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Central California coast CUs weather downturn

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SAN LUIS OBISPO, Calif. (11/12/08)--Credit unions on California’s central coast are weathering an economic downturn in the area caused by a depressed housing market, troubled credit markets and mounting job losses. However, credit union presidents in the area said that avoiding risky loans such as subprime mortgages and adhering to conservative management practices have prepared credit unions to stay in good financial shape during the tough times (San Luis Obispo Tribune Nov. 8). While three of four credit unions surveyed in the area had net income declines year-to-date, credit unions serving San Luis Obispo County continue to experience strong deposit growth and remain well-capitalized--which prepares them for tough times, the newspaper said. Weaknesses in the broader economy have affected credit unions, Daniel Penrod, analyst for the California and Nevada Credit Union Leagues, told the paper. Even though credit unions did not offer risky loans, members may have gone elsewhere to obtain them, he added. In its 2008-2009 forecast, the Credit Union National Association (CUNA) predicted that credit quality would deteriorate this year because declining home prices and the mortgage credit crisis flowed over into the auto, credit card, student and business lending sectors, the paper said. CUNA also predicted an increase in delinquency rates to 1.08% from 0.93% in 2007, the article said. However, despite the U.S. economic slowdown, credit unions remain stable overall and should experience savings growth and loan growth this year and next year, CUNA said.

Maine CUs see car-loan slump as opportunity

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PORTLAND, Maine (11/12/08)--Maine has seen an exodus of national lenders willing to make auto loans. The state's auto dealers are turning to credit unions, among others, to help them through the auto-loan slump. Because Mainers who have fewer and more costly options for car loans, especially if their credit histories are stellar, credit unions are seeing opportunities, said Portland Press Herald (Nov. 9). One dealership, Lee Auto Malls, is relying on in-house financing and is forging new relationships with credit unions. According to owner Adam Lee, credit unions "are my new best friends. They want to loan money, they have members who buy cars, and I have a bunch of cars I want to sell." The article interviewed Louis Alexander, a postal worker who used a credit union loan to buy a used 2008 Jeep Grand Cherokee from an auto dealer in Portand. His credit was a little shaky but not poor. He could have received a loan from the dealer, but the monthly payment was too much, he said. His loan from ePort CU, Portland, is for $100 a month less than the dealer financing. The article noted that in today's lending environment, many banks see the auto loans business as more risky and less profitable, compared with commercial loans and home mortgages. Their departure coincides with GMAC's announcement that it would loan only to prime borrowers with credit scores above 700, said the article.

Tennessee CU works on gaining Hispanics trust

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KNOXVILLE, Tenn. (11/12/08)--At least one credit union in Knoxville, Tenn., must be doing something right to gain the trust of area Hispanics, who are notorious about their distrust of financial institutions. Holston Methodist FCU, a $21.8 million asset credit union, opened 191 accounts, mostly for Hispanic members, in the period from June 2007 to the end of October 2008, Stacy Johnson, Hispanic member development director with the credit union, told the Chattanooga Times/Free Press (Nov. 8). The increase of Hispanic clients has not been as dramatic at the area's banks, although the banks have seen some increases, said the article. Building trust between the community and financial institutions is a main priority for those working with Hispanics. "We want them to trust financial institutions so they will feel comfortable coming to our credit union and eventually to other institutions," Johnson told the newspaper. Hispanics have historically avoided traditional financial institutions because of losses in their home countries when banks closed. But because they carry around money, they are subject to robbers, burglaries and home invasions. The newspaper interviewed Ruben Torres outside the St. Andrews Center, where he went to ask about an assistance organization, La Paz de Dios. Instead, he got information about how to open an account at Holston Methodist FCU, which is housed in the same building as the center. He told the newspaper he's not sure about the institution because it's small and may disappear and he'd lose his money. But he said he would return to the credit union and make a decision on opening an account. He said he knows "it's the safest way to keep my money."

RMJ Foundation award winners announced

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SAN FRANCISCO (11/12/08)--San Francisco-based Mission SF FCU, Travis CU in Vacaville, Calif., and Timothy Allen of AltaOne FCU in Ridgecrest, Calif., received the 2008 Beacon Awards from the Richard Myles Johnson (RMJ) Foundation. RMJ’s Beacon Awards are the foundation’s highest honor.
The Golden 1 CU Leadership Scholars Program winners are, from left (front), Lynn Athens, Spectrum FCU, San Francisco; Christine Haley, Southern California Postal CU, Long Beach; Jon Hernandez, Mattel FCU, El Segundo, Calif.; and Gregg Stockdale, 1st Valley CU, San Bernardino, Calif. (Back), Michael Stremme, Palo Alto (Calif.) Community FCU; Adam Denbo, California Agribusiness CU, Buena Park; Stephen Serfozo, McClatchy Employees CU, Sacramento; and Eric Bruen, Desert Valleys FCU, Ridgecrest, Calif. (Photos provided by the California and Nevada Credit Union leagues)
2008 Beacon Award recipients, from left, with RMJ Foundation namesake, Richard Myles Johnson (in the middle)--Mission SF FCU’s Youth Credit Union Program representatives Jessica Leal and Celina Ramos Castro with Mission SF Community Financial Center Executive Director Margaret Libby; Travis CU Financial Education Officer Marlene Myers; and AltaOne FCU Community Education Specialist Timothy Allen.
The awards were presented at the fifth annual Beacon Awards Gala Reception, held Nov. 4 in San Francisco. The RMJ Foundation is the state foundation for credit unions in California and Nevada. The program is offered to small and mid-sized league-member credit unions in the two states. “This year was special because of all the varied and worthy entries,” said Marie Alonzo, chairman of the Beacon Awards nomination committee and board chairman of Arrowhead CU, San Bernardino, Calif. “The committee judges and the foundation would like to thank all the nominees for their work in providing quality financial education to young people.” The winner of the Beacon Award for a smaller organization was Mission SF FCU. The credit union was honored for its program, which targets youth from low-income and immigrant families, as well as those who use fringe financial outlets. It provides financial education and leadership development to its 450 youth members. The Beacon Award for a larger organization went to Travis CU for its multi-level financial literacy program, which reaches youth through financial literacy workshops at Travis Air Force Base and for its program on Cal Grants and Cash for College. The 2008 Beacon Award for an individual went to AltaOne Community FCU Education Specialist Timothy Allen. He developed a Substitute Teacher Program, where he volunteers as a substitute teacher and teaches the National Endowment for Financial Education curriculum, which meets state and national guidelines. He also presented the Mad City Money seminar to local high schools. Other finalists were: Bay FCU, Capitola, Calif.; L.A. (Calif.) Financial FCU; Meriwest CU, San Jose, Calif.; Sonoma County Grange CU, Santa Rosa, Calif.; and The Golden 1 CU, Sacramento, (organizational category), and Michelle Lawrence from American First CU, La Habra, Calif. (individual). The Beacon Award recognizes promising or exemplary financial education programs or projects that provide information to the broader credit union community and the general public. The 2008 recipients of the Leadership Scholars Program--offered by The Golden 1 Credit Union, in partnership with the RMJ Foundation--also were announced. Recipients included:
* Lynn Athens, CEO, Spectrum FCU, San Francisco; * Adam Denbo, CEO, California Agribusiness CU, Buena Park, Calif.; * Christine Haley, CEO, Southern California Postal CU, Long Beach, Calif.; * Jon Hernandez, CEO, Mattel FCU, El Segundo, Calif.; * Stephen Serfozo, CEO, McClatchy Employees CU, Sacramento; * Eric Bruen, CEO, Desert Valleys FCU, Ridgecrest, Calif.; * Gregg Stockdale, CEO, 1st Valley CU, San Bernardino, Calif.; and * Michael Stremme, CEO, Palo Alto Community FCU, Palo Alto, Calif.
The goal is to award scholarships each year to credit union staff with leadership potential. Applicants provide information on their tenure within the credit union industry, educational background, and how they plan to use the development their credit unions or careers.

Ohio CUs can help as payday-loan caps take effect

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DAYTON, Ohio (11/12/08)--Ohio might experience a shortage of payday lenders as a result of the passage of Issue 5--which reaffirms a new state regulation that limits the interest rate charged on cash advances. However, people needing short-term loans can turn to credit unions. According to Dayton Daily News (Nov.7), Issue 5 means that more payday lenders likely will close shop in the state, while consumers strapped for cash will still need short-term loans. One solution is credit unions that offer a stretch pay alternative to payday loans, the Ohio Credit Union League told the paper. Borrowers can get $250 or $500 at 18% annual interest rates through 120 credit union branches that offer stretch pay, said Becky Hart, Ohio Credit Union Foundation executive director. Hart said borrowers must pay off the balance every 30 days and be members of the credit union. If they have trouble paying off the debt, they can obtain budget counseling and personal financial education, Hart added. However, credit unions won't be the solution for everyone with cash problems. "We're not trying to be payday lenders, but we do know it's possible to offer small, short-term loans," Hart said. When the bill was signed into law this summer, 150 of the 1,600 payday lending locations in Ohio closed. After the election, Cashland announced it would close one-third of its 139 locations in Ohio. Advance America, another payday lender, may close if its small loans are unprofitable. Payday lenders charged 391% annual interest rates. The new law limits interest rates on the loans to 28%.

IWall St. JournalI Local CUs an option for borrowers

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NEW YORK (11/12/08)--The Wall St. Journal Tuesday noted credit unions as an option for borrowers seeking small business loans. The Journal told the story of Amy Loera, who wanted to expand her family’s Mexican restaurant. After being turned down by nine banks for loans, Loera received a $643,000 loan from Arrowhead CU, San Bernardino, Calif. Jon Parks, Arrowhead CU vice president, said Loera’s loan was approved because the family showed it had experience managing restaurants and proved its restaurants were successful. The new location is being planned as an affordable family restaurant, which will help it succeed in today’s economy, he added. The credit union looks for strong credit scores, but cash flow often trumps that, he said. Loera’s business had a credit score of 750, was debt-free, and the restaurant was able to predict how much money it would make in the next year. These factors didn’t matter to any of the banks--but it did matter to Arrowhead, Leora told the paper. Parks said his institution looks at the outlook of the overall industry when approving loans. Some businesses may do well despite a tough economy because they offer a niche, he added. Sandy Baruah, acting administrator of the Small Business Administration, told the paper that larger financial institutions rely on credit scores. Community institutions look at the business plan and make a decision based on their comfort level with the business plan and presentation, though credit scores still matter, Baruah said.

Mass. CUs lobby summit for inclusion in rescue plan

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BOSTON (11/12/08)--Massachusetts credit unions met with state House Speaker Sal DiMasi and other lawmakers to discuss concerns about the $700 billion rescue plan for the financial system. The rescue plan would pump billions of dollars into big banks, giving them financial room to devote funds to marketing and lowering interest rates for loans, while credit unions and community banks would be put at a competitive disadvantage, they told the Boston Herald (Nov. 11). Dan Egan, president of the Massachusetts Credit Union League, said "credit unions don't have access to that money. The larger banks can do what they want with that (federal) capital. It makes them stronger." Treasury Secretary Henry Paulson is earmarking billions of dollars for the nation's largest banks to push lending, even though some of them are not in peril, Egan told the newspaper. As a result, smaller banks and credit unions are in a "disadvantageous position" because they can't access the bailout funds, he said. DiMasi's "economic summit" meeting was with financial institutions and insurers. DiMasi told the Herald local financial leaders there made it clear that distribution of bailout funds should include smaller institutions, even those that are financially healthy.

CU System briefs (11/11/2008)

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* HARRISBURG, Pa. (11/12/08)--Lancaster (Pa.) Red Rose CU used a grant from the Pennsylvania Credit Union Foundation to open a Latino branch at Lancaster's Puerto Rican Cultural Center on Nov. 6 (Life is a Highway Nov. 7). The branch is part of a strategy of the Lancaster Consortium--a group of six credit unions--that has included opening two branches in Latino areas of Lancaster in the past two months. The consortium has invested over $250,000 in Lancaster's Latino community in the past three years, with support from credit unions, the National Credit Union Foundation, and the Pennsylvania foundation. From left are Abby Achey, CEO of the credit union, Lancaster Mayor Rick Gray, and Moe Rodriguez, director, Puerto Rican Cultural Center. (Photo provided by the Pennsylvania Credit Union Association) … * RICHMOND, Va. (11/12/08)--One of two suspects accused of a series of after-midnight shootings March 27 along Interstate 64 between Albemarle and Waynesboro, Va., was sentenced Monday to two years in prison. Slade Allen Woodson, 20, still has 15 felony counts pending against him in Albermarle. Woodson and Brandon Dawson, 16, had been drinking when they began shooting into cars, at property--including a building and car at DuPoint Community CU--and into houses. Two motorists were slightly injured. No one was inside the credit union at the time. Dawson was convicted as a juvenile and ordered to spent 180 days at the Blue Ridge Detention Center. Woodson received seven years each, with five years suspended, for two counts of shooting into an occupied building and three counts of shooting from a vehicle. He was also sentenced to five years--with three years suspended--for felony destruction of property. Woodson is to serve two years for all six counts concurrently (Richmond Times-Dispatch Nov. 11) … * SAN DIEGO (11/12/08)--Mission FCU has selected Debra Schwartz as president/CEO. Schwartz had been serving in the dual role as interim CEO and executive vice president since April, when former president/CEO Ron Martin retired (Post-Journal Nov. 9). Schwartz has more than 25 years of financial leadership experience. Prior to joining Mission Federal, Schwartz served in senior executive positions at First Future CU and as executive vice president of San Diego County CU … * BIRMINGHAM, Ala. (11/12/08)--More than 400 credit union professionals, guests and vendors attended the Alabama Credit Union League's fall Development Conference in Biloxi, Miss., to discuss issues facing credit unions today and in the future. Opening General Session speaker Albert Mensah spoke on "Every Day is an Opportunity," and the first day's Closing General Session speaker, Chuck Clay, partner in Brock, Clay, Calhoun & Rogers P.C., discussed "The Impact of the Election Results." The conference's closing General Session featured Pat Williams, senior vice president of the Orlando Magic, discussing "The Seven Principles of Leadership." League President/CEO Gary Wolter noted that "continuing education is the key to helping our credit unions weather the current economic storm and come out on top." …

Filene studies consumer debit-credit behavior

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MADISON, Wis. (11/12/08)--A new study from the Filene Research Institute aims to track transaction choices consumers make between using debit and credit and
information on consumer characteristics such as income and creditworthiness. “Debit vs. Credit: How People Choose to Pay,” by Victor Stango, University of California-Davis, and Jonathan Zinman, Dartmouth College, uses behavioral economics to try and understand how people make economic decisions. The study found that:
* Most people “single-home,” using nearly all debit or all credit for retail purchases; * Purchase characteristics, such as transaction size, influence their payment choices, but there is a clear propensity to use debit, which varies across consumers and is stable over time. It also is easy to classify people as “debit” or “credit” users; * While there are only small differences in income and total spending, debit users tend to be less creditworthy than credit users, and their credit cards have higher interest rates. * Persistent debit card use is not fully explained by the most important economic factor that should affect the costs of debit vs. credit--carrying a credit card balance; * Credit users pay less in account fees than debit users; and * Debit is a useful way to moderate overall spending.
“Credit unions looking for ways to better understand member behavior will find this report extremely useful,” said George Hofheimer, Filene chief research officer. “The findings give credit unions a lot to think about it terms of segmentation, member behavior, product development and the concept of consumer behaviors. “Across demographic segments, many consumers rely on only one payment choice. This creates an opportunity for credit unions to broaden their thinking about how to segment their membership,” he added.