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CU System brief (12/23/2010)

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* JACKSONVILLE, Fla. (12/28/10)--An ATM belonging to Jacksonville, Fla.-based Vystar CU was pulled from its base and damaged by a front-end loader that fled with the machine at about 3:50 a.m. Monday UPI.com Dec. 22). Police responding to a burglar alarm at the credit union found a trail of debris that led to a suspect in a front-end loader, which was attempting to turn from the highway onto a bike trail. The driver failed to stop for police, then put the Caterpillar into reversed and headed for a patrol car, which evaded a collision. The driver finally stopped the vehicle. Police arrested Robert Anderson, 31, who was charged with burglary of more than $1,000 and aggravated assault. Although the ATM was severely damaged, its cash cartridge remained intact, the report said …

Earl named interim CEO of ColoradoWyoming associations

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DENVER, Colo. (12/28/10)--Arizona Credit Union League President/CEO Scott Earl has been named interim president/CEO of the Credit Union Association of Colorado (CUAC) and the Credit Union Association of Wyoming (CUAW), which are working toward a merger with the Arizona league. Effective Jan. 1, Earl will manage his time among the three states to insure operations continue at their highest level service to member credit unions. CUAC outgoing interim CEO Pete Kirchhof will return to his full-time lobbying practice and will continue to represent credit unions in Colorado's State Capitol. No official timeline has been developed for the proposed merger. It requires a membership vote, which could be scheduled for first quarter 2011, said the associations' press release. If the merger is approved, Earl will become CEO of the new entity. Denver has been selected as the location for the merged organization's headquarters. Additional offices will be maintained and staffed in Phoeniz, Ariz., and Casper, Wyo.

Mass. league presents 125000 to homeless coalition

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MARLBOROUGH, Mass. (12/28/10)--The Credit Union Community Hope Initiative presented the Massachusetts Coalition for the Homeless with a check for $125,000 on Dec. 17, representing funds raised by the credit unions of Massachusetts during 2010, according to the Massachusetts Credit Union League (MCUL). The presentation took place at Hanscom FCU’s main office, which is located on Hanscom Air Force Base, Mass. It contributed $10,000 to the appeal. The initiative is an effort organized by the Massachusetts league through which Massachusetts credit unions join together to assist worthy causes. The Massachusetts Coalition for the Homeless has been the league’s charitable partner for more than 20 years. “The Massachusetts Coalition for the Homeless is an organization that inspires all of us in the credit union community,” said Nicole James, president of MAFCU FCU in Boston and chairman of the league’s Social Responsibility Committee. “With a small staff of skilled, dedicated, and highly motivated professionals, they work tirelessly to help families find safe, affordable, and permanent homes.” MCUL President Daniel F. Egan Jr. praised the credit unions’ efforts. “The leadership, staff, and membership of Hanscom FCU constantly demonstrate their generosity,” he said. “Not only has the credit union done a tremendous job in supporting the Massachusetts Coalition for the Homeless, but it also raises money for Children’s Hospital, veterans’ charities, scholarships, the Lowell High School ROTC program, and many other great causes.” In a related matter, Hanscom FCU earlier this month delivered $1,000 worth of personal items to the Veterans Affairs Boston Healthcare System--part of a longstanding credit union tradition to make donations to commemorate Veteran’s Day.

3Q report shows Maine CUs ahead of nations growth

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PORTLAND, Maine (12/28/10)--Maine credit unions outperformed national averages of credit unions in several key performance categories during the third quarter. During the quarter ended Sept. 30, asset growth at Maine credit unions grew by 5.17%, compared to the national average of 4.96%. During the same time period, loan growth was 2.54% at Maine credit unions, while nationally credit union loan portfolios shrunk at a -0.44% rate (Maine Credit Union League Weekly Update Dec. 24). Maine credit unions’ quarterly return on assets was 0.50%, or 0.06% higher than the national average, according to Callahan’s Performance Summary. Maine’s loan delinquency rate of 1.23% was 0.53% lower than the national average.

More walk on mortgages but keep second mortgage

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MADISON, Wis. (12/28/10)--More U.S. citizens than ever are willing to walk away from their underwater homes (homes for which they owe more in mortgage payments than the home’s worth), according to a recent Harris Interactive survey commissioned by Trulia and RealtyTrac. Such a move, dubbed a “strategic default” by the real estate industry, refers to people who decide to walk away, even though they can technically afford to continue paying off their mortgage (msnbc.com Dec. 20). Almost half, 48%, of homeowners who have an underwater mortgage said they would consider walking away from their home, the survey indicated. Six months ago, a similar survey indicated just 41% of respondents would do so. “It’s a phenomenon we haven’t seen before in the housing market,” Rick Sharga, senior vice president of RealtyTrac, told msnbc. “The mindset of why people purchase a home has changed over the past decade.” Credit unions also may be interested that in a second study conducted by researchers at the Federal Reserve Bank of Philadelphia that one in five borrowers who fall into foreclosure on their first mortgage, indicated they would continue to pay their second-lien mortgage (The Wall Street Journal Dec. 20). Although banks are likely to foreclose on borrowers when they stop paying a first mortgage, second-lien holders have little incentive to foreclose on underwater borrowers because their debt has little or no value. “Given the large number of current homeowners with negative equity, there are likely a large number of borrowers who could default on their home equity loans without being forced into foreclosure if they continue to pay their first mortgage,” the study’s authors write. However, their research indicates that isn’t happening: “Borrowers rarely engage in this strategy even though it appears to be viable,” the study reported. “Given the degree of second liens that have been underwater during the current mortgage crisis and given that second-lien holders are not likely to foreclose on many of these underwater second liens, it is surprising to find that the default rate for first-lien mortgages far exceeds the default rate on the second-lien mortgage for the same property.” To read the articles, use the link.

Empower FCU announces 25M dividend

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SYRACUSE, N.Y. (12/28/10)--Empower FCU is paying $2.5 million in “give-back” bonus dividends to reward members for a successful year. John D. Wakefield, president/CEO of Empower FCU, reports that assets, loans and net income increased significantly in 2010 at the $900 million-asset Syracuse-based credit union. The dividend and interest rebate will be posted on Dec. 31.

WesCorp judge renders temporary decision favoring directors

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LOS ANGELES (12/28/10)--A U.S. District judge in Los Angeles has rendered a tentative decision in favor of former board members of Western Corporate FCU in a lawsuit by the National Credit Union Administration (NCUA) related to WesCorp's failure. However, the court has permitted the lawsuit against WesCorp's former officers to proceed. The decision to dismiss NCUA's complaints of breach of fiduciary duty and gross negligence against the directors is not final. Instead, Judge George Wu of the U.S. District Court for the Central District of California is allowing NCUA's attorneys one more chance to amend their complaint and proffer what they would argue, if they were given the chance to do so. NCUA will get until Jan. 10 to amend its arguments, with defendant directors/officers responding by Jan. 24. A hearing on Jan. 31 will determine whether the tentative ruling stands as a final rule. In essence Judge Wu divided the ruling into several areas of complaint--breach of fiduciary duty claims, gross negligence claims, statute of limitations, and claims related to WesCorp's Supplemental Executive Retirement Plans (SERP). The case also was separated in terms of whether defendants were directors or officers. The breach of fiduciary duties complaint, which hinged on the interpretation of California's Business Judgment Rule, was dismissed against former directors Bill Cheney (now president/CEO of the Credit Union National Association), Gordon Dames, Robert Harvey, James Jordan, Timothy Kramer, Robin Lentz, John Merlo, Warren Nakamura, Brian Osberg, David Rhamey and Sharon Updike. In the decision, the court said the directors fall under the business judgment rule in decisions that do not involve fraud or breach of trust. The rule provides directors "broad discretion in making corporate decisions and [allows] these decisions to be made without judicial second-guessing in hindsight." However, although the court dismissed the breach of fiduciary duties issue against Robert Burrell, WesCorp's former executive vice president/chief information officer, it is allowing NCUA to amend the complaint against Burrell and noted that it has not dismissed the breach of fiduciary duties against management/officers of WesCorp. The gross negligence charges have been dismissed for everyone because there is no cause of action against gross negligence under California law, said Judge Wu. The court also indicated it was ready to grant director Cheney a clean bill on a statute of limitations argument as it applies to the gross negligence claim. However, it did not reach a conclusion about Rhamy and Updike because of a dispute about whether the statute of limitations was two years or three. Since the gross negligence claim was invalid, Wu did not have to decide which limit to use. A two-year limit would favor all three directors, while a three-year limit would apply only to Cheney because of the dates of departure from the board. The court did not dismiss claims related to WesCorp's SERP policies against Robert A. Siravo (WesCorp's former president/CEO), Todd M. Lane (former chief financial officer) and Thomas E. Swedberg. Those claims allege Siravo and Swedberg manipulated the SERP to increase pay-outs and that Lane was "enriched" by executing an early payout agreement in exchange for his SERP rights.

Maine legislators commend CUs at regional breakfasts

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PORTLAND, Maine (12/28/10)--The Maine's Credit Union League's Breakfast with Legislators series heard plenty of praise heaped on credit unions from many of the nearly 75 lawmakers attending the breakfasts.
Click to view larger image New Speaker of the Maine House, Robert Nutting, left, poses with Maine Credit Union League President John Murphy at the League's Breakfast with Legislators event in Augusta, one of five breakfasts the League held prior to the start of the Legislative session in January. (Photo provided by the Maine Credit Union League)
Among legislative leaders attending the series were Speaker of the House Robert Nutting, Assistant Majority Leader Andre Cushing, and Assistant Minority Leader Teresea Hayes. Nutting, who attended the Augusta breakfast, called credit unions "a great part of communities who deserve our appreciation." During the month of December, the Maine Credit Union League held five regional breakfasts in Augusta, Bangor, Brunswick, Lewiston and Portland. A sixth planned for Presque Isle was postponed due to inclement weather and will be rescheduled later either in Aroostook County or Augusta . The breakfasts' goal was to strengthen and build relationships between credit unions and legislators. "We had a positive response from legislators, both new and returning, to our breakfasts, as well as close to 100 credit union representatives attend," said John Murphy, league president. "Each breakfast generated lots of discussion on the important role that credit unions have in financial services in Maine, with many legislators eager to help support issues of importance to credit unions. We also provided background information on the positive growth of credit unions in Maine, and educated those legislators who were less familiar with credit unions about our issues, products and services." Murphy said it was nice to hear so many legislators mention the important role that credit unions had played in their lives. "From lending money for a first car, first house or to start a business, legislators were proud and appreciative of the help that their local credit union had given to them."