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CUs weigh in on FDICs unbanked study

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MADISON, Wis. (12/4/09)--Several credit unions had a chance to weigh in with local media about a Federal Deposit Insurance Corp. (FDIC) report that found roughly nine million U.S. households have no checking or savings account while another 21 million use payday lenders and other nontraditional services. In Great Falls, Mont., 9.1% of households with income below $30,000 are unbanked and 25.3% are underserved., according to the FDIC survey, released Wednesday. Julie McCamley, marketing director of the Great Falls Teachers FCU, a $75 million asset credit union, said the survey should help insured financial institutions understand the demographic of the unbanked and underbanked population (Great Falls Tribune Dec. 3). "You'd be surprised, it's often times people you don't expect--single moms with good jobs that need money right away [and] that are often going to places that charge big interest rates," McCamley told the publication. "Sometimes they are people who are intimidated or have had a bad experience with a financial institution." The credit union participates in several outreach efforts to the underbanked, such as an income tax refund anticipate loan program with Rural Dynamics designed to steer people away from high-interest products. "But sometimes you think you are hitting the bull's-eye, and often we are not, so it's good to see this information and find out where the areas are that we are not reaching," she said. In San Antonio, a columnist for WOAI.com (Dec. 3) , reported on the FDIC study and included advice from the Consumer Credit Counseling (CCC) of Greater San Antonio for how to avoid high-priced check cashers. Although CCC said to check with several different banks, the columnist said: "Check with credit unions; the organization says credit unions may be even more likely to give you a second chance." A columnist in the Tampa (Fla.) Times (Dec. 2) offered Tampa-based GTE FCU as an example of how a credit union has moved to provide services in a neighborhood where banks feared to tread. "In 19 days, a new GTE FCU branch opens in the heart of Midtown, a St. Petersburg neighborhood that's been scrapping to attract basic consumer services for years," wrote columnist Robert Trigaux. He noted Sun Trust bank years ago committed to building a branch in Midtown, "but the land it bought remains vacant." "Earlier this year, the Tampa-based GTE credit union heard that St. Petersburg was looking anew for a financial institution for Midtown. GTE stepped up quickly. "What SunTrust chose not to do for years, the credit union did in months. I mention this because a new government study was released Wednesday that shows who uses and who does not use banking service," he wrote. Trigaux noted three reasons why banks won't attract the segment of the population.
* They've never been anxious to reach out to the unbanked or underbanked because banks do not consider them profitable customers. * People who do not use banks do so for a reason--living paycheck to paycheck and lacking funds to deposit into accounts. * Today's best innovations aimed at providing services to the unbanked/underbanked come not from banks but from other financial and non-financial companies.
In Oceanside, Calif., Daniel Scott, president of Faith Based FCU, which works with low-income residents, said people in lower income brackets tend to be poorly educated and have little idea how to manage their money. Noting that rich people don't pay fees while poor people do, Scott told North County Times (Dec. 3): "They pay fees based on not knowing how to control their resources to avoid fees." The fees lead to a mistrust of the banking system, said Scott, and they end up using payday loans or other high-cost methods to take out loans. "It doesn’t really help them to build wealth. It basically marginalizes their economic capacity," he said, calling it a Band-Aid, not a longer-term strategy.

Corporate Fed discount window action has no impact on ops

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WARRENVILLE, Ill. (12/4/09)--Members United Corporate FCU says the Federal Reserve Board's revocation in October of the corporate's access to the Fed discount window should have no impact on its operations. "Based on our current liquidity position and other sources of funds, we do not foresee this as having any impact on our ongoing operations," Ronald E. Koza, chief investment officer, told News Now. The revocation isn't new, and the Warrenville, Ill.-based corporate's members already know about it, but recent press reports have brought the situation to a broader audience. "The Fed telephoned us in early October and told us that our discount window access was being revoked due to their internal analysis of our financial position," Koza said, noting that the decision was reported to the corporate's members in its October Portfolio Update and Financial Reports, published Nov. 20. The corporate has never needed to use the discount window. "We have not borrowed from the discount window and did not anticipate a need to borrow from the window due to our strong liquidity position," Koza said. "Members United is currently above expected seasonal trends for liquidity, and has been for most of 2009," he said in a statement. "With the implementation of the Temporary Corporate Credit Union Share Guarantee Program, access to the discount window as a source of back-up liquidity is less important today for Members United than it was at the beginning of the year, when we first put the facility in place as a contingency. Collateral maintained at the Federal Reserve Bank has been released and is available for other borrowings," Koza said. Other sources of funds include secured borrowing from brokers and dealers, U.S. Central, and guaranteed borrowings from the fed funds market, Koza told News Now. "If the situation warranted, we have the option to establish a debt issuance program with a guarantee similar to that of our deposit program." So how does the corporate get back its access to the discount window? "Through later research we found out that we could request reinstatement once our financial position had changed," said the corporate in an e-mail to News Now. "Unless we request reinstatement, we do not know when or if the Fed might review this again." Koza noted that Members United "continues to participate in the Temporary Corporate Credit Union Share Guarantee program, which has insured member deposits are safe and has provided us with enhanced liquidity. We have deliberately changed our investment strategy to invest cash or cash equivalents in this volatile market, and have been doing so over 18 months." The corporate clarified that the Fed's action was not taken as a result of the corporate's October financial results. The action was taken before the corporate reported a $149.6 million loss for October and a $295.1 million loss for 2009. Members United also clarified that it began the process of developing access to the discount window based on its own review of its liquidity situation and as a backstop in the event of a severe liquidity stress. "This was prior to the deposit guarantee program instituted by the National Credit Union Administration, which provided much more stability of deposits and liquidity" with a government agency guarantee, the corporate said.

Votes due Dec. 18 on REAL Solutions videos

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WASHINGTON (12/4/09)--Dec. 18 is the deadline for voting on five finalist videos illustrating how the National Credit Union Foundation’s (NCUF) signature program, REAL Solutions, is impacting the credit union movement. The finalists are:
* Guadalupe and Thomas Bryan, who found financing to open their restaurant, Boom Boom Mex Mex, with the help of Cooperative FCU in Syracuse, N.Y; * The Gregory Family adopted a son and bought a house to raise him in with the help of Community First CU in Appleton, Wis.; * Deborah Decker, who shared the financial difficulties she faced after leaving an abusive husband without an exit plan. She received expert financial advice and compassion from Episcopal Community FCU in Los Angeles; * Luis Lozoya, who talked about the joy of being a first time homebuyer and opening up a restaurant through Guadalupe CU in Santa Fe, N.M.; and * Dorothy James, who sought financial advice from Spectrum CU in San Francisco to pay off her credit cards, buy a car and reach her goal of buying a home.
The winner will be chosen by the voting public by Dec. 18. To cast a vote, visit the REAL Solutions website (use the resource link below) and click the “Vote” link on the homepage. Each voter can cast only one on-line ballot. The grand prize-winner will earn free trips to Washington for the winning league, credit union and member. As guests of NCUF, the winners will share the stage at a VIP event prior to the Wegner Awards Dinner, which is held during the Credit Union National Association’s (CUNA) Governmental Affairs Conference, Feb. 21 to 25. “Hearing and seeing a member passionately talking about how their credit union experience has made the real difference is what this contest is all about,” said Lois Kitsch, NCUF national program manager. “While we can only have one contest winner, each story exemplifies what makes credit unions unique and special.” The field was narrowed by NCUF staff from 40 videos to 15 that were the most compelling examples of credit unions in action. Then, an external judging committee representing CUNA, CUNA Mutual Group, Filene Research Institute, leagues and credit unions voted, narrowing the field down to five entries.

CUs card loans up banks cut lines by 1 trillion

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WASHINGTON (12/4/09)--Credit unions are stepping up their lending through credit card programs because banks continue to ease back, according to a recent webinar. Credit unions’ credit card loans were at $33.8 billion and unused credit card lines were $74.4 billion. Banks’ credit lines fell by $1 trillion over the past year, according to third quarter data from a Callahan and Associates webinar, “Trendwatch 3Q 2009.” The webinar noted a Maryland-based credit union that offered a no-fee credit card with a 7.5% interest rate. The card triggered threefold growth of the credit union’s card program in new accounts and outstanding balances. A recurring theme at the webinar was the financial resilience and stability of the credit union system during the nation’s financial crisis. Credit unions have benefited from consumers’ confidence in them and are growing. Liquidity was up by $60 billion last year, and all share categories posted higher growth this year, Callahan said. Callahan and Associates is a Washington, D.C.-based firm that provides research on credit union issues.

CUs savings is fastest growth since 2001

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MADISON, Wis. (12/4/09)--Through October, year-to-date credit union savings balances rose 10.2%, setting up credit unions for the fastest growth since 2001, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly sample of credit unions.
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Credit union savings balances increased 1.6% in October 2009 and 10.3% during the first 10 months of 2009. During October, share drafts rose 7.3%, followed by regular shares (2.6%), and money market accounts (1.8%). One-year certificates increased 0.8%, while individual retirement accounts decreased 0.6%. “With members in no mood to take on additional debt, credit union investment portfolios rose almost 30% so far this year,” Steve Rick, CUNA senior economist, told News Now. “This will put downward pressure on asset yields and net income as the asset mix shifts towards low-interest-rate investments and away from higher yielding loans.” Credit union loans outstanding decreased 0.1% during October 2009, but rose 1.8% during the first 10 months of 2009, down from a 6.1% increase during the same period of 2008.
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During October, home equity loans led loan growth, rising 2.3%, followed by used-auto loans (0.2%) and credit card loans (0.1%). Adjustable-rate mortgages decreased 0.1%, fixed-rate mortgages fell 0.4%, and unsecured personal loans declined 0.6%. New-auto loans and other mortgages decreased by 0.6% and 2.1%, respectively. “Credit union loan balances were essentially unchanged in October from September,” Rick said. “Mortgage, new-auto and unsecured loan balances all declined in October. The underlying loan growth trend cycle is now around 0.2% per month, the lowest since the recession of 1991. Loan growth will be weak in 2010--about 3% to 4%--due to low consumer confidence, a weak labor market and falling home prices.” Concerning asset quality, credit union 60-plus-day delinquencies remained roughly constant at 1.8% in October. “Credit union overall loan delinquency rates rose to 1.81% in October, up from 1.76% in September and 1.14% one year ago,” Rick said. “The jobless economic expansion and further declines in home prices will keep upward pressure on loan delinquency and charge-off numbers through the first half of 2010. “We believe net job creation and home-price stabilization will occur in the second half of 2010, slowing the deterioration in loan quality,” he added. The credit union movement’s overall capital-to-asset ratio remained constant at 10% in October. The total dollar amount of capital is $90 billion. The loan-to-savings ratio decreased to 76.9% in October. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--increased to 20% from 19% in September.

At WOCCUs behest Polands president opposes CU bill

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WARSAW, Poland (12/4/09)--Poland President Lech Kaczynski filed an application Monday with Poland’s Constitutional Court to examine the legality of a new bill that would affect the way Polish credit unions, or SKOKs, are supervised. The World Council of Credit Unions (WOCCU) opposes the bill, saying it could weaken SKOKs. The proposed act would limit credit unions’ business powers and require them to pay income taxes. It also dismantles the existing mandatory deposit stabilization fund of Polish credit unions by eliminating the sector’s supervisory capacity, and does not offer credit unions complimentary access to the Banking Guarantee Fund, according to WOCCU. In filing an application with the court, Kaczynski is questioning the legislative nature in which the act was passed, the possible interference in Polish credit unions’ autonomy, and the limited time credit unions are given under the new law to comply with new capital requirements and other provisions. “Such actions bring an unnecessary level of risk to Polish depositors and are in contradiction to European Union regulations for mandatory deposit insurance,” said David Grace, WOCCU vice president of association services, in a letter to Kaczynski. Under the act, credit unions also would have to meet new capital standards within nine months of the bill’s enactment. The capital requirement was not preceded by a thorough analysis of the current financial situation of credit unions by its supervisor, the National Association of Cooperative Savings and Credit Unions (NACSCU), WOCCU added. NACSCU is WOCCU’s member organization in Poland, headed by Grzegorz Bierecki. WOCCU also noted that the act does not follow the recommendations of the G-20 Leaders Summit in London in March. The G-20 recommends that nonsystemically important financial institutions could be subject to some form of registration requirement or oversight, depending on the type and degree of risk posed. Polish credit unions serve two million households, but hold only 1.1% of the bank sector assets and are not the type of institution that the G-20 was concerned about in its recommendation, WOCCU said. Dame Pauline Green, co-president of Cooperatives Europe, also opposes the legislation. “The new law on credit unions in its approved form violates the independence of the cooperatives, ignores the autonomy of the sector, abandons not-for-profit principle and last but not least, does not eliminate the existing fiscal discrimination of the credit unions against the commercial banking sector,” Green wrote in a letter to Kaczynski. The Polish credit union system is the second largest financial system in Poland, said Brian Branch, WOCCU executive vice president and chief operating officer. “During the financial crisis, the Polish credit unions maintained the strongest prudential financial standards and continued to provide credit services to Polish citizens when credit was not available from other financial institutions,” Branch said.