Thursday, October 22, 2020

Assessing the CEO During a Pandemic by Tim Harrington

Credit union directors face a daunting challenge this year as you consider the annual review of your credit union’s CEO. Many or all of your standard metrics will need to be thrown out and replaced with criteria that is specific to the context of the year.

By Tim Harrington and Kevin Smith

CEO Annual Review

CEO Annual Review

One of the significant functions of the board of directors is to perform the annual review of your CEO. Many of you will face this soon, before the end of the year. So what emoji adequately captures your thoughts on getting ready for that? Confusion, fright, thoughtful, scared, face-palm, nausea, challenge? It’s all of the above, right?

The most likely scenario is that whatever you set up last year as part of the strategic plan for 2020 you need to fully or mostly throw aside and you will have to start over.

At TEAM Resources we have been working on this issue. We found it challenging as well. We have done research about what other industries are doing. Do you know what we found? Very little, many are stumped, and what advice IS out there is impossibly vague. Not helpful.

Consider this: Your CEO may have worked harder than ever before this year. In previous years, a less-than-stellar CEO in a good economy may have reached numbers that meant a very large bonus. This year, despite all of the hard work from a great leader, the credit union might lose some money. Thanks to his/her hard work, the credit union not only still exists, but the loss of money could have been a bloodbath, but it’s not. Is it fair to not reward this because the organization “lost” money? (We’re facing a Gilligan’s Island moment, believe it or not: “If not for the courage of the fearless crew, the Minnow would be lost, the Minnow would be lost.”)

At the same time, you will have to consider how much the credit union is struggling, or whether there have been layoffs or furloughs in the face of the pandemic. This may not be the time to be handing out bonuses despite how hard your CEO worked, and how much they rose to the leadership challenges throw their way.

So, What Annual Review Criteria Do You Look For This Year?

Now is the time to reflect on your values as a credit union and as a board. Review all that has happened. What were the notable things that happened that are in line with the clear values of the organization? Things like:

  • Members helped;
  • Staff health and wellbeing preserved … or notably inspired;
  • Difficult decisions made under duress that helped; or
  • Innovative products created;

Or … the opposite of all of this. What if the CEO didn’t rise to the crisis leadership challenge? This cannot be glossed over either. But judging that on outdated financial targets/projections is not the way to assess that.

Part of what you can do is let these values guide you and your discussion throughout the process. But what we want to caution you about is turning this review into a purely subjective response.

Considerations of the CEO Assessment     

Boards also need to consider are the implications to not getting this annual review right.

There are significant downsides of not being able to reward the efforts, recognize the dedication, loyalty & achievement. This is true in any year, but may be more so in a year of crisis.

How do you handle this? Like all good complex questions, the answer is “it depends.” You will need to ask your CEO for different kinds of information that aren’t on your standard metric reporting. Ask for measurements of things that did happen this year that were in line with your values and goals for the credit union.

Can you compare to expectations, or to peer? Well … maybe, but both of those options require some significant analysis of the context to make them realistic and valuable.

Want more detail on this topic?

We have created a webinar on this topic to dig in further. We invite you to have a look: https://forteamresources.com/webinars/ for more information.

Wednesday, October 21, 2020

NAFCU Supports NCUA Proposal for Three-Year CECL Phase In

WASHINGTON—In response to NCUA's proposed rule to create a three-year phase-in of the day-one adverse impacts of the current expected credit loss (CECL) accounting standard on federally-insured credit unions' net worth ratio, NAFCU expressed support for the concept, but also again called for a longer phase-in option and additional examination flexibility.

As the standard currently does not become effective for credit unions until 2023, NAFCU Senior Counsel for Research and Policy Andrew Morris suggested there is still time for an intervention to occur before the industry transitions to a standard that has the potential to "chill lending activities during a period of critical economic recovery."

"NAFCU maintains that credit unions should not be subject to the CECL standard given our industry’s record of prudent fiscal management before and after the financial crisis, limited complexity, and structure as not-for-profit, member-owned cooperatives," wrote Morris. "The NCUA should recognize this difference and identify opportunities to work with the FASB and Congress to exclude credit unions from coverage under CECL."

 

Monday, October 19, 2020

REQUIRED INFORMATION FOR CREDIT UNION BOARD CHAIRMEN AND MANAGEMENT

 

If these cuts in salaries catch on, is your credit union ready?

NEW ORLEANS — The first New Orleans firefighters were furloughed on Sunday under a plan requiring six unpaid days off by the end of the year to help stem a precipitous decline in city sales tax revenue during the coronavirus pandemic.

The city’s furlough requires almost all 4,700 employees to take the six unpaid days, including police, firefighters and other safety workers, reducing their salaries by about 10% and saving the city $6 million.

New Orleans' firefighters' union says the city's furloughs have had an impact on service. The city has required nearly all of its public employees to take at least six unpaid days off before the end of the year in order to offset COVID-19-related budget issues.

But firefighters say it comes at the cost of public safety and the safety of firefighters.

The firefighters’ union said Sunday the impacts of the furloughs are already being felt. Three trucks were out of service on Sunday because firefighters had to be moved around to fill shifts elsewhere.

While only about 13 people at the department were furloughed on Sunday, prior staffing issues left the NOFD with only about 110 on duty out of about 153 the union considers necessary to be fully staffed, said Aaron Mischler, the union president.

“That’s going to be (the same for) every day for the rest of the year,” Mischler said. “It’s going to get worse, guys are going to be working a lot harder so injuries are going to go up, fires are going to get bigger and emergency calls are going to get worse.”

The lack of staffing could have implications for the department’s response times and ability to properly respond to emergencies, he said.

While no firehouses went understaffed on Sunday, stations on Jefferson Davis Parkway, St. Peter and Basin streets and Elysian Fields Avenue were down to single trucks, he said. Because each of those trucks only has three firefighters on it and rules require at least four people at a scene before firefighters are allowed inside a burning building, that could mean delays in properly responding to serious fires, Mischler said.

By way of illustration, Mischler noted that the trucks in the Elysian Fields firehouse were called out to a fire on the porch of a house on Frenchman Street just before the shift change on Sunday. Because both trucks were able to respond in about four minutes, they were able to keep the blaze from spreading to the home, he said.

But if the fire had been called in 10 minutes later, only one of those trucks could have been sent out and the department would have had to rely on a second truck from a station all the way on Poland Avenue, which could have taken 12 to 15 minutes to arrive, he said. In that time, the situation could have gotten far worse, he said.

Mischler predicted the lower staffing would mean more injuries for firefighters, which would further reduce the departments’ staffing levels. In addition, it means shifting firefighters around to neighborhoods and trucks they may be less familiar with.

“Everyone on the job has a knowledge of the streets of the city, we know where we live, we know the makeup of the streets and where they are generally. It does stand to reason that the people who work those neighborhoods regularly know where the potholes are, know where the fire hydrants are,” he said. “It’s the little things that can make a difference and cut precious seconds off a call.”

The city has said the cuts are necessary to offset COVID-19 spending and plummeting revenues from sales tax. The $6 million in savings hardly makes up for the $41 million in corona virus-related expenses the city has not been reimbursed for.

The city has incurred $92 million in pandemic expenses. But it has only received reimbursement for $52 million from the federal government, an amount dived out by the state based on a formula accounting for population and coronavirus cases. The city hoped to receive more money, but negotiations over aid to local governments were called off by President Trump earlier this week.

 

Friday, October 16, 2020

Fantastic Marketing!

 Omnicommander Fantastic Marketing!

Josh Gallo
Regional Manager
omnicommander.com

Office 800-807-3109 #220

Cell 917.402.7720

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Thursday, October 15, 2020

Help your credit union and NCOFCU with a Charitable Donation Account (CDA)

What is a NCUA Charitable Donation Account (CDA) Investment?

CDA is a hybrid investment which grants a federal credit union expanded investment powers to fund charitable contributions. To qualify as a CDA, the primary purpose of the investment must be to fund charitable contributions. To meet the primary purpose test, a minimum of 51% of the earnings and capital gains must be distributed to charities at a frequency of no less than five years. Gains and interest in excess of the 51% are booked as investment income by the credit union.

How does your credit union retain control over the CDA?

Your credit union maintains authority over the investment management of the CDA. MEMBERS Trust Company will develop an Investment Policy Statement that is compatible with the credit union’s risk tolerance, investment time period and business objective for its CDA. Investment strategy may be changed at any time by the credit union by simply notifying MEMBERS Trust Company of the need to change the Investment Policy Statement. The CDA can be terminated at any time after distributing 51% of the total return earned up to the termination date as required by the regulation.

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Wednesday, October 14, 2020

Credit Card Balances Decline

NEW YORK—U.S. consumer borrowing unexpectedly fell in August as credit card balances declined for a sixth consecutive month with the coronavirus pandemic continuing to limit some purchases amid elevated unemployment.

Total credit decreased $7.2 billion from the prior month after an upwardly revised $14.7 billion July gain, Federal Reserve figures showed. The median estimate in a Bloomberg survey of economists called for a $14 billion increase in August, Bloomberg said.

The decline in revolving credit to a three-year low indicates the pace of consumer spending growth is moderating after outsized gains immediately followed the gradual lifting of restrictions on businesses and individuals, Bloomberg said.

“The expiration of a $600 weekly supplemental benefit for the unemployed may have also played a role in the drop in consumer charges,” Bloomberg added.