Winners of RSM McGladrey's "Best Practice" Awards Hone in on Relationship Pricing, Risk Assessment and Everything in Between

LOS ANGELES – Submissions for RSM McGladrey’s Best Practice awards continue to grow each year making selecting the winners a more arduous process. More than 100 credit union representatives sent in their submissions within seven categories: accounting and finance; internal audit; compliance; information technology; lending; policies; and miscellaneous. Seventeen nomination finalists were selected and three winners and four honorable mention recipients were ultimately recognized. The winners are Derrik Wynkoop, CFO at $1.9 billion Hudson Valley FCU for “Measuring the Effectiveness of Relationship Pricing”; Bill Pelter, audit manager at $1.4 billion SECU CU for “Internal Audit Risk Analysis and Risk Assessment Process”; and Erin Ewart, compliance fraud and security manager at $1.1 billion Redwood CU for “Member Information Security Compliance Program.” Honorable mentions were awarded to Shauna Smith, information security manager at $141 million Allegiance Credit Union for “Disaster Recovery Plan”; Michael Denny, acting controller at $370 million Christian Community CU for “Accounting Department Flowchart”; Russell Dennick, controller at $428 million Credit Union of Southern California for “Indirect Lending Monitoring Reports”; and Jonathon Storment, internal auditor at $260 million FAA Credit Union for “Code of Ethical Conduct Policy & Declaration.” “The Best Practices forum demonstrates the spirit of cooperation and sharing we don’t think could exist in any other industry and we are very excited to be a part of it,” said Tom Lent, managing director, credit union services for RSM McGladrey. Lent said the forum also recognizes “excellence in credit union financial analysis and internal controls and acknowledges the CEOs, CFOs, Internal Auditors and other credit union professionals whose analyses, spread sheets, graphs, studies and internal control procedures are voted Best Practices by their credit union peers.” Wynkoop from Hudson Valley FCU called on his 19 years of banking and credit union experience to come up with a model that “closes the loop” on measuring the effectiveness of a relationship pricing program launched by the CU in 2003. “Unfortunately, an all too common industry practice is to launch a program or strategic initiative only to forget about the critical `measurement piece,’” Wynkoop said. The former strategic planning college instructor came up with a measurement methodology that quantified the premium paid on dividends to members; giveback of non-interest income (fees) to members; total monthly dollar amount of giveback to members; results of the program to date to its overall goal; and membership mitigation into the upper tiers of the program. As a result of the measurement methodology, Hudson Valley FCU was able to exceed a two-year capital goal of $1.4 million by $3.6 million. It also migrated more members within a three-tier system: Choice, for members with up to $10,000 in aggregate loan balances; Plus, $10,000-$20,000; and Ultimate, more than $20,000, where members get nearly all of their services for free, Wynkoop said. “It encouraged members to bring their services over from other financial institutions,” Wynkoop said. The credit union also saw success with its “Steal a Loan” program, which provided enticing car loans rates and its “Mortgage Originators on the Road,” where CU representatives made visits to mortgage firms to establish relationships. Wynkoop said more than 15 CUs have approached him about using the model but cautioned them that it was specifically tailored for Hudson Valley FCU. Above all else, credit unions can share one common trait when it comes to measuring the impact of relationship pricing – not being afraid to close the loop. “You get so excited about a program, you launch it and then sometimes we don’t do that Monday morning quarterbacking,” Wynkoop said. “We need to look at what worked and what didn’t work.” Another Best Practice winner, Pelter at SECU CU in Linthicum, Md. prepared a comprehensive risk assessment of various areas to determine the credit union’s annual internal audit plan. Depending on the various risk factors, attributes and ratings, a score was given for each audit area to determine which areas needed auditing. A budget of the hours involved for each audit was also incorporated into the internal audit risk analysis. Pelter said having the time to conduct the audits is a critical piece for credit unions. “There are only so many hours available to perform the audits, you want to focus on the areas where a credit union will get the biggest bang for its buck,” Pelter said. Pelter is a member of the Association of Credit Union Internal Auditors and in his travels to conferences and in conversations with colleagues, the risk assessment process kept coming up. Generally speaking, Pelter said auditors should know what their specific goals are, come up with a plan and follow through. While the award is a career highlight, there’s another benefit that outweighs it, he said. “It’s particularly gratifying (that I), at a bigger credit union, can help some of the smaller credit unions” that may not have the resources or expertise to do risk assessment. That was the case for a small, one-person run New York credit union, Pelter recalled. The president sought out Pelter at an industry conference. There in the hotel lobby, Pelter went through the model with her. Lent said a number of areas are looked at in picking the winners. “The submissions are selected based on their overall integrity of application, innovation in presenting new ways of looking at critical information, achievements in identifying and analyzing risk and value in helping non-financial professionals understand and interpret risk and other financial information,” Lent said. Nominations for consideration for the 2005 Best Practice awards may be sent to [email protected] or mailed to Best Practices,150 North Hill Drive, Suite 27, Brisbane, CA. 94005. [email protected]