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CU System Briefs (11/18/2013)

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  • HARRISBURG, Pa. (11/18/13)--The Pennsylvania Credit Union Association and its charity arm were honored Thursday by state legislators for supporting an organization called Junior Achievement (Life is a Highway Nov. 15). Sen. Rob Teplitz (D-15), and Reps. Mauree Gingrich (R-101) and Sue Helm (R-104) gave the Pennsylvania Credit Union Foundation three legislative citations in a ceremony at the Giant Center in Hershey, Pa. Elizabeth Ackerman, a coordinator for Junior Achievement, also presented the PCUF with a Donor of the Year Award. On behalf of PCUA, PCUF and state credit unions, foundation Executive Director Joe Wambach (center) accepted the honors. He is shown with Teplitz (left) and Gingrich (right). Wambach praised state credit unions' employees for volunteering thousands of hours to Junior Achievement volunteer teaching programs and its Men's and Women's Symposium. Since 2003, the foundation has given more than $100,000 to Junior Achievement, and individual credit unions have contributed tens of thousands of dollars. (Photo provided by the Pennsylvania Credit Union Association) ...
  • PITTSBURGH, Pa. (11/18/13)--A 59-year old woman was sentenced Thursday by a federal judge to 10 months in prison followed by three years of probation after she pleaded guilty to embezzling more than $100,000 from a church-affiliated credit union (WFMJ.com Nov. 14). Victoria Rozanski, of Elwood City, Pa., admitted in July that she siphoned funds from Holy Redeemer Parish FCU between 2003 and 2009. The judge ordered her to pay back $118,000 to Freedom United FCU, which absorbed Holy Redeemer--an institution that was based out of a 10-square foot room and only open for three hours a week (News Now May 3). When it was acquired by Freedom United FCU last year, Holy Redeemer had 234 members and nearly $630,000 in assets. Freedom United, based in Rochester, Pa., has $49.1 million in assets ...

CUNA Sets Record Straight On CU vs. Bank Exec Compensation

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WASHINGTON (11/18/13)--The Credit National Association is setting the record straight on the issue of credit union CEO vs. bank CEO compensation after the American Banker cited a statistic that is "misleading," said CUNA.

A Nov. 13 item in the Banker titled "Banks Trail Credit Unions In Exec Pay, Loan Growth, Political Clout" cited an enetrix study that claimed the median base salary of credit union CEOs is higher than that of bank CEOs.  (enetrix is a division of Gallup, Inc.)

The Banker failed to note one of the study's key points on page 14: that payout from bonuses and stock options, which are far more valuable than base salary, are not available to credit union CEOs, since they are member-owned cooperatives.

The American Banker claim is "very misleading," said Paul Gentile, CUNA's executive vice president of strategic communications and engagement. He noted the comparisons in the section of the study include only base salary--not long-term incentives provided to bank CEOs such as yearly bonuses, stock grants and stock options.

"When credit union CEOs end their careers, they have nothing to cash in because the members own the whole credit union," said CUNA Chief Economist Bill Hampel.  He pointed out that with the increased scrutiny given to CEO salaries, banks have moved more toward other forms of raising compensation levels rather than base salary: Historically, on a like-size basis, CUNA compensation studies have consistently shown credit union CEO compensation is reasonable. 
 
The studies also consistently have shown, Hampel noted, that bank CEO compensation is substantially higher than credit union compensation. More recently, he said, this has changed for some size groups--not because credit union compensation has increased substantially, but apparently because bank non-stock compensation has declined dramatically. CUNA's current comparative data shows a nearly 25% decline in bank non-stock compensation compared to the 2006 norm. 
 
"We believe it is incredibly unlikely that total bank CEO compensation--including stock--has declined by 25% over the past five years.  It simply defies logic," Hampel said.
 
Instead, he added, what has likely happened is that in the wake of the financial crisis and Dodd-Frank Act reforms, bank CEO base pay has become a substantially less prevalent component of total bank CEO compensation while other forms of compensation such as restricted stock grants have become a substantially more prevalent component.  Favorable accounting and income tax rules for restricted stock has helped to fuel this trend. 
 
Hampel noted, "If bank CEO compensation is similar to other small corporations, then cash compensation represents only 40% of the total, and a bank CEO earning $250K in base pay--typical in the $500 million to $1 billion asset range--would have total compensation of over $600k--well above the credit union average in every asset-size category we track."

Hampel charged that the American Banker article "magnifies and gives further credence to the false impression it has created by quoting a banker who claims that, 'Credit unions are paying their folks more than two times what I pay mine.'" However, the enetrix study also shows that, across all asset classes, credit union median total compensation for most key senior executives is substantially lower than bank median total compensation. 
 
However, in today's complex financial environment, compensation for CEOs must be sufficient to attract talent needed to manage financial institutions that in many cases offer a complete menu of financial services and act as stewards for their member savings, Hampel said.

Express CU Teams With Seattle On Fin. Empowerment Centers

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SEATTLE (11/18/13)--Express CU, Seattle, is participating in a new program designed to alleviate poverty in Seattle by helping vulnerable consumers gain fundamental financial skills.
 
A $1.8 million grant from The Paul G. Allen Family Foundation will help launch six Financial Empowerment Centers in 2014, including a full-time central hub and five satellite locations throughout the Seattle. At the centers, clients will get free one-on-one financial coaching and lessons in financial know-how, such as paying down debt, increasing savings and improving credit.
 
Express CU, with $10 million in assets, will provide tellers for the empowerment centers, Sharon Hall, Express CU president/CEO told News Now Friday. The credit unions has provided community teller services to various city of Seattle social service agencies since 2009, she said.
 
The city of Seattle, which was the direct recipient of the grant from the Paul G. Allen Foundation, asked Express CU to provide teller services for the program, Hall said.
 
Low-income consumers will use the centers to build credit and clean up their financial histories, Hall said. "While they are there, they can have access to our products and services," Hall said. "We have products that help them build their credit, and we have savings accounts and unbundled checking accounts and other types of services that reduce financial barriers."
 
Express will be the only financial institution at the Seattle Financial Empowerment Center hub and satellite offices, Hall said.
 
The credit union will provide a full-time teller at the financial empowerment center hub and mobile tellers at the satellite centers.
 
Participation in the program reflects Express CU's commitment to serving the low-income members of the community, Hall said. Express CU is a community development financial institute and a low-income designated credit union--which means more than 50% of its membership is designated low income.
 
In October, Express CU received a Technical Assistance grant from the U.S. Treasury Department's Community Development Financial Institutions Fund. Technical Assistance awards can be used for purchasing equipment, paying salaries and benefits, and training staff and boards.
 
"We are fully committed with the support of the community," Hall said. "The community wants this to happen."

CUs Provide Typhoon Relief, State Warns Of Charity Scammers

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MADISON, Wis. (11/18/13)--Credit unions and state leagues are providing disaster relief to victims in the Philippines impacted by Typhoon Haiyan, one of the most powerful storms ever recorded.  However, one state is warning that scammers are taking advantage of the kindness of people by setting up fake charities.

While relief organizations are ramping up efforts to raise funds for victims, the Wisconsin Department of Financial Institutions warned  citizens about scams. "In times of such a tragedy, legitimate relief organizations aren't the only ones that ask for donations," warned the DFI, which regulates state-chartered credit unions and banks.

"Unfortunately, scammers and charlatans are quick to prey on the good intentions of potential donors," said DFI Secretary Peter Bildsten. He encouraged Wisconsinites "to make sure their donations are being made to a reputable charity."

Credit unions and leagues are stepping up with donations to the movement's international charity arm, the Worldwide Foundation for Credit Unions for its International Disaster Relief Fund. The World Council of Credit Unions, which says 1,320 credit unions serve roughly 3.2 million members in the Philippines, is in contact with authorities there to determine how best to assist the victims.  It worked closely with Philippine credit unions from 2007 to 2010 in a partnership that focused on model credit union building and institutional branding.

The Northwest Credit Union Foundation has committed $5,000 to the international relief effort, said the Northwest Credit Union Association (Anthem Nov. 14). NWCUF Executive Director Kim Vu urged credit unions in the Northwest to donate.  "Credit unions here and in the Philippines have had a special relationship for years, including a partnership with the Washington Credit Union League in the mid-2000s," she said.

The Cornerstone Credit Union Foundation Board of Trustees approved a $3,500 donation to the relief fund, said the Cornerstone Credit Union League (Leaguer Nov. 12). "Our hearts go out to everyone who has been impacted by typhoon Haiyan," said Cornerstone foundation Executive Director Courtney Moran. "They have a long road to recovery ahead of them, and just as the credit union community has come to our aid when hurricanes, fires, flooding and tornadoes have devastated our region, we are here to help our credit union family in the Philippines."

The Pennsylvania Credit Union Association and Pacul Services, Inc., each pledged $1,000 donations, and the Pennsylvania Credit Union Foundation will make a $2,000 donation, as well (Life is a Highway  Nov. 13). "It is heartbreaking to see this massive devastation and the Philippine citizens suffering from this terrible disaster," said Jim McCormack, in one of his last acts before retiring as PCUA president/CEO. "The credit union community is known for its People Helping People philosophy and contributions are needed to provide resources to help credit union members and employees rebuild their lives."

Credit unions also are finding ways to enlist their community's help in assisting the victims.  For example, Redwood CU, Santa Rosa, Calif., is accepting contributions to the American Red Cross' International Relief Fund.  All 18 RCU branch locations are designated as collection sites for donations from members and nonmembers in the community.  The collection drive "is our way of offering assistance and responding to the requests of members who would like to help," said Brett Martinez, RCU president/CEO.

Typhoon Haiyan, which struck Nov. 8, killed at least 3,633, although death estimates are expected to be as high as 10,000. It injured at least 12,487, with 1,179 people listed missing (CNN.com Nov. 15). Nine million people were impacted in 44 provinces, 536 municipalities and 55 cities. Hardest-hit was Tacloban City, the capital of the Leyte province. Roughly two million people are displaced. Of those, 400,000 are in shelters.

To support the international credit union disaster relief fund and rebuilding of Philippine credit unions, donations may be sent via check, credit card or wire to:

Worldwide Foundation for Credit Unions Inc.
5710 Mineral Point Road
Madison, WI 53705, USA.

Individuals may donate with a credit card online by using the link. For additional information, contact: Calyn Ostrowski, foundation director at 608- 395-2056 or e-mail  costrowski@woccu.org. Contributors should indicate the donation is designated for Philippine Disaster Relief Fund.

Data Breach At Card Processor Impacts CU In Idaho

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SANDPOINT, Idaho. (11/18/13)--Computer hackers appeared to have breached the database of a large retailer's third-party card processor, stealing card information from at least one Northwest credit union and compromising member accounts.
 
Horizons FCU, Spokane Valley, Wash., was notified of the breach by its card processor, Vantiv, about 10 days ago. Since then more than 100 members have reported fraudulent charges, Horizon CU President/CEO Jeff Adams told News Now Friday.

The retailer has not been identified, Adams said.
 
The cybercriminals have "been moving from state to state and making charges at major retailers," Adams said.  
 
The credit union has been blocking and reissuing cards on a case-by-case basis, Adams said.
 
Other financial institutions are almost certainly affected, Adams said. "We know that there are multiple financials, credit unions and other FIs, that are affected," he said, adding that the card batch from a large retailer "is typically credit unions, banks, the whole gamut of financial service providers."
 
Police in Idaho, where Horizon CU has four branches, have also reported instances of credit card fraud (Bonner County Daily Bee Nov. 15). Sandpoint (Idaho) Police Department Chief Corey Coon said it's unclear if members and customers of other credit unions and banks in the area are being affected because those institutions may not require a police report case number when fraud is reported, but handle them through a security company.
 
Coon recommended that credit card holders carefully watch their account statements for fraudulent charges and report any suspicious activity.

CUNA Lending Council White Paper Discusses Merchant Lending

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MADISON, Wis. (11/18/13)--With merchants and consumers mainly relying on credit cards with terms credit unions can easily beat, the market opportunity for indirect merchant lending is plentiful, according to a new white paper from the CUNA Lending Council.
 
Through indirect merchant lending, credit unions can provide members with loans when and where they need them, expand their lending portfolios and acquire new members, according to the white paper, "Indirect Loan Opportunities."
 
From an operations perspective, the components of merchant lending are familiar to credit unions. Back-end processing is the same as with unsecured personal loans. Members or potential members will still be price and payment sensitive to varying degrees. A different kind of risk does exist when acquiring loans from a merchant; credit unions replicate much of the risk protection practices from indirect auto lending, the paper said.
 
Merchant lending is unique in several ways:
  • The loans are often small. While big-ticket items aren't out of the norm, more partners deal in smaller dollar products. As a result, programs plan for a higher volume of smaller loans or for merchant lending to be a smaller part of their lending portfolio.
  • The merchants also tend to be smaller and potentially less stable. This increases the need for good due diligence, but don't overdo it, the paper advised. The risk is ultimately with the person making the payments.
  • The competition isn't another lender offering similar terms. It's usually some kind of credit card. This significantly reduces the competitive rate environment.
  • Credit unions have an opportunity to educate--and even "wow"--potential partners. Retail stores and service providers are often unaware of how much a credit union can help their business and their customers. They might not offer financing. They might dislike the financing they do offer and wish they had an alternative, the report said.
 To download the whitepaper, use the link.

Harborstone, State Rep. Take Advocacy On The Road

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TACOMA, Wash. (11/18/13)--In Tacoma, Wash., Harborstone CU has set out to prove that credit unions must stand up for themselves so they don't lose their tax status and go out of business. How? By taking advocacy on the road, with a state lawmaker.
 

During October and November, the credit union's Governmental Affairs Roadshow stopped at every one of Harborstone's 17 branches in Washington. Its goal: Make sure that every employee, at every branch, understands the structure, value and impact of the credit union movement (Anthem Recap Nov. 15).
 
"We believe that every credit union employee should be able to fully articulate the importance of credit unions, understand the reasons why credit unions have an income tax exemption, and expertly explain these ideas to our membership," Vicky Nelson, Harborstone's business sales and services manager, told the Northwest Credit Union Association.
 
She and Harborstone President/CEO Phil Jones developed the idea to motivate employees to become advocates.
 
State Rep. Steve Kirby (D-29), who is chairman of the House Business and Financial Services Committee and a business sales and service specialist at Harborstone, agreed to talk to employees about his role in the legislature and how he supports credit unions.
 
Nelson also recruited NWCUA's vice president for legislative affairs, Mark Minickiello, to discuss "the big picture" of governmental affairs and the grassroots efforts of the national "Don't Tax My Credit Union" campaign.
 
During the 30-minute Roadshows, Nelson addresses:

Washington State Rep. Steve Kirby, who is also a business sales and service specialist at Harborstone CU, Tacoma, Wash., and Vicky Nelson, Harborstone's business sales and services manager, head out for a Governmental Affairs Roadshow that stops at all 17 branches of the credit union to make sure every employee understands the structure, value and impact of the credit union movement. (Photo provided by the Northwest Credit Union Association)

The Roadshow "is an important part of our ongoing advocacy efforts to first educate ourselves to understand what a credit union is and the reasons credit unions have an income-tax exemption," Nelson said. "Only then will we be able to fully articulate the importance to members."
 
Beyond the Roadshow, Harborstone provides articles with basic questions, and devotes a website page to its advocacy theme, "Protect your financial right to choose." It also posts educational messages once a week to Facebook and Twitter.
 
"Rarely do you see this level of engagement by a credit union," said NWCUA's Minickiello. "I'm asked a few times a year to speak to boards of directors or management of a credit union...but never...to visit branches and educate frontline staff." It is even rarer to get the opportunity for frontline staff to hear from a professional credit union advocate and a sitting legislator.

  • The difference between credit unions and banks;
  • Why it's important for the credit union to participate in advocacy;
  • What lobbyists are, what they do, and why developing and maintaining relationships with credit union friendly legislators, including the need for campaign contributions, is important;
  • What the acronyms PAC and CULAC mean; and
  • Why it is crucial to nurture informed and educated communication about governmental affairs between Harborstone employees and members.

Vermont CUs OK Dues Formula Change

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SOUTH BURLINGTON, Vt. (11/18/13)--The Association of Vermont Credit Unions approved a new schedule of dues proposed by its Board of Directors.
 
Member credit unions voted 35-1 to amend the AVCU's bylaws on Wednesday. As a result, each AVCU member will pay dues calculated by a formula based on the square root of its assets, starting in 2014. Between 2014 and 2017, however, no single credit union's dues will fluctuate by more than 25%.
 
About 20 other state credit union leagues charge dues in proportion to members' assets.
 
For the first time in AVCU's history, the ballot was conducted online through a secure service, with each delegate required to register to receive a unique identifier that expired after the vote.
 
The AVCU Board of Directors announced in September its proposal to reform the trade association's fee schedule in September, with discussions over the issue progressing via e-mails and webcasts.