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CU System briefs (08/05/2011)

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* WASHINGTON (8/8/11)--Reginald A. Clark, 42, a former accountant at Washington, D.C.-based Hoya FCU, was sentenced Thursday to 63 months in prison for the theft of nearly $220,000 from the credit union, which serves Georgetown University faculty, staff and families. He was convicted on Feb. 1 in a U.S. District Court in Washington of taking advantage of the credit union's internal computer system to steal funds between 2001 and 2003. The charges were bank fraud, wire fraud and making false entries in federal credit institution records. He also was sentenced to five years of supervised release. Kenard Walston, 40, a cousin of Clark from Norwich, Conn., pleaded guilty in June to making a false statement related to the case. His sentencing is set for Aug. 31. (Targeted News Service Aug. 4) … * DES MOINES, Iowa (8/8/11)--Robin T. Brooks Jr. was indicted by a federal grand jury in Des Moines, Iowa, on charges of bank robbery and weapons violations related to the May 13 holdup at Tradesmen Community CU in Des Moines. He already was facing charges in a state court for the crime. His trial in state court on charges of attempted murder, theft, and robbery will begin Aug. 22. Brooks is accused of hijacking a van during the getaway and ramming a police card with it. He was shot during the capture (The Des Moines Register Aug. 5) … * SYRACUSE, N.Y. (8/8/11)--Empower FCU, a $925.5 million asset credit union based in Syracuse, N.Y., has reached the 100,000-member milestone. It has been celebrating the milestone all summer with members through weekly drawings and announcements of winners on its website. The celebration will end with grand prize drawings on Sept. 9. "It means we are reaching a growing number of people with the benefits of credit union membership," said Empower President/CEO John Wakefield. Empower serves members through more than 2,000 select employee groups or associations … * PAULSBORO, N.J. (8/8/11)--Diane Delooff, CEO of Paulsboro, N.J.-based Research-1166 FCU, will retire, effective Sept. 2. Delooff has served the credit union industry for more than 30 years, first at RCA FCU in Harrison, N.J., and then at Research-1166 FCU, according to the New Jersey Credit Union League (The Daily Exchange and The Weekly Exchange Aug. 5). Delooff has been with Research-1166 for 22 years and oversaw its growth from $12 million to $16 million in assets …

New York governor signs subpoena bill into law

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ALBANY, N.Y. (8/8/11)--New York Gov. Andrew Cuomo has signed into law legislation that will establish stricter guidelines for creditors serving information subpoenas, a priority issue for the Credit Union Association of New York. The measure, sponsored by Assemblyman Joseph Lentol (D-Metropolitan) and Sen. Stephen Saland (R-Catskill/Hudson), was a priority issue because a number of credit unions have been inundated with information subpoena requests by law firms and debt collectors seeking to enforce money judgments. The new law will deter frivolous subpoenas by imposing record-keeping requirements on debt collectors giving both private parties and the state's Attorney General the power to seek fines against the worst offenders, said the credit union association. "On behalf of the association and our member credit unions, I applaud Gov. Cuomo for signing this important legislation," said William J. Mellin, association president/CEO. "Our thanks also go out to Senator Saland and Assemblyman Lentol for championing this bill in the legislature."

CMG Mortgage Insurance on solid financial footing

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SAN FRANCISCO (8/8/11)--Although the mortgage insurance industry in general has recently reported losses, CMG Mortgage Insurance Co. (CMG MI) issued a statement Friday reconfirming its financial strength and ability to originate new mortgage insurance. "Despite current industry stresses, CMG MI is on solid financial footing," said Kim Shaul, senior vice president and general manager of the company. "CMG MI leads the mortgage insurance industry in several key areas--ratings, risk-to-capital and delinquency ratios, and liquidity," she added. The company operates as a corporate joint venture between CUNA Mutual Insurance Society and PMI Mortgage Insurance Co. It provides private mortgage guaranty insurance to protect credit unions against potential losses from borrower default. "Because CMG MI works exclusively with credit unions, who know their members, our book of business performs at a higher level," she said. "Rating agencies have also recognized this strength as well as our successful record in loss mitigation." She cited several factors as evidence for the insurer's solid footing:
* The company is a stand-alone, incorporated entity with its own capital and staffing in a number of operational departments, including claims. * It has the industry's strongest risk-to-capital ratio of 19.7 to 1, as of June 30. * It benefits from expertise and synergies of two shareholders, including CUNA Mutual Group, which is currently rated "A" by A.M. Best. * As a separate legal entity, its investment grade ratings--"BB" from Standard & Poor's (S&P's) and "BBB" from Fitch Ratings--are based primarily on its own capital, operations performance and loss mitigation, independent of its shareholders. Its Fitch rating was affirmed in July. S&P's rating has been stable since February 2010. * It has the industry's lowest portfolio delinquency ratio--5.3% as of June 30 and an improvement from 5.6% on March 31. That compares with the industry average ratio in the 16% range. * It has a strong liquidity position, as of June 30, with claims-paying resources, backed by cash and readily marketable securities of $328 million. * It has $171 million in loss reserves for claims as of the end of second quarter. * Its 2-to-1 ratio of liquidity to reserves is one of the highest in the mortgage insurance industry. * Its delinquency inventory improved in second quarter, resulting in a favorable release of more than $8 million in previously established loss reserves.

Despite bailouts Wis. banks seek CU taxation

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PEWAUKEE, Wis. (8/8/11)--Despite huge taxpayer-funded bailouts during the past few years, Wisconsin banks are pushing to have credit unions pay more taxes, according to the Wisconsin Credit Union League. Many banks behaved irresponsibly, playing a role in causing the collapse of the economy, said the league in a press release. “Then they continued the abuse of American taxpayers by grabbing billions in bailout money when they themselves don’t pay taxes on their sizable profits, but incredibly, the Wisconsin Bankers Association (WBA) now is asking for more taxes on the working citizens of Wisconsin,” the league said. In a recent letter to Wisconsin’s congressional delegation, WBA asked for a tax increase on credit unions, institutions that have filled the void for loans to individuals and small businesses as banks have further restricted credit, the league said. The league noted credit unions already pay millions of dollars a year in taxes; and another tax would impact working Wisconsin citizens because they own the credit unions where they borrow and save. “The WBA’s outrageous tax increase plea is based on a hypocritical concern for taxpayers, its never-ending desire to legislate its competition out of business and fuzzy math,” said league President/CEO Brett Thompson. Thompson in a letter to the congressional delegation setting the record straight, said the WBA’s letter is a “sloppy effort to distract the public’s attention from banks’ lead role in the economic downturn and their subsequent gratuitous reach for hard-earned taxpayer money for their bailouts.” He also pointed out several statistics:
* More than 80 banks in Wisconsin do not pay federal or state corporate income taxes each year. But whereas credit unions return their profits to members, but these banks turn theirs over to a few shareholders. * In the past, Wisconsin banks earning billions in profits paid nothing or next to nothing in state income taxes by hiding their profits in other states. * Many banking executives have been handsomely rewarded via taxpayer bailout dollars, in spite of their poor performance.
“Last year, in Wisconsin alone, credit union members saved $203 million because of credit unions’ lower loan rates, higher savings rates and lower and fewer fees,” Thompsons’ letter stated, adding that WBA cites a “vastly inflated tax figure that might be collected from credit unions.” The banks’ number is dwarfed--nearly six times over--by the savings of credit union members, said the league. Credit unions also saved Wisconsin bank customers in 2010 because their competition helped to keep bank fees and rates in line,” Thompson continued. “America’s credit unions last year saved their 91 million members over $6.7 billion when compared to banks.” Thompson’s letter also pointed to a recent news report citing two prominent Wisconsin banks that paid little or no income taxes. In addition to the $269 million that credit unions saved for all Wisconsin consumers, credit unions have been doing all along what banks should be doing--but haven’t--to help consumers, particularly those suffering financial distress because of the economic downturn, Thompson said. He added credit unions have done so voluntarily precisely because they are cooperatives that focus on the needs of their member-owners. His letter cited 100 credit union branches inside Wisconsin schools that have encouraged young people to save almost $3 million, credit unions’ small-dollar loans that provide an alternative to high-cost payday loans, and their free financial counseling to help members.

How stock market woes may impact CUs

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MADISON, Wis. (8/8/11)--Thursday’s 513-point plunge in the stock market--the worst decline in nearly two years--could affect credit unions and their members. The Standard & Poor’s 500 Index fell to 1,199.38, down 7.2% from last Friday's close, its worst week since November of 2008 (MarketWatch Aug. 5). Many analysts said the dive was due to the failure of policymakers to stabilize financial markets and investors crumpling under the strain of a worldwide economic slowdown (The Wall Street Journal Aug. 5). What is the consumer-confidence effect of the market plunge on credit union members? “A little bit more than half of U.S. households have a direct or indirect interest in the stock market,” Mike Schenk, vice president of research and statistics for the Credit Union National Association (CUNA), told News Now. “The stock market going down affects net worth, consumer sentiment and the willingness and ability to spend money.” Historical data indicate that in situations similar to what happened last week people react with a lag and basically sell on the bottom--precisely when they shouldn’t be selling. “Usually the consequence is you see flight-to-safety flows, and that should cause demand for savings balances to go up at credit unions, and also banks,” Schenk said. Will a declining stock market impact credit unions’ pricing on loans and deposits? Deposit pricing keys off the Fed Funds rate, which was near zero on Friday to begin with, Schenk said. “At least one bank is charging customers for deposits--that basically is a negative interest rate in which customers are paying banks to take their money,” he explained. “No credit unions are doing this that we know of. “However, it is conceivable that credit unions that have seen really fast deposit growth may try to limit deposit growth in the current environment,” Schenk added. “Some credit unions that have already experienced fast deposit growth have seen net-worth ratios decline, and they may drop pricing even closer to zero.” Although Schenk doesn’t expect drastic changes in loan pricing by credit unions, mortgage loan pricing is determined by the secondary market and is near historic lows. Therefore, credit unions involved in mortgage lending will drop their rates, or ignore rate declines and basically originate mortgages for a short period of time or else significantly curtail mortgages, he said. Should credit unions do anything right now in response to a large stock market tumble? “It’s unwise to assume that this is the new normal,” Schenk said. “There’s a lot of uncertainty in the marketplace, but a lot of it has declined recently--more stability in the Middle East, fewer weather-related disasters, and the Japanese manufacturing supply disruptions have worked themselves out. “Our [CUNA’s] baseline view is that this is likely to be an extended soft patch--a slowdown in the middle of a sustainable economic recovery.” For CUNA’s Economic and Credit Union 2011-2012 Forecast, use the link.

CUs outperform banks on national customer loyalty metric

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CHICAGO, Ill. (8/8/11)--Credit unions are outperforming banks when it comes to maintaining member/customer loyalty, according to a nationally recognized customer loyalty metric. Credit unions have a 58% Net Promoter score, compared with 18% at banks, according to the Member Loyalty Group's second quarter credit union Net Promoter benchmark score. The group was created in 2008 to develop a common member loyalty benchmark for the credit union industry. It works with a partner, Satmetrix, to measure and compare member loyalty in credit unions. "The findings really validate what we in the credit union industry have seen time and time again, that members are significantly more loyal to their credit unions than bank customers are to their banks--and that translates to considerable, tangible business benefits," said Michelle Bloedorn, CEO of Member Loyalty Group, a credit union service organization based in Chicago. However, while this is good news for credit unions, "You can't assume just because you're a credit union, that you are also a loyalty leader," she cautioned. Individual credit union scores can vary widely. "In our benchmark study, we saw individual credit union Net Promoter scores range from as low as 19% to as high as 75%," she said. In 2010, "Consumer Loyalty in Retail Banking," a study conducted by Bain & Co., found that customers who are promoters stay longer with their banks, buy more products, refer more new customers and cost less to serve. Loyalty leaders enjoy a growth rate that is 10% greater and a cost of funds that is 80 basis points lower than banks that are considered price leaders, the study found.

CU staffer to co-host weekly finance TV show

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PORTLAND, Maine (8/8/11)--Dan Daggett, president of Consolidated Solutions, a subsidiary of Down East CU in Baileyville, Maine, will co-host a weekly finance TV talk show in the state. Recently, Daggett joined forces with Maine VideoOn Demand, an independent video production company based in central Maine, to co-host a new weekly show with Kim Lindlof of the Mid-Maine Chamber of Commerce. The show is called “Inside Maine Finance” (Weekly Update Aug. 5). The show focuses on topics related to finances, including credit unions and other financial institutions. The first program featured Bruce Poliquin, Maine state treasurer. The show airs on Time Warner Cable Channel 9 and online at www.insidemainefinance.tv.

CUNA Mutual New rules mean new risks for directors

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LAS VEGAS (8/8/11)--The increased personal risk exposure created by new fiduciary and financial literacy rules for directors of federally chartered credit unions also provides an opportunity to establish new practices to protect credit unions and their board members a CUNA Mutual Group product executive told a breakout session audience Thursday at the 34th Annual National Directors’ Convention. John Wallace, vice president of commercial products, described four keys to protecting directors’ personal assets, starting with a solid understanding of their fiduciary duties. The National Credit Union Administration (NCUA) in December finalized sections from its rules and regulations concerning federal credit union directors’ fiduciary duties and indemnification. “Federal credit union directors must carry out their duties in good faith and within six months of their election or appointment, they must also gain an understanding of ‘basic finance and accounting practices,’” Wallace said. NCUA also passed a rule on indemnification that strips federal credit unions of the ability to indemnify officials or employees for liability associated with misconduct that’s “grossly negligent, reckless, or willful” as deemed by a court in connection with a decision that affects the “fundamental rights” of credit unions’ members. This applies to decisions affecting members’ rights, such as with conversions and changing share insurance. In addition, NCUA “Rule 750” limits indemnification payments by credit unions. Recent actions by the Federal Deposit Insurance Corp. (FDIC) provide some context and might be a potential precursor for what credit union directors could face. As of July 6, FDIC authorized action against 248 individuals in connection with 28 failed institutions, seeking $6.8 billion. A second way directors can protect themselves is by establishing and/or broadening their corporate governance process, which Wallace defined as “a set of processes, customs, rules, policies, and laws that guide how an organization, like a credit union, is directed and controlled for the benefit of its stakeholders.” Examples include establishing a lead director on governance, a whistle-blower policy or a risk oversight policy. He also urged directors to consider their indemnification options to ensure alignment with the board's philosophy on risk. Indemnification is where the credit union agrees to reimburse an officer or director for expenses related to claims brought against them in their capacity as officers and directors. “Consult a qualified attorney to help you construct your indemnification agreements,” Wallace said. “This is particularly important given the newly adopted rule that limits indemnification.” Wallace recommended credit unions have directors’ and officers’ (D&O) liability insurance coverage to cover losses related to claims against the Wrongful Management Liability Act. Boards of directors should play an active role in establishing the type and coverage limits for D&O insurance, he added. Wallace also offered several other recommendations to help directors protect their personal assets and their credit unions:
* Conduct conflict of interest disclosures at least once a year; * Determine what risks the credit unions faces and ask for information to monitor that risk; * Think of opportunities to improve.
The 34th Annual National Directors’ Conference ended Friday.

80 Ohio CUs connect on Facebook

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COLUMBUS, Ohio (8/8/11)--Roughly 80 Ohio credit union have a presence on Facebook, according to the Ohio Credit Union League (eLumination July 27). Bryce Roth, marketing coordinator, at Vacationland FCU, Sandusky, said Facebook and other forms of social media offer two-way communication--where traditional forms of “broadcast” marketing and advertising allowed for only one-way messaging. “If you’re not in those places where you can connect with members, you really stand to lose in today’s environment, but if you’re there and you execute correctly you really stand to gain,” Roth told News Now. Vacationland FCU keeps its page lively with simple messages that any Facebook friend would ask--such as, “What’s for lunch?” or “What’s up this weekend?”--mixed with relevant financial and marketing information. “When members feel more connected to the credit union, then they feel more invested in it,” Roth said. “We strive to create an atmosphere that this is their page.” Social media also provides a great tool for organizing people, said Roth. Vacationland FCU uses Facebook as an extension of its Change Agent Squad community, a group of local high school and college students interested in giving back to their community. The credit union posts videos of the squad’s projects, alerts of upcoming meetings and ideas for expanding the program. Ohio University CU, Athens, posts first-person messages from its mascot, Cool Cat, as he makes his rounds throughout the summer. Posts include photos of Cool Cat exploring local attractions--which happen to be existing and potential select employee groups--and entertainment. Cool Cat is part of the credit union’s youth marketing campaign, which has tailored products and services for children of all age groups and financial education. Dover-Phila FCU, Dover, keeps its Facebook page lively with ticket giveaways, event updates, links to financial articles and photos of raffle winners. As a conversation starter, the credit union recently asked its Facebook fans if they opted for a “stay-cation” rather than a traditional vacation this summer. Midwest Community FCU, Defiance, shares ideas for managing personal finances through its social media presence. The messages support the credit union’s mission of improving the financial lives of its members and contribute to the organization’s image as a trusted resource. Among the topics Midwest FCU recently shared with its members on Facebook were “Six Ways to Save on Back-to-School Basics,” “Eight New Annoying Things Consumers Need to be Aware Of” and “How to Complain About Your Credit Card.” All four credit unions hold frequent contests to gain more followers. Contest prizes range from low-dollar gift cards to hot items such as iPads.

BECU introduces 12-year no-fee mortgage

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TUKWILA, Wash. (8/8/11)--BECU, with $9.1 billion in assets, Tukwila, Wash., has introduced a new 12-year, no-fee mortgage. The 12-year mortgage offers an interest rate comparable with a 10-year fixed-rate mortgage without closing costs or fees. “BECU’s vision is that qualified homeowners should be able to access these historically low mortgage rates,” said Bob Stroup, BECU vice president of member strategies. “The 12-year no-fee mortgage was designed for consumers with a low balance on their current mortgage who desire to have the financial freedom of owning their home in 12 years or less but have been reluctant to refinance to a lower rate because of closing costs and fees.” Features of the 12-year mortgage include:
* Used to refinance of a primary residence; * Has minimum loan amount of $35,000, with a maximum loan amount of $200,000; * Has maximum loan to value of 80%, including cash-out; * Involves no prepayment penalties; * Makes borrower is responsible for paying all fees and charges imposed by an existing lender; and * Makes borrower is responsible for payment of interim interest, property taxes and insurance premiums (if due).

North Carolina league dedicates new headquarters

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RALEIGH, N.C. (8/8/11)--About 150 credit union representatives
Click to view larger image At the ribbon cutting dedication Wednesday of the new North Carolina Credit Union League headquarters in downtown Raleigh, N.C., are from left: Credit Union National Association President/CEO Bill Cheney; league President/CEO John Radebaugh; league chairman Maurice Smith and the league board. (Photo provided by the North Carolina Credit Union League)
across North Carolina traveled to Raleigh, N.C., Wednesday to help the North Carolina Credit Union League dedicate its new headquarters location. Credit Union National Association (CUNA) President/CEO Bill Cheney made remarks at the event, which included an afternoon open house. NCCUL President/CEO John Radebaugh addressed the purpose of the move to the state's capital city from Greensboro, N.C., "Credit unions have told us for many years that advocacy is one of the most valuable things the league brings to the table. Relocating to Raleigh raises the visibility of the North Carolina credit union movement with policy makers," he said (Weekly Update Aug. 5). Cheney updated the group on the major legislative issues credit unions recently have faced or will face in the next several months. He thanked credit unions for their efforts on the debit interchange fees issue despite the fact a Senate amendment to delay the implementation of the Federal Reserve's final rules was unable to pass. "I won't sugarcoat it," Cheney said. "I wish the amendment [to delay the rule until further study of its impact could be made] would have passed." Credit unions still had a very positive impact on the process, he was quick to add, and the Fed's final rule was better than initially proposed. "I really wonder if the Fed's final rules would have been that much better even if the amendment would have passed," he said. Cheney's remarks also addressed efforts to push Congress to lift credit unions' member business lending cap to 27.5% of assets from 12.25%, supplemental capital for credit unions and other key issues. He also took questions from the gathering of credit union leaders. The league's directors joined Cheney and Radebaugh for a ribbon-cutting ceremony, and visitors toured the new league's new home the remainder of the afternoon. The new headquarters is located in Quorum Center, just three blocks from the office buildings of the North Carolina General Assembly. "This move centers our people with our purpose," Radebaugh said, "and will help credit unions be more effective in their grassroots efforts."

Ebron elected to North Carolina league board

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RALEIGH, N.C. (8/8/11)--Credit unions in the Northwest Chapter of the North Carolina Credit Union League (NCCUL) met in a special chapter session Tuesday and elected Tony Ebron as their representative on the league's board of directors. Ebron is president/CEO of Winston-Salem (N.C.) City Employees FCU. He won the director position previously held by John McGrail, who left the board in June after being named president/CEO of the Carolinas Credit Union Foundation (Weekly Update Aug. 4). Ebron hit the ground running as the chapter's new representative as he traveled Thursday to Raleigh for the NCCUL board's quarterly meeting, said the league. Also, the Piedmont Chapter is also in the process of choosing a new director to replace Bill Flowers, who retired. The chapter will meet Aug. 18 to select a new board representative, the league said.