in the areas of governance, risk and compliance — or GRC — as well as enterprise risk management — or ERM, to complement the existing offerings for planning facilitation and executive coaching.

Moving into 2019, the team’s vision is to create a product suite for credit unions of all sizes that provides a way of improving financial performance and risk mitigation with great tools and advisory services.

MCUL and CUSG’s mission is to help credit unions serve, grow and remain strong so that, together we can make an impact on people’s lives. Moving into next year, CUSG will work together with MCUL to help our Michigan credit union community be successful.

If you have questions or suggestions on how MCUL and CUSG can better meet your needs, again, feel free to contact any member of our leadership team. We’re excited about what 2019 has in store as we work with you as a trusted partner.