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Startups creating more jobs than established firms

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KANSAS CITY, Mo. (12/5/12)--While credit unions advocate raising the member business lending (MBL) cap to help create more jobs at small businesses, a new report indicates that job creation and the hiring rate in firms less than two years old has outpaced job creation in more established firms.

The report, "Job Creation, Worker Churning, and Wages at Young Businesses," was released by the Kansas City, Mo.-based Kauffman Foundation, which specializes in entrepreneurship.

The study follows on other studies that "established the important role of startups and fast-growing young businesses in job creation and employment growth in the U.S. economy," said the report. It noted that "new firms and young businesses account for about 70% of gross job creation and disproportionately contribute to net job creation."

The current study, based on quarterly work force indicators in 28 states, finds that young firms, in the first two years of their lives "have higher job creation and job destruction rates than older firms. A substantial fraction of the job creation for young firms is due to the job creation that occurs in the quarter of starting up.

"However, there is substantial subsequent job creation as well as job destruction in the succeeding quarters in the first two years. The overall net job creation (the difference between job creation and destruction) is much higher for young firms than for older firms," said the report.

"Job creation rates for the youngest firms are twice those in the firm age range of two to 10 years, and four times as large as the rates for mature businesses (11-plus years old)," the report said, noting that  four out of every 10 hires at young firms "are for newly created jobs, much higher than in older firms, where the ratio fluctuates between 0.25 and 0.33."

Also, worker churn rate has slowed, which could indicate the economy is becoming less dynamic, said the Kauffman Foundation.  For workers with fewer opportunities to change companies and job roles, it will be harder for them to advance their careers and grow their earnings, said the report.

The report also indicated that the 2007/09 recession hit the youngest businesses much harder than the 2001 recession did. Despite being hit hard in the financial crisis, youngest businesses have had the most robust recovery, with their job creation rate growing from 0.18 to 0.23 between 2009 and 2011.

Credit unions currently have a limit of how much they can loan to small businesses--12.25% of assets. They are urging Congress to pass bills that would raise theMBL to 27.5%. The Credit Union National Association estimates that raising the cap would generate $13 billion in new funds for small businesses, which in turn could result in 140,000 new jobs the first year of enactment, at no cost to taxpayers.

For the full report, use the link.

WOCCU European CUs meet with EU policymakers

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BRUSSELS (12/5/12)--The European Network of Credit Unions (ENCU) and World Council of Credit Unions (WOCCU) met with policymakers in Brussels this week to discuss regulatory issues related to draft directives about data protection, the proposed pan-European banking union and deposit guarantee plans being considered in the European Union (EU).

Meeting at the Permanent Representation of Ireland to the European Union (EU) in Brussels this week to discuss draft directives for EU-wide legislation were, from left: Paweł Grzesik, NACSCU in Poland; Brian Branch, World Council of Credit Unions in the U.S.; Brian McCrory, ILCU, Ireland; Michael Taggart, Permanent Representation of Ireland to the EU; and Matt Bland, ABCUL, Britain. (Photo provided by World Council of Credit Unions)
"Everywhere credit unions are seeing increased regulatory burden," said Brian Branch, WOCCU president/CEO. He and Michael Edwards, WOCCU chief counsel and vice president for advocacy and government affairs, joined the ENCU delegation in Brussels. "While we believe strongly in rigorous prudential discipline and risk management, we need to constantly dialogue with policymakers to educate them about the proportionately high compliance cost of such rules for smaller and less risky credit unions," Branch said.

ENCU representatives included Matt Bland, policy and communications officer, Association of British Credit Unions Ltd.; Andrus Ristkok, president, Estonian Union of Credit Cooperatives; Brian McCrory, director, Irish League of Credit Unions; and Paweł Grzesik, Warsaw representative of the National Association of Co-operative Savings and Credit Unions in Poland.

The ENCU group visited representatives from the European Commission and from the European Parliament's Civil Liberties, Justice and Home Affairs Committee to discuss a new regulation that would help harmonize data protection laws in the EU's 27 member states and would require most organizations dealing with sensitive personal data to appoint a data protection officer.

Small and medium businesses with fewer than 250 employees would be excluded from the requirement unless they conducted regular and systemic customer monitoring as part of their core business.

The group sought clarification on the regulation's application to credit unions and suggested ways to achieve the regulation's objectives without unreasonably burdening credit unions. It emphasized to policymakers that financial services, not managing personal data, are the core business of credit unions.

In anticipation of Ireland becoming the EU president, ENCU delegates also met with Michael Taggart, financial services attaché, Permanent Representation of Ireland to the EU, to address proposed directives that would excessively burden credit unions.

The EU is seriously considering expanding authority of the European Central Bank and other EU banking supervision entities to directly supervise all banking institutions in the EU. ENCU and World Council representatives advocated having local, national regulatory bodies with day-to-day regulatory and examination responsibility to retain jurisdiction over credit union business activities, corporate governance and related activities. ENCU delegates noted to Taggart that credit unions do not operate on a cross-border basis, unlike systemically important commercial banks certain to be subject to increased EU-level supervision.

The delegation also addressed with Taggart the EU's forthcoming mortgage lending requirements, which would require significant training of credit union personnel. ENCU representatives stressed that credit unions not engaged in purchase-money first mortgage lending, which includes virtually all EU credit unions, should be exempt from such requirements.

The group also met with MEP Peter Simon, a key member of the influential Economic and Monetary Affairs Committee who is the rapporteur of the draft directive on an EU-wide deposit guarantee scheme.

Arizona CU ATMs offer prepaid gift cards

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PHOENIX and MESA, Ariz. (12/5/12)--Banner FCU in Phoenix and Better ATM Services, a technology provider in the ATM industry, Tuesday announced a partnership to provide an ATM-issued multibrand prepaid card, the myGIFT card.

The ATM-dispensed myGIFT One Card Many Choices Discover Prepaid Card allows consumers to shop at nationally recognized restaurant and retail stores including Macys, Lowe's, Outback Steakhouse, and Bonefish Grill. Cards are redeemable to buy goods and services at specific merchants that accept Discover cards.

During the pilot program, myGIFT cards will be available at walk-up Banner FCU ATMs at 11select Banner Health ATM locations throughout Arizona.

Technology-enabled ATMs, supplied and run by Express Teller Services for Banner FCU, will include a menu screen option offering consumers the prepaid card for purchase in addition to cash and other banking service options. The new ATM-dispensed card is made of a thin, durable material, allowing cards to easily pass through an ATM's cash mechanisms and works like any other prepaid card.

Early card sales will have an important impact on Arizona communities, said Better ATM Services. For every ATM-dispensed myGIFT Discover Prepaid card sold through March, fifty cents will be donated to Banner Health Foundation.

Earlier this year, three Arizona credit unions participated in a similar pilot program offering Visa's first ATM-dispensed gift cards. Credit Union West, Glendale; MariSol FCU, Phoenix; and Pinal County FCU, Casa Grande; began offering their members Visa gift cards at walk-up and drive-through ATMs (News Now Jan 12).

Calif and Nevada leagues elect board officers

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ONTARIO, Calif. (12/5/12)--Both the California and Nevada Credit Union Leagues recently elected new board chairmen at their annual meetings held in Las Vegas--Teresa Halleck and Wayne Tew, respectively.

Halleck, president/CEO of San Diego County CU (SDCCU), San Diego's largest locally owned financial institution, was re-elected as chairman of the board of the California Credit Union League.

Also elected to the executive committee of the board were Teresa Freeborn, president/ CEO of Xceed Financial FCU in El Segundo, as vice chairman; and Jon Hernandez, president/CEO of CalCom FCU in Torrance, City of Downey FCU in Downey, and Mattel FCU in El Segundo, as an at-large director.  

Halleck, with more than 20 years of financial industry experience, joined SDCCU as president/CEO in August 2010. Prior to SDCCU, she served as president/CEO of Sacramento-based The Golden 1 CU for nearly eight years. Under Halleck's leadership, SDCCU has continued to remain the top financial performer in San Diego. SDCCU's membership growth is roughly three times the industry average in 2012.

Halleck also has served on the California Department of Financial Institutions' Credit Union Advisory Committee. 

The California league represents more than 300 credit unions and more than 8.7 million members in California.

Tew, president/CEO of Clark County CU in Las Vegas, was elected as the Nevada Credit Union League board chairman. The other members of the board are:

  • Vice Chairman Eric Estes, president/CEO of Boulder Dam CU, Boulder City;
  • Treasurer Wally Murray, president /CEO of Greater Nevada CU, Carson City;
  • Director Dennis Flannigan, president/CEO of Great Basin FCU, Reno, Nev.; and
  • Director Barbara Reuter, president/CEO of Financial Horizons CU, Hawthorne.
Tew has served as president/ CEO of Clark County since 1986. He has served as chairman of the Client Group Board for SUMMIT Information Systems, a FiServ company that provides data processing software to credit unions throughout the world, and on the advisory board for American Share Insurance, the largest private deposit insurance company in the U.S.

The Nevada Credit Union League represents 14 credit unions and more than 193,000 credit union members in Nevada.

CU System briefs (12/04/2012)

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  • SHEBOYGAN, Wis. (12/5/12)--The former president of Midwest CU, a $3.8 million asset credit union based in Sheboygan, Wis., was sentenced Monday to one year in jail and eight years of probation in the embezzlement of more than $100,000 from the credit union. Sarah M. Gora, 33, of Mosinee, was also ordered by the Sheboygan County Circuit Court to repay $91,547 and will be granted work-release while in jail, with a portion of her wages going to the credit union (Sheboygan Press Dec. 3). Gora, in a plea bargain, pleaded no contest to one felony count of theft from a financial institution. An audit discovered stolen funds, falsified loan documents and the use of a company credit card for personal items and vacations. She was the only full-time employee at the credit union from June 2006 until March 2011. Gora allegedly put the stolen funds into a personal account at another credit union …
  • MARLBOROUGH, Mass. (12/5/12)--The Massachusetts Credit Union League's Financial Literacy Committee has announced the league will sponsor six college sponsorships to be awarded in late April to high school seniors. The scholarships are $1,500 each and will be awarded to one of each of the league's six chapters. Credit unions must submit their top three choices to their chapter president by March 19. The chapter's top entry must be submitted no later than April 9, said the league (Values & Visions December) …
  • SPRINGFIELD, Mass. (12/5/12)--The Massachusetts District Office of the U.S. Small Business Admiminstration (SBA) has named Springfield, Mass.-based Freedom CU as the top SBA 7(a) Lender in total dollars throughout Western Massachusetts (The Republican Dec. 3). In 2012, Freedom approved seven loans totaling $2.8 billion. Freedom's commercial loan officer, Bryan Kaye, accepted the award at a ceremony in Boston …

Media reports CUs want to lend to small businesses

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MADISON, Wis. (12/5/12)--Two newspapers, one on the East Coast and one in the Midwest, have reported that credit unions are eager and able to provide small businesses with loans to grow their businesses.

St. Mary's Bank in Manchester, N.H., the first U.S. credit union, has been lending to businesses for more than a century, so if federal legislators allowed it to lend more money to businesses, that would be right in the heart of its mission, Ron Covey, St. Mary's president/CEO, told the New Hampshire Union Leader (Dec. 1).   

The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' member business lending (MBL) cap to 27.5% of assets from 12.25% so that more loans could be made to small businesses. CUNA and credit unions say that increasing credit unions' MBL cap 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. (See related News Now article "Startups creating more jobs than established firms.")

If that legislation passes, St. Mary's could double or triple its business loan portfolio of roughly $90 million, Covey told the Union Leader. With less than 5% of the business loans in New Hampshire, credit unions would not be taking way large amounts of business from banks if legislation passed, he added.

The lifting of the MBL cap  is needed to bolster many small businesses in Wisconsin, Brett Thompson, president/CEO of the Wisconsin Credit Union League, told the Milwaukee Journal Sentinel (Dec. 1).

Many small businesses are increasingly looking to credit unions for their lending needs because they have seen their credit resources and lines of credit eliminated from their banking relationships, he added. 

Small businesses would be helped and the economy turned around at no cost to taxpayers if the MBL cap were raised, Thompson told the Journal Sentinel. Most business loans that credit unions are issuing are too small for banks to be interested anyway, he added.

The average size of credit unions' business loans in Wisconsin is $176,000. Many members who come to credit unions have been turned down by banks because they do not want to handle such a small amount of credit, Thompson told the newspaper.

To read the articles, use the links.

More CUs announce mergers

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MADISON, Wis. (12/5/12)--Mergers continue to reshape the credit union marketplace nationwide.

Mergers initiated or in the works include:

  • Safeway Los Angeles FCU, with $55 million in assets, Norwalk, Calif., has merged into $750 million Xceed Financial FCU, according to the Xceed FCU website. The merger was approved Nov. 7 by the National Credit Union Administration.
  • Detroit (Mich.) Metropolitan CU, with $452 million in assets, and $24 million asset Clawson (Mich.) Community CU have merged, with Detroit Metropolitan remaining as the surviving credit union (Observer and Eccentric Dec. 2). The membership of Clawson Community CU approved the merger Oct. 25.
  • Community First CU, with $143 million in assets, and located in Santa Rosa, Calif., has initiated a merger with $5.5 million Health Care Professionals of Napa (Calif.) FCU, according to the California Department of Financial Institutions (DFI) (DFI Monthly Bulletin October 2012).
  • National 1st CU, with $208 million in assets, Santa Clara, Calif., has announced its intention to merge with $140 million asset San Jose (Calif.) CU, according to the California Department of Financial Institutions (DFI Monthly Bulletin October 2012).
  • Valley First CU, with $410 million in assets, Modesto, Calif., will merge with $72 million State Center CU in Fresno, Calif., said the California Department of Financial Institutions (DFI Monthly Bulletin October 2012).
  • Eaton County Educational CU, with $32 million in assets, Charlotte, Mich., will merge into $2.2 billion asset Michigan State University FCU, East Lansing, Mich. (Lansing State Journal Nov. 30). Eaton County Educational CU membership must approve the merger. Regulatory approval is also required.
  • On a second vote, members of the Main Street Financial FCU, with $97 million in assets, Denham Springs, La., approved a merger with $283 million Jefferson Financial FCU, Metairie, La. Main Street will change its name to Jefferson Financial CU on Jan. 1 (The Advocate Dec. 3).
  • Credit Union of America, with $488 million in assets, has merged with $72 million asset First Choice CU. Both credit unions are located in Wichita, Kan. The credit unions merged data systems this week (Wichita Eagle Dec. 4).

League More Texans putting trust in CUs

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FARMERS BRANCH, Texas (12/5/12)--Texas credit unions continue to grow, with state membership in cooperative financial institutions nearing $8 million consumers, and that surge is a result of the trust credit unions have built in the minds of consumers, according to Dick Ensweiler, president/CEO of the Texas Credit Union League.

"Consumers want to do business with a financial institution they can trust," notes Ensweiler.  "Texas credit unions have experienced remarkable growth in 2012 because consumers appreciate the fact that credit unions put people over profit."

Texas credit unions have grown in membership more rapidly in the past nine months than at any time since the beginning of the recession, Ensweiler said. Through September, Texas credit union membership grew 3.3% for the year, outpacing the high water mark of 2.9% in 2008 and 2009.

"The current growth rate exceeds the national average of 2.7% and brings the total membership to 7.96 million Texas residents," notes Ensweiler. "At the current growth rate, membership in Texas credit unions could easily top eight million Texans by year-end."

Membership growth is also reflected in financial results. Texas credit unions' assets now exceed $76 billion. Members have added $2.8 billion to savings deposits in their credit unions since the beginning of the year.  Credit union loan portfolios have grown by $2.5 billion--to a consolidated $47.4 billion.

While membership, savings, and borrowing have increased, delinquencies and net charge-offs have decreased. Total loan delinquencies are 0.84% while net charge-offs are nearly one-half of one percent. First mortgages are better, with over 99.2% of all first mortgages in good standing.

"Texas credit unions are responsive to the needs of their communities, and their commitment to the financial success of Texas families has resulted in tremendous growth across the board," adds Ensweiler.

Boulder Valley CU assumes Indiana Members CU branch ops

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BOULDER, Colo. (12/5/12)--In a rare move for the credit union industry, Boulder Valley CU (BVCU) has assumed control of the Boulder, Colo.-based branch and equipment of Indiana Members CU (IMCU).

BVCU opened the branch Monday as a branch of BVCU and will continue service for IMCU's Colorado members. IMCU began encouraging its Colorado members to switch their accounts to BVCU in October so they would be ready for Monday's branch assumption. Staff at the branch will not change.

IMCU is a $1.4 billion asset credit union based in Indianapolis.  BVCU has more than $265 million in assets and is based in Boulder.

The agreement has several benefits to members and the credit unions, said BVCU. IMCU will see more efficient operations by focusing on Indiana only, while BVCU adds another branch location and obtains increased membership and loans.

Members of the new branch now have a financial institution with a local infrastructure and increased overall convenience, such as nationwide access to their money through more than 28,000 surcharge-free ATMs and more than 4,500 shared-branch locations; access to Mobile Banking apps; FREE BillPay; and BVCU's online eBranch and account opening services.

"This collaboration and cooperation between not-for-profit financial institutions are what makes credit unions unique and special as an industry," said Rick Allen, BVCU president/CEO.

Governor announces appointments to Ohio CU Council

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COLUMBUS, Ohio (12/5/12)--Ohio Gov. John Kasich has appointed Mike King, CEO of Genesis Employees CU in Zanesville, to a three-year term on the Ohio Credit Union Council.

The governor also reappointed to the council Vidya Iyengar, CEO of Marion (Ohio) Community CU, and Greg Kidwell, president of Pathways Financial, Gahanna, said the Ohio Credit Union League (eLumination Newsletter Nov. 28).

The seven-member council advises the Ohio Division of Financial Institutions (ODFI) about matters that affect state-chartered credit unions--including field of membership, regulation, examination, and safety and soundness issues.

It also confirms the annual supervisory fees that ODFI assesses state-chartered credit unions.

Other members of the council include: Christine Blake, CEO of Cardinal Community CU, Mentor; Gary Soukenik, CEO of Seven Seventeen CU, Warren; and Matthew Studer, CEO of Toledo Postal Employees CU, Toledo.

The council is chaired by Mike Wettrich, ODFI's deputy superintendent for credit unions.

NCUF grant combines fin ed movies

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SPRINGHILL, La. (12/5/12)--Carter FCU (CFCU), Springhill, La., has developed a financial education program that combines education with entertainment through partnerships with local businesses.

Carter FCU's Collaborative Financial Education Pilot Program combines education with entertainment. A CFCU volunteer distributes information on Biz Kid$ and tips for starting a business at a Biz Kid$ screening at Springhill Theatre, in Springhill, La.
In developing its Collaborative Financial Education Pilot Program, CFCU partnered with a local studio to film a series of financial literacy video trailers to be shown before movie features in a theatre. It also provided interactive workshops around Biz Kid$ financial education programming.

Biz Kid$ is the Emmy Award-winning and credit union-funded public television series that teaches kids about money management and entrepreneurship.

CFCU's program was launched this year with a grant from the National Credit Union Foundation (NCUF) to help increase its capacity for delivering financial education programming and expand opportunities to access financial literacy training and financial counseling in low-wealth and underserved populations in Northwest Louisiana and South Arkansas.

Two CFCU member businesses, Fairfield Studios and The Spring Theatre LLC, have partnered with the credit union to develop and implement the project by contributing services, products and funding. 

"Carter FCU's multi-faceted approach to financial literacy is great," said Lois Kitsch, NCUF national program director. "Plus, trailers are an integral part of the theater experience, which makes this such a clever way to reach moviegoers with a message that will resonate."

CFCU's pilot program includes three initiatives to deliver financial education and literacy training to target populations by increasing the number of trainers and venues available, specifically venues beyond traditional classroom settings.

The marquee of Springhill Theatre, in Springhill, La. displays information about an upcoming Biz Kid$ screening. (Photos provided by National Credit Union Foundation)
CFCU's first initiative was to establish a member volunteer training program. During the pilot phase, 10 member volunteers were trained and certified by the credit union to deliver financial education workshops and presentations in communities served by CFCU. The group was named the "Carter Federal Education Team" (CFET) and includes credit union members and employees. More than 500 people have received financial education training as a result of the initiative. 

CFCU's second initiative--its partnership with Fairfield Studios--created a series of educational video trailers that are shown in Spring Theatre, a local movie theater. The videos introduce financial literacy topics to age-appropriate audiences using a "Carter's Fun Facts About Money" concept. Filmed on location in the communities CFCU serves, the videos combine familiar surroundings, and social and cultural elements with financial literacy topics to peak interest and raise awareness among viewers.

Video titles include:

  • "A New Bike," targeted towards youth and shown before G-rated movies. It addresses careless spending and the importance of savings.
  • "Your Financial Future Preview," targeted towards viewers 21 years and older. It addresses the importance of retirement planning, savings and investing for the future.
  • "Looking Back Looking Forward," targeting a broad audience age 17 years and older. It is shown during PG rated movies. The script was written to address the financial literacy issues that are most relevant to CFCU members and its communities.
The trailers are also available on YouTube. Use the links

CFCU's third initiative is its partnership with the Spring Theatre LLC, to develop a financial education program that adds an educational component to its summer Kids Camp Movie Program and Senior Citizens Night. The initiative increases the financial literacy of up to 2,818 students ages five to 18 years and up to 3,000 senior citizens.