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Keeping an eye out for Earl... Fiona... Gaston...

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MADISON, Wis. (9/3/10)--Lining up like ducks at a shooting gallery, hurricanes and tropical storms in the Atlantic mean credit unions are keeping an eye on the weather and making sure their disaster recovery plans are in place. But budget cuts in information technology (IT) departments could affect how well they work. The National Oceanic and Atmospheric Administration (NOAA) predicts an unusually active hurricane season this year, saying it could rival 2005--the most active year on record. The peak hurricane season--late August to November--has just begun. Hurricane Earl, which was reduced to a Category 2 storm as of 8 p.m. Thursday, was churning off the North Carolina coast about 185 miles south of Cape Hatteras, N.C., with sustained winds of 110 mph at that time. Its path is along the East Coast of the U.S. That hurricane will be followed closely by what are now tropical storms Fiona and Gaston making their way across the Atlantic Ocean (Los Angeles Times and USA TODAY Sept. 2). Fiona is heading toward Bermuda while Gaston is too far east to predict its path accurately. The increased storm activity is a reminder of what credit unions learned five years ago when Hurricane Katrina and other storms prompted them to review their disaster recovery plans. Since Katrina, the need to keep data centers and applications running during disasters has become more vital because businesses and financial insitutions are relying increasingly on automation. It is becoming more difficult to run businesses manually, Deloitte & Touche's Technology Risk practice told Sept. 2). But, according to Damian Walch, director of the practice, IT systems are at a greater risk when a storm hits now because the economic downturn has resulted in businesses cutting back on IT budgets. During the past year, some companies have put their business continuity or recovery programs on hold--or scaled them back--resulting in "bad habits." The cutbacks have resulted in decreased investments in alternative data recovery sites, fewer staff responsible for disaster recovery and business continuity, insufficient capacity on servers and storage, and neglect in updating plans and procedures, said the article. With fewer staff to run the systems, companies don't have the geographic diversity as before, and the risks have increased, Walch told the publication. Credit unions and others are reminded that September is National Preparedness Month. "There is a tendency to think that a large-scale disaster is not going to happen 'where I live,'" said U.S. Small Business Administration (SBA) Adminstrator Karen Mills in a press release Wednesday. "The reality is that storms, floods, earthquakes, fires and man-made disasters can strike anytime and anywhere." SBA urged businesses and the public to prepare for disasters and provided four tips:
* Develop a solid emergency response plan. * Make sure you have adequate insurance coverage. * Copy important records. * Create a "Disaster Survival Kit."

Movement rallied for Katrina victims Last of series

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MADISON, Wis. (9/3/10)--It's hard to wrap one's mind around the extent of the damages and hardship wreaked five years to the Gulf Coast by Hurricane Katrina. Almost as mind-boggling is the extent of the credit union movement's response--one that time and time again is mentioned by the people who lived through the disaster.
Click for slide show Cash became king in the aftermath of Hurricane Katrina. An Escambia County, Fla., SWAT team accompanied two Pensacola, Fla.-based Pen Air FCU officials to deliver funds to Keesler FCU in Biloxi, Miss. The delivery was made on Sept. 2--four days after Katrina hit the Gulf Coast. The civilians in the photo are John Davis, then president/CEO of Pen Air FCU; Scotty Broome, then president/CEO of Keesler FCU; and John Ochs, then Pen Air FCU executive vice president/chief operating officer. (Photo provided by Pen Air FCU)
Katrina brought out the Good Samaritan in everyone. Credit unions took full advantage of their cooperative nature and the system in place to get credit unions in the affected areas the help they needed. They stepped up to provide the type of assistance that they themselves almost take for granted because, "Hey, that's our philosophy--'People Helping People.'" But credit unions broke all kinds of records with their outpouring of support. The National Credit Union Foundation (NCUF), aided by collections efforts coordinated by state credit union foundations and leagues, said in 2009 that it worked with the Louisiana Credit Union League and Mississippi Credit Union Association to distribute more than $3.6 million in Katrina-relief grants--specifically for credit union people. It was the largest disaster-relief fundraising effort in credit union history (News Now Feb. 3, 2009). As a result of that hurricane season, a new fundraising mechanism was formed: CU Aid, the online fundraising platform developed by NCUF to assist credit unions and credit union people impacted by disasters. Using the platform helped to keep credit unions' relief dollars helping credit unions. The platform still exists today, and was used most recently in getting relief to credit unions destroyed in Haiti's earthquake. Funds were just the tip of the iceberg. In the months that followed the Aug. 29, 2005 landfall of the hurricane, thousands of credit unions chipped in, with funds, office equipment, supplies such as satellite phones and generators and backup equipment. Some credit unions opened their physical doors to credit unions whose branches were underwater and shared their space. The state leagues in Louisiana and Mississippi, whose employees faced much the same situation as their credit unions' employees, coordinated at the local and regional level, helping find temporary offices, matching donor credit unions with ones in need, acting as liaisons between homeless credit union employees and grants from credit union foundations, and setting up visits with grief counselors. A shortage of cash right after the hurricane hit prompted help from several corporates such as Louisiana Corporate CU, which offered $15 million in special disaster lines-of-credit at 0% interest. By early November that year, it had already loaned out $8 million. (News Now Nov. 8, 2005). Southeast Corporate FCU coordinated cash drops to Mississippi credit unions and provided equipment. Its staff trucked in 25 generators, gasoline, cell phones and computers (News Now Sept. 7, 2005). Others concentrated on the people, getting them the basics: a place to stay, food, and even utensils. Numerous credit unions "adopted" the staffs of the affected credit unions and provided support. News Now received a steady flow of information in 2005 and 2006 detailing what credit unions were doing to help. (See slide show). And sometimes the little gestures meant the most--the cookies baked, the Valentine's Day flowers sent, the holiday presents provided for staff and families. All in all, credit unions more than lived up to the philosophy they practice every day. But with Katrina, they went above and beyond.

Pa.s small-loans program saves consumers 12M

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HARRISBURG, Pa. (9/3/10)--More than 35,000 small-dollar loans have been issued by Pennsylvania credit unions through the Credit Union Better Choice program--a payday loan alternative, said the Pennsylvania Credit Union Association (PCUA). Borrowers also placed $1.6 million into savings accounts. The program is a partnership of PCUA and the Pennsylvania Treasury Department. Through the program’s lending alternative product, credit unions offer borrowers a 90-day loan with a $500 dollar limit. The loans have totaled $16.7 million dollars since Credit Union Better Choice launched in 2006. The program has saved borrowers more than $12 million over a traditional payday lending product, PCUA said. Since the program’s inception, 80 credit unions have offered Credit Union Better Choice loans. Participants continue to sign on. During the first six-month of 2010, credit unions issued 6,780 loans totaling $3.4 million dollars. “Credit unions stepped up to the plate and are meeting the small-dollar borrowing needs of Pennsylvanians,” said Jim McCormack, PCUA president/CEO. “Just as important, credit unions also are providing financial counseling to help assist borrowers with managing their money. The continued growth of the Credit Union Better Choice program shows that consumers are still feeling the effects of the down economy and that paychecks do not stretch far enough when unexpected expenses occur.” “Many Pennsylvanians need their dollars to stretch further in these tough times--to help them avoid a costly ‘debt trap,’” said Pennsylvania Treasurer Rob McCord. “Better Choice short-term loans have helped families make it to pay day and help borrowers save millions in predatory fees and usurious interest rates.” A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or about $450 over 90 days. A $500 Credit Union Better Choice loan costs consumers about $42.50 for the same 90 days, and at the end of the loan term, consumers have $50 in a savings account, which allows them to develop a savings habit, PCUA said. Also, the program builds upon the wealth-building component by providing financial education to consumers so they can make better-informed financial decisions. Pennsylvania consumers saved an average of 80 cents in loan fees and costs for every dollar borrowed through a Credit Union Better Choice loan rather than through a typical loan from a payday lender, translating into more than $12 million saved, PCUA concluded.

CUs see mortgage refinancepurchase boom in July

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MADISON, Wis. (9/3/10)--Recent record-low mortgage interest rates caused a mortgage refinance and purchase boom at credit unions in July, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly review of credit unions.
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Credit union loans outstanding decreased about 0.1% during July, compared to a 0.3% increase during June 2010. Fixed-rate mortgages led loan growth, rising 0.8%, followed by unsecured personal loans and credit card loans, which went up 0.7% and 0.6%, respectively. Used-auto loans grew 0.5%, while home equity loans increased 0.1%. Adjustable-rate mortgages and new-auto loans decreased 0.1% and 1.4%, respectively. Credit union loans in July totaled $581.9 billion, compared with $586.2 billion in July 2009. “Credit union loan balances fell again in July,” Steve Rick, CUNA senior economist, told News Now. “That was the seventh monthly decline over the past nine months. Loan balances fell 1% since the start of the year. “However, recent record-low mortgage interest rates have caused a mortgage refinance and purchase boom at credit unions,” he said. “Fixed-rate first-mortgage balances, which was the fastest growing loan product, rose 0.75% in July.”
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Credit union savings balances rose 0.8% in July, compared with a 0.3% decrease during June. Share drafts rose 4.8%, followed by money market accounts (up 0.8%) and regular shares (up 0.4%). One-year certificates and individual retirement accounts decreased 0.3% and 0.5%, respectively. Credit union savings in July totaled $801.5 billion--or $43.2 billion more than the $758.3 billion saved in July 2009. “Credit union savings balances rose $6.2 billion, or 0.8%, in July to break the $800 billion mark,” Rick said. “During the past 12 months, savings balances are up 5.7%, down from 9.8% reported for the comparable period one year earlier. Credit union members are choosing to pay down debt as they accumulate any surplus funds, as well as building up their precautionary savings balances.” Credit unions’ 60-plus-day delinquencies increased slightly to 1.8% during July. “Credit union loan delinquency rates appear to have leveled off over the past three months around 1.75%,” Rick said. “This is off the recent high of 1.85% reported in January. Loan charge-offs and a slightly better labor market are the two main factors bringing down the loan delinquency rate.” Credit unions’ loan-to-savings ratio remained at 73% in July. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 19%. The movement’s overall capital-to-asset ratio remained at 10% in July. The total dollar amount of capital is $92 billion.

CU System briefs (09/02/2010)

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* HARAHAN, La. (9/3/10)--The Louisiana Jump$tart Coalition for Personal Financial Literacy will conduct its 2010 Youth Financial Educators' Summit in Baton Rouge Sept. 27-28, according to the Louisiana Credit Union League (eNews Sept. 1). The event will meet instructional needs of free enterprise, business, math,, economics AP, Jr. ROTC and family/consumer science teachers at the high school level for public, private and parochial schools in the state. The coalition is driven by volunteers from more than 40 organizations committed to financial education of youth and adults. Its partners provide resources, training and curricula that integrate financial education into the school curriculum ... * GROTON, Conn. (9/3/10)--Charter Oak FCU, Groton, Conn., sold the assets of its Charter Oak-The Insurance Professionals to Smith Brothers Insurance. Smith Brothers is a regional insurance company with more than 100 employees ( Sept. 2). Terms of the deal were not disclosed. Operations will be known as Charter Oak-The Insurance Professionals, offering personal and business insurance. Charter Oak will maintain insurance offices in two of its Groton branches. The new alliance will benefit members because Smith Brothers offers more insurance products and services, Brian Orenstein, Charter Oak CEO, told the newspaper. Charter Oak has $635 million in assets ... * MAPLE GROVE, Minn. (9/3/10)--TopLine FCU staff partnered with North Hennepin Community College to present two financial education sessions to the college’s Job Support Network Group. The first session, “Personal Money Management,” helped attendees better understand how to manage their money with reduced incomes. Topics included how to use credit wisely, how to budget and reduce debt, and how credit scoring works. The $275 million-asset, Maple Grove, Minn.-based credit union also extended a benefit it offers to its members--free confidential financial counseling sessions --to attendees at the session. TopLine human resources staff also participated in a second session that highlighted the factors most considered when hiring, and tips and tactics for finding a job ...

GCUA poll on savings cited in Atlanta newspaper

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ATLANTA (9/3/10)--The Atlanta-Journal Constitution Thursday published a story about savings, based on a poll conducted by the Georgia Credit Union Affiliates (GCUA) that indicated consumers are holding tightly to their wallets. The story featured Allen Nichols, a member of Georgia FCU, Duluth, whose income dropped by 50%. He turned to his retirement savings to pay the bills, sold his lake home, downsized to cars with more affordable payments, stopped eating out and knocked his credit card debt to $2,000 from $20,000. Roughly 53% of those GCUA surveyed were working to increase savings, the newspaper reported. About 50.3% predicted they could survive for three months or fewer if they lost their income, and 20% indicated they had enough savings to last more than one year. Twenty-six percent said they could not sustain through any loss of income. Also, the national savings rate has risen to 6%, the newspaper said. To read the article, use the link.

Magazine features New Jersey league article

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HIGHTSTOWN, N.J. (9/3/10)--New Jersey Business magazine featured an article on how credit unions in New Jersey have stayed viable through tough economic times and dedicated to helping consumers and businesses in the state. The article was written by New Jersey Credit Union League President Paul Gentile in a special 100th anniversary September 2010 issue of the magazine (The Daily Exchange Sept 2). “The 100-year history of credit unions is as diverse as the more than 90 million Americans they serve today,” Gentile wrote in the article, titled “Cooperative Ventures.” He explained the origins of “credit societies” in Germany, which eventually translated to the establishment of credit unions in the U.S. by Edward Filene and Roy Bergengren. Gentile outlined the history of credit unions in America, from their role as safe keepers for funds during the Great Depression to the economic turmoil of 2009, when credit union lending grew while other financial institutions held back. He also explained the establishment of the Credit Union National Association and the New Jersey Credit Union League. New Jersey has more than 200 credit unions with $11 billion in assets, serving more than 1.2 million state consumers, Gentile noted. “Credit unions also are looking to help New Jersey’s public entities earn a better return on their deposits,” he wrote. “Recently, the New Jersey Senate passed legislation that would allow credit unions to accept public deposits. This is a positive development for taxpayers. If credit unions can bring more competition to the municipal deposit market, taxpayers win.” To read the article, use the link.

CUNA closed Monday no News Now

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WASHINGTON and MADISON, Wis. (9/3/10)--The Washington, D.C., and Madison, Wis., offices of the Credit Union National Association (CUNA) will be closed Monday, in observance of the Labor Day holiday. CUNA's News Now will not post a Monday edition but will resume its regular publication schedule on Tuesday.

N.Y. governor signs law allows insurance co. deposits in CUs

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ALBANY, N.Y. (9/3/10)--Nonlife insurance companies can now invest up to $250,000 in share certificates at New York credit unions. New York Gov. David Paterson signed a law Monday allowing the companies to invest in credit unions. It reverses a ruling of the New York State Insurance Department that prevented insurance companies from investing in credit unions. The legislation was signed into law as Chapter 461. It was sponsored by Senate Insurance Committee Chair Neil Breslin (D-Albany) and Assembly Insurance Committee Joseph Morelle (D-Irondequoit). The law was supported by both chambers unanimously. “The more safe investment options a business has, the more likelihood that it will be able to expand and hire new employees,” Breslin said. The Credit Union Association of New York applauded the measure, noting that consumers will benefit from a more cost-effective marketplace. “The association will continue to work toward the passage of legislation, such as municipal depository choice, which would increase the financial options available to consumers, businesses and local governments,” said William J. Mellin, association president/CEO. “Credit unions have provided security and high-quality banking services for millions of New Yorkers,” Morelle added. “Allowing non-life insurance companies to invest in them strengthens credit unions, their members and policyholders alike.” Thomas White, president of Community Mutual Insurance Company, said his company advocated for the change. “I am able to better diversify Community Mutual’s investment portfolio and maximize return on investment now that my company has the ability to deposit funds in credit unions,” White said.