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Constitution Corporate 1Q financials reported

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WALLINGFORD, Conn. (5/14/10)--Constitution Corporate FCU reported its unaudited financial results for first quarter 2010, with a year-to-date net income totaling $708,000, which includes investments other-than-temporary impairment (OTTI) charges of nearly $1.16 million. This compares with a net loss of $31.17 million for the same period in 2009. The improvement in earnings was attributed to nearly a $30.56 million decline in OTTI charges from $31.72 million in 2009. Constitution Corporate is operating with special regulatory assistance under a Prior Undivided Earnings Deficit (PUED). Constitution ended 2009 with a PUED of $25.2 million, which was reduced to $24.5 million as of March 31, as a result of net income recorded for 2010. Year-to-date core earnings, or earnings before OTTI charges, totaled nearly $1.9 million, an increase of $1.3 million from $549,000 reported during first quarter 2009. The return on average assets before OTTI charges rose to 59.9 basis points from 15.8 basis points as a result. Constitution Corporate attributed the increase in core earnings to a $913,000 increase in net interest income and a $439,000 reduction of operating expenses.

Colorado CU association meets with Her Majestys CU

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DENVER (5/14/10)--An An alleged phoney credit union based in the Virgin Islands with an office in Colorado continues to stir up concern among credit union organizations and regulators. In light of the recent publicity over Her Majesty's CU (HMCU), which has a back-office processing office in Denver, the Credit Union Association of Colorado (CUAC) issued a statement, saying it had met with the credit union this week. John Dill, CUAC CEO, said the association "continues to review the reports surrounding Her Majesty's CU with concern." News Now had posted an article Thursday about state and federal regulators' attempts to determine whether the credit union was legitimate. The credit union's CEO is the CEO of an organization that had sponsored another credit union in Georgia that had failed eight months after it opened in 2005 (News Now May 13). Representatives from CUAC met Wednesday in Denver with Stan Roberson, CEO of HMCU "in response to HMCU's website, which suggested that certificates of deposit could be obtained by non-members," Dill said. "It was the intent of CUAC to determine if HMCU was operating as a deposit-taking financial institution within Colorado," he added. The meeting "occurred approximately two years after a May 29, 2008, HMCU meeting with CUAC to petition for membership in the association. HMCU did not receive CUAC membership because, per CUAC bylaws, the credit union did not have a member service 'brick and mortar' location within the state of Colorado," Dill said. "After the Wednesday meeting, CUAC felt that Mr. Roberson provided inconsistent information regarding the background of HMCU and [CUAC] remains concerned about various inconsistencies uncovered in our visit," Dill said. Some of the inconsistencies include:
* "Roberson stated to CUAC that HMCU was the only credit union in the U.S. Virgin Islands. Upon review, CUAC staff members found five federally chartered credit unions located in the U.S. Virgin Islands," said Dill. * "Roberson stated that a federal charter and the National Credit Union Share Insurance Fund was not available to credit unions chartered in the U.S. Virgin Islands. CUAC staff has determined that the other five credit unions chartered in the U.S. Virgin Islands do have federal charters and NCUSIF insurance," Dill added. * "Roberson stated that HMCU was once a member of the Credit Union Association of New York (CUANY). CUAC staff has determined that HMCU has not been a member of CUANY." * "Roberson stated that HMCU was a member of the Credit Union National Association (CUNA), and the CUNA logo was displayed on the HMCU website. CUNA now informs us that HMCU is not a member of our national association."
"The CUAC is vitally interested in protecting the strong reputation of credit unions in Colorado as well as across the nation, and we continue to have extreme concern over HMCU and the veracity of this organization," Dill said. "As appropriate, CUAC will continue its vigilance of HMCU on behalf of Colorado consumers and credit unions," he added. The CUNA logo referred to is the "America's Credit Unions" trademark. News Now checked HMCU's website Thursday and found the brand displayed prominently on the site's home page. "The credit union has ignored CUNA's requests to remove the America's Credit Union trademark and slogan, 'where people are worth more than money' from its website," said Linda L. Lilledahl, vice president and association general counsel at CUNA. She told News Now that the marks are used by CUNA members and available to nonaffiliates that obtain a license from CUNA. "This credit union has no license," she said.

NCUA sues defunct-CU members on real estate sales

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SALT LAKE CITY (5/14/10)--The National Credit Union Administration (NCUA), in its role as liquidating agent for Utah-based Heritage West FCU, has succeeded in substituting itself for the credit union in several lawsuits against members who defaulted on construction loans tied to a failed real estate venture in Salt Lake City. NCUA also succeeded in removing the cases from a state court to a federal court. In three suits, which are now in the U.S. District Court for the District of Utah, Central Division, in Salt Lake City, NCUA maintains that the members defaulted on their speculative real estate loans then bought the properties back during foreclosure sales at a hefty discount. In separate suits, NCUA is seeking the discount amounts--$112,000 from Brent R. Preece; $219,000 from Warren B. Shaw and Martina Shaw; and $215,000 from Randal B. Rasmussen and Carma L. Rasmussen. A fourth suit, involving several dozen members and full of a number of claims and counter claims, alleges that the credit union and the real estate developer, Castle Stone Homes, violated a number of laws, including federal and state securities and exchange laws and the state Uniform Fraudulent Transfer Act. Court documents allege that dozens of members invested in construction loans for a project developed and built by Castle Stone. The members allege that between 2005 and 2007, the developer promised them high returns on their investment property. Heritage West FCU, formerly Tooele FCU, partnered with Castle to finance the construction of the houses to be built, marketed and sold by Castle Stone. However, the project unraveled about 14 to 24 months after the construction began, with homes only 50% to 75% complete. Castle Stone negotiated extra loans with the credit union for all the investors to complete the homes. Thirty-six months after construction started, the homes still were not complete, the court documents said. Heritage West never recovered from the venture, a situation similar to Colorado-based Norlarco CU and Michigan-based Huron River Areas CU. Those credit unions also financed real-estate projects that failed in Florida. In 2009, NCUA negotiated a purchase and assumption agreement for Heritage West with Chartway FCU.

Fitch announces ratings for U.S. Central

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NEW YORK (5/14/10)--Fitch Ratings affirmed the long- and short-term Issuer Default Ratings (IDR) for U.S. Central FCU (USC) at “AA” (very high credit quality) and “F1+” (highest short-term credit quality), respectively. Fitch also has removed USC’s Individual Rating of “F” (default or would have defaulted without external support) and assigned new Individual rating of “E” (a bank with very serious problems, which requires or is likely to require external support). The rating outlook is stable (Business Wire via MarketWatch May 13). The affirmation of the IDRs is based on the National Credit Union Administration’s (NCUA) continued support of USC while the company operates under NCUA conservatorship. Fitch said NCUA will continue to support the ongoing operations of USC to maintain the stability of the corporate credit union system. To that end, NCUA is developing a plan to remove roughly $50 billion of problem securities from the corporate credit union system, much of which will be lifted out of USC. USC’s IDRs reflect the company's current support rating of “1” (a bank for which there is an extremely high probability of external support) and the support floor of “AA,” which Fitch still considers appropriate at this time. Given that USC’s long-term IDR is at its support floor, the Rating Outlook is stable. However, Fitch said a restructuring of the corporate credit union network could lessen the support provided to USC in the future. Fitch said that USC will continue to benefit from government support throughout the planned restructuring of the corporate credit union network and the implementation of new corporate credit union regulations. The removal of the “F” Individual rating (assigned Feb. 2, 2009) reflects the temporary nature of the rating, which is assigned to signify a company that has defaulted or, in Fitch’s opinion, would have defaulted if it had not received external support. USC was placed under conservatorship on March 23, 2009. The assignment of the “E” Individual rating is Fitch’s reassessment of the company on a standalone basis and reflects that the company continues to operate under NCUA conservatorship and with substantial external support.

Youth Savings Challenge deposits total 25M

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MADISON, Wis. (5/14/10)--This year’s National Youth Saving Challenge saw young credit union members depositing roughly $25 million into their saving accounts and share certificates.
Click to view larger image U.S. Rep. Kathy Dahlkemper (D-Pa.) helped Erie (Pa.) FCU teach a group of fifth grade students about the importance of saving during April to help celebrate Financial Literacy Month. (Photo provided by Erie FCU)
Participating credit unions used the seventh annual challenge to motivate children, teenagers and their parents to start and maintain a saving habit by opening accounts and making deposits. This year, about 350 credit unions reported receiving deposits from 168,438 young members, including 10,385 who opened new accounts. This year’s results average out to $147 deposited per child. Last year’s more than $26 million savings total averaged $190 deposited per child, up from $87 per child in the 2004 inaugural year. “Get in the Savings Game” was the theme for the recently concluded National Credit Union Youth Week held April 18-24. Credit unions hosted lobby and off-site events, contests, tours, in-school presentations and sports-themed giveaways. A Web page illustrating activities for each state will be posted on the Credit Union National Association’s (CUNA) Web site in July. CUNA also selected 10 credit unions at random from those who reported their results to receive $100 each, to award to the young saver of their choice. The winning credit unions are:
* Dover (Del.) FCU, Dover; * MaPS CU, Salem, Ore.; * Unison CU, Kaukauna, Wis.; * Central Communications CU, Independence, Mo.; * Daviess County Teachers FCU, Owensboro, Ky.; * America’s CU, Garland, Texas; * Susquehanna Valley FCU, Camp Hill, Pa.; * Sterling-Van Dyke CU, Sterling Heights, Mich.; * Sunflower UP FCU, Marysville, Kan.; and * Gateway regional CU, St. Louis.
“Once again, our young members are telling us that they want to start and maintain a saving habit--and they want to do it at a credit union,” said Dan Mica, CUNA president/CEO. “Last year’s recession saw a record deposit of more than $26 million. We’re encouraged that youth are still committed to saving as the economy shifts upward again, and this should inspire us to continually find ways to reach and teach the young population so important to our future.”
Click to view larger image Oregon Community CU, Eugene, Ore., hosted activities during Youth Week, including field trips and prize drawings. Credit union staff also visited local schools to teach financial literacy courses. Pictured are two children who received piggy banks from the credit union to help them save their money. (Photo provided by Oregon Community CU)
"Credit unions are in a unique position to grow their own loyal members,” said Lin Standke, CUNA’s Youth Week manager. “The Saving Challenge is an event with a big payoff for everyone. Kids learn to save, parents see the credit union as ‘their trusted financial adviser,’ and staff have fun celebrating with youth.” Youth Week began as an opportunity for credit unions to focus on the financial needs of young people and to provide financial literacy education. The event has become a focal point for teaching the benefits of saving and goal setting. U.S. Rep. Kathy Dahlkemper (D-Pa.) visited Burton Elementary School with Erie (Pa.) FCU to support April as Financial Literacy Month. She helped the credit union teach the importance of saving and how to budget to a fifth grade class. “By showing how small savings over time results in big gains, we can help them understand the rewards and the importance of saving,” Dahlkemper said. “If we can get kids saving now, they can put money away for college and give themselves a real financial advantage down the road.” Erie FCU offers a Save-Up School Financial Literacy Program, providing each student with a $5 certificate to open their new account. “Results from mid-year financial literacy testing of our efforts have shown a 27% increase in financial literacy test scores from September 2009 through January 2010,” said Garrett Tadda of Erie FCU. “So we know our program is working.” Linn-Co FCU, Lebanon, Ore., celebrated Youth Week with an education carnival on April 22. The credit union has booths on CUNA’s Googolplex--a program aimed at teaching financial literacy to elementary through high school students--writing checks, saving and budgeting, cash counting and ATM safety. Youth receive a savings game bag with prizes and a Money Matters quiz, which has five questions. Youth can find the answers to the questions at each booth. Linn-Co also partnered with the local Boys’ and Girls’ Club to hold an early carnival for club members and then another carnival that was open to anyone in the community. Oregon Community CU, Eugene, Ore., offered a number of activities for youth. The downtown branch arranged for a second grade class to visit the branch, where youth were given a tour of the credit union and could try out the coin counter. Some of the youth also helped run the drive-up window. Gateway Metro CU, St. Louis, offered seven 25-minute classes on saving, earning and spending money. Youth also could practice writing checks on a large dry-erase board (The Missouri difference May 5). Beaver Valley FCU, Beaver Falls, Pa., offered youth a contest to win four $100 savings bonds, and a hoop and golf contest. Handouts included activity books, flyers, bookmarks, memo pads and snacks. TruMark Financial CU, Trevose, Pa., gave away $9,200 in scholarships to three high school seniors through the credit union’s Financial Jeopardy competition, which coincided with Youth Week. In addition to the top three winners, six other contestants each received $200 scholarships deposited into accounts opened in their names.

PCUA Calif. study errs on payday loan program

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HARRISBURG, Pa. (5/14/10)--The Pennsylvania Credit Union Association (PCUA) says the conclusions of a California study of credit unions as alternatives to payday loans are erroneous. The study, “Are credit Unions Viable Providers of Short-term Credit?” by Victor Stango of the Graduate School of Management at the University of California, Davis, focuses on credit unions as potential competitors to payday lenders. It maintains that national data on credit unions’ payday loan offerings indicate “that very few credit unions currently offer a payday loan alternative. Industry reports suggest that those credit unions offering such loans seem unwilling or unable to undercut substantially the prevailing prices set by payday lenders.” The study said that the short-term loans offered by credit unions “generally carry greater restrictions on approval and repayment, meaning that risk-adjusted prices for credit union payday loans may not be lower at all.” Stango said that current prices and features for credit union payday loans are not competitive; that most current payday borrowers prefer higher-priced but less restrictive standard payday loans to lower-priced but more restrictive alternatives offered by credit unions. “The combined demand- and supply-side evidence suggests that credit unions are probably not viable providers of short-term credit for consumers who currently use payday loans,” the study concluded. In its rebuttal statement to the study, PCUA said: “First and foremost, credit union programs are designed to be an alternative to payday lenders. As alternatives, these credit union programs offer longer repayment terms and lower rates and fees. Further, the researcher, Professor Victor Stango, inaccurately cites cost attributes of Pennsylvania’s Credit Union Better Choice loan program.” The Credit Union Better Choice loan program offers consumers a loan up to $500 for up to 90 days at an 18% interest rate with a one time $25 application fee, PCUA added. The consumer then makes payments on the loan in weekly, biweekly, or monthly installments instead of a one-time payment at the end of a two-week period, as is the practice of payday loans. In Pennsylvania, payday lenders charge $15 or more per $100 borrowed every 14 days. Using those figures, the total cost for a $500 loan over 90 days is $450. By comparison, a 90-day Credit Union Better Choice loan at the maximum rate and application fee costs that same borrower only $40.09, PCUA said. “[The program] is not simply designed to be a less expensive payday loan option,” PCUA added. “Rather it is intended to break the cycle of debt that typically traps payday borrowers by transitioning them from wealth-stripping products like payday loans to wealth-building products typically offered by mainstream financial institutions. “In addition to providing a lower cost alternative to payday loans, the Credit Union Better Choice program has a required savings component and requires credit unions to provide financial education/coaching to Credit Union Better Choice borrowers,” PCUA said. PCUA concluded: “Since the inception of the Credit Union Better Choice loan program in October 2006, Pennsylvania credit unions have issued more than 28,000 loans totaling $13.4 million, which saved borrowers more than $10 million over traditional payday lenders and also put more than $1.3 million into borrowers’ savings accounts. Quite frankly, these statistics speak for themselves and directly refute the U.C. Davis study.” To read the PCUA statement, use the link.

Latest study adds to list of satisfied CU members

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NEW YORK (5/14/10)--Credit unions provide the most satisfying online banking experience, according to a survey conducted by ForeSee Results. Credit unions garnered an aggregate satisfaction score of 84. The top five banks provide the least satisfying experience, but still have an average score above 80, ForeSee said. Highly satisfied online banking and credit union members report an overall bank satisfaction score that is 32 points higher than dissatisfied customers. “As has been the case in every year of the study, credit unions provide their customers with the most satisfying experience,” the study said. “Credit unions also produced the highest trust score at 87.” The five biggest banks--Bank of America, Citi, Chase, PNC and Wells Fargo--scored the lowest with scores ranging from 78 to 83. Although credit unions scored high in online satisfaction, overall satisfaction with online banking dipped to 81 from an all-time high of 83 last year. “Financial services companies should care about online customer satisfaction for more reasons than just public image,” the study said. “Highly satisfied online customers report by a wide margin that they are more likely than less satisfied customers to purchase more services, open more accounts, use the [institution’s] website as a primary channel, and recommend both the company and its website.” ForSee suggested that credit unions understand how online satisfaction drives multichannel behavior and loyalty. To increase satisfaction, they must understand which elements have the greatest impact on satisfaction, the Ann Arbor, Mich.-based company said. The survey was conducted among 3,000 respondents in April. Survey respondents included subscribers to Forbes.com and online panelists from FGI Research.

WOCCU names two Distinguished Awards recipients

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MADISON, Wis. (5/14/10)--Credit Union National Association (CUNA) Board Vice Chair Harriet May, president/CEO of GECU in El Paso, Texas, and Credit Union Executives Society (CUES), the Madison-based credit union professional development organization, have received World Council of Credit Unions’ (WOCCU) Distinguished Service Awards (DSA) for 2010.
Click to view larger image Credit Union National Association Vice Chair Harriet May, president/CEO of GECU of El Paso, Texas, received an individual 2010 World Council of Credit Unions Distinguished Service Award. (Photo provided by the World Council of Credit Unions)
The winners will be honored along with Lech Kaczyñski, the late Polish president whose DSA honor was announced last month. They will be recognized during a special ceremony at The 1 Credit Union Conference, July 11-14 in Las Vegas. Kaczynksi died with 95 others in a plane crash last month. “DSA honors are bestowed by our board of directors only when candidates of worth present themselves,” said Pete Crear, WOCCU president/CEO. “Both CUES and Harriet May have a long history of promoting and supporting global credit union development at its most intrinsic level, and I am thrilled that our board chose to honor them this year.” May, nominated by the Texas Credit Union League, was originally scheduled to be honored during WOCCU's 2009 World Credit Union Conference in Barcelona, Spain, but was unable to attend. The WOCCU board voted to approve her award as part of the 2010 event. May has helped financial cooperatives work beyond state and national borders to meet the needs of members worldwide. In the 1990s, she was instrumental in helping WOCCU develop and launch IRnet, its international remittance program enabling workers in the U.S. to cost-effectively send money home--primarily to Latin American countries--through a network of credit unions. She also has worked to extend the influence and service of the Texas league by initiating the league’s formal Texas/Mexico Credit Union Relationship Committee in 1999. She helped Texas credit unions address the emerging Hispanic market and has worked with Vicente Fox, former president of Mexico, to develop cross-border relationships. CUES, the 2010 institutional honoree, has educated and served international credit union leaders since its inception in 1962, and financially supported WOCCU’s development and relief initiatives for two decades. The organization in 1990 pledged $10,000 to support credit union development in Eastern Europe, became an inaugural WOCCU Supporter in 2000 and continues to support WOCCU’s goals and objectives annually. In 2005, CUES donated $100,000 to help rebuild Sri Lanka credit unions that were devastated by the tsunami. Earlier this year, CUES contributed $15,000 to WOCCU's Haiti Earthquake Relief Fund, and last month CUES President/CEO Fred Johnson traveled with a credit union delegation to witness the devastation Haiti and its credit unions had suffered. Also, CUES continues to host many educational programs at international locations with the goal of broadening participants’ perspectives to better understand the global credit union movement. The 1 Credit Union Conference is a one-time event that combines CUNA's America's Credit Union Conference with WOCCU’s World Credit Union Conference. The conference's early bird registration deadline is May 20, after which registration fees will increase. For more information, use the link.

Local. Trusted. Serving You. is new ICU Day theme

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MADISON, Wis. (5/14/10)--This year’s International Credit Union Day theme--“Local. Trusted. Serving You”--focuses on credit unions’ trusted, community-focused approach to member service, said the World Council of Credit Unions (WOCCU).
Click to view larger image Click for larger view
ICU Day is Oct. 21. This year’s theme was developed by Amanda Vester, marketing coordinator at Indiana State University FCU in Terre Haute. Vester’s submission was selected from multiple entries by an international committee representing WOCCU, the Credit Union National Association (CUNA), Credit Union Central of Canada, the National Cooperative Business Association (NCBA) and the Canadian Co-operative Association. In the U.S., cooperatives celebrate Co-op Month in October and for the first time, NCBA and its cooperatives will join credit unions and Canadian co-ops to share a common theme and graphics. In Canada, ICU Day coincides with the country’s Co-op Week, Oct. 17-23. Canada’s Co-op Week theme for this year, “Experience the Co-operative Difference,” was adopted as the tagline for ICU Day and the Co-Op Week poster will use the same graphics as the one for ICU Day. ICU Day has been celebrated annually on the third Thursday of October since 1948. The celebration of Co-op Week the same time in Canada became a national event in 1982. WOCCU President/CEO Pete Crear reflected on the importance of ICU Day amid economically tough times. “At a time when the public’s trust is repeatedly compromised by large commercial banks, credit unions’ commitment to their local communities and to providing trustworthy member service could not be more important,” Crear said. “This October, let us all celebrate these fundamental credit union qualities that offer tremendous opportunity for growth of financial cooperatives worldwide.” CUNA President/CEO Dan Mica said, “As the credit union movement both here and abroad continues to grow stronger, we can see that it is the intrinsic characteristics of credit unions and many financial cooperatives that give them their strength and allow them to survive, and even thrive in tough economic times.” For more information, use the link.