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New small business CUSO reaches profitability

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TALLAHASSEE, Fla. (1/4/08)--Member Business Solutions (MBS), a credit union service organization owned by Southeast Corporate FCU and Georgia Central CU, announced that it has underwritten more than $350 million in credit union small business loans in its first three years. “The best loans for credit unions tend to be for $500,000 or less, not multi-million dollar development loans,” said Jim Gallagher, MBS president. “We’ve encouraged our credit union partners to focus on small-business members, rather than looking elsewhere to make bigger loans.” Small businesses continue to thrive, according to an Aite Group survey. About 69% of large banks surveyed said they consider small businesses important to their success, and 80% of community bankers have placed a stronger emphasis on small businesses than they did three years ago. “Credit unions have the edge if they stick to what has made them unique all long--lending to people they know,” Gallagher said. MBS serves 45 credit union partners in 12 states.

Maintaining loan growth will be the challenge for 2008

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MADISON, Wis. (1/4/08)--Credit unions during November saw significant pickups in growth of credit card lending, delinquencies, and mortgage lending, and will face the issue of how to maintain their loan growth during 2008.
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Savings growth in credit unions outpaced their loan growth during November, according to the Monthly Credit Union Estimates from the Credit Union National Association (CUNA). The overall loan-to-savings ratio--83.6%--was down a percentage point from October's 84.6%. Credit union loans totaled $545.8 billion in November 2007, compared with $508.9 billion for the same period in 2006. Loans outstanding increased 0.4% from October and grew 7.3% over the past 12 months.
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Leading the monthly loan growth were credit cards--up 2.2% in November. "This is significantly above the national average," said Steve Rick, CUNA senior economist, told News Now. November's growth brings the year-to-year growth for credit cards to 15.2%, "which is really strong, when compared with last year's year-to-year growth of 11.1%." While credit cards were the fastest-growing loans, they are also the most worrisome. Borrowers are piling up unsecured debt, which can be dangerous to both the lender and the borrower, Rick said. He attributed the higher card growth to falling home prices' impact on home equity loan growth, which fell -0.3% for the month and are down 13.3% for year-to-year growth. Overall delinquencies are up 20 basis points--to 0.89% growth in November from 0.69% in June. "Delinquencies are up across the board," Rick said, citing rises in card, mortgage and business lending delinquencies. Business lending delinquencies grew 1.66% in September, compared with 0.5% at year-end in December 2006. For the same period, mortgage delinquencies grew to 0.57% from 0.34%. "The good news is that credit unions have extremely low delinquencies, but they are trending upward," Rick said. Credit card delinquency growth rose to 1.20% from 1.05% in November, and December likely will be worse. CUNA economists are forecasting the delinquency growth rate to be 1% this year, which is still very low, he said. Other good news: mortgage lending in credit unions is still strong, with a year-to-year growth at 14.3% for fixed-rate mortgages and at 11.1% for adjustable-rate mortgages. "Mortgages are for large amounts and there's not a lot of risk attached because credit unions aren't seeing the problems associated with subprime mortgages," he added. As for auto lending, "the new-auto lending picture is difficult, with negative growth. The market will be in used-auto loans. The slowdown in the new-auto market means dealers will offer incentive financing and will be very competitive," Rick said. More people are buying used cars likely because of the "wealth effect" from falling home prices. "Dealers will get incentives to move the new autos, which will be tough for credit unions. The used-auto lending is the auto loan market for 2008." The big concern for 2008 for credit unions will be the slowing loan growth and how to maintain their loan growth. "We're forecasting loan growth at 5% this year and savings growth at 9%, Rick told News Now. Credit unions can mitigate the loan growth problem by being more aggressive in their lending. "Banks are tightening their lending standards so this is an opportunity for credit unions. They can be more aggressive and make more loans," Rick said. Credit union savings balances grew 1.6% in November and 6.3% the past 12 months. Savings totaled $652.9 billion in November, compared with $614.3 billion in November 2006. The liquidity ratio was 18% during November, up 1.4 percentage points from October. While the movement's overall capital-to-asset ratio dropped slightly to 11.5% in November from 11.6% in October, the total dollar amount of capital increased to $89.2 billion from $83.8 billion a year ago.

CU System briefs (01/03/2008)

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* FORT BRAGG, N.C. (1/4/08)--A car crashed into the rear entrance of Fort Bragg FCU Wednesday afternoon, destroying the $268.8 million asset credit union's two outer glass doors. An unidentified 52-year-old woman drove the car, said an emergency communications report, which attributed the crash to a medical condition (The Fayetteville Observer Jan. 3). The car had extensive front-end damage and was towed from the scene … * NAPERVILLE, Ill. (1/4/08)--During 2007, the Illinois Credit Union Foundation awarded nearly $220,000 in scholarships and grants. Small Credit Union Development grants, totaling $96,220, were awarded to 51 credit unions; $132,000 in community service grants went to 11 credit unions; marketing and business development grants totaling $61,780 went to 20 credit unions; and one credit union--Cornerstone CU, Freeport-- received a $10,000 Financial Independence and Revitalization Effort grant. For 2008, grant application review deadlines will be March 31, July 31, and Oct. 31, with the main scholarship application due March 31. Downloadable grant request forms are available via the Illinois Credit Union League's website … * RANCHO CUCAMONGA, Calif. (1/4/08)--Dianne Harding, retired CEO of Pomona Valley CU--now Inland Empire CU--Pomona, Calif., has received the "Unsung Hero" award from the California Credit Union League's Historical Preservation Committee. She was the credit union's CEO from 1972 until her retirement in 2004. Harding served at various levels with the league, including member of its policy making body, as director of the California League Services Corp., and member of various committees. She also was a trustee of what is now the Richard Myles Johnson Foundation. Harding was active in two credit union chapters. In 1984, she was named Mt. Baldy Chapter's Volunteer of the Year. The unsung hero award honors individuals with at least 20 years of service … * HARAHAN, La. (1/4/08)--The Louisiana Credit Union League has hired Jim Phillips as its sales/marketing consultant for credit unions in the Baton Rouge, Lafayette and Lake Charles areas, announced the league Thursday. Phillips previously was employed by the Louisiana Corporate CU. Phillips also was employed for more than 20 years by CUNA Mutual Group, the league said … * HARRISBURG, Pa. (1/4/08)--Harrisburg-based Belco Community CU teamed up with Harrisburg and Hanover Hospitals to welcome the area's first baby of the New Year, according to the Pennsylvania Credit Union Association (Life is a Highway Jan. 3). The $257.7 million asset credit union provided each hospital with a certificate for a $100 savings bond, a new baby account, and a bag full of baby essentials and BELCO-related goodies for the family …

Jeffco CU restores online banking site

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LAKEWOOD, Colo. (1/4/08)--Jeffco CU has restored its online banking site after shutting it down last week to protect members from a phishing scam. No member data were compromised, according to Paula Felten, Jeffco vice president of marketing. Scammers sent e-mails to Jeffco members telling them that their accounts had been suspended. The members were told to use a link, which led them to a website where they could enter their personal account information. The fake site looked similar to Jeffco CU’s main site (News Now Jan. 2). The credit union shut down its online banking site because it “wasn’t sure what members were giving out” to the scammers, Felten said. Jeffco CU has $145 million in assets.

Pennsylvania court to hear FOM arguments today

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HARRISBURG, Pa. (1/4/08)--Several credit unions entities, including the Credit Union National Association (CUNA), will be in Harrisburg, Pa., today for a federal court hearing on the banking industry’s challenge to the National Credit Union Administration’s (NCUA) field-of-membership decision involving three Pennsylvania credit unions. The case is before the U.S. District Court for the Middle District of Pennsylvania. The arguments on the credit union side of the case will be made by the U.S. Justice Department on behalf of NCUA, and by Paul Lambert, counsel from the Bingham McCutcheon law firm. Lambert is representing CUNA, the Pennsylvania Credit Union Association (PCUA), the three affected credit unions and the National Association of Federal Credit Unions, Eric Richard, CUNA general counsel, told News Now. “The credit union parties, as well as NCUA, have prepared an extremely strong case,” said Rick Wargo, PCUA executive vice president/general counsel. “We look forward to making the presentation and having the opportunity to address any questions that the judge may have.” A recent motion by banking plaintiffs seeks a summary judgment against the NCUA. That action would invalidate the agency's decision to grant community charters to the three Pennsylvania credit unions: Members 1st FCU, New Cumberland FCU, and Americhoice FCU (News Now Dec. 5). The first of the community charters was approved by the NCUA on Aril 24, 2003, Richard said. The bankers' case was filed in 2007 by the American Bankers Association and a group calling itself the Credit Union Task Force of Pennsylvania. The litigation challenges NCUA's determination that a six-county area in south central Pennsylvania constitutes a "well-defined local community" under the Federal Credit Union Act.

Ohios struggling economy impacted CUs during third quarter

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DUBLIN, Ohio (1/4/08)--Ohio credit unions were affected by the state’s troubled economy, but weren’t hit hard by the subprime mortgage crisis, according to data from the Ohio Credit Union League’s 2007 Third Quarter Performance Report. Mortgage delinquencies remained at 0.83%. Ohio credit unions added capital, and their net worth increased 12.6%, said the league (eLumination Newsletter Jan. 2). Share draft penetration rose 6.9%, and non-interest income increased to 19.1%. Foreclosures, unemployment and a sluggish auto industry impacted credit unions according to Dave Shoup, league director of regulatory advocacy and compliance. Total income growth slowed to 7.3% annually, and membership fell 2.8% over the past 12 months. Loan demand was weak 75.1%, compared with 82.6% nationally. Mergers and liquidations slowed to nine in the third quarter, from 35 in 2006. Mortgage originations grew 11.5%.

Dakota CUs looking at small-dollar loans

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SIOUX FALLS, S.D. (1/4/08)--Three Sioux Falls credit unions are emphasizing small-dollar loans to compete against payday lenders. In light of the prevalence of payday loans, credit unions need to market small-dollar short-term loans--which have traditionally been an earmark of credit unions--and also educate underserved segments of the population about the loans, said Tony Richards, president/CEO of the Mid-America Credit Union Association, the association for credit unions in North Dakota and South Dakota (Sioux Falls Business Journal Jan. 2). The $107.3 million asset Sioux Falls FCU informs it members about the availability of small-dollar loans, but needs to increase its education of nonmembers, Kevin Kavanaugh, vice president of marketing at Sioux Falls FCU, told the newspaper. While discussing ways to better reach nonmembers, Kavanaugh said it’s difficult to compete with payday lending vendors who seem to be on almost every street corner, because convenience is paramount to many consumers. In the past 18 months more members of Sioux Empire FCU--a $53.7 million asset institution--have obtained small-dollar loans and lines of credit, according to Tim Ingalls, Sioux Empire vice president. Although the amount members can borrow is largely determined by their needs, the credit union requires a $75 minimum monthly repayment term. Also, if Sioux Empire members successfully complete the Sioux Empire Housing Partnership’s Credit When Credit Is Due program, which teaches finance and credit basics, they are refunded the cost of the class. The $26.3 million asset Sioux Falls Bell FCU recently launched its Fresh Start program, which allows members to recover from their financial missteps. The program is a better way of handling finances for young and old members in the long term, as opposed to a quick fix such as a payday loan, said Sioux Falls Bell President Barb Erb.