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WesCorp plans holding investments through recovery

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SAN DIMAS, Calif. (12/5/08)--WesCorp FCU has changed its benchmark pricing model on its assets to improve reductions on its balance sheet in light of the turmoil in the economic marketplace, according to its October 2008 Financials Summary. WesCorp’s net income for the first 10 months of 2008 totaled $48.6 million, said the summary. During October, it experienced a $7.4 million increase to retained earnings, comprised of $13.4 million in net interest income and $2.8 million in other operating income offset by $8.4 million in operating expenses and $0.4 million of PIC dividends. That’s $3.2 million above budgeted levels, WesCorp said. Third-party adjustments to the benchmark pricing model resulted in a modest improvement—to $1.7 billion from $1.8 billion in September--of WesCorp’s aggregate unrealized losses in its securities portfolio and hedge positions—a reflection of the markets remaining in turmoil. “We believe the depressed fair values of these investments are largely attributable to the dislocation in the securities market caused by the current illiquidity and credit conditions, and do not accurately reflect the underlying credit quality and likely performance of our holdings,” said the report. The majority of WesCorp’s portfolio continues performing well and retaining high ratings. “Since WesCorp has the ability and intent to hold those investments most impacted until a price recovery occurs or until maturity, those investments are not considered by management to be other-than-temporarily impaired,” said the summary. In March, WesCorp redesignated $9.7 billion in “available for sale” securities to a “held to maturity” classification. As of Oct. 31, these securities amounted to $9.3 billion. Of the $1.7 billion in unrealized losses, $653 million was related to held-to-maturity securities. The reclassification reflects WesCorp’s intent and ability to hold the securities to maturity, as well as the lack of an active market in the specific securities, the corporate said. WesCorp said it is continuing to conduct monthly cash flow analysis on its holdings and performing impairment testing quarterly, and is being proactive in seeking external validation of its due diligence. It noted that collateralized debt obligations (CDOs) still are returning principal and interest in full, but credit support has eroded. “As a result, we may record other-than-temporary-impairment related to certain of our CDO holdings at some point in the future, given the continuing deterioration and the stressed market environment.” WesCorp owns 10 CDO securities totaling $550 million--slightly more than 2% of its portfolio. WesCorp also moved to Level 3 pricing on some portfolio sectors at the end of March, in accordance with SFAS 157, and those conditions still persist, the corporate said.

CU System briefs (12/04/2008)

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* HAVERHILL, Mass. (12/5/08)--Northeast Community CU, a Haverhill-based credit union whose merger with Haverhill Bank was approved last month, is expecting an easy transition. Peter L. DiBenedetto, CEO of the credit union, told The Boston Globe (Nov. 30) he anticipates the transition will go smoothly because both institutions already use the same computer and home banking computer systems. He also noted both have “deep local roots in the community and hold similar values.” The credit union will convert to a bank before its merger into the bank. Haverhill Bank will retain its name. DiBenedetto will become president of the bank, while the current bank president will become CEO … * MADISON, Wis. (12/5/08)--Filene Research Institute is inviting credit union professionals who are 30 or younger to participate in an online survey to gauge ways to attract more potential young adult employees into the credit union movement. It will publish the results in early 2009. For more information, check out the headline, “A Survey for Whippersnappers,” on Filene’s website … * NORWOOD, Mass. (12/5/08)—A school vice principal who serves as the treasurer of Norwood School Employees FCU has resigned and is on paid leave while police and the National Credit Union Administration are investigating the credit union’s finances, according to The Boston Globe (Dec. 4). Stephen Shinnick’s resignation will be effective Dec. 20. Paul Bishop, information officer of Norwood’s Police Department, said accounting practices are being investigated and that an audit will begin Monday … * WAYNESBORO, Va. (12/5/08)--Louis Hausrath, former president and board member of the former Waynesboro (Va.) DuPont CU, died Nov. 29 in Waynesboro at the age of 87. Hausrath was a former president and a board member of the Central Virginia Chapter of the Virginia Credit Union League and on the board of the Association of DuPont Credit Unions (Daily News Leader Nov. 30) …

Flight to safety means deposits to Mississippi CUs

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JACKSON, Miss. (12/5/08)--Credit unions in Mississippi are seeing more deposits and members as consumers exit the stock market for more conservative investments, according to the Clarion-Ledger (Dec. 2). Mississippi Credit Union Association President/CEO Charles Elliott told the publication that the state’s credit unions have received additional deposits as a result of consumers’ “flight to safety.” Membership rose about 2% in the state and nationally, he said. Deposits at Mississippi Telco CU, a $99 million asset credit union in Pearl, rose $14 million to more than $88.5 million between January and the end of November, said President/CEO, Kevin Long. He told the publication the largest amounts came from existing members who pulled money from other investments and financial institutions. The deposits at Telco averaged $100,000 to $150,000, although Elliott noted some deposits at credit unions have topped several hundred thousand dollars. The newspaper also interviewed Steve Pollman, CEO, Magnolia FCU, Jackson, who explained the $82 million asset credit union’s growth was from new accounts, rather than large deposits, and a hairdresser who said she would move her accounts to the credit union. She had considered moving to Wachovia Bank, but when it was taken over by Wells Fargo, she became more leery. “I think my money will be more secure in the credit union,” she told the newspaper. The article also discusses the credit union difference in terms of structure and better rates and lower fees.

U.S. Central investments strategy firm

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LENEXA, Kan. (12/5/08)--U.S. Central has a strategy firmly in place for weathering the economic downturn’s impact on its balance sheet. While patience is a key part of that, it is not a “wait and see” strategy. “The Fed and the Treasury are consistently introducing new programs because the market continues to be frozen. As a result, U.S. Central is still reluctant to sell its securities while the market value is dislocated or not rational,” said David Dickens, executive vice president of asset liability management at U.S. Central. “This is evidenced by the continual rollout of new programs from the Fed and Treasury.” As of Oct. 31, U.S. Central had $37 billion of assets on its balance sheet. That’s off by $9 billion compared with October 2007, which had $46 billion on the balance sheet, Dickens told News Now. “We have let the investments mature off at 100 cents on the dollar. We can sell them early for 60 cents to 85 cents on the dollar, but we’re being very patient, letting the investments mature off instead,” he said. U.S. Central is making a “conscious decision not to reinvest so we can shrink our balance sheet. We’re projecting over the next 12 months additional maturities of about $5 billion more. That’s assuming we don’t sell bonds in addition to what matures. If we sell them, the reductions would be larger.” So what is U.S. Central telling credit unions and corporates to do to ease the impact of the economy on their own balance sheets? Individual, natural-person-based credit unions are making a lot of loans to their members, who can’t get them from other financial institutions in a tightening credit market. “Credit unions have a long history of making high-quality loans,” Dickens said. Corporate credit unions make few loans, but “they are very attuned to the liquidity environment,” Dickens said, adding, “They have a similar strategy (to U.S. Central’s). They are holding their balance sheet size steady or shrinking it.” The advantage of shrinking the balance sheet is that it raises capital ratios because there are fewer assets supported by capital. The past year has seen “a significant reduction in balance sheet size,” Dickens said. “But, we talk about the patience involved with investments we have that are good. It would be a very bad financial decision to sell into a dislocated market. A more prudent move is to let good investments pay down as they are scheduled to do,” Dickens said. The $9 billion reduction in the investment portfolio is not all due to repayments and paydowns. “We’ve also sold about $1 ½ to $2 billion in bonds, so we’re not just taking a passive strategy. We’re actively reducing holdings as opportunities allow. It’s not a wait-and-see approach,” he told News Now. And next year, it will be $5 billion smaller than today’s asset size. That’s part of our strategy. We have enough liquidity to weather through until the economic recovery arrives,” he added. U.S. Central’s financials for the month of October recorded net income of nearly $30 million, with year-to-date earnings at $75.9 million, according to the monthly financials report on its website. Net losses for the month totaled $1.4 million, with net unrealized losses on securities classified as trading, jumbo mortgage loans held for sale and SFAS 133 hedge ineffectiveness comprised most of the loss.

Branch gives hands-on experience to elementary students

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BIRMINGHAM, Ala. (12/5/08)--Community CU, based in Gadsden, Ala., has opened its fifth in-school credit union branch, this one at Albertville Elementary School, to provide hands-on financial experience to youngsters on how to make their savings accounts grow. They’ll also get experience at online banking.
Click to view larger image Working together on Gadsden, Ala.-based Community CU’s newest in-school branch in Albertville Elementary School are, on the left, Albertville teachers, principals and school board members and the mayor of Albertville, and on the right side, the credit union’s employees and AES students who will be branch tellers and runners as part of a class. (Photo provided by Community CU)
The 1,700 students at the school “will be able to make deposits at school each week, but can only make withdrawals at our main offices with their parents,” said Brenda Gunnells, Community CU branch manager. “We hope by learning how to deposit money into savings accounts, they will learn the value of saving money and be better prepared for when they become adults.” Once the money is deposited, the students can see it grow when they receive statements or go online to Students can mouse over to the CU-e icon and use their account number and password to log into their account, beginning their electronic banking education, Gunnells said. Students are trained as tellers, are led by a teacher and assisted by parent volunteers. At the end of each deposit session, students must tally the day’s deposits and reconcile them with receipts. The program is beginning with fourth graders, but other grades will be added in the next few months, said the $222.6 million asset credit union. According to the Alabama Credit Union League, Community CU is one of the league’s first REAL Solutions credit unions. “We are pleased to see the credit union making what will be a long-lasting impact with area students, as well as building relationships, and the league will continue to help the credit union with its outreach in the future,” said Adena Whitman Zamora, league director of public and political affairs. REAL Solutions is an Alabama league initiative in conjunction with the National Credit Union Foundation and other leagues.

Kansas CUs report strong quarter

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WICHITA, Kan. (12/5/08)--Kansas credit unions reported a strong third quarter, according to a Kansas Department of Credit Unions report issued this week. The report indicated that assets, loans and net worth were higher for the state’s 85 credit unions for the quarter, despite an increase in delinquencies (The Wichita Eagle Dec. 4). Kansas credit unions overall are strong and performing well in tough financial times, John Smith, department administrator, told the newspaper. Kansas credit union assets in the quarter totaled $3.29 billion--nearly a 12% rise from the third quarter of 2007, the paper reported. Total loans increased more than 9% to $2.29 billion in the same period. The net worth of credit unions also went up 5.7% to $388 million. Credit union membership climbed to 514,523 compared with 506,629 a year ago. For the complete story, use the link:

New York league announces marketing awards

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ALBANY, N.Y. (12/5/08)--The Credit Union Association of New York announced the winners of its 2007 Pinnacle Marketing Awards. The awards recognize credit unions that have designed the most successful and creative marketing campaigns throughout 2007. Campaigns are judged on clarity of their goal, creative execution, quality of production, and campaign results. “From calendars to college survival kits to annual reports, this year’s award winners clearly demonstrated how marketing planning, originality and results are key components to credit union success and growth,” said Camille Aleixo, association vice president of marketing and communications. Pinnacle awards were given in four categories: Membership Kits, Product Penetration, Annual Reports, and Best in Show. Membership Kits award winners:
* Polish & Slavic FCU, Brooklyn, for 2008 Calendar, non-agency--more than $501 million assets category; * CCSD FCU, Elmira Heights, for College Survival Kit, non-agency--$51 million to $100 million; * OPCS FCU, Orchard Park, for Membership Brochure, non-agency--$21 million to $50 million.
Product Penetration award winners:
* Quorum FCU, Purchase, for Spread the Wealth, agency--more than $501 million assets; * Buffalo (N.Y.) Metropolitan FCU, for Who Knew?, agency--$51 million to $100 million; * Oswego (N.Y.) County FCU, for Join Our Growing Family, agency--$21 million to $50 million; * Providers FCU, Syracuse, for Proud to be a Part of the Community, agency--under $20 million.
Annual Reports award winners:
* Quorum FCU, for Center of the Universe; * Sperry FCU, New Hyde Park, for Putting the Pieces Together, agency--$101 million to $500 million; * Capital Communications FCU, Albany, for Commitment, non-agency--more than $501 million; * Polish and Slavic FCU, for 30th Anniversary.
The Best in Show award winner was Quorum FCU for Spread the Wealth.

Commonwealth CU reports bogus checks

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FRANKFORT, Ky. (12/5/08)--Counterfeit cashiers checks bearing the name of Commonwealth CU are being used in various scams. The $827.8 million asset, Frankfort, Ky.-based credit union received calls from banks and credit unions in Pennsylvania, Iowa and Tennessee for verification on checks from Veridian Research drawn on the credit union. The amount of these checks is $3,590, said Gloria Thomas, Commonwealth fraud and loss prevention officer. The checks were payment for work performed from a research job to locate individuals who were entitled to uncollected (escheat) funds from the government, she said. The job was advertised in the local newspaper, and participants were instructed to call a telephone number for instructions to get started. This was followed up with a letter and the check. The scam is being run from Ontario, Canada. The address the scammers are giving is P.O. Box 978, Frankfort, KY 40622. The phone number they provided is 1-866-439-1658. The envelope has a postmark from Canada. The credit union also has received calls from Georgia for cashier’s checks in the amount of $1,998, which are part of a mystery shopping scam with a fake-check mailing. The check used carries the name and routing number of Commonwealth CU. The counterfeit checks have an incorrect logo and incorrect signatures.