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U.S. Central to release quarterly financials Wednesday

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LENEXA, Kan. (5/11/09)--U.S. Central FCU plans to release its 2009 first-quarter financial report on Wednesday, according to its website. It had planned to release its March 2009 financial statements Friday, according to the National Credit Union Administration's (NCUA) weekly corporate credit union update Friday. However, the financials for the month were not posted publicly on U.S. Central's website. The corporate credit union reported to its members last week that 100% of its paid-in-capital funds and 63% of its membership capital accounts have been exhausted (News Now May 4).

Preliminary jury rule in UBIT trial favorable to CU

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MADISON, Wis. (5/11/09)--The trial in a Wisconsin credit union's challenge of an Internal Revenue Service's (IRS) interpretation of an unrelated business income tax (UBIT) begins today in a U.S. District Court in Madison, Wis. Friday the judge issued a ruling on jury instructions that is overall favorable for the credit union. Community First CU, based in Appleton, Wis., filed suit in January 2008 against the government after the IRS determined that certain guaranteed auto protection (GAP) and insurance products offered to members fall outside the credit union's main mission and are subject to UBIT. The credit union is seeking a refund of $54,000 in taxes paid on credit life and credit disability insurance and GAP products (News Now Jan. 16, 2008, and April 30). Friday U.S. District Court Judge William Griesbach issued a jury instruction memorandum with instructions in three areas--two of them favoring the credit union. The ruling rejected the government's assertion that, for UBIT purposes, federal law adds an additional "mutual purpose" element to the state law definition of a state-chartered credit union's purpose. Based on the government's pre-trial filings in the case, the government had planned to argue to the jury that this federal "mutual purpose" language required that every GAP or insurance product offered by the credit union had to be economically beneficial to every member virtually every time it was sold in order to be exempt from UBIT. Judge Griesbach said that the federal "mutual purpose" language only applied to whether the credit union qualified as a tax-exempt institution as a threshold matter and was not relevant to UBIT. The judge held that only the state law under which the credit union was chartered defined its "tax-exempt purpose." The issue of what constitutes the credit union's tax-exempt purpose is central to the case because a product must be "substantially related" to the credit union's tax-exempt purpose in order to be exempt from UBIT. Wisconsin law sets forth three purposes of a credit union: "to encourage thrift among its members, create a source of credit at a fair and reasonable cost, and provide an opportunity for its members to improve their economic and social conditions." The judge held that there was no basis to expand on the state's definition as the government attempted to do. "We won on that issue," Michael Edwards, counsel for special projects with the Credit Union National Association (CUNA), told News Now. "The judge is saying that the state's definition of a credit union's purpose is the controlling definition for UBIT purposes. This is consistent with Supreme Court precedent cited by the judge that the 'mutual purpose' language in I.R.C. section 501(c)(14) is only relevant to whether the state has grossly misused the term 'credit union,' such as if Wisconsin tried to make an entity tax-exempt that should not be, like a stock bank, just by calling it a 'credit union.'" The judge also rejected the government's request to have the jury treat credit life insurance and credit disability insurance as separate issues. He stated that "both simplicity and the interest in avoiding jury confusion would warrant a single question rather than two." CUNA's Edwards noted this is good because otherwise it would have been possible for the jury to conclude, illogically, that credit life should be exempt from UBIT but credit disability should be taxed, or vice versa. On the third issue, Judge Griesbach ruled against the credit union. "The point we lost on is about a Wisconsin regulation on the sale of credit insurance, which says it [the insurance] is 'directly related' to the business of the credit union. We wanted to bring that up in the trial, and the government didn't," Edwards said. "Overall, the rulings were pretty favorable, especially because it kept the additional 'mutuality' concept out of the picture," Edwards told News Now. CUNA General Counsel Eric Richard and Edwards will be attending the trial this week to monitor the case's progress. CUNA Vice President of Economics and Statistics Mike Schenk will be one of the expert witnesses testifying, via videotape, on behalf of the credit union. Check News Now throughout the week for updates.

Lawsuit alleges discrimination against deaf consumers

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LOS ANGELES (5/11/09)--A class action suit has been filed against a credit union based in Santa Clara, Calif., by the Disability Rights Advocates (DRA), alleging discrimination against deaf consumers. The suit, filed in Alameda County against KeyPoint CU, a $837.3 million asset credit union, alleges the credit union refused to accept telephone relay service calls from deaf members and potential members (AllHeadlineNews May 7). The suit said the credit union "repeatedly refused" to accept the calls and engaged in "systemic civil rights violations" in violation of state and federal anti-discrimination laws. The $837.3 million asset credit union serves high-technology workers. DRA is a non-profit group based in California.

First Carolina Corporate signs share guarantee agreement

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GREENSBORO, N.C. (5/11/09)--First Carolina Corporate CU's board of directors voted May 4 to participate in the Temporary Corporate Credit Union Share Guarantee Program, based on modifications made by the National Credit Union Administration (NCUA). The revised program is more flexible and provides corporates the opportunity to receive share guarantee extensions. Effective immediately, all of First Carolina's uninsured shares--except capital accounts--are covered under the program through at least Sept. 30, 2011, with quarterly extensions available through Dec. 31, 2014. NCUA re-opened the program to all corporate credit unions. First Carolina's board earlier had decided not to participate in the program because of concerns about protecting member credit unions' capital and protecting the membership's ability to have a voice in determining its corporate's future. At its April 21 meeting, NCUA's Board voted to revise the program to include more precise language and increased flexibility. "Frankly, the revised Share Guarantee Program is a better deal and addressed many of the issues that we had concerns with in the prior program," said David Brehmer, president/CEO of First Carolina. "We appreciate the time NCUA's staff and board took to take another look and make certain changes, and we support their efforts to stabilize liquidity within the corporate system to minimize future losses to credit unions," he said. First Carolina's board based its decision on liquidity, the current recapitalization effort, member feedback, the changing landscape in the corporate network and improvements to the overall share guarantee program, said the corporate.

Sen. Dodd calls Connecticut league with legislative update

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MERIDEN, Conn. (5/11/09)--Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs Christopher J. Dodd (D-Conn.) hosted a conference call Thursday with the Credit Union League of Connecticut to discuss S. 896, the Helping Families Save Their Homes Act. The bill passed the Senate on Wednesday by a vote of 91-5. According to a league press release, Dodd provided an update and discussed S. 896 with the league and its member credit unions. "We sincerely appreciate Senator Dodd's efforts to include and assist credit unions and their members throughout the U.S., especially during this difficult economic time," said league President/CEO Tony Emerson. The league noted that the legislation was significantly improved by Dodd's amendment, which increases deposit insurance to $250,000 effective until 2013 and permanently increases the National Credit Union Administration's (NCUA) borrowing authority to $6 billion, with a possible extension to $30 billion in exigent circumstances. It also creates a temporary Corporate Credit Union Stabilization Fund, enabling credit unions to spread the cost of replenishing the National Credit Union Share Insurance Fund over eight years. "I was pleased to discuss the Helping Families Save Their Homes Act with members of the Connecticut Credit Union League yesterday," Sen. Dodd said Friday in the league's press release. "Credit unions play a critically important role in our economy, which is why I worked to ensure that the bill we passed in the Senate this week included provisions that will help credit unions weather these tough economic times and expand lending. Not only will these provisions help the 143 Connecticut credit unions, but they will also help the countless Connecticut residents and small businesses who rely on them," the release said.

Coastals new teller system increases branch traffic

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RALEIGH, N.C. (5/11/09)--Coastal FCU, Raleigh, N.C., has experienced a strong increase in the number of members using its Wakefield branch--especially in the evenings--because of a new Express Teller system.
Coastal FCU, Raleigh, N.C., has experienced a strong increase in branch traffic at its Wakefield location because of Express Teller, which allows credit union tellers to serve members at multiple locations from a remote site. (Photo provided by Coastal FCU)
Express Teller, which allows tellers to provide traditional services at multiple branches from one location, is in place at four of Coastal’s 18 branches. Coastal is looking to install the machines--priced similar to regular ATMs--at 10 branches by the end of the year (News and Observer May 8). With Express Teller, members can make transactions from 7 a.m. to 7 p.m. Monday through Friday at Express Teller branches in Raleigh, Garner and Cary. The credit union said it expects that the teller system will improve service and facilitate growth. Express Teller also frees in-branch employees to focus on opening accounts and making loans. Tellers working on the system are based at Coastal’s Raleigh headquarters. The technology helps the credit union operate with only half the tellers needed with a traditional set-up. Tellers have been transferred to other branches or given new job assignments at branches with Express Teller, but no layoffs are expected, Coastal told the newspaper. Coastal is the only financial institution in the state and one of five in the U.S. using Express Teller. It has $2.2 billion in assets.

Jeffco CU members vote to merge with Westerra CU

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DENVER (5/11/09)--The membership of Jeffco CU--a credit union serving Colorado’s largest school district, Jeffco Public Schools--voted by a margin of 90% to merge with Denver-based Westerra CU. The vote Thursday was the final step for merger approval. The proposed merger already was approved by state and federal regulators and both credit unions’ boards of directors. “This alliance enables us to offer local financial resources in our community through more locations, enhanced technology, a high level of service and more convenience all around,” said C. Alan Peppers, president/CEO of Westerra CU. Through Westerra CU, Jeffco members will have access to 11 branches across the Denver metro area and 150 Colorado service center locations and 800 surcharge-free ATMs. The combined credit union will have over $1 billion in assets and serve 88,000 members when the merger is effective July 1. Peppers will continue as Westerra president/CEO. The full integration of Jeffco CU operations will take place throughout the second half of 2009. Connie Ephland, chairman of Jeffco CU, said that both credit unions share a commitment to financial education through classroom presentations, online financial literacy tools, college scholarships, and providing resources for members to help with their financial decisions.

State-budget limits cancel CU Commission meeting

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GREENSBORO, N.C. (5/11/09)--In the wake of travel restrictions enacted by North Carolina to save money, the North Carolina Credit Union Division announced last week its state Credit Union Commission meeting June 16 has been cancelled. The meeting will be rescheduled to take place in Raleigh at a date to be determined, said the North Carolina Credit Union League (Weekly Update May 8). The meeting, which is required by state statute to be held twice per year, was originally scheduled to take place in Pinehurst.

Jobless rate affects Nashville CUs growth

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NASHVILLE (5/11/09)--Tennessee’s unemployment rate might be affecting the growth of Nashville credit unions. Nashville credit unions are growing more slowly than credit unions nationwide. Total assets at Middle Tennessee credit unions rose 3.7% in 2008 from 2007. Nationally, credit unions’ assets increased 7.7% last year. Also, Nashville credit unions’ membership was flat in 2008, while nationally credit union membership grew by 2% (Nashville Business Journal May 8). Because the state’s unemployment rate is about one point higher than the national rate, it could be harming local credit union performance, some in the state’s credit union industry believe. However, some local credit unions are reporting robust first-quarter growth, the Journal said. Cornerstone Financial FCU, with $187.8 million in assets, has experienced a first-quarter upshot in deposits. The growth is attributed to members pulling money out of the stock market or mutual funds, said Cornerstone President Henry Flurry. Cornerstone opened 531 new accounts in the first quarter. “That’s a pretty good growth number for us,” Flurry told the Journal. However, provisions for loan and lease losses at area credit unions rose 129% last year while the national rate was 112%. Area credit unions are anticipating roughly the same degree of loan loss portfolios as credit unions nationwide, Thomas Gaines, president of the Tennessee Credit Union League, told the Journal.

CU System briefs (05/08/2009)

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* HARAHAN, La. (5/11/09)--Two Louisiana credit unions are again the targets of phishing attacks aimed at collecting personal information, according to the Louisiana Credit Union League. Jefferson Financial CU, based in Metairie, and Jefferson Parish Employees FCU, based in Harahan, reported that members and non-members are receiving text messages and phone calls informing them their accounts have been closed, are negative, or show suspicious activity. The league noted the calls are not coming from legitimate sources and told credit unions to tell members to report any contact to the Federal Trade Commission (FTC) at 877-382-4357. The phone number that the call or text originates from is not important, but the number recipients are asked to contact is. Informing the FTC that there is a fraudulent 800 number activated will encourage the FTC to disconnect the number, the league said … *
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REDWOOD CITY, Calif. (5/11/09)--San Mateo CU's (SMCU) Redwood City branch helped fourth graders from Sandpiper Elementary School convert pennies into a check that they could send to their chosen cause, Pennies for Peace, during a field trip Thursday to the branch. Students have collected pennies since Feb. 1. The campaign aims to build a bridge for peace by offering educational alternatives to 400 mountain villages in remote northern Pakistan and Afghanistan. (Photo provided by San Mateo CU ) …

California CUs keep close watch on rare May fire

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SANTA BARBARA, Calif. (5/11/09)--A wildfire on hills near Santa Barbara, Calif., hasn’t closed down some area credit unions, but they are staying alert. Fueled by 60 mph winds, the fire has burned about 3,500 acres and evacuated 30,000 people from their homes as of Friday morning (The New York Times May 9). “We are still open for business,” Theresa Zanini, CEO of the $34.7 million-asset Santa Barbara County FCU, told News Now. “We’re in a warning area because the fire is right next to us. Members are still coming in to get cash. We’re going to stay open until the police tell us to move out or the smoke [from the fire] gets too bad. We’re OK, other than smoke from the fire being all over Santa Barbara.” On Friday, the credit union was half-staffed because about half of the employees were evacuated from their homes that morning. Erratic winds were blowing the fire’s embers “all over the place,” Zanini added. “Not a lot of homes have been lost at present, because the fire still is in the foothills of the city,” she explained. So far, about 1,400 firefighters, 14 helicopters and 12 airplanes were battling the fire, Zanini said. WesCom Central CU, a $3.237 billion asset credit union based in Pasadena, Calif., has two branches in the Santa Barbara area--a Le Cumbre branch and a Miltas branch. Neither has closed. “We are still operating,” Deena Spicer, WesCom vice president of marketing and communications, told News Now. “So at this point--knock on wood--there is no news. We’re keeping in touch with the branches. At this time, we are not in the evacuation zone. “We have normal staffing at the branches,” she added. “We also are fortunate that no employee homes have been damaged.”