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Marcellus Shale opportunities risks affect appraisals

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HARRISBURG, Pa. (8/18/11)--Credit unions located in rural areas of Pennsylvania and surrounding states will be affected by an economic development surge expected in the next 20 years along the Marcellus Shale, one of the world's largest gas fields. The impact is a mixed bag of opportunities and risks, according to the Pennsylvania Credit Union Association (PCUA). The natural gas in the Marcellus Shale stretches over 95,000 square miles from West Virginia through upper New York. Roughly 40,000 to 50,000 square miles of the formations are in what is dubbed a "Fairway" through the state of Pennsylvania (Times News Online Aug. 5). Nearly 212,000 new jobs are expected, says American Banker (Jan. 13). One gas company, Chevron Corp., says that for each Chevron employee, there are three or four employees of contractors working with the company. Those contractors use their own equipment and separate crews to work each stage of developing a well (Herald-Standard May 7). PCUA sponsored a webinar recently for member credit unions where six experts detailed issues facing credit unions related to the expansion (Keystone Extra Aug. 5). Credit unions can expect:
* An influx of deposits at credit unions from newly created jobs; * Mortgage loans with complex issues related to value and appraising land with wells and mineral rights; * Complex property leases and related issues; * More complex tax income classifications; and * Opportunities for loans to small businesses serving the population of workers.
In PCUA's webinar, Charles Kern, chairman/CEO of Charles Kern & Co. addressed impacts Marcellus Shale will have on the income taxes of borrowers. Credit unions should first understand the entity types that can generate income, either passive or earned income, he said. They also should understand the facts and circumstances of income to properly classify it and know where to verify the income on tax returns depending on the manner the income is claimed. Phil Lambling of CUNA Brokerage Services Inc. detailed ways to address the influx of deposits credit unions will receive from members, including that company's Independent Advisor Program. "Everything changes when valuable minerals are discovered," John Hosey, chief appraiser for DataQuick, told attendees. Credit unions no longer can use a traditional property appraisal where there are surface, mineral and/or royalty rights involved, he said. Property values are still affected when the minerals are no longer present. There could be lingering impacts to the environment, well caps, and other issues, he said. Kern noted there are different types of values--market value, fair market value and investment value. All are legal terms and mean different things. He urged credit unions to have qualified appraisers and legal guidance. Andrew Giorgione, an attorney with Buchanan Ingersoll Rooney, reiterated the legal and environmental impacts from Marcellus Shale and cautioned that even though a property might not have a gas well on it, it still might be subject to underground horizontal gas drilling. Another related concern is the impact those mortgages would have on the secondary market. Coz Manzo of First Heritage Financial, a mortgage credit union service organization, compared the impact to a Rubik's Cube, saying there are many moving pieces to be aligned. Paul Whitman, CMGMI, noted it is important to align the type of appraisal credit unions will accept to what the secondary market will require. Pennsylvania banks already are lining up to take advantage of an industry that could generate $18.8 billion in economic value by 2020, said the American Banker (Jan. 13).

Kenya seeks new co-op development model in tough times

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NAIROBI, Kenya (8/18/11)--Kenya is preparing to help the co-operative development model gather steam during 2012, which has been declared as the International Year of Cooperatives (IYC) by the United Nations. Cooperative and Marketing Minister Joseph Nyagah last week launched a steering committee on the celebration to help impress the importance of cooperatives as a sustainability model in alleviating poverty, reported (Aug. 16). Recent global financial crisis and the collapse of the socialist-communism development model in the 1980s means the cooperative model could be an appropriate one to adopt, said Nyagah, who added that next year will assert the presence of cooperatives as a different development model in the world. Kenya is ranked seventh in the world and No. 1 in Africa on the size of its cooperative development by the World Council of Credit Unions (WOCCU), the article said. The nation has about 12,000 cooperatives with about seven million members. The country's 4,020 Savings and Credit Cooperatives (Saccos) or credit unions have nearly four million members. By 2004, Kenya had a penetration rate of 11% of Saccos (credit unions), compared with 8% in Rwanda, 6% in Uganda, and less than 1% in South Africa and Tanzania. Kenya accounted for 60% of the savings portfolio in Africa, the article said. The IYC will officially begin on Oct. 31, 2011 when the U.N. Secretary General gives a speech before the United Nations General Assembly (News Now July 25). Recognition events will then extend throughout the remainder of 2011 and into 2012. The theme for the international year is "Cooperative Enterprises Build a Better World." The Credit Union National Association and WOCCU have dovetailed that theme with this year's International Credit Union Day on Oct. 18, whose theme is "Credit Unions Build a Better World."

NYIB leaders elected for 2011-2012

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BROOKINGS, Ore. (8/18/11)--The National Youth Involvement Board (NYIB) re-elected one regional coordinator, confirmed two new coordinators, and re-elected the chairman of the NYIB executive committee during its annual meeting July 28 in Pittsburgh. Rebecca Isaacs, business development director of the Credit Union Association of New Mexico, will continue to chair the NYIB for 2011-2012. NYIB regional coordinators elected to two-year terms include:
* North East: Anne-Marie Bisson, assistant vice president of community education, Jeanne D’Arc CU, Lowell, Mass.; * North Central: Janice Quigg, marketing and community development specialist, OUR CU, Royal Oak, Mich.; and * North West: Incumbent Adam VanCleave, marketing specialist, Chetco FCU, Brookings, Ore.
Regional coordinators continuing the second year of their terms are:
* South West: Julie McLean, director of financial education, Arapahoe CU, Centennial, Colo.; * South Central: Cynthia Campbell, assistant vice president of financial empowerment, Tinker FCU, Oklahoma City; and * South East: Juli Lewis, youth marketing manager, Suncoast Schools FCU, Tampa.
Afterward, the Executive Committee elected as officers: Vice chairman, McLean; Secretary, Lewis; Treasurer, Bisson; and Media manager, VanCleave. The group will reconvene Aug. 25-28 in New Orleans, the location of the 2012 NYIB conference, for its annual planning session. Suggestions for speakers and topics on youth financial education are welcome, said NYIB.

Invest in America wins Wegner Award

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MADISON, Wis. (8/18/11)--Invest in America (IIA), a credit union growth and loyalty program that offers members discounts on consumer purchases, has been named the winner of the 2012 Herb Wegner Memorial Award for Outstanding Program. The award will be one of three Herb Wegner Memorial Awards presented March 19 at a special dinner hosted by National Credit Union Foundation during the Credit Union National Association’s 2012 Governmental Affairs Conference. IIA was started in 2008 by CUcorp, a wholly-owned subsidiary of the Michigan Credit Union League. CUcorp is now CU Solutions Group, a national marketing company that manages the program. Through the program, credit unions banded together to promote and support credit unions products and services and those offered by participating American-based companies, such as General Motors (GM) or Sprint. Credit union members were given discounts to the companies, which in turn drove membership growth and loyalty, said NCUF. IIA has since grown into an enhancement program helping credit unions to add vehicle loans, increase debit/credit card transactions/balances and provide non-interest income opportunities. “IIA’s success is a direct result of the support of our 46 state association partners and the thousands of credit unions that promote these offers to their members,” said MCUL President/CEO Dave Adams “We look forward to much greater success for Invest in America as credit unions continue to promote member discounts on the products of great U.S.-based companies.” IIA’s Big Ticket program aims to increase new membership and vehicle loan volume. The partnership with U.S. based companies such as GM also helps credit union members save on new vehicles. Through April, roughly 400,000 vehicles have been sold through the Big Ticket program, generating an estimated $6.4 billion in credit union vehicle loans. The National Sprint discount program from IIA saves credit union members on wireless services through lower monthly bills, waived fees, and discounts. As part of the partnership with Sprint, credit unions receive noninterest income to support their marketing expenses. Another IIA program, Membership Rewards, is designed to increase credit unions’ card transactions and balances by providing discounts on products and services. Partners in the program include Allied Van Lines, FTD, DIRECTV, TurboTax and Shop America, a new web-based mall exclusively for credit union members. Along with NCUF, Invest in America is also one of the largest independent sponsors of Biz Kid$, the Emmy Award winning and credit union-funded public television series that teaches kids about money management and entrepreneurship. Nearly 3,000 credit unions nationwide, representing more than 70% of credit union members, support Invest in America.

Despite weather losses CUNA Mutual strengthens capital

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MADISON, Wis. (8/18/11)--CUNA Mutual Group--like most property and casualty insurance companies--incurred more weather-related losses in the first half of 2011 than in all of 2010. Spring tornadoes and storms resulted in losses in its auto and home business, and droughts and flood conditions across the U.S. affected its crop insurance program. However, solid performance from its lending and financial services products offset the weather-related losses, said CUNA Mutual. As a result, the company saw $51 million in GAAP (generally accepted accounting principles) net income through June. That compares with $63 million during the same period in 2010. Also, GAAP operating revenue grew 2.3% during the first half of 2011. CUNA Mutual's statutory total adjusted capital grew to $1.45 billion through June, up $30 million from year-end 2010. "Weather-related losses are part of the unpredictable nature of the insurance business," said Jerry Pavelich, the company's chief financial officer. "Despite those losses, our other financial measurers continue to head in the right direction, and we continue to execute on initiatives that are within our control."

In the media Four CUs look to expand MBL portfolio

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MADISON, Wis. (8/18/11)--Four credit unions were featured in the various media with their ideas about how to expand member business lending (MBL) portfolios. Credit unions featured included:
* Nutmeg FCU in Rocky Hill, Conn., which plans to begin commercial lending and lifestyle loans this fall to bolster weak loan demand among members ( Aug. 15). With 27,000 members and $333 million in assets, Nutmeg has the capital, size and scope to get into commercial lending, John Holt, president/CEO, told the publication. While some credit unions try to offer better interest rates on loans, Nutmeg is looking to broaden its loan offerings. In September, Nutmeg plans to introduce a new lifestyle loan product, which will provide financing for service such as plastic surgery, expensive dental work and Lasik eye surgery, with more competitive pricing than typical personal loans. Nutmeg also is aggressively offering loan and deposit products for businesses. To read the article, use the link. * Redwood CU, a $1.73 billion asset credit union based in Santa Rosa, Calif., which began offering MBLs because a third of its members were involved in some type of business activity and were looking to the credit union to offer business services, said Brett Martinez, Redwood president/CEO ( March 25). The credit union’s direct business loans portfolio totals more than $100 million. Redwood does direct operating lending that includes commercial transactions, working capital, purchasing equipment and owner-user real estate, Martinez told the publication. To read the article, use the link. * The $349 million asset, Birmingham, Ala.-based Legacy Community FCU, which saw a significant surge in loan requests from small businesses during the past two years (Birmingham Business Journal Online Aug. 12) . This is in part due to heightened awareness of Legacy in the community and also because many banks have withdrawn their credit availability, Glenn Bryan, Legacy senior vice president, told the Journal. * Mutual Savings CU, based in Hoover, Ala., with $173 million in assets, is positioning itself to partner with quality businesses to offer opportunities to the businesses and the credit union, said Doug Key, Mutual Savings CEO (Birmingham Business Journal Online Aug. 12). Instead of targeting a specific business size with a minimum revenue requirement, the credit union looks at the overall situation of the business and determines if it can help.
The Credit Union National Association (CUNA) and credit unions are pressing Congress to increase credit unions’ MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

Two IN.Y. TimesI blogs tout co-ops NCUF link

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NEW YORK (8/18/11)--One New York Times blog this week touted the benefits of co-ops, while another linked to the National Credit Union Foundation’s REAL Solutions Impact Center, featuring information about non-prime auto loans. Expanding the cooperative business model could mitigate future economic crises and reshape the U.S. economy to make it stronger, said a Tuesday post by Wilhelmina A. Leigh, an economist and senior research associate at the Joint Center for Political and Economic Studies, in “A Chance to Reshape the Economy.” “Cooperatives operate in most sectors of the economy and offer services as diverse as producing and delivering energy and providing health care service to the elderly,” Leigh wrote. “In particular, cooperatively owned financial institutions, like credit unions, fared better during the subprime market collapse than their brethren institutions that were not cooperatively owned. “Recent estimates suggest that more than 100 million people are members of 47,000 cooperatives in the U.S,” she continued. “Expanding the ‘cooperative’ economy could buffer the nations against future crises.” Also, Lisa Margonelli, in a Tuesday post titled “Making Low-Interest Auto Loans Work,” said: “The National Credit Union Foundation lists a variety of credit union programs that reach out to borrowers with poor credit on car loans. Analyst Bill Myers found that lending autos to people with poor credit can be profitable for credit unions, but they need to help clients select good cars, work more closely with them to ensure repayment and provide things like mechanical breakdown insurance …” She provided a link to REAL Solutions information about non-prime auto loans. See the links to the blog posts and the REAL Solutions link.

iWSJi web page covers CUs pitch to Obama on MBLs

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MADISON, Wis. (8/18/11)--An Iowa credit union CEO’s pitch to President Barack Obama for member business lending (MBL) relief during a rural economic forum received coverage on The Wall Street Journal’s website Wednesday. “Yesterday in Peosta, Iowa, as part of a White House forum on job creation in the state, President Obama met with Jeff Disterhoft, a credit union representative and CEO of The University of Iowa Community CU,” said the article, “Credit Unions Pitch Obama on Job Creation Plan” on the Journal’s website. “For almost two minutes, Disterhoft tried to enlist Obama's support for legislation that would raise the credit union business lending cap from the current 12.5% of assets to 25% of assets.” The article further explained that the MBL bill was filed in March, is under review by House and Senate committee, and faces “fierce” opposition from banks. Disterhoft’s advocacy efforts also received local media coverage in Iowa. (To see New Now’s coverage ue the link to Wednesday’s story.) The Iowa City Press-Citizen published an article on Tuesday describing the process of how Disterhoft was approached by the Iowa Credit Union League to attend the forum--“I jumped at it right away,” he said of the opportunity--through his meeting with the president. Disterhoft told the Press-Citizen his role was to ask the president to take a stand on legislation. He said it was rewarding to see “Democracy at its finest” as the president sought input from business leaders. The Wall Street Journal also noted statistics from the Credit Union National Association that increasing the member business lending cap to 27.5% of assets from 12.25% would inject $13 billion in loans into the economy and create 140,000 new jobs at no cost to the American tax payer.

CU System briefs (08/17/2011)

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* BURLINGAME, Calif. (8/18/11)--Norielyn Galbadores Bautista, 43, a former employee of a Burlingame, Calif.-based Pacifica Advantage FCU, pleaded no contest Monday to grand theft, forgery and identity theft in the theft of more than $428,000 from 15 members and the credit union's general fund. She originally had pleaded not guilty. Bautista allegedly used the funds for personal needs such as school over a four-year period, between March 2006 and 2010. None of the money has been recovered. Her sentencing is scheduled for Sept. 21 (The San Mateo Daily Journal Aug. 16) … * TAMPA, Fla. (8/18/11)--Tampa Bay area credit unions, through Credit Unions for Kids, donated $1.5 million in a five-year gift to All Children's Hospital to help establish a comprehensive center for children with autism and related disorders (Tampa Bay Business Journal Online (Aug. 15). The center is set for completion by next Spring. Credit unions, through CU4Kids, raise funds for Children's Miracle Network Hospitals, with funds collected going to their local children's hospitals. Participating credit unions included Achieva CU, Florida Central CU, Florida West Coast CU, Grow Financial FCU, GTE FCU, MidFlorida CU, Pinellas FCU, PowerNet CU, Railroad and Industrial FCU, San Antonio Citizens FCU, Suncoast Schools FCU, Tampa Bay FCU, Tampa Postal FCU, and USF FCU. The group also recently completed a $1.5 million pledge to create a 28-bed intensive care unit at All Children's … * NAPERVILLE, Ill. (8/18/11)--Illinois Credit Union League (ICUL) staff completed three community service projects--a food drive, a
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children's hospital visit, and a blood drive--to help people in need the past several weeks. Staff collected nearly 700 pounds of food for the Northern Illinois Food Bank, which saw a 36% surge in demand by more than 520 food pantries, shelters, soup kitchens and other food assistance sites in 13 counties. More than 502,000 people receive food assistance each year from its network; 48% are children under age 16. ICUL staff also participated in a blood drive, providing 20 pints of blood for Heartland Blood Centers, which serves 38 hospitals in 12 counties in northeastern Illinois and northwestern Indiana. And, staff visited Children's Memorial Hospital in Chicago to volunteer and interact with patients and siblings in outpatient waiting areas. Activities included projects, games and reading books. ICUL also conducts a toy drive during the winter holidays for the hospital. The hospital, Illinois' only freestanding hospital exclusively for kids, served more than 146,000 kids in 2010. At the event are, from left: Drew Kayvani, education program developer I; Carly Kipper, member service representative; Will Wille, PR coordinator; entertainer "Mr. Singer"; Melissa Ceasario, corporate and human resources administrator; Sarah Eigel, human resources manager; Deborah Frances, accounting analyst; and Joy Patel, member service representative. (Photo provided by the Illinois Credit Union League) … * SAN ANTONIO (8/18/11)--James C. Kemple, former chairman of San Antonio-based Air Force FCU, died Sunday at the age of 80. He was a chief master sergeant with the U.S. Air Force until retiring in 1981. Kemple served on the credit union's board of directors from March 1981 until November 2003. He served on numerous committees and was chairman from 1996 until he stepped down in 2003. A memorial service will be at 10 a.m. CT today in San Antonio …