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CU System Archive

CU System

Brand capital levels student loans spike ACUC interest

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BOSTON (6/24/09)--National branding, capital levels and students loans—not the corporate credit union stabilization plan—were the focus of questions to the Credit Union National Association’s (CUNA) senior management team during Tuesday morning’s general session at the America’s Credit Union Conference and Expo (ACUC). Fielding questions from attendees were CUNA President/CEO Dan Mica; Eric Richard, executive vice president and general counsel; John Magill, senior vice president of legislative affairs; Mary Dunn, deputy general counsel of regulatory advocacy; and Bill Hampel, senior vice president and chief economist. Among the questions and answers: Q: Would CUNA leverage the positive press credit unions have received through the recession to build a national brand to take credit unions to a new level in the public’s awareness? A: “I’m ready today,” said Mica. “America’s Credit Unions logo sells well and has been a huge positive force.” However, he noted, successful campaigns like the “Got Milk?” and “Pork, the other white meat” cost $40 million to $50 million a year with a minimum five-year commitment to be successful. In comparison, CUNA’s dues are about $20 million. An option would be for CUNA to prepare the ads and send them to the leagues to implement. Another option, he said: going viral, by using the Web and the Internet. Q: The capital level required is 7%. Where will the target for capital levels be in the future, and what’s the value of secondary capital? A: “I have revised my view and am now comfortable with 8-10% capital, instead of the original 7%-9%,” said Hampel. He doubted credit unions will have to increase their capital required, but does not expect a reduction either in required capital. “Credit unions will need alternative access to capital,” he said. Q: Is risk-based capital dead? A: “It’s not on a connected decline,” said Mica, noting that a survey on capital asked if credit unions would take external capital--such as offering a normally 4% CD at 5% to 6%, with part of it uninsured. “A percentage could be offered only to members and any other outside investments, but if you don’t offer both, it won’t be worthwhile.” He noted CUNA would try to get alternative capital measures passed. Q: With low interest rates today continuing down the road, will long-term low-fixed-rate mortgages squeeze credit union earnings down the road? A. Hampel said there is not much interest-rate risk unless international investors take out their money on Treasury securities. However, he urged credit unions to “be cautious when interest rates dip and refinancings pick up. Be careful not to have too many.” Q: Congress has been flooded with the administration’s proposals. How long can it continue at this rate without reaching exhaustion? A: Magill noted Congress can go forever at this rate and that the system is unlikely to break down. However, many measures—such as health care and energy--are on the front pages and costly. “Our challenge as credit unions is to come out on top of the heap. We have a 6% market share, so we can do well getting our message across.” Q: Federal student loans cost too much money compared with the commercial rate. As a result, student loans may not be profitable. A: “Congress is in mind to get out of the student loan business,” said Magill. “But it doesn’t want the private sector to offer student loans. We don’t have an answer,” he said but promised that News Now would update readers in the next few days. Q: Our credit union originates mortgages and we’ve been told to hold 5% to 10% of our mortgages. A: Mary Dunn said this is a priority for the administration to “make sure that originations don’t just sell downstream. We’ll work very closely with the administration to make sure credit unions won’t be at a disadvantage. Mica noted that when he visited the White House recently, the president orally stated that he intended to raise the capital requirement for every financial institution in the U.S. “This would have a profound effect on credit unions.” It’s one more area to review, he said. ACUC ends today in Boston. Follow the events via the ACUC weblog by News Now and the convention’s Daily Wednesday by using the links.

CUNA economists address net income pressure on bottom line

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BOSTON (6/24/09)--The overall economy has some good news, with a light at the end of the tunnel. But don’t expect boom times ahead because this isn’t a V-shaped recession, Credit Union National Association’s economists told America’s Credit Union Conference and Expo attendees Tuesday morning in Boston. In their session on the economy and its impact on credit unions, Bill Hampel, CUNA chief economist, and Mike Schenk, senior economist, presented a general overview of the economy and how that affects credit unions’ bottom lines and presented suggestions for getting through the tough times.
Click to view larger image CUNA Chief Economist Bill Hampel advises credit unions to keep their responses to the economy restrained and let their capital cushion do its work. He made the comments during a general session on the economy’s impact on credit unions at America’s Credit Union Conference Tuesday in Boston.
“Credit unions are collateral damage to the financial crisis and the recession. It wasn’t because of stupid stuff you did, it’s because of the U.S. financial markets in general. You have to take the hits, but the nasty effects are bottoming out,” Hampel told credit unions. He urged credit unions to be restrained in their responses and let their capital cushion do its work. “Avoid penalizing members with high fees and rate changes. Some credit unions that are in hard hit areas may have to make changes in loan policies,” Hampel said. Loan losses will eat net income but will back off later this year and next, and yield curves will get steeper, he said. But credit unions don’t need to run CD specials or pay higher rates. “Instead of a sale, tell members you have money to loan,” he said. Net worth is more important than net income, Hampel said. Credit unions ended 2008 with a capital-to-assets ratio totaling 10.8%. In 2009, it would reach 9.7% and by 2010, it would be 8.7%. “If we end the three worst years with a 9.7%, that’s not the worst place to be,” he added.
Click to view larger image Mike Schenk, vice president of economics and statistics and senior economist with the Credit Union National Association, outlined the general economic outlook for attendees at session at the America’s Credit Union Conference in Boston Tuesday morning. He noted that the Fed’s target interest rates likely will stay the same--near 0%-- throughout the middle of next year. (Photos provided by CUNA)
Schenk said there is good news in the overall economy. “Two or three months ago we were talking about whether the financial system we know and love would survive,” he began. “Today we see that the light at the end of the tunnel is actually the end of the tunnel and not a train. We still have a long, difficult and uncomfortable time ahead, but we’re on the way out.” He noted the rate spreads have declined but now the market is functioning more normally. “Since the downturn, we lost six million in jobs, and there are nine million who are underemployed (working part time). The rate of decline has slowed—that’s good news and says to us the worse is over.” Still, the unemployment rate is at 9.4% and will be at 10% this year and up to 10 1/2%, which means another 1 1/2 million people will be out of work by next year. He noted personal consumption is up and the majority of the economic indicators index is on the upswing. However, there are a few concerns. Net worth has declined within a short time, equities aren’t going anywhere and net worth won’t be changing dramatically anytime soon. In the housing sector, he noted, last year saw 1 1/2 million foreclosures, with another 1 1/2 million expected this year, “despite programs to soften the blow,” Schenk said. For more coverage, check out News Now’s blog and Credit Union Magazine’s Daily reports online. Use the links.

CUs have numbers that for-profits envy--Mica

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BOSTON (6/24/09)--Credit unions have numbers that banks and other for-profit financial institutions envy, said Credit Union National Association President/CEO Dan Mica Tuesday morning at America’s Credit Union Conference and Expo in Boston.
Click to view larger image Holding up Tuesday morning’s New York Times, Credit Union National Association President/CEO Dan Mica told America’s Credit Union Conference in Boston that the article compares credit cards issued by banks and credit unions. "It shows that banks don’t have to be ruthless, don’t have to punish their customers, and don’t have to charge higher fees and interest rates. They don’t have to because they can study credit unions and see how credit unions do it right." He quoted the article, which said "the whole system of credit cards ought to take a look at how credit unions do it." (Photo provided by CUNA)
Mica made the comments prior to a question and answer session with CUNA’s senior management and attendees. He discussed credit unions in the recession, credit unions vs. banks, and key legislative/regulative events impacting credit unions from Washington. Lending in credit unions is up. “Banks are good for credit unions,” he said. This recession is different because banks and for-profit institutions essentially shut down their lending and thus helped boost credit union membership, which is up by 1.6% He projected credit unions will have 100 million members in five or six years, but “if banks keep acting the way they do, (reaching that milestone) may be earlier.” Other points:
* CUNA is getting support for its efforts toward member business lending legislation. U.S. Rep. Barney Frank (D-Mass.) supports the issue, which is on the legislative schedule but not finalized for next year. “We’re going to get that legislation ready and if there’s an open time or day, with Frank’s support, we’ll move that through,” he told ACUC attendees. * Assets are up, largely because credit unions consistently beat banks in the area of consumer trust and fees. For 22 years, bankers' own surveys showed credit unions shining on consumer trust. "We won every year, so they stopped doing (the surveys)," he said. "They don't want another year where credit unions come out on top." Now, other groups have begun similar surveys and credit unions are at the top of those also. "Banks are as low as they've ever been," Mica said. Credit unions have the kind of delinquency numbers that the for-profits envy, he said. * Credit unions also are seeing a “newfound credibility” in Washington, which now has a “hyperactive” president and Congress pushing more bills and hearings. With the increase is an increase in the number of times CUNA has been invited to lend its expertise at a congressional hearing. “We’re getting invited more frequently—six times in the past five months. And we’re being asked, ‘How did you do it?’ and ‘Tell us how you did that,’” he said. * CUNA has seen successes in what has not happened in Washington, Mica said. There’s no CRA or cramdown this year, and CUNA has lobbied for a less dramatic interchange bill, and supported an independent National Credit Union Administration (NCUA). * “Corporate stabilization was a tough one, with a massive financial write-off for credit unions. About 80% of credit unions would have had a negative return on assets if legislation hadn’t passed,” he said. He also noted that if deposit insurance hadn’t been expanded to $250,000 from $100,000, credit unions would have been hurt dramatically. * Congress is attempting to determine whether there are too many corporate credit unions, whether there should be any corporates all all, or whether there should be corporates but with restrictions in transactions. A systemwide task force representing all groups in the Credit Union System is addressing the issue, he said. * A plan to regulate all financial products through a federal consumer financial product agency that would provide transparency, fairness, simplicity and access has “caught fire in Washington,” Mica said. “On their face, we are for these, but we have a very grave concern about how it’s done. Others have said a hands-down ‘no,’ but we’ll serve in good faith and reserve the ability to walk away from the table” if needed, he said. “This ship has left the dock. Everyone projects it will pass. If it passes as is, it is absolutely not what we want.”
For more ACUC coverage, check out News Now’s blog and Credit Union Magazine’s Daily reports online. Use the links. The conference ends today.

Follow ACUC live via blog (06/23/2009)

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BOSTON, Mass. (6/24/09)--Credit unions can get instant online coverage of the latest happenings during America's Credit Union Conference and Expo (ACUC) here via blogs, twitter, and daily stories in News Now and Credit Union Magazine's website. The Credit Union National Association (CUNA) conference kicked off Sunday and will end this afternoon. Leigh Gregg, CUNA online editorial director, will provide frequent convention updates on the America's Credit Union Conference blog produced by News Now. She also will tweet short news hits on News Now's LiveWire, a service through Twitter, as well as provide stories daily to News Now. Watch for the ACUC Daily and ACUC WEBLOG icons appearing on CUNA's website at www.cuna.org.

CU System briefs (06/23/2009)

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* SANTA ROSA, Calif. (6/24/09)--Redwood CU (RCU), Santa Rosa,
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Calif., was recently named “Best Credit Union” and RCU President/CEO Brett Martinez was named Best North Bay Business Community Leader” in a readers’ poll by NorthBay biz magazine, which serves business communities in northern California. From left are: Bob Steele, RCU board member; Mishel Kaufman, RCU senior vice president; Cynthia Negri, RCU senior vice president; Mark Michaels, RCU senior vice president; Robin McKenzie, RCU senior bice president, Joni Rosinski, Northbay biz vice president; and Anne Benjamin, RCU executive vice president and chief operating officer. RCU has $1.8 billion in assets. (Photo provided by Redwood CU) ... * PALO ALTO, Calif. (6/24/09)--Addison Avenue FCU, Palo Alto, Calif., has partnered with US solar systems maker SunPower Corp. to offer a loan program to make solar power systems more affordable (ADP News June 15). Addison will offer five-year loans up to $50,000 that will allow homeowners to use a 30% federal tax credit to purchase the systems. Interest paid on home equity loans also may be tax deductible. Those who purchase a residential SunPower system will also receive a rebate from SunPower at a rate of 30 cents per watt ... * OSHKOSH, Wis. (6/24/09)--Jean B. Kolodzik, 71, who helped establish Winnebago Community CU in Oshkosh, Wis., died June 18 in Oshkosh. Kolodzik served in several capacities at the Winnebago Community, including teller and acting vice president. She retired from the credit union in 2004. Winnebago Community has $54 million in assets ... * FARMERS BRANCH, Texas (6/24/09)--Dick Ensweiler, Texas Credit Union League (TCUL) president/CEO, and Karen Hart, TCUL chief financial officer, dueled in a bowl-off June 15 to raise money for the American Cancer Society. Ensweiler won the bowl-off. The league raised more than $2,100 from pledges and donations from TCUL board members and staff in care of Tom Hodge, TCUL vice president of sales and marketing; and Karen Houston, regional vice president of CU Employment Resources. A video highlight reel of the bowling event is available on TCUL’s website ...

Community Trust Self-Help CUs merge

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MODESTO, Calif. (6/24/09)--Community Trust CU, Modesto, Calif., has merged with Self-Help FCU, Durham, N.C. The two credit unions said the move was a proactive step to take advantage of each of their relative strengths (Modesto Bee June 23). By partnering with Self-Help, Community Trust will be able to expand its services to members and increase its positive impact on the Modesto-area community, Joe Duran, Community Trust’s CEO, told the newspaper. The merger with Self-Help will inject money into Community Trust’s balance sheets, tripling Community’s Trust’s net capital, Duran added. The merger was approved earlier this year by federal and state regulatory agencies, and Community Trust’s membership, the paper said. Community Trust has $42 million in assets. Self-Help, based in Durham, N.C., has $333.4 million assets.

White papers cover ACH usage CU asset size

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MADISON, Wis. (6/24/09)--Credit union professionals can receive tips to get the most out of automated clearing house (ACH) use in the first of two recently released white papers from the CUNA Councils. “ACH Payments: A Key Tool in Your Electronic Payments Toolbox,” from the CUNA Operations, Sales, and Service Council, analyzes this important time- and money-saving tool for credit unions. The paper looks at how ACH works and how it has evolved, its benefits and pitfalls, and future innovations. Also, it provides examples from credit unions that use ACH to originate and receive funds transfers. It illustrates how each credit union approaches the process a little differently, and includes tips for successful use. A second white paper, “Differentiating Credit Unions by Asset Size: Key Financial Issues,” examines the characteristics of credit union groups when asset size is the distinguishing variable. The paper, sponsored by the CUNA Chief Financial Officers (CFO) Council, was authored by Dr. Harold Sollenberger and Andrew Stanecki from Michigan State University in East Lansing, Mich. Using trends from the past four years, the paper arranges credit unions into six asset size groups and draws comparisons. It then offers analysis on key issues, including: member growth, deposit growth, loans-to-deposits patterns, asset quality, capital, earnings, operating expenses and liquidity. For more information, use the links.

Expert Retaining baby boomer CU members is critical

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BOSTON (6/24/09)--The retirement of the baby boomer generation will become a crisis for credit unions if they don’t act now, Jeff Hunt, consumer program manager at CUNA Mutual Group, told attendees at America’s Credit Union Conference & Expo Monday in Boston.
The retirement of the baby boomer generation will become a crisis for credit unions if they don’t act now, Jeff Hunt, consumer program manager at CUNA Mutual Group, told attendees at America’s Credit Union Conference & Expo Monday in Boston. (Photo provided by CUNA Mutual Group)
“The size and wealth of this generation means credit unions will face a membership drop of millions and an asset loss of billions if loss rates match up with historical averages,” Hunt said. “Replacing the boomer retirees with younger generations of members is just not possible in the short term. Generation X is too small and financially stretched, and Generation Y is too far away from their peak borrowing and earning years to fill the gap.” Hunt’s findings came from a study conducted by CUNA Mutual in 2008 to determine if and why boomers were leaving their credit unions and how to retain them into retirement. Using video of boomer interviews from the study, Hunt presented his case for why credit unions need to pay attention to this key demographic. Credit unions have long enjoyed high membership numbers among middle-aged adults. The 2008 CUNA National Member Survey shows 37% among those 45-64 years old. However, the percentage drops to 26% for those 65 years and older. “This makes sense given that the credit union business model was a good fit for middle-aged boomer members in their prime borrowing years,” Hunt said. “But with that generation hitting retirement and no one to replace it, either the model has to change or the generation has to stick around; or both.” The study results bear this out. When asked how likely boomers were to stop using their credit union in retirement, 17% of boomer respondents said they were somewhat or very likely to leave. While the percentage sounds small, it translates to a loss of more than 5 million members when applied to the estimated 33 million boomer credit union members. To retain these boomer retirees, the research suggests credit unions ultimately need to evolve from being mainly lending institutions for mid-life borrowers to retirement companies that offer a full range of solutions to boomer members. Hunt provided six steps to help credit unions manage this transition:
* Create an endorsed retiree product portfolio--Offer boomers the products they need in retirement, such as individual retirement accounts; income-oriented investments and annuities, Medicare-related products; and long-term care. * Talk retirement and never stop--Just like they have effectively with lending, credit unions need to market their retirement expertise, capabilities, and products all the time. * Build awareness in each channel--The communication channels should be where boomers want to read them, which includes statement inserts, brochures sent through the mail, e-mails with appropriate links, brochures and/or seminars at the branch or announcements on the credit union’s website. * Build retirement research centers--Boomers want to research and form an opinion before they buy a product; credit unions can help drive member purchases by becoming an information resource for their members. * Build purchase channels--Boomers have strong purchase preferences, and they won’t suffer through a purchase channel they don’t like. Credit unions should be flexible and diverse in their channel offerings understanding that boomers will make trade-offs based on experience, price and convenience. * Make the credit union their retirement advisor--Achieving the coveted position of a member’s retirement adviser requires every credit union employee to play a role, and ensuring they work as a team to be successful. The credit union itself should be seen as the adviser, not just the person with that title.
For more coverage, check out News Now’s blog and Credit Union Magazine’s Daily reports online. Use the links.

NJ CUs sponsor gubernatorial candidate dinner

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PRINCETON, N.J. (6/24/09)--New Jersey credit unions sponsored the New Jersey Business and Industry Association Employer Legislative
New Jersey Gov. John Corzine (left) and New Jersey Credit Union League President/CEO Paul Gentile at a dinner sponsored by New Jersey credit unions. (Photo provided by the New Jersey Credit Union League)
Committee’s 50th Anniversary dinner where incumbent Gov. John Corzine and Republican challenger Chris Christie made their first joint appearance for the general election campaign. During the event, New Jersey Credit Union League President/CEO Paul Gentile briefed more than 450 of the state’s business leaders and policymakers on the state’s 215 credit unions and their 1.2 million members. Not only are New Jersey’s credit unions a major constituency, but they are healthy, well-capitalized and ready to play a key role in the state’s economic recovery, Gentile said. “This was a great opportunity for us to get the credit union message in front of key lawmakers, business leaders and members of the media,” Gentile said. About 40 credit union leaders attended the event, the New Jersey League said.

Financial crisis accentuates CUs significance

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BOSTON (6/24/09)--In an era of historic credit and budget deficit crises and a global recession, credit unions’ relevance may never be stronger, an industry expert told attendees of CUNA’s America’s Credit Union Conference & Expo Monday.
Credit unions' significance accentuates in the economic crisis, according to John Lass, senior vice president, strategy, CUNA Mutual Group. Lass spoke during America’s Credit Union Conference and Expo Monday in Boston. (Photo provided by CUNA Mutual Group)
“There’s no doubt that spread pressures, corporate stabilization expenses and potential regulatory oversight changes are stressing credit unions,” said John Lass, senior vice president, strategy, CUNA Mutual Group. “But credit unions’ many strengths not only make these obstacles surmountable, they pose an opportunity to shine, even during one of the worst economic downturns in the nation’s history.” Further strengthening the credit union charter’s relevance is the plummeting image of banks and their role in the country’s economic collapse, Lass said. “For the most part, credit unions avoided the subprime and related mortgage lending practices. Credit unions didn’t cause this crisis, but they have been caught in its backwash.” Lass said image alone isn’t why the credit union charter is needed now more than ever and provided reasons why they are in a position to make gains with consumers:
* Local presence/funding--Credit unions’ loanable funds are primarily through deposits. “They don’t depend on the capital markets like banks and finance companies, and credit unions utilize local underwriting and decisioning for loans. It’s more personal,” Lass said. * Cooperative ownership structure--Credit unions’ member ownership makes it very difficult for any outside group to exert undue influence on the strategic decisions, unlike banks. For example, there has been a significant infusion of capital in banks from sovereign wealth funds recently. *Affordability--Credit unions provide affordably priced financial services, which is important to consumers, now more than ever. Credit unions provided an average benefit of $170 per member household over banks, according to Credit Union National Association research. * Concentration--Although the credit union system has experienced concentration of deposits in recent years, it’s not nearly as concentrated as the banking industry. The top five bank holding companies hold 38% of all domestic deposits, while the top five credit unions hold 9% of all deposits. * Capital--To date, credit union losses have been managed from within the system, and the industry as a whole is well-capitalized: Credit unions, 10.8% capitalization level; banks, excluding Troubled Asset Relief Program funds, 7.6%. * Lower risk--The cooperative structure does not require excessive risk-taking. Credit unions’ delinquency rates and net loan charge-offs are significantly less than banks. * Compensation/risk--Compared to the “asymmetric” incentives applied in the investment banking industry, credit unions’ compensation does not reward excessive risk taking. * Consumer loyalty--Credit unions’ member intimacy is almost impossible for a bank to emulate. “Customer intimacy is considered the most powerful value proposition an organization can build. It fosters the longest-lasting relationships and allows an organization to anticipate its customers’ needs,” Lass said. * Consumer trust--Independent surveys consistently rank credit unions high in consumer trust, compared to banks. Meanwhile, the trust level in banks has plummeted. * Purpose--The current economic crisis is the same type of environment that brought about federal enabling legislation for credit unions in 1934.
For more coverage, check out News Now’s blog and Credit Union Magazine’s Daily reports online. Use the links.

Federation welcomes new board of directors

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PHOENIX (6/24/09)--The National Federation of Community Development Credit Unions elected a new board of directors June 12, during the 35th Annual Conference on Serving the Underserved in Phoenix. Randy Chambers, Self-Help CU chief financial officer, was elected chairman. Chambers, from the Durham, N.C.-based credit union, had served as vice chair for the past three years. He succeeds Eunice J. Rogers, who is retiring.
Click to view larger imageThe National Federation of Community Development Credit Unions elected a new board of directors during its 35th Annual Conference on Serving the Underserved in Phoenix. From left are: Cliff Rosenthal, Federation president; Eunice J. Rogers, former Federation chair; and Randy Chambers, newly elected federation chairman. (Photo provided by the National Federation of Community Development Credit Unions)
Rounding out the board is:
* Vice Chair: Lynda Milton, CEO, Team Financial FCU, Houston; * Treasurer: Michael Chan, board president, Northeast Community FCU, San Francisco; * Recording Secretary: Deyanira Del Rio, board chairman, Lower East Side People’s FCU, New York City; and * Corresponding Secretary: Gregg Brown, CEO, South Side Community FCU, Chicago.
Others elected include:
* Region 1 (East)--Sharon Saulters, president/CEO, Triumph Baptist FCU, Philadelphia; * Region 2 (South)--Miss. State Sen. Robert L. Jackson (D), treasurer/CEO, First Delta FCU, Marks, Miss.; * Region 3 (Mid/South West)--Brown; * Region 4 (West)--Daniel Scott, president/CEO of Faith Based FCU, Oceanside, Calif.; * At-Large--Chambers.