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The Nation’s Leading Credit Union Newsweekly

2011

2011A POWERFUL NETWORK for Your Products and ServicesSourceMedia provides news, data tools, analysis and commentary for credit union and financial services executives. In addition to Credit Union Journal, publications include U.S. Banker, Bank Technology News and American Banker, as well as live events and custom marketing services.

The community of professionals we serve is committed to building and operating successful credit unions. And it depends on information services that offer market perspective and insight to enhance and support decision-making. Reaching this community daily, weekly and monthly, we are positioned to provide up-to-date news coverage and in-depth analysis of the key issues affecting the industry—the perfect vehicle for your advertising message.

CREDIBLE COVERAGE in Print and Online Credit Union Journal delivers the latest information to credit union leaders so they can serve their members in this growing market. Influential credit union heads look to Credit Union Journal each week for the latest developments in the credit union community.

For the past thirteen years, our readers have turned to us for trustworthy and concise coverage on growth strategies, member relationship management, small business services, legislative changes and other relevant topics.

Combined with the voluminous content available at CUJournal.com, Credit Union Journal provides unmatched value to credit union decision-makers.

With Credit Union Journal,

you can reach credit union leaders

in print, online, or in-person all

year long.

BESTPRACTICES

CREDIT UNION JOURNAL

2010

CU Journal Issues

Call For Entries For

Best Practices Awards.

See Page 5 For Details

MasterCard Offers Windfall

To Its CU Stockholders

PURCHASE, N.Y.–MasterCard,

one of just two stocks owned by

credit unions, announced a ma-

jor windfall for credit unions with

the conversion of closely held

Class B shares to commonly

traded Class A shares.

The company,

which issued

Class B shares

to its credit

union and

bank owners

as part of its

2006 initial

public offer-

ing, announced

that 7.5 million

Class B shares

will be eligible

for conversion

under a four-week

program. Effec-

tive June 1, all of those Class B

shares were converted to Class

A shares on a one-for-one basis

and now are eligible for sale on

the open market.

Class A MasterCard shares,

under siege recently because

of proposed legislation to lower

card interchange fees, closed

up 63 cents last Wednesday at

$201.02 in the wake of the an-

nouncement.

Hundreds of credit unions re-

ceived Class B shares in the IPO

and were forced to hold a large

portion of those shares for three

years. Credit unions also received

Visa shares as part of Visa’s

2008 IPO. The two issues are the

only common stocks credit unions

are permitted to own.

CU Card Card Portfolio Sales

Likely To Hit New Low In ‘10

PETERBOROUGH, N.H.–Credit

unions appear to be on track

to make 2010 the year of the

fewest sales of credit card

portfolios.

During the first quarter, just

two portfolios of more than $1

million in outstandings were

sold, according to TRK Advisors,

Vol.XIV, No 23

June 7, 2010

ON

DEADLINE

CUs Hit The Hill To Push

For Interchange Relief

WASHINGTON–Credit unions will be making a last-ditch effort to

lobby Congress on the issue of interchange this week with a CUNA-

sponsored “National Hike

the Hill.”

At press time, the num-

ber of credit union reps

expected was reportedly

lower than anticipated, but

CUNA said it was confident

attendance will be strong.

CUNA President Dan

Mica has called on credit unions to rally in Washington June 8 and

9 to show their dissatisfaction with the interchange amendment

currently included in the Senate version of the regulatory reform

Continued on page 29

CRED IT UNIO N

JO UR NA LT H E N E W S W E E K L Y F O R G R O W T H - O R I E N T E D C R E D I T U N I O N S



Index

cujrounal.com

Class Action Suit Raises Stakes In

New York Mortgage Tax Challenge

Kinecta, NuVision Propose Union Of

Own In $4.7B Merger Page 3

How 1 CU Learned Cash Really Is

The ChampionPage 4

CUs Facing Tougher Exams Page 4

A Day In The Life

Of CUs Page 5

By Ray Birch, Correspondent

WEST PALM BEACH, Fla.–

The R&D dollars being spent

by credit union suppliers

offer a look back at trends

from the first half of 2010

and insights into what the

second half of the year--and

beyond--might hold. In this

issue Credit Union Journal

offers readers a look-ahead

at what Q3 and Q4 might

hold for CUs, plus strategies

for meeting challenges.

Coverage begins on page 13.

The Second-

Half Forecast

CU Launches Effort To

Reach Out To Muslims

TOTOWA, N.J.–North Jersey FCU is reaching out to its large

Muslim community by becoming one of the first American finan-

cial institutions to offer Sharia-compliant financial products.

New Jersey is home to the second-largest percentage of Muslims

in the U.S, with more than 700,000 Muslims in Bergen County

alone. The credit union said its deposit program is consistent with

the principles of Islamic Law (Sharia).

“We were approached by some of the leaders of the [commu-

nity] mosques; they came to explain how it is really difficult for

those who are observant to get mortgages or car loans, because it

By Matt Blumenfeld, Reporter

NEWARK, N.J.–In the latest legal salvo over the $140 million fraud

at U.S. Mortgage/CU National Mortgage, Suffolk FCU, the biggest

victim in the case, filed suit in federal court last

week against Fannie Mae for return of some

$42 million the secondary mortgage market gi-

ant bought under false pretenses from the failed

mortgage company.

The suit, filed in the district of the New

Jersey-based CU National, claims Fannie Mae

should have known that mortgages sold to it by

the company’s CEO Michael McGrath were not

valid and that the constant pipeline of mortgages

By Ed Roberts, Washington Bureau ChiefSuffolk FCU Sues Fannie Mae As

Part Of CU National Litigation


CUNA President Dan Mica urges CUs to “Hike The

Hill” to lobby against interchange reform.

Gary Meyerhoff

Sonnenschein Nath

Debate Over What Q1 Lending Decline Might Mean

WASHINGTON–A 5% decline during

the first quarter in overall lending at credit

unions has led to several different interpreta-

tions of what it might portend.

The performance marked one of the

sharpest quarterly declines ever reported by

credit unions. In its analysis, N

AFCU sees

the precipitous drop as potentially indicating

a more lasting shift in consumer behavior,

while CUNA contends the decline signals

that a lending rebound will simply be slower

than expected.

“We are in the midst of a sustainable eco-

nomic recovery and that means labor markets

will improve substantially and consumer be-

havioral changes seen the last year or so will

begin to turn around,” said CUNA Senior

Economist Mike Schenk. “But loan demand

won’t go up quite as rapidly as it typi-

cally does in a rebound, because people

are concerned about their debt levels. We

expect loan demand will be substantially

higher in the second and third quarters.”

Overall, CUNA is projecting 4%

CU loan growth for the entire year, but

household debt will continue to mute

demand, Schenk noted. “We do believe

By Ray Birch, Correspondent Continued on page 29

SOARING?ARE YOUR CARD NUMBERS

www.themembersgroup.com I turn the page to learn how

CUJ060710_page01 1

6/3/2010 3:27:07 PM

BESTPRACTICESCREDIT UNION JOURNAL2010CU Journal Issues Call For Entries For Best Practices Awards. Go to www.cujournal.comFor DetailsDays & Counting

3White House Kick-Starts CU Bid To Raise Cap On MBLsWASHINGTON–The decade-long effort to lift the member busi-ness loan limit, which had been dying on the vine, was revived by the written endorsement of Trea-sury Secretary Timothy Geithner.

“The administration’s support of our efforts to increase the industry’s business lending is a very significant step forward as we continue to pursue enact-ment of such legislation in this Congress,” said NAFCU Presi-dent Fred Becker.

Treasury Secretary Geithner told House Financial Services

Committee Chairman Barney Frank that

he supports raising the MBL limit for healthy credit unions to as much as

27.5% of as-sets, more than double the current 12.25% limit.

Credit unions have been working for years to raise

the limit but were losing hope of getting a legislative change this year until a high-ranking Treasury official said during a House hear-ing the Obama administration supports the MBL bid as part of a broader bill that would provide small business loan capital for community banks. Geithner’s letter to Frank formalizes the Administration’s support.

The Treasury secretary sug-gested certain conditions for the increased limit, including a proven record of making MBLs, proof the credit union is near the current limit and has strong capital. “It is important that re-forms are not done in a way that inappropriately introduces more risk to credit union members, the credit union system, the National Credit Union Share Insurance Fund or the financial system as a whole,” wrote Geithner to Frank.

Vol.XIV, No 22 May 31, 2010

ONDEADLINECRED IT UNIO N



Index

cujrounal.com

CUs May Take Up To A 9BP Hit From Overdraft Reform

Page 2Alaska USA Using Mergers, P&As To Expand On West Coast

Page 3Ahh, Life Is Good. For Your Bak’s CEO, Ads Say

Page 4Targeting A Younger Demo, Connex CU Says It’s Time To ‘Unbank’

Page 4How To Gain–& Keep–A Bigger Piece Of The Mortgage Pie

Page 84 Low-Cost Steps To Clean Up Data, Con-nect With Members

Page 8

Strategies WillAffect Revenue

WILMINGTON, N.C.–Credit unions that have approached the upcoming Reg E deadlines as a marketing opportunity and not just an operations issue stand a much greater chance of protecting their debit card revenue, analysts told Credit Union Journal.

With less than one month left to com-ply with the new law, major card proces-sors and industry experts believe that the majority of credit unions are prepared for the respective July 1 and Aug. 15 deadlines, but also agree that many are not. They cite widespread differences in CU readiness in


NEW ORLEANS–Credit unions have no choice but to re-examine their fee structures and opt-in policies in the wake of pending changes to Reg E.

And they will have to move quickly.Fabio Biasella, VP and managing

drecto of Strategic Advisory Services with Raddon Financial Group, told the CUNA CFO Council’s annual meting, “Every fee is under assault. It’s hard to quantify how much of a threat there is to various income streams.”

Biasella said the typical CU household

Time To Rethink Fee Structure


By Ray Birch, Correspondent By Frank J. Diekmann, Editor

New Refi Boom In Wings?

BEAVERTON, Ore.–The ongoing sovereign debt crisis in Europe could lead to another surge in mortgage refinance volume this sum-mer, but CUs should temper their optimism.

“If rates continue to fall I would anticipate another mini refi boom, maybe not as much last year because much of that was caused


Critical Reg E Deadline Approaching

012345678

Jan ‘07 Jan ‘08 Jan ‘09 Jan ‘10

15 YR CONF30 YR CONF


Mark-To-Market RuleFor Loans Is Proposed

By Ed Roberts, Washington Bureau Chief

NORWALK, Conn.–The Financial Account-ing Standards Board last week proposed rules

that would extend market value accounting to a new set of holdings, including loans.

The move has been widely criticized by credit unions and banks, who say it could wreak havoc as current rules allow them to report loans at book val-

ue as long as they have an intent to hold them.Marking the loans to market value could re-



CU Difference Is Not A Trivial Pursuit

CANTON, Ohio–First Ohio Community FCU is hoping members’ interest in movies, sports, and history will drive branch traffic and cross-sales.

The $25-million CU is playing its own ver-sion of Trivial Pursuit with members, ask-ing them a new ques-

tion each day of the week during May and June. Each time members answer correctly, they’re entered into a drawing for a $25 Visa Gift Card that will be held the first week of July.


Robert HerzFASB

Mortgage Rate Trends Over The Last Three Years

Source: Informa Research Services

CUJ053110_page01 1 5/27/2010 3:52:39 PM

media.CUJournal.com

2011ThE CREDIT UNION MARKETPLACE is Expanding While American taxpayers were bailing out other financial services providers, it was credit unions that were helping bail out American consumers in 2010 and into 2011 with more favorable pricing on products and services, and a willingness to offer helpful financial counsel.

Americans have responded by moving some $925 billion of their assets into credit unions during 2010, up significantly from less than $700 billion at the end of 2008. Now, as the American economy recovers, America’s credit unions are poised to grow even faster as they get ready to surpass more than $1 trillion in assets.

As of June 2010 there were 7,598 federally insured credit unions with nearly 92 million members.

2007 88.5

2008 89.9

2009 91.2

MID-YEAR 2010 91.7

2006 87.4

2005 86.1

Source: CUNA, Economics and Statistics Department, prepared September 7, 2010

Source: CUNA, Economics and Statistics Department, prepared September 7, 2010 Source: CUNA, Economics and Statistics Department, prepared September 7, 2010

2007 $770.1

2008 $825.8

2009 $896.8

MID-YEAR 2010 $916.1

2006 $726.2

2005 $694.2


2007 $646.8

2008 $691.8

2009 $763.3

MID-YEAR 2010 $788.6

2006 $615.3

2005 $590.8


Credit Union asset size ($ in billions)

SavingS entruSted to credit unionS ($ in billions)

Credit Union MeMbership (Membership in millions)

media.CUJournal.com

Readers pass their copy to 3.1 other people.

OUR CIRCULATION IS STRONG—And AuditedCredit Union Journal is the only BPA-audited credit union newsweekly, guaranteeing our subscriber claims and ensuring the highest industry standards.

Our 8,103 subscribers* turn to Credit Union Journal for the credit union community news and information they need to manage their business. But our publication reaches more than just our influential subscribers. Each week, our subscribers pass their issue along to approximately 3.1 individuals**, making total weekly readership more than 25,000 strong.** Sources: * June 2010 BPA Worldwide Statement, based on 8,103 qualified circulation

**Harvey Research, March 2008, Ad Q® Study

The TiTles you need To reach...

Job Title

... At the InstItutIons You WAnt

Business Type

68% CEO/President/ CU Head/ Chairman

88% Credit Union

2% Director/ Board Member

Other

1% Association/Government/College/Library

2% CUSO/EFT Network

3% Consulting Firm/Vendor/Others Allied to the Field

6% Other Paid

EVP/SVP/CFO/CIO/VP/AVP/Mgr16%

14%

Source: June 2010 BPA Worldwide Statement, based on 8,103 qualified circulation

Source: June 2010 BPA Worldwide Statement, based on 8,103 qualified circulation

BESTPRACTICES

CREDIT UNION JOURNAL

2010

CU Journal Issues

Call For Entries For

Best Practices Awards.

Go to www.cujournal.com

For Details

More Losses Recorded,

Higher Assessment Likely

ALEXANDRIA, Va.–NCUA had

more bad news for credit unions

last week, announcing it has

added eight more credit unions

to its troubled list and set aside

an additional $170-million to

cover losses at natural-person

credit unions. The additional re-

serves cut the reserve ratio for

the National CU Share Insurance

Fund and, with two other nega-

tive indicators, point to a higher

premium assessment later this

year, agency officials said during

the NCUA Board’s monthly meet-

ing. The other negative indica-

tors are significantly lower inter-

est earnings on the NCUSIF’s

$9.4 billion in Treasury securi-

ties, and high share growth

of 11% for the first quarter of

the year, which would cause to

greater dilution of reserves later

in the year. NCUA had originally

budgeted $750 mil-

lion for losses in

natural-person

credit unions,

but the addi-

tional reserves

increased that

pot to $896-

million. Me-

linda Love, chief

examiner for

NCUA, warned of

increasing losses

as the condition

of some of the

deteriorating, large

credit unions becomes clearer.

“There is an increasing potential

that $750 million will not be

sufficient to cover the potential

losses (of those troubled, large

credit unions),” said Love. “We’ll

know more about losses at the

big credit unions later in the

summer. The losses by natural-

person credit unions are one of

the two components that will

figure into a special assessment

credit unions will be charged this

year, with a separate payment

Vol.XIV, No 21

May 24, 2010

ON

DEADLINE

CRED IT UNIO N



Auditors Express Doubts On Corps

WARRENVILLE, Ill.–Losses for corporate

credit unions continue to pile up at an accel

-

erated pace, r

aising doubts about the corpo-

rates’ ability to continue as “

going concerns”

and new questions about whether NCUA will

be forced to go back to Congress and seek ad-

ditional assistance for the corporate b

ailout.

Growing losses at Members U

nited Cor-

porate FCU have elim

inated almost all of the

$9.5-billion corporate’s member capital and

“raise substantial doubt about Member Unit-

ed’s ability to continue as a going concern,”

the corporate’s auditors McGladrey & Pullen


Index

cujrounal.com

Bill Creates New Problems For CUs

Page 3

Earnings Up Despite Loan Slowdown

Page 3

CU Launches Site With Goal Of

Doubling MBLs

‘Private Member Advisor’ Aims To

Help Deepen Member Relationships

Page 4

Self-Help CU Uses Secondary

Capital To Finance New CDCUPage 5

Don’t Confuse Bigger

With Better Page 8

NEW ORLEANS–To get a sense of how balance sheet demands

have changed for credit unions one need travel no further than

the CFO Council’s annual meeting here last week.

Finding income streams, especially to replace those that will

likely be diminished under pending rules related to Reg E and

plastic cards, and knowing at a greater level of detail exactly

what each member and product means to the credit union were

primary discussion points. While a number of presenters and CFOs

on hand stressed the importance of not losing sight of why credit

unions exist, little doubt was left that compressed margins have left

few choices but to reexamine fees and pricing.

Yet even with an overhaul of those revenue streams, the silver lin-


WEST PALM BEACH, Fla.–Hacking into your credit union’s da-

tabase has never been so cheap and easy, thanks be to Zeus.

Wanna-be fraudsters are just an

Internet connection away from down-

loading free, effective hacking tools

from criminal websites and file-shar-

ing programs. The most pernicious free

tool on the Net today? Certainly the Zeus Banking Trojan, malicious

software that can download itself onto computers and steal data.

5 Cheap,

Easy Ways to

Hack-A-CU

How 1 CU Grew Its MBL

Volume By 2,900%

ERIE, Penn.–A novel indirect lending program for a wide variety of

consumer products, combined with an aggressive marketing and com-

munity outreach campaign, has led to big results for one CU here.

Erie FCU has seen its business lending portfolio swell from

$275,000 in 2007 to nearly $8 million by the

end of 2009 and more than doubled its num-

ber of “Business Affinity Partners,” the term

it uses for SEGs.

“When I was going out to recruit new businesses to join the credit

union (in 2008), they were telling me about how they were struggling

in this economy,” VP of Business Development Sandi Carangi said,

explaining that area businesses were chiefly concerned with their cus-

tomers’ lack of credit access. “A lot of the credit companies they were

going through were no longer approving loans to anyone had a credit



By Frank J. Diekmann, Editor

By Kevin Jepson, Technology Correspondent


Kids, Try This At Home

SPECIAL REPORT:

TECHNOLOGY

See pages 13-19

Old Scammers Eye New Targets

PLEASANTON, Calif.–With enforcement of the new Red Flag

rules imminent, a new analysis suggests scammer are now seeking

out other weak links.

The report from Javelin Strategy & Research found that the per-

centage of fraud victims whose accounts were taken over by change

of address declined to 24% in 2009 from 66% in 2006 as institu-

tions began to comply with the RFR requirement to provide an


By Ed Roberts, Washington Bureau Chief CUNA CEO Dan Mica, Michigan Economic Development Corp.’s Paul

Brown and Kalamazoo County State Bank CEO James MacPhee

testify before Congress. For hearing coverage, see page 10.


Finding New Revenue Streams In

Wake Of Rules Tops CFO Agenda

see our ad

inside!

CUJ052410_page01 1

5/20/2010 3:05:48 PM

Texas’ OCECU Shut Down;13th CU Failure In 2010ORANGE, Texas–NCUA and state regulators last week shut down Orange County Employees Credit Union, the 13th credit union failure of 2010. Regula-tors immediately assigned the assets of OCEFCU to Sabine FCU, a $150-million credit union based in the same town, under a purchase-and-assumption agree-ment. NCUA said the rapidly deteriorating financial condition of the credit union, which had shrunk to just $1.7-million in assets as of March 31 from $4 million as of Sept. 30, 2009, along with negative net worth led to the closure.

Herb Yolles Will Head UpRegion III Through Year-EndALEXANDRIA, Va.–NCUA named Herb Yolles as temporary Regional Director of Region III

through the remainder of 2010. Yolles joined NCUA in 1978 and he has served during his career as CFO, deputy director of examination

and insurance, president of the Central Liquidity Facility, and Inspector General. Most recently Yolles Associate Regional Direc-tor of Operations in Region II.

To Mark 75th Birthday,BECU Giving Out CashSEATTLE–To mark its 75th anniversary, BECU is handing out $1 bills. The credit union, chartered in 1935 by 18 employ-ees of Boeing, passed out the largesse last week at its Capitol Hill branch in the city and will be handing out more cash today at Northgate Mall. The credit union is also be donating $25 for every account opened to the Lifelong AIDS Alliance, except for Friday, when the money will go

Vol.XIV, No 24June 14, 2010

ONDEADLINE

People Ignoring People

MADISON, Wis.–A new Filene Research Institute study finds credit union management needs to better listen to their employees.

The study suggests “statistically…good ideas are just as likely to come from the front line as from man-agers, and that even job tenure and edu-cation levels are only weak predictors of who has quality ideas. It also shows that employees don’t speak up often enough.”

Chief Research Officer George Hofheimer noted, “Ideas come from every aspect of the organization and the researchers were un-able come up with any correlation that linked specific types of in-dividuals to ideas.”

“Employee Voice and (Missed) Opportunities for Learning in Credit Unions” is the result of an 18-month study by Ph.D re-searchers Ethan Burris of the University of Texas at Austin; James

CRED IT UNIO NJO UR NA LT H E N E W S W E E K L Y F O R G R O W T H - O R I E N T E D C R E D I T U N I O N S

MEMPHIS, Tenn.–Where should credit unions invest their dollars when it comes to e-banking?

Increased personalization, widespread adop-tion of mobile banking and direct person-to-person payments are the future of electronic banking, according to industry experts.

“As time goes on you will see the self-ser-vice model evolving to the next level,” pre-dicted uMonitor President/CEO Dinesh

Sheth. “You and I will be doing everything from our desks or smartphones. The consumer will be getting more comfortable doing everything from any device.”

With personal fi-nancial management solutions (PFM) al-ready catching fire, the next major change in electronic banking will be personalizing that channel and turning it into a true virtual

What Lies Ahead For E-Services? Continued on page 22

Index

cujournal.com

CU destroyed by tornadoPage 2

First Tech’s secrets to strong performance

Page 4

Hard lessons from the BP oil spillPage 8

CEO steps down amid probePage 11

Opportunities in deposit-based payments

Page 12

What’s in it for Me? Page 15





At a press conference last week in DC, from left, CUNA’s Dan Mica, ICBA’s Cam Fine, and NAFCU’s Fred Becker.

Last-Ditch Effort Made To Kill Interchange Proposal

WASHINGTON – Hundreds of credit union executives criss-crossed the halls of Congress last week in an effort to convince lawmakers to scrap the provision of the bank reform bill that would establish price controls over debit card interchange, but their efforts face great odds.

“I think we all know that this stays in the bill unless we see a mini-riot by credit unions and community banks that will be most affected by this,” said Buddy Gill, political director for the Texas CU League, who was accompanying a delegation of credit union executives on their rounds yesterday.

He was referring to a Senate version of the bank that includes



As Seen On TV–And Elsewhere

LANSING, Mich.–Credit unions are doing anything but taking the summer off when it comes to advertising, especially on the airwaves.

Several credit unions and associations in dif-ferent markets last week announced plans to ag-gressively role out cam-paigns designed to boost awareness and member-ship. The Michigan CU League has budgeted some $4-million and launched what it said was the largest ad campaign by credit unions in the state’s history. In the Washington and DC markets, the Mary-land and DC CU League added new components to its “What’s In


Mich.’s $4M Campaign Leads The Way


A scene from Michigan CUs’ new TV spots.

SpecialReport:

E Services

Herb YollesNCUA

Study: CU Staff Aren’t Being Heard

CUJ061410_page01 1 6/10/2010 4:36:28 PM


Stock Prices Of Fannie,Freddie Plunge After ReportWALL STREET–The stock prices of mortgage giants Fannie Mae and Freddie Mac plummeted last week after announcing they had been ordered to delist from the New York Stock Exchange.Fannie Mae’s stock was down 45% to 51 cents and Freddie Mac’s stock was down 47% to 65 cents at presstime. The Federal Housing Finance Agency,

the federal regulator for the two secondary mortgage market giants, said the delisting order was not taken due to the compa-nies’ performance.The two companies have been hemorrhaging red ink and have tapped more than $145 billion combined in federal aid. They have an open credit line with the

Treasury Department through 2012. OTC trading of shares of the two companies is expected to start approximately July 8.Card Delinquencies, Charge-Offs Hit Near Highs During Q1PORTLAND, Ore.–Credit card delinquencies and charge-offs at credit unions remained near all-time highs, even as the average balance on card accounts contin-ued to grow in the first quarter, according to AssetExchange, a card broker for credit unions.The delinquency ratio as of March 31 rose to 4.6%, believed

to be its highest ever, while the charge-off ratio was at 1.9%. At the same time, the average balance on a CU card grew to $2,619, up from $2,471 a year ago, the company said.Student Loan CUSO Launched In WisconsinMADISON, Wis.–The $1-billion UW Credit Union has formed a CUSO called CU Campus Resources to offer a private stu-dent loan program for CUs, as well as the colleges. CU Campus

Resources has partnered with Cology, Inc., Scottsdale, Ariz., to provide the core processing.


ONDEADLINE

PITTSBURGH–According to some small credit unions, there is a

disconnect between the direction NCUA is providing examiners on

evaluating small CUs and what field staff are actually doing.Leaders of community development and low-income credit unions

shared just that concern, and others, with NCUA Chairman Debbie

Matz during a plenary session at the 36th Annual Conference on

Smaller CUs Say NCUA, Examiners Inconsistent

Amidst The Gloom, CUs Hit A New Milestone: 10% MarketshareWASHINGTON–For the first time in history, credit unions in the U.S. have reached the 10% mark in terms of share of retail consumer deposits. It’s a significant milestone CUs will likely surpass in the coming years, suggested Callahan & As-sociates. “With the strong share growth we are seeing currently and how credit unions are remaining active with competitive rates, I think

we will continue to see credit unions make strides here,” said Nick

Connors, senior industry analyst. “They are positioned well.”Credit unions hit the 10% mark in March after closing 2009 at

9.8%. It has been a steady climb for the industry over the past year,

gaining ground each month after a marked drop in 2008 to 9.2%. Continued on page 13


Index

cujournal.com

Big Mergers Shake Up Markets In MI & FL, Shore Up Troubled CUsPage 3‘SURF Dude’ Kicks Off Summer ATM Promo In Maine

Page 3When The Going Got Tough...Process Made EasierPage 4

CU Employees Who Hit The Lottery Share Their Plans

Page 16Special Report: CUSOsPages 20-21




1990 1995 2000 2005 2010

0

2

4

6

8

10

6.9%8.1% 8.4%

9.6% 10.0%

CU MARKETSHARE

Why 1 CU Is Embracing A Little Monkey BusinessTAMPA, Fla.–GTE FCU is hoping is efforts to capitalize on a local

icon will generate some real monkey business. The $1.6 billion credit union launched its “Mys-tery Monkey Tour” based on a rhesus monkey

that has achieved cult status in southwest Florida as it has roamed around the area for the last year, narrowly avoiding capture multiple times.


Durbin Kills 1 Argument Against Interchange ReformBy Ed Roberts, Washington Bureau ChiefWASHINGTON–The chief sponsor of the Senate’s interchange

amendment creating price controls agreed last week to exempt all

government programs from his provision, eliminating an argument

being used by credit unions and banks lobbying against the measure.

Sen. Richard Durbin, the Illinois Democrat working to develop a

regulatory scheme for the $50-billion-a-year market for credit and debit

card interchange, said last week he will propose a new exemption, or

carve-out, from the Senate-passed provision for some $8-billion a year

in government benefits programs delivered with debit cards.Durbin made the announcement during a hearing on how the Continued on page 22

ALEXANDRIA, Va.–The NCUA Board approved a $1-billion charge to pay for the corporate credit union bailout, while also disclosing that losses accrued by the Nation-al CU Shares Insurance Fund have reached almost $1.1 billion for 2010, presaging an-

other big assessment later this year.The corporate assessment comes after last year’s charge of $1.1-billion, which included $337-million for the first year of the corpo-rate bailout and the remainder to replenish reserves for the NCUSIF. This year’s corpo-

rate assessment amounts to 13.4 basis points and must be accrued by credit unions for the second quarter, and paid by Aug. 30.NCUA Chairman Deborah Matz said the

decision to assess the corporate charge was a difficult one. “We wrestled with this, both in terms of the amount and the timing,” said

NCUA OK’s $1B In New Corporate-Related Charges



Source: CUNA

NCUA Chairman Debbie Matz speaks in Pittsburgh

CUJ062110_page01 1

6/17/2010 4:41:15 PM

Source: Harvey Research, March 2008, Ad Q® Study

2011

DELIVERING READERS WITh Purchase Power & InfluenceEach week, influential credit union leaders and decision-makers look to the Credit Union Journal for the latest developments in the credit union community, and that includes information about new products, services and solutions. While other publications are read only by those making policy changes—not purchasing decisions— our subscribers hold the key to the industry’s massive buying power and influence.

Over 91% of our readers are involved in the purchase of products or services at their credit union Source: Zoomerang Subscriber Study, September 2009

Business Development/Marketing 76%

Member Relationship Management 68%

Risk Management 68%

Information Technology 63%

Facilities 63%

Business Intelligence 61%

Security 60%

Document Processing 59%

Insurance 59%

Lending Services 58%

E-Commerce Solutions/Web site 58%

Processing 55%

Investments 54%

Auto Loan Services 54%

Card Services 52%

Mortgages 47%

Source: Zoomerang Subscriber Study, September 2009Source: Zoomerang Subscriber Study, September 2009

Percentage of readers with Buying influence

90% of readers have taken action during the past year as a result of an advertisement and/or articles in Credit Union Journal.

77% Discussed an ad/article with someone else in the company

72% Referred an ad/article to someone else in the company by passing along a tearsheet, photocopy or actual issue

38% Visited advertiser’s Web site

10% Requested additional information from a company, sales representative or distributor

20112011

media.CUJournal.com

OUR ONLINE AUDIENCE is GrowingCUJournal.com, the online companion to Credit Union Journal, is updated throughout the day with breaking credit union news and analysis. Online traffic has been steadily increasing in 2009.

In addition to traditional Web site advertising, the Credit Union Journal Daily Briefing is sent to an opt-in list comprised of 7,857* credit union leaders—and the list continues to grow each month.

Topics regularly covered online include: Technology, Corporate Credit Unions, Growth Strategies, Insurance, Lending, Facilities, Mortgages, and more.

91% of business professionals declare that online advertising is effective at driving traffic to Web sites; 62% say that it is effective at delivering targeted promotions; and 60% state that it is effective at generating leads.

Source: ABM 2007 Forrester Study

Source: *Publisher’s Own Data, November 2009

CUJournal.com At-A-Glance(monthly average)

Visitors: 36,670 Unique Visitors: 12,712Page Views: 87,885 Source: HitBox, December 2010

2011

AmericanBanker.com Community Banking Update Daily Briefing Intraday Updates Morning Scan Mortgages UpdatePayment Systems Update Technology UpdateWealth Management UpdateWashington Regulatory Update

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US-Banker.com U.S. Banker Bulletin

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25 Most Powerful Women in Banking The Mentor Factor

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BankTechNews.com Bank Technology News Bulletin

We are dedicated to meeting your marketing needs and growing your business. Our strongest programs are those that we custom build for our clients, based on their marketing and sales objectives. From building brand recognition to generating leads to crafting custom programs, Credit Union Journal has a solution for you. Make your budget work harder in 2011 by combining the right advertising solutions to achieve short- and long-term goals.

Visit Solutions.SourceMedia.com to learn how we can build your custom marketing program.

february 5,2007

T h e F i n a n c i a l S e r v i c e S d a i l yVo l u m e C L X X I V N o . 8 7 A m e r i c a n B a n k e r. c o m

SuBSCrIptIoNS: 800-221-1809

May 7, 2009thursday

KBW Bank Index 11.5%ABA/Nasdaq Index 3.2%

toDAY’S NEWSBanks needing more capitalwill have until June 8 to develop a plan and until Nov. 9 to implement that plan, regulators said. Page 2

WASHINGtoNThe Senate approved a bill that would increase the FDIC’s borrowing authority. Page 3

MortGAGES Pipeline: An upcoming horror film depicts the consequences of denying a mysterious woman a loan extension. Page 4The number of underwater homeowners continued to grow in the first quarter as home prices dropped further, a Zillow report says. Page 4Lenders that financed eight General Growth Properties malls want them removed from the company’s Chapter 11 bankruptcy case. Page 4

CoMMuNItY BANKING Page 5

CArDS Discover says it expects its loan chargeoff rate to rise to about 8% this quarter. Page 6

WEALtH MANAGEMENtFidelity Investments says it manages the most assets for U.S. millionaire households, followed by B of A and Goldman Sachs.

tECHNoLoGYA subprime auto lender is testing two types of technology that it hopes will make its debt easier to sell. Page 9Jack Henry execs say they are not concerned about Metavante’s deal to sell itself to Fidelity National Information Services. Page 9

MArKEt MoNItorBlackRock, Federated Investors and Franklin Resources made preliminary bids for B of A’s mutual fund unit, sources say. Back pageHuntington is teaming up with the state of Ohio to lend to companies there. Back page

Though 13 banks have bought back preferred shares issued through the Treasury Depart-ment’s capital initiative, all but one continue to haggle with the government over the price of the program’s warrants.

Only two banks have completed the process of exiting the Capi-tal Purchase Program, and the first was the privately held Centra Financial Holdings Inc. of Mor-gantown, W.Va.

To buy its way out of the gov-ernment’s $15 million investment, the $1.2 billion-asset company proposed paying a dollar for each of its 750 warrants. The Treasury insisted on the $1,000 face value, or a $750,000 payment.

“It was incredibly unfair,” said Douglas Leech, Centra’s chairman, president, and chief executive offi-cer. The company’s board opted to proceed with the sale rather than continue to operate under restrictions enacted by Congress in recent months, or risk dilution for other investors. “We felt that the financial penalty for staying in the program would have been exponentially greater,” Leech said.

Another TarpTangle: PriceOf Warrants

So close and yet so far away.First State Bancorp. in Albu-

querque was well on its way to sat-isfying regulators’ capital require-ments when it ran into another setback.

Under a regulatory order, the company’s $3.5 billion-asset bank must boost its total risk-based capital ratio to 12%. A deal that First State made in March to sell its Colorado branches would have accomplished that.

But last week the company reported a wider-than-expected loss for the first quarter. The loss ate up so much capital that it now could take several quarters to hit the target in the September order. And in all likelihood, First State will have to do so by continuing to shrink itself; its shares are trad-ing below book value, making an equity sale prohibitive.

“If the capital markets would free up a little, we would consider”

Loss Means Branch Sale Won’t Lift Capital After All

The suggestion was barely out of Federal Deposit Insurance Corp. Chairman Sheila Bair’s mouth before lawmakers began embracing the idea of creat-ing a systemic risk council to over-see large financial companies.

To date discussions about a systemic regulator have centered on expanding the Federal Reserve Board’s powers. For months Sen-ate Banking Committee Chairman Chris Dodd and other senators have expressed concern about that idea, given the central bank’s track record in the run-up to the finan-cial crisis.

At a hearing Wednesday, Bair offered the first real alternative: a council composed of existing reg-ulators that would have the “teeth” to intervene when necessary.

The idea quickly drew favor from Dodd and others.

Council for SystemicOversightGains Steam

Not JustThe Fed“Nobody really has a handle right now on the entire system,” Bair said, proposing a panel of several agencies to police big firms.

Labor DayAssets per employee at selected large banking companies. Dollars in millions. Additional data begins on page 10

The ever-shrinking bank divi-dends could start vanishing.

After drastic cuts over the last year or so, more large banking companies might have to suspend their dividends to raise capital to counter mounting losses.

“When you’ve got loan losses, you’ve got to come up with the money [to cover them] some way,” said Ed Yardeni, the president of Yardeni Research Inc. “Paying out dividends just doesn’t make any sense.”

Most of the major banking firms have cut their dividend to a dime a share or less as the reces-sion has deepened. But the fear of losing investors has made these firms reluctant to discard divi-dends completely. Also, keeping even a small one lets them tout a track record of cutting checks to

A Penny for Your RecoveryWhy any dividend might now be too steep

Online account opening’s notexactly on the IT frontier ,but its potential as a low- costengine for deposit growth pro-vides a new option for the fu-ture of community and re-gional banks.

“It’s...almost a standalonebranch without overhead,”says Stratton Huggins, a vp ofmarket ing for RenasantBank, a $4 billion institutionbased in Tupelo, MS.

Renasant generated $1 mil-lion in online account openingsin five months starting in latein 2008 after it outsourced thefunction to Goldleaf Finan-cial Solutions. The bankachieved those results withminimal increase to call centerstaffing and no branch expan-

sion. “It costs a lot less than the$25,000 per month it wouldcost us to open, provide staffand pay for one new brick andmortar branch,” Huggins says.

Smaller banks’ outsourcingof electronic account openingsto Andera , Me tavan te ,Goldleaf and others on a pay-per-transaction basis has thusfar lagged the actual innova-tion—much of the technologyis a couple of years old, andmost large banks already offer

Fighting external fraud has become like whack-a-mole; with theonline channel increasingly secure, organized crime has taken to ex-ploiting the weaknesses in the call center as they evolve their multi-channel business model. The mallet that accompanies the carnivalgame might be easier to wield, but the biggest banks are lookingat PINs, voice biometrics, automated KBA, and enterprise fraud de-tection to combat shape-shifting fraudsters.

“Call center authentication is the biggest pain point to me rightnow,” says Stan Swalbenest, remote channel risk director in con-sumer risk management at JPMorgan Chase. “When I look at myportfolio, the biggest risks I see are social engineering-through thecall center, through the branch.”

JPMorgan Chase certainly isn’t alone. Call center fraud is increas-ingly sophisticated, with reps vulnerable not just to advanced social

banktechnews.com

BOFA GREETSCUSTOMERSIN AN ANTI-

PHISHING“TEACHABLE

MOMENT” Page 13

FLASHING BLINGMobile payments gets anew playerPage 10

IN THE SUNA Phoenix bank opens itsroof to solar powerPage 14

After Heartland Payment Systems suffered its massivebreach in January, CEO RobertO. Carr issued a call to action,suggesting payments playersimplement end-to-end encryp-tion and share breach forensicsamong themselves. Some dis-missed this rant as a public re-lations strategy to distract fromHeartland’s culpability in thecase, but Carr made good onhis word in early May with theformation of the Payments Pro-cessing Information SharingCouncil (PPISC).

Carr kicked off the inauguralmeeting of the PPISC as a newsubsidiary of the Financial Ser-vices Information Sharing andAnalysis Center (FS-ISAC), firmin his belief that the entire indus-try would benefit from the

CALL CENTER

Phone FraudAdvancesBiometricsThe call center is the weakest link in multi-channelfraud; voice biometrics emerge as a viable solution

CHANNEL MIGRATION

Grow Without Getting BigCommunity banks outsource e-account opening for low-cost deposits

SECURITY

BreachSharingGets Off theGroundHeartland’s call for the industry to work together finds willingparticipants

BY THE NUMBERS

JUNE 2009 TECHNOLOGY INNOVATION. BUSINESS RESULTS. VOL. 22 NO. 6

$4.9 billion

$2 billion

25%

IS EMV THEANSWER?

Whether it’s a bold acquisition, a shrewd secu-rity play, a payments platform or energy-savingdata center, these firms are making waves thatbuck the economic storm.

February 2009 Beyond Business as Usual

us-banker.com

Microfinance is filling an importantniche for an under-served and

unbanked U.S. population, and it’sattracting big banks like Citi to

the movement. Can a for-profitmodel coexist with the spirit

and mission behind this anti-poverty strategy?

TREASURY, TARP ON TRIAL

Community bankers are up in arms over theFDIC’s hike in risk-basedassessment rates. Theirargument: Risks to thesystem are higherbecause of the actionsof the biggest banks.

THE SINS OFOTHERS

‘09 AD BUZZWORD:STABILITYMarketing budgets may decline for a thirdstraight year. But somebanks see opportunitywith consumers andinvestors looking for DDA safe-havens.

MICRO MISSION,

MACROCHALLENGE

0902USB_cover.3.qxd 1/12/09 4:43 PM Page 1

CREDITUNIONJOURNAL

Technology ReportPages 15-22

T H E N A T I O N ’ S L E A D I N G I N D E P E N D E N T C R E D I T U N I O N N E W S W E E K L Y

Vol.XIII, No 33 August 17, 2009

cujournal.com


BIRMINGHAM, Ala.–Is the record number of CU liquidations in2009 a reflection of regulatory agencies acting quickly–or too late?

Some analysts have questioned whether state and federal regulatorshave been up to the task as losses have mounted and net worth hasdeclined into low single digits at some credit unions, forcing closures,P&As, and losses to the insurance fund. But regulators told CreditUnion Journal they have acted as quickly as possible, and that in casessuch as the red numbers posted by some corporate CUs, no one could

State Agencies Say Losses, Closures NotReflective Of A Lack Of Oversight

2010 MarketplaceDirectory Out Next Week

Used Car DealerConvicted In Repo Fraud

MidFlorida FCU ConvertsTo State Charter

Tricorp Slashes Dividend On CUThat Gave Withdrawal NoticeBy Matt Blumenfeld, Reporter

RUTLAND, Vt.–One CEO here is wondering if the rate his corporateis paying is reflective of market realities, or is it a punishment?

After the conservatorship of US Central and WesCorp and numerousother shocks to the corporate system, Credit Union of Vermont CEO

Brian Fogg was simply looking outfor his members, he said, when hegave Tricorp its 36-month notice

that it intended to withdraw all of its funds from the corporate.Nearly two months after that notice was given, Fogg was surprised to

hear from Tricorp CEO Steve Roy that the corporate’s board decided toplace all MCS accounts from credit unions that had given notice into adifferent classification and cut their dividends to just one basis point.Because the corporate was paying just 12 basis points on the $110,000that CU of Vermont had with Tricorp, the move was not one to savemoney but was instead a “slap” at CUs that were looking outside the cor-porate system, Fogg contended.

“Corporates have cost [natural person] credit unions tremendous loss-

see our ads inside!

The Role Of Regulators

DEADLINE


MADISON, Wis.–Credit unions across the country are scrambling tocomply with the open-ended lending segment of the CARD Act thatgoes into effect on Aug. 20.

Several sources and CU CEOs indicated they are not prepared to bein full compliance, and both CU trade groups were lobbying for exten-sions as Credit Union Journal was going to press. The rule requires finan-cial institutions to notify consumers what they owe on open-end prod-ucts 21 days before the bill is due. If an institution fails to send thisnotice, the account cannot be considered late.

CUs Scramble As CARDCompliance Days Away

ON

Index

unSocial MediaHow CUs Are Using MySpace, Facebook To Track Down Debtors

By Kevin Jepson,Technology Correspondent

WEST JORDAN, Utah–The collectionsteam at Mountain America CU here is usingFacebook and MySpace to find memberswho aren’t paying their credit union loans.


LAS VEGAS–In last week’s NCUA takeover of Community One FCUthere was little doubt the troubled credit union’s net worth ratio was farbelow the critical level set under NCUA’s minimum capital rules.

The $160-million credit union, which wracked up almost $12 millionin losses over the last 18 months, had less than 1% of net worth, wellbelow the 2% level where NCUA rules qualify a credit union as “criti-cally undercapitalized.”

But the NCUA’s net worth calculations leave a lot of discretion by theregulators and management in determining what qualifies for net worth.

In the recent takeover of Mutual Savings CU in Birmingham, Ala.,

No Standard For Net Worth LeavesCalculation In Eye Of The Beholder

20112011

CUJournal.com Daily Breifing

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issue materials due special reports bonus distribution

1/31/101/171/241/31

12/22/2010 12/29/2010 1/5 1/12 1/19

2011 Preview/The Year AheadLending in 2011TechnologyGrowth Strategies for 2011Fraud & Risk Prevention

2/72/142/212/28

1/262/22/92/16

Insurance & Non-Interest Income SourcesTechnologyCredit/DebitCUNA GAC Issue

• NAFCU Technology & Security Conference, Las Vegas; CUES Symposium

• CUES Executive Summit• CUNA’s Governmental Affairs Conference, Washington, DC

3/73/143/213/28

2/233/23/93/16

CUSOsAuto LendingTechnologyAd Recall Study

• CO and MO Credit Union Leagues’ Annual Meetings

4/44/114/184/25

3/233/304/64/13

LendingThe Bottom Line ReportTechnologyInsurance & Non-Interest Income Sources

• OH, CT, IL, VA and MN Credit Union Leagues’ Annual Meetings• DE, KS, SC Credit Union Leagues’ Annual Meetings; NAFCU CEO’s Conference; CUNA HR/TD Council Annual• Texan Credit Union League Annual Meeting, NACUSO Annual Meeting

5/25/95/165/23 5/30

4/204/275/45/115/18

Credit/DebitMobile Banking ServicesFacilities/Branch AutomationTechnologyMortgage Lending

• GA and WI Credit Union Leagues’ Annual Meetings• MI, MS, PA Credit Union Leagues’ Annual Meetings• CUNA CFO Council Annual Meeting; ME Credit Union League Annual Meeting

• NM, NE, NY Credit Union Leagues’ Annual Meetings

6/66/136/206/27

5/256/16/86/15

2011 2nd Half ForecastTechnologyCUNA America’s Credit Union ConferenceNAFCU Annual Conference & Exhibition

• Mid-America Credit Union Association Annual Meeting• NC, AZ, FL/AL Credit Union Leagues’ Annual Meetings• CUNA’s America’s Credit Union Conference• NAFCU Annual Conference & Exhibition; CUES Annual Conference

7/47/117/187/25

6/226/297/67/13

LendingCorporate Credit UnionsTechnologyCompliance

• WOCCU World Conference, Scotland

8/18/88/158/228/29

7/207/278/38/108/17

Strategic Planning 2012Credit/DebitFraud & Risk PreventionTechnology2012 Marketplace & Buyer’s Guide Directory

• LA Credit Union League Annual Meeting

9/59/129/199/26

8/248/319/79/14

Mortgage LendingComplianceTechnologyThe Big Branch Report/Facilities

• MN, IA Credit Union Leagues’ Annual Meetings• NAFCU Congressional Caucus• WA Credit Union League Annual Meeting

10/310/1010/1710/2410/31

9/219/2810/510/12 10/19

Auto LendingTechnologyDay in the Life of Credit UnionsInsurance & Non-Interest Income Sources Facilities/Branch Automation issue

• KY, CA/NV Credit Union Leagues’ Annual Meetings• OR Credit Union Association Annual Meeting

11/711/1411/2111/28

10/2611/211/911/16

Credit/DebitCorporate Credit UnionsTechnologyBest Practices Awards

12/512/1212/19

11/2311/3012/7

Ad Recall StudyTechnology2011 Year in Review

• CUES Directors Conference

The editorial calendar and bonus distribution are subject to change. Please contact your sales manager for the current schedule.

E d i t o r i a l C a l E n d a r

media.CUJournal.com

2011P Display aDvertising rates

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P Online Advertising rAtesHome Page advertising

Ad size dimensiOn (pixels)

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Printing Process: Web Offset, SWOP standards applyTrim Size: 10 7/8” x 12 ¾” Live Area: 10” x 12 ¾” Bleed: 11 1/8” x 14”Binding Method: FoldBlack & White: Negatives, RRESD, film base 4 mil. Half tone screens 85–100 line. Furnish print with each negative.

P CreAtive FormAts & speCiFiCAtions [print]pdF speCiFiCAtionsWe prefer to receive digital advertising files in Adobe’s PDF format created from an Adobe application using the PDF/X-1a:2001 specification. Typically, PDF files are created from Postscript files utilizing Adobe Acrobat Distiller, but PDF’s created directly from InDesign will work as well. We do NOT recommend exporting PDF files directly from your native operating system, Quark or other non-Adobe applications. The results of exporting from non-Adobe applications can be unreliable and will not meet our specifications because the profiles listed below were not used in the creation process.

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BESTPRACTICESCREDIT UNION JOURNAL2010CU Journal Issues Call For Entries For Best Practices Awards. Go to www.cujournal.comFor Details

More Losses Recorded,Higher Assessment LikelyALEXANDRIA, Va.–NCUA had more bad news for credit unions last week, announcing it has added eight more credit unions to its troubled list and set aside an additional $170-million to cover losses at natural-person credit unions. The additional re-serves cut the reserve ratio for the National CU Share Insurance Fund and, with two other nega-tive indicators, point to a higher premium assessment later this year, agency officials said during the NCUA Board’s monthly meet-ing. The other negative indica-tors are significantly lower inter-est earnings on the NCUSIF’s $9.4 billion in Treasury securi-ties, and high share growth of 11% for the first quarter of the year, which would cause to greater dilution of reserves later in the year. NCUA had originally

budgeted $750 mil-lion for losses in

natural-person credit unions, but the addi-tional reserves increased that pot to $896-

million. Me-linda Love, chief examiner for NCUA, warned of increasing losses as the condition of some of the deteriorating, large

credit unions becomes clearer. “There is an increasing potential that $750 million will not be sufficient to cover the potential losses (of those troubled, large credit unions),” said Love. “We’ll know more about losses at the big credit unions later in the summer. The losses by natural-person credit unions are one of the two components that will figure into a special assessment credit unions will be charged this year, with a separate payment





Auditors Express Doubts On Corps

WARRENVILLE, Ill.–Losses for corporate credit unions continue to pile up at an accel-erated pace, raising doubts about the corpo-rates’ ability to continue as “going concerns” and new questions about whether NCUA will be forced to go back to Congress and seek ad-

ditional assistance for the corporate bailout.Growing losses at Members United Cor-

porate FCU have eliminated almost all of the $9.5-billion corporate’s member capital and “raise substantial doubt about Member Unit-ed’s ability to continue as a going concern,” the corporate’s auditors McGladrey & Pullen


Index

cujrounal.com

Bill Creates New Problems For CUsPage 3

Earnings Up Despite Loan SlowdownPage 3

CU Launches Site With Goal Of Doubling MBLs

Page 4

‘Private Member Advisor’ Aims To Help Deepen Member Relationships

Page 4

Self-Help CU Uses Secondary Capital To Finance New CDCU

Page 5

Don’t Confuse Bigger With Better

Page 8

NEW ORLEANS–To get a sense of how balance sheet demands have changed for credit unions one need travel no further than the CFO Council’s annual meeting here last week.

Finding income streams, especially to replace those that will likely be diminished under pending rules related to Reg E and plastic cards, and knowing at a greater level of detail exactly what each member and product means to the credit union were primary discussion points. While a number of presenters and CFOs on hand stressed the importance of not losing sight of why credit unions exist, little doubt was left that compressed margins have left few choices but to reexamine fees and pricing.

Yet even with an overhaul of those revenue streams, the silver lin-Continued on page 23

WEST PALM BEACH, Fla.–Hacking into your credit union’s da-tabase has never been so cheap and easy, thanks be to Zeus.

Wanna-be fraudsters are just an Internet connection away from down-loading free, effective hacking tools from criminal websites and file-shar-ing programs. The most pernicious free

tool on the Net today? Certainly the Zeus Banking Trojan, malicious software that can download itself onto computers and steal data.

5 Cheap, Easy Ways to Hack-A-CU

How 1 CU Grew Its MBL Volume By 2,900%

ERIE, Penn.–A novel indirect lending program for a wide variety of consumer products, combined with an aggressive marketing and com-munity outreach campaign, has led to big results for one CU here.

Erie FCU has seen its business lending portfolio swell from $275,000 in 2007 to nearly $8 million by the end of 2009 and more than doubled its num-

ber of “Business Affinity Partners,” the term it uses for SEGs.“When I was going out to recruit new businesses to join the credit

union (in 2008), they were telling me about how they were struggling in this economy,” VP of Business Development Sandi Carangi said, explaining that area businesses were chiefly concerned with their cus-tomers’ lack of credit access. “A lot of the credit companies they were going through were no longer approving loans to anyone had a credit




By Kevin Jepson, Technology Correspondent


Kids, Try This At Home

SPECIAL REPORT: TECHNOLOGYSee pages 13-19

Old Scammers Eye New Targets

PLEASANTON, Calif.–With enforcement of the new Red Flag rules imminent, a new analysis suggests scammer are now seeking out other weak links.

The report from Javelin Strategy & Research found that the per-centage of fraud victims whose accounts were taken over by change of address declined to 24% in 2009 from 66% in 2006 as institu-tions began to comply with the RFR requirement to provide an



CUNA CEO Dan Mica, Michigan Economic Development Corp.’s Paul Brown and Kalamazoo County State Bank CEO James MacPhee testify before Congress. For hearing coverage, see page 10.


Finding New Revenue Streams In Wake Of Rules Tops CFO Agenda

see our ad inside!

CUJ052410_page01 1 5/20/2010 3:05:48 PM

BESTPRACTICESCREDIT UNION JOURNAL2010CU Journal Issues Call For Entries For Best Practices Awards. See Page 5 For Details

MasterCard Offers Windfall To Its CU StockholdersPURCHASE, N.Y.–MasterCard, one of just two stocks owned by credit unions, announced a ma-jor windfall for credit unions with the conversion of closely held Class B shares to commonly traded Class A shares.

The company, which issued

Class B shares to its credit union and bank owners as part of its 2006 initial

public offer-ing, announced that 7.5 million Class B shares will be eligible for conversion under a four-week program. Effec-

tive June 1, all of those Class B shares were converted to Class A shares on a one-for-one basis and now are eligible for sale on the open market.

Class A MasterCard shares, under siege recently because of proposed legislation to lower card interchange fees, closed up 63 cents last Wednesday at $201.02 in the wake of the an-nouncement.

Hundreds of credit unions re-ceived Class B shares in the IPO and were forced to hold a large portion of those shares for three years. Credit unions also received Visa shares as part of Visa’s 2008 IPO. The two issues are the only common stocks credit unions are permitted to own.

CU Card Card Portfolio Sales Likely To Hit New Low In ‘10PETERBOROUGH, N.H.–Credit unions appear to be on track to make 2010 the year of the fewest sales of credit card portfolios.

During the first quarter, just two portfolios of more than $1 million in outstandings were sold, according to TRK Advisors,


ONDEADLINE

CUs Hit The Hill To Push For Interchange Relief

WASHINGTON–Credit unions will be making a last-ditch effort to lobby Congress on the issue of interchange this week with a CUNA-sponsored “National Hike the Hill.”

At press time, the num-ber of credit union reps expected was reportedly lower than anticipated, but CUNA said it was confident attendance will be strong.

CUNA President Dan Mica has called on credit unions to rally in Washington June 8 and 9 to show their dissatisfaction with the interchange amendment currently included in the Senate version of the regulatory reform





Index

cujrounal.com

Class Action Suit Raises Stakes In New York Mortgage Tax Challenge

Page 2

Kinecta, NuVision Propose Union Of Own In $4.7B Merger

Page 3

How 1 CU Learned Cash Really Is The Champion

Page 4

CUs Facing Tougher ExamsPage 4

A Day In The Life Of CUs

Page 5

By Ray Birch, CorrespondentWEST PALM BEACH, Fla.–

The R&D dollars being spent by credit union suppliers

offer a look back at trends from the first half of 2010 and insights into what the

second half of the year--and beyond--might hold. In this issue Credit Union Journal

offers readers a look-ahead at what Q3 and Q4 might

hold for CUs, plus strategies for meeting challenges.

Coverage begins on page 13.

The Second-Half Forecast

CU Launches Effort To Reach Out To Muslims

TOTOWA, N.J.–North Jersey FCU is reaching out to its large Muslim community by becoming one of the first American finan-cial institutions to offer Sharia-compliant financial products.

New Jersey is home to the second-largest percentage of Muslims in the U.S, with more than 700,000 Muslims in Bergen County alone. The credit union said its deposit program is consistent with the principles of Islamic Law (Sharia).

“We were approached by some of the leaders of the [commu-nity] mosques; they came to explain how it is really difficult for those who are observant to get mortgages or car loans, because it

By Matt Blumenfeld, ReporterNEWARK, N.J.–In the latest legal salvo over the $140 million fraud at U.S. Mortgage/CU National Mortgage, Suffolk FCU, the biggest

victim in the case, filed suit in federal court last week against Fannie Mae for return of some $42 million the secondary mortgage market gi-ant bought under false pretenses from the failed mortgage company.

The suit, filed in the district of the New Jersey-based CU National, claims Fannie Mae should have known that mortgages sold to it by the company’s CEO Michael McGrath were not valid and that the constant pipeline of mortgages


Suffolk FCU Sues Fannie Mae As Part Of CU National Litigation


CUNA President Dan Mica urges CUs to “Hike The Hill” to lobby against interchange reform.

Gary MeyerhoffSonnenschein Nath

Debate Over What Q1 Lending Decline Might Mean

WASHINGTON–A 5% decline during the first quarter in overall lending at credit unions has led to several different interpreta-tions of what it might portend.

The performance marked one of the sharpest quarterly declines ever reported by credit unions. In its analysis, NAFCU sees the precipitous drop as potentially indicating

a more lasting shift in consumer behavior, while CUNA contends the decline signals that a lending rebound will simply be slower than expected.

“We are in the midst of a sustainable eco-nomic recovery and that means labor markets will improve substantially and consumer be-havioral changes seen the last year or so will begin to turn around,” said CUNA Senior Economist Mike Schenk. “But loan demand

won’t go up quite as rapidly as it typi-cally does in a rebound, because people are concerned about their debt levels. We expect loan demand will be substantially higher in the second and third quarters.”

Overall, CUNA is projecting 4% CU loan growth for the entire year, but household debt will continue to mute demand, Schenk noted. “We do believe



SOARING?ARE YOUR CARD NUMBERS

www.themembersgroup.com I turn the page to learn how

CUJ060710_page01 1 6/3/2010 3:27:07 PM

THE NATION’S

LEADING INDEPENDENT CREDIT UNION NEWSWEEkLy

2011 MEDIA kIT

BESTPRACTICESCREDIT UNION JOURNAL2010CU Journal Issues Call For Entries For Best Practices Awards. Go to www.cujournal.comFor DetailsDays & Counting

3White House Kick-Starts CU Bid To Raise Cap On MBLsWASHINGTON–The decade-long effort to lift the member busi-ness loan limit, which had been dying on the vine, was revived by the written endorsement of Trea-sury Secretary Timothy Geithner.

“The administration’s support of our efforts to increase the industry’s business lending is a very significant step forward as we continue to pursue enact-ment of such legislation in this Congress,” said NAFCU Presi-dent Fred Becker.

Treasury Secretary Geithner told House Financial Services

Committee Chairman Barney Frank that

he supports raising the MBL limit for healthy credit unions to as much as

27.5% of as-sets, more than double the current 12.25% limit.

Credit unions have been working for years to raise

the limit but were losing hope of getting a legislative change this year until a high-ranking Treasury official said during a House hear-ing the Obama administration supports the MBL bid as part of a broader bill that would provide small business loan capital for community banks. Geithner’s letter to Frank formalizes the Administration’s support.

The Treasury secretary sug-gested certain conditions for the increased limit, including a proven record of making MBLs, proof the credit union is near the current limit and has strong capital. “It is important that re-forms are not done in a way that inappropriately introduces more risk to credit union members, the credit union system, the National Credit Union Share Insurance Fund or the financial system as a whole,” wrote Geithner to Frank.





Index

cujrounal.com

CUs May Take Up To A 9BP Hit From Overdraft Reform

Page 2Alaska USA Using Mergers, P&As To Expand On West Coast

Page 3Ahh, Life Is Good. For Your Bak’s CEO, Ads Say

Page 4Targeting A Younger Demo, Connex CU Says It’s Time To ‘Unbank’

Page 4How To Gain–& Keep–A Bigger Piece Of The Mortgage Pie

Page 84 Low-Cost Steps To Clean Up Data, Con-nect With Members

Page 8

Strategies WillAffect Revenue

WILMINGTON, N.C.–Credit unions that have approached the upcoming Reg E deadlines as a marketing opportunity and not just an operations issue stand a much greater chance of protecting their debit card revenue, analysts told Credit Union Journal.

With less than one month left to com-ply with the new law, major card proces-sors and industry experts believe that the majority of credit unions are prepared for the respective July 1 and Aug. 15 deadlines, but also agree that many are not. They cite widespread differences in CU readiness in


NEW ORLEANS–Credit unions have no choice but to re-examine their fee structures and opt-in policies in the wake of pending changes to Reg E.

And they will have to move quickly.Fabio Biasella, VP and managing

drecto of Strategic Advisory Services with Raddon Financial Group, told the CUNA CFO Council’s annual meting, “Every fee is under assault. It’s hard to quantify how much of a threat there is to various income streams.”

Biasella said the typical CU household

Time To Rethink Fee Structure


By Ray Birch, Correspondent By Frank J. Diekmann, Editor

New Refi Boom In Wings?

BEAVERTON, Ore.–The ongoing sovereign debt crisis in Europe could lead to another surge in mortgage refinance volume this sum-mer, but CUs should temper their optimism.

“If rates continue to fall I would anticipate another mini refi boom, maybe not as much last year because much of that was caused


Critical Reg E Deadline Approaching

012345678

Jan ‘07 Jan ‘08 Jan ‘09 Jan ‘10

15 YR CONF30 YR CONF


Mark-To-Market RuleFor Loans Is Proposed


NORWALK, Conn.–The Financial Account-ing Standards Board last week proposed rules

that would extend market value accounting to a new set of holdings, including loans.

The move has been widely criticized by credit unions and banks, who say it could wreak havoc as current rules allow them to report loans at book val-

ue as long as they have an intent to hold them.Marking the loans to market value could re-



CU Difference Is Not A Trivial Pursuit

CANTON, Ohio–First Ohio Community FCU is hoping members’ interest in movies, sports, and history will drive branch traffic and cross-sales.

The $25-million CU is playing its own ver-sion of Trivial Pursuit with members, ask-ing them a new ques-

tion each day of the week during May and June. Each time members answer correctly, they’re entered into a drawing for a $25 Visa Gift Card that will be held the first week of July.


Robert HerzFASB

Mortgage Rate Trends Over The Last Three Years

Source: Informa Research Services

CUJ053110_page01 1 5/27/2010 3:52:39 PM

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