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Fed ELEP policy affects CUs 2 ways--CUNA economist

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WASHINGTON (12/17/09)--Federal Reserve policymakers' decision Wednesday to continue the policy of "Exceptionally Low interest rates for an Extended Period" (ELEP) will affect credit unions in two ways, said a Credit Union National Association (CUNA) economist. Those with strong loan demand will see an increase in net interest margins. Those with weak loan demand will see investments putting "significant downward pressure" on assets, said CUNA Senior Economist Steve Rick. Noting that economic activity has continued picking up and labor market deterioration is abating, the Federal Open Market Committee (FOMC) Wednesday kept the target range for federal funds at 0%-0.25%. That "is considered to be an emergency interest rate due to the financial crisis," said Rick. "The stance of monetary policy remains extraordinarily accommodative," Rick said about the decision to continue the ELEP policy. "This will maintain a steep yield curve for a while longer. Longer-term interest rates could rise further if financial market participants see short-term political pressure impairing the Federal Reserve's independence. This could push up inflation expectations and therefore longer term interest rates," he told News Now. "For those credit unions with strong loan demand, the steep yield curve should increase net interest margins as low-rate short-term deposits are used to fund longer-term higher-rate loans," he said. "Credit union average net interest margins rose to 3.23% in third quarter, up from 3.13% in the second quarter. The higher net interest margins should help credit unions cover loan chargeoffs and NCUA (National Credit Union Administration) assessments, and therefore earn their way out of the current financial crisis," Rick said. "Unfortunately, credit union loan growth has declined significantly since the beginning of the financial crisis in the fall of 2008. Credit union loan balances are up only 2.4% in the 12 months ending in October, the slowest pace since 1992 and below the last five-year average of 8.5%.," he added. The FOM noted in its statement that household spending remains constrained and faces many headwinds (weak labor market, modest income growth, lower housing wealth, and tight credit), Rick said, adding, "Until those headwinds become tailwinds, credit union loan portfolios will post small gains, with forecasts of only 3%-5% in 2010. "In the third quarter, credit unions responded to the ELEP policy by lowering their deposit interest rates enough to lower their cost of funds 14 basis points (1.63% in the third quarter versus 1.76% in the second quarter)," Rick said. "Low interest rates on savings, however, have not discouraged credit union members from increasing their deposit balances. During the first 10 months of 2009, credit union savings balances rose 10.3%, faster than the 6.2% reported for the similar period last year. "This has increased credit union liquidity and credit union investment portfolios," Rick noted. "Investment portfolios rose 30% over the last year, pushing up credit union investment-to-asset ratios from 26.3% in October 2008 to 31.3% in October 2009. This change in the distribution of assets from loans to investments is putting significant downward pressure on asset yields for those credit unions with weak loan demand." In addition to keeping the target range steady, the FOMC Wednesday said the Fed would ease the pace of purchasing securities and set dates for scaling back or terminating a number of temporary liquidity swap arrangements. To support mortgage lending and housing markets and to improve private credit market conditions, the Fed will purchase $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt, as well as gradually slow the pace of these purchases. It anticipates the transactions will be executed by the end of first quarter 2010. The Fed expects that most of its special liquidity facilities will expire on Feb. 1, "consistent with the Federal Reserve's announcement of June 25," the FOMC said in a statement after Wednesday's meeting. The facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility. The Fed will also work with its central banks to close its temporary liquidity swap arrangements by Feb. 1. "The Federal Reserve expects that amounts provided under the Term Auction Facility will continue to be scaled back in early 2010. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30, 2010, for loans backed by new-issue commercial mortgage-backed securities and March 31, 2010, for loans backed by all other types of collateral," the committee said. "The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth," it added.

Ohio U. CU launches SEG ambassador Web portal

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ATHENS, Ohio (12/17/09)--Ohio University CU (OUCU) in Athens is launching a new Select Employee Group Ambassador Web Portal to better manage the credit union’s roughly 65 select employee groups (SEG) Ambassador Program and enhance its SEG relationships. The SEG portal, was developed by the credit union marketing firm Profound Communications. “We are hoping that this will really enhance the value we bring to our SEGs,” said Laura Pratt, OUCU vice president of marketing. “[A SEG] is a partnership and we want to build on that partnership.” The portal includes the latest credit union news, the tasks ambassadors can perform and the rewards they can earn. Ambassadors each have a secure user login for the portal. The site tracks the points on their individual points statement. The portal also includes a task-reporting form and rewards-redemption form that allows ambassadors to manage their activities online. “We wanted to make it easy for our SEG ambassadors to keep track of their activities and make it easier for them to redeem rewards. We had a paper program and it's just been cumbersome,” Pratt said. “The self-reporting features will greatly improve our management of the program.” Ohio University CU is in the process of hiring a new SEG development coordinator to help it implement the SEG portal in early 2010. The credit union has $241 million in assets.

CU waives coin fee for kids donation

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NORTH TONAWANDA, N.Y. (12/17/09)--Niagara Regional FCU waived its usual coin sorting fee to help a group of children who donated their change to buy a new chair for the local fire department. About 60 second-graders arrived at the North Tonawanda, N.Y. credit union to exchange $151 in coins for dollar bills. The money was used to purchase a new armchair for the fire department. A local store manager had agreed to sell the chair to the children at cost (Tonawanda News Dec. 16). Donna Wick, Niagara Regional FCU CEO, was touched by the children’s donation. She decided to waive the standard fee of 4% for using the machine so the children could keep all the money they raised. She told the newspaper that it was “cool” to see the children come into the credit union. She lined the children up two by two so they all could use the machine. The children’s teacher, Patricia Froebel, got the idea to buy a new armchair after she saw the living area for the firefighters a few years ago. The furniture was in poor condition, she said. Niagara Regional FCU has $19 million in assets.

Frugal Vermonters have low delinquencies says CU

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BURLINGTON, Vt. (12/17/09)--Residents of Vermont have a reputation for being frugal, and recent data that track delinquent payments of auto loans, home loans and credit card bills support that perception, said a Vermont credit union. “When we look at our members who [are] lower income, they tend to have a lower delinquency rate than your average American,” said Jodi Harrington, marketing and member-services manager for Burlington, Vt.-based Opportunities CU (The Burlington Free Press Dec. 16). In general, Vermonters demonstrate “common sense and frugality” when managing their finances--character traits that help them maintain low debt burdens, Harrington told the newspaper. Only 0.65% of car loans in Vermont were more than two months delinquent in the third quarter, the paper said, adding that this favorably compares with a national delinquency rate of 0.81%, according to a report released last week by TransUnion LLC, in Chicago, which tracks auto, credit card and mortgage-debt performance. Opportunities CU has $28.5 million in assets.

CU System briefs (12/16/2009)

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* MANHATTAN BEACH, Calif. (12/17/09)--Kinecta FCU applauded U.S Rep. Jane Harman's (D-Calif.) vote this week opposing the Mortgage Bankruptcy Cramdown Amendment to H.R. 4173, which would have impacted credit unions and community banks. "The cramdown amendment would have impeded our ability to continue lending to our 225,000 members," said Kinecta President/CEO Simone Lagomarsino in a media statement Tuesday. "Credit unions did not make subprime loans, and during this economic crisis, we have diligently worked with our members offering loan modification programs to help them stay in their homes," Lagomarsino said. "Rep. Harman has been proactive in the community by supporting educational seminars to help people retain their homes and has recognized the negative impact this amendment would have had on the broader community." California and Nevada Credit Union Leagues President/CEO Bill Cheney noted Harman understands "the challenges facing our industry during this difficult time. We know it was a tough decision for the congresswoman, but her vote makes it clear she truly listens and responds to the needs of her constituency." The amendment was originally introduced to reduce foreclosures from the subprime crisis, but would have affected all financial institutions … * ST. LOUIS (12/17/09)--U.S. Rep. Roy Blunt (R-Mo.), a long-time credit union supporter, stopped by the Missouri Credit Union Association (MCUA) Dec. 14 to meet with representatives from 11 area credit unions (The Missouri difference Dec. 16). He is a candidate for the U.S. Senate seat currently held by Sen. Kit Bond (R), who is not running for re-election in 2010. Blunt thanked credit unions for their continued communication about financial legislation and agreed that more legislators need to learn the difference between banks and credit unions. "I have always valued my relationship with Missouri credit unions, and I hope you feel the same," he said, noting "this is a very crucial time in politics." (Photo provided by the Missouri Credit Union Association) * SIOUX CITY, Iowa (12/17/09)--Council Bluffs, Iowa, police have arrested a man with a hatchet who allegedly tried to rob Telco Triad Community CU twice Tuesday. Alert employees at the $65 million asset credit union noted the man wore wore a ski-mask and had something up his sleeve, and locked him out of the credit union both times. The second time, a nearby policeman followed him and arrested him. Police arrested Larry Eugene Burns, 21, of Denver, and charged with suspicion of conspiracy to commit robber, first-degree robbery and ongoing criminal conduct. He and a second man, James Lunsford, were also charged in connection of a robbery at a local bank at 2 p.m. Monday (Omaha World-Herald Dec. 16 and Dec. 15) … * OLYMPIA, Wash. (12/17/09)--Washington State Employees CU, based in Olympia, has opened its new headquarters downtown after six years of planning. The five-story, 130,000-square-foot building, which is near its old headquarters, was opened in stages, a spokeswoman told The Olympian (Dec. 16). The grand opening was Wednesday. The $1.4 billion asset credit union invested $65 million to buy the land. The old building will house the credit union's data center, with space available for leasing, and some retail space will be available in the new building, CEO Kevin Foster-Keddie told the newspaper. The new facilities include a 469-stall employee parking garage. It is a LEED certified silver, a rating set by the U.S. Green Building Council … * ALBANY, N.Y. (12/17/09)--GPO FCU employee Kristi Cieslak is the grand prize winner of FIS' "Did You Know" warehouse dash, reported Covera Card Solutions. FIS is Covera's card processing partner. The warehouse is filled with "awards" available to cardholders and includes items such as a MACbook air laptop, Movado watches, pearl and diamond earrings, an all-clad cookware set, a Sony Blu-Ray Disc home theatre system and more. FIS received thousands of entries in the campaign, which was created to drive credit union employee knowledge and promotion of FIS' credit/debit card rewards program, Scorecard. Cieslak is shown with GPO FCU CEO John Prumo, who surprised her with flowers as he shared the news she had won. (Photo provided by Covera Card Solutions) …

CUs holiday giving focuses on childrens needs

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MADISON, Wis. (12/17/09)--Many holiday giving activities at credit unions nationwide are focusing on helping children--from collecting warm winter clothing and toys to gathering cash donations. Some examples are:
* Associated School Employees CU, Youngstown, Ohio, donated 350 hats, scarves and gloves to the Head Start Program at Trumbull Community Action Program. Santa Claus presented the winter gear and cookies to each preschooler in the program. Head Start provides services to children with special needs.
Click to view larger image Associated School Employees CU, Youngstown, Ohio, donated winter gear to preschoolers at a local head start program. Santa Claus distributed the winter gear and cookies to the children. (Photo provided by Associated School Employees CU)
Click to view larger image Connecticut credit unions presented a check to the U.S. Marines for its Toys for Tots program. The credit unions raised $1,380 for Toys for Tots. From left: Corporal Ryan Roberts, U.S. Marines; Doreen Roy, president, Moran/Nixon Chapter, vice president human resources and public relations, Northwest Hills CU, Torrington, CT; Jim Howard, president, New Haven Chapter, branch manager, New Haven County CU, North Haven, CT; Betty Maurer, president, Hartford Chapter, president & CEO, Workers FCU, Stafford Springs, CT; Lance Corporal Alex Stock, U.S. Marines. (Photo provided by the Credit Union League of Connecticut)
* Connecticut credit unions raised $1,380 for the U.S. Marines’ Toys for Tots program. More than 135 credit union representatives and their guests also provided 300 unwrapped gifts and toys for the program. * The Kansas City Chapter of Credit Unions also donated to Toys for Tots (The Missouri Difference Dec. 4). * The Delaware County Chapter of Credit Unions in Pennsylvania donated $1,200 to the St. Vincent DePaul Society, and collected for Toys for Tots (Life is a Highway Dec. 3). Meadville (Pa.) Area FCU also is collecting toys for the Salvation Army. * Capital CU, Kimberly, Wis., is sponsoring giving trees in which members take a tag from the tree and buy the item listed for a needy child or family. The credit union also is donating the proceeds from its holiday money gift envelopes and is accepting cash donations. * Erie (Pa.) General Electric FCU sponsored a tree for a local festival. The tree’s theme, a spin-off of “How the Grinch Stole Christmas,” was “How EGEFCU Gives Back at Christmas.” The credit union also filled a sleigh with presents and decorated a tree with toys. The toys will be given to children at the St. Martin Center in Erie (Life is a Highway Dec. 8). * Security Service FCU, San Antonio, Texas, employees filled more than 100 stockings with toys and other items for ChildSafe, which provides services for child and adolescent victims of sexual abuse. * US FCU, Burnsville, Minn., donated 100 mittens and hats to the local Community Action Council’s Armful of Love program. The program has identified 1,300 needy families and will provide them with gifts and a meal. * Staff of the Pennsylvania Credit Union Association (PCUA) volunteered at a Coats for Kids telethon on Dec. 11. PCUA provided credit card machines, processed all payments and paid the interchange fee so 100% of contributions went to the Salvation Army (Life is a Highway Dec. 14). The telethon raised $232,119. * Rome, N.Y.-based AmeriCu’s five branches are offering several holiday activities, including Toys for Tots drives, a Salvation Army kettle drive and mitten challenge. The Herkimer branch also offered a “stuff the bus” promotion to gather toy donations Dec. 11.