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August 21, 2014

Data breaches cost consumers average of $157: W. Va. league webinar

Washington
PARKERSBURG, W.V. (8/21/14)--Nearly 40% of data breaches come from inadvertent misuse of data by employees, according to a cybersecurity webinar held Wednesday.

The webinar, held by the West Virginia Credit Union League and TraceSecurity, was designed to help credit unions be more aware of cyberattack threats and implement best practices when it comes to data security.

"The NCUA regional director has publicly stated that credit union information technology security will be a top priority during current credit union examination cycle," said Rich Schaffer, league senior vice president. "From our perspective, we want to ensure credit unions have available options when complying with examiner requests. The cost and effort required to prevent an attack is lower, and seems more manageable, than it is to react to one."

A Ponemon Institute study of data breaches showed that that average financial cost to victims of a data breach averages $157 per consumer, when the breach is a result of malicious criminal intent. For companies that are hit with such attacks, the average cost is $3.5 million.

"Outside of financial losses, you've got reputational losses. If you're hacked ... that can lead to loss of business, and other costs, such as reimbursement and legal fees, are there too," said Charles Lybrand, an information security analyst with TraceSecurity.

Lybrand recommended companies undergo a vulnerability assessment, which consists of a scan of addresses within a system, such as a phone, computer or printer, and look for vulnerabilities. The vulnerabilities are then reported.

A penetration test follows, with the vulnerability data used to go after system weaknesses, including passwords, system defaults and secure folders, all of which can contain sensitive information.

According to Lybrand, hackers can gain access to data by using a public IP address of a credit union and attacking that IP address. Other attacks are what is known as "social engineering" attacks. These attacks can be carried out via phone or e-mail, with the hacker posing as an IT staff member, a human resources staff member or CEO asking for system information, passwords or personal information.

Social engineering attacks can also be carried out in person, with the hacker visiting a location and getting physical access to an institution's servers or other equipment.

"Someone can come in acting like a new employee, or even dress as pest inspector, and get in," Lybrand said. "I've run into chief information officers and IT professionals who say that will never work, but I've dressed up as a pest inspector, gone into an institution dressed in a uniform and said, 'I'm here to look at the mouse problem.' Next thing I know I'm back in a server room."

TraceSecurity is a CUNA Strategic Services alliance provider. The webinar, titled "Protecting Your Credit Union Against Cyberattacks," will be posted on TraceSecurity's website within the next few days.

Use the resource link below for more information. And use the second resource to access a recent related News Now story, "What NCUA examiners look for on cybersecurity efforts: NCUA Report." ReadMore

Bank of America agrees to record $17B settlement in MBS case

Washington
WASHINGTON (8/21/14)--Bank of America has reached a record $17 billion settlement with federal and state authorities, according to an Associated Press report citing officials it says are directly familiar with the matter. The settlement comes from Bank of America's role in selling mortgage-backed securities leading up to the financial crisis in 2008.

The Bank of America settlement was negotiated through a joint federal and state working group with the U.S. Justice Department and other federal and state authorities, according to the Associated Press .

The BofA deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure, the article notes. It follows agreements in the last year with Citigroup for $7 billion and with JPMorgan Chase & Co. for $13 billion.

The Associated Press also reports that the deal requires Bank of America to acknowledge making serious misrepresentations about the quality of the residential mortgage-backed securities it issued, along with securities issued by Countrywide Financial and Merrill Lynch, entities which were acquired by the bank in 2008.

According to the report, $10 billion will be paid in cash and another $7 billion in consumer relief will be provided. An official announcement is expected to come later today.

Bank of America settled with the National Credit Union Administration in April 2013 over allegations that the mortgage-backed securities sold by Bank of America led to the failure of several credit unions. The NCUA suit was settled for $165 million. ReadMore

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Calif., Nev. catching up with robust loan growth

CU System
ONTARIO, Calif. (8/21/14)--Loan growth at California and Nevada credit unions has surged recently, with both states posting numbers that haven't been recorded since before the Great Recession.

In California, credit unions nearly doubled their first quarter rate of loan growth, posting a 4% increase, which is the best second quarter for the state since 2007 ( CU Weekly Aug. 18).

Auto loans fueled the increase, with new-vehicle lending up 17.6%--nearly matching the national year-over-year increase of 19.4%--and used-auto loans increasing 8.1%. Mortgage-loan growth jumped 5.6% as well.

Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues, told News Now that California lagged behind the rest of the country in recovering from the recession, and that the state is just now realizing the gains the rest of the country experienced previously.

"It's essentially California playing catch up," Johnston said. "(We've seen) a lot of growth in higher-paying jobs, and that's translated into better numbers this year."

Further, savings at California credit unions ticked up 3% in the first half of 2014 and are up 3.6% year-over-year. Credit union membership in the state has climbed 0.9% so far in 2014.

Credit unions in Nevada watched overall loan growth jump 4.7% in the second quarter, according to numbers from the Credit Union National Association, pushing up growth for all of 2014 to 5.1%.

And in Nevada, which took a similar economic hit to California, the economy is just now starting to catch up, according to Johnston.

"Nevada's biggest sector, travel and leisure, makes up more than 30% of workforce," Johnston told News Now . "It's now just recovered back to pre-recession levels."

While the majority of credit unions in the United States have seen growth driven largely by auto loans, credit card loans led the way in Nevada, with card balances climbing 7.2% in the first two quarters of the year.

Used-vehicle loans rose 5.9%, meanwhile, first mortgages increased 4.4% and new vehicles edged up 2.3%.

Deposits also climbed in Nevada, as balances jumped 0.6% in the second quarter, with savings account balances increasing 3.6% in the first six months of the year. ReadMore

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Save to Win hits $1M in savings at 6 Wash. CUs

CU System
SILVERDALE, Wash. (8/21/14)--Credit unions in Washington offering the Save to Win program achieved the major milestone of taking in more than $1 million in deposits.

Launched a little over a year ago, Save to Win is a type of prize-linked savings (PLS) account that credit unions throughout the United States are encouraging state legislatures to legalize in order to help under-banked citizens improve their savings habits.

Washington's foray into PLS demonstrates just how effective the programs can be.

Among the six credit unions offering Save to Win, 1,242 members have opened accounts as of July 31, and the average account balance was $812.39 ( Anthem Aug. 19).

"Save to Win has been a great tool for us to help our members save money in a fun and unique way," Scott Prior, president/CEO of Connection CU, Silverdale, Wash., with $27 million in assets, told Anthem. "It's interesting the looks you get from people when you explain how it works, as if it almost sounds too good to be true."

Through the yearlong program, members open a 12-month share certificate with at least $25. For every $25 they save, they earn entry into monthly and annual drawings to win prizes that range from $50 to $5,000.

While not all Save to Win participants win prizes, they do keep all the money they've put away, plus interest, at the end of the year.

"I think the synopsis is, this works," said Jim Morrell, CEO of Peninsula Community FCU, Shelton, Wash., with $149 million in assets, who told Anthem he expects more credit unions to pick up the program in future months. "It encourages people to save and they don't have any chance of losing money."

"Not enough people are in the habit of saving," Morrell added. "This can help instill that habit."

States that have passed PLS legislation include Connecticut, Maryland, Indiana, Nebraska, North Carolina, Washington, Maine and Rhode Island, with New York's own law only awaiting the signature of Gov. Andrew Cuomo ( News Now July 9). ReadMore

CU CEO confidence continues upward trend

CU System
PLANO, Texas (8/21/14)--Strong financial conditions and expectations have driven credit union CEO confidence to its third quarterly increase, according to Catalyst Corporate FCU's survey.
 
Catalyst Corporate's Credit Union CEO Confidence Index reached its highest level in six years--32.94--in the second quarter. This follows a first-quarter number of 30.32.
 
The largest quarter-over-quarter increase was noted in the CEOs' expectations for their credit unions' financial condition section, which jumped to 45.64 from 39.16.
 
The Present Situation Index edged upward to 32.76 from 29.47, and the Expectations Index bumped up to 33.03 from 30.75 in the first quarter.
 
The percentage of CEOs expecting conditions to improve over the next six months increased to 45.64 from 39.16. Assessment of their institutions' current condition also rose to 37.61 from 34.78.
 
"I share the optimism of the survey results," said Mike Murphy, CEO, $141 million-asset Holyoke (Mass.) CU, in a statement. "Credit losses are low, and real estate values are increasing modestly. Loan demand is up, with the exception of mortgage refinance activity, and the cost of funds is stable. Improvements in employment prospects are sure to benefit my membership."
 
CEOs also reported a positive membership environment, giving members' current financial condition an increase of 3.8 points and 3.44 points in the expectations for future conditions category.
 
Loan growth expectations barely moved from the previous quarter, and share growth potential declined to 23.27 from 24.15.
 
Credit unions have seen much-needed growth in consumer loans, said Brian Turner, director/chief strategist, Catalyst Strategic Solutions. "Unfortunately, the industry's larger credit unions ($500 million and greater) continue to get the lion's share of that growth. Credit unions under $500 million in assets are collectively experiencing a 12% decline," he noted.
 
More than 200 credit union professionals responded to the July survey, which evaluates current financial condition of members; current financial condition of the credit union; anticipated financial condition of members in six months; anticipated financial condition of the credit union in six months; anticipated loan demand at the credit union in six months; and anticipated share deposit growth at the credit union in six months. ReadMore

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Sen. Merkley talks to CUs about raising MBL cap, keeping CU tax status

Washington
TIGARD, Ore. (8/21/14)--Sen. Jeff Merkley (D-Ore.) met with members of the Northwest Credit Union Association (NWCUA) last week, sharing several items on his legislative agenda that would benefit credit unions.

His agenda included pushing for an increase in member business lending cap and maintaining credit unions' tax status, according to the NWCUA's Anthem .

Merkley expressed his support Sen. Mark Udall's (D-Colo.) bill that would raise the member business lending cap to 27.5% of assets, up from the current 12.25% cap.
Click to view larger image Sen. Jeff Merkley (D-Ore.) meets with Oregon credit union leaders at the Northwest Credit Union Association's office in Tigard, Ore. (Northwest Credit Union Association Photo)

In terms of regulatory reform, Merkley said he realized that some of the proposals intended to appropriately regulate large banks that contributed to the 2008 financial collapse would "cast a shadow" on community credit unions.

"[It's a] continuing balancing act to authentically take on practices that may be unethical, without applying a regulatory burden where it doesn't belong," he said.

He also proclaimed himself a supporter of preserving the credit union tax status, and urged those in attendance, as well as the greater credit union community, to keep spreading the word about why the status is beneficial to the American consumer.

Merkley, a member of the Senate Appropriations and the Banking, Housing and Urban Affairs Committees, is one of 27 senators to write to the National Credit Union Administration expressing reservations about the agency's risk-based capital proposal.

Echoing the concerns of many credit unions in his state, Merkley said credit unions' current regulations in regard to holding capital served them well, but any changes might require credit unions to raise more capital, which they have a limited ability to do ( News Now June 26).

Merkley also said housing finance reform and cutting college costs would be priorities for him once the Senate is back in session.

Use the resource link for more information. ReadMore

CUNA supports NCUA appraisal rule, seeks technical changes

Washington
WASHINGTON (8/21/14)--The Credit Union National Association generally supports the National Credit Union Administration's proposed changes to appraisal requirements, according to a comment letter filed Tuesday.

The rule, which was proposed at the agency's June board meeting, would expand the current exemption in existing appraisal regulations to allow credit unions to refinance or modify a real estate-related loan in a declining housing market without having to obtain an additional appraisal.

CUNA first recommended changes to the NCUA's appraisal requirements in its 2013 regulatory review comment letter. The trade group's latest comment letter also offers additional suggestions for a few technical changes to the proposal.

"We request that NCUA's final rule clarify that the 'written estimate of market value,' required for exempt transactions, be satisfied by an estimated market value based on an automated valuation model," the letter reads. "This change would be consistent with the 2010 Federal Financial Institutions Examination Council's interagency appraisal and evaluation guidelines."

The NCUA's proposed rule would also eliminate a now duplicative requirement that federal credit unions make available, to any requesting member, a copy of the appraisal used in connection with that member's application for a loan secured by a first lien on a dwelling.

CUNA supports this part of the proposed rule as well, stating it will reduce regulatory burden for credit unions, a top priority for the association.

Use the resource link to access the letter. ReadMore
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