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CU System

CU loans up savings down in June

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MADISON, Wis. (8/4/08)--Credit union loans are up and savings have declined, and that’s causing Credit Union National Association (CUNA) economists to reconsider their economic outlook.
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Credit unions loans outstanding increased 1.3% in June, while overall loan growth for the first six months of the year was at 4.1%, up from 2.4% for the same period in 2007, according to CUNA’s monthly sample of credit unions. Fixed-rate mortgage loans led loan growth, rising 2.4% during June and 13.1% year-to-date. Credit cards (1.9%) and adjustable-rate mortgages (1.5%) also increased, followed by unsecured personal loans, used-auto loans and other mortgages--all rising 1.3%. New auto loans dropped 0.5% and have decreased monthly since November 2007. Credit union savings balances declined 0.5% in June, but had grown 6.2% over the first six months of 2008, up from 4.3% for the same period in 2007. “The current numbers are causing CUNA economists to rethink their credit union outlook for the year,” Mike Schenk, CUNA vice president of economic and statistics, told News Now. “Normally in an economic slowdown, credit union savings growth speeds up significantly, and credit union loan growth declines significantly. Typically in this environment, savings growth exceeds loan growth. “What appears to be happening now though, is first, on the loan side of the balance sheet, credit unions are experiencing faster growth than expected,” he continued. “We think this is a reflection of their willingness to step up to the plate and help members who obtain toxic mortgages from other lenders.” Growing were money market accounts (1.4%), individual retirement accounts (1.1%) and regular shares (0.4%), while share drafts and one-year certificates declined 5.6% and 0.8%, respectively.
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With loan growth outpacing savings growth, the loan-to-savings ratio increased to 81.8% in June from 80.3% in May. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--decreased to 17.6% in June from 19.5% in May. Regarding asset quality, credit unions’ 60-plus-day delinquencies slightly rose from 1% in May to 1.1% in June. The movement’s overall capital-to-asset ratio is 11%. The total dollar amount of capital remains at $90 billion. “In general, consumers aren’t borrowing as much or spending as much, but relatively speaking, credit unions are doing more business than their competitors; they’re picking up market share on the loan side,” Schenk said. “In contrast, on the savings side, many credit union competitors are aggressively pricing up in an effort to stem outflow from savings accounts. “The spectacular failure of Indy Mac is undoubtedly driving some of this activity,” he concluded.

Indiana league article CUs a bright spot in economy

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INDIANAPOLIS (8/4/08)--Building Indiana magazine will feature in its September/October issue a column written by Indiana Credit Union League President John McKenzie promoting credit union mortgage and business lending successes. The column discusses how credit unions are expanding lending while other institutions pull back. It will be read by business owners, executives, management staff and board chairmen, and elected officials in a seven-county area of Northern Indiana. "During 2007 and into 2008, credit unions have represented a bright spot in the midst of a generally cloudy picture for the financial services industry," McKenzie wrote. He provided state statistics on the state's 208 credit unions and noted their asset growth continued at a strong pace. The article cited strong mortgage growth, with first mortgages growing 12% in 2007, as other mortgage lenders scaled back. Business lending "grew at a 17% pace last year" and surpassed $1 billion in loans outstanding" at time when credit availability for businesses has tightened, especially for small business owners, McKenzie said. As Congress considers how to stimulate the economy and create jobs, he wrote, "credit unions could do even more to make additional credit available to help businesses in their communities if Congress would pass H.R. 1537 (the Credit Union Regulatory Improvements Act)." Credit unions' services are based on the needs of their memberships, with an increasing number of credit unions offering business loans. "As locally owned financial institutions rooted in their communities, many credit unions are finding increased interest in being a source of borrowing for businesses for a number of reasons," McKenzie wrote. He also explained that credit unions have "steered clear of the subprime mortgage mess" by operating more conservatively and holding most mortgage loans in their portfolios, instead of selling them on the secondary market. He added that "credit unions focus on serving the consumers and business owners who are the members/owners of their credit unions. There is no separate group of stockholders with lofty profit expectations, which contributed to problems" at other types of financial institutions. The economy and financial environment had consumers considering whom they can trust, and this has "resulted in more people and business owners looking to credit unions as an attractive, safe option for financial services, especially during challenging economic times," he concluded.

Phone e-mail scams move westward

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MADISON, Wis. (8/4/08)--Several phone and e-mail scams that have affected credit unions in the eastern part of the U.S. are now moving westward. Some credit unions experiencing scams are:
* UW CU, Madison, Wis., whose members are targets of a hybrid e-mail/phone scam. An e-mail reads: “All UW credit union accounts were recently updated with a new security enhancement. For your security, we have temporary suspended your account.” The e-mail mail then provides a bogus 800 number to call to reactivate the account. The UW CU sent a message telling members to never access the credit union site by clicking on a link provided in an e-mail, and that the credit union will never solicit personal or financial information in this manner. * Oregon Community CU, Eugene, Ore., which said scammers call its members on their home and cell phones, telling them that there is an issue with their accounts (kezi.com July 31). The scammers are deploying an automated service that asks members to give person information over the phone. The credit union told members not to respond if they receive one of these calls. * Kitsap CU, Bremerton, Ore., which received hundreds of calls last week about scammers attempting to get members’ credit and debit card information (Kitsap.com July 31). The credit union said an unknown entity was blanketing the 360 area code with calls telling people that their credit or debit cards were suspended. Kitsap CU is one of the financial institutions the callers claim to represent. The credit union received 200 calls about the scam in a 15-minute period Thursday afternoon, said Ron Rogerson, Kitsap senior vice president of marketing. Kitsap CU reported the scam to companies that issue the cards, Bremerton Police, and the state attorney general’s office, Rogerson added. * The TVA Employees CU, Knoxville, Tenn., issued a security alert regarding a phishing e-mail scam that attempts to solicit personal financial information from members. The e-mail tells members to call a phone number to update financial information. The credit union notified members that it will not use e-mails for confidential account notifications.

Former CU extends stock repurchase plan

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WAYCROSS, Ga. (8/4/08)--Atlantic Coast Federal Corp., a holding company for Atlantic Coast Bank, a former credit union, announced Friday that it expanded and extended its stock repurchase program. Atlantic Coast Bank was organized in 1939 as a credit union to serve Atlantic Coast Line Railroad employees. The bank currently serves Georgia and northeastern Florida. Atlantic Coast’s board extended the stock program to July 31, 2009. The program was set to expire at the end of this month. The board also reauthorized the repurchase of up to 220,000 additional shares, increasing to 277,000 the total shares subject to repurchase. The corporation has more than 13.5 million shares outstanding, including over 4.4 million publicly held shares. Atlantic Coast Federal holds 8.7 million shares, or 64% of the company’s total outstanding stock. Those shares will not be publicly traded and are not included in the repurchase program. Atlantic Coast completed its initial public stock offering in October 2004.

CUNA Technology Council announces board members officers

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MADISON, Wis. (8/4/08)--The executive committee and officers of the CUNA Technology Council were announced during the council’s 13th annual summit, which took place Wednesday through Saturday in Williamsburg, Va. Rudy Pereira, senior vice president of operations and technology of Alliant CU, Chicago, was named chair. He replaces Brian Warfel, executive vice president of sales and service at Power Financial CU, Pembroke Pines, Fla. Warfel reached his term limit as chair but remains on the executive committee. Jackie Buchanan, chief information officer of T&C FCU, Pontiac, Mich., was appointed first vice chair. She supersedes outgoing member Gail Koehler, vice president of technology and retail delivery, Purdue Employees FCU, West Lafayette, Ind., who completed her term. Gordon Gregory, vice president of technology for Mazuma CU, Kansas City, Mo., is the second vice chair. In addition to Koehler, Robert Keubler, vice president of information technology for 1st Financial FCU, St. Charles, Mo., left the committee. The two newest members of the committee are: Robert Reh, chief information officer, Nassau Financial FCU, Garden City, N.Y., and Belinda Caillouet, vice president of information technology, Spokane Teachers CU, Spokane, Wash. The board also includes Ron Broaddus, chief information officer for Potlatch 1 FCU, Lewiston, Idaho; and John Morawski, chief technology officer, Massachusetts Credit Union League.

Cornell U REAL Solutions a successful strategy

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ITHACA, N.Y (8/4/08)--The REAL Solutions initiative illustrates the type of strategy credit unions could adopt to successfully engage the underserved financial market, according to research conducted by Cornell University and commissioned by the Filene Research Institute. REAL Solutions is the signature program of the National Credit Union Foundation (NCUF) and is available to credit unions through nearly 30 state credit union associations. "REAL" stands for "Relevant, Effective, Asset-building, Loyalty-producing" solutions. REAL Solutions helps credit unions provide financial services to serve working families with low wealth and modest means. Researchers at Cornell's Center for Sustainable Global Enterprise emphasized that, "This is important because underserved households--while at the bottom of the economic pyramid now--represent future savers, future car buyers, future homeowners, and future generations of credit union members." The research report, titled Back to the Future: Integrating Sustainability into Credit Union Strategy, touches on much of what REAL Solutions has learned so far about why and how credit unions can provide affordable services to the underserved financial market. Several strategies detailed in the report are based on REAL Solutions’ experience. “The most successful services are not only affordable for consumers, but also sustainable for credit unions,” said REAL Solutions National Program Director Lois Kitsch. “Sustainable services can become a permanent part of credit unions’ business plans--as opposed to ‘loss leaders’ that must be limited in volume or subsidized by other parts of the credit unions’ operations.” Report co-author Monica Touesnard, managing director of learning labs at Cornell University’s Center for Sustainable Global Enterprise, agreed. In a letter to NCUF Executive Director Steve Delfin, whom she interviewed for the report, Touesnard wrote, “This report gives credit unions a reliable working definition of sustainability, providing a variety of models to consider for integrating sustainability into credit union strategic plans.” “The opportunities identified in this report suggest that financial institutions are just beginning to experiment with programs and initiatives related to sustainability,” concluded Filene Chief Research Officer George Hofheimer. “As a result, we have yet to realize the challenges and opportunities implicit in sustainability strategies.”

Kenyan SACCO project proceeds in aftermath of riots

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MADISON, Wis. (8/4/08)--In the aftermath of deadly riots that broke out in Kenya at the end of 2007, the World Council of Credit Unions’ (WOCCU) SACCO Capacity Building Program is proceeding apace.
Erick Sile, World Council of Credit Unions (WOCCU) project director, Kenya, talked about how political unrest in Kenya affected WOCCU’s SACCO (credit union) Capacity Building Project. (Photo provided by the Credit Union National Association)
Credit unions in Kenya are known as SACCOs (savings and credit cooperatives). The broad goal of the project is to provide financial inclusion in the financial sector in Kenya, Erick Sile, WOCCU project director, Kenya, told News Now. “The project is about developing the market of Kenyan SACCOs on the demand and supply sides,” Sile explained. “We also work with financial service providers. Using different WOCCU tools, we provide technical assistance to train consultants who work with credit unions.” Funded by the British Department for International Development, the project is working with five credit unions, but hopes to add five more by the end of September, and 10 more for a total of 20 in the third round by the end of December, Sile added. The project is moving ahead, he added. Violence in Kenya resulted in the killing of several hundred people the week after Mwai Kibaki was re-elected. He was sworn as the country’s president Dec. 30. The opposition candidate claimed the election was rigged (News Now Jan. 3). The unrest, which Sile said lasted about two-and-a-half months, slowed down the project in the first quarter of this year. “You couldn’t travel in some areas; there were roadblocks and rallies,” he said. “The unrest affected some credit unions, but not all.” Sile did not feel any real threat from the violence. “I was relatively safe because in the city of Nairobi there was security. I didn’t feel threatened while at home. Most of the violence was going on in other poorer areas.” WOCCU has two other projects in Kenya. The SACCO Growth Project, which is funded by the Gates Foundation, is directed by Jesus Chavez. The project provides technical assistance to consultants who work with credit unions, in Kibera, a slum inside Nairobi. Another project is Mitigating the Impact of HIV/AIDS on Economic Growth through Credit Union Modernization; Institutional Restructuring; Agricultural Business Development and Services and Education. The project is run by Sam Dunlap in Kisumu, and is funded by the U.S. Department of Agriculture. Of the 30 million people in Kenya about four million (19.1%) are credit union members, according to WOCCU statistics.

Banks use switch kits to lure new depositors

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NORTH PALM BEACH, Fla. (8/4/08)--Banks are making it easier for depositors to ”jump ship” by using switch kits, which allow a near-seamless transition for depositors to move from one financial institution to another. Switch kits collect data from depositors’ services--such as automatic payments and savings plans--to help the new financial institution continue the transactions (Bankrate.com July 29). Some kits send letters to appropriate parties to redirect payments and switch direct deposits. The kits also help when a financial institution merges with another, or when a financial institution seeks to retain a depositor that moves to a city that has the institution’s branches, the news outlet said. Switch kits appear to target younger depositors who move around a lot, but they actually are geared toward older depositors who have a lot of assets. These depositors often have multiple accounts and may view switching institutions as cumbersome, Bankrate said. Digital Dialogue offers switch kit capabilities that help new members move existing accounts to credit unions (News Now May 24).

Broker for liquidated CU a suicide

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NEW LONDON, Conn. (8/4/08)--A broker who handled investments for a credit union in Connecticut that was liquidated last week committed suicide, according to local news media. Edwin F. Rachleff, 82, a broker for A.G. Edwards, handled the investments of New London Security FCU, based in New London, Conn. (theday.com July 30) Authorities did not tie his death with the credit union's situation. Rachleff, apparently despondent about failing eyesight, jumped from an apartment building. The National Credit Union Administration reported July 28 it had liquidated the $12 million asset credit union after determining it was insolvent.

CUs still fielding deposit insurance queries

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MADISON, Wis. (8/4/08)--More credit unions say they are fielding inquiries from their members and the media about whether their deposits are covered by share insurance. The uptick in interest stems from several notable bank failures and the woes generated by the subprime lending market. In Loveland, Colo., two credit unions were interviewed about the safety of their members' deposits by the Loveland Reporter-Herald (July 31). Bill Becker, CEO of Sunrise CU, a $3.9 million asset credit union based in Loveland, told the newspaper that bank failures are rare and credit union failures even rarer, because of their cooperative, nonprofit structure. Sondra Koberstein, president of Longs Peak CU, urged the $26 million asset credit union's members to speak to her when they want information about the credit union. The article noted that credit unions are insured by the National Credit Union Administration (NCUA) and that NCUA has information available online about the stability of credit unions. The Delaware Credit Union League reported the state's credit unions are responding to members' concerns (Together July 31). Dover, DPL, Provident and Sussex County FCUs issued talking points for front-line staff highlighting credit unions' financial strength. EWOD FCU plans to send a brochure on the insurance fund to all members. New Castle County School Employees FCU reported a "good number" of calls from members wanting to know whether their money was insured and for how much. In all cases, the credit unions assured members they were well-capitalized and had no relationships with the subprime market. In Winston-Salem, N.C., Truliant FCU is offering seminars to educate members about how their money is insured (Weekly Update July 31). Beginning Tuesday, the $ million asset credit union, will host eight seminars during the next two weeks to educate members about share insurance.

Missouri CUs meet with candidates before primary

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United CU Marketing Manager Heather DeMint (left) and Troy branch manager Jill Kiel met with State Rep. Ed Schieffer (D) before Missouri’s primary.
ST. LOUIS, Mo. (8/4/08)--Missouri credit unions have been stepping up their political activities in preparation for Tuesday’s primary in the state. Mexico, Mo.-based United CU Marketing Manager Heather DeMint and Troy branch manager Jill Kiel met with State Rep. Ed Schieffer (D) July 9 and discussed the credit union difference and issues, according to the Missouri Credit Union Association (MCUA) (CourietNet July 30). Crystal Cowan, an accounting clerk with Central Missouri
Crystal Cowan of Central Missouri Community CU, Warrensburg, volunteers at the Johnson County Democratic Headquarters. (Photos provided by the Missouri Credit Union Association)
Community CU, based in Warrensburg, volunteers at the Johnson County Democratic Headquarters, where she has educated both voters and candidates about the credit union difference. Today, St. Louis area credit union staff and volunteers are scheduled to meet with State Rep. Russ Carnahan (D) in St. Louis. Carnahan is a Credit Union Regulatory Improvements Act co-sponsor., said MCUA. Following tomorrow's election, MCUA will send out its bi-annual candidate’s survey on credit union issues to each Republican and Democratic primary winner. Their responses will be published in a future issue of MCUA's newsletter, Missouri Courier.