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Stretching car-loan terms may be risky says consultant

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NEW YORK (2/14/08)--Some auto lenders are pushing longer-term car loans because they have less access to cheap-interest funds and can't cut monthly loan payments as deeply. That can be risky for the buyer and the lender, say several industry experts. About 82% of auto loans are for 60 months to 77.9 months. However, some go as long as 84 months, 96 months and nearly 102 months, according to data from Power Information Network, a unit of J.D. Power and Associates (USA TODAY Feb. 13). Toyota Motor Credit said last week it has been making 84-month (seven year)loans since August to ease buyers' monthly payments and to boost sales. GMAC offers 84-month loans, and Ford Motor Credit offers them in test marketing situations. But Argus Research auto analyst Kevin Tynan says easy buying and long loans can induce a bubble that will burst, much like the housing market did. Credit unions, seeing competition from auto dealers who offer lower month payments by stretching the number of those payments, may be tempted to follow their lead to stay competitive. However, there are other reasons to be cautious about extending loan payments, says Tynan:
* Longer loans mean the buyer plans to keep the vehicle a long time or is looking for a low monthly payment. That hurts future sales and financing opportunities. A decline in new car demand hurts the economy. * Vehicles depreciate fast. At a little over halfway into a 60-month loan, a vehicle might be worth little more than the loan balance. A longer loan means the buyer owes a lot more than the car is worth. * If the borrower decides to trade in, he still owes the balance on the original vehicle. The balance gets rolled into a new loan, making it almost impossible to have equity in a new vehicle.

CUs alerted to virus spread through e-Valentines

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HARRISBURG, Pa. (2/14/08)--Credit unions may want to monitor incoming e-mails that advertise e-Valentines because employees and others sending or receiving them could introduce a virus into the credit union’s system. The Pennsylvania Credit Union Association and the Louisiana Credit Union League warned their credit unions Wednesday of possible scams after the Internet Crime Complaint Center (IC3) sent out an alert warning against spam e-mails (Life is a Highway and eNews Feb. 13). Some of the spam e-mails can spread Storm Worm malicious software (malware). The e-mails ask users to click on a link, which downloads malware to the computer and infects it with the Storm Worm botnet, according to IC3. A botnet is a network of compromised machines under control of one user and set up to facilitate criminal activity. The Storm Worm virus was sent through millions of e-mails during holidays the past year, with Valentine’s Day identified as the next target. Recipients should be wary of e-mails from unknown senders and should not open unsolicited e-mails or click on the links provided, IC3 said.

Beehive members cast votes on bank conversion

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SALT LAKE CITY (2/14/08)--Members of Beehive Credit Union were scheduled to vote yesterday at a special meeting on whether to convert the $185 million asset credit union to a mutual savings bank. Voting via mail ballots began in early January and was to culminate in the special meeting Wednesday. Results of the vote were unavailable at press time. The state-chartered credit union announced the conversion proposal last March. It applied for a bank charter with the Office of Thrift Supervision on Sept. 10, 2007 (News Now Oct. 5, 2007). The credit union says conversion would allow it to offer more branches, larger business loans and more competitive financial services. A state law passed in 1999 prevents the credit union from building another branch in Utah County. At a conversion meeting last year, the credit union's board told members the state's banks have attempted to limit credit unions' service and take away their tax-exempt status. The Utah League of Credit Unions launched a website last May,, to make sure members are informed about what happens to a credit union if it converts to a bank (News Now May 1, 2007). Scott Jorgensen, CEO of the credit union, has told local newspapers there are no plans to take Beehive public after a conversion.

CU System briefs (02/13/2008)

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* DUBLIN, Ohio (2/14/08)--Ohio State Sen. Steve Stivers (R) attended Ohio HealthCare FCU’s (OHCFCU) Dignitary Open House Feb. 6. Stivers received a tour of the branch and spoke to attendees about his excitement over the branch’s service to healthcare employees and other credit union shared branching members. He also tried out one of the remote teller kiosks and said the kiosk's security feature will deter robberies. Stivers, left, is shown with Bill Butler, OHFCU CEO, at the kiosk. (Photo provided by Ohio HealthCare FCU) ... * SAN ANTONIO, Texas (2/14/08)--San Antonio FCU (SACU) is providing ATMs on the grounds of the 2008 San Antonio Stock Show & Rodeo to help out rodeo patrons needing cash. SACU has a mobile ATM, shown here at the event, and seven ATM kiosks in place on the livestock and rodeo grounds during the 18-day event. “SACU is proud to be a sponsor of the 2008 San Antonio Stock Show & Rodeo, which provides such a positive impact on our community through its educational and financial commitment to young people,” said Jeff Farver, SACU president/CEO. (Photo provided by San Antonio FCU) … * SAN DIEGO (2/14/08)--Ron Martin, president/CEO of Mission FCU, a San Diego-based credit union, announced Tuesday he will retire after 38 years in the financial industry, effective April 30. During the 12 years Martin led Mission FCU, the credit union tripled its assets to $1.8 billion and equity to $192 million (BusinessWire Feb. 12). The credit union also expanded to 23 branches and introduced electronic and online banking. During Martin’s tenure, Mission FCU received several awards for promoting financial literacy among youth. In 2003, the credit union received a federal community charter to serve all 2.8 million residents of San Diego County … * SAN DIEGO (2/14/08)--Jim McPheters, president/CEO of California Coast Union CU, announced his retirement will be effective April 1. He has been president/CEO of the credit union for more than 21 years. Under his leadership, the credit union’s membership increased to more than 66,000 from 18,000. He also served as board chair of the California Credit Union League from 2005 to 2006. Kathy Cady, California Coast Union CU senior vice president, will serve as interim CEO ... * PEMBROKE PINES, Fla. (2/14/08)--Power Financial CU invited the community's children to its headquarters last weekend to "Have a Heart" and create a Valentine's Day card for patients at the Joe DiMaggio Children's Hospital and listen to local author Leah Orr read her children's story, Kyle's First Playdate. The photo shows PFCU President/CEO Allan M. Prindle and mascot Rocky the Raccoon delivering the cards and a stack of Orr's books Wednesday to Tangi Brownlee, supervisor of the hospital's Child Life Department. "By inviting young children in to create Valentine's Day cards for the kids in the hospital, we're sharing with them the importance of giving back and affording them the opportunity to learn what it means to truly 'Have a Heart,'" Prindle said. (Photo provided by Power Financial CU) …

CUs warn against using account statements as voter IDs

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PEWAUKEE, Wis. (2/14/08)--Credit union members should avoid using their account statements as identification when voting, said the Wisconsin Credit Union League. “You’re better off using a state identification, utility bill or some other permitted document,” said Brett Thompson, league president/CEO. “It’s just safer to limit your exposure with sensitive information.” Using an account statement could increase the chances of identity theft. Some voters are tempted to use account statements if a current address is not reflected on their driver’s license, the league said. “It’s an unnecessary risk to allow anyone to see your account number,” Thompson said. He advised consumers to be cautious, whether registering with a municipal clerk or as part of local voter registration drives.

Gift card sales doubled says TMG

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DES MOINES, Iowa (2/14/08)--ATIRAgift card sales nearly doubled this past holiday season, with gift card increases experienced by credit unions nationwide, according to The Members Group (TMG). “Credit union members are embracing branded prepaid debit cards,” said Jeff Falk, TMG director of product development. “The evidence is in the total number of gift cards sold throughout the country during the past seven years. So it’s not surprising to see the numbers of our total cards sold double, and penetration per branch increase 20% over the 2006 holiday figures.” More than $4 million was loaded onto nearly 50,000 ATIRAgift cards, which averaged a $6 per card increase over last year, Falk said. “Our clients continue to talk about the importance of member satisfaction. They are encouraged by the multiple uses of gift cards--such as travel and teaching teens how to budget,” Falk said. Fifty-five credit unions, ranging in assets from less than $6 million to more than $4 billion, offer ATIRAgift cards through custom issuer or reseller programs, TMG said.

Emerson named CEO at Connecticut league

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WALLINGFORD, Conn. (2/14/08)--The Credit Union League of Connecticut board of directors announced the appointment of Anthony L. Emerson as the league’s new president/CEO. Emerson--who holds a doctorate in business administration--is vice president of finance, accounting and operations at Maine Savings FCU, Hampden, Maine. He also co-founded Business Lending Solutions--a commercial services credit union service organization (CUSO)--and oversees the ownership interests of CUSO Mortgage Corporation for Maine Savings. Emerson is involved in the credit union community, regularly making presentations to local college and high students on financial education. He also is involved in a credit union reality fair for students in Maine. “The league board, management and staff are looking forward to working with Tony in continuing to serve credit unions in Connecticut with exceptional services, programs and educational sessions,” said Kathy Chartier, CEO, Members CU and league chair. “Member credit unions will have an opportunity to meet and greet him at our upcoming Connecticut Governmental Affairs Conference Feb. 20 at the state capitol.” Emerson will assume the position of league president/CEO March 17.

CEO USC still among top-rated depository institutions

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LENEXA, Kan. (2/14/08)--In a letter to trade press, the president/CEO of U.S. Central (USC) outlined factors that affected the corporate's 2007 performance and led to debt rating change from a rating agency, and concluded USC is still among the top-rated depository institutions in the country, with strong capital and ample resources for liquidity. Francis Lee, president/CEO, noted in the letter that as "an effective buffer to our corporates from much of the disruption in the credit markets," the Lenexa, Kan.-based corporate has "not been immune to the impact of the market dislocation." He addressed the debt rating changes by Standard & Poor's (S&P), Moody's and Fitch. S&P moved its rating from the top rating of "AAA"--which U.S. Central shared with one other depository institution, Wells Fargo--to the second-highest "AA+" rating, shared with two other domestic institutions, Bank of America and U.S. Bank. The high ratings validate U.S. Central's strength and stability, Lee said. Lee also clarified events that occurred in 2007, when the currently unaudited year-end financials showed net income substantially below 2006. He attributed the reduction to $96 million in "unusual investment-related charges, some realized and some unrealized." The charges were partially offset by an additional $40 million in net interest income, compared with 2006. The unusual investment charges consisted of three components:
* An isolation strategy was implemented at the beginning of the market's dislocation, after USC detected "abnormal deterioration in collateral performance of securities in our $40 billion portfolio," said Lee. USC projected likely permanent impairment for 19 bonds and recognized through income a loss of $38 million, leaving a remaining principal balance of $66 million of these bonds. * "U.S. Central had established an Asset Backed Commercial Paper (ABCP) conduit, for the purpose of generating fee income as well as adding an additional source of liquidity. In 2007, that market dried up. Like most conduits, it was required to be consolidated onto the balance sheet. Upon consolidation onto U.S. Central’s balance sheet, these assets were recorded at their fair market value with a charge against U.S. Central’s earnings equal to their unrealized loss, or $31 million. This loss will be accreted to income over the remaining life of the securities (approximately five years) in a similar manner as an investment security purchased at a discount." * USC recorded a $27 million unrealized loss from declining market values of securities classified for accounting purposes as trading. Market value changes on trading are recorded as income or loss immediately (unlike securities classified as available-for-sale).
Of the total unusual charges of $96 million, only $38 million in write- downs represent permanent losses, Lee said. The other $58 million are unrealized losses. USC believes those will be recovered as markets stabilize or as assets approach maturity. "U.S. Central remains one of the most highly rated depository institutions in the U.S. by the three most prominent rating agencies," Lee said. "It has a strong capital level of approximately $2.4 billion and ample resources to provide liquidity to its members--with approximately $3.5 billion in cash and equivalents available and access to more than $20 billion in liquidity," he said. For more detail, see Lee's full letter by using the resource link.

Texas man is first volunteer elected to NCUF Board

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HOUSTON (2/14/08)--Former 2003 Texas Volunteer of the Year Curtis Collins is the first volunteer to be elected to a three-year term on the board of the National Credit Union Foundation (NCUF). Collins--who has volunteered at all levels of the credit union system for 43 years--is vice chairman and membership officer for JSC FCU, Houston. He also is an active credit union development educator. In recent years, Collins has volunteered on the boards of the Texas Credit Union Foundation, the Texas Credit Union League, and the American Red Cross Houston Chapter. He also served six years as a loaned executive for the United Way of the Texas Gulf Coast. “Board members agreed that Curtis will bring valuable fundraising experience, state credit union foundation perspectives, and a renewed spirit of volunteerism,” said NCUF Chairman Mary Cunningham. “We are impressed with how the Texas Credit Union Foundation generated significant increases in the Community Investment Fund (CIF),” said NCUF Governance and Nominations Committee Chairman Chuck Purvis. Because of Collins’ efforts to promote CIF benefits to local credit union professionals, several new investments were made, Purvis added.