Hello, and thanks for joining us for the Michigan Credit Union League’s third quarter update for 2017. We’ll take a look at year-to-date priorities for the league, specifically in the context of MCUL’s four pillars — those are removing barriers, promoting the credit union difference, providing solutions for service excellence and delivering comprehensive compliance solutions.
But before we start, we’d like to give a quick overview of MCUL financials year-to-date. MCUL closed September with an increase to members’ net assets of $487,000, bringing the year-to-date increase to $2.1 million. The increase in members’ net assets surpassed September’s budget by $540,000. These favorable variances are largely attributed to MCUL’s subsidiary income and unrealized gains on investments as well as lower than expected expenses.
Last month, MCUL, along with nearly 50 Michigan credit union leaders, traveled to Washington, D.C. for our annual Hike the Hill. Credit union leaders from every MCUL chapter met with their members of Congress, including U.S. Senators Debbie Stabenow and Gary Peters, as well as NCUA Chairman McWatters and representatives of the CFPB.
Some of the federal legislative issues we discussed included maintaining the credit union not-for-profit tax status, common sense regulatory relief and support for SJ Res. 47, which would repeal the CFPB’s arbitration rule.
We also talked about the recent Equifax data breach and what Congress can do to require companies and organizations like Equifax to better protect sensitive consumer data. Since then, MCUL has joined the class action lawsuit CUNA has filed against Equifax and working with CUNA and AACUL, we’re encouraging a broad-based coalition of associations to do the same. This data breach has impacted more than 145 million consumers, and just as we did with the Wendy’s and Home Depot data breaches, MCUL will be working in lockstep with CUNA to push for greater security standards in order to protect consumer data and to seek financial recoveries for credit union fraud recoveries and card reissuance costs.
I want to thank our Michigan credit union community, as well as CUNA, that joined us in promoting the credit union difference in Washington, D.C. These fly-ins to Washington are a big part of making our voice heard in order to make headway on our advocacy agenda.
From the nation’s capital to the state capitol, this month the Michigan credit union community made its way to downtown Lansing for our biennial event, Capitol Day. The advocacy event featured briefings on current state issues followed by a luncheon with lawmakers and staff.
Capitol Day is an excellent opportunity for credit union employees and volunteers to show their support of MCUL’s advocacy efforts by communicating credit union issues to state legislative leaders and staff. Leading this year’s list of legislative priorities was data breach legislation and payday lending. We certainly made an impact with pivotal Michigan lawmakers, so thank you, once again, to all who joined us for this important event.
MCUL would also like to briefly mention how pleased I am with the NCUA Board’s decision to close the Temporary Corporate Credit Union Stabilization Fund. As you know, MCUL was an early and strong advocate of the plan. In May 2017, together with 113 Michigan credit union CEOs, we called upon the NCUA board to merge the TCCUSF into the NCUSIF. This is a big victory for credit unions and speaks volumes to the power of the CUNA/league system. While we were displeased with the Board’s decision to maintain a Net Operating Level at 1.39 percent vs. 1.3, we are pleased with the funds merger which will begin the return of funds back to credit unions where they belong.
According to NCUA, credit unions should receive a rebate or dividend in 2018 between $600 million to $800 million. NCUA also stated that credit unions will receive between $600 million to $1.1 billion in dividends between 2019 through 2021. This will be very meaningful for all credit unions.
Lastly, MCUL thanks you, our credit union community. It is only through your continued support that we’re all able to see successes at both state and federal levels. Our 2018 Affiliation Packets will be headed your way very soon, and as you begin your decision process, I hope you will consider how much stronger we are when we work together on our important priorities of removing barriers, promoting the credit union difference, providing solutions for service excellence and helping credit unions with a total regulatory compliance solution. And while we enjoy 100 percent affiliation with the MCUL, we can do better at driving complete support for both CUNA and MCUL. We look forward to having those discussions with each of you so that we can earn that ongoing support.
A lot has happened since our second quarter report. First and foremost, the Michigan Credit Union League, on behalf of Michigan credit unions, joined the class action lawsuit that CUNA filed against Equifax on October 4th.
As terrible as this breach is for millions of Americans, it pushes an important issue to the forefront of public opinion. Already with four hearings on Capitol Hill through October, senators on both sides of the aisle have expressed anger and frustration with Equifax’s mismanagement of this massive breach. We’re also seeing some indication that Washington, D.C. may finally take action on the issue. While we’re seeing movement, exactly what lawmakers have in mind is still unclear — that means it’s important as ever for credit unions to speak in a strong, unified voice with a clear and concise goal. MCUL will continue to work in lockstep with CUNA to help craft and voice this pivotal message as we move ahead.
Meanwhile, CUNA continued with its own push for Congress to ensure impacted consumers are notified and protected with three letters sent to Senate and House committees earlier in the month. The letters were sent to leaders of the Senate Banking Committee, Senate Judiciary Committee and House Financial Services Committee, each of which conducted a hearing the same week that letters were sent.
In the midst of this, MCUL had already made data breach a priority at the state level due Washington’s prior reluctance to take a strong stance on the subject. While these new developments have seemed to breathe life into the issue on the federal level, we’ll continue to advocate for meaningful reform in the state of Michigan.
As such, MCUL has been working closely on a bill sponsored by Senator Darwin Booher that was presented to the Michigan State Senate October 17th – the same day as our Capitol Day advocacy event. If passed into law, this bill would require merchants to notify credit unions within three days that a breach has occurred, would allow credit unions to communicate where the breach occurred to their members and would allow credit unions to bring civil action for damages incurred from breaches.
In other important news, earlier in October, payday lenders were dealt dual blows by the CFPB and the OCC. The CFPB finalized its long-awaited rule on short-term, high-interest loans by requiring lenders to proactively gauge a borrower’s ability to repay such high-interest loans. Within an hour of the CFPB’s ruling, the OCC rescinded guidance that made it difficult for financial institutions, such as credit unions, to offer their own small-dollar, short-term loans.
This, again, comes as MCUL leads the opposition against payday lending expansion in Lansing. A point of discussion just weeks ago at Capitol Day, a new bill sponsored by Senators Dave Robertson and Vincent Gregory seeks to increase loans from the current 30-day term, to a 24-month installment period. It will look to increase the loan dollar amount from two, $600 loans, to $2,500, and would also eliminate important protections established by the Deferred Presentment Services Transaction Act. This huge expansion of payday lending authority isn’t good for Michigan residents or our communities and we’re working hard to educate policymakers on why they should oppose these bills.
We’ve seen an amazing display of support from the credit union community on these important issues, and we need to sustain that support moving forward. State PAC, Federal PAC and A Stronger Financial Michigan fundraising continues with strong momentum into the last quarter of 2017. As we wrap up the Grand Raffle Federal PAC campaign, we saw 129 credit unions participating and close to 100,000 tickets sold – this was a significant increase from last year. As we move into the holiday season, we’re planning to pilot a new plush stuffed animal sale to raise additional funds for the State PAC.
As always, we strongly encourage you to stay involved at the grassroots level, and if there’s anything we can do to help, please don’t hesitate to let us know. Make sure reach out to your elected officials, stay abreast of their activities and know when to act on the behalf of credit unions. Thank you once again for your continued support — keep up the great work.
In compliance news, we launched several new features to our total compliance solution, DestinationCompliance. These include new enhancements to the site’s layout, more intuitive and robust search functionality and a highly-requested discussion board for users. Don’t forget that DestinationCompliance is a free-to-use resource for all MCUL-affiliated credit unions — just visit mi.DestinationCompliance.com.
In addition to enhancements made to DestinationCompliance, League InfoSight added the ability to log and manage complaints to ComplySight, its self-assessment tool that credit unions can use to grade themselves on compliance with federal regulations. Also a popular request from ComplySight users, the enhancement was added with no extra fee, and reinforces MCUL, CUNA and LeagueInfoSight’s ongoing effort to provide effective and affordable compliance products to credit unions.
Last month, many of you received an email announcing the official unveiling of the 2018 CU Link cooperative advertising campaign. New CU Link creative won’t hit the air until 2018, which makes the fourth quarter of 2017 the perfect time for credit unions to preview these new materials and start planning next year’s marketing efforts.
New in 2018, full-share CU Link contributors will have access to free customization so that they can integrate with the statewide campaign — this is great way to stretch your marketing budget and still leverage high-quality advertising. Also, for the first time in CU Link’s history, we’ll be running credit union advertising throughout the entire calendar year. Once again, make sure get online and preview these new assets now at MCUL.org/CULinkAdvertising.
Early in October, MCUL announced state-level winners for the 2017 CUNA Awards. Administered in Michigan by MCUL and CUNA, the Louise Herring, Dora Maxwell and Alphonse Desjardins award programs recognize credit unions for above-and-beyond community service and financial education efforts. State-level CUNA Award winners will go on to compete against other state league winners for CUNA National Awards — those winners will be announced at the CUNA GAC in February 2018. A complete list of winning credit unions in each asset size category can be viewed on our website. Congratulations again to all of our winning credit unions here in Michigan, and good luck at CUNA nationals.
Finally, the Michigan Credit Union League and Michigan Credit Union Foundation opened the nomination process for the MCUL/MCUF Awards. Our award programs recognize both credit unions and individual credit union employees for industry innovation, chapter effectiveness, community leadership and other accomplishments. Visit MCUL.org/MCUL-Awards for more information or to submit a nomination.
MCUL’s value proposition for member credit unions is built on a combination of great association services in areas of our four pillars, coupled with very low dues that fund those operations. To that end, the financial success of CU Solutions Group is of critical importance since MCUL owns approximately two-thirds of CUSG and those earnings help fund MCUL with a very low reliance on member dues.
So, let us share a brief update on CUSG’s year-to-date financial progress. Through the third quarter of 2017, CUSG continued with strong financial performance through September with EBITDA of $505,000 for the month and $10.5 million year to date. Although year-to-date revenues were below budget by $2.2 million, net operating income exceeded budget by $124,000. Year-to-date net income of $5.8 million exceeded budget by 37 percent and the year-to-date net profit margin was 17.9 percent, 5.7 percent ahead of the year-to-date target.
CUSG’s balance sheet remains solid with assets totaling $86 million, including cash and marketable securities of $57.7 million. Shareholders’ equity totaled $69 million, which increased by $6.4 million year-to-date, an increase of $572 per share. In summary, year-to-date results were positive with better than budgeted results, and all divisions are performing well.
The big product announcement from CUSG this third quarter, is the official launch of LifeSteps Wallet.
The new wraparound container app is launching November 1st with a handful of select credit unions, and with CUSG clients nationally later in the month. As reported previously, credit unions will be able to customize and brand LifeSteps Wallet to incorporate their mobile banking services, but it’s built to go far beyond the typical credit union mobile app. The entire platform is built to help credit unions provide a service that’s simple, convenient, engaging and that saves members time and money. All of this integrates seamlessly and affordably with any credit union’s mobile banking app, regardless of provider.
As part of the LifeSteps app, we believe that enabling best-in-class P2P money transfers and we’ve made the default applications PayPal, Venmo and PayPal’s international product, Xoom. Of course, if a credit union wants to customize the wallet with their own proprietary P2P solution, that’s possible too.
In this vein, this past quarter we finalized a partnership between CUSG and PayPal. This is a great opportunity both for credit unions. With this new agreement, credit union members will be able to seamlessly link their credit union-issued cards to three PayPal products: PayPal for online purchases, Venmo for P2P fund transfers and Xoom for international P2P fund transfers.
These new features represent just one of the many ways that a credit union can help members make smart financial decisions by leveraging the power and convenience offered by LifeSteps Wallet. Of course, in addition to financial tools, the app is launching with consumer resources built around home, auto, shopping and financial wellness decisions and the credit union lending, insurance and investment services that align with these areas. These tools are designed to align members’ major life decisions with their credit union’s core products and services. When a member researches a merchant or uses a coupon, their credit union’s card is top-of-wallet; when they browse homes and vehicles, their credit union’s financing and insurance options are a single tap away.
So once again, we’re very excited to get this LifeSteps Wallet into the hands of credit unions and their members. We already have a strong pipeline of credit unions in the queue but we’re excited to work with all of you to see how this product can work for you.
If your credit union isn’t currently in queue for a custom LifeSteps Wallet buildout, contact your league rep for more information. While we’re focused on larger credit unions and a highly customized product initially, we plan to offer a more affordable, lite version of the product for smaller credit unions by early next year.
Beginning in 2018, CUSG is working toward the launch of a new partnership model with credit union leagues to help generate more revenue for league service corporations and to help CUSG sell solutions more efficiently. The new model will require some adaptation on the part of both CUSG and League Service Corporations for how we partner, but from the onset, we see a clear path for major advantages to be had by all parties involved. We’re looking at a model that will provide both a base marketing fee, as well as product-by-product incentives for selling and generating leads for CUSG’s current and future core offerings.
In short, CUSG is committed to redefining its business model to put a greater emphasis on league partnering, revenue sharing and investing collaboratively. To help address any questions leagues might have regarding 2018 financial projections, revised contracts and partnering opportunities, we held several webinars through October to help leagues better understand the new partnership model. Additionally, we’re beginning to have one-on-one conversations with leagues to complete revised contracts by the end of the year. We’ll have more details in the next quarterly report.
On the technology side of CUSG’s business, ADA website regulations are expected to go into effect early next year. Originally set to go in to effect February 2018, the date is being temporarily pushed back, but we expect that this will come back online in the near future. As such, CUSG Technology Solutions has received calls from many credit unions looking for compliance assistance for their websites. To make sure that we’re equipped to help all credit unions in need, we recently partnered with the service provider, AudioEye, to help us produce detailed enhancements and reports more effectively.
Our CUSG offerings give a comprehensive service that runs a deep scan of your credit union’s website and automates the vast majority of required ADA fixes so that your site remains in compliance during this change. AudioEye has agreed to provide this service to CUSG clients for more than 50 percent off retail price, so we’re certainly excited to get to work with this new, valuable partner.
Looking to CUSG Marketing Solutions, I’m pleased to report that through September 30th, the new Sprint Credit Union Member Cash Rewards program has reached more than 414,000 registered lines. Since then, a total of more than 207,000 lines have been paid out to credit union members, totaling nearly $18 million! And the program continues to grow nationally every month.
We’re committed to keeping these numbers trending in the right direction, so with the help of FocusIQ, we’re working on several Sprint campaigns that’ll run through the remainder of the year. The first, themed for the holiday season and the busiest shopping time of the year, reminds members that they receive an extra $100 for every new Sprint line activated. This campaign goes live on November 1st and runs through mid-December.
Additionally, the Snap, Share, Win Sweepstakes launched on October 15th and runs through December 16th. During this campaign, we’ll encourage credit union members and non-members alike to post photos via social media showing how they’d spend their Sprint cash rewards. Using the hashtag #SprintRewardsSweepstakes on Twitter or Instagram, three winners will be selected each week to receive a Visa reward gift card of up to $1,500.
In other marketing news, to help celebrate International Credit Union Day, CUSG partnered with Gas Station TV and 22 credit union leagues — including MCUL — to run free credit union advertising at gas pumps across 32 states! Many of you likely saw at your own local GSTV-affiliate, the week-long promotion ran October 13th through the 19th, and here in Michigan, largely mirrored the CU Link campaign.
These advertisements were featured at close to 12,000 gas stations and delivered 43 million impressions across the country, which amounts to nearly $1.8 million worth of advertising. Since then, we’ve been in contact with many credit unions nationwide interested in leveraging these impressions and launching follow-up GSTV campaigns of their own.
Along with a sustained push for GSTV, CUSG Marketing Solutions has also been hard at work finalizing turnkey marketing solutions for credit unions. Our first series of marketing packs — official name TBD — will launch in the fourth quarter of 2017 and will include professionally-produced, template-based assets. These include libraries of turnkey, digital video; social media assets; digital banners; print assets and many others.
We’re also working a similar approach for the official launch of the Just Getting By marketing campaign. While the full-length documentary is free to watch now at JustGettingBy.org, Marketing Solutions and FocusIQ are finalizing turnkey marketing materials that’ll be available to credit unions later in Q4.
Again, the Just Getting By documentary is designed to raise awareness of the financial struggles facing everyday Americans — it’s meant to provide consumers with the financial education that will help them get back to financial stability. But it is also a brand compliment for all credit unions because it projects credit unions as the ones who care more and do more for financially challenged members. The campaign aims to present participating credit unions as healthier alternatives to banks and predatory lenders. Marketing material related to the documentary will include a full-length, digital copy of the film, a handful of five-minute video vignettes, more than 30 one-minute social media videos, digital banners, email templates, print materials and more.
Finally, the third quarter was full of important accomplishments for CUSG Performance Solutions. Performance Pro and Compease continue to be best-in-class solutions for credit unions and more and more credit unions of all sizes are seeing the benefit of these products. The division’s new long-term new sales goal is to go from $800,000 in annual sales in 2015, to close to $3 million by 2019. Plans are in place to grow the division’s renewal base from $5M to nearly $7M by 2019, and new sales are on pace to overtake the record performance posted just last year.
Performance Solutions is beta testing its strategic and operational planning product CU PlanningPro with select Michigan credit unions. After piloting the software internally and with credit unions, CU PlanningPro will launch. As always, our priority is to help credit unions serve, grow and remain strong so that they can make a positive impact on people’s lives. As we move into the final part of the year, we’ll continue to work with our clients to ensure that we’re providing the right solutions to meet their needs.
If you have questions or suggestions on how we can better serve your credit union, feel free to contact any member of CUSG’s leadership.
We hope you’ve found this update valuable and worthwhile. It’s part of our continued commitment to be transparent with our member credit unions and CUSOs, and to communicate our focus and priorities as we move into the final part of the year.
We have a very dedicated team of staff and board directors working on your behalf, and we remain positive as we look to the future, working with CUNA to remove barriers, promote the credit union difference, provide solutions for service excellence and provide you with a total compliance solution through Destination Compliance.
Thank you for watching.