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CU System briefs (09/28/2011)

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* BALTIMORE (9/29/11)--Two Maryland men who pleaded guilty as co-conspirators in a scheme to obtain fraudulent loans from several Maryland credit unions were sentenced Thursday in a U.S. District Court in Baltimore. Christopher Houston, 34, of Edgewood, Md., was sentenced to 33 months in prison plus five years of supervised release for bank fraud conspiracy. He also was ordered to pay more than $126,000 in restitution. Donald Brown, 31, Elkton, received five months in prison and five months of home detention, plus three years of supervised release. Houston is the boyfriend and Brown the brother of the ring's central figure, Latesha Brown, 26, of Edgewood, who was sentenced earlier this month to six years in prison for bank fraud conspiracy and aggravated identity theft. Court documents alleged that the three and others used false, modified, or stolen identities and documents while Latesha Brown was employed at credit unions to allegedly help them obtain loans with no collateral. She was employed at Transit Employees FCU, and allegedly helped obtain fraudulent loans from Harford County Maryland FCU and Municipal Employees FCU and a number of other credit unions. Records indicated she allegedly applied for jobs at 33 credit unions and for membership in 29 credit unions. The incidents occurred from September 2004 through August 2010 and resulted in $234,552 in losses, said a press release from the U.S. Attorney's Office in Baltimore (Dagger Press Sept. 22) … * FARMERS BRANCH, Texas (9/29/11)--University FCU, based in Austin, Texas, has donated $1.7 million to St. Edwards University to renovate its Alumni Gym, according to the Texas Credit Union League (LoneStar Leaguer Sept. 27). St. Edwards will rename the building University FCU Alumni Gym. The $1.4 billion asset credit union has contributed more than $2 million to the university since 1991, and has supported it by providing funds for scholarships, event sponsorships and more. It also provides internships for students interested in careers in business and/or finance and consumer education in personal finance for the university community, said the league … * SAN ANTONIO (9/29/11)--The newly designed website of San Antonio-based, $6.5 billion asset Security Service has been named the 2011 Best Credit Union Website by the Web Marketing Association. The award is based on criteria that included design, ease of use, copywriting, interactivity, use of technology and content. The credit union partnered with Extractable, a San Francisco-based digital user experience design agency, on the project to create a more engaging online experience for users. The credit union reported double-digit percentage gains have already been realized in credit card application and vehicle loan volume since the site was revamped … * MOLINE, Ill. (9/29/11)--Joseph VandeMoortel, 81, died Thursday at his home in Moline, Ill. VandeMoortel was a manager for 15 years at John Deere Foundry CU. He also was a past director of the Illinois Credit Union League, active in the Mississippi Valley Chapter of Credit Unions, chairman of the Illinois Credit Union Board from 1981 to 1983, and was a Credit Union National Association national director from 1979 to 1983 (The Quad City Times Sept. 24) …

Missouri association honors CU award winners

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ST. LOUIS (9/29/11)--The Missouri Credit Union Association (MCUA) honored state-level winners of the Dora Maxwell Social Responsibility Award, Louise Herring Award for Philosophy in Action, and the Desjardins Financial Education Award at its 2011 Annual Convention and Exposition. The convention, held Sept. 20-22 in Branson, Mo., was co-sponsored this year with the Credit Union Association of Oklahoma and brought record numbers of participants, said MCUA (The Missouri difference Sept. 27). First place Dora Maxwell winners were:
* Joplin (Mo.) Metro CU, $20 million-$50 million asset category; * Central Missouri Community CU, Warrensburg, $50 million-$100 million assets; * Gateway Metro FCU, St. Louis, $100 million-$200 million assets; * Mazuma CU, Kansas City, $200 million-$500 million assets; * Vantage CU, Bridgeton, $500 million-$1 billion assets; and * First Community CU, Chesterfield, more than $1 billion assets.
First place Louise Herring Award winners were:
* St. Louis (Mo.) Community CU, $50 million-$250 million assets; * Mazuma CU, $250 million assets-$1 billion assets; and * First Community CU, more than $1 billion assets.
First place Desjardins Financial Education Award winners were:
* Raytown Lee's Summit Community CU, Raytown, youth financial education award, $50 million-$150 million assets; * Electro Savings CU, St. Louis, adult financial education award, $50 million-$150 million assets; * Gateway Metro FCU, youth, $150 million-$500 million; * St. Louis Community CU, adult, $150 million-$500 million; * Vantage CU, youth, more than $500 million; and * Community/America CU, Kansas City, adult, more than $500 million.
State level winners will move to the national competitions, sponsored by the Credit Union National Association.

SBA designates Financial Resources FCU as Preferred Lender

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BRIDGEWATER, N.J. (9/29/11)--The U.S. Small Business Administration (SBA) has designated Financial Resources FCU, Bridgewater, N.J., as a Preferred Lender. Preferred Lender status allows the $398.5 million asset credit union to provide quicker processing and loan approval to small business owners, which in turn allows the businesses to expand. That makes Financial Resources FCU an important partner in helping to create jobs and further economic development in the local economy, said the New Jersey Credit Union League (The Weekly Exchange Sept. 23). Financial Resources is one of five credit unions in New Jersey participating in the SBA lending program, and the only one to have achieved the Preferred Lender status. Nationwide, less than 20% of all approved SBA lenders achieve that designation, the league said. The Preferred Lenders Program (PLP) is part of SBA’s effort to streamline the procedures to provide financial assistance to the small-business community. Under the program, SBA delegates the final credit decision and most servicing and liquidation authority and responsibility to selected PLP lenders. However, SBA continues to check loan eligibility criteria.

CUNA OpSS Council elects exec committee

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MADISON, Wis. (9/29/11)--The new executive committee and officers for the CUNA Operations, Sales & Service (OpSS) Council were announced during the council’s 14th annual conference, which ended Wednesday in San Antonio. Sue Douglas, senior vice president e-delivery and risk management, State Employees’ CU, Raleigh, N.C., will become chair of the executive committee, succeeding Jennifer Lehn, executive vice president, Numerica CU, Spokane Valley, Wash. Steve Langley, vice president, sales/service/training, Travis CU, Vacaville, Calif., will become vice chair. Other elections and appointments:
* Incumbents Douglas and Debbie Baumann, vice president, operations/chief operations officer, Mazuma CU, Kansas City, Mo., were re-elected, and Greg Inman, senior vice president, Neighbors FCU, Baton Rouge, La. was elected to his first three-year term on the committee. * Steve Stryker, chief operations officer, Scott CU, Collinsville, Ill., was appointed to succeed Tina McMinn, vice president/operations, Stanford FCU, Palo Alto, Calif.
The CUNA OpSS Council executive committee also includes:
* Dave Tate, vice president, branch operations, Anheuser-Busch Employees’ CU, St. Louis; * Robb Keith, senior vice president retail services, Members 1st FCU, Mechanicsburg, Pa.; * Becky Davis, vice president, branch operations, Delta Community CU, Atlanta; and * Patsy Gayda, vice president of branches, Spokane Teachers CU, Liberty Lake, Wash.

Tech Council speaker Tech trends can affect CU

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SAN ANTONIO (9/29/11)--The rapid “consumerization” of technology is changing how credit unions conduct business, including how they interact with their members, Rick Roy, CUNA Mutual Group senior vice president and chief information officer told the attendees at the annual CUNA Technology Council Conference in San Antonio.
Rick Roy, CUNA Mutual Group senior vice president and chief information officer, told the annual CUNA Technology Council Conference in San Antonio on Tuesday that the “consumerization” of technology is changing how credit unions do business. (Photo provided by CUNA Mutual Group)
Consumerization of information technology is the increasing influence consumer products or technologies traditionally used by employees for personal use have when they are brought into the corporate environment for business use, Roy explained. He identified social media, mobility, cloud computing and data security/privacy as four key trends credit unions should closely monitor as consumerization evolves. “Social networks are changing how we talk, interact, sell, and build brands. The astounding reach social media has had on marketing and sales can create new opportunities for credit unions to reach new demographics, quickly and effectively,” Roy added. The same can be said with the explosion of mobility. With millions of mobile devices sold worldwide, smartphones and tablets are inescapable and a consumer-driven revolution. “Mobility is a powerful market differentiator for credit unions,” Roy added. Roy also discussed the increased interest and viability of cloud computing in the credit union marketplace. “Today, cloud computing has experienced a major shift from infancy to a real business strategy for many companies. We are hearing more about how insurers are adopting software as a service platforms outside their core systems of policy administration, claims and financials,” Roy said. But he also cautioned that while market forces may push toward this strategy, the insurance industry is still assessing whether it is the best solution. Roy acknowledged the potential drawbacks related to the security, performance and availability of cloud offerings. “Security for non-public, private information remains a huge concern for insurers, as it is a business issue that spans beyond just technology.” Roy also discussed the latest data security and privacy issues. “Data breaches can happen quickly, and they have profound effects on credit unions, including financial ramifications, loss of members, brand damage, regulatory scrutiny, and legal liability,” he said. Many data breaches occur both internally and externally, including theft of personal information by employees or loss of unencrypted equipment containing personal information. These threats change so frequently that it is important to constantly monitor for them. “Breaches occur from both internal and external sources, and many incidents can be easily prevented with changes in one’s internal controls,” Roy said. He provided several key recommendations for each trend:
* For social media, develop an internal and external social media policy that incorporates clear corporate messaging standards for all employees to use. * For mobility strategies, embrace mobile devices’ new levels of productivity for employees, and create a secure, “mobility choice” support model. * When addressing security and privacy, eliminate all non-essential private and credit union data and encrypt the remaining data, including data on mobile devices. * For cloud computing, beware of industry hype, but closely monitor industry progress because options are maturing very quickly; be clear on security and privacy shortcomings.
“Ensure your technology strategy can support your business strategy, and that your people and processes are lined up to help your credit union capitalize on new market opportunities that come your way,” Roy said.

PCUA submits testimony for state hearing on disaster program

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HARRISBURG, Pa. (9/29/11)--The Pennsylvania Credit Union Association (PCUA) submitted testimony about credit union disaster relief efforts for a hearing held Tuesday by state legislative committees on establishing a state disaster assistance program. The state Senate and House Veterans Affairs and Emergency Preparedness Committees held the joint hearing, said PCUA (Life is a Highway Sept. 28). More than 20 states have a dedicated state disaster assistance fund to help fund recovery efforts in the aftermath of natural and manmade disasters that fall below the federal threshold for aid. PCUA submitted written testimony on behalf of credit union efforts to assist victims of Tropical Storm Lee flooding. It noted that in response to Hurricane Irene and Tropical Storm Lee, PCUA joined forces with the National Credit Union Foundation to activate an online disaster relief system,, to raise money for credit union members, volunteers and employees who suffered losses not covered by insurance or any government assistance. "Credit unions are being commended by elected officials for the quick response of developing a private sector solution for a desperate public need," said PCUA in its newsletter.

CUNA Economic Forecast puts economy in CU perspective

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MADISON, Wis. (9/29/11)--The Credit Union National Association’s (CUNA) Economic and Credit Union 2011-2012 Forecast is less optimistic than previous ones because of weakening manufacturing numbers, a frail labor market, falling equity prices and the turmoil related to the Euro-zone crisis. Also the possibility of a double dip recession has increased.
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CUNA’s forecast also includes a midyear summary of credit union operating results--a U.S. Credit Union Profile. (Use the link to access the report.) How does the forecast impact credit unions? “Credit unions have been making progress, but it has been slow progress,” Paul Ledin, CUNA senior data analyst, told News Now. “As uncertainty in the market remains, loan growth will remain weak and the uncertainty will act a headwind against credit unions’ loan growth. “A recession is not likely to happen, but the fear in the market is what causes problems--all driven by the manufacturing and other economic numbers being down,” he added. “There now is a one-in-three chance of recession, which has gone upward from a one-in-four chance. The fact that the chance increased is causing concern.” A key factor in CUNA’s economic forecast is a higher than normal unemployment rate, which leads to higher delinquency and charge-off rates. That in turn feeds into lower loan demand because more people are unemployed. “People will pull back on spending, which will depress loan growth,” Ledin said. Another factor in the economic forecast is the flattening of the Treasury yield curve in 2012 due to the Federal Reserve’s “operation twist.” As long-term interest rates fall, the cost of funds will remain steady, but the interest income derived from them will decline, Ledin said. “It’s clear the Fed can push down interest rates, but how that translates into loan demand is not as clear at credit unions,” he added. As for the credit union forecast, members are in synchronization with credit unions, Ledin said. “People are behaving like credit unions are,” he explained. “During the past few years, they have built up their rainy-day funds. People are probably going to become more sensitive to short-term interest rates--balancing savings versus consumption. But the uncertainty issue still is there, and it will affect long-term spending for bigger-ticket items. “That’s what credit unions would like to see--growth in long-term spending because that drives loan growth,” he continued. “People don’t borrow for lunch or day trips, but they do borrow for computers and cars.” Is there anything credit unions should do--given CUNA’s Economic and Credit Union Forecast? “As the interest margins come down, for credit unions to thrive they will need to drive volume to maintain their current level of income. They’ll want to grow loans,” Ledin concluded.

Former COO pleads guilty to fraud at defunct St. Paul Croatian CU

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CLEVELAND (9/29/11)--The former chief operating officer of defunct St. Paul Croatian FCU, Eastlake, Ohio, Tuesday pleaded guilty to leading a loan scheme that resulted in what federal officials are calling the largest credit union failure ever. Anthony Raguz, 52, of Mentor, Ohio, pleaded guilty to six counts, including bank fraud, money laundering and bank bribery (US Fed News Sept. 27). Raguz allegedly issued more than 1,000 fraudulent loans totaling more than $70 million to more than 300 account holders at St. Paul from 2000 to April 2010, according to court documents. He accepted more than $1 million worth of bribes, kickbacks and gifts in exchange for the fraudulent loans, they said. He is one of 16 people charged in U.S. District Court for their roles in the credit union collapse. Raguz is scheduled to be sentenced Jan. 4. St. Paul Croatian FCU went into conservatorship and then forced liquidation in April 2010. The failure cost the National Credit Union Share Insurance Fund $170 million. Raguz allegedly originated hundreds of loans to account holders with little or no assets, income or employment history and oversaw “loan resets” in which older loans were fraudulently repaid with new loans under false names, said court documents cited by the U.S. Attorney’s Office for the Northern District of Ohio. The money laundering counts stem from Raguz allegedly issuing checks totaling $371,800 drawn on his St. Paul account payable to The Vanguard Group, according to court documents.

Missouri Corporate refunds excess cap commitments to CUs

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ST. LOUIS (9/29/11)--Missouri Corporate CU (MCCU) will refund $2.6 million in excess capital commitments to its members, the corporate announced Wednesday. The capital commitments resulted from the corporate's recent re-capitalization effort, which aimed to raise a minimum of $17.5 million. Member credit unions actually pledged more than $22.6 million. In a meeting Thursday, the corporate's board of directors voted to top the capital commitments at $20 million and return roughly $2.6 million in escrow to current members. "The support of our members was overwhelming and well beyond our expectations," said Dennis DeGroodt, president/CEO of MCCU. "It is unusual, especially for a corporate credit union, to return excess capital commitments, but that's exactly what we are doing. Right now, our members need the funds more than we do," he added. The amounts refunded ranged from $182 to $92,300. Even with the refunds, MCCU remains adequately capitalized with a Leverage Ratio of 5.5%, a Tier-1 Risk Based Capital ratio of 114.3% and a Total Risk Based Capital Ratio of 151.9%, as of Tuesday, the announcement said. DeGroodt said the corporate, which serves 124 natural person credit unions, would welcome new members. "We're not a large corporate, and our focus is not on scale," said DeGroodt. "Our focus is on providing a high level of personal service, backed by a full range of products that are designed to simplify our members' interaction with us. Our goal is to become 'invisible' to credit union employees and free their time to concentrate on their own members."

N.J. league recognizes 2011 award winners

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HIGHTSTOWN, N.J. (9/29/11)--The New Jersey Credit Union League (NJCUL) recognized its 2011 award winners during its 77th Annual Meeting and Convention. Those recognized include:
* CEO of the Year: Milt Hershberger, ABCO FCU, Willingboro; * Credit Union of the Year: XCEL FCU, Bloomfield; * Volunteer of the Year: St. James A.M.E. FCU, Newark, and Calvin Jackson, NJCUL board member * The Difference Maker of the Year: Jeannie Straub, who provides administrative support to executive management at Jersey Shore FCU, Northfield; * Miller/Kosobucki Marketing Award: West Orange (N.J.) Municipal FCU (less than $10 million category)and Jersey Shore FCU (more than $25 million category); * The Dora Maxwell Social Responsibility Award ($100 million to $200 million category): Jersey Shore FCU; * The Louise Herring Philosophy in Action Award: Jersey Shore FCU ($50 million to $250 million category) and Credit Union of New Jersey, Ewing ($250 million to $1 billion category); and * The Desjardins Youth Financial Education Award: Raritan Bay FCU, Sayreville ($50 million to $150 million category).
A special Lifetime Achievement Award was given to Jersey Shore FCU CEO Virginia Williams for her years of dedicated service to the credit union industry.