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U.S. Central records 39M net loss in 2Q

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LENEXA, Kan. (8/3/10)--U.S. Central FCU recorded a $39.4 million net loss for second quarter, compared with a net loss of $475.4 million for second quarter 2009. Both figures are attributed mainly to other-than-temporary-impairment (OTTI) charges, U.S. Central said in its financial report for the quarter ended June 30. The financial report is on U.S. Central's website (use the link). In it, U.S. Central noted that prices on fixed income securities generally improved during the quarter, and projections of aggregate principal losses in its existing investment portfolio declined somewhat. However, loss projections for certain non-agency residential mortgage-backed securities (RMBs) worsened, requiring an additional $44.9 million in OTTI charges for the quarter. That compares with $487.3 million in OTTI charges for the same period in 2009. While accounting guidance requires OTTI charges be recorded based on securities' projected losses, U.S. Central also tracks actual principal losses on its portfolio. Actual principal losses on 65 of its impaired securities totaled $128.1 million during second quarter of 2010. Through June 30, actual principal losses for 71 securities totaled $396.8 million. Excluding OTTI charges, U.S. Central said it recorded net losses on financial instruments of $5.8 million for the quarter, compared with net gains of $3.9 million for the same period a year earlier. "Although accounting rules don't allow OTTI charges to be reversed when securities improve, it appears that overall expected credit losses declined "somewhat" during the second quarter. That is a good sign," said Bill Hampel, chief economist at the Credit Union National Association. "This report reminds us that the vast bulk of the actual losses that will be borne on securities held by corporates are yet to occur," Hampel told News Now. "Although U.S. Central has expensed about $7 billion in OTTI charges on its portfolio, through June it has only recorded actual losses of $400 million," he said. "This does not, however, mean the OTTI charges have over-estimated the actual losses. The actual losses just have not happened yet. They could end being around $7 billion, they could be much more, or they could be much less. Only time will tell." Assets as of June 30 totaled $30.2 billion, a decline of $4.9 billion, or 13.9%, from $35.1 billion assets recorded for Dec. 31, 2009. As of June 30, 2010, U.S. Central's regulatory capital ratio was 7.2%, compared with 6.9% on June 30, 2009. Its retained earnings ratio was 1.9%, compared with 1.8% for the period last year. Using actual capital balances as of this past June 30, U.S. Central's capital ratio and retained earnings ratio were 0.8% and 0.0%, respectively. Those compare with 3.8% and 0.0%., respectively, as of June 30, 2009.

Southwest Corporate OTTI losses increase

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PLANO, Texas (8/3/10)--Southwest Corporate FCU announced a net loss of nearly $20 million for the first six months of 2010, compared with a net income of more than $16.6 million for the same period last year. As a result, the corporate will be required to deplete members' capital accounts in July to eliminate the deficit. The $9 billion asset corporate said the net loss was primarily due to $31.6 million in other than temporary impairment (OTTI) charges recorded in April related to further deterioration of certain non-agency residential mortgage-backed securities since Dec. 31, 2009. Southwest Corporate recorded more than $1.6 million in OTTI charges in June, which was offset by other operating income of nearly $2.6 million. The corporate's net loss for the six months ended June 30 is partially offset by net operating income totaling more than $15 million. The July depletion of members' capital accounts increases the cumulative members' capital account depletion percentage to 77.62% from 72.68%. The corporate reported in its unaudited financial statements posted on its website members' capital accounts totaling $106 million minus the nearly $20 million retained deficit leaves $86.1 million in total regulatory capital. That amount is net of $4 million related to the portion of shares on notice that cannot be counted as regulatory capital as of June 30. The corporate's capital ratio is 1.03%. National Credit Union Administration rules and regulations require a minimum of 5%.

Mississippi mourns Rudy Dill former league president

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JACKSON, Miss. (8/3/10)--Rudolph "Rudy" Dill, former president of the Mississippi Credit Union League (now Mississippi Credit Union Association) died Saturday in Ocean Spring, Miss. He was 97. Dill served in the U.S. military from 1939 to 1961 in both the Army and Air Force, and earned two Purple Hearts. He entered the credit union industry after retiring from the military in 1961, first working at Keesler FCU, Biloxi, Miss., and later managing Mutual CU in Vicksburg, Miss. He was elected to the Mississippi league board in 1970 and was appointed league president in 1983. Dill spent 21 years on the league's legislative committee and helped organize 24 credit unions. In 1985, he was named was named CUNADATA Corp. League Executive of the Year. He retired as league president in 1989.

Hudson Valley files appeal in mortgage tax case

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POUGHKEEPSIE, N.Y. (8/3/10)--Attorneys for Hudson Valley FCU filed an appeal in a New York state appellate court, asking for reversal of a lower state court's dismissal of the credit union's challenge against the state's mortgage-recording tax (MRT). The challenge was based on the Federal Credit Union (FCU) Act's tax exemption for federal credit unions. The Poughkeepsie, N.Y.-based credit union's appeal was filed July 27 in the Appellate Division of the Supreme Court of New York. The original decision was rendered by New York Supreme Court Justice Judith Gische on May 14 and filed May 20. New York's Supreme Court is a trial-level court in that state. "Federal credit unions' immunity from taxation under the Supremacy Clause of the U.S. Constitution and the FCU Act prohibits the state's imposition of mortgage recording taxes on mortgages granted to secure loans made by federal credit unions to their members, regardless of how the Court of Appeals has characterized the tax for other purposes and in other contexts," said the appeal. The lower court "had reasoned in its dismissal that it was constrained to follow two decisions of the New York Court of Appeals that for purposes and in contexts unrelated to the impact of federal credit unions' immunity from state taxation, characterized the MRT as a tax on the 'privilege of recording' rather than as a tax on property. On this basis, the court determined that the state may continue to impose the tax," said the appeal document. The credit union had filed the suit on May 12, 2009 against the New York State Department of Taxation and Finance, Commissioner Robert L. Megna, and the State of New York (News Now May 24). It sought a declaratory judgment that the state may not impose the MRT on mortgages granted to secure loans made by the credit union because it is a federal credit union. Federal credit unions are federal instrumentalities and thus are immune from such state taxation under the Supremacy Clause of the U.S. Constitution, the credit union argued. It also noted that under the FCU Act, federal credit unions, their franchises and their intangible personal property, including mortgages, are exempt from "all federal, state, local and territorial taxation." "We hope and expect it will be a successful appeal for the benefit of the credit union and its members, and other federal credit unions and their members," Dale J. Lois of the Fishkill, N.Y.-based law firm Quartaratro & Lois, PLLC., one of the credit union's attorneys, told News Now Monday. Lois and Eli R. Mattioli of K&L Gates LLP law firm in New York City represent the credit union in the proceedings. Amicus briefs on behalf of the credit union were filed by the U.S. Department of Justice, Credit Union Association of New York, the Credit Union National Association, and the National Association of Federal Credit Unions.

N.J. CUs brace for interchange impact

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TRENTON, N.J. (8/3/10)--A Sunday article in The Times of Trenton, N.J., examines the federal financial reform bill signed last week by President Barack Obama--in particular, the bill’s interchange language and its impact on credit unions. Titled “Credit Unions Brace for Impact of Changes in ‘Swipe Fees,’” the article explains that the bill’s interchange provisions could force credit unions “to institute new fees for checking and savings accounts and reduce incentives for customers, hurting the general public who the bill is designed to protect.” “The consumers certainly did not win on this bill on interchange fees,” Paul Gentile, president/CEO of the New Jersey Credit Union League, told the newspaper. One provision in the new law requires the Federal Reserve to limit interchange or “swipe fees” that merchants pay financial institutions when their customers use debit cards, the league said. The fees must be set at a level “reasonable and proportional to the processing costs,” but it is unclear what those levels will be. That is why credit unions are concerned that the card networks that process debit card transactions will apply the new fee limit to all financial institutions, depriving them of funds needed to provide and oversee debit cards, the league said. “That could have a very significant impact on the smaller institutions that rely heavily on the income to cover the program costs to monitor fraud and to issue plastic,” Andrew Jaeger, CEO of the Credit Union of New Jersey in Ewing, told the paper. To read the article, use the link.

IUSA TodayI IN.Y. PostI note CUs service

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MADISON, Wis. (8/3/10)--The benefits of membership at credit unions were noted in articles Sunday in the New York Post and Monday in USA Today. Credit unions are “a quiet success story [that] remains largely unsung,” except for credit union members who “think they have the answer to what ails us,” the Post said in an article titled “Giving credit where credit (union) is due.” “I would rather do whatever it takes to finance through [credit unions] than go anywhere else,” Maureen Robinson, told the newspaper. Robinson’s mortgage application was initially rejected by Bethpage (N.Y.) FCU. But she then got her finances in order, reapplied and now is “comfortably paying off her first home loan,” the paper said. The Post also mentioned ads created by Connex CU, North Haven, Conn.; America’s First FCU, Birmingham, Ala.; and Boeing Employees CU, Tukwila, Wash., that are creatively showing how credit unions favorably compare with banks. A USA Today “Money” column briefly mentioned that credit unions are the best place for consumers trying to consolidate their debts. To read the articles, use the links.

NFCC One-fourth of consumers will opt-in on overdrafts

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SILVER SPRING, Md. (8/3/10)--Twenty-six percent of Americans surveyed say they intend to opt-in to overdraft protection in spite of there being a fee charged for the service, said the National Foundation for Credit Counseling (NFCC). Although most overdrafts from paper checks and automatic payments will continue to be covered (for a fee), consumers must now opt-in to authorize this service for ATM and debit card transactions made at a point of sale. “It is disturbing that this many people live so close to the financial edge,” said Gail Cunningham, NFCC spokeswoman. “Anticipating that they will overdraw their account, they are willing to exacerbate the problem by paying a fee to have their purchases approved. The real answer lies in examining the root problem and resolving it, as continued overdrafts can result in some significant financial damage.” As of Aug. 15, existing and new customers of financial institutions must sign up for overdraft protection before a financial institution is allowed to charge the customer a fee for clearing the transaction. If consumers do not notify their bank or credit union, they will not be covered. No action is necessary from consumers who do not wish to opt in. Industry studies show that the average overdraft fee is $27, with about half of the more than $37 billion generated in fees in 2009 coming from debit card and ATM overdrafts. Banks are anxious to retain these fees, with many having launched significant campaigns encouraging consumers to opt in, NFCC said. Credit unions can tell members to:
* Keep your check register current, recording all withdrawals and balancing often. Be sure to note all ATM and debit card transactions along with any paper checks written on the account. * Link your checking account to your savings account. In case of an overdraft, the money will be automatically taken from your savings with little or no fee attached. * Pad your checking account by carrying a balance that you will not likely exceed. Most people spend a similar amount each month. If possible, keep an extra $100 in your checking account to cover unplanned expenses. * Use technology. If your financial institution offers it, sign up for e-mail or text alerts that notify you when your balance is low. * Reach out to your creditors. If payment due dates do not coincide with paydays, contact your creditor and request a due date change. You may have to pay a little extra interest to cover the gap for the first month, but over time this step should help to organize your finances. * Get help managing your finances. Reach out to an NFCC member agency by going online at National Foundation for Credit Counseling (use the link) or to be automatically connected to the closest agency, call 800-388-2227. For assistance in Spanish dial 800-682-9832.
“Even though there may be a small embarrassment if a transaction is denied, the consumer should evaluate this inconvenience against the potential savings and value of solving the underlying financial issue that resulted in the overdraft,” Cunningham said. “Know that if you have already opted in, you can always cancel the program.” NFCC’s July Financial Literacy Opinion Index was conducted via the homepage of its website from July 1 though July 31 and answered by 2,089 respondents.

Davis to leave NACUSO

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NEWPORT BEACH, Calif. (8/3/10)--Tom Davis, CEO of the National Association of Credit Union Service Organizations (NACUSO), plans to step down from his position, effective at year-end. Davis plans to use the opportunity to “walk the talk” that he espoused while heading NACUSO and build collaborative businesses, NACUSO said in a release. Davis accepted his CEO position at NACUSO four years ago and has served on its board for 20 years. He will now serve as CEO of CUSO Development Company LLC. He also owns a management consulting firm, Davis and Company. While at NACUSO, Davis initiated the National Center for Collaboration and Innovation. Programs initiated through the center include a joint educational program on collaboration and network businesses, annual conferences with a focus on collaboration, a regional conference series featuring 3.0: The Next Generation of Collaboration, and regulatory advocacy for credit union service organizations. NACUSO has formed a search committee for Davis’ replacement. NACUSO, based in Newport Beach, Calif., is a trade association representing credit union service organizations.

Top 10 INews NowI stories for July (08/02/2010)

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MADISON, Wis. (8/3/10)--Regulatory reform topped July’s list of top 10 stories in News Now, with a story about the CEO of an Atlanta credit union shot and killed in a New Jersey park claiming the second spot. July’s top 10 stories are: 10. Voluntary merger, P&A guidance released by NCUA ALEXANDRIA, Va. (7/2/10)--The National Credit Union Administration on Thursday provided credit unions with background information on its purchase and assumption (P&A) and merger process and detailed the criteria that the agency uses to evaluate P&As and mergers. 9. CU loans, savings and asset trends see reversals in May MADISON, Wis. (7/6/10)--The Credit Union National Association’s monthly review of credit unions for May reflected three reversals in recent trends--in loans, savings balances and asset quality, according to a CUNA economist’s analysis. 8. Cheney on board, outlines priorities as CUNA’s new CEO WASHINGTON (7/6/10)--William “Bill” Cheney, who officially became president/CEO of the Credit Union National Association over the long holiday weekend--on July 5--says his first priority upon taking the helm at CUNA is to assure a smooth transition of power during this volatile time for credit unions. 7. Police say CEO threatened officer before shooting NEWARK, N.J. (7/22/10)--The CEO of an Atlanta, Ga., credit union threatened a police officer before being fatally shot in a New Jersey park Friday, according to a statement from the prosecutor’s office of Essex County. 6. NCUA announces CU liquidation, merger ALEXANDRIA, Va. (7/2/10)--The National Credit Union Administration on Thursday allowed Virginia Beach, Va.-based Chartway FCU to assume some of the assets and liabilities of Saint George, Utah’s, Southwest Community FCU, which was liquidated on Wednesday. 5. Cheney refutes American Banker CU criticism WASHINGTON (7/8/10)--Responding to a recent American Banker story on poor credit union performance, Credit Union National Association President/CEO Bill Cheney said that credit unions are “coping with today’s economic challenges and continue to shine.” 4. NCUA cautions CUs on home equity schemes ALEXANDRIA, Va. (7/19/10)--The National Credit Union Administration in a regulatory alert warned credit unions of potential red flags for home equity fraud schemes. 3. Four barred by NCUA from CU work ALEXANDRIA, Va. (7/21/10)--The National Credit Union Administration issued orders prohibiting the following individuals from participating in the affairs of any federally insured financial institution. 2. CEO of CU Atlanta killed by police ATLANTA (7/20/10)--The CEO of CU of Atlanta was shot and killed by New Jersey police over the weekend, according to local media reports. 1. CUNA: Final reg reform has some CU improvements WASHINGTON (7/16/10)--Following the Senate’s 60 to 39 vote approval of comprehensive financial regulatory reform legislation, Credit Union National Association President/CEO Bill Cheney said that credit unions would work with regulators to ease the impact that interchange provisions could have on their operations and members.

MBL cap lift long overdue says Calif. CUs

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ONTARIO, Calif. (8/3/10)--Lifting credit unions’ member business lending cap is long overdue, California credit unions told The Los Angeles Business Journal Monday. U.S. Sen. Mark Udall (D-Colo.) has proposed an amendment to a jobs bill that would raise credit unions’ cap to 27.5% from 12.25%. The Senate is expected to vote as early as this week on the measure, the publication said. The Credit Union National Association (CUNA) and credit unions support the amendment. Grace Mayo, CEO of Telesis Community CU, Chatsworth, Calif., said that the bill is “long overdue” because there are many credit unions that can and should be able to make business lending “a regular program.” An increase in lending could generate $694 million in small business loans in Los Angeles County over the next year, according to California Credit Union League data the publication cited. The league also estimated that the higher caps could create 7,500 jobs in the area. Of the 140 credit unions in Los Angeles County, about 53 engage in small business lending. The credit unions have about $3.2 billion in outstanding commercial loans. During the first quarter of this year, business lending was up 9.5% year-over-year at credit unions nationwide, while bank lending has declined, the Journal added. Some California credit unions, including Kinecta FCU, Manhattan Beach, plan to increase their business lending if the caps are raised. Paul Cleary, Kinecta vice president of lending, said he regularly receives calls from businesses looking for capital. Kinecta began offering such loans in 2006 but pulled back because of the economy. Kinecta wants to offer the loans again, and a higher cap would allow the credit union to dedicate more resources to lending, he added. CUNA has estimated that nationally, lifting the caps could free up $10 billion in credit and create more than 108,000 jobs.

CUNAs back-to-school advice featured in nations media

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MADISON, Wis. (8/3/10)--The Credit Union National Association (CUNA) provided some back-to-school money-saving tips for families to The Associated Press and CNBC.com Thursday. Phil Heckman, CUNA director of youth programs, suggested that parents allow their children to buy something extra for school with money left over after parents have bought school supply necessities. Some children may want to buy multiple items of clothing, but parents need to determine what their children really need--and prepare a list before heading to the store, the article said. The AP story also was picked up by several media outlets, including The Shreveport Times, Telegram.com, WSLS 10, The Northwestern, The Tuscaloosa News, Lubbock Online, and The Post and Courier. Other media noted the ways credit unions are helping students:
* Campus FCU, Baton Rouge, La., offers college students credit cards with low interest rates. Campus, which serves students at Louisiana State University, offers students free checking accounts that are linked to their student identification cards with online checking and bill pay (Walletpop.com Aug. 2). * Northern Star CU, Portsmouth, Va., received a Creating Excellence Award from Virginia’s education department for providing financial services to students at two local high schools through an in-school credit union branch. The credit union partnered with Portsmouth Schools to offer the services as a way to teach teens about saving. About 45 students and 18 school employees are members of the credit union (The Virginian-Pilot and Ledger-Star Aug. 1). Northern Star also awarded $1,000 college scholarships to several high school graduates.

CU System briefs (08/02/2010)

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* MECHANICSBURG, Pa. (8/3/10)--A software administrator at Mechanicsburg, Pa.-based Members 1st CU was arrested Monday and charged in the alleged hacking of the credit union's computers and embezzlement of nearly $90,000. Kim Allen Heim allegedly manipulated a test version of the credit union's software to generate changes in account records and transfer credit union funds into his private loan accounts, then moved the money from the account into his checking account (The Patriot-News Aug. 2). The scheme was uncovered in May 2009 during a routine system check when an employee noticed a 10-year car loan in Heim's name. The credit union does not allow car loans that long, said investigators. Heim was arraigned Monday on three counts each of theft by deception, unlawful use of a computer, tampering records and computer trespass. A preliminary hearing was set for Aug. 31 ... * DETROIT (8/3/10)--Closing arguments were made Monday in the trial of Timothy Dennis O'Reilly, 37, who is charged with murdering an armored truck guard during a Dec. 14, 2001, heist outside Dearborn FCU. If jurors determine that O'Reilly is guilty of murdering Norman "Anthony" Stephens, a separate trial will be held to determine whether O'Reilly should be sentenced to death or to life in prison. Michigan was the first state to ban capital punishment--in 1847--but the death penalty can still be imposed for certain federal crimes, such as murder during a bank robbery (The Detroit News Aug. 2) ... * BASKING RIDGE, N.J. (8/3/10)--Credit Union Mortgage Alliance Network (CUMAnet), a credit union service organization (CUSO) that provides mortgage origination and servicing to credit unions, has appointed Diane Johnson as president and Dirck Van Deusen as vice president, mortgage business development. CUMAnet, which originated in the northeast, has expanded to Washington D.C., Chicago and other markets. Johnson's goals include improving efficiencies and expanding CUMAnet's business on the brokerage side. Van Deusen's role is to raise overall industry awareness of CUMAnet (New Jersey Credit Union League's The Daily Exchange July 26-30) ... * HARRISBURG, Pa. (8/3/10)--Mike Casper, former Pennsylvania Credit Union Association (PCUA) board member and charter member of the Doehler-Jarvis Pottstown FCU (now Apex Community FCU), Pottstown, died July 29, at the age of 88. He was treasurer of the credit union for many years, said PCUA (Life is a Highway Aug. 2).Casper served on PCUA's board for 27 years, from 1957 to 1984, and was chairman from 1978 to 1980. He was a past president of the Montgomery County Chapter of Credit Unions. He is survived by his wife, a son and a daughter. Services are today ...