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CU System briefs (03/11/2010)

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* ST. PAUL, Minn. (3/12/10)--Steven Lee Olson, 48, of South St. Paul, Minn., pleaded guilty in Minneapolis to robbing the Wakota FCU on Oct. 30 of $1,514. He admitted he robbed five other institutions--all banks in Minnesota and Wisconsin--between Sept. 25 and Oct. 21. He also said he tried to rob a sixth bank in St. Paul on Oct. 20, but the teller refused his demands for money, even though he pointed a handgun at her. He fled without the money. Olson was apprehended after the credit union robbery when a witness followed his car. His sentencing has not been set (Star Tribune March 9) ... * HOUSTON (3/12/10)--A former credit union manager was sentenced Wednesday in a U.S. District Court in Houston to 15 months in federal prison without parole for embezzling more than $56,862 from the former Saint John Vianney FCU (now San Antonio CU). Donna Gonzalez, 40, of Houston pleaded guilty on Oct. 20 to the embezzlement. She used her position to steal from dormant accounts between Sept. 22, 2006 and Feb. 22, 2008. She also was ordered to pay $56,862 in restitution to San Antonio CU. The prison term will be followed by a three-year supervised release (The Police News March 11) ... * MANHATTAN, N.Y. (3/12/10)--Two executives of Mount Vernon (N.Y.) Money Centers, a financial company that administered ATMs and provided armored car and payroll services, were indicted Wednesday on charges they stole $50 million from two credit unions, banks and other institutions. Robert Egan, 64, Bedford, the firm's president and owner, and Bernard McGarry, 50, Yonkers, chief operating officer, were charged with six counts of bank fraud and one of conspiracy. Among the victims cited in the indictment were Actors FCU and ADP FCU, as well as Webster Bank, Bank of America U.S. Bank, and New York Community Bancorp. The indictments said the two used clients' cash from the company's vaults to play the float and co-mingled clients' funds that were supposed to be kept in individual accounts. If convicted, each man faces up to $30 years in prison. (The Journal News March 11) ...

States vary widely on 09 loan growth--CU financial summary

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MADISON, Wis. (3/12/10)--The Credit Union National Association (CUNA) has compiled its state-by-state Credit Union Financial Summary--highlighting the financial trends of the past year for credit unions and gleaned from the National Credit Union Administration's final call report release of 2009. While the weak economy of the past 12 months continued the recent trends of depressed earnings, strong savings growth and weak loan growth , the latest state level financial summary report also shows there is tremendous variation across the country, said CUNA's economics and statistics analysts. For example, while loan growth overall was rather anemic (at 0.8%), several states posted loan growth on par with industrywide asset growth numbers. Arkansas in particular saw loan growth in the double digits--at 11%. In fact, each of the top 10 states in terms of loan growth outpaced the median asset growth (7.2%) of the country's credit unions as a whole. To access the financial summary for December 2009, use the resource link.

Missouri DOT tells 10 CUs to vacate offices

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JEFFERSON CITY, Mo. (3/12/10)--The Missouri Highways and Transportation Commission approved a staff recommendation Wednesday to sever ties with the 10 credit unions located in Missouri Department of Transportation (MoDOT) facilities in the state, according to the Missouri Credit Union Association (MCUA). The credit unions were told Jan. 21 that they would be required to vacate their locations by Sept. 30. They would no longer be able to process payroll and benefits through MoDOT after that date. Credit union employees were on MoDOT’s salary and benefits plan but credit unions fully reimbursed MoDOT for those costs, MCUA said. Following pressure from MCUA, state lawmakers and the Missouri Division of Credit Unions, the final proposal offered to the Highway Commission for approval extended the move-out date to Dec. 31, 2012, and included waiving billing for salary and benefits for one quarter--totaling about $325,000 for the credit unions. However, the credit unions were asked to begin paying rent on their space in MoDOT facilities beginning Jan. 1, 2011. The commission ratified MoDOT staff’s recommendation. At the commission meeting, representatives of MCUA testified on behalf of the credit unions and asked that the decision to sever ties with the credit unions be revisited. Legislators speaking on behalf of credit unions included: Rep. Tom Loehner (R-112), Rep. Mike Parson (R-133), Rep. Tom Shively (D-8), and Rep. Larry Wilson (R-119). Also attending were Rep. Paul LeVota (D-52) and Rep. Bill Deeken (R-114). Testifying on behalf of credit unions were Board Chairman Norm Beeman, District 4 Highway CU, and credit union members Jim Reser, Steve Torbet and Forrest Wrisinger. About 90 people attended the meeting. Peggy Nalls, MCUA senior vice president of public and legislative affairs, said: “We can find no logical, rational reason for this decision. MoDOT claims that it doesn’t know anything about running financial institutions. “They don’t have to; the regulators and NCUA, the insurer, take care of that,” she said. “MoDOT claims that credit unions are not part of their core transportation mission. Credit unions are an employee benefit,” she said. “MoDOT provides dry cleaning services and boot subsidies and any number of other employee benefits,” Nalls continued. “What’s the difference? The only reason we can see for MoDOT taking this action is that Gov. [Jay] Nixon told them to cut full-time employees. They cut employees that work for the credit union so MoDOT won’t have to cut their workforce and won’t have a reduction in personnel expenses.” MCUA CEO Rosie Holub called MoDOT to ask how it announced its intention to sever ties to the credit unions. “The first issue is a lack of inclusion of the state credit union regulatory agency on the impact of this decision on the safety and stability of the affected credit unions,” she said. “The Missouri Division of Credit Unions was neither informed nor consulted prior to [MoDOT] taking a course of action that displaces 10 independent financial institutions totaling $138 million in assets and 18,000 members," Holub added. “If any of these credit unions experience safety and soundness issues, it will be because of MoDOT’s actions and it will be their responsibility,” she said. “MoDOT’s actions are unconscionable.” MCUA will continue working with legislators and the governor’s office on the issue. It also will work with the credit unions, their MCUA assigned field representatives and the Missouri Division of Credit Unions to assist the credit unions through any transition. Credit unions affected by MoDOT’s decision include:
* District One Highway CU, St. Joseph; * District Two Highway CU, Macon; * Division Three Highway CU, Hannibal; * District Four Highway CU, Lee’s Summit; * District Five Highway CU, Jefferson City; * Division Six Highway CU, Chesterfield; * District Seven Highway CU, Joplin; * District Eight Highway CU, Springfield; * District Nine Highway CU, Willow Springs; and * Division 10 Highway CU, Sikeston.

First Tech Addison Avenue CUs to merge

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PALO ALTO, Calif. and BEAVERTON, Ore. (3/12/10)--The boards of Addison Avenue FCU, Palo Alto, Calif., and First Tech CU, Beaverton, Ore., have approved a merger agreement between the two organizations. The agreement is the first formal step in the merger process. State and federal regulators and First Tech members must approve the merger. Addison Avenue and First Tech are independently strong, well-capitalized institutions that are recognized leaders in innovative financial services delivery to the high-tech sector and individual, the credit unions said. Both institutions share a heritage in serving members from high-tech companies such as Hewlett Packard, Microsoft, Agilent, Intel, CH2M HILL and Nike. The combined credit union would have assets of $4.6 billion, 38 branches, and 320,000 members nationwide. It would offer members an expanded branch and ATM network and online offerings, and continue to offer a product line including mortgage, investment and insurance services. The continuing credit union would use Addison Avenue’s federal charter with the addition of First Tech’s fields of membership. The combined credit union would operate as First Tech FCU with corporate offices in Palo Alto, Beaverton and Rocklin, Calif. Tom Sargent, First Tech CU president/CEO, is scheduled to retire this spring. “As Tom’s retirement approached, our board sought a replacement who would lead First Tech with the same integrity, passion, and commitment to innovation that Tom has demonstrated at First Tech for 25 years,” said Carolyn Strong, First Tech board chairman. “During our search, we also explored other strategic alternatives and a partnership with Addison Avenue presented a great opportunity.” “This partnership is a tremendous opportunity to create more value for our combined membership and sponsor companies,” said Benson Porter, Addison Avenue president/CEO. “Both institutions share great similarities, starting with our strong member-centric cultures focused on serving the high-tech sector and individual.”

Minnesota lobby day shines light on CU priorities

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ST. PAUL, Minn. (3/12/10)--Acknowledging credit unions’ dedication to serving communities, members of Minnesota’s House and Senate leadership praised credit unions during Minnesota Credit Union Network’s (MnCUN) Credit Union Day at the Capitol Tuesday.
Click to view larger image During the Minnesota Credit Union Network’s Credit Union Day at the Capitol in St. Paul, state House Majority Leader Tony Sertich commended Minnesota credit unions for the key role they play as “stable institutions in our communities.” (Photo provided by the Minnesota Credit Union Network)
The annual advocacy event, which welcomed more than 130 professionals and volunteers, reminded elected officials that Minnesota credit unions’ priorities align with the state’s efforts to strengthen the local economy, said MnCUN. During the day, credit unions received political insight from several legislative leaders, including House Majority Leader Tony Sertich (DFL-Chisholm), House Commerce Committee Chair Joe Atkins (DFL-Inver Grove Heights), Senate Minority Leader David Senjem (R-Rochester), and State Rep. Debra Hilstrom (DFL-Brooklyn Center). Amid talk about jobs creation and the state’s dismal economic forecast, the legislators expressed appreciation for the support and assistance credit unions offer to Minnesotans throughout the state. “You all play a key role as stable institutions in our communities,” Sertich said. “I commend you for that.” Atkins applauded credit unions for their resilience during the recession, stating that they’ve “weathered the storm better than anyone else out there.” Senjem also acknowledged the contributions credit unions make to the quality of life in Minnesota. “You are part of what makes our state great,” Senjem said. “Know this--you’re a vibrant part of the state. Know that you have friends at the state Capitol.” The lawmakers also encouraged credit unions to continue telling their story at the state Capitol. Throughout the legislative session, MnCUN and credit unions work to provide elected officials insight into how proposed legislation will impact consumers and the credit union movement. With the theme “Serving Main Street, Not Wall Street,” this year’s Credit Union Day at the Capitol reminded lawmakers of the role credit unions play in serving “Main Street Minnesota.” During the day, credit unions shared real members’ stories that highlight credit unions’ efforts to help strengthen the state’s economy. “Currently, legislators are faced with difficult decisions as they work to lead the state out of the recession,” said Mark D. Cummins, MnCUN president/CEO. “During Credit Union Day, we were able to remind lawmakers that every day credit unions are doing their part to assist Minnesotans as they get back on their feet.” The event also offered sessions that discussed credit unions’ 2010 legislative priorities, social media advocacy and the legislative process.

Ohio public funds bill has second third hearings

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DUBLIN, Ohio (3/12/10)--Legislation in Ohio to include credit unions as a choice of depositories for public funds underwent its second and third hearings before the state House Financial Institutions, Real Estate and Securities Committee on March 3 and again on Wednesday, said the Ohio Credit Union League.
Click to view larger image Attending a hearing on Ohio's House Bill 317, which would include credit unions as a choice of depositories for public funds, were, from left: John Kozlowski, Ohio Credit Union League General Counsel; State Rep. Ted Celeste (D-Grandview Heights), Greg Kidwell, Members First CU CEO; and Grandview Heights Mayor Ray Degraw. Kozlowski and Degraw testified in favor of the bill.
Click to view larger image Ohio credit union leaders showed their support for Ohio legislation that would include credit unions as a choice for depositing public funds by attending a March 3 hearing on House Bill 317. A similar group also supported testimony on behalf of the bill in a hearing conducted on Wednesday. (Photos provided by the Ohio Credit Union League)
Testifying in favor of House Bill 317 and on behalf of credit unions on March 3 was Hardin Community FCU Matt Jennings and Board President Dick Wilcox. Each stressed the importance of community and choice, and the important role the credit union plays in the community and lives of the people in Hardin and Logan Counties. Hardin Community FCU is a $60 million asset credit union based in Kenton, Ohio. Also testifying on behalf of credit unions was Ray Degraw, mayor of Grandview Heights, located in central Ohio. DeGraw testified that the legislation would give his city a true choice of depositories and a local option within his community. League General Counsel John Kozlowski stated in his testimony that the league has long advocated including credit unions as eligible depositories for public funds and for their inclusion in lending and savings programs available through the Treasurer of State's office. Testifying in opposition to H.B. 317 was Scott McComb, president of Heartland Bank, and Joan Jones, president of Peoples Bancshares. Both advocated taxing credit unions to offset what they called credit unions' "unfair advantage" and to "level the playing field." Kozlowski, in his testimony, addressed that issue, saying that credit unions pay property taxes and payroll taxes, and state-chartered credit unions also pay sales and use taxes. He noted credit unions don't have an unfair advantage. "If this were true, why do credit unions have only 0.81% of the total assets in financial institutions in Ohio and hold only 6.7% of deposits in the state?" During Wednesday's hearing, the Ohio Bankers League and two bankers testified in opposition to the bill. They argued that credit unions had an unfair tax advantage and deviated from their original mission and that their common bond had eroded. They also suggested credit unions' interest in public funds stemmed from lack of liquidity and need for funds. Also testifying Wednesday in favor of the bill were Seth Michael, clerk of court for Jackson County, and Terry Scott, auditor for the city of Mount Vernon. They testified in favor of the choice HB 317 would present their public entities and noted the safety and soundness of credit unions. Knox County Commissioner President Bob White also submitted a letter to the committee on behalf of himself and two other commissioners stating they were in favor of HB 317.

Good to Great author keynotes The 1 CU Conference

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MADISON, Wis. (3/12/10)--Bestselling author Jim Collins will tell credit unions how to go from “good to great” at The 1 Credit Union Conference in Las Vegas July 11-14. Collins, author of “Good to Great: Why Some Companies Make the Leap...and Others Don’t,” will keynote the conference. The event is a one-time joint effort by the World Council of Credit Unions (WOCCU) and the Credit Union National Association. It combines America’s Credit Union Conference and Expo and the World Credit Union Conference. Collins is a former Stanford Graduate School of Business professor and management consultant. His book was on bestseller lists for the New York Times, Wall Street Journal and Business Week in 2001. It has been translated into 35 languages and has sold more than three million copies worldwide. His latest work, “How the Mighty Fall: And Why Some Companies Never Give In,” was released in May. Collins, who accepts few speaking engagements, will address his first credit union audience at the event. He is scheduled to speak during the Monday morning session of the conference. For more information, use the link.

CU Profile notes liquidity asset quality trends

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MADISON, Wis. (3/12/10)--Credit union liquidity increased and asset quality decreased, according to the U.S. Credit Union Profile report, the Credit Union National Association’s (CUNA) summary of National Credit Union Administration (NCUA) call report data released March 1. The profile report of edited NCUA data confirms the broad trends NCUA reported and also reveals some trends and details that were not highlighted by the agency’s news release, said Mike Schenk, CUNA vice president of economics and statistics. For example:
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* Credit union liquidity increased in 2009 as savings inflows exceeded loan growth by a wide margin. Savings grew at a doubledigit rate (+10.3%) while loans increased a modest 1.2%. Loan-to-savings ratios fell from 83.2% to 76.3% and the liquid asset ratio remained near 33%--about 10 percentage points higher than the level at year-end 2005. * Asset quality deteriorated marginally in the year as delinquencies jumped 0.45% (to 1.82%) and net chargeoffs rose by 0.37% (to 1.21%).
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While these increases were large, they paled in comparison to those seen in the commercial banking sector. U.S. banks saw year-end 2009 delinquencies rise to a stunning 5.37%, and bank net chargeoffs in the year were 2.49%--double the level experienced by credit unions. Credit union bankruptcies increased from 2.6 per thousand members in 2008 to 3.6 per thousand members in 2009. The 2009 level is nearly equal to the levels seen immediately prior to passage of bankruptcy reform in 2005. * Interest rate risks seemed to moderate if only slightly in 2009. Credit union long-term assets declined to 31.6% of total assets (from 31.9% in 2008). Credit unions sold more than half of their mortgage originations into the secondary market in 2009--which helped to keep this exposure at manageable levels. Also, core deposits rose slightly--from 36.2% of total deposits in 2008 to 36.9% in 2009. Share drafts grew 15.4% in 2009 and regular shares increased by 11.7%. While credit union rate-risk exposure moderated somewhat in 2009, the risks appear greater than they did four or five years ago, which will mean that interest-rate risk management will be a point of emphasis in the coming exam cycle.
CUNA’s Profile report also includes a snapshot of recent economic activity, which reflects strong fourth quarter growth, vastly improved labor market conditions, more stable home prices and tame inflation--obvious signs of progress toward a self-sustaining recovery, Schenk said. The profile’s economic outlook summary reflects economic improvement in 2010 but a continued steep yield curve--which will help keep credit union interest margins high. The prospect of faster loan growth, slower savings growth and obvious asset quality improvement later in the year are clear signs that the biggest challenges are behind us, Schenk said. To view the profile report, use the link.