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Why Capital CU is IPost CrescentsI Small Biz of Year

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KIMBERLY, Wis. (3/18/11)--Capital CU, based in Kimberly, Wis., has been named The Post-Crescent's Small Business of the Year, according to the newspaper (March 16). Alan Zierler, CEO, was lauded for his voluntarism and the $393.1 million asset credit union's many charitable projects, including Rebuilding Together-Fox Valley, Haitian relief, food pantries, blood drives, financial literacy tours and the first Salvation Army Red Kettle match day in December. The 120 staffers who volunteered in programs logged nearly 1,300 hours outside the office, with top performers thanked at an annual company-paid gala dinner. Other reasons it was chosen:
* It boosted its outward physical presence in the community with a purchase of the $1.5 million former Landmark Building for its administrative offices at one of the most prominent intersections in Kimberly. * It increased assets 10% this year to $393 million, and added another $29 million in deposits last year, indicating members believe their money is safe. The past four years have seen 45% growth. It ranked in the top 10% of credit unions nationwide for safety and soundness in a bank rating service's ratings, gaining a "superior" five stars. * It is the third largest credit union in Fox Cities. Zierler noted the No. 1 goal is not to be No. 1 in assets but to remain profitable so it can grow membership and outstanding loans. Last year, Capital lent more than $90 million in new money, and it doubled its business lending portfolio in the past two years. * Its sound lending practices have meant much fewer foreclosures than the overall industry. It had 15 foreclosures out of more than 1,200 home loans, and its delinquency rate is one half of 1%, Zierler told the publication.

CU Mortgage fraud insurance claim case remanded

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NEW YORK (3/18/11)--A federal court in New York has remanded a case involving insurance coverage on claims on mortgages fraudulently sold to Fannie Mae by U.S. Mortgage/CU Mortgage back to a New York state court. TCT FCU, based in Ballston Spa, N.Y., had sued Cumis Insurance Society, of Madison,Wis., and Waverly, Iowa, and 11 homeowners whose mortgages were sold in the fraud. It won the remand back to the original trial-level court, the New York Supreme Court, Saratoga County, in a decision by Senior U.S. District Court Judge Frederick J. Scullin Jr. of the U.S. District Court Northern District of New York , Syracuse. The lawsuit stemmed from claims the credit union submitted with Cumis. The insurance company denied coverage on the claims on the ground that the insurance provided in that bond did not cover the type of losses the credit union suffered as a result of CU National's action, according to court documents. On Feb. 8, 2010, Cumis filed a notice of removal of the case to the U.S. District Court in Syracuse, noting that federally chartered credit unions are considered national citizens unless a "localization" doctrine applies. A localization doctrine would indicate that the credit union is a citizen of its home state by virtue of its activities there. The district court found that TCT is considered a New York citizen because its activities are localized to New York, and therefore would have met the "complete diversity" principle that requires federal suit parties to be from separate states but for the presence of the homeowner defendants in the case. In an earlier case involving both TCT and Cumis, TCT conceded it was diverse to Cumis. Cumis also argued that the homeowner defendants were fraudulently joined in the case to defeat the "diversity" requirement, because all the homeowners are from New York. The doctrine of fraudulent joinder is meant to prevent plaintiffs from joining nondiverse parties in an effort to defeat federal jurisdiction, Cumis maintained. The court found that Cumis met its burden of proof on the initial diversity issue, but did not meet the burden to show that the defendants were joined fraudulently. That means the individual defendants' presence in the case defeats the complete diversity requirement, and the federal court lacks subject matter jurisdiction over the case. The case will now return to New York state court.

NCUF teams with MEMBERS TRUST for CIF options

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MADISON, Wis. (3/18/11)--The National Credit Union Foundation (NCUF) and MEMBERS Trust Co., FSB have entered into a strategic alliance to expand options so credit unions can make charitable contributions to the foundation through the Community Investment Fund (CIF). CIF is a way for credit unions to participate in and support the programs and services that NCUF and the state credit union foundations provide. The alliance will give credit unions new alternatives, including an insured CD Custodian Account and a Part 703 compliant Investment Trust. NCUF and MEMBERS Trust Co. are also finalizing details for another CIF option in the form of a Charitable Lead Trust. With this trust, NCUF will receive income payments for a fixed period of time after which the assets and any excess earnings over the annual income payments would be returned to the credit union unless the term is renewed. The investments, as with the standard Charitable Lead Trust created for U.S. foundations, would be allocated with bonds and equity securities. In its 12th year, CIF gives credit unions the ability to leverage their investments to support innovative credit union programs. Credit unions invest in a CIF account through a corporate credit union, MEMBERS Trust Co., or National Cooperative Bank. Each quarter, half of the CIF dividends are returned to investing credit unions. The other half is donated to NCUF, which grants half of its dividend to each investing credit union’s state foundation or league. NCUF uses the remaining portion of the CIF dividend to support its national programs including:
* REAL Solutions; * Credit Union Development Education; * Financial Education Grants; and * CUAid-- Disaster Relief;

Tsunami update CUs helping with donations

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MADISON, Wis. (3/18/11)--Credit unions throughout North America have rallied to assist victims of the devastating earthquake and tsunami in Japan. One credit union, Altura CU, Riverside, Calif., has a special connection to the natural disaster. Riverside and Sendai, one of the hardest hit cities in Japan, have been sister cities since 1957, one of the oldest continuous sister-city relationships in the U.S. Altura has set up a Japan Relief Fund and is urging its 106,500 members to donate $1 each. "The images of the tragedy in Japan are stunning. We want to do what we can to help," said Altura CEO Mark Hawkins. "Yet we understand that people in the Inland Empire have their own financial struggles. So we are asking that each of our members contribute just $1. By pooling our donations, we can make a real difference." Donations will be collected for one month, then 100% of the funds collected will be donated to the American Red Cross. Following Haiti's earthquake in 2010, Altura members donated $42,000. Other efforts are under way from credit unions in other states. Ten credit unions in the county of Hawaii have agreed to serve as collection points for the “Aloha for Japan” relief effort, joining in a statewide campaign with the largest banks in Hawaii to assist people in Japan ( March 16). Participating credit unions in the county of Hawaii include HFS FCU, Hilo; Hawaii Community FCU, Kailua Kona; CU Hawaii FCU, Hilo; Hawaii County Employees FCU, Hilo; and Hawaii First FCU, Kamuela. Also joining in the relief effort are the Independent Employers Group FCU, Hawaii; North Hawaii Community FCU, Honokaa; Ka’u FCU, Naalehu; Big Island FCU, Hilo; and Onomea FCU, Papaikou. “With such close ties between Hawaii and Japan, we are very happy to join in this collaborative effort of credit unions across the island to support our family, friends and all those in Japan suffering during this traumatic time,” said Bernard Balsis, president of the Independent Employers Group FCU. Redwood CU (RCU), Santa Rosa, Calif., is accepting contributions to the Red Cross Japanese Disaster Relief Fund to directly assist the victims of the earthquake and tsunami in Japan. All RCU branch locations have been designated as collection sites for donations from members and the general public. Bay FCU, Capitola, Calif., established a fund to provide assistance to Japan. Financial donations will support priority needs in Japan--food, water, temporary shelter, medical services and rescue efforts--through the American Red Cross. A second fund has been set up to provide aid to local residents who were displaced when their boat residences were damaged by strong tsunami currents in the Santa Cruz Harbor. “The victims of this devastation need our help,” said Bay Federal President/CEO Carrie Birkhofer. “The Red Cross and other organizations are doing all they can to care for victims and prevent further tragedy. I hope affected people in both Japan and Santa Cruz will be comforted by the knowledge that many caring people are stepping up to offer their support.” Mazuma CU, Kansas City, Mo., is offering free wire transfers to members who are sending money to Japan to help in relief efforts. From March 15-April 30, any member who wishes to wire money to an individual or organization for relief efforts of the earthquake and tsunami will not be charged the regular fee of $30 for each international wire transfer. “Mazuma is happy to help members who want to do what they can for the insurmountable tasks that lay before the country of Japan,” said Brandon Michaels, Mazuma chief financial officer. “It’s the least we can do to help.” In Canada, Saskatchewan credit unions are accepting cash donations to support Red Cross relief efforts in Japan. Donations will be accepted in all Saskatchewan credit unions until April 15. The 9.0 earthquake--the largest in Japan and the fifth largest in the world--knocked the island of Japan eight feet closer to the U.S. and produced a 23-foot tall wall of water that slammed into Japan’s eastern coast. Thousands are feared dead in Rukuzentakata and Sendai. It also created nuclear reactor concerns about five nuclear plants and forced the evacuation of hundreds of thousands people who lived near one of the reactors (USA Today March 14).

Mass. banking commissioner seeks clearer savings ads

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BOSTON (3/18/11)--Massachusetts Commissioner of Banks David J. Cotney asked credit unions and banks to review their deposit advertising to make sure that they are providing a “full and fair disclosure of all material terms of an offer, clearly and conspicuously,” in a letter dated March 8. He reminded managers of financial institutions that they must be in compliance with the Truth in Savings Law, whose purpose is to “allow a consumer to make meaningful comparisons among institutions on similar products,” according to the Massachusetts Credit Union League (e-Weekly March 8). Cotney also cited the state’s consumer protection statute chapter 93A, which protects consumers from unfair and deceptive practices. The letter provides specific examples. To read the letter, use the link.

Report High delinquency default rates on student loans

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MADISON, Wis. (3/18/11)--A high percentage--41%--of student borrowers who receive financial aid to fund higher education face the negative consequences of delinquency or default during the first five years after they begin repaying their loans, according to a new study. About 37% of borrowers who began making repayments in 2005 made timely payments without postponing payments or becoming delinquent, according to the Institute for Higher Education Policy report. Because credit unions are increasingly using student loans to attract young members, the credit unions need to be careful that higher percentages of loans they issue don’t become delinquent or lead to defaults. Other findings of the study include:
* Roughly 15% of student borrowers not only became delinquent, but also defaulted on their loans at some time during the first five years of their repayment term; * About 23% of borrowers used repayment tools and options provided by the federal government to postpone their payments, and therefore, avoid delinquency; * More than one-fourth--26%--of borrowers who began repayments in 2005 became delinquent on their loans, but did not default; and * Most borrowers who left postsecondary education without graduating had trouble repaying their loans. About 33% of undergraduate borrowers who left without a credential became delinquent without defaulting, and 26% defaulted.
To read the report, use the link.

Western Bridge Corp. task force Merger most viable choice

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ONTARIO, Calif. (3/18/11)--The Western States Corporate Realignment Task Force concluded that a merger of Western Bridge Corporate CU and Members United Bridge Corporate CU would be the most viable future for the corporate. However, given federal regulators' recent restriction on corporate mergers, the task force recommended Western Bridge apply for a new charter as a stand-alone corporate credit union. The task force announced its recommendations Wednesday. It also announced that Joan Opp, CEO of Palo Alto, Calif.-based Stanford FCU will be its new chairman, succeeding Dave Chatfield. The task force, which was formed on Sept. 24 is not a league committee nor associated with any corporate credit union. It is a volunteer, independent group of credit union leaders from eight western states; Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington. Recommendations included:
* The merger of Western Bridge and Members United Bridge should be implemented at the earliest possible date."Too small to succeed" concerns warrant as much, if not more attention than "too big to fail" concerns. * Since at this time Western Bridge is precluded from proceeding with the merger by the National Credit Union Administration (NCUA), the corporate should move forward to apply for a new charter as a stand-alone corporate credit union, using either a de novo charter or employing a "reverse merger" with purchase and assumption of its operations through an existing--presumably western--non-conserved corporate credit union charter. * While continuing to encourage the proposed merger as the best option, the task force recommended natural person credit unions support the reconstituted Western Bridge by participating in its recapitalization and its services. "This support is imperative in order to help retain a cooperative, unified, affordable system solution for credit unions of all types and sizes owned and controlled by credit unions," the task force said. * In the interest of attracting capital from natural person credit unions, Western Bridge and other corporates should be encouraged to use non-perpetual capital accounts to create necessary accountabilities. "This will create positive and constructive incentives for newly formed corporates to improve their financial performance in the 2011-2013 time frame, rather than relying on the 'comfort' of perpetual capital." To the extent corporates rely on perpetual capital accounts to meet reserves and undivided earnings (RUDE) and leverage targets, fewer natural person credit unions will be willing to recapitalize their corporates. Using non-perpetual capital will be more attractive and put the onus on corporates and NCUA to assure that necessary financial disciplines and long overdue efficiencies are implemented in the broader corporate system. * Natural person credit unions should take several actions to assess whether a stand-along Western Bridge makes the most sense for them. Credit unions should assess attribution assumptions to affirm or disaffirm business model projections, and request a customized pro forma pricing comparison that:
* Models the pro forma based on the natural person credit union's payments and settlements volumes; * Compares pricing for all of its contemplated providers, such as the Fed, a third party bank, Western Bridge and other alternate corporates being considered; and * Compares service level, service quality, service gaps, product mix, and product limitations across all the contemplated providers being considered.
For more details, use the link. The report also outlines the group's guiding principles of system solution, aggregation and universal solution, and several scenarios, pricing and service comparisons with other providers, and more.

New-car shoppers 44 plan financing from CUbank

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IRVINE, Calif. (3/18/11)--Of those consumers planning to finance their next vehicle, 44% plan to obtain vehicle financing pre-approval through a credit union or bank branch, according to a recent study. About 43% plan to secure financing at the dealership at the time of purchase, and 6% plan to apply for pre-approval through an online vehicle financing company, according to a recent study. For new-car shoppers who plan to obtain pre-approval for a loan before proceeding to a dealership, 50% say they do it for the low interest rate, 28% indicate they do so for control in negotiations, 13% do it for convenience, 7% are motivated to reduce time spent at the dealership, and 3% get pre-approval because they have bad credit (PR Newswire March 17). The findings were part of the recent Kelley Blue Book Market Intelligence survey concerning car financing. The study revealed that 66% of new-car shoppers indicated they plan to finance some or all of the cost of their next vehicle purchase; 34% say they plan to pay the entire cost of their next vehicle in cash. Among new-car shoppers intending to finance some or all of their next vehicle purchase, 35% say they would choose a 60-month loan; 23% a 48-month loan; 23% a 36-month loan; 10% a 72-month loan; and 9% a 24-month loan. Of those new-car intenders planning to finance, 48% plan to use money from a trade-in as a down payment and finance the rest, 46% said they would use cash as a down payment and finance the rest, and 6% plan to finance the entire cost of their next new vehicle. Kelley Blue Book also recently expanded its current relationship with Autobytel Inc.’s to offer site visitors with credit challenges and those in need of local auto-finance assistance access to’s network of participating dealers and lenders.

CUs not hiking ATM fees big banks test 5 surcharges

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NEW YORK (3/18/11)--Although U.S. credit unions and small banks don’t seem to be raising ATM fees, some of the largest U.S. banks are initiating new fees and even testing $5 noncustomer withdrawal charges. The banks’ moves are the most recent examples of new fees that banks are levying on customers to make up for billions of dollars in anticipated lost revenue because of new federal regulations on debit cards and overdraft charges (The Wall Street Journal March 16). JPMorgan Chase & Co., PNC Financial Services Group and TD Bank Financial Group already have amended their ATM policies to collect more fees, the Journal said. Chase is testing fees for noncustomer withdrawals of $5 and $4 in Illinois and Texas, respectively, the Journal said. While large banks are using “scare tactics” by increasing ATM fees at the same time they are battling new debit-card restrictions, credit unions and small banks don’t seem to be raising ATM fees yet, Ed Mierzwinski, consumer program director for the U.S Public Interest Research Group, told the Journal. ATMs nationwide generated $7.1 billion in fees during 2010, consulting firm Oliver Wyman told the publication. To read the article, use the link.

Discovery Webinar on economic outlook draws 1100

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MADISON, Wis. (3/18/11)--Many credit union leaders are more optimistic today than they were at this time last year. But 2011-12 will be just as challenging as the previous two years, but for other reasons, warned CUNA Mutual Group in its first Discovery Webinar of 2011, held Thursday.
Click to view larger image CUNA Mutual Group Chief Economist Dave Colby, right, answers an audience question asked by moderator Phil Tschudy, CUNA Mutual media relations manager, during Thursday’s Discovery Webinar on the economic outlook for 2011-12. (Photo provided by CUNA Mutual Group)
CUNA Mutual Group Chief Economist Dave Colby told about 1,100 registered participants that the next two years will be just as challenging, but for other reasons. The geo-political and geo-economic environment are presenting new challenges to credit unions, and previously deferred decisions by the government must now be made, Colby said in "Is it Over Yet … Or is This the Calm Before Another Economic Storm?" “The economy and credit unions achieved some recovery in 2010, including capital growth and net-worth ratio improvement,” Colby said. However, he warned credit unions will be faced with many risk factors. “We see credit unions managing their key ratios by managing growth. But the biggest challenge remains growing loans, especially short-term consumer loans," Colby said, adding this won't be easy because "consumers are in pay-off mode, and competition will continue from subsidized financing." He outlined some “headwinds” credit unions face, including weak consumer loan demand, regulatory caps on income (debit interchange, nonsufficient funds/courtesy pay) and rising compliance burdens. “All of those will continue to challenge credit unions’ ability to replenish capital by growing their bottom lines.” Further burdening credit unions are risks the economy faces on its road to a full recovery, including prolonged elevated energy prices, continuing credit market uncertainty and external shocks such as terrorism, weather or geological incidents. “The world is in a weaker state, thus the impacts of one of these external shocks would be greater,” Colby added. “All the risks to credit unions go directly to the bottom line and adversely impact our ability to replenish capital,” Colby said. He cited near-term risks that include the likelihood of rising compliance costs and the yet-to-be-written rules coming out of the Financial Reform Act. Longer-term risks are primarily two-fold, Colby said. “As we regain our capital ratios through limiting asset growth, sooner or later expense growth overwhelms us. In the spread business, it’s difficult to earn a positive spread without loans. We also need to redefine our role in consumer financial services," he added. “Boomers expect wealth preservation solutions, while the next wave of borrowers expects point-of-purchase financing. To whom will we be relevant?” Other 2011 Discovery events, which are free to credit unions, include:
* April 18--Lending Trends, presented by Dan Kaiser; * May 24--Technology Strategies and Trends, presented by Rick Roy; * June 18-21--Seventeen Discovery sessions will be offered at the Credit Union National Association's America’s Credit Union Conference (ACUC); * July 19--Regulation double-feature, presented by Bill Klewin & Brad Pricer; and * Oct. 4 – 2--Annual Online Discovery Conference.

CU System briefs (03/17/2011)

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* NEW BERLIN, Wis. (3/18/11)--With help from thousands of members
Click to view larger image Click for larger view
and its 450 employees, New Berlin, Wis.-based Landmark CU raised $30,145 for the Children's Hospital Foundation by selling $1 "links" and $10 "hearts" during its Credit Unions for Kids Chain of Hearts campaign. This represented an increase of 3.8% over the total Landmark raised last year. Joey Marczewski, teller at Landmark's Milwaukee South branch, is shown here chained down and crowned with links. Ron Kase, president of the $1.6 billion asset Landmark, noted that all donations support the Children's Miracle Network Hospital closest to where the money was raised. Nationwide, credit unions have raised $80 million for the Children's Miracle Network Hospitals since 1996. Last year, credit unions raised $8.7 million. (Photo provided by Landmark CU) … * LAUREL, Md. (3/18/11)--Tower FCU employees and members raised more than $24,000 for the Johns Hopkins Children's Center in Baltimore, Md. During Tower's annual "Have a Heart" fundraiser in February. For a donation of $1 or more, Tower members and employees wrote their name or the name of a family member on a colorful paper heart. The hearts were displayed in the $2.26 billion asset credit union's 16 branches and member service center at Tower's headquarters in Laurel, Md. Tower employees competed against each other to see who could sell the most hearts. Top sellers were Doris Aguilar, who raised $213, followed by Stephanie Langr and Jeni Newell, who raised $83 and $61 respectively. Throughout the month, members could buy raffle tickets for a chance to win a three month gym membership valued at $300 and $50 gift certificates to local retailers ...