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CU System Archive

CU System

Louisiana banks stir up battle against CUs in article

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NEW ORLEANS (3/4/08)--Louisiana's banks are stirring up the taxation debate in an article in New Orleans City Business (March 3) about the battle between bankers and credit unions. In the article, "Battle Lines," Shell New Orleans FCU and the National Credit Union Administration (NCUA) explain that credit unions deserve their tax-exempt status, based on their not-for-profit, democratically elected structure. It cites statistics from The Credit Union National Association (CUNA): Of the nation's $13.5 trillion in assets, credit unions make up 5.6% of the market, with combined assets of $760 billion. CUNA also notes there are more banks than credit unions--8,561 vs. 8,334, respectively. Datatrac, a Milwaukee-based market research firm, reports credit unions offer more favorable interest rates than banks for deposit accounts and most consumer loans and mortgage loan products, says the article. The banks claim that the tax exemption allows credit unions to lower their rates and provide unfair competition and that credit unions have lost sight of their original mission. Shell New Orleans FCU, which originally was chartered to serve employees at Shell Oil Co., has widened its charter so "we're now allowed to service anyone living, working, worshipping or attending school in Orleans or Jefferson Parish (County)," Michelle Duhe, CEO, told the newspaper. She noted that "our tax-exempt status is fair because we don't have a paid board. Banks have stockholders who receive dividends and a paid board of directors." The article also quotes the Louisiana Bankers Association and the American Bankers Association. To access the full article, use the link.

SECU payday loan alternative passes 1 billion mark

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RALEIGH, N.C. (3/4/08)--North Carolina-based State Employees' CU (SECU) has surpassed the $1 billion mark for cumulative advances on its Salary Advance Loan (SALO) program, a payday loan alternative. SALO's savings component has helped members, who had no previous savings, accumulate more than $13.2 million in savings. The program originated in January 2001 as a low-cost alternative to payday lenders charging exorbitant fees. So far SECU has nearly 100,000 members with the program, which saved them $145 million when compared with the cost of typical payday loans. Typical payday lenders charge an average of $15 per $100 borrowed, which cost consumers more than $150 million for $1 billion in loan advances. In contrast, $1 billion in advances on the SALO program cost credit union members $5.9 million. SECU's SALO program is a no fee, low interest 12% loan that allows members to borrow up to $500 per month and repay the loan with funds from their next paycheck. The savings feature automatically deducts 5% of the borrowed amount and places it in a savings account for the member to cover future expenses. According to Phil Greer, senior vice president of SECU's loan administration department, the program has "provided a viable alternative to members who were being taken advantage of by payday lenders. Not only has the credit union been able to save members millions of dollars in interest, we have given them a unique way to accumulate substantial savings and make a positive financial difference in their lives."

Iowa league CUs explore issues with CUs in Panama

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PANAMA CITY, Panama (3/4/08)--The Iowa Credit Union League (ICUL) and three credit unions traveled to Panama last week to discuss
Iowa Credit Union League CEO Pat Jury discusses the league's role in facilitating growth in Iowa credit unions during the Third International Seminar on Best Practices in Credit Union Operations last week in Panama City. (Photo provided by the Iowa Credit Union League)
issues facing Panamanian credit unions about growth and development, particularly regulation. The Third International Seminar on Best Practices and Credit Union Operations took place Feb. 23 in Panama City, with Iowa league staffers Pat Jury, CEO; Murray Williams, vice president; and Jim Niederhauser, director of credit union growth, addressing more than 70 people on league-related topics. The meeting was the latest in an ongoing relationship between the league and Corporacion Fondo de Estabilizacion y Garantia de Cooperativas de Ahorro y Credito de Panama, R.L. (COFEP). They have been partners in the World Council of Credit Unions' International Partnernships program for three years. WOCCU has assisted in the drive for credit union-specific legislation in Panama and shared branching since the partnership began. Attendees learned about ICUL's role in facilitating growth of Iowa credit unions, starting for-profit ventures and subsidiaries and using them to take advantage of economies of scale, and credit risk and its effect on loan portfolio value and quality related to international norms. New to the seminar this year was the CEO Panel, with ICUL Chairman Pat Drennan, CEO of First Gateway CU, Camanche, and ICUL board members Rick Benhart, EO of Collins Community CU, Cedar Rapids, and Mike Whittie, CEO of Federal Employees CU, Des Moines. Topics ranged from governance, marketing issues and growth strategies to daily CEO functions and the board/CEO relationship. The group also examined a key issue facing Panamanian credit unions: The regulatory landscape and the advantages strong regulations offer credit unions--an offshoot of previous efforts by the partnership's members, according to Victor Miguel Corro, WOCCU's International Partnerships manager. The delegates from Iowa also visited five smaller credit unions and learned of their challenges in evolving from closed-bond single-employer memberships to open-bond community-based ones. They took special note of credit unions' efforts to attract youth membership. They also visited two credit unions that may become involved in a direct credit union-to-credit union partnership.

Credit card issuers can take steps to mitigate risks losses

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NEEDHAM, Mass. (3/4/08)--Although the U.S. credit card industry faces a challenging environment in 2008, new research from TowerGroup points to steps issuers--including credit unions--can take to withstand the storm and recover more quickly when the economy normalizes. The TowerGroup research report, titled “Process and Data Risks in a Changing Economy: How Credit Card Issuers Can Protect Their Portfolios,” is authored by Brian Riley, a senior research analyst for the Bank Cards practice at TowerGroup, a research and advisory firm focused on the financial services industry. Existing models and metrics did not prepare issuers for the credit crisis that followed in the wake of the subprime mortgage collapse. To remain successful, card issuers must look deeply into each segment of their portfolios and react more quickly to the fast-changing environment, TowerGroup said. The most important message for card issuers in 2008 is that each segment of their member/customer base will behave differently. Tools that worked well before, such as linear regression models that follow the month-to-month aging of payment delinquency, have never been tested under the current extreme risk conditions, the report noted. In order to prevent systemic failure, credit unions and other card issuers must look at all functional processes to ensure that each business segment is tuned to the new environment. In the research, TowerGroup outlines five core challenges to the credit cycle:
* Changing Purchasing Habits--Diminished savings, lost home equity, increased debt, and higher unemployment means that U.S. card issuers must be ready for changes in card members' purchasing habits across every portfolio segment; * Changing Payment Patterns--Once industry darlings for their contributions to interest revenue, members/customers who carry a balance month to month must be scored more aggressively to assess risk; * Implementing New Tests for Risk Models--Revenue and risk models, along with the capacity plans that assess staffing requirements, are typically regression-based and volume-sensitive. Current business models have never been tested at higher delinquency rates; * Creating a Redefinition of a "Good" Customer--The definition of a profitable member/customer--traditionally, a card member who uses most of a credit line and revolves the balance, but with modest delinquency--can quickly change when that customer faces a stressed household budget. * Reacting to “Wild Card” Vulnerabilities--Traditional support mechanisms like domestic collection agencies and offshore call centers that work to collect overdue receivables will be subjected to stress as delinquency volumes rise. Issuers must try to anticipate where unexpected vulnerabilities might crop up.

IKiplingerWash. PostI CUs have the best deals

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WASHINGTON (3/4/08)--Credit unions have the best deals, beating banks in every category--consumer loans, mortgages and savings accounts--according to a recent survey conducted by Datatrac, a financial services firm, and reported in Kiplinger.com and WashingtonPost.com. As an example, the credit card interest rate issued by credit unions was 12.04%--2.5 percentage points lower than the average bank card (Kiplinger.com via The Washington Post.com March 2). Members of smaller credit unions can receive many of the amenities and services of larger organizations through shared branches and networks of surcharge-free ATMs, said Greg McBride of Bankrate.com. Membership in the country’s roughly 8,500 credit unions is generally less restrictive than it used to be, Kiplinger.com said. Eligibility in a credit union is available if a family member belongs, if one’s employer or spouse sponsors one, or if people live within the boundaries of a community-based credit union. Also if one works for the federal government or has a military affiliation, Kiplinger added.

CUs January loan-to-share ratio decreases

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MADISON, Wis. (3/4/08)--With savings growth outpacing loan growth, the loan-to-savings ratio decreased to 84.4% in January from 84.6% in December, according to the Credit Union National Association’s (CUNA) monthly sample of credit unions for January 2008.
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The liquidity ratio (the ratio of surplus funds maturing in less than one year to borrowings plus liabilities) rose to 18% in January from 17% in December. “The loan-to-savings ratio fell from its recent high in January as savings growth outpaced loan growth,” said Steve Rick, CUNA senior economist. “This indicates there will be a slight easing of liquidity pressure on credit unions. We expect this trend to play out through 2008. It will be another factor pushing down credit union earnings this year.” Rick mentioned some yearly trends as well. Credit union savings balances increased 0.43% in January 2008, the fastest January savings growth since 2004. Share certificate balances increased quickly, rising 2.08%--the quickest pace since 2001. Members continue to shun regular share accounts, which declined 1.8% in January and 7.4% over the last year. “On the loan side, real estate lending was the only category with growing balances in January,” Rick said. “Lower market interest rates increased fixed-rate mortgage balances by 1.74% and adjustable rate mortgages by 0.48%. Year-over-year, fixed-rate balances are up 17.4%, while adjustable-rate balances are up 12.7%,” he added. Credit union loans outstanding rose 0.2% in January 2008, compared with a slight decline in January 2007. “Other loans” led growth, rising 4.2%, followed by fixed-rate first mortgages and home equity loans, increasing 1.7% and 1.5%, respectively. Following the holidays, credit card loans outstanding decreased 1%. Also declining were new auto loans (0.8%), other mortgages (0.6%), and unsecured personal loans (0.3%). “While declining slightly in January, credit card loan balances are up 15.5% over the last 12 months, the fastest pace since 1996,” Rick said.
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Credit union savings balances rose 0.4% in January 2008, compared with a decline of 0.6% in January 2007. Certificates, individual retirement accounts, and money market accounts grew 2.1%, 0.7%, and 0.1%, respectively. Regular shares declined 1.8%, followed by share drafts (0.9%). In terms of asset quality, credit union 60-plus day delinquencies increased to 0.99% in January from 0.95% in December. The credit union movement’s overall capital-to-asset ratio remained at 11.5% in January. The total dollar amount of capital ended the year at $89 billion, an increase of 6.7% from one year ago.

CU System briefs (03/03/2008)

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* ESCANABA, Mich. (3/4/08)--U.S. Rep. Bart Stupak (D-Mich.) met with 225 members and guests at Great Lakes First FCU's annual meeting Feb. 9 and spoke about credit union taxation and other issues (Michigan Monitor March 3). Banks are increasing the pressure in Congress to tax credit unions, he said, adding he has received more visits from banking industry lobbyists pressing the issue than he did last year. He stated his long-standing support for the credit unions' tax exemption: "Credit unions have no unfair advantage over the banks and deserve their tax-exempt status," he told the group. He is one of 11 Michigan co-sponsors of the Credit Union Regulatory Improvements Act (CURIA), which he said would give credit unions more flexibility in many areas, particularly in member business lending. Stupak, left, is shown here with Great Lakes First FCU Chairman William Charon. (Photo provided by the Michigan Credit Union League) … * NORTHVILLE TOWNSHIP, Mich. (3/4/08)--The Michigan Credit Union League (MCUL) has named Rep. Joe Knollenberg (R-Mich.) as its 2007 Federal Legislator of the Year and State Rep. Andy Coulouris (D-Sagninaw) as State Legislator of the Year (Michigan Monitor March 3). The MCUL Board also named Matt Mika, legislative assistant to Rep. Tim Walberg (R-Mich.), as Federal Staffer of the Year, and Teri Ambs, legislative director to State Sen. Randy Richardville (R-Monroe), as State Staffer of the Year. Knollenberg, Michigan's 11th co-sponsor of the Credit Union Regulatory Improvements Act (CURIA), has been a staunch supporter of the credit union tax exemption and played a key role in helping the Credit Union National Association and the World Council of Credit Unions obtain funding for the Cooperative Development Program, said the league. Coulouris serves as chairman of the state House Banking and Financial Services Committee and has assisted credit unions with numerous measures … * BLOOMFIELD, Mich. (3/4/08)--Professionals, volunteers and members of T&C FCU are rallying to assist a branch teller whose home was destroyed by fire Feb. 26. The home of Keysha Griffin, a teller at the credit union's Ypsilanti branch, burned to the ground and she lost everything, said branch manager Christine Schulz, who added there's a question about how much insurance will cover on the home. A fund has been set up at the credit union. Checks should be made payable to Keysha Griffin Relief Fund, at T&C FCU, 2820 Tyler Rd., Ypsilanti, MI 48198 (Michigan Monitor March 3) … * METAIRIE, La. (3/4/08)--Jefferson Parish School Board Employees CU is changing its name to reflect its ability to serve the broader community, said Mark Rosa, president/CEO. The new name is Jefferson Financial CU. "We've got a new name, soon we'll have a new building, and most important, our membership is now open to all residents of Jefferson Parish (County)," he said. The credit union is the largest state-chartered credit union in Louisiana, with $140 million in assets. The credit union is the first in the state to receive a "residential group common bond" field of membership from the Louisiana Office of Financial Institutions, since OFI established new regulations last August, said the credit union …

Public Service CU to hire over 90 of Norlarco staff

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DENVER (3/4/08)--Public Service CU (PSCU) officials said that they have made formal offers of employment to more than 90% of Norlarco CU staff, after signing an agreement to purchase assets of Norlarco Friday. “Out of 104 employees, we identified 100 in good standing that will embrace and adapt to our business ethics and management principles,” said David Maus, PSCU president/CEO. “Of those employees, we were able to extend employment offers to 94%.” The purchase and assumption of Norlarco CU by Public Service CU, a $637 million asset, Denver-based credit union, closed Friday (News Now Feb. 28). Colorado state regulators placed Norlarco into conservatorship in May after a number of construction loans it issued in Lee County, Fla., became delinquent. In July, the National Credit Union Administration took control of the credit union and removed its board of directors (News Now Sept. 20). Norlarco's delinquent loans total more than $65 million, said a Colorado newspaper (The Coloradoan Nov. 27). Norlarco CEO Bob Hamer was among those not rehired. Only three employees, who were in good standing, and sought employment with PSCU, were not offered a position. Those individuals were provided with a severance package that included three months of salary and outplacement services, according to PSCU. “We feel fortunate to have such a large pool of local talent to help us move forward in a new direction,” Maus said. “We want to be the new, local, premier lender with the focus on our members, rather than Norlarco’s previous business model. We’re committed to serving our members and becoming an active partner in this community.” Employees will assume their new roles immediately, and there will be no interruption in service for the members, PSCU said. “With institutions of this size, combining operations and service will take a little bit of time,” Maus said. “However, there are some changes that members will notice immediately, such as more competitive rates, Saturday lobby hours and more favorable consumer lending options. We are committed to making this as easy and seamless as possible, and to keeping our members informed every step of the way.”