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Washington CUs gaining on banks--ISeattle TimesI

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SEATTLE (3/10/09)--A positive article in Sunday's The Seattle Times cites Credit Union National Association statistics in reiterating what credit unions have been pointing out the past several months: credit unions are a safe alternative to banks. In Washington state, credit unions added about 140,000 members in 2008, while their deposits grew 8.8% to more than $27 billion. CUNA statistics show they loaned 9.6% more money last year than in 2007. Lending at Washington's banks and thrifts grew about 5.8%, said the Times, pointing out that credit unions have required no federal takeovers. "I feel a little bit bad about crowing about having a good year," John Annaloro, CEO of the Washington Credit Union League, told the newspaper. He noted many consumers are rethinking their banking relationships, especially in the aftermath of the Washington Mutual (WaMu) failure. Credit unions were built during the worst of economic times and that may be why they whether economic storms so well, Annaloro added. Still, the article points out the economic fallout has drifted toward credit unions, which have seen increases in loan losses. Gary Oakland of Boeing Employees CU (BECU), based in Tukwila, told the Times its charge-offs on bad loans nearly tripled to $79 million, even though that was just 1.1% of its total lending. The charge-offs are from members holding adjustable rate bank mortgages with payments that ballooned so much they couldn't pay their other loans--car loans, credit cards, and home equity loans. The credit union increased 11% in depositors throughout the year, with an intense two week activity in September as consumers fled WaMu for saver havens. In December, new-mortgage applications at BECU totaled more than $900 million, and the credit union can fund all of them. "Credit unions have kept to the straight and narrow since the movement gained federal approval in the midst of the Great Depression," said the Times. "Savings and loans also were depositor-owned institutions originally, but those largely morphed into investor-owned money machines prone to overheating and flaming out (see WaMu)," the newspaper said. In the article Lewis Mandell, visiting professor at the University of Washington's Foster School of Business and whose research focuses on financial literacy and consumer behavior, pointed out that very few credit unions were caught up in the subprime mortgages. "They are old-fashioned entities. They really don't aspire to be more than the are," he said. He also pointed out they pay "significantly higher" interest rates on deposits and offer better rates on loans. For the entire article, use the link.

CEO to IBaltimore SunI Longer loans help manage debt

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BALTIMORE (3/10/09)--A letter to the editor of the Baltimore Sun from a Maryland credit union CEO about extending mortgages says that as a lending institution, he would rather own a long-term 5% loan than have a bankruptcy judge cramdown a mortgage payment. Richard T. Webb, CEO of Hunt Valley, Md.-based Atlantic Financial FCU, was responding to a letter criticizing extending mortgages to 50 years or longer. The point, that such loans increase the borrower's debt is valid, Webb said but fails to consider the length of time most homeowners keep a mortgage. The average time a mortgage is held is around seven to nine years, Webb wrote, adding it would make sense to make smaller payments on a longer-term loan when the chances of staying in a house for 30 years are small. For the full letter, use the link.

Maryland to implement fin lit task forces recommendations

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BALTIMORE, Md. (3/10/09)--Maryland state education officials have written a letter indicating the state will follow through on the recommendations of the Maryland State Task Force on Financial Literacy. The task force included two credit union representatives. The task force submitted its recommendations in a report to the Maryland State Board of Edcuation (MSBE) in January. It requested that MSBE implement financial literacy education within the existing Voluntary Statewide Curriculum. The two credit union representatives on the governor's task force are Bert Hash, CEO of MECU of Baltimore, and Thom Beck, CEO of MCT FCU, Rockville. On March 2, Maryland State Superintendent Nancy Grasmick released the letter replying to the report. In it she outlined three steps MSBE will take in response to the task force report. MSBE will:
* Form a design team to ensure that K-12 content standards are developed that explicitly speak to financial literacy; * Develop a prototype course for local school systems to teach financial literacy concepts to middle and high school students; and * Convene an advisory group to engage local representatives from the education and financial services communities.

MDDCCUA testifies for financial literacy bill

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ANNAPOLIS, Md. (3/10/09)--The Maryland and District of Columbia Credit Union Association (MDDCCUA) testified March 4 before a Maryland State Senate committee in support of a bill that would require developing a financial literacy curriculum for Prince George's County schools. Senate Bill 500, sponsored by state Sen. Anthony Muse (D-Prince George's), would require the county's board of education to develop curriculum content for a financial literacy course and require high school students to complete a financial literacy course to graduate from high school (FOCUS Newsletter March 9). During his testimony before the Senate Education Health and Environmental Affairs Committee, Brian Tate, MDDCCUA vice president of legislative affairs, expressed the association's strong support for financial literacy. "In today's complex society, an understanding of basic financial concepts is essential as today's students become tomorrow's consumers," Tate told the committee. Sen. Muse told the committee that financial literacy education is "essential" for young people to learn and that it is necessary to help them navigate a complicated financial landscape. He is also a member of the Governor's Task Force on Financial Literacy. Also testifying were representatives from the Maryland Coalition on Financial Literacy, the Maryland Bankers Association and two high schools.

Central States Mortgage suspends operations

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WAUWATOSA, Wis. (3/10/09)--CSMC Inc., a Wisconsin-based mortgage broker doing business as Central States Mortgage (CSM), suspended operations Monday, the company announced. While it no longer actively originates loans for the 250 credit unions it served nationwide, some of its staff are remaining to help transfer the operations to other providers, the company said in a press release. The firm will continue servicing loans for credit unions. "While the decision to close was a difficult one, it was necessary and in the best interest of our shareholders," said CSMC Board Chairman Dean Wilson, CEO of FOCUS CU, Menomonee Falls, Wis. Wilson said the firm's shareholder credit unions already reflected the loss of their investment in the firm as part of their 2008 financial statements. "Our goal is to assist our customers now such that this development does not affect service to their members," he said. Last month, a Wisconsin court awarded U.S. Bank a $2.7 million judgment against Interim Funding LLC of Wauwatosa, Wis., a firm owned by the founder and former CEO of CSM, Dick Jungen. The bank sued Jungen and five executives of Interim, including three former CSM employees, alleging the company defaulted on a $3 million revolving loan from the bank. CSM fired Jungen in July 2008 after the credit union service organization learned he secretly controlled Interim Funding. The CUSO sued in February, alleging he scammed the CUSO out of $15 million (News Now March 2). The case is pending (The Business Journal Milwaukee March 9). Central States' parent company, CSCM, also is a defendant in a lawsuit filed Feb. 24 by Equitable Bank of Wauwatosa involving a foreclosure on a condo project in West Allis, Wis. CSMC holds a $4.3 million mortgage with a development group that includes Jungen, said the newspaper. Central States measures sales by loan originations, which totaled $523 million in 2008, a 26% drop from $707 million in 2007. Among the credit unions that had write downs from the distressed loans was Prime Financial CU in Cudahy, Wis., which wrote down $5.5 million. That credit union was taken over by the Wisconsin regulator on Feb. 26 (News Now March 3).

Feliciana FCU closes branch near shuttered mill

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ZACHARY, La. (3/10/09)--Feliciana FCU has shut down its St. Francisville, La., branch and put the building up for sale. The $23.9 million asset Zachary, La.-based credit union has served employees of the shuttered Tembec paper mill for the past 40 years (theadvocate.com). All main office operations have been moved to the Zachary, La., branch. Members can get services there or at its New Roads branch. The 3,000-member credit union’s St. Francisville branch was built on land donated by the mill several decades ago. It had made logistical sense to have the branch just a few miles from the mill, even though the credit union was diversifying its customer base and had become a full-service financial institution, Gigi Robertson, Feliciana president/CEO, told the newspaper. However, with the mill closed now for about 18 months, and the Zachary branch having more of a central location, the St. Francisville branch location no longer made sense, Robertson added.

Two corporates shed ratings agency programs

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COLUMBUS, Ohio and WARRENVILLE, Ill. (3/10/09)--Two corporates announced that they have discontinued relationships with their ratings agencies. Corporate One FCU, Columbus, Ohio, announced Friday that it is discontinuing its commercial paper program and has terminated relationships with Standard & Poor’s and Moody’s. Corporate One will save its members more than $260,000 annually primarily by no longer obtaining short-term credit ratings from the rating agencies, the credit union said in a release. “Credit unions are already being negatively affected by the current economic downturn,” Corporate One said. “Given the unreliability to generate liquidity by issuing commercial paper, it makes sense to save our members from paying for our debt ratings.” "Current high levels of cash and cash equivalents at the corporate (currently at $1.4 billion) combined with the ability to generate additional liquidity(approximately $2.1 billion) through other tested and available sources, drove the decision to discontinue our CP program," said Lee Butke, president/CEO. Members United, Warrenville, Ill., also terminated its relationship with Standard & Poor’s to trim expenses, said Todd Adams, Members United chief financial officer. The corporate also may consider suspending a second agency relationship, he added.

Are CUs relevant asks CUNA Council white paper

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MADISON, Wis. (3/10/09)--Credit union professionals can learn ideas and receive advice to ensure that credit unions remain relevant in the current marketplace in a new all-CUNA Councils white paper. “Are Credit Unions Relevant?” explains that one of the best ways for credit unions to stay relevant is by being member-centric and fully understanding each member’s individual needs. It also addresses the three factors to help create relevance: do the right thing, know your markets, and differentiate. The paper also offers a caveat to its credit union readers: “If you’re not offering competitive products and services, you can talk about the credit union philosophy all you want, but it won’t bring people in, or keep them.” “The public doesn’t really care if you are a credit union or a bank--what they care about is, ‘Can you meet my needs? Can you facilitate my dreams?’” said D.G. Markwell, senior vice president of marketing and business development at MAX FCU, Montgomery, Ala. “It’s too easy to wake up every day and do the same thing we did yesterday, last week, last month, last year and last decade.” For more information, use the link.

Wisconsin CUs boosting loan-loss allowance

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MADISON, Wis. (3/10/09)--Several of Wisconsin’s credit unions boosted their reserves to offset loan losses this year, but the Wisconsin Credit Union League notes that credit unions remain healthy. “Wisconsin credit unions saw some of the largest gains in the country in loan, asset and membership growth,” said Brett Thompson, Wisconsin Credit Union League president/CEO. Wisconsin credit unions are continuing to lend because members are relying on credit unions for loans now more than ever, Thompson added. As such, many credit unions also are preparing for potential delinquencies given the troubled economy. Fourth-quarter reserves at credit unions increased in 2008, according to the State Office of Credit Unions (The Wisconsin State Journal March 6). The $1 billion asset UW CU and $1.2 billion asset Summit CU, two of the state’s largest credit unions and based in Madison, increased their allowances this year. Summit bumped its allowance to $10.5 million from $2.6 million in December 2007. Summit merged with Great Wisconsin CU last October. UW CU increased its allowance to $6.2 million from $4.5 million last year. It also merged with MATC CU in November, which had no delinquencies, the newspaper said. The $151 million asset Heartland CU, Madison, increased its allowance to $662,625 from $651,535. The $153 million-asset Heritage CU, Madison, boosted its allowance to $759,968 from $751,077. Larger credit unions may be boosting their reserves in preparation for losses from real estate loans, the State Office of Credit Unions told the newspaper. About 66% of larger credit unions’ portfolios are from real estate, whereas smaller credit unions have about 13% of their portfolios in real estate, according to the Office of Credit Unions. Kim Sponem, Summit CU president, said Summit anticipates delinquencies and charge-offs to increase this year. She also noted that credit unions with a higher percentage of real estate loans may be hit harder by losses because real estate loans are larger. UW CU has adjusted its loan loss reserve also, but Lisa Girdharry, UW CU marketing director, told the newspaper that the credit union’s loan losses are lower than the industry average. Wisconsin credit unions’ delinquencies increased only slightly last year, by 1.44%, the league noted.

N.J. Assembly bill on state funds includes CUs

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TRENTON, N.J. (3/10/09)--A bill introduced in the New Jersey State Assembly aimed at spurring economic growth by creating more lending capacity among financial institutions would give credit unions equal footing with banks, according to the New Jersey Credit Union League. The bill was introduced in the Assembly Appropriations Committee Monday and has a companion bill in the Senate. The Senate Budget and Appropriations Committee approved the legislation with a vote of 14-0 (The Weekly Exchange March 2). The legislation would temporarily expand the range of investment vehicles available to the director of the New Jersey Division of Investments for the New Jersey Cash Management Fund and state pension fund. It also would authorize the director to invest in any obligation guaranteed by the National Credit Union Share Insurance Fund or the Federal Deposit Insurance Corp., the league said. The league submitted a statement of support to the Senate and will do the same for the Assembly. The New Jersey Bankers Association and the New Jersey Business and Industry also registered their support, the league said.

CU System briefs (03/09/2009)

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* WASHINGTON (3/10/09)--Eight credit union officials from the United Kingdom (UK) attended the Credit Union National Association Governmental Affairs Conference and visited credit unions in the area, says to the Maryland and District of Columbia Credit Union Association (MDDCCUA) . They toured the FRB FCU and the Federal Reserve Board, and the Capitol after MDDCCUA's legislative reception Feb. 25. MDDCCUA signed a partnership last year with the Association of British Credit Unions Ltd. Two World Council of Credit Unions International Partnerships have formed among: MECU, Baltimore, with UK's Capital CU and Agriculture FCU, Alexandria, Va., with UK's Scotwest (FOCUS Newsletter March 9). From left, Robert Taylor, director of Copperpot CU, which serves police officers in Northamptonshire, Eng., meets Danny Gregg, president/CEO of Police FCU, at a legislative luncheon. Hosting the visitors were Agriculture FCU, District Government Employees FCU, FRB FCU, HEW FCU, MECU, and Police FCU. (Photo provided by the Maryland and District of Columbia Credit Union Association) … * COLUMBIA, Md. (3/10/09)--The board of directors of the Maryland and District of Columbia Credit Union Association (MDDCCUA) voted last week to move MDDCCUA's Fourth Annual Meeting and Convention to Baltimore's Inner Harbor from its original location in Ocean City (FOCUS Newsletter March 9). Board Chairman Wes Bone noted that "credit unions are facing extraordinary times." The board made the change because of several factors: An online survey and conversations with CEOs indicated most would be challenged by the cost of an Ocean City event, which would involve a three-night hotel stay. A more local event allows attendees the option of fewer or no hotel room costs, and mileage and other travel expenses would be less … * LANSING, Mich. (3/10/09)--The Michigan Credit Union League unveiled its redesigned website, Lovemycreditunion.org, to showcase its "CU Difference" campaign and Invest in America auto loan program. The theme, "Love + Trust = My Credit Union," focuses on why members love their credit union and the ways credit unions have earned their trust. It also highlights the Invest in America partnership with CUcorp, MCUL's wholly owned subsidiary; General Motors; and Chrysler. The website has more than 25,000 visitors per week … * HARRISBURG, Pa. (3/10/09)--Mike Wishnow, senior vice president, communications and marketing for the Pennsylvania Credit Union Association, participated on the Steve Cordasco WPHT radio show, "The Big Talker 1210," Saturday. The two-hour show airs live on Saturdays from 8 a.m. to 10 a.m. Wishnow told listeners that credit unions continue to make loans to small businesses as credit dries up from other sources. He also discussed pending legislation that would increase the cap on small business loans from 12.25% (Life is a Highway March 9) … * SOMERVILLE, Mass. (3/10/09)--Cambridge Portuguese CU (CPCU), based in Somerville, Mass., is teaming up with the Massachusetts Alliance of Portuguese Speakers (MAPS) to help immigrants with their English skills (wickedlocal.com March 7). CPCU donated $2,500 to the organization to sponsor English for Speakers of Other Languages (ESOL) classes for members. Already 16 members have benefited from the free, 12-week course sponsored by the $80.7 million asset credit union. The two-hour class meets two evenings a week and is open to the community at half price because of the credit union's support … * LEXINGTON, Ky. (3/10/09)--Every year, University of Kentucky FCU
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donates $15,000 in scholarship funds--$5,000 to each of the three main entities it serves: University of Kentucky (UK), Eastern Kentucky University (EKU) and the Kentucky Community and Technical College System (KCTCS). The scholarships are awarded by the separate Financial Aid offices to students needing financial assistance. From left are: David Kennedy, UKFCU president/CEO; Kayla Chandler, EKU student; Claire Scholly, KCTCS North American Racing Academy student; and Greg Baker, UKFCU vice president of sales and marketing. Not pictured are Christopher VanDevender, UK student; and Ryan Pacheco, KCTCS North American Racing Academy student. (Photo provided by University of Kentucky FCU) … * HARRISBURG, Pa. (3/10/09)--The Pennsylvania Credit Union Association and Pennsylvania Credit Union Foundation helped sponsor the third annual Young Men's Futures Symposium, organized by the Junior Achievement (JA) of Central Pennsylvania. It provides guidance to male high school juniors and sophomores in career choices, interviewing techniques and budgeting, and encourages one-on-one discussions between the students and community business and government representatives (Life is a Highway March 6). George Nahodil (pictured here, standing), executive vice president, marketing, Members lst FCU, led a budget session for the 125 student participants. Jesus Cruz, vice president, Belco Community CU, facilitated eight students; Paul Wagner, vice president, Hershey FCU, facilitated eight students and was mentor for two students; and foundation Executive Director Joe Wambach, was a career presenter for eight students and mentor for two. JA has completed four symposiums during the 2008-2009 period under a $10,000 foundation grant. (Photo provided by the Pennsylvania Credit Union Association) …

Texas CUs member growth shines

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FARMERS BRANCH, Texas (3/10/09)--Texas credit unions saw robust membership growth of 2.9% in 2008, their fastest growth since they posted 3% growth in 2003. Several factors caused the increase, Dick Ensweiler, president/CEO of the Texas Credit Union League and chair of the membership growth task force for the Credit Union National Association, told News Now. The factors include:
* Credit unions have embraced REAL Solutions for a full year, with 24 Texas credit unions signing up. “This has brought on new members who might not have normally come aboard,” Ensweiler said; * Texas has the second-largest shared service center in the U.S. for credit union members, so there are lots of points of contact with members; * Texas has a more stable economy and lower unemployment than most states; and * Of all the people who moved across state lines in the U.S. last year, about 38% moved into Texas, Gov. Rick Perry told Ensweiler.
Ensweiler said the reasons so many people moved into Texas in 2008 are because the state has a stable economy, lower unemployment than the national average, a great climate, no state income tax, and a pro-business environment. “Therefore, as more people move to Texas, credit unions are getting their share of new members,” he explained. Texas is below the foreclosure average for Sunbelt states, and it has home equity laws that are not consumer friendly. Therefore, mortgage refinancings and home equity loans have not been a big part of credit unions’ membership growth, Ensweiler said. “We focus on auto lending,” he explained. “Texas has a higher percentage of auto lending compared with all other types of lending, relative to most states. So indirect lending is big here. Lots of auto dealers in Texas use credit unions as their primary lenders. That brings in new members. We get a significant number of members through indirect lending.” The Texas league also helps credit unions deliver their safety and soundness messages to the public. “We give credit unions talking points, a safety-and- soundness tool kit, and press releases to promote their credit union to members,” Ensweiler said. Ensweiler offered some 2008 statistics, comparing Texas credit unions with those nationwide:
* Increase in money market shares: Texas 19.6% and U.S. 14.8%; * Increase in regular shares: Texas 8.3% and U.S. 5.3%; * Increase in share drafts: Texas 5.3% and U.S. 3.1%; * Increase in used-auto loans: Texas 9.9% and U.S. 5.1%; and * Increase in new-auto loans: Texas 0.4% and U.S. -6.6%.
Looking to future growth for Texas credit unions, Ensweiler said that it is important to educate consumers about two facts: credit unions are open for business and have money to lend, and credit unions are strong and secure. “In times like these, there is a tendency for credit unions to hunker down, crawl in a shell and cut back when--in fact--they have very strong reserve postures, and other financial institutions are cutting back,” he explained. “So the right philosophy is to spend a little more now on marketing and to spend more to make sure that credit union employees are trained as much as possible in service and sales,” he continued. “Because credit unions should be saying ‘We are the answer,’ instead of cutting back.” When financial institutions’ reserves are low, often they don’t want to take on more savings because they need more reserves to back them up, Ensweiler explained. However, credit unions are well-positioned with their capital and reserves to take on more savings and to issue more loans. “We are open for business,” Ensweiler concluded.

28 Minnesota CUs seen as the REAL Deal

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WASHINGTON (3/10/09)--Twenty-eight Minnesota credit unions were recognized as “The REAL Deal” during the Credit Union National Association’s (CUNA) Governmental Affairs Conference in Washington, D.C., Feb. 24. REAL Deal certification recognizes credit union service in loans, financial education, charitable work and partnerships with non profits. The program was created by CUNA and implemented by the Minnesota Credit Union Network (MnCUN). “This program is a great way for credit unions to summarize the good works that they do,” said Monica Weber, MnCUN political advocacy director. “Credit unions certified as the REAL Deal set themselves apart from other financial institutions and are passionate about member service.” For a list of the credit unions that were recognized, use the link.

Wisconsin CUs nab Governors Award for youth branches

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PEWAUKEE, Wis. (3/10/09)--Wisconsin credit unions received their third Governor’s Financial Literacy Award for helping youth recognize the value of saving money, according to the Wisconsin Credit Union League. Individual credit unions receiving the award include Brokaw CU, Weston; Educators CU, Racine; STAR CU, Madison; and UW CU, Madison. Credit unions last received the award in 2008. “Wisconsin has gone far beyond many states in supporting financial education,” said Brett Thompson, president/CEO of the league. “Not only has the Department of Public Instruction defined competencies for personal finance that students should acquire prior to high school graduation, but the [Gov. Jim] Doyle administration has supported effective partnerships across the public, private and nonprofit sectors to advance financial education efforts without adding additional costs to taxpayers.” Wisconsin credit unions also operate 80 youth-run branches inside schools. The branches help students make deposits and withdrawals from savings accounts. Through the credit unions, students “avoid debt, complete their educations and become self-supporting members of the economy through regular saving and responsible borrowing,” Thompson said. “Young people have witnessed within their families the economic pain affecting our country,” Thompson added. “The fact they are saving shows they understand that the proverbial ‘rainy day’ is inevitable and it’s never too early to start building a financial cushion.”