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Alloya Corporate organizes selects officers

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WARRENVILLE, Ill. (10/5/11)--The newly chartered Alloya Corporate FCU held its first organizational meeting Thursday and Friday and selected its first officers. Elected were:
* Chairman, Amy Sink, senior vice president and chief financial officer of Teachers CU, South Bend, Ind.; * Vice chairman: John Fiore, president/CEO of Motorola Employees CU, Schaumburg, Ill.; * Treasurer, Leanne McGuinness, The Summit FCU, Rochester, N.Y.; and * Secretary, Curt Cecala, CEO, TCT FCU, Ballston Spa, N.Y.
Sink was vice chairman and Fiore was chairman of the corporate's Charter Advisory Group. A federal interlock regulation prevents Fiore from serving chairman while he is currently a director on the board of the Illinois Credit Union League, Fiore told News Now. The group will act as the interim board as the Warrenville, Ill.-based corporate begins operating on Oct. 24 and transfers operations from the Members United Bridge FCU. The interim group will serve until open elections can be held next June, Fiore said. It will determine governance issues such as how many board members to elect, and it already is searching for a CEO, he added. The corporate, which has offices in Albany, N.Y. will conduct its second board meeting on Oct. 27 in Albany so it can interact face-to-face with employees there and congratulate them. "Both groups' livelihoods were at stake [before approval of the charter] but all our management, staff, board and credit unions are working together" to make the corporate succeed, he said. "We're waiting to see what will happen out West with Western Bridge Corporate and whether there may be an opportunity for us there, and if we'll play a role," he told News Now. Other members of the interim board include (this is a corrected list from an earlier version):
* Lynne Kothe, president/CEO, North Memorial FCU, Minn.; * Floyd Rummel III, president/CEO, Dakota Territory FCU, Deadwood, S.D.; and * David Suvall, president/CEO, Rhode Island CU, Providence, R.I.
Alloya Corporate received approval on Sept. 22 from the National Credit Union Administration to form a new charter and merge the Members United Bridge operations into the new corporate (News Now Sept. 26). Alloya extended the period of its initial capital offering until Oct. 31. It was required to generate a minimum of $70 million in contributed capital as of Aug. 31 and had raised $71 million by that date (News Now Sept. 1). Members United Bridge is the bridge corporate entity that assumed the existing business of the Members United Corporate FCU after it was placed into conservatorship by NCUA, which formed the bridge corporate in early October 2010 (News Now Sept. 1).

Court Huron River real-estate lawsuit to proceed

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FORT MYERS, Fla. (10/5/11)--A federal court in Fort Myers, Fla., has denied a motion for summary judgment by the National Credit Union Administration (NCUA) to dismiss claims of at least 27 borrowers from nine states who invested in real estate in southwest Florida and whose loans were held by the now-defunct Michigan-based Huron River Area CU. The ruling, filed Friday in the U.S. District Court, Middle District of Florida, Fort Myers division, means the case, which stems from real estate investors' claims that they were victims of a get-rich-scheme, will proceed. Oral arguments were held Aug. 22 on the matter. NCUA, as liquidating agent for the credit union, had begun foreclosure proceedings on mortgages made by the borrowers, who invested in the undeveloped Cape Coral and Lehigh Acres projects in Florida, which went bust when the real estate market bottomed out. NCUA argued that the borrowers' claims are barred under the D'Oench Doctrine, in which federal common law and the Federal Credit Union Act bar certain lawsuits and recoveries related to the declining value of housings. Earlier the court had considered 29 arguments made by the borrowers and rejected those as being barred by the D'Oench Doctrine. In Friday's ruling, U.S. District Judge Charlene Edwards Honeywell indicated that the group of borrowers had raised seven new valid arguments about the credit union's relationship with Construction Loan Co. and Whitney Education Group, which conducts real estate investment seminars under the name "Millionaire University." Several of those arguments are not barred and four of the defenses "present genuine issues of material fact," said the ruling. In defending against the summary motion, the borrowers noted they are not asserting to a right to payment but merely are asserting to defeat NCUA's foreclosure action. They are suing for breach of contract and violation of the credit union's fiduciary duty, NCUA assumed control of the $360 million asset credit union in February 2007 and liquidated on Nov. 18, 2007. The credit union's member accounts were purchased by Detroit Edison CU of Detroit (News Now Dec. 2, 2007). The credit union is one of three credit unions--the others being Fort Collins, Colo.-based Norlarco CU and Denver-based New Horizons Community FCU--that provided the mortgage construction loans (News Now Sept. 16, 2009).

Two Michigan CUs to merge

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MONROE, Mich. (10/5/11)--St. Patrick CU, with $1.9 million in assets, Carleton, Mich., has closed and merged operations with $148 million asset Monroe County Community CU, Monroe, Mich. The two credit unions are merging under a joint operations agreement, according to Mike Newman, president/CEO of Monroe County Community CU, (The Monroe Evening News Oct. 1). The agreement has been approved by the National Credit Union Administration and the state regulator. St. Patrick’s had found it difficult to provide services to its members due to current economic conditions beyond its control, Newman said. St. Patrick’s, with 700 members, primarily served the parish of St. Patrick’s Catholic Church and Grade School in Carleton. Its last day of operations was Friday.

Streamline financial life CUNA expert tells IFox BusinessI

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MADISON, Wis. (10/5/11)--Readers of FoxBusiness.com received tips Monday from a Credit Union National Association (CUNA) personal finance expert on how to start their personal "fiscal year" in good shape. Monday's article, "Five Fixes for Your Own Fiscal Year," featured as one of its fixes the advice of Susan Tiffany, director of consumer periodicals at CUNA. Tiffany suggested that to streamline financial life, "Automate. Take the 'I'll get around to it' out of your financial vocabulary." Tiffany told readers that can mean direct deposit for a paycheck and a corresponding transfer to a saving s account. For bills that don't vary, such as mortgage or cable bills, consider automated online payments through a credit union or bank, she said. "It just frees you up so much," she said. Consumers can even set up recurring payments to cover minimums on credit card bills to avoid late fees. "You may always, at any time, make additional payments, but you'll never have a lost or late payment." For the rest of the tips and the full article, use the link.

Online Discovery speaker Make mortgage loan opportunities

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MADISON, Wis. (10/5/11)--Credit unions must create their own opportunities in the midst of a difficult mortgage lending environment, a CMG Mortgage Insurance Company (CMG MI) regional sales director, told an Online Discovery audience Tuesday. Online Discovery is CUNA Mutual Group’s free Web-based conference. The event attracted a national and international audience of more than 1,800 credit union and league staff. Mortgage lending is key to keeping members from defecting to banks over the long run, said Ira Oskowsky, who heads CMG MI’s eastern sales division. “When credit unions don’t offer mortgages, a bank can move in quickly to persuade members to transfer all their business,” Oskowsky said. “And if the credit union does offer mortgages, it needs to do it competitively, not just with pricing, but with products, ease of use, and by building a relationship with your local real estate agents. Credit unions’ share of the mortgage market had climbed to 10% but recently dropped back down to about 3%, according the American Credit Union Mortgage Association. “How can we climb back up? By making our own opportunities and not just relying passively on member loyalty to see us through,” Oskowksy said. Among the best practices Oskowsky recommended in the session:
* Put real estate lending at the center of the credit union’s strategy; * Create a team of loan officers to proactively approach members and real estate agents; * Expand product mix to include more first-time homebuyer programs, specialty products and portfolio options; * Think about how consumers shop for mortgages and homes, and adjust credit union schedules to include weekend hours and online mortgage applications; * Initiate new relationships--or enhance existing ones--with mortgage aggregators; and * Step up and accept the role of home finance expert in advise members.
Oskowsky asked if mortgage lending is a good option for credit unions in the current housing market. Mortgage loans will always have some of the highest margins compared to other investments, he said. “As for risk, if you mitigate it effectively, then mortgages actually represent the lowest risk of any investment,” he added. “Develop your strategy carefully, but recognize that mortgage lending, handled wisely, can be the best way to replenish liquidity, improve member relationships and win business away from banks. Becoming full-service credit unions is the future for our industry.” Watch for more coverage of the Online Discovery sessions in Thursday’s News Now. Also, see related story, "Data breaches now No. 1 fraud type--CUNA Mutual," in today's System News.

Data breaches now No. 1 fraud type--CUNA Mutual

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MADISON, Wis. (10/5/11)--Data breaches have taken over theft of physical assets as the No. 1 fraud type, with most data theft occurring in the financial services industry. To avoid crippling financial damage and loss of member trust, credit unions must implement measures to prevent breaches and have a solid mitigation plan if one occurs, said CUNA Mutual Group.
Click to view larger image Ken Otsuka, CUNA Mutual Group senior risk consultant, offered tips to credit unions to avoid financial, reputational and legal risks from the No. 1 type of fraud--data breaches--during Tuesday's Online Discovery Conference. (Photo provided by CUNA Mutual Group)
Speaking to Online Discovery attendees Tuesday, CUNA Mutual Senior Risk Consultant Ken Otsuka cited the 2010 Annual Global Fraud Report from Kroll, a risk management consulting firm. The information-rich financial services industry leads in data theft incidents among various companies, with 42% in 2010. That's an increase of 24% from 2009, the report indicated "Data breaches have quickly become a top concern," Otsuka said. "They are increasing in frequency and severity in terms of number of records breached and recovery costs." Breaches can involve electronic or paper data, and occur through many ways, including:
* Lost or stolen disks, laptops and other data-bearing devices; * Dishonest employees; * System intrusions by hackers; * Negligent disposal of data; and * Breaches at third-party vendors housing confidential personal member data.
A data breach can be devastating for a credit union, potentially even bankrupting it, Otsuka said. According to a 2010 Ponemon Institute study, the average cost to repair a compromised record was $214. For financial institutions, that cost was $353. But that's not the only cost of breaches. "A breach could shake members' confidence in the credit union's ability to protect their personal information, which could have a devastating effect on the credit union's reputation," Otsuka added. He also noted compliance and legal risks. "The federal Gramm-Leach-Bliley Act requires credit unions to protect and secure members' personal information. Penalties for non-compliance, whether at the state or federal level, can be severe. In addition, numerous well-publicized lawsuits have been brought by consumers against organizations that experienced data breaches." Otsuka urged attendees to implement proper technology, policies and procedures to protect confidential member data. He offered these tips:
* Protect confidential member data residing anywhere on the network, including workstation hard drives and servers. Encrypt data residing on networks, all mobile devices, and in data transmissions over the Internet and e-mail. * Install a data loss prevention solution to identify where confidential member data are located on the network and determine if employees inappropriately transmit data via e-mail or downloading data to external devices. * Lock down USB ports and CD ROM/DVD drives of workstation computers, based on employee job duties, to prevent downloading of confidential member data. * Implement an identity and access management solution that allows only authorized users to access the network and secures remote access for employees and vendors. * Have an end-point security solution to protect all entry points to the network, including firewalls, and software for viruses, malware and intrusion detection. * Protect corporate mobile devices by ensuring confidential member data are stored in encrypted
If all else fails, have an insurance backstop, Otsuka said. He provided an overview of CUNA Mutual Group's Cyber & Security Incident Package, which provides coverage for credit unions if there's a breach. Online Discovery is CUNA Mutual's Web-based virtual conference. The free event attracted more than 1,800 attendees. Watch for more coverage in Thursday's News Now. See related story, "Online Discovery speaker: Make mortgage loan opportunities," in today's System News.

MBL helps Jersey vet open chiropractic office

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BRIDGEWATER, N.J. (10/5/11)--Financial Resources FCU, Bridgewater, N.J., recently helped a veteran re-establish himself with its first Patriot Express loan, as part of the Small Business Administration’s (SBA) Patriot Express Pilot Loan Initiative program.
In closing its first Small Business Association Patriot Express loan, Financial Resources FCU, Bridgewater, N.J. helped Navy veteran Dr. Michael Eosso open a chiropractic office. From left, Marc Sovelove, senior vice president of lending for Financial Resources FCU congratulates Eosso, owner of Back in Health Chiropractic, Branchburg, N.J. (Photo provided by New Jersey Credit Union League)
Dr. Michael Eosso, a veteran of the U.S. Navy, will use his loan to start up a chiropractic office in Branchburg, N.J. told the New Jersey Credit Union League (The Daily Exchange Oct. 4) The program was created by the SBA to help veterans and members of the military community establish or expand small businesses. “This loan has allowed me to get office space and purchase necessary equipment,” Eosso said. “For that, I am grateful.” Marc S. Sovelove, senior vice president of lending at Financial Resources FCU and his member business lending team worked to make the Patriot Express lending process as accessible as possible to Eosso. “We look forward to making many more loans of this kind,” Sovelove told the league. Patriot Express loans can be used for start-up costs, equipment purchases, business-occupied real-estate purchases, working capital, expansion and more. Typically, Patriot Express loans feature the SBA’s lowest interest rates for business loans, generally 2.25% to 4.75% over prime, depending upon the size and maturity of the loan, said the league. The Credit Union National Association and credit unions are urging Congress to increase credit unions’ member business lending cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity for credit unions to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

Alabama CUs earnings total 68.3M in 2Q

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BIRMINGHAM, Ala. (10/5/11)--Alabama credit unions increased earnings 60% during the second quarter from the same period a year ago, according to National Credit Union Administration data. Aggregated net income for the credit unions was $68.3 million for the quarter ending June 30, compared with $42.6 million in the second quarter of 2010, (Birmingham Business Journal Sept. 30). The earnings increase was primarily attributable to credit unions putting aside less money for bad loans, according to Patrick La Pine, president and CEO of the League of Southeastern Credit Unions. Credit unions used the same strategy in the first quarter, La Pine said. Loan delinquencies for all loan types totaled $88.2 million in the second quarter, an 8.5% decrease from the $93.4 million reported in 2010. Net charge-offs dropped 24% to $24.5 million. APCO Employees CU reported $8.5 million in net income for the second quarter, a 49% improvement from the $5.7 million the second quarter of 2010. APCO Employees CEO Merrill Mann told the publication the credit union reserved less money to cover bad loans, but cost-controlling measures was the biggest reason for the earnings improvement. With about 90 employees and more than $2 billion in assets, APCO Employee CU operates very efficiently for its size, Mann said.

N.J. CUs ranked in top 50 in banking by iNJBIZi

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HIGHTSTOWN, N.J. (10/5/11)--New Jersey’s credit unions are well represented on NJBIZ magazine’s first Power 50 Banking list. The list was largely shaped by the battle over municipal deposits, which NJBIZ cited as the state’s biggest banking story of the year, said the New Jersey Credit Union League (NJCUL) (The Daily Exchange Oct. 4). “There was no bigger story in banking this year than the fight over municipal deposits,” the article said. “Once the sole domain of banks, legislation that the governor signed earlier this year has now opened this lucrative realm to credit unions, marking a big victory for them and a setback for bankers.” The bi-partisan municipal deposit reform legislation, signed into law on Aug. 18, allows credit unions to become eligible depositories for counties, municipalities and school boards (News Now Sept. 22). Among the credit union representatives on NJBIZ’s Power 50 Banking list:
* Paul Gentile, league president/CEO. Gentile was instrumental in garnering support among the league’s member credit unions, NJBIZ said. * Ray Del Nero, president/CEO of Merck Employees FCU, Rahway, and NJCUL board member. Merck had $1.65 billion in assets on June 30, an increase of more than 10% from the previous year. * Andrew L. Jaeger, president/CEO of Credit Union of New Jersey (CUNJ), Ewing, N.J., the state’s largest state-chartered credit union. With the potential influx of deposits after the municipal deposit legislation, CUNJ “can become even bigger,” NJBIZ said. * John Fenton, president/CEO Affinity FCU. Affinity, the largest credit union in New Jersey, is another beneficiary of the municipal deposit legislation, according to NJBIZ. With about $2 billion in assets as of June 30, Affinity saw 3.6% growth over last year.

CU System briefs (10/04/2011)

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* HARRISBURG, Pa. (10/5/11)--The Reading (Pa.) Museum has a new Moneyville Exhibit that includes a credit union where up and coming tellers can practice their cash-handling skills, said the Pennsylvania Credit Union Association (Life is a Highway Oct. 4). Each part of the exhibit, which kicked off Friday, has a hands-on component geared toward enhancing math skills and promoting financial literacy in a fun environment. The exhibit is sponsored by CTCE FCU, which provided a resource center with free financial education materials for parents and community groups. On hand for the kickoff were CTCE CEO Glenn Pottieger, the credit union's board, Sammy the Savings Squirrel and Pennsylvania Credit Union Foundation Executive Director Joe Wambach, shown here with a parent at the exhibit as a student plays teller. (Photo provided by the Pennsylvania Credit Union Association) …