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CU System briefs (07/26/2012)

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  • MUNCIE, Ind. (7/27/12)--A Muncie, Ind., man went on trial this week in relation to the theft of $250,000 during a robbery three years ago at Industrial Centre FCU in Muncie. Stanley Dewayne Wills, 33, is charged with robbery, conspiracy to commit robbery, criminal confinement and theft. He faces nearly 32 years in prison. The incident occurred on May 27, 2009. One witness testified the holdup men held a gun so tightly to his forehead it left an indentation. Two other employees testified they believed the two bandits intended to shoot them. Also testifying was Wills' co-defendant, John D. Repass, 27, who pleaded guilty in April 2011 to armed robbery. He is awaiting sentencing (The Star Press July 26) …
  • LEXINGTON, Ky. (7/27/12)--The University of Kentucky FCU in Lexington, Ky., which is celebrating 75 years of service, announced it has reached its 50,000th member. It presented a $500 Visa gift card to the 50,000th member, Justin Epperson, who will attend the university this fall and plans to study electrical engineering. "Reaching 50,000 members is a huge milestone for us, and accomplishing this during our 75th anniversary makes it that much better," said David Kennedy, president/CEO of the credit union.  "We've enjoyed strong membership growth again this year, and we expect that to increase as the year continues.  We hear all the time how our members love us, and we have proven that by our growth and their continued trust in us" he added …
  • HARRISBURG, Pa. (7/27/12)--More Pennsylvania consumers are falling victim to a text messaging scam that has hit mid-state. Thousands have received text messages falsely claiming to be from Harrisburg, Pa.-based Belco Community CU. News Now reported earlier in the month on the scam (News Now July 12), which is now making another round, said (July 24). The scam texts say recipients' debit accounts have been deactivated and urges them to call a number, where a recording prompts them to enter their account number and personal identification number. Both members and nonmembers are receiving the messages. The station posted comments from dozens of viewers from as far away as Hawaii who said they had received them. Belco Community re-emphasized that it would never ask members for that type of information. It advised viewers to disregard the messages and call only listed numbers for banks and credit unions …

Court NCUAs Wall St. bank suits can proceed

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TOPEKA, Kan. (7/27/12)--A U.S. District Court judge in Kansas has given the go-ahead to continue a combined lawsuit filed by the National Credit Union Administration (NCUA) against RBS Securities Inc. and Wachovia Capital Markets Inc. over losses from mortgage-backed securities (MBS) the banks sold to the now defunct U.S. Central FCU and Western Corporate FCU.

The decision by U.S. District Judge Richard D. Rogers of the U.S. District Court for the District of Kansas was filed Wednesday in Topeka. Rogers supported NCUA on two key questions:

  • Whether NCUA had met the statute of limitations requirement in filing the suit with an extension of time, called an "extender clause";  and
  • Whether the agency had provided enough evidence to make a "plausible" claim of misrepresentation by the banks regarding the risk of the securities bought by the corporates.
"NCUA is pleased that the court recognized the central merits of our complaints and allowed the cases to move forward," said NCUA Board Chairman Debbie Matz Thursday. "The Wall Street firms that created and sold these securities materially misrepresented the inherent level of risks to investors," she said.

"We will continue to vigorously pursue these lawsuits, and the others previously filed. As liquidating agent for U.S. Central, NCUA has a duty to maximize recoveries from responsible parties, in order to limit losses to the federally insured credit union system."

The certificates in question were offered and sold to U.S. Central in 2006 and 2007, more than three years before NCUA filed the lawsuit on June 20. 2011. The banks had argued that NCUA had not met the required statute of limitations.

"But plaintiff (NCUA) was not appointed conservator or liquidator of U.S. Central until March 20, 2009 and, therefore, had littleor, as defendants allege, no time to assess whether to bring the claims it brings here, unless the time to do so was extended," said the judge in his ruling.

Rogers said the extender statute applies in NCUA's case.  "In cases involving ambiguous limitations provisions impacting actions brought by the government, courts generally construe those provisions in favor of the government," he wrote, noting that "when the sovereign elects to subject itself to a statute of limitations, the sovereign is given the benefit of the doubt if the scope of the statute is ambiguous."

Rogers said NCUA had not waited too late to file its suits. "Given the time it apparently took rating agencies to react to the delinquency and default data and the dispute between the parties concerning the time and ease of performing loan-level analysis, the court cannot say that it is irrefutably clear from this data that a reasonably diligent investor would have sufficient notice to file a plausible claim by March 2008," the court said in the ruling.

It also said government agencies such as NCUA could not have known the details of the offerings until after taking an entity into conservatorship, and the corporates could not have known at the time they purchased the securities that there were potential misstatements of fact or omissions of facts in the offering documents.

The court denied the banks' motion for dismissal of all of NCUA's arguments--except the agency's claim that credit enhancement statements in prospectus supplements of the MBS offerings were material and untrue representations. "The court does not believe the allegations in the complaint state a plausible claim that the alleged credit enhancement language was untrue and material."

The suit against North Carolina-based Wachovia was tied to actions it took before being taken over by Wells Fargo in a government-arranged sale in 2008.

U.S. Central and WesCorp in 2006 each purchased around $44 million in residential mortgage-backed securities from Wachovia, and U.S. Central bought an additional $112 million in Wachovia-underwritten securities that were originated by a third party, NovaStar Mortgage Funding Trust (News Now April 3).

NCUA has also filed similar lawsuits against Goldman Sachs & Co. and JP Morgan Chase.

N.Y. CUs grow make 695M in MBLs in 1Q

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ALBANY, N.Y. (7/27/12)--New York credit unions' growth rates for assets, savings (shares), members and loans outperformed national averages in the first quarter of 2012 while business loans increased 14.6%.

Credit union assets in the state grew more than 4% to roughly $60.37 million. Savings held at New York credit unions also increased more than 4 % to more than $52.17 million, according to the Credit Union Association of New York (CUANY).

The membership growth rate during the past 12 months for New York credit unions was 2.9%, exceeding the industry average of 1.9%. In the first quarter, more than 56,000 credit union members were added, bringing total membership to a record 4.68 million, said CUANY.

Outstanding business loans at New York credit unions increased 14.6% from March 2011 levels, with credit unions originating $695 million in member business loans in the first three months of 2012. During the same time period, outstanding small business loans at New York banks decreased, according to statistics from Callahan & Associates.

"As the numbers show, New York's credit unions have been doing a great job of working with small businesses to get them the loans they need--especially at a time when the financial crisis of the past few years has resulted in a reduction of available business credit from traditional banking outlets," said William J. Mellin, CUANY president/CEO, Credit Union Association of New York. "Credit unions have proven to be a viable solution to help fill the lending gap--not to mention a less expensive one--for small businesses looking to secure the credit they need to build and grow."

Legislation is currently pending in Congress that would allow credit unions to increase their business lending, and in turn, adding an infusion of much-needed credit into the small business lending market. It's estimated that, if passed, this provision would make approximately $13 billion in capital available and create 140,000 jobs nationwide in the first year at no cost to taxpayers, according to statistics from the Credit Union National Association (CUNA) .

"While this legislation would stimulate the economy, banks--which control about 95% of the business lending market--have been fiercely fighting its passage," Mellin said. "I strongly believe that the time has come for Congress to pass this bill for the good of our country's economy."

CUNA and credit unions are urging Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%.

Mass. league endorses Elizabeth Warren for Senate

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Massachusetts Credit Union League Board members and supporters pose with Elizabeth Warren in announcing the league's endorsement of her U.S. Senate candidacy. From left are Kathy Hutchinson, president/CEO of UMass 5 College CU; Judy Fredenberg, member Worcester CU; C. David Surface, president/CEO of St. Jean's CU; Mary Ann Clancy, general counsel and senior vice president, legislative affairs; Eugene Foley, president/CEO Harvard University Employees CU; Warren; David Plantier, president/ CEO, Mass Mutual Employees FCU; and David L'Ecuyer, president/CEO, Central One FCU.  (Photo provided by the Massachusetts Credit Union League)
WORCESTER, Mass. (7/27/12)--The Massachusetts Credit Union League Wednesday endorsed Elizabeth Warren in the U.S. Senate race in Massachusetts, saying that she will be a strong advocate to promote a level playing field for credit unions.

"Elizabeth Warren has been a strong and vocal proponent of the benefits that credit unions provide to working families across the Commonwealth and around the country," said Daniel F. Egan Jr., league president."It is our hope and expectation that Elizabeth will be a United States Senator who will ensure that credit unions and their members have an advocate in the Senate because the big banks in this country already have enough of them."

There are more than 200 credit unions in Massachusetts with over 2.5 million members, the league said.

"I'm honored to receive the endorsement of the Massachusetts Credit Union League," Warren said. "Credit unions have played a crucial role in the development of the middle class, both across America and within Massachusetts. The league and the credit unions that compose it provide valuable services to their communities. Credit unions serve their members more than viewing them as a source of revenue. That's why it's important to level the playing field for credit unions and the hard-working Americans who rely on their services."

Warren left the Consumer Financial Protection Bureau (CFPB) as special adviser to U.S. Treasury Secretary Tim Geithner on Aug. 1. Warren was long thought to be the frontrunner for the CFPB's top post, but a number of key Republicans opposed her for the CFPB position, raising doubts about her nomination clearing the U.S. Senate confirmation process (News Now July 28, 2011).

CUs Go for the Gold in time for Olympics

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MADISON, Wis. (7/27/12)--While Visa announced it is earmarking more than a quarter of its marketing budget this year to Olympics sponsorship in London, several credit unions are running promotions and activities of their own tied to the Summer Olympics. The Olympics opens today.

Some of them are:

  • Fulda (Minn.) Area CU, with $65.4 million in assets, invites all youth under 18 years of age to participate in a Free '"Go For The Gold"' Olympic-themed event Saturday. Kids can participate in carnival games, activity games and a Wii four-circuit event, create their own Olympic Medal and win door prizes. The first 100 youth in attendance will receive a Fulda Area CU water bottle. Participants in the events will be divided into several age groups. Each event will award a gold, silver and bronze medal in each age group.
  • Fairwinds CU in Orlando, Fla., ran a Visa promotion in April and May for a member to win a trip to the Summer Olympics in London (CU Insight July 24). Members of the $1.58 billion asset credit union garnered more chances to win, the more they used their Visa card.
  • VyStar CU, a $4.39 billion asset credit union based in Jacksonville, Fla., also is running a Visa credit card promotion through Aug. 31. VyStar plans to conduct the promotion every four years starting in 2016, with a different grand prize winner and guest going to each Summer Olympics (CU Insight July 24).
  • Mutual Savings CU, based in Atlanta with $68 million is assets, is making comparisons between its products and services and various aspect of the Olympics.  For example: "The 2012 summer Olympics will begin in London in the coming days. Athletes that have trained for the majority of their lives will gather to compete on the world's highest stage. Your financial path is very similar to that of an Olympic athlete and with Mutual Savings CU, you can achieve your peak performance. Let's take a closer look at the similarities."
  • Kelly Community FCU in Tyler, Texas, with $81.5 million assets, conducted a "Loan Olympics" from April through June, in which members who referred a current member or nonmember for an auto loan through the credit union received $100 as an award" (CU Insight July 24).
  • San Jose (Calif.) CU in July and August adopted an Olympic theme for it Kid$ Day$ promotions (CU Insight July 24). Kids can come to the $138 million asset credit union, which is decorated with an Olympic motif, and participate in Olympic-themed activities while learning about finances.
  • Timothy Cannon, president/CEO of 1st CU in Gainesville, Fla., with $47.9 million in assets, will attend the Summer Olympics in London his wife and two daughters ( July 22).

CUNA council white paper discusses juggling priorities

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MADISON, Wis. (7/27/12)--The operations and branch managers who keep credit unions' branch operations in motion typically are experts in juggling priorities, according to a new CUNA Operations Sales & Service Council white paper.

"Juggling Priorities in Branch Operations Management" is based on information gathered from a variety of sources, including six operations and branch managers at four credit unions.

The white paper explores the tactics used by managers to balance multiple demands. For example, operations and branch managers must meet member needs, nurture employees, reinvent processes, pursue strategic goals, introduce new initiatives and serve a critical role on special teams and task forces.

Operations and branch managers alike play a pivotal role in driving significant changes within the credit union, said the paper. In some cases, they may help drive these changes as part of teams working on special projects that impact culture, compensation, products and services, and front-line operations. In other situations, they are responsible for helping employees adopt changes in their daily work life based on initiatives driven by other managers, the executive suite or the board. In either scenario, they play a key role in making sure that plans turn into reality in day-to-day operations, the paper said.

"You have to be a visionary person who isn't stuck on 'the way we've always done it,'" said Laura Enquist, director of branches at $1.6 billion asset Spokane (Wash.) Teachers CU. At the same time, managers must be willing to make adjustments to new ideas until they work, or even abandon them if they don't improve.

The responsibilities of branch operations managers and branch managers also can vary, depending on the size and organization of their credit union. At smaller credit unions, a branch manager may even double as the branch operations manager. Small to mid-size credit unions may also combine the operation manager's role with other responsibilities, such as collections or compliance.

Operations and branch managers interviewed for the white paper said they believe the branch will survive the increasing emphasis on electronic interaction because members still want and need face-to-face interaction in some situations. At the same time, these managers recognize that as the number of branch transactions declines, the role of the branch will evolve to focus on relationships.

Finding the right balance will be crucial as operations and branch managers work to satisfy day-to-day demands with long-term priorities, the paper said.

"You're always going to have more than you can do on your priority list," said Marshall Pipkin, branch manager at $749 million asset Firstmark CU, San Antonio. "Be strategic in the ones you decide to attack."

Virginia CUs resilient in earnings growth

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LYNCHBURG, Va. (7/27/12)--Virginia-based credit unions advanced in virtually every aspect of their operations in the first quarter, with improved earnings and loan growth leading the surge.

"Virginia's credit unions continue their good work to serve the needs of their members," said Virginia Credit Union League President Rick Pillow. "The good news is that more consumers are discovering the benefits of credit union membership. With money to lend, better rates and service, and far fewer fees, credit unions are the consumer-friendly alternative to the nation's for-profit banks."

Virginia-based credit unions added 41,900 new members and 68,000 new share draft/checking accounts during the quarter. In the first quarter of the previous 10 years, the state's credit unions added an average of 26,000 new share draft/checking accounts.

During the six months ended March 2012, the state's credit unions added 141,000 new members, a rise fueled by Bank Transfer Day and positive media coverage throughout 2011.

Net income (return on assets) for state's credit unions was 1.21%, exceeding the national average of 0.83%. Virginia's first-quarter net-income figure reflected a four basis-point slip from the fourth quarter of 2011.

On the lending front, loan growth for the year ended March 2012, was fueled by spikes in credit card lending (12%), member business loans (MBL) (10%), and used auto loans (8%).

Nearly one-quarter of Virginia's 184 credit unions offer MBLs, representing balances of $810 million. Nationally, credit unions hold $39.7 billion in MBLs.

The Credit Union National Association (CUNA) and credit unions have been urging Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

Commercial banks still hold a majority of U.S. business loans, but the nation's credit unions are approving a higher percentage of loan applications, according to the Biz2Credit's small-business lending index.

Credit unions approved nearly 56% of such applications last month, compared with 47.5% approval among banks with less than $10 billion in assets. The study found bigger banks approved 11.1% of such applications.

Savings growth among Virginia credit unions continued to be concentrated in short-term, liquid accounts. Share draft/checking balances rose by 14% in the year ended March 2012, with regular shares and money market accounts logging 12% and 9% increases. Individual retirement account balances saw a small rise of 4% over the past year.

Virginia-based credit unions' delinquency and charge-off rates both stood at 1.08%. Delinquency and charge-off rates for state's banks are 2.48% and 1.96%, respectively.

Former mayor pleads guilty to defrauding CU

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TOOELE, Utah (7/27/12)--The former mayor of a Utah city pleaded guilty Monday to one count of felony bank fraud against a credit union.

Eric. A. Richardson, the former mayor of Cedar Hills, was charged in an equity skimming scheme involving HeritageWest CU, Salt Lake City. Heritage West CU is a division of Chartway FCU, based in Virginia Beach, Va.

"HeritageWest has cooperated fully with this investigation and we are pleased to hear that Mr. Richardson has accepted responsibility for his actions," said Bruce Bryan, regional president of HeritageWest.  "Our members should be assured that HeritageWest was an innocent victim in this scam, and that the credit union suffered no financial loss." 

Richardson resigned from his mayoral post two days before federal charges were filed against him in the U.S. District Court for Utah for allegedly submitting a vehicle loan application containing false information, with the intention of skimming money for other uses (The Salt Lake Tribune July 25)

Richardson allegedly signed a blank vehicle loan application in 2010 for $57,144.90 to purchase a 2009 Range Rover. He claimed a monthly income of $15,000 from a firm with which he was no longer associated, according to the court documents. The actual sales price of the vehicle was less than the loan. Richardson allegedly worked in partnership with convicted scammer Christopher D. Hales.

In pleading guilty, Richardson will receive a prison sentence of a year and a day, though the final amount of prison time is to be decided by U.S. District Judge David Nuffer. Richardson is to be sentenced Nov. 14, according to Heritage West CU.