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IBloomberg RadioI interviews CUNA on U.S. debt

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WASHINGTON (2/1/11)--Credit Union National Association Chief Economist Bill Hampel lent his insight on the economy in an interview Monday on Bloomberg Radio's "The Hays Advantage" show, hosted by Kathleen Hays. The show discussed U.S. debt and deleveraging. Hampel and Hays talked about the outlook for the economy based on the condition of U.S. consumers. Consumer spending likely would strengthen this year because the household balance sheet, though still damaged, had improved considerably the past year, Hampel said in the interview. They also discussed the importance of the growth of exports to take up some of the slack from what until 2007 was a booming consumer sector. The Hays Advantage is a weekday program that brings indepth insight and analysis to important economic, market and policy issues.Hays has covered the U.S. economy and Federal Reserve for more than 20 years for various media outlets.

Southwest Bridge Corp. votes to merge with Ga. Corp.

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PLANO, Texas (2/1/11)--Members of Southwest Bridge Corporate followed the recommendation of its Member Advisory Council and voted last week to merge with Georgia Corporate FCU. Southwest Bridge announced 540 votes, or 39.1% of membership, were cast. Of those, 493, or 91.3% of members, voted in favor of the merger. Another 28 or 5.2% voted not to approve, and 19, or 3.5%, cast "undecided" votes. The results include both mail ballots and electronic ballots cast during a special member meeting held Jan. 20. More than 230 member credit unions attended the meeting via webinar. The vote as recommended by the Member Advisory Council was "not a commitment to recapitalization or continued use of Southwest Bridge Corporate's services," said an update from Southwest Bridge Corporate on its website. "The vote was an indication of support for the proposed business model." The Jan. 20 meeting presented the consolidation model and provided information about alternative models considered as well as the pros and cons of each model. The Business and Capital Plan for the merger is being reviewed by the National Credit Union Administration's Office of Corporate Credit Unions. The consolidated corporates' business plan requires perpetual contributed capital (PCC) to support the plan. Town Halls have been scheduled during March in 22 cities in eight states--Texas, Louisiana, Arkansas, New Mexico, Oregon, Washington, Oklahoma and Florida--to provide credit unions another venue to obtain information about the consolidation proposal, including the investment in PCC. The schedule is available at the link.

CUs loan volume drops--1st time since early 1980

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MADISON, Wis. (2/1/11)--Credit union loan portfolios nationwide collectively declined by 1% in 2010--the first time in roughly 30 years that their loans declined, according to a Credit Union National Association (CUNA) economist’s analysis of December’s monthly estimates of credit unions. “Full-year 2010 operating results at credit unions were a mixed bag,” Mike Schenk, CUNA vice president of economics and statistics, told News Now. “The 2010 results reflect some substantial operational improvements, but also reveal that credit unions have not fully recovered from the effects of the economic downturn.”
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Used-auto loans (4%), fixed-rate first mortgages (2%) and credit cards (2%) all showed increases in the year, but most other areas of loan portfolios eked out marginal gains or reflected outright declines, Schenk said. “Indeed, in the aggregate, credit union loan portfolios declined by 1% during 2010--the first year since 1980 that the portfolio shrunk,” he added. “This is a clear reflection of weak labor markets, a general nervousness on the part of many consumers and, as a consequence, members who are focused on paying down debt to manageable levels.” Credit union loans outstanding decreased 0.2% during December, the same decline as in November. Credit card loans led loan growth, increasing 1.5%, followed by fixed-rate mortgages, unsecured personal loans, and used-auto loans, which rose 1.0%, 0.7% and 0.3%, respectively. Meanwhile, home equity loans declined 0.1%, adjustable-rate mortgages dropped 1% and new-auto loans fell 1.8%. Credit union loans in December totaled $579.1 billion, compared with $587.4 billion in December 2009. Credit union savings balances grew 0.6% in December 2010, compared to a 0.5% decrease during November. Share drafts led savings growth, increasing 2.8%, followed by regular shares (0.9%) and money market accounts (0.3%). Individual retirement accounts rose 0.3%, while one-year certificates decreased by 0.3%. Credit union savings in December totaled $804 billion--or $34.6 billion more than the $769.4 billion in December 2009.
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“Credit union savings balances increased by a modest 4.5% in 2010, led by an 11% increase in regular shares and a 10% jump in money market accounts,” Schenk said. “Share drafts and individual retirement accounts grew by 6% and 4% respectively, but certificates--which account for one-third of total credit union savings--declined by 5% in the year. Members have clearly decided that with market interest rates stuck near 0% it makes more sense to pay down debt than to build savings balances.” The combination of declining loans and growth in savings account balances pushed the movement-wide loan-to-savings ratio down to 72% at the end of 2010--a significant decline from readings of 76% at year-end 2009 and 83% at the end of 2008, Schenk said. While a steep yield curve undoubtedly helped to buoy credit union earnings low loan growth and the resulting relatively fast growth in investment portfolios put pressure on credit union earnings during the year, he added. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained constant at 19%. Credit unions’ 60-plus-day loan delinquencies, which started the year at 1.9% and drifted down to 1.8% during most of the rest of the year, decreased slightly to 1.7% at the end of December. The trend in asset quality is positive, but the speed of the return to normalcy is reflecting the speed of the economic and labor market recoveries--essentially long, drawn-out affairs, Schenk said. The movement’s overall capital-to-asset ratio remained at 10% in December 2010. The total dollar amount of capital is $93 billion. The combination of more modest increases in savings balances, higher asset quality and firming earnings helped to keep the movement’s overall capital-to-asset ratio at 10%, Schenk said. “Looking forward, results will be greatly influenced by labor market improvements,” Schenk said. “The economy is likely to grow at a decent rate in 2011--3% or a bit more--but the big dislocations in labor markets and continued softness in real estate will virtually guarantee that our members’ cautious behavior seen in 2010 will be a defining characteristic of the recovery in 2011 as well. “That will mean that the Federal Reserve will be apt to stay on the sidelines in 2011. And while we expect loan growth to pick up during the year, the increase will be modest, will lag the increase in savings, and will moderate the beneficial effects of a steep yield curve,” he concluded.

NASCUS board changes announced

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ARLINGTON, Va. (2/1/11)--National Association of State Credit Union Supervisors (NASCUS) Chairman Tom Candon (Vt.) has announced changes to the NASCUS Board of Directors. Howard Pitkin, commissioner of the Connecticut Department of Banking, has been appointed to the board. Pitkin previously served on the board from 2003 to 2005 when he was the agency’s administrator of depository institutions. He has more than 30 years of experience as a state regulator. Pitkin is filling an unexpired one-year term, which will end in September. Also, the board elected Mary Hughes, Idaho Department of Finance’s Financial Institutions bureau chief, to serve as the group’s secretary/treasurer. Hughes follows Sue Cowan, who held the position as a board member when she most recently served as the director of the Wisconsin Office of Credit Unions.

Maine league provides first testimony of new session

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PORTLAND, Maine (2/1/11)--The Maine Credit Union League provided its first testimony of the new state legislative session Wednesday before a joint of the state Appropriations and Financial Affairs, and Insurance and Financial Services Committees. Quincy Hentzel, league director of governmental affairs, testified on behalf of Maine's credit unions in support of a portion of L.D. 100, the supplemental budget (Weekly Update Jan. 28). She focused his comment specifically to Part AA, which would eliminate a provision requiring the governor to appoint the Commissioner of Professional and Financial Regulation from among the superintendents of Financial Institutions, Consumer Credit Protection and Insurance or the director of the Office of Licensing and Regulation. "Prior to the change, which was enacted by the Legislature in 2008 to conserve financial resources, our state-chartered credit unions felt the system of appointing an independent commissioner worked well and believe it can work well moving forward," Hentzel testified. "The goal of the league and our state-chartered credit unions is to have a strong and prominent Department of Professional and Financial Regulation in order to foster and promote the industries in which that department oversees," she said. "Allowing the governor to appoint the position of commissioner will give strength not only to the position itself but to the entire department," she said. The league said the committees are expected to have a work session and vote on the bill today.

Michigans new tax plan doesnt affect CUs

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LANSING, Mich. (2/1/11)--Michigan Lt. Gov. Brian Calley told a meeting of credit union executives that Michigan Gov. Rick Snyder has no plans to change credit unions’ nonprofit status. Calley’s presentation clarified the impact of the governor’s recently released budget plan on credit unions, saying that the changes would not touch nonprofit tax exemptions (Michigan Monitor Jan.31). He spoke at the Michigan Council of Credit Union Executives’ Economic Summit in Ypsilanti. The Snyder administration’s budget seeks to eliminate the Michigan Business Tax and replace it with a 6% Michigan Corporate Income Tax. The only tax credit to remain will be the small-business tax credit. The proposed corporate income tax will function as a tax on profit, and should not affect not-for-profit credit unions, said the Michigan Credit Union League. The event also featured CenCorp President/CEO Bill Walby, Credit Union National Association Vice President of Economic and Statistics Mike Schenk and other presenters on risk management, capital markets and housing trends.

Oregon Senate introduces bill on board governance

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BEAVERTON, Ore. (2/1/11)--The Northwest Credit Union Association (NWCUA) has sponsored a bill going before the Oregon State Senate that would require credit union boards of directors to meet 10 times per year instead of the 12 times currently required by the Oregon State Credit Union Act. The proposal was based in part on a desire to provide flexibility for directors with increased requirements for educations and training, said Pam Leavitt, senior vice president of governmental affairs/public relations for the Northwest Credit Union Association. “With those requirements we want to be able to provide the flexibility to ensure we are able to attract professionals to credit union boards,” Leavitt said. “We think this bill will give credit unions more flexibility in scheduling meetings and having board members attend to their other additional commitments as well.” Senate Bill 177 also includes provisions that:
* Permit credit unions to appoint a chief credit officer in lieu of a credit committee; * Require credit union chief credit officers to approve loans or designate loan officers with authority to approve loans under conditions that chief credit officer prescribes; * Allow credit unions to make loans under certain conditions to their president/CEO or officer that has policymaking or credit approval authority; and * Specify how credit unions may invest funds not used in loans to members.
Leavitt told News Now the provisions are not necessarily related. She said the league reviews the Oregon Credit Union Act about every other year to ensure it meets the needs of its members. “These are changes we deem conceptually important for Oregon credit unions,” Leavitt said. The bill is scheduled to go to committee this week.

Wash. state outlines director emeritus rules

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OLYMPIA, Wash. (2/1/11)--Individuals with director emeritus status are not eligible for expense reimbursement from state-chartered credit unions for travel, training, or insurance benefits, the Washington State Department of Financial Institutions (DFI) ruled. The Washington Credit Union Act did not provide for director emeritus status. The ruling, outlined in a letter from Linda K. Jekel, director of credit unions for the State of Washington, approved the director emeritus title as an honorary, nonvoting position with limited attendance requirements. Jekel explained that a director emeritus is typically an honorary title and may provide experience-based advice to elected officials. Training should be limited to elected officials and regular committee members who have clear responsibilities and standards of care for their duties, Jekel said. Jekel cited an October 2003 opinion letter published by the National Credit Union Association in guiding her ruling. Northwest Credit Union Association (NWCUA) CEO John Annaloro issued the following statement regarding the ruling. “NWCUA appreciates the DFI’s recognition about the importance of keeping open credit unions’ options for recognition of distinguished board members, via the director emeritus title,” Annaloro said. “Additionally, the DFI ruling suggests that such positions should have defined expectations, and once established can sit and serve without the fiduciary liabilities and education expectations for regular members of the board of directors. “That clarification is very beneficial,” he continued. “DFI appears correct that merely bestowing a title on someone, however impressive that title may be, is not in itself sufficient reason to pay compensation or future expenses for the individual. It should also be noted that credit unions still have the option of retaining and compensating advisers and consultants for specific and business purposes, as well as to reimburse for legitimate expenses. In some manner, everyone potentially benefits by this clarification by the Washington State DFI.”

MCUL CEO testifies on foreclosures in state House

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LANSING, Mich. (2/1/11)--Michigan Credit Union League (MCUL) CEO David Adams last week called on the state legislature to reform foreclosure laws, improve Michigan's economic development programs and develop policies to encourage state residents to spend more responsibly.
Michigan Credit Union League CEO David Adams testified Wednesday about foreclosures before the Michigan House Banking and Financial Services Committee. (Photo provided by the Michigan Credit Union League)
Speaking before the House Banking and Financial Services Committee Wednesday, Adams suggested extending the 90-day foreclosure workout period and shortening the redemption period on the back end of the process. Currently, the redemption period ranges from six months to a year for occupied property (Michigan Monitor Jan. 31). "Michigan's overly burdensome foreclosure law is in need of reform," Adams said, urging committee members "to consider striking a balance between homeowners' interests and the financial risks borne by depository institutions in this very challenging economic climate." Legislature needs to strengthen the Michigan Economic Development Corp's Capital Access Program (CAP) by providing more funding, he said. CAP uses small amounts of public resources to generate financing and provide small businesses access to capital that might not otherwise be available. "State-endorsed risk mitigation programs can help stimulate increased lending by financial institutions," he added. State and local governments could also "work with the financial industry to use tax policy in a manner that develops incentives for smart financial behavior and penalizes reckless/immoral behavior," Adams told the committee. He cited homeowners who decide on a strategic default. "These homeowners can afford to pay, but walk away from their mortgage obligation, leaving lenders holding the debt," he said. Improving the economic climate begins with helping people learn more about finances, he said, noting that consumers in the nation have "become under-educated on basic finance" and have "borrowed recklessly and saved too little." He suggested moving toward a culture that encourages and rewards increased financial responsibility.

WOCCU golf tournament to aid global CU development

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MADISON, Wis. (2/1/11)--Golfers should plan to take their clubs when they attend this year’s World Credit Union Conference. World Council of Credit Unions’ (WOCCU) premier event, July 24-27 in Glasgow, will be immediately followed by a charity golf outing on one of Scotland’s legendary courses. Proceeds from the July 28 Worldwide Foundation for Credit Unions outing, a fundraiser presented by CO-OP Financial Services, will benefit the Global Women’s Leadership Network’s outreach efforts on behalf of worldwide credit union development. The proceeds from the Worldwide Foundation Golf Tournament will be used to “help alleviate poverty through the empowerment of women around the world.” said Kimberly Hester, CO-OP executive vice president of network services. The opportunity will pit golfers against the challenges of the Carrick Course on Loch Lomond, which ranks 63rd among the world’s top 100 courses according to www.top100golfcourses.co.uk. Designed by Canadian golf course designer Doug Carrick, the course offers a front nine holes over relatively flat terrain, known as “the lowlands,” with the back nine routed over higher terrain, “the highlands.” The course has views of both Loch Lomond and Ben Lomond from the 10th fairway. The tournament, the second to benefit the network, is not limited to network members and is open to both men and women. The $439 registration fee ($499 after May 20) includes transportation to and from select conference hotels, breakfast, lunch, green fees, prizes, a caddy and tip. All amounts are in U.S. dollars. For more information, use the link. For more information on the Global Women’s Leadership Network, use the link.