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CU System briefs (07/23/2010)

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* ORLANDO, Fla. (7/26/10)--A retired Florida police officer was sentenced Wednesday to 20 years in prison on two money laundering charges related to the theft of $200,000 in Federal Emergency Management Agency (FEMA) funds that she deposited into accounts at Orlando FCU. Amy Bretches, 49, was found not guilty in a federal court of a third money laundering charge. Bretches opened savings and checking accounts at the credit union for herself and the Orlando Police Department Gang Resistance Education and Training. She used the police department's address and the city's taxpayer identification number, listed the city as a grant recipient and herself as the key contact. The accounts were opened in 2000 and a FEMA voucher for $200,000 was transferred into one of the accounts in 2004 (Orlando Sentinel July 22) ... * ONTARIO, Calif. (7/26/10)--Three directors have been elected to Financial Service Centers Cooperative’s board. Ron Westad, president/CEO of Arizona FCU, Phoenix, will serve a second term on the board. New additions are Bob Schumacher, MountainCrest CU, Arlington, Wash., and Ken Burns, Patelco, San Francisco. Board officers include Chairman Steven Stapp, president/CEO of San Francisco FCU; Vice Chairman John Fiore, president/CEO of Motorola Employees CU, Schaumburg, Ill.; Treasurer Patricia Smith, president/CEO of Unitus Community CU, Portland, Ore.; and Secretary Roger Michaelis, president/CEO of iQ CU, Vancouver, Wash. Other members of the board include Kevin Foster-Keddie, president/CEO of Washington State Employees CU, Olympia, Wash., and Norman Okimoto of Hawaiian Tel FCU, Honolulu ... * PITTSFIELD, Mass. (7/26/10)--Greylock FCU's Board of Directors has appointed Marilyn Sperling as president/CEO of the $1.2 billion institution, effective immediately (Berkshires.com July 23). Sperling, who formerly was senior vice president of the $1.2 billion asset credit union, had been appointed as interim president/CEO in June ... * RICHMOND, Va. (7/26/10)--Richmond-based Virginia CU last week offered 18 teens financial education in a five-day money camp at the Tuckahoe library branch in Henrico County. The credit union's financial education director, Cherry Hedges, taught the five one-hour sessions and noted that the students had to come up with a budget for $100 that included an expense for savings. "When I looked at everyone's budget, no one had taken out for savings," she told the Richmond Times-Dispatch (July 22). "Saving money is hard; it is a discipline. You have to train and make a conscious effort. You need to rewire your brain to think: 'When I get money, I'm going to save it,'" she said ...

CU creates Sharia-compliant products for Muslim members

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TOTOWA, N.J. (7/26/10)--North Jersey FCU said it is the first U.S. credit union to offer mortgages for the underserved Islamic population that are compliant with Islamic Sharia law, which prohibits the payment or acceptance of interest fees for the lending and accepting of money. The mortgage loans are offered through Reston, Va.-based Guidance Residential and are approved by an independent board of Sharia scholars. The loans also comply with the federal truth-in-lending law, but are different from conventional mortgage loans (The [Hackensack, N.J.] Record via insurancenewsnet.com June 29). Although sharia-compliant mortgages can be structured in several ways, Guidance Residential uses a method in which the buyer and the lender create a partnership to purchase a house. Over time, the borrower buys out the lender’s share--with the lender obtaining a previously agreed-upon profit, the newspaper said. An estimated 600,000 Islamic residents live in New Jersey’s Bergen, Passaic and Hudson counties. Islamic law, known as Sharia, is the framework of ethical guidance that Muslims follow. It rules over many aspects of life, but has specific principles governing finances, said the New Jersey Credit Union League (The Weekly Exchange July 19). One way the $183 million asset, Totowa, N.J.-based credit union is fulfilling its mission is through establishing an Islamic finance division. The division also offers mutual funds that preclude investments in alcohol, gambling, pork or pornography, James Giffin, North Jersey vice president of sales and marketing, told the paper. “Our job is to serve the underserved,” Giffin told the New Jersey league. “And after nine months of study and research, we found out how to do it.” The credit union is awaiting regulators’ approval of its plans to offer deposit accounts for Islamic members so they could be paid in dividends instead of interest, the paper said. North Jersey FCU has to respond to the National Credit Union Administration’s questions by Sept. 30. Giffin who expects a decision by year-end, told the paper he doesn’t anticipate any problems. “I haven’t had one member call to complain about the program, and it’s been on our website now for some time,” Giffin told the league. “I don’t think we will have any reputational risk within our field of membership. After all, everyone lives here together in the same community.” With information on credit union regulations and Sharia law gathered, and in collaboration with local religious leaders and those of the local Muslim community, the credit union developed products and services that remain Sharia-compliant, the league said. They include mortgages in partnership with Guidance Residential, no-interest checking accounts with a debit card, and mutual funds in partnership with New England Financial. However, Sharia-compliant auto loans are not on the horizon at this time. “The compliance people haven’t figured out how to do car loans,” Giffin told the paper. To read the articles, use the link.

2011 Youth Week savings theme is Music

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MADISON, Wis. (7/26/10)--“Music” is the theme for the 2011 National Credit Union Youth Week and Saving Challenge, and the Credit Union National Association (CUNA) is asking credit unions to come up with a “musical” slogan. Some slogan ideas include:
* Sing a song of saving; * Be a saving rock star; and * Credit unions sing and dance to your tune.
CUNA is asking credit unions to send their feedback about slogan ideas and suggestions by Aug. 4. Suggestions can be sent to lstandke@cuna.coop. The credit union with the winning suggestion will receive a $50 gift certificate toward 2011 Youth Week products. Youth Week will be held April 17-23. During the 2010 Saving Challenge, about 350 credit unions reported receiving deposits from 168,438 young members, including 10,385 who opened new accounts for 2010. This year’s results average out to $147 deposited per child. In 2009, more than $26 million savings total averaged $190 deposited per child, up from $87 per child in the 2004 inaugural year. “Get in the Savings Game” was the theme for the 2010 Youth Week held April 18-24.

Southwest Corporate asks SandP to pull rating

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PLANO, Texas (7/26/10)--At the request of the Plano, Texas-based Southwest Corporate FCU, Standard & Poor's (S&P) Wednesday pulled out its BBB-/A-3 counterparty credit rating on the corporate. "As part of ongoing efforts to reduce operating expenses, Southwest Corporate requested that Standard & Poor's withdraw the counterparty rating," confirmed Melissa Wardell, senior vice president and chief financial officer at the corporate. "Southwest Corporate does not anticipate needing the rating," she told News Now, adding that the corporate "previously eliminated other external ratings to also reduce operating expenses." S&P, a credit rating agency based in New York, said a counterparty credit rating evaluates the creditworthiness of both public and private financial institutions and financial service entities. The rating demonstrates financial strength, improves leverage in financial transactions, creates a standard that allows for peer comparisons, and enhances debit issuance in the credit markets, giving borrowers a range of placements of their debt instruments, according to S&P.

Arrowhead Centrals corrected 2Q results posted by NCUA

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ALEXANDRIA, Va. (7/26/10)--The National Credit Union Administration (NCUA), as conservator of Arrowhead Central CU, posted its corrected version Friday of the $876 million asset credit union's second quarter Call Report. NCUA says it showed a continued decline in Arrowhead Central's financial condition from loan portfolio losses. The call report corrects earlier errors by the San Bernardino, Calif.-based credit union's previous management, and reveals a loss of $1.4 million year to date due to loan loss expenses, NCUA said in a press release. Arrowhead Central’s net worth ratio declined to 3% on June 30, from the reported level of 3.36% on March 31. Under standards set forth in the Federal Credit Union Act, Arrowhead Central is "significantly undercapitalized" for a fourth consecutive quarter, NCUA said. Assets decreased about $67 million since March 31, and loans dropped about $40 million in the same time period. NCUA placed Arrowhead Central into conservatorship on June 25 due to its declining financial condition, NCUA said. The credit union has continued serving its members as NCUA has worked to stabilize the institution's operations. Arrowhead Central previously "posted inaccurate information that distorted the true financial condition of the institution," said NCUA in the press release. The agency noted the loan loss reserve account was not adequately funded in the first quarter 2010 financial report. The corrected statement indicates Arrowhead Central’s loan loss reserve increased from $49.5 million on March 31, to nearly $53.6 million as of June 30. The related loss reserve expense has risen from more than $6 million on March 31 to nearly $19 million year-to-date, NCUA explained. The $12 million increase in expense is the result of funding the loan loss reserve account in accordance with methodology approved by the credit union’s external CPA review in October 2009. In March, prior management did not comply with the accounting method, thus understating its expenses and misstating income. The corrected funding has eliminated all earnings incorrectly previously shown by the former management team, revealing the $1.4 million loss year-to-date, NCUA said. NCUA reviewed Arrowhead Central's records, the agency determined the credit union's former management team did not charge off loan losses in a timely or consistent manner, and that historical ratios did not consistently reflect actual losses experienced. The team also chose to revise loan loss reserve methodology less than six months after it was reviewed by an external auditor, which reduced the funds needed for known and potential losses. "Had Arrowhead Central's management acted in accordance with approved and validated methodology, losses would have increased and earnings would not have shown a positive trend as of March 31," NCUA said. Since mid-2009, NCUA has required Arrowhead Central to submit an acceptable net worth restoration plan. The credit union's management team tried four times and was "unable to submit a plan based on reasonable assumptions and showed positive earnings that would restore net worth, despite specific guidance from both federal and state regulators about deficiencies in their submitted plans." NCUA said it and the state regulator, the California Department of Financial Institutions provided instructions, information and guidance but the credit union's team did not properly identify and monitor loan modifications to ensure they complied with generally accepted accounting principles (GAAP) and provided relief or assistance to the members." The financial results are available on NCUA's website, Financial Performance Report section. Use the resource link and insert the credit union’s name in the field, then click on "Financial Report" and follow the instructions.

Altura CU offers budget-impasse emergency loans

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RIVERSIDE, Calif. (7/26/10)--Altura CU Thursday announced an Emergency Loan Program to provide assistance to Riverside County workers who may have their pay temporarily reduced or delayed due to California’s budget stalemate. The state legislature did not pass a budget by the start of the new fiscal year on July 1. As a result, about 1,100 state workers stopped receiving pay on July 1, and Gov. Arnold Schwarzenegger ordered wages for about 200,000 other state workers cut to $7.25 per hour, the federal minimum wage, until a budget is passed. So far, state Controller John Chiang has not complied with that order, despite a state appellate court decision on July 2 ordering him to do so, the credit union said. “State workers get caught in the crunch when a budget isn’t passed on time. As a credit union, we are focused on helping people, particularly our members,” said Jennifer Binkley, Altura chief operating officer. “We developed the Emergency Loan Program to provide state workers with the cash they will need to pay their own bills if their pay is delayed or reduced. The program is open to state government employees who are current Altura members as well as nonmembers eligible for membership.” The Emergency Loan Program offers:
* 0% annual percentage rate (APR) for 90 days on an emergency loan; * No payments for 90 days; * A 12.99% APR after 90 days; * No prepayment penalties; and * No loan application fee.
The requirements and terms for the Emergency Loan Program include:
* The borrower must be an existing or new Altura member with payroll direct deposit; * The member must provide proof of delayed or reduced pay, and a copy of the last payroll stub; * Maximum loan is limited to three-month payroll advance based on current pay; * Maximum loan term is 18 months; and * Limited loan funding is available.
Several other credit unions have announced emergency loans to help state workers caught in state budget impasses. These include The Golden 1 CU, Sacramento; Virginia CU, Richmond, Va.; North Carolina State Employees’ CU, Raleigh, N.C.; Honolulu State FCU and more than 20 Pennsylvania credit unions.