June 2013 VOL 28 | nO 6

Measuring The CooperaTive DifferenCe A new way of looking at data helps leaders look beyond traditional definitions of successBy ScOtt PatterSOn

Credit union exeCutives have traditionally relied on routine bank performance metrics to evaluate the performance and health of their institutions Metrics such as return on assets expense ratios and delinquency percentages are no doubt important however leaders must also look beyond traditional definitions of success to better assess the unique role of credit unions in Americarsquos modern financial space In addition to monitoring the bottom line credit union executives must consider aspects such as how the institution is helping its members advancing its core value propositions and distinguishing itself from for-profit institutions To measure these kinds of outcomes leaders must look at standard metrics in a new way re-examine neglected metrics or consider metrics that in the past have been too difficult to assemble or interpret

Since its inception more than 25 years ago Callahan amp Associates has helped credit unions evaluate their financial performance as well as broaden the scope of what constitutes a successful credit union Quarterly performance data helps leaders establish a solid monetary foundation but those leaders must then dig deeper to better understand the credit unionrsquos strengths and weaknesses Callahan helps industry decision makers strategically employ all kinds of metrics broken into four categories here to direct better long-term outcomes

MarkeT suCCess MeasuresToday data is more readily available in greater amount and detail than ever before Credit

unions can take evaluations of their products and services to a whole new level by slicing and dicing this wealth of information in new and interesting ways

For example credit unions can track and compare deposits all the way down to the branch level allowing managers to answer questions such as What percentage of local deposits do we hold Who has the highest market share of deposits in our local area Who is doing the best job of attracting deposits in our local area

continued on page 2 raquo

The Callahan reporTAt the Leading Edge of Credit Unions

in This issue

Heather KaartDirector of Member and community Insights Vancouver city Savings credit union

2 June 2013 | creDItunIOnScOMrePOrt

MeaSurIng tHe cOOPeratIVe DIfference

Comments Editor|Brooke c Stoddard Designer|Kristine chatterjie editorcallahancom stoddardbcgmailcom kchatterjiecallahancom

copy 2013 callahan amp associates Inc | 1001 connecticut avenue nW Ste 1001 Washington Dc 20036 (P) 8004467453 (F) 2022231311

SEan HESSion ceO Jon JEffrEyS VP callahan financial Services Jay JoHnSon eVP alix PattErSon cOO SCott PattErSon VP of new Business Innovation

exeCuTive TeaM

on-siTe visiTsJune 3-7 | MissouriKevin Heal vice president of sales and business development for cufSLP is traveling to the Midwest to meet with Missouri corporate credit union a new distributor of trust for credit unionsrsquo mutual funds While in Missouri Heal is also meeting with credit unions in St Louis Springfield and Kansas City To schedule a visit call 202-223-3920

nebraska CreDiT union League annuaL MeeTingJune 8 | Lincoln NEcallahan client relationship Manager alex gekas is providing an industry overview and demonstration of callahanrsquos cuanalyzer attendees will learn how to analyze performance relative to customized peer groups establish meaningful benchmarks and goals and compare financial strategies Stop by and see Alex on Friday during the exhibitor showcase

xTenD annuaL ConferenCeJune 18-20 | Grand Rapids MIKevin Heal vice president of sales and business development for cufSLP is off to Michigan for the Xtend stockholdersrsquo meeting and leadership conference attendees will network with peers and learn about whatrsquos on the horizon for 2013 the cuSO is a distribution partner of the trust for credit unionsrsquo mutual funds

LeaDership prograM Cfo rounDTabLeJuly 11 | Minneapolis MN August 21 | Seattle WACallahan amp Associates developed its Roundtable Series specifically to provide credit union professionals an open forum to discuss the challenges and opportunities they face in todayrsquos financial services marketplace Contact Victoria Neeb at vneebcallahancom to register or for more information

CufsLp parTners MeeTingJuly 17-19 | San Francisco CAcufSLP partners and the callahan management team will spend two days applying lessons learned from big data payments and mortgage liquidity to a vision for the industryrsquos future The meeting will include an off-site learning experience group discussions and guest speakers

in person amp onLine Where yoursquoLL finD CaLLahan Managers can compare year-over-year changes and growth in deposits with competitors in specific markets Such information helps managers make the most out of existing branches as well as decide where to locate new ones Similar information is available for auto lending which allows managers to ascertain the market share of competitors in specific cities or counties as well as determine the market share of lenders within a particu-lar dealership Tracking such data allows managers to measure the lending growth at a particular dealership If there is no growth the credit union can meet with the dealer to discuss possible obstacles in the lending process

Additionally mortgage data is available that breaks out information such as num-ber of loan applications received number of loans approved number of loans de-nied and total funded loans with amount funded for all lending institutions With this data a credit union can compare its own performance with the applications it receives For example a credit union can use the information to determine whether it needs to attract more applications or concentrate on converting approvals to funded mortgages

The data also shows how an institutionrsquos rates and fees perform in a marketplace Management positions rates and fees ex-pecting certain results but thinly sliced local data shows how those rates and fees are actually received by consumers Members have options and available data shows how members are using mdash or not using mdash those options

Itrsquos not only the raw data but also the source of data that is expanding Credit bureaus are uncovering trends by taking pieces of information from individual credit files and aggregating like data from tens of thousands of individuals Such methods provide not only aggregated present scores but also movements over the past 12 months

TransUnion offers a map of the United States that shows county by county where credit rates are shakiest and where they are the most reliable The map reveals pockets of solidity in regions of weakness and vice versa The credit bureau also pro-vides information such as average credit balances by county number of open credit

creDItunIOnScOMrePOrt | June 2013 3

cards per county and delinquencies per county Using this information a credit union can determine if it is faring better or worse than its competitors and identify where fresh opportunities might lie

CooperaTive suCCess MeasuresCredit union leaders can talk about the

importance of operating within a coop-erative environment but there are scant ways of measuring how the institution is improving itself as a cooperative Callahan has long advocated a metric called Return of the Member (ROM) which measures what members are gaining from mem-bership in the credit union Callahan has improved its ROM metric over the years but the basic factors mdash such as average dividend paid loans per member and share drafts per member mdash remain the same The higher a credit unionrsquos ROM score the better it is at rewarding credit union membership

Some credit unions track how much they have collectively saved members through refinancing Others use the Net Promoter Score (NPS) to measure mem-ber service One credit union even tried to quantify member benefit by gather-ing fees and rates on checking accounts money market funds IRAs share drafts signature loans mortgages and auto loans from 21 competitors The credit union took the difference between its rates and the competitorsrsquo average rate in each category and multiplied the annual balances in the credit union to calculate aggregate benefit to members for exam-ple $30000 to the whole membership in lower credit card charges It added the individual categories then divided by number of members to arrive at an annual benefit per member

Credit unions have long pledged al-legiance to the Seven Cooperative Prin-ciples but it is difficult to assess how they are performing relative to each principle A metric under development by CUAnswers in Michigan takes the form of a point-rewarding questionnaire Survey questions about the democratic member control principal include Do you advertise elections as zestfully as you do loan specials or branch openings Do you have elections even when there are

The 7 CooperaTive prinCipLes1 VoluntAry And open MeMbershipcooperatives are voluntary organizations open to all persons able to use their services and willing to accept the responsibilities of membership without gender social racial political or religious discrimination

2 deMocrAtic MeMber control cooperatives are democratic organizations controlled by their members who actively participate in setting their policies and making decisions Men and women serving as elected representatives are accountable to the membership In primary cooperatives members have equal voting rights (one member one vote) and cooperatives at other levels are also organized in a democratic manner

3 MeMber econoMic pArticipAtionMembers contribute equitably to and democratically control the capital of their cooperative at least part of that capital is usually the common property of the cooperative Members usually receive limited compensation if any on capital subscribed as a condition of membership Members allocate surpluses for any or all of the following purposes developing their cooperative possibly by setting up reserves part of which at least would be indivisible benefiting members in proportion to their transactions with the cooperative and supporting other activities approved by the membership

4 AutonoMy And independenceCooperatives are autonomous self-help organizations controlled by their members If they enter to agreements with other organizations including governments or raise capital from external sources they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy

5 educAtion trAining And inforMAtion cooperatives provide education and training for their members elected representatives managers and employees so they can contribute effectively to the development of their cooperatives they inform the public mdash particularly young people and opinion leaders mdash about the nature and benefits of cooperation

6 cooperAtion AMong cooperAtiVescooperatives serve their members most effectively and strengthen the cooperative movement by working together through local national regional and international structures

7 concern for coMMunity cooperatives work for the sustainable development of their communities through policies approved by their members

sourCe ICACOOP (httpicacoopenwhat-co-opco-operative-identity-values-principles)

MeaSurIng tHe cOOPeratIVe DIfference

continued on page 4 raquo

4 June 2013 | creDItunIOnScOMrePOrt

ldquoLimiting performance metrics to traditional measures stymies managementrsquos ability to make the best decisions for the credit unionrdquo

no contested seats What is your 3-year member voting percentage How many ways can members vote

The survey provides a score that indi-cates gradations of success or lack there-of at conforming to the principle The sur-vey is available on the Cooperative Score portion of cuanswerscom CUAnswers does not consider this survey and scoring mechanism fully mature and encourages feedback so the survey evolves into a more exacting and useful form

finanCiaL perforManCe MeasuresFinancial performance measures are

already in wide use by credit unions and banks These include balance sheet ratios income statement ratios ROA loan balances and the like Credit unions should not neglect this level of analysis as this quarterrsquos expense ratio or non-interest income ratio are important for executives and the board to evaluate a credit unionrsquos performance today

In many cases however a deeper exami-nation yields greater insight Comparing operating expenses to all expenses or non-interest income to all income over the past 10 years sheds light on how a credit union has changed thus providing guidance on where it is headed Gradual year-to-year increases easily go unnoticed but an in-crease in non-interest income from 7 to 25 over 10 years shows a clear decline in lending The same concept holds true for analyzing the divisions of a credit unionrsquos loan portfolio Using this kind of analysis many credit union leaders have discovered that what they traditionally considered a core strength was actually waning in popularity

For years credit unions have bench-marked their performance against credit unions of similar asset size or field of membership In fact the ability to build a peer group for proper benchmarking

is a hallmark of Callahanrsquos Peer-to-Peer software Credit unions can glean a lot of insight from the performance of other credit unions that work with the military an entire community or a single SEG And the considerations for all credit unions with $250-$500 million in assets is sig-nificantly different from credit unions with $250-$500 million in assets and 15 or more branches

Peer group comparisons help a credit unionrsquos leadership identify strengths and weaknesses relative to other credit unions operating under like business models But decision makers should also benchmark the credit unionrsquos performance against competitors in their geographical region After all the economic condition of a spe-cific location might help explain why a credit union looks good when compared to peers around the country but is slipping among credit unions in its own region Minute data is now available that allows analysts to thinly slice information and evaluate performance in focused fields For example a credit union in Plano TX can examine the Plano market which is different from both the Dallas or broader Texas markets

non-TraDiTionaL perforManCe MeasuresUsing historical data and peer bench-

marking are useful ways to gain a more complete picture of a credit union but limiting performance metrics to tradition-al measures stymies managementrsquos ability to make the best decisions for the credit union In todayrsquos data-driven environment management must think larger in terms of what metrics are available and how they can reveal new opportunities

Credit unions that have set goals in non-traditional or nonfinancial areas have the opportunity to define success by their own terms Once they determine that definition there are ways of customizing metrics to

more accurately measure performance

FOR EXAMPLE

bullAffinity Plus FCU ($17B St Paul MN) aims to be the most trusted financial institution in its market It evaluates its progress in obtaining this goal by mea-suring the increase in member activity and new member referrals by current members

bullPentagon FCU ($160B Alexandria VA) sets its products and services apart by offering aggressive pricing The credit union continually strives for a lower op-erating expense ratio (OER) thereby allowing it to deliver products at lower prices Through diligent monitoring Pentagon dropped its OER from 25 in 1999 to 135 in first quarter 2013 thatrsquos nearly half the 264 average ra-tio for credit unions nationally with $1 billion or more in assets

bullThe goal at BCU ($19B Vernon Hills IL) is to succeed in four areas mdash finan-cial operations human capital and member experience mdash and it uses a bal-anced score card to measure activity in these areas On its scorecard SEG pene-tration helps measure financial success service revenue income helps measure operational success employee retention helps measure human capital success and member satisfaction surveys help measure member experience success

The go-to metrics of the past are perfectly fine for measuring traditional measures of success But the world is evolving mdash by data gathering methods and analysis capabilities to say the least mdash and credit unions must hold themselves to a different standard than for-profit financial institu-tions ldquoFinerdquo is no longer good enough and credit unions must now consider both previously neglected and new ways of evaluating their performance The public certainly is times

MeaSurIng tHe cOOPeratIVe DIfference

creDItunIOnScOMrePOrt | June 2013 5

By HeatHer Kaart DIrectOr Of MeMBer anD cOMMunIty InSIgHtS VancOuVer cIty SaVIngS creDIt unIOn

non-TraDiTionaL MeTriCs heLp Measure suCCessA canadian community credit union uses impact measures to gain a better understanding of how it is growing as a cooperative

Vancouver City Savings Credit Union is a Canadian credit union that serves residents of British Columbia Vancity is Canadarsquos largest community credit union by assets It has slightly more than $17 billion CAD in assets and more than 490000 members primarily located in Vancouver and on Vancouver Island Heather Kaart joined Vancity in 2012 as the credit unionrsquos director of member and community insights Here she addresses the ways in which the credit union tracks goals that are difficult to measure using traditional metrics

vanCity has been working to grow as a cooperative in a number of important areas such as cooperative principles en-vironmental sustainability social justice and financial inclusion The credit union has focused on social and environmental efforts since its inception in 1946 Since 1997 we have produced an accountability report that provides a complete view of our social environmental and economic performance More recently we have been establishing ldquoimpact metricsrdquo to measure the impact of this work in our communities

Vancity was the first Canadian financial institution invited to join the Global Al-liance for Banking on Values (GABV) This is an independent association of banks and credit unions around the world whose members ldquocomply with sus-tainable banking principles and have a shared commitment to find global solu-tions to international problems mdash and to promote a positive viable alternative to the current financial systemrdquo Members of GABV ldquouse finance to deliver sustain-able development for underserved people communities and the environmentrdquo and are committed to a triple bottom line ac-counting of advancing people planet and community The Alliancersquos members sup-port the real economy of businesses that improve lives and communities

GABV has six guiding principles As a member institution Vancity is working to measure how we are advancing toward them For example we measure the per-centage of assets we have put into lending to organizations working at social justice or environmental responsibility

non-TraDiTionaL reporTingThe work of the Global Alliance for Bank-

ing on Values and the assessments wersquore building represent a small portion of what Vancity tracks and reports We measure a variety of targets and indicators outside the traditional banking metrics and publish an integrated annual report Some of Vanc-ityrsquos non-traditional goals and measures are categorized under the three headings of impact confidence and integrity

ldquoImpactrdquo examines member well-being We have created a well-being index based on a survey that includes questions about a memberrsquos feelings of connectedness to the community their financial security achievement of life goals and so on We compare member responses to those of non-members to gauge how Vancity is pro-moting well-being to its members

ldquoConfidencerdquo examines public trust in Vancity by quantifying member growth and return on member equity

ldquoIntegrityrdquo examines how well what Van-city does aligns with what it says it does We measure integrity through feedback from staff who can identify whether poli-cies and processes are working in the way theyrsquore intended

TraCking MeTriCsVancity tracks other efforts that are dif-

ficult to quantify such as the cooperative economy We track the extent to which we purchase locally and how we are doing in funding community-minded organiza-tions An even more difficult measure is the leverage influence or impact Vancity has in kick-starting beneficial programs

Heather KaartDirector of Member and community Insights Vancouver city Savings credit union

with a grant or a loan Attribution can be challenging because itrsquos not always clear mdash once other groups are involved mdash whose contribution was the catalyst for the project to proceed or had the most impact

We measure how Vancity is helping mem-bers meet their long-term financial goals and track financial inclusion and social justice We use metrics such as reduction in poverty the number of people who have taken free Vancity financial literacy courses the number of members who have received credit otherwise denied or who have had their credit rehabilitated the number of affordable housing units we have funded and the amount of assets we have invested in socially responsible or environmentally beneficial projects and businesses

Finally we have a measure for environ-mental sustainability We track how we work with members on climate change issues the number groups we support that are focused on environmental sus-tainability and the amount of our assets committed to areas of positive environ-mental impact

Measuring iMpaCTThese new kinds of metrics and mea-

sures are helping us move from a more conventional model of business that helps communities to a business model that is dedicated to bringing about posi-tive changes in areas of community social justice and environmental improvement We are moving from measuring our efforts or outputs to measuring the outcomes pro-duced through the efforts Many organi-zations including the Global Alliance for Banking on Values have been working to develop impact measures for years It is a complex and challenging undertaking But we are making progress and continue to work with our partners and stakeholders to find the best way to measure the impact Vancity has on the lives of our members and their communities times

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L Co

nfe

ren

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Las

veg

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neV

aDa

In A

pril

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laha

n EV

P Ja

y Jo

hnso

n an

d CO

O A

lix P

atte

rson

spen

t tw

o da

ys in

Sin

Ci

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r the

NAC

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Ann

ual C

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John

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sec

ond

term

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NAC

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rd o

f dir

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nd p

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nted

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ards

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and

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labo

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Year

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r be

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edrdquo

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as re

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But

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SOs h

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ting

thei

r NC

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r cas

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Cre

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odel

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ike

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d on

the

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ness

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el w

hile

Bet

hpag

e Fe

dera

l C

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t Uni

on C

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irk

Kord

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ki l

ed a

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n ab

out i

ts C

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n Te

chno

logy

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lutio

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hich

it o

pera

tes

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artn

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f Mar

ylan

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ow la

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nd t

heir

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cted

ness

Pre

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copy 2013 CUAnswers ~cuanswers201209_callahan_advert

Scan to reviewour 7 CooperativePrinciples Live ItSeries and orderinformation cuanswerscom | 800- 327-3478

We live it every day

Bringing

The Cooperative PrinciplesFront amp Center

Live ItThe Cooperative Spirit

2 June 2013 | creDItunIOnScOMrePOrt

MeaSurIng tHe cOOPeratIVe DIfference

Comments Editor|Brooke c Stoddard Designer|Kristine chatterjie editorcallahancom stoddardbcgmailcom kchatterjiecallahancom

copy 2013 callahan amp associates Inc | 1001 connecticut avenue nW Ste 1001 Washington Dc 20036 (P) 8004467453 (F) 2022231311

SEan HESSion ceO Jon JEffrEyS VP callahan financial Services Jay JoHnSon eVP alix PattErSon cOO SCott PattErSon VP of new Business Innovation

exeCuTive TeaM

on-siTe visiTsJune 3-7 | MissouriKevin Heal vice president of sales and business development for cufSLP is traveling to the Midwest to meet with Missouri corporate credit union a new distributor of trust for credit unionsrsquo mutual funds While in Missouri Heal is also meeting with credit unions in St Louis Springfield and Kansas City To schedule a visit call 202-223-3920

nebraska CreDiT union League annuaL MeeTingJune 8 | Lincoln NEcallahan client relationship Manager alex gekas is providing an industry overview and demonstration of callahanrsquos cuanalyzer attendees will learn how to analyze performance relative to customized peer groups establish meaningful benchmarks and goals and compare financial strategies Stop by and see Alex on Friday during the exhibitor showcase

xTenD annuaL ConferenCeJune 18-20 | Grand Rapids MIKevin Heal vice president of sales and business development for cufSLP is off to Michigan for the Xtend stockholdersrsquo meeting and leadership conference attendees will network with peers and learn about whatrsquos on the horizon for 2013 the cuSO is a distribution partner of the trust for credit unionsrsquo mutual funds

LeaDership prograM Cfo rounDTabLeJuly 11 | Minneapolis MN August 21 | Seattle WACallahan amp Associates developed its Roundtable Series specifically to provide credit union professionals an open forum to discuss the challenges and opportunities they face in todayrsquos financial services marketplace Contact Victoria Neeb at vneebcallahancom to register or for more information

CufsLp parTners MeeTingJuly 17-19 | San Francisco CAcufSLP partners and the callahan management team will spend two days applying lessons learned from big data payments and mortgage liquidity to a vision for the industryrsquos future The meeting will include an off-site learning experience group discussions and guest speakers

in person amp onLine Where yoursquoLL finD CaLLahan Managers can compare year-over-year changes and growth in deposits with competitors in specific markets Such information helps managers make the most out of existing branches as well as decide where to locate new ones Similar information is available for auto lending which allows managers to ascertain the market share of competitors in specific cities or counties as well as determine the market share of lenders within a particu-lar dealership Tracking such data allows managers to measure the lending growth at a particular dealership If there is no growth the credit union can meet with the dealer to discuss possible obstacles in the lending process

Additionally mortgage data is available that breaks out information such as num-ber of loan applications received number of loans approved number of loans de-nied and total funded loans with amount funded for all lending institutions With this data a credit union can compare its own performance with the applications it receives For example a credit union can use the information to determine whether it needs to attract more applications or concentrate on converting approvals to funded mortgages

The data also shows how an institutionrsquos rates and fees perform in a marketplace Management positions rates and fees ex-pecting certain results but thinly sliced local data shows how those rates and fees are actually received by consumers Members have options and available data shows how members are using mdash or not using mdash those options

Itrsquos not only the raw data but also the source of data that is expanding Credit bureaus are uncovering trends by taking pieces of information from individual credit files and aggregating like data from tens of thousands of individuals Such methods provide not only aggregated present scores but also movements over the past 12 months

TransUnion offers a map of the United States that shows county by county where credit rates are shakiest and where they are the most reliable The map reveals pockets of solidity in regions of weakness and vice versa The credit bureau also pro-vides information such as average credit balances by county number of open credit

creDItunIOnScOMrePOrt | June 2013 3

cards per county and delinquencies per county Using this information a credit union can determine if it is faring better or worse than its competitors and identify where fresh opportunities might lie

CooperaTive suCCess MeasuresCredit union leaders can talk about the

importance of operating within a coop-erative environment but there are scant ways of measuring how the institution is improving itself as a cooperative Callahan has long advocated a metric called Return of the Member (ROM) which measures what members are gaining from mem-bership in the credit union Callahan has improved its ROM metric over the years but the basic factors mdash such as average dividend paid loans per member and share drafts per member mdash remain the same The higher a credit unionrsquos ROM score the better it is at rewarding credit union membership

Some credit unions track how much they have collectively saved members through refinancing Others use the Net Promoter Score (NPS) to measure mem-ber service One credit union even tried to quantify member benefit by gather-ing fees and rates on checking accounts money market funds IRAs share drafts signature loans mortgages and auto loans from 21 competitors The credit union took the difference between its rates and the competitorsrsquo average rate in each category and multiplied the annual balances in the credit union to calculate aggregate benefit to members for exam-ple $30000 to the whole membership in lower credit card charges It added the individual categories then divided by number of members to arrive at an annual benefit per member

Credit unions have long pledged al-legiance to the Seven Cooperative Prin-ciples but it is difficult to assess how they are performing relative to each principle A metric under development by CUAnswers in Michigan takes the form of a point-rewarding questionnaire Survey questions about the democratic member control principal include Do you advertise elections as zestfully as you do loan specials or branch openings Do you have elections even when there are

The 7 CooperaTive prinCipLes1 VoluntAry And open MeMbershipcooperatives are voluntary organizations open to all persons able to use their services and willing to accept the responsibilities of membership without gender social racial political or religious discrimination

2 deMocrAtic MeMber control cooperatives are democratic organizations controlled by their members who actively participate in setting their policies and making decisions Men and women serving as elected representatives are accountable to the membership In primary cooperatives members have equal voting rights (one member one vote) and cooperatives at other levels are also organized in a democratic manner

3 MeMber econoMic pArticipAtionMembers contribute equitably to and democratically control the capital of their cooperative at least part of that capital is usually the common property of the cooperative Members usually receive limited compensation if any on capital subscribed as a condition of membership Members allocate surpluses for any or all of the following purposes developing their cooperative possibly by setting up reserves part of which at least would be indivisible benefiting members in proportion to their transactions with the cooperative and supporting other activities approved by the membership

4 AutonoMy And independenceCooperatives are autonomous self-help organizations controlled by their members If they enter to agreements with other organizations including governments or raise capital from external sources they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy

5 educAtion trAining And inforMAtion cooperatives provide education and training for their members elected representatives managers and employees so they can contribute effectively to the development of their cooperatives they inform the public mdash particularly young people and opinion leaders mdash about the nature and benefits of cooperation

6 cooperAtion AMong cooperAtiVescooperatives serve their members most effectively and strengthen the cooperative movement by working together through local national regional and international structures

7 concern for coMMunity cooperatives work for the sustainable development of their communities through policies approved by their members

sourCe ICACOOP (httpicacoopenwhat-co-opco-operative-identity-values-principles)

MeaSurIng tHe cOOPeratIVe DIfference

continued on page 4 raquo

4 June 2013 | creDItunIOnScOMrePOrt

ldquoLimiting performance metrics to traditional measures stymies managementrsquos ability to make the best decisions for the credit unionrdquo

no contested seats What is your 3-year member voting percentage How many ways can members vote

The survey provides a score that indi-cates gradations of success or lack there-of at conforming to the principle The sur-vey is available on the Cooperative Score portion of cuanswerscom CUAnswers does not consider this survey and scoring mechanism fully mature and encourages feedback so the survey evolves into a more exacting and useful form

finanCiaL perforManCe MeasuresFinancial performance measures are

already in wide use by credit unions and banks These include balance sheet ratios income statement ratios ROA loan balances and the like Credit unions should not neglect this level of analysis as this quarterrsquos expense ratio or non-interest income ratio are important for executives and the board to evaluate a credit unionrsquos performance today

In many cases however a deeper exami-nation yields greater insight Comparing operating expenses to all expenses or non-interest income to all income over the past 10 years sheds light on how a credit union has changed thus providing guidance on where it is headed Gradual year-to-year increases easily go unnoticed but an in-crease in non-interest income from 7 to 25 over 10 years shows a clear decline in lending The same concept holds true for analyzing the divisions of a credit unionrsquos loan portfolio Using this kind of analysis many credit union leaders have discovered that what they traditionally considered a core strength was actually waning in popularity

For years credit unions have bench-marked their performance against credit unions of similar asset size or field of membership In fact the ability to build a peer group for proper benchmarking

is a hallmark of Callahanrsquos Peer-to-Peer software Credit unions can glean a lot of insight from the performance of other credit unions that work with the military an entire community or a single SEG And the considerations for all credit unions with $250-$500 million in assets is sig-nificantly different from credit unions with $250-$500 million in assets and 15 or more branches

Peer group comparisons help a credit unionrsquos leadership identify strengths and weaknesses relative to other credit unions operating under like business models But decision makers should also benchmark the credit unionrsquos performance against competitors in their geographical region After all the economic condition of a spe-cific location might help explain why a credit union looks good when compared to peers around the country but is slipping among credit unions in its own region Minute data is now available that allows analysts to thinly slice information and evaluate performance in focused fields For example a credit union in Plano TX can examine the Plano market which is different from both the Dallas or broader Texas markets

non-TraDiTionaL perforManCe MeasuresUsing historical data and peer bench-

marking are useful ways to gain a more complete picture of a credit union but limiting performance metrics to tradition-al measures stymies managementrsquos ability to make the best decisions for the credit union In todayrsquos data-driven environment management must think larger in terms of what metrics are available and how they can reveal new opportunities

Credit unions that have set goals in non-traditional or nonfinancial areas have the opportunity to define success by their own terms Once they determine that definition there are ways of customizing metrics to

more accurately measure performance

FOR EXAMPLE

bullAffinity Plus FCU ($17B St Paul MN) aims to be the most trusted financial institution in its market It evaluates its progress in obtaining this goal by mea-suring the increase in member activity and new member referrals by current members

bullPentagon FCU ($160B Alexandria VA) sets its products and services apart by offering aggressive pricing The credit union continually strives for a lower op-erating expense ratio (OER) thereby allowing it to deliver products at lower prices Through diligent monitoring Pentagon dropped its OER from 25 in 1999 to 135 in first quarter 2013 thatrsquos nearly half the 264 average ra-tio for credit unions nationally with $1 billion or more in assets

bullThe goal at BCU ($19B Vernon Hills IL) is to succeed in four areas mdash finan-cial operations human capital and member experience mdash and it uses a bal-anced score card to measure activity in these areas On its scorecard SEG pene-tration helps measure financial success service revenue income helps measure operational success employee retention helps measure human capital success and member satisfaction surveys help measure member experience success

The go-to metrics of the past are perfectly fine for measuring traditional measures of success But the world is evolving mdash by data gathering methods and analysis capabilities to say the least mdash and credit unions must hold themselves to a different standard than for-profit financial institu-tions ldquoFinerdquo is no longer good enough and credit unions must now consider both previously neglected and new ways of evaluating their performance The public certainly is times

MeaSurIng tHe cOOPeratIVe DIfference

creDItunIOnScOMrePOrt | June 2013 5

By HeatHer Kaart DIrectOr Of MeMBer anD cOMMunIty InSIgHtS VancOuVer cIty SaVIngS creDIt unIOn

non-TraDiTionaL MeTriCs heLp Measure suCCessA canadian community credit union uses impact measures to gain a better understanding of how it is growing as a cooperative

Vancouver City Savings Credit Union is a Canadian credit union that serves residents of British Columbia Vancity is Canadarsquos largest community credit union by assets It has slightly more than $17 billion CAD in assets and more than 490000 members primarily located in Vancouver and on Vancouver Island Heather Kaart joined Vancity in 2012 as the credit unionrsquos director of member and community insights Here she addresses the ways in which the credit union tracks goals that are difficult to measure using traditional metrics

vanCity has been working to grow as a cooperative in a number of important areas such as cooperative principles en-vironmental sustainability social justice and financial inclusion The credit union has focused on social and environmental efforts since its inception in 1946 Since 1997 we have produced an accountability report that provides a complete view of our social environmental and economic performance More recently we have been establishing ldquoimpact metricsrdquo to measure the impact of this work in our communities

Vancity was the first Canadian financial institution invited to join the Global Al-liance for Banking on Values (GABV) This is an independent association of banks and credit unions around the world whose members ldquocomply with sus-tainable banking principles and have a shared commitment to find global solu-tions to international problems mdash and to promote a positive viable alternative to the current financial systemrdquo Members of GABV ldquouse finance to deliver sustain-able development for underserved people communities and the environmentrdquo and are committed to a triple bottom line ac-counting of advancing people planet and community The Alliancersquos members sup-port the real economy of businesses that improve lives and communities

GABV has six guiding principles As a member institution Vancity is working to measure how we are advancing toward them For example we measure the per-centage of assets we have put into lending to organizations working at social justice or environmental responsibility

non-TraDiTionaL reporTingThe work of the Global Alliance for Bank-

ing on Values and the assessments wersquore building represent a small portion of what Vancity tracks and reports We measure a variety of targets and indicators outside the traditional banking metrics and publish an integrated annual report Some of Vanc-ityrsquos non-traditional goals and measures are categorized under the three headings of impact confidence and integrity

ldquoImpactrdquo examines member well-being We have created a well-being index based on a survey that includes questions about a memberrsquos feelings of connectedness to the community their financial security achievement of life goals and so on We compare member responses to those of non-members to gauge how Vancity is pro-moting well-being to its members

ldquoConfidencerdquo examines public trust in Vancity by quantifying member growth and return on member equity

ldquoIntegrityrdquo examines how well what Van-city does aligns with what it says it does We measure integrity through feedback from staff who can identify whether poli-cies and processes are working in the way theyrsquore intended

TraCking MeTriCsVancity tracks other efforts that are dif-

ficult to quantify such as the cooperative economy We track the extent to which we purchase locally and how we are doing in funding community-minded organiza-tions An even more difficult measure is the leverage influence or impact Vancity has in kick-starting beneficial programs

Heather KaartDirector of Member and community Insights Vancouver city Savings credit union

with a grant or a loan Attribution can be challenging because itrsquos not always clear mdash once other groups are involved mdash whose contribution was the catalyst for the project to proceed or had the most impact

We measure how Vancity is helping mem-bers meet their long-term financial goals and track financial inclusion and social justice We use metrics such as reduction in poverty the number of people who have taken free Vancity financial literacy courses the number of members who have received credit otherwise denied or who have had their credit rehabilitated the number of affordable housing units we have funded and the amount of assets we have invested in socially responsible or environmentally beneficial projects and businesses

Finally we have a measure for environ-mental sustainability We track how we work with members on climate change issues the number groups we support that are focused on environmental sus-tainability and the amount of our assets committed to areas of positive environ-mental impact

Measuring iMpaCTThese new kinds of metrics and mea-

sures are helping us move from a more conventional model of business that helps communities to a business model that is dedicated to bringing about posi-tive changes in areas of community social justice and environmental improvement We are moving from measuring our efforts or outputs to measuring the outcomes pro-duced through the efforts Many organi-zations including the Global Alliance for Banking on Values have been working to develop impact measures for years It is a complex and challenging undertaking But we are making progress and continue to work with our partners and stakeholders to find the best way to measure the impact Vancity has on the lives of our members and their communities times

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creDItunIOnScOMrePOrt | June 2013 7

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oric

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Hot

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sets

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of th

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Can

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ndt

able

Ser

ies

for

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In

Apr

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CFO

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incl

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dit

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angi

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om $

304

mill

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to $

4 bi

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Our

firs

t CFO

rou

ndta

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of 2

013

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star

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Not

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ost o

f the

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ffic

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Ser

vice

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ovid

e by

the

cre

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luti

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ranc

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rvic

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ne p

artic

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two

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tha

t w

ill r

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ck-o

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-er

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s a

way

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save

mon

ey a

nd

incr

ease

eff

icie

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Map

s fe

Der

aL C

reD

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M

Oreg

On

Calla

han

edito

r Aar

on P

ugh

amp m

ultim

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rew

Gro

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avel

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Paci

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orth

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14th in

stal

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CU

SP A

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my

seri

es f

eatu

ring

M

aps

Fede

ral C

redi

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on

Map

s ($

460M

Sal

em O

R)

empl

oys

seve

ral

stra

tegi

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ork

acro

ss t

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indu

stry

an

d re

ap t

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ost

from

it

mar

ket

Not

ably

it

has

com

mit

ted

roug

hly

$28

mill

ion

as e

ithe

r an

op -

erat

or o

r in

vest

or i

n 14

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a w

hole

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nera

te a

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0

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apsrsquo

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e O

ne o

f it

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ost

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essf

ul C

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s C

UW

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ess

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unch

ed a

s a

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hone

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n pr

ovid

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ut h

as s

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ile b

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ng d

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opm

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titu

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ared

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o m

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e pa

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ay n

on-c

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t un

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nt r

eplic

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ch a

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is a

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elpi

ng M

aps

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e av

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e of

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uy L

ocal

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ay th

e cr

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on is

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ng a

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und-

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king

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f th

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ocal

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roup

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pro

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fers

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ail

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r m

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rs d

rive

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affi

c to

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all b

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nd in

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e It

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ghly

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l bus

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d m

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he 1

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f C

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eets

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une

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ren

Ce

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veg

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pril

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laha

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y Jo

hnso

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lix P

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t tw

o da

ys in

Sin

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ty fo

r the

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ual C

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ond

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rd o

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ards

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rato

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Year

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y C

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r be

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iew

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el w

hile

Bet

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l C

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t Uni

on C

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irk

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ki l

ed a

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n ab

out i

ts C

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n Te

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lutio

ns w

hich

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tes

in p

artn

er-

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f Mar

ylan

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d Be

llco

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dit U

nion

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ow la

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w C

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nd t

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labl

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ect C

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copy 2013 CUAnswers ~cuanswers201209_callahan_advert

Scan to reviewour 7 CooperativePrinciples Live ItSeries and orderinformation cuanswerscom | 800- 327-3478

We live it every day

Bringing

The Cooperative PrinciplesFront amp Center

Live ItThe Cooperative Spirit

creDItunIOnScOMrePOrt | June 2013 3

cards per county and delinquencies per county Using this information a credit union can determine if it is faring better or worse than its competitors and identify where fresh opportunities might lie

CooperaTive suCCess MeasuresCredit union leaders can talk about the

importance of operating within a coop-erative environment but there are scant ways of measuring how the institution is improving itself as a cooperative Callahan has long advocated a metric called Return of the Member (ROM) which measures what members are gaining from mem-bership in the credit union Callahan has improved its ROM metric over the years but the basic factors mdash such as average dividend paid loans per member and share drafts per member mdash remain the same The higher a credit unionrsquos ROM score the better it is at rewarding credit union membership

Some credit unions track how much they have collectively saved members through refinancing Others use the Net Promoter Score (NPS) to measure mem-ber service One credit union even tried to quantify member benefit by gather-ing fees and rates on checking accounts money market funds IRAs share drafts signature loans mortgages and auto loans from 21 competitors The credit union took the difference between its rates and the competitorsrsquo average rate in each category and multiplied the annual balances in the credit union to calculate aggregate benefit to members for exam-ple $30000 to the whole membership in lower credit card charges It added the individual categories then divided by number of members to arrive at an annual benefit per member

Credit unions have long pledged al-legiance to the Seven Cooperative Prin-ciples but it is difficult to assess how they are performing relative to each principle A metric under development by CUAnswers in Michigan takes the form of a point-rewarding questionnaire Survey questions about the democratic member control principal include Do you advertise elections as zestfully as you do loan specials or branch openings Do you have elections even when there are

The 7 CooperaTive prinCipLes1 VoluntAry And open MeMbershipcooperatives are voluntary organizations open to all persons able to use their services and willing to accept the responsibilities of membership without gender social racial political or religious discrimination

2 deMocrAtic MeMber control cooperatives are democratic organizations controlled by their members who actively participate in setting their policies and making decisions Men and women serving as elected representatives are accountable to the membership In primary cooperatives members have equal voting rights (one member one vote) and cooperatives at other levels are also organized in a democratic manner

3 MeMber econoMic pArticipAtionMembers contribute equitably to and democratically control the capital of their cooperative at least part of that capital is usually the common property of the cooperative Members usually receive limited compensation if any on capital subscribed as a condition of membership Members allocate surpluses for any or all of the following purposes developing their cooperative possibly by setting up reserves part of which at least would be indivisible benefiting members in proportion to their transactions with the cooperative and supporting other activities approved by the membership

4 AutonoMy And independenceCooperatives are autonomous self-help organizations controlled by their members If they enter to agreements with other organizations including governments or raise capital from external sources they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy

5 educAtion trAining And inforMAtion cooperatives provide education and training for their members elected representatives managers and employees so they can contribute effectively to the development of their cooperatives they inform the public mdash particularly young people and opinion leaders mdash about the nature and benefits of cooperation

6 cooperAtion AMong cooperAtiVescooperatives serve their members most effectively and strengthen the cooperative movement by working together through local national regional and international structures

7 concern for coMMunity cooperatives work for the sustainable development of their communities through policies approved by their members

sourCe ICACOOP (httpicacoopenwhat-co-opco-operative-identity-values-principles)

MeaSurIng tHe cOOPeratIVe DIfference

continued on page 4 raquo

4 June 2013 | creDItunIOnScOMrePOrt

ldquoLimiting performance metrics to traditional measures stymies managementrsquos ability to make the best decisions for the credit unionrdquo

no contested seats What is your 3-year member voting percentage How many ways can members vote

The survey provides a score that indi-cates gradations of success or lack there-of at conforming to the principle The sur-vey is available on the Cooperative Score portion of cuanswerscom CUAnswers does not consider this survey and scoring mechanism fully mature and encourages feedback so the survey evolves into a more exacting and useful form

finanCiaL perforManCe MeasuresFinancial performance measures are

already in wide use by credit unions and banks These include balance sheet ratios income statement ratios ROA loan balances and the like Credit unions should not neglect this level of analysis as this quarterrsquos expense ratio or non-interest income ratio are important for executives and the board to evaluate a credit unionrsquos performance today

In many cases however a deeper exami-nation yields greater insight Comparing operating expenses to all expenses or non-interest income to all income over the past 10 years sheds light on how a credit union has changed thus providing guidance on where it is headed Gradual year-to-year increases easily go unnoticed but an in-crease in non-interest income from 7 to 25 over 10 years shows a clear decline in lending The same concept holds true for analyzing the divisions of a credit unionrsquos loan portfolio Using this kind of analysis many credit union leaders have discovered that what they traditionally considered a core strength was actually waning in popularity

For years credit unions have bench-marked their performance against credit unions of similar asset size or field of membership In fact the ability to build a peer group for proper benchmarking

is a hallmark of Callahanrsquos Peer-to-Peer software Credit unions can glean a lot of insight from the performance of other credit unions that work with the military an entire community or a single SEG And the considerations for all credit unions with $250-$500 million in assets is sig-nificantly different from credit unions with $250-$500 million in assets and 15 or more branches

Peer group comparisons help a credit unionrsquos leadership identify strengths and weaknesses relative to other credit unions operating under like business models But decision makers should also benchmark the credit unionrsquos performance against competitors in their geographical region After all the economic condition of a spe-cific location might help explain why a credit union looks good when compared to peers around the country but is slipping among credit unions in its own region Minute data is now available that allows analysts to thinly slice information and evaluate performance in focused fields For example a credit union in Plano TX can examine the Plano market which is different from both the Dallas or broader Texas markets

non-TraDiTionaL perforManCe MeasuresUsing historical data and peer bench-

marking are useful ways to gain a more complete picture of a credit union but limiting performance metrics to tradition-al measures stymies managementrsquos ability to make the best decisions for the credit union In todayrsquos data-driven environment management must think larger in terms of what metrics are available and how they can reveal new opportunities

Credit unions that have set goals in non-traditional or nonfinancial areas have the opportunity to define success by their own terms Once they determine that definition there are ways of customizing metrics to

more accurately measure performance

FOR EXAMPLE

bullAffinity Plus FCU ($17B St Paul MN) aims to be the most trusted financial institution in its market It evaluates its progress in obtaining this goal by mea-suring the increase in member activity and new member referrals by current members

bullPentagon FCU ($160B Alexandria VA) sets its products and services apart by offering aggressive pricing The credit union continually strives for a lower op-erating expense ratio (OER) thereby allowing it to deliver products at lower prices Through diligent monitoring Pentagon dropped its OER from 25 in 1999 to 135 in first quarter 2013 thatrsquos nearly half the 264 average ra-tio for credit unions nationally with $1 billion or more in assets

bullThe goal at BCU ($19B Vernon Hills IL) is to succeed in four areas mdash finan-cial operations human capital and member experience mdash and it uses a bal-anced score card to measure activity in these areas On its scorecard SEG pene-tration helps measure financial success service revenue income helps measure operational success employee retention helps measure human capital success and member satisfaction surveys help measure member experience success

The go-to metrics of the past are perfectly fine for measuring traditional measures of success But the world is evolving mdash by data gathering methods and analysis capabilities to say the least mdash and credit unions must hold themselves to a different standard than for-profit financial institu-tions ldquoFinerdquo is no longer good enough and credit unions must now consider both previously neglected and new ways of evaluating their performance The public certainly is times

MeaSurIng tHe cOOPeratIVe DIfference

creDItunIOnScOMrePOrt | June 2013 5

By HeatHer Kaart DIrectOr Of MeMBer anD cOMMunIty InSIgHtS VancOuVer cIty SaVIngS creDIt unIOn

non-TraDiTionaL MeTriCs heLp Measure suCCessA canadian community credit union uses impact measures to gain a better understanding of how it is growing as a cooperative

Vancouver City Savings Credit Union is a Canadian credit union that serves residents of British Columbia Vancity is Canadarsquos largest community credit union by assets It has slightly more than $17 billion CAD in assets and more than 490000 members primarily located in Vancouver and on Vancouver Island Heather Kaart joined Vancity in 2012 as the credit unionrsquos director of member and community insights Here she addresses the ways in which the credit union tracks goals that are difficult to measure using traditional metrics

vanCity has been working to grow as a cooperative in a number of important areas such as cooperative principles en-vironmental sustainability social justice and financial inclusion The credit union has focused on social and environmental efforts since its inception in 1946 Since 1997 we have produced an accountability report that provides a complete view of our social environmental and economic performance More recently we have been establishing ldquoimpact metricsrdquo to measure the impact of this work in our communities

Vancity was the first Canadian financial institution invited to join the Global Al-liance for Banking on Values (GABV) This is an independent association of banks and credit unions around the world whose members ldquocomply with sus-tainable banking principles and have a shared commitment to find global solu-tions to international problems mdash and to promote a positive viable alternative to the current financial systemrdquo Members of GABV ldquouse finance to deliver sustain-able development for underserved people communities and the environmentrdquo and are committed to a triple bottom line ac-counting of advancing people planet and community The Alliancersquos members sup-port the real economy of businesses that improve lives and communities

GABV has six guiding principles As a member institution Vancity is working to measure how we are advancing toward them For example we measure the per-centage of assets we have put into lending to organizations working at social justice or environmental responsibility

non-TraDiTionaL reporTingThe work of the Global Alliance for Bank-

ing on Values and the assessments wersquore building represent a small portion of what Vancity tracks and reports We measure a variety of targets and indicators outside the traditional banking metrics and publish an integrated annual report Some of Vanc-ityrsquos non-traditional goals and measures are categorized under the three headings of impact confidence and integrity

ldquoImpactrdquo examines member well-being We have created a well-being index based on a survey that includes questions about a memberrsquos feelings of connectedness to the community their financial security achievement of life goals and so on We compare member responses to those of non-members to gauge how Vancity is pro-moting well-being to its members

ldquoConfidencerdquo examines public trust in Vancity by quantifying member growth and return on member equity

ldquoIntegrityrdquo examines how well what Van-city does aligns with what it says it does We measure integrity through feedback from staff who can identify whether poli-cies and processes are working in the way theyrsquore intended

TraCking MeTriCsVancity tracks other efforts that are dif-

ficult to quantify such as the cooperative economy We track the extent to which we purchase locally and how we are doing in funding community-minded organiza-tions An even more difficult measure is the leverage influence or impact Vancity has in kick-starting beneficial programs

Heather KaartDirector of Member and community Insights Vancouver city Savings credit union

with a grant or a loan Attribution can be challenging because itrsquos not always clear mdash once other groups are involved mdash whose contribution was the catalyst for the project to proceed or had the most impact

We measure how Vancity is helping mem-bers meet their long-term financial goals and track financial inclusion and social justice We use metrics such as reduction in poverty the number of people who have taken free Vancity financial literacy courses the number of members who have received credit otherwise denied or who have had their credit rehabilitated the number of affordable housing units we have funded and the amount of assets we have invested in socially responsible or environmentally beneficial projects and businesses

Finally we have a measure for environ-mental sustainability We track how we work with members on climate change issues the number groups we support that are focused on environmental sus-tainability and the amount of our assets committed to areas of positive environ-mental impact

Measuring iMpaCTThese new kinds of metrics and mea-

sures are helping us move from a more conventional model of business that helps communities to a business model that is dedicated to bringing about posi-tive changes in areas of community social justice and environmental improvement We are moving from measuring our efforts or outputs to measuring the outcomes pro-duced through the efforts Many organi-zations including the Global Alliance for Banking on Values have been working to develop impact measures for years It is a complex and challenging undertaking But we are making progress and continue to work with our partners and stakeholders to find the best way to measure the impact Vancity has on the lives of our members and their communities times

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creDItunIOnScOMrePOrt | June 2013 7

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oric

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Can

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ndt

able

Ser

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In

Apr

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dit

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Not

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ost o

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dditi

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Ser

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way

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save

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nd

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Map

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Der

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Oreg

On

Calla

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rew

Gro

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Paci

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orth

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14th in

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nato

my

seri

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M

aps

Fede

ral C

redi

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on

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empl

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ral

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ork

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stry

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mar

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Not

ably

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has

com

mit

ted

roug

hly

$28

mill

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ithe

r an

op -

erat

or o

r in

vest

or i

n 14

CU

SOs

As

a w

hole

the

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nera

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uch

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apsrsquo

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al n

et i

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e O

ne o

f it

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ost

succ

essf

ul C

USO

s C

UW

irel

ess

la

unch

ed a

s a

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ount

ed p

hone

pla

n pr

ovid

er b

ut h

as s

ince

exp

ande

d in

to

mob

ile b

anki

ng d

evel

opm

ent

Spr

ig

the

CU

SOrsquos

new

mob

ile

wal

let

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omis

es t

o br

ing

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ulti

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titu

tion

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ared

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nch

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rien

ce t

o m

obil

e pa

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ts in

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ay n

on-c

redi

t un

ions

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nt r

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ate

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hnol

ogic

al o

ffer

ings

su

ch a

s th

is a

re h

elpi

ng M

aps

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act

youn

ger

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bers

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e av

erag

e ag

e of

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new

mem

ber

is 2

1

Map

srsquo B

uy L

ocal

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ther

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ay th

e cr

edit

uni

on is

usi

ng a

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und-

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king

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cept

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erm

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f th

e co

oper

ativ

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uy L

ocal

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roup

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gram

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fers

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ail

perk

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r m

embe

rs d

rive

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affi

c to

sm

all b

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nd in

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ses

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rcha

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com

e It

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win

-win

-win

and

rou

ghly

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loca

l bus

ines

ses

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icip

ate

Rea

d m

ore

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he 1

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ed

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n o

f C

USP

hit

ting

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str

eets

in J

une

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uso

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nua

L Co

nfe

ren

Ce

Las

veg

as

neV

aDa

In A

pril

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laha

n EV

P Ja

y Jo

hnso

n an

d CO

O A

lix P

atte

rson

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t tw

o da

ys in

Sin

Ci

ty fo

r the

NAC

USO

Ann

ual C

onfe

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John

son

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ond

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NAC

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rd o

f dir

ecto

rs a

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rese

nted

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ards

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and

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labo

rato

r of

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Year

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y C

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iced

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tion

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r be

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ave

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copy 2013 CUAnswers ~cuanswers201209_callahan_advert

Scan to reviewour 7 CooperativePrinciples Live ItSeries and orderinformation cuanswerscom | 800- 327-3478

We live it every day

Bringing

The Cooperative PrinciplesFront amp Center

Live ItThe Cooperative Spirit

4 June 2013 | creDItunIOnScOMrePOrt

ldquoLimiting performance metrics to traditional measures stymies managementrsquos ability to make the best decisions for the credit unionrdquo

no contested seats What is your 3-year member voting percentage How many ways can members vote

The survey provides a score that indi-cates gradations of success or lack there-of at conforming to the principle The sur-vey is available on the Cooperative Score portion of cuanswerscom CUAnswers does not consider this survey and scoring mechanism fully mature and encourages feedback so the survey evolves into a more exacting and useful form

finanCiaL perforManCe MeasuresFinancial performance measures are

already in wide use by credit unions and banks These include balance sheet ratios income statement ratios ROA loan balances and the like Credit unions should not neglect this level of analysis as this quarterrsquos expense ratio or non-interest income ratio are important for executives and the board to evaluate a credit unionrsquos performance today

In many cases however a deeper exami-nation yields greater insight Comparing operating expenses to all expenses or non-interest income to all income over the past 10 years sheds light on how a credit union has changed thus providing guidance on where it is headed Gradual year-to-year increases easily go unnoticed but an in-crease in non-interest income from 7 to 25 over 10 years shows a clear decline in lending The same concept holds true for analyzing the divisions of a credit unionrsquos loan portfolio Using this kind of analysis many credit union leaders have discovered that what they traditionally considered a core strength was actually waning in popularity

For years credit unions have bench-marked their performance against credit unions of similar asset size or field of membership In fact the ability to build a peer group for proper benchmarking

is a hallmark of Callahanrsquos Peer-to-Peer software Credit unions can glean a lot of insight from the performance of other credit unions that work with the military an entire community or a single SEG And the considerations for all credit unions with $250-$500 million in assets is sig-nificantly different from credit unions with $250-$500 million in assets and 15 or more branches

Peer group comparisons help a credit unionrsquos leadership identify strengths and weaknesses relative to other credit unions operating under like business models But decision makers should also benchmark the credit unionrsquos performance against competitors in their geographical region After all the economic condition of a spe-cific location might help explain why a credit union looks good when compared to peers around the country but is slipping among credit unions in its own region Minute data is now available that allows analysts to thinly slice information and evaluate performance in focused fields For example a credit union in Plano TX can examine the Plano market which is different from both the Dallas or broader Texas markets

non-TraDiTionaL perforManCe MeasuresUsing historical data and peer bench-

marking are useful ways to gain a more complete picture of a credit union but limiting performance metrics to tradition-al measures stymies managementrsquos ability to make the best decisions for the credit union In todayrsquos data-driven environment management must think larger in terms of what metrics are available and how they can reveal new opportunities

Credit unions that have set goals in non-traditional or nonfinancial areas have the opportunity to define success by their own terms Once they determine that definition there are ways of customizing metrics to

more accurately measure performance

FOR EXAMPLE

bullAffinity Plus FCU ($17B St Paul MN) aims to be the most trusted financial institution in its market It evaluates its progress in obtaining this goal by mea-suring the increase in member activity and new member referrals by current members

bullPentagon FCU ($160B Alexandria VA) sets its products and services apart by offering aggressive pricing The credit union continually strives for a lower op-erating expense ratio (OER) thereby allowing it to deliver products at lower prices Through diligent monitoring Pentagon dropped its OER from 25 in 1999 to 135 in first quarter 2013 thatrsquos nearly half the 264 average ra-tio for credit unions nationally with $1 billion or more in assets

bullThe goal at BCU ($19B Vernon Hills IL) is to succeed in four areas mdash finan-cial operations human capital and member experience mdash and it uses a bal-anced score card to measure activity in these areas On its scorecard SEG pene-tration helps measure financial success service revenue income helps measure operational success employee retention helps measure human capital success and member satisfaction surveys help measure member experience success

The go-to metrics of the past are perfectly fine for measuring traditional measures of success But the world is evolving mdash by data gathering methods and analysis capabilities to say the least mdash and credit unions must hold themselves to a different standard than for-profit financial institu-tions ldquoFinerdquo is no longer good enough and credit unions must now consider both previously neglected and new ways of evaluating their performance The public certainly is times

MeaSurIng tHe cOOPeratIVe DIfference

creDItunIOnScOMrePOrt | June 2013 5

By HeatHer Kaart DIrectOr Of MeMBer anD cOMMunIty InSIgHtS VancOuVer cIty SaVIngS creDIt unIOn

non-TraDiTionaL MeTriCs heLp Measure suCCessA canadian community credit union uses impact measures to gain a better understanding of how it is growing as a cooperative

Vancouver City Savings Credit Union is a Canadian credit union that serves residents of British Columbia Vancity is Canadarsquos largest community credit union by assets It has slightly more than $17 billion CAD in assets and more than 490000 members primarily located in Vancouver and on Vancouver Island Heather Kaart joined Vancity in 2012 as the credit unionrsquos director of member and community insights Here she addresses the ways in which the credit union tracks goals that are difficult to measure using traditional metrics

vanCity has been working to grow as a cooperative in a number of important areas such as cooperative principles en-vironmental sustainability social justice and financial inclusion The credit union has focused on social and environmental efforts since its inception in 1946 Since 1997 we have produced an accountability report that provides a complete view of our social environmental and economic performance More recently we have been establishing ldquoimpact metricsrdquo to measure the impact of this work in our communities

Vancity was the first Canadian financial institution invited to join the Global Al-liance for Banking on Values (GABV) This is an independent association of banks and credit unions around the world whose members ldquocomply with sus-tainable banking principles and have a shared commitment to find global solu-tions to international problems mdash and to promote a positive viable alternative to the current financial systemrdquo Members of GABV ldquouse finance to deliver sustain-able development for underserved people communities and the environmentrdquo and are committed to a triple bottom line ac-counting of advancing people planet and community The Alliancersquos members sup-port the real economy of businesses that improve lives and communities

GABV has six guiding principles As a member institution Vancity is working to measure how we are advancing toward them For example we measure the per-centage of assets we have put into lending to organizations working at social justice or environmental responsibility

non-TraDiTionaL reporTingThe work of the Global Alliance for Bank-

ing on Values and the assessments wersquore building represent a small portion of what Vancity tracks and reports We measure a variety of targets and indicators outside the traditional banking metrics and publish an integrated annual report Some of Vanc-ityrsquos non-traditional goals and measures are categorized under the three headings of impact confidence and integrity

ldquoImpactrdquo examines member well-being We have created a well-being index based on a survey that includes questions about a memberrsquos feelings of connectedness to the community their financial security achievement of life goals and so on We compare member responses to those of non-members to gauge how Vancity is pro-moting well-being to its members

ldquoConfidencerdquo examines public trust in Vancity by quantifying member growth and return on member equity

ldquoIntegrityrdquo examines how well what Van-city does aligns with what it says it does We measure integrity through feedback from staff who can identify whether poli-cies and processes are working in the way theyrsquore intended

TraCking MeTriCsVancity tracks other efforts that are dif-

ficult to quantify such as the cooperative economy We track the extent to which we purchase locally and how we are doing in funding community-minded organiza-tions An even more difficult measure is the leverage influence or impact Vancity has in kick-starting beneficial programs

Heather KaartDirector of Member and community Insights Vancouver city Savings credit union

with a grant or a loan Attribution can be challenging because itrsquos not always clear mdash once other groups are involved mdash whose contribution was the catalyst for the project to proceed or had the most impact

We measure how Vancity is helping mem-bers meet their long-term financial goals and track financial inclusion and social justice We use metrics such as reduction in poverty the number of people who have taken free Vancity financial literacy courses the number of members who have received credit otherwise denied or who have had their credit rehabilitated the number of affordable housing units we have funded and the amount of assets we have invested in socially responsible or environmentally beneficial projects and businesses

Finally we have a measure for environ-mental sustainability We track how we work with members on climate change issues the number groups we support that are focused on environmental sus-tainability and the amount of our assets committed to areas of positive environ-mental impact

Measuring iMpaCTThese new kinds of metrics and mea-

sures are helping us move from a more conventional model of business that helps communities to a business model that is dedicated to bringing about posi-tive changes in areas of community social justice and environmental improvement We are moving from measuring our efforts or outputs to measuring the outcomes pro-duced through the efforts Many organi-zations including the Global Alliance for Banking on Values have been working to develop impact measures for years It is a complex and challenging undertaking But we are making progress and continue to work with our partners and stakeholders to find the best way to measure the impact Vancity has on the lives of our members and their communities times

no

Tes

fro

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The

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DW

hat w

ersquove

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re w

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IStr

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MaS

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tS

creDItunIOnScOMrePOrt | June 2013 7

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f Le

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off

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ndt

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ies

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ip c

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m fo

r cr

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ader

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nd o

ppor

tuni

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ng

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r ro

les

In

May

C

alla

han

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son

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erat

ed a

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ndta

ble

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hist

oric

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ni S

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Hot

el in

our

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l Cr

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sets

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g

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ta-

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ly 8

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of th

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tgag

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ions

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pplic

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ugh

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web

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Can

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r cr

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andl

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at k

ind

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e

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ettS

Cal

lah

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Rou

ndt

able

Ser

ies

for

lead

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ip c

lien

ts p

rovi

des

an o

pen

foru

m fo

r cr

edit

uni

on le

ader

s to

disc

uss

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chal

leng

es a

nd o

ppor

tuni

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ng

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r ro

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In

Apr

il C

alla

han

EVP

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John

son

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erat

ed a

CFO

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ndta

ble

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incl

uded

cre

dit

unio

ns r

angi

ng in

si

ze fr

om $

304

mill

ion

to $

4 bi

llion

Our

firs

t CFO

rou

ndta

ble

of 2

013

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star

ted

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caus

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alla

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ploy

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cted

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lan

for s

omet

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rly

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C V

ice

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iden

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mot

orca

de B

ut o

nce

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ollin

g th

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owed

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sily

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tinu

ousl

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Not

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gin

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enue

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pmen

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r pro

fitab

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and

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curr

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xam

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ost o

f the

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dit

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enda

nce

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artn

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n (o

r bot

h) th

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rces

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nue

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ffic

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Ser

vice

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ovid

e by

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clud

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artn

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r cre

dit u

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laun

ch a

new

C

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tha

t w

ill r

un a

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ck-o

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-er

atio

ns a

s a

way

to

save

mon

ey a

nd

incr

ease

eff

icie

ncy

Map

s fe

Der

aL C

reD

iT u

nio

n

saLe

M

Oreg

On

Calla

han

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r Aar

on P

ugh

amp m

ultim

edia

pr

oduc

er D

rew

Gro

ssm

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avel

ed to

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Paci

fic N

orth

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t for

the

14th in

stal

lmen

t of

the

CU

SP A

nato

my

seri

es f

eatu

ring

M

aps

Fede

ral C

redi

t Uni

on

Map

s ($

460M

Sal

em O

R)

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ral

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tegi

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ork

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ss t

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stry

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d re

ap t

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ost

from

it

mar

ket

Not

ably

it

has

com

mit

ted

roug

hly

$28

mill

ion

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ithe

r an

op -

erat

or o

r in

vest

or i

n 14

CU

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As

a w

hole

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nera

te a

s m

uch

as 3

0

of M

apsrsquo

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et i

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e O

ne o

f it

s m

ost

succ

essf

ul C

USO

s C

UW

irel

ess

la

unch

ed a

s a

disc

ount

ed p

hone

pla

n pr

ovid

er b

ut h

as s

ince

exp

ande

d in

to

mob

ile b

anki

ng d

evel

opm

ent

Spr

ig

the

CU

SOrsquos

new

mob

ile

wal

let

app

pr

omis

es t

o br

ing

a m

ulti

-ins

titu

tion

sh

ared

bra

nch

expe

rien

ce t

o m

obil

e pa

ymen

ts in

a w

ay n

on-c

redi

t un

ions

ca

nt r

eplic

ate

Tec

hnol

ogic

al o

ffer

ings

su

ch a

s th

is a

re h

elpi

ng M

aps

attr

act

youn

ger

mem

bers

th

e av

erag

e ag

e of

a

new

mem

ber

is 2

1

Map

srsquo B

uy L

ocal

init

iati

ve is

ano

ther

w

ay th

e cr

edit

uni

on is

usi

ng a

gro

und-

brea

king

con

cept

for

the

bett

erm

ent o

f th

e co

oper

ativ

e B

uy L

ocal

a G

roup

on-

like

pro

gram

of

fers

ret

ail

perk

s fo

r m

embe

rs d

rive

s tr

affi

c to

sm

all b

usi-

ness

es a

nd in

crea

ses

inte

rcha

nge

in-

com

e It

rsquos a

win

-win

-win

and

rou

ghly

70

loca

l bus

ines

ses

part

icip

ate

Rea

d m

ore

in t

he 1

Q13

ed

itio

n o

f C

USP

hit

ting

the

str

eets

in J

une

naC

uso

an

nua

L Co

nfe

ren

Ce

Las

veg

as

neV

aDa

In A

pril

Cal

laha

n EV

P Ja

y Jo

hnso

n an

d CO

O A

lix P

atte

rson

spen

t tw

o da

ys in

Sin

Ci

ty fo

r the

NAC

USO

Ann

ual C

onfe

renc

e

John

son

won

his

sec

ond

term

on

the

NAC

USO

boa

rd o

f dir

ecto

rs a

nd p

rese

nted

aw

ards

for

CUSO

and

CU

Col

labo

rato

r of

the

Year

Man

y C

USO

s vo

iced

fru

stra

tion

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ike

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irk

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copy 2013 CUAnswers ~cuanswers201209_callahan_advert

Scan to reviewour 7 CooperativePrinciples Live ItSeries and orderinformation cuanswerscom | 800- 327-3478

We live it every day

Bringing

The Cooperative PrinciplesFront amp Center

Live ItThe Cooperative Spirit

creDItunIOnScOMrePOrt | June 2013 5

By HeatHer Kaart DIrectOr Of MeMBer anD cOMMunIty InSIgHtS VancOuVer cIty SaVIngS creDIt unIOn

non-TraDiTionaL MeTriCs heLp Measure suCCessA canadian community credit union uses impact measures to gain a better understanding of how it is growing as a cooperative

Vancouver City Savings Credit Union is a Canadian credit union that serves residents of British Columbia Vancity is Canadarsquos largest community credit union by assets It has slightly more than $17 billion CAD in assets and more than 490000 members primarily located in Vancouver and on Vancouver Island Heather Kaart joined Vancity in 2012 as the credit unionrsquos director of member and community insights Here she addresses the ways in which the credit union tracks goals that are difficult to measure using traditional metrics

vanCity has been working to grow as a cooperative in a number of important areas such as cooperative principles en-vironmental sustainability social justice and financial inclusion The credit union has focused on social and environmental efforts since its inception in 1946 Since 1997 we have produced an accountability report that provides a complete view of our social environmental and economic performance More recently we have been establishing ldquoimpact metricsrdquo to measure the impact of this work in our communities

Vancity was the first Canadian financial institution invited to join the Global Al-liance for Banking on Values (GABV) This is an independent association of banks and credit unions around the world whose members ldquocomply with sus-tainable banking principles and have a shared commitment to find global solu-tions to international problems mdash and to promote a positive viable alternative to the current financial systemrdquo Members of GABV ldquouse finance to deliver sustain-able development for underserved people communities and the environmentrdquo and are committed to a triple bottom line ac-counting of advancing people planet and community The Alliancersquos members sup-port the real economy of businesses that improve lives and communities

GABV has six guiding principles As a member institution Vancity is working to measure how we are advancing toward them For example we measure the per-centage of assets we have put into lending to organizations working at social justice or environmental responsibility

non-TraDiTionaL reporTingThe work of the Global Alliance for Bank-

ing on Values and the assessments wersquore building represent a small portion of what Vancity tracks and reports We measure a variety of targets and indicators outside the traditional banking metrics and publish an integrated annual report Some of Vanc-ityrsquos non-traditional goals and measures are categorized under the three headings of impact confidence and integrity

ldquoImpactrdquo examines member well-being We have created a well-being index based on a survey that includes questions about a memberrsquos feelings of connectedness to the community their financial security achievement of life goals and so on We compare member responses to those of non-members to gauge how Vancity is pro-moting well-being to its members

ldquoConfidencerdquo examines public trust in Vancity by quantifying member growth and return on member equity

ldquoIntegrityrdquo examines how well what Van-city does aligns with what it says it does We measure integrity through feedback from staff who can identify whether poli-cies and processes are working in the way theyrsquore intended

TraCking MeTriCsVancity tracks other efforts that are dif-

ficult to quantify such as the cooperative economy We track the extent to which we purchase locally and how we are doing in funding community-minded organiza-tions An even more difficult measure is the leverage influence or impact Vancity has in kick-starting beneficial programs

Heather KaartDirector of Member and community Insights Vancouver city Savings credit union

with a grant or a loan Attribution can be challenging because itrsquos not always clear mdash once other groups are involved mdash whose contribution was the catalyst for the project to proceed or had the most impact

We measure how Vancity is helping mem-bers meet their long-term financial goals and track financial inclusion and social justice We use metrics such as reduction in poverty the number of people who have taken free Vancity financial literacy courses the number of members who have received credit otherwise denied or who have had their credit rehabilitated the number of affordable housing units we have funded and the amount of assets we have invested in socially responsible or environmentally beneficial projects and businesses

Finally we have a measure for environ-mental sustainability We track how we work with members on climate change issues the number groups we support that are focused on environmental sus-tainability and the amount of our assets committed to areas of positive environ-mental impact

Measuring iMpaCTThese new kinds of metrics and mea-

sures are helping us move from a more conventional model of business that helps communities to a business model that is dedicated to bringing about posi-tive changes in areas of community social justice and environmental improvement We are moving from measuring our efforts or outputs to measuring the outcomes pro-duced through the efforts Many organi-zations including the Global Alliance for Banking on Values have been working to develop impact measures for years It is a complex and challenging undertaking But we are making progress and continue to work with our partners and stakeholders to find the best way to measure the impact Vancity has on the lives of our members and their communities times

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even

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copy 2013 CUAnswers ~cuanswers201209_callahan_advert

Scan to reviewour 7 CooperativePrinciples Live ItSeries and orderinformation cuanswerscom | 800- 327-3478

We live it every day

Bringing

The Cooperative PrinciplesFront amp Center

Live ItThe Cooperative Spirit

no

Tes

fro

M

The

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ersquove

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MaS

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creDItunIOnScOMrePOrt | June 2013 7

Chie

f Le

nD

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off

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f fi

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tuni

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Live ItThe Cooperative Spirit

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