The Perfect Board Packet and Understanding the Information in It

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The Perfect Board Packetand Understanding the
Information in It

• Presented by
• Tim Harrington, CPA
• T.E.A.M. Resources
• [phone]
• Tharrington_at_forTeamResources.com

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Whats the Boards Role?

• To oversee and guide the credit union so that the
  members assets are as safe and productive as
  possible.

Govern!
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Governance is workingOutside the Box
Values, Mission, Plans, Goals, Policies
Operations at the control of CEO
Member survey, Staff survey, Mystery Shops Fraud
hotline
Monthly reports Dash board Other reports
Competitive analysis
External Audit, Internal
Audit Regulatory Exam
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The Governance Process
Start all over again!
Governance Policies, Strategic Goals and
Measurable Results
Management Carries Out Plans And Policies
Reviews Results, Compares to Plan
Evaluation! Reward Management If plan met or
exceeded
Management
Board (and Management)
Board
Board and Management
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What has been said of Boards

• Effective governance by a board is a relatively
  rare and unnatural act. Chait
• There is one thing all boards have in
  commonThey do not function. Drucker
• Boards tend to be incompetent groups of
  competent individuals. Carver

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Whats the Boards Role?

• Depends on
• The size of the credit union
• The background of the Board Members
• The sophistication of the management team
• The degree of urgency or risk in the credit
  unions situation

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Boards Role Varies with Credit Union Size

• Small CU - Small credit unions usually lack
  specialists to deal with specialized areas,
  therefore the Board
• May be active in management decisions
• May be active in lending decisions
• May be active in marketing decisions
• May be active in personnel decisions

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Boards Role Varies with Credit Union Size

• Medium CU - Medium sized credit unions still lack
  specialists, but have more employees to assist.
  Therefore
• Board members may have special expertise or extra
  time to offer management
• but, Board should still try to stay with policy
  issues and planning.

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Boards Role Varies with Credit Union Size

• Large CU- Large credit unions usually have some
  or many specialists, therefore
• Board should be heavy into policy and planning
• Give your management team goals and let them run
  with the ball
• Monitor the results

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Degree of Urgency or Risk at the Credit Union

• The Board should consider more in depth oversight
  of the credit union if
• You are rated a CAMEL 3, 4 or 5
• Audits or Exams have noted serious or numerous
  findings
• Additional risk is introduced through
• Indirect Lending
• Risk-Based Lending or Pricing
• Mortgage Lending
• Commercial Lending, etc.

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Board Packets.Look Familiar?
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Whats the Purpose of the Board MeetingUnder
Normal Circumstances?
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Board meetings occur because of the need for
Board members to

• Plan together
• Learn together
• Contemplate together
• Deliberate together
• Decide together
• Plan together

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Whats the Purpose of the Board Meeting?

• Compare to Plan
• Evaluate progress toward plan
• Look to future for strategic issues on horizon
  that could effect the CU

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Whats the Purpose of the Board Meeting?

• Purpose Meet on purpose
• Priority Focus on the most important things you
  need to accomplish
• Pace Keep it quick, make it fast
• Process Evaluate and Improve the process
• Pranks Make it fun

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The Perfect Board Meeting?

• Starts on time
• Board members and staff are prepared
• Have read packet
• Have asked questions in advance (may share with
  Board at meeting)
• Have prepared Management for additional
  information that may be needed
• Focuses on MAJOR governance issues
• Carries forward the Strategic Plan
• Is SHORT and EFFICIENT

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The Board Packet
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Whats the Purpose of the Board Packet?

• To help the Board determine if operations are
  meeting expectations
• To assist the Board in determining future
  direction
• To update the Boards knowledge of the operations
  of the credit union
• To provide insight into trends that may be
  occurring
• To provide information to assist in the decision
  making process

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• A Good Board Packet
• Is the Boards eyes into the soul of the credit
  union
• Keeps Board Members informed and up to date
• Helps Board Members see trends, even if
  management hasnt discussed them
• Allows Board Members to make informed decisions
  and ask insightful questions

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The Perfect Board PacketSome Ideas of Content

• Agenda
• Consent Agenda Items
• Financial Ratios and Trends-DASHBOARD
• Financial Reports with
• Comparison to previous periods
• Comparison to plan
• Comparison to budget

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The Perfect Board PacketSome Ideas of Content

• Strategic Planning Update
• Strategic Issues Discussion
• FYI or CEOs/Chairs Corner
• Risk Area Analysis as needed
• Indirect Lending - Risk-Based Pricing
• Mortgage Lending - Commercial Lending
• New products/services - Delinquency and
• Repossessed Collateral Charge-offs

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Board Packet is only useful if you study it
prior to the Board Meeting.Further, you may
want to call CEO and chairman with questions
prior to the meeting.
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Consent Agenda
Consent Agenda only works if Board
Members actually read the contents of the packet
prior to the meeting

• Items that are routine and
• dont require discussion
• May include
• Minutes - Financial/Statistical reports
• Membership - Delinquency/Charge-off
• Dividends - etc., etc., etc.

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Financial Reports with comparison to previous
periods
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Financial Reports with comparison to previous
periods
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Using a Dashboard
Safe Range
Goal
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Planning, Measurement and Evaluation-Key
Achievements
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Planning, Measurement and Evaluation-12 Month
Trend
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Planning, Measurement and Evaluation-36 Month
Trend
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Strategic Planning - FYI
Another Bank Fails
Housing Starts Lowest in 9 Years
New development planned for downtown
Ford Lays-off 8,000
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Other Analysis

• Remote transactions Vs branch transactions
• Products/Services per Member
• Audit or Exam Resolution Update
• Supervisory Committee Report
• Plan for the period
• Results of testing or auditing
• Branch activity trends
• Branch profitability analysis

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Risk Area Analysis

• Indirect Lending - Risk-Based Pricing
• Mortgage Lending - Commercial Lending
• New products/services - Delinquency and
• Repossessed Collateral Charge-offs

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Indirect Lending
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Risk-Based Pricing
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New Products/Services

• Depends on the new product and service
• The goal is to analyze the new product or service
  acceptance by the members
• Set expectations
• Compare actual results to the expected results
• Probably on a quarterly basis

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Delinquency and Charge-offs

• Delinquency and Charge-off Graphs
• Delinquency by loan type
• New/Used Auto - Signature
• Visa - 1st Mortgage
• Home Equity - Variable Rate Mtg
• Delinquency by branch
• Delinquency by loan officer
• Delinquency by Risk Based score

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Delinquency and Charge-offs

• Unless you are a small credit union, you dont
  need the detail
• Larger CUs just need the big picture
• Trends over last several years
• Trends over last 12 to 36 months
• Always look at Delinquency and Charge-offs
  together. They are related in a very important
  way
• Recoveries as a percentage of Charge-offs

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Allowance for Loan Losses Calculation

• These vary dramatically
• New regulatory method initiated June 02 complies
  with GAAP
• Smaller CUs may K.I.S.S.
• Some credit unions use a more sophisticated
  approach
• May stratify more loan types
• May attempt to quantify current lending
  environment

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Results of any Compensation Incentive Plans

• Depends on the compensation plan
• Idea is to determine through measurement whether
  the incentive given is resulting in the behavior
  desired
• Report should identify
• Expected or planned result
• Actual result
• Cost to the credit union
• Benefit to the credit union

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The Perfect Board Packetand Understanding the
Information in It

• Presented by
• Tim Harrington, CPA
• T.E.A.M. Resources
• [phone]
• Tharrington_at_forTeamResources.com