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CU System briefs (07/06/2009)

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* HARRISBURG, Pa. (7/7/09)--The board of the Pennsylvania Credit Union Association (PCUA) Wednesday approved PCUA's partnering with Credit Union Student Choice to offer credit unions a private student loan plan for their members that complements existing federal student loan programs (Life is a Highway July 6). Credit Union Student Choice is a two-year-old credit union service organization offered by more than 50 credit unions nationwide and owned by nine credit unions, PSCU Financial Services, and Callahan and Associates, PCUA said … * HARRISBURG, Pa. (7/7/09)--The Pennsylvania Credit Union Foundation has two new board members--Barbara Bowker, vice president of marketing at Pennsylvania State Employees CU (PSECU), and Chris Woods, CEO of Keystone FCU. They were approved Wednesday by the Pennsylvania Credit Union Association board (Life is a Highway July 6) … * ATLANTA (7/7/09)--A man nicknamed the “Dracula Bandit” was sentenced Saturday for robbing CDC FCU, Atlanta, in 2006. Nathaniel Little Jr., 43, was sentenced to 20 years in prison, followed by five years of supervised release. He also was ordered to pay restitution of $14,669. On Aug. 23, 2006, Little entered CDC FCU wearing a Dracula mask and carrying a semi-automatic gun. He placed a bag on the credit union’s counter, pointed his gun at the tellers, and ordered them to fill the bag with money. Little also told one teller, “Don’t make me have to shoot you.” After taking the money, he fled the credit union. After a long investigation, key witnesses helped the Federal Bureau of Investigation identify Little--who had been arrested on unrelated state charges after robbing the credit union. CDC FCU has $185 million in assets (US Fed News July 4) ... * LA CROSSE, Wis. (7/7/09)--A man was ticketed $96 after he wore a hooded, masked skeleton sweatshirt into the Government Employee's CU Wednesday. Eric Harding, 33, wore the sweatshirt with the face zipped up when he rode up on his bike, but he unzipped the mask as he entered the credit union's lobby. A member at a drive through saw the masked man and called 911 (WEAU.com and Winona Daily News July 2). Harding withdrew funds for his rent from his account and left on his bike. But police intercepted him and held him as a possible robbery suspect, putting him in handcuffs. Police reports said he was uncooperative and belligerent. When police realized there was no robbery, they ticketed Harding $96 for disorderly conduct and causing a public disturbance by rushing into the building while masked. Check the link for a photo of the sweatshirt … * COLUMBIA, S.C. (7/7/09)--Eric Robinson, 19, and Joshua Stokes, 23, both of North Charleston, N.C., were sentenced Monday in federal court for armed bank robbery and firearms charges stemming from a 2008 credit union robbery, said U.S. Attorney W. Walter Wilkins. Chief U.S. District Judge David C. Norton of Charleston, sentenced Stokes to 97 months in federal prison, and Robinson to a term of 106 months. On Sept. 16, 2008, Robinson and Stokes entered South Carolina FCU, Charleston, S.C, wearing black ski masks and white gloves. Stokes brandished a silver revolver, while Robinson used what appeared to be a 9mm semi-automatic pistol. Stokes ordered everyone to get on the ground, while Robinson jumped over the teller counter. Robinson then put the barrel of his pistol to the back of the head of a teller and ordered employees to open their cash drawers. He stuffed $3,693 into a pink pillowcase. Police officers arrived at the scene almost immediately, arresting Stokes. Robinson was nabbed a short time later. Officers recovered most of the stolen money when the men dropped the pillowcase while running from the credit union (Media Newswires.com July 6) ... * DES MOINES, Iowa (7/7/09)--Reckless driving charges are being filed against a man whose pickup truck struck at car, then traveled at a high rate of speed in reverse up a street before slamming into several unoccupied vehicles in a credit union's parking lot. The incident occurred Monday at 10 a.m. when a pickup truck driven by Kirk Moon, 20, hit a car with a woman in it. When he kicked into reverse, he hit one vehicle, and pushed it into several others and downed a light pole. A passenger in the pickup was taken to a medical center with undisclosed injuries. The events ended with Moon leaving his truck and confronting a television crew trying to cover the multi-vehicle accident (Des Moines Register July 6) …

Banks CUs honor Calif. IOUs but banks add a deadline

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LOS ANGELES (7/7/09)--California banks and credit unions say they will honor state-issued "registered warrants" or IOUs --a promise to pay once the state's budget is passed. However, banks are putting deadlines on how long they'll accept the IOUs, while credit unions generally aren't setting a time limit. Bank of America (BofA), which announced it would accept the IOUs last week set a cutoff date of July 10--Friday. Other banks are following suit, with Chase, Wells Fargo & Co., and Union Bank saying they'll cash the IOUs from their customers only through Friday. Some banks, including City National, haven't set a deadline yet but didn't say they wouldn't. Credit unions, on the other hand, have agreed to accept the IOUs from members without setting a deadline, the California Credit Union League told the Los Angeles Times (July 3). News reports and bloggers' comments indicate that the banks' decision is generating some negative press. "The banks' hardball strategy will create hardships for their customers if no budget deal is struck soon and the state continues to issue IOUs instead of checks," said the Times. BofA cited two reasons for its decision, which it says is firm: the operational and financial challenge of accepting the IOUs, and its experience from the last time the state issued registered warrants in 1992. Then, the longer the warrants were accepted, the longer it took the legislature to resolve the matter, BofA said.

Members 1st FCU sues bank over trademarked M

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HARRISBURG, Pa. (7/7/09)--A Pennsylvania-based credit union has filed suit against a local bank alleging that the bank's symbol, a big red "M," infringes on the credit union's trademark. Members lst FCU, a $1.545 billion asset credit union in Mechanicsburg, filed the suit June 19 in U.S. District Court in Harrisburg, alleging that Metro Bank, which is based in Harrisburg, is using a big red M as its symbol. The complaint said that on or about March 1, 2003, the credit union began using its current red M logo. Since then, it has spent millions of dollars in advertising and marketing to promote its M logo (Pennlive.com July 6). The bank unveiled its logo in June as part of a conversion of Commerce Bank/Harrisburg to Metro Bank, said the article. Metro's M has a break in the left side of the M, while Members 1st M has a break on the right side to form part of the letter M as "1st." The two logos are so similar that both bank customers and credit union members have walked into the other institution's branches, thinking they were their own institutions, the credit union told the publication. The complaint alleges that the bank adopted the logo "in an effort to capitalize on Members lst's goodwill and thereby obtain a competitive advantage" in the midstate market. The bank said it would not comment about ongoing litigation.

Class action suit filed against CU over investments

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MIAMI (7/7/09)--Attorneys for a Florida woman have filed a class action lawsuit against a Boca Raton-based credit union and four individuals that alleges they lost millions of dollars by investing in a now-defunct company that the suit terms was "a bucket shop rife with fraud." The case--filed on behalf of Boca Raton resident and former IBM employee Claudia Schorrig against IBM Southeast Employees' FCU--"highlights the problem with respected financial institutions referring their clients to other firms without doing the necessary due diligence or closing their eyes to obvious red flags," according to the plaintiff's counsel. The complaint expressly states that it is not accusing the credit union of fraud or of knowing about the alleged fraud. The complaint was filed June 30 in the U.S. District Court for the Southern District of Florida, West Palm Beach division by three Florida law firms--Dimond Kaplan & Rothstein of Coconut Grove; Blum & Silver of Coral Springs; and Sallah & Cox LLC of Boca Raton. In addition to the credit union, defendants include Lary B. McCants, president/CEO of the credit union; and three financial services representatives of Wellstone--Christi Seay, Jay Jones and Barbara Leschander. The complaint alleges that the credit union "negligently solicited and referred" its members to Wellstone Securities LLP, a now-defunct broker-dealer. Wellstone Securities recommended and sold bonds issued by Cornerstone Ministries Investments Inc. to credit union members. Cornerstone is now in bankruptcy, having collapsed under a fraud scheme. Members who purchased the securities lost millions of dollars, said the complaint. The suit alleges that upon the credit union's recommendation, Schorrig paid $60,000 for two bonds issued by Cornerstone through Wellstone and "with the active solicitation of the credit union and at least one of the individual defendants." Schorrig lost that money when the company folded. According to the court records, the complaint maintains that had the credit union performed due diligence it would have found that Cornerstone lied in an SEC registration statement that it was approved for listing on the Chicago Stock Exchange and that several state regulators had brought action against Cornerstone for misrepresenting its stock. The credit union's law firm maintains that the complaint is misdirected and full of inaccuracies, such as the representation of the Wellstone employees as credit union employees. The credit union and its CEO is denying the allegations and intend to vigorously defend themselves in court. The lawsuit, it said, stems from a growing tide of legal actions by victims of fraud, bad judgment, or the economy who look for the nearest deep pockets to blame.

Federations 2009 CU Institute accepting applications

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MADISON, Wis. (7/7/09)--The National Federation of Community Development Credit Unions is celebrating the 10th anniversary of its CDCU Institute and accepting applications for the 2009 institute. This year it runs from Aug. 9 to 15 in Madison, Wis. Launched in 1999, the CDCU Institute has trained more than 200 credit union staff and board members. The three-year training program is designed for credit unions serving low- and moderate-income communities. With support from partner organizations, the institute focuses on credit union management and community economic development. The CDCU Institute is for credit union managers, staff, board officials and volunteers new to the community development field or who represent:
* Community development credit unions of any size seeking to improve or expand their services; * Large credit unions eager to expand their services for low- and moderate-income members; * Small credit unions with plans for significant growth; * Credit unions in operation for five years or less; * Groups completing the chartering process; and * Anyone looking to learn more about providing affordable financial services to low-income communities.
To learn more about the CDCU Institute, use the links.

Sanders announces 130000 grant for AVCU fin ed effort

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SOUTH BURLINGTON, Vt. (7/7/09)--U.S. Sen. Bernie Sanders (I-Vt.) announced last week that the Association of Vermont Credit Unions (AVCU) would receive a $130,000 federal grant to improve the financial literacy of Vermont's middle school and high school students. Sanders invited AVCU President Joe Bergeron and Vice President Bryan Kent to join him in making the announcement at a press conference in Sander’s office Wednesday. “We have a responsibility to provide young Vermonters with the tools and the education they need to make sound financial decisions later in life,” said Sanders, who has been a champion of credit unions throughout his political career. He said he hopes the program will make students aware of the realities they face when making decisions about financial institutions. “If it sounds too good to be true, the likelihood is that it is too good to be true,” he added. The association is completing grant-required documentation and determining how to maximize the opportunity that Sanders’ work has made possible, the association said. “We anticipate that this two-year grant will be used, at least in part, to contract with a statewide credit union youth financial literacy coordinator,” Bergeron said. The coordinator’s responsibilities would include the advancement of financial literacy for Vermont’s youth by using the knowledge and experiences of credit unions statewide.

CU capital and savings grow

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MADISON, Wis. (7/7/09)--Credit unions’ capital formation and savings balances are both on the rise, according to a Credit Union National Association (CUNA) economist’s evaluation of CUNA’s May monthly sample of credit unions. “Credit unions resumed capital formation in May after five consecutive months of decline,” Steve Rick, CUNA senior economist, told News Now. “The credit union movement’s capital level grew 0.5% in May, reaching $83.6 billion. This is 7.1% lower than a year earlier and $7.28 billion below the high-water mark set in November 2008.”
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Credit union savings balances increased 0.8% in May, but grew 7.3% during the first five months of 2009. Share drafts grew the fastest with a 2.5% increase, followed by money market accounts (2.4%), regular shares (1.0%), and individual retirement accounts (0.8%). One-year certificates declined 0.6% during May. “Credit union savings balances rose 7.3% in the first five months of this year, up from 6.8% for the similar period last year, and above the recent 16-year average of 4.8%,” Rick said. “Members’ concerns over job security have reduced their proclivity to spend and increased their desire to save current income. Precautionary savings balances are on the rise as witnessed by the 7.5% increase in regular shares over the last five months. “With interest rates bottoming out, the speculative demand for money is also on the rise, as witnessed by the 12% jump in money market accounts so far this year,” he added. “When market interest rates turn the corner and begin to rise over the next year, funds from both of these products will flow back into share certificates.”
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Credit union loans outstanding increased 0.2% in May and 0.5% during the first five months of 2009, down from a 2% increase during the same period of 2008. Credit card loans led growth, rising 1.2%, followed by fixed-rate mortgages (0.7%), other loans (0.6%), and used-auto loans (0.5%). “Credit union loan balance growth was very weak in the first five months of 2009; in fact it was the slowest pace since the 1992 recession,” Rick said. “During the first five months of 2009, loan balances increased only 0.51%, down from 2% for the similar period last year and lower than the past 16-year average of 2.7%. “Credit union members are deleveraging their balance sheets by paying down their consumer loans,” he added. “So far this year, credit card, unsecured and new-auto loan balances fell 2.1%, 3.8% and 2.2%, respectively. The fastest growing loan category was used-auto lending at 2.8%, followed by adjustable-rate mortgages at 2.4%.” Declining during May were unsecured personal loans (-0.1%), new-auto loans (-0.3%), and adjustable-rate mortgages (-0.4%). Other mortgages and home equity loans led the decline in May (-0.4% and -1%, respectively). Credit union 60-plus-day delinquencies grew to 1.7% in May from 1.6% in April. “Rising unemployment rates and falling home prices are the major contributing factors to the recent rise in credit union loan delinquency rates,” Rick said. “In May, 1.7% of all credit union loans were delinquent, up from 1% a year earlier. With both economic indicators expected to deteriorate for another year, credit unions should plan for further weakening in their credit quality.” The loan-to-savings ratio decreased slightly to 78% in May 2009. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities-- increased slightly to 20% from 19% in April. The movement’s overall capital-to-asset ratio remains at 9.5%. The total amount of capital is $84 billion.

Recovery will be slow Hampel tells IPoliticoI

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WASHINGTON (7/7/09)--The nation’s economic recovery is going to take some time, according to Bill Hampel, Credit Union National Association (CUNA) chief economist. Hampel was prominently quoted in a Thursday Politico article, “Where are the jobs?” about the nation’s economic outlook. He told the Washington, D.C.-based newspaper that when the economic recovery takes place, it’s “not going to be much to write home about. It’s going to be a long, slow recovery, and the economy is going to be pretty fragile,” he said. The nation’s unemployment rate has reached 9.5% and 467,000 jobs in June have been lost, Politico reported. To read the full article, use the link.

MnCUN CUs must overcome modesty spread word

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MINNEAPOLIS (7/7/09)--Credit unions can’t allow themselves to be a secret that’s passed from generation to generation, according to Mark Cummins, CEO of the Minnesota Credit Union Network. Rather, they need to spread the word. “We want [credit union membership] to be an option for anybody who lives in Minnesota,” he told Finance and Commerce (July 3), a Minneapolis-based business publication. Cummins emphasized credit unions’ strengths while explaining their challenges in the struggling economy. Credit unions with a lot of real estate loans are seeing declining values and job losses--but their underwriting is more conservative, so their losses aren’t as great as other lenders, he said. “We weren’t into exotic [mortgages] because we have other deals with our members--car loans, second mortgages--so it’s in our best interest to make sure the first mortgage fits well,” he added. Credit unions in low-income areas are taking major hits as their members lose jobs, but most credit unions will survive the losses because their capital levels are strong. Minnesota’s capital average for credit unions was 10.5% at the end of 2008, above the 7% threshold set by regulators, Cummins told the newspaper. Real estate lending is strong, although credit unions’ bread-and-butter auto loans are stagnant. “It’s a matter of consumer confidence; if you don’t feel confident that you’ll have your job, you aren’t going to trade for a new car,” Cummins said. Despite stagnant auto lending and members’ job losses, deposits are growing. “People see us as a safe haven,” he added.

Pa. CUs loan balances savings growth up

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HARRISBURG, Pa. (7/7/09)--Pennsylvania credit unions reported strong deposit growth for the first quarter of 2009, according to the Pennsylvania Credit Union Association (PCUA). Money market shares grew 8.8%. Regular share account balances grew 7.8%. Compared with national statistics, Pennsylvania credit unions are ahead in overall savings (Life is a Highway July 6). Loan balances at credit unions increased 1.2%. First mortgage loans increased 4.4%, compared with 1.4% nationally. New auto loans grew 1% and used auto loans increased 2.4% in Pennsylvania, PCUA said. PCUA also advised credit unions to plan for rising delinquency rates in 2010. The figures were taken from the Pennsylvania Profile First Quarter 2009 report.

Dupaco offers interest-free loans to small biz

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DUBUQUE, Iowa (7/7/09)--Dupaco Community CU is helping Dubuque, Iowa, area businesses having difficulty meeting expenses in the economy. It's offering interest-free, short-term loans through the U.S. Small Business Administration's (SBA) America's Recovery Capital Loan (ARC) Program. The program can provide up to $35,000 in short-term relief for viable small businesses facing immediate financial hardship to help ride out the uncertain economic times and return to profitability, according to Steve Baumhover, the credit union's vice president of business lending and development. The program, launched in mid-June, has these features:
* Available for existing businesses only; * 0% interest rate on the loan; * No guaranty fee; * Up to six months to draw funds; * No payments for the first 12 to 18 months; * Payments of principal only scheduled over the next 60 months; and * Loan proceeds used only for payment of loan payments no more than 60 days old.
Baumhover says ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. "These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs," said Baumhover. "For example, making loan payments on existing loans with proceeds from an ARC loan can allow the business to focus more funds on core operations, such as buying inventory or making payroll. He noted that the best candidates for ARC loans are small businesses that in the past were profitable but are currently struggling, yet have been making loan payments or are just beginning to miss loan payments due to financial hardship. The program lasts as long as SBA has funding available or until Sept. 30, 2010, whichever comes first, says SBA. To get the loan, small businesses must be an established business, have financial statements stating it was profitable in one of the past two years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval. Dupaco Community CU is a $660 million asset credit union based in Dubuque.

New Jersey league CEO explains CU difference on TV

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HIGHTSTOWN, N. J. (7/7/09)--Paul Gentile, president/CEO of the New Jersey Credit Union League, was interviewed for “It’s Your Money,” a personal finance show that airs on a statewide New Jersey news channel. Gentile discussed the benefits of credit unions, how it’s never been easier to join a credit union, and the importance of the league’s statewide advertising initiative--“New Jersey’s Credit Unions, Banking You Can Trust.” He also talked about a bill the league has been advocating in Trenton that would add credit unions to institutions eligible for public deposits. Credit unions are not global and national financial firms--rather, they are local institutions, Gentile said. He also noted the nonprofit status of credit unions, their volunteer boards of directors, and the fact that they do not have shareholders to please. Focusing on credit unions’ cooperative nature, Gentile also spoke about the benefits of shared branching networks, and illustrated the conveniences of belonging to a credit union. “Being interviewed for ‘It’s Your Money’ is just one way we are pushing the credit union message into the state,” Gentile said. “With our potential membership at more than nine million people here in New Jersey, the more we can do to educate the population, the greater the increase in credit union membership will be. To be on a statewide news show and advocating credit unions is just one more way we’re getting the word out.” The league’s multimedia advertising “Banking You Can Trust” campaign uses print, radio and television outlets to explain what credit unions are and how they can help consumers. “We play off of the word ‘trust’ because trust is so important today, given the events in the financial services industry,” Gentile said. “We also use ‘banking’ to instantly explain what we do. Credit unions offer low-cost, high-quality banking services. We have to convey those basics to consumers.”