Life Is A Highway...March 17, 2010

Happy St. Patrick’s Day

Top o’ the mornin’ to you

May you have:
A world of wishes at your command
God and his angels close at hand
Friends and family their love impart,
And Irish blessings in you heart.

Support MBL Bill

The American Bankers Association (ABA) is having a D.C. fly-in this week. One of their top legislative priorities is to sway Congressional members from not co-sponsoring H.R. 3380, the member business lending bill.

The Association urges credit unions to contact their legislator asking them to co-sponsor member business lending. Letters may be sent through http://capwiz.com/cuna/.

More “Straight to the Point” information is available here.

$13,000 REAL Solutions Grant Approved For Better Choice Impact Assessment

The National Credit Union Foundation has approved a $13,000 grant to the Pennsylvania Credit Union Association so that it may conduct a Better Choice Impact Assessment under the auspices of the REAL Solutions project. The assessment will measure the extent to which credit unions that offer the Credit Union Better Choice payday loan alternatives are able to transition users into mainstream financial products and services.

The project will permit the Better Choice project manager and credit unions to make improvements that will ensure the program’s continued viability through financial support from the Commonwealth of Pennsylvania’s Treasury Department.

The project’s specific intent is to enable the Association and its credit unions to accurately quantify and communicate the average amount of money saved by each borrower as compared to traditional payday loans, and the extent to which Better Choice users are able to build savings, improve their financial stability, and become mainstream financial service users.

NCUF project funds will support data processing activities, as well as the continued presence of a REAL Solutions Coach. Both the Association and the Pennsylvania Credit Union Foundation are expected to support continued REAL Solutions services by the project coordinator and the project manager. Grant implementation will begin in May 2010 and is expected to last one year.

Philly Tribune: Credit Unions Enjoying A Resurgence

The Philadelphia Tribune published a very positive article about credit unions in its Monday, March 15, edition. A lot of attention is being given to credit unions as consumers shift their finances from large, corporate banks into credit unions and smaller community banks. The article notes an increase in credit union membership and loan volume, primarily reflecting loans for used cars, credit cards, and first mortgages.

Mike Wishnow, Association SVP, Communications & Marketing, spoke with the Tribune Correspondent Christopher Moraff and explained the difference between credit unions and banks. He also discussed the Association’s iBelong awareness campaign to educate consumers about credit unions and how to join, since credit unions are still unknown to many people.

There are more than 60 credit unions in the Philadelphia area and Moraff highlights several in his article, in addition to a brief review of the history of credit unions.
Philadelphia Tribune Article

Key Notes: What Was Your First Car?

Everyone can look back on their first car with either fond or not-so-fond memories. What was your first car?

Please let us know, and your answer may be published in the May/June issue of Key Notes magazine. Send an e-mail to Key Notes editor M.E. Siegfried at me.siegfried@pcua.coop with your answer.

Stage Set For PA Primary Election; Convention Attendees Should Get Absentee Ballot

Petitions have been filed for the May 18 Pennsylvania Primary Election, and the stage is set for a minimum of 23 new House members in 2011. There are currently three vacant seats in the House, 15 retiring members, and five leaving to seek other offices. There are 65 members unopposed in the primary and general election – and 16 primary-only races.

If you’re planning to attend the Association’s Annual Convention, May 16-18 in Atlantic City, and still want to vote in the Pennsylvania Primary, you should request an absentee ballot.

Click here for an absentee ballot. Last day to apply for an absentee ballot is May 11, 2010.

If you’re not registered to vote, April 19 is the deadline to register for the Primary Election.  

For more information, visit www.votespa.com.

Education & Training

Cost Management Workshop With Rory Rowland

April 6, Harrisburg

Margins shrinking? Other income flat? ROA anemic?

The Association has a program designed to give you specific advice on managing costs while maintaining satisfied members and happy employees.

Rory Rowland will draw on his background as a credit union CEO as well as the specific record of a large credit union which maintained 1.7% operating expense-to-asset ratio. He will share the forms, reports, policies, and formulas that you can use at your credit union. Rory will also discuss ways to generate revenue in this regulatory climate. How will you cope if NSF and courtesy checking income disappears? Find out how other credit unions are meeting this challenge.

Bring your management team to this valuable workshop. For more information or to register: click here.

Newsmakers

Philippe Ouellette, Jr., Board Chairman of Citadel FCU, is one of nine credit union leaders named as advisors to a CUES Steering Committee for the Center for Credit Union Board Excellence. The Center, which is under development and set to launch June 7, will offer online resources for credit union volunteers, while supporting their mission to effectively govern and meet the challenges facing credit unions today.

Patriot FCU, based in Chambersburg, opened a new branch on March 8 in Hagerstown, Maryland, to better serve the area. A ribbon-cutting ceremony is planned for Thursday, March 25, followed by a Member Appreciation Event on Saturday, March 27. There will be a drawing for a Dream Vacation worth $1,500 in travel money, as well as free hot dogs from 10:00 a.m. – noon in the branch parking lot. In addition, special Grand Opening offers include special, incredibly low auto loan rates.

National News

Fed stays steady on low-rate policy

WASHINGTON (3/17/10)--With the Federal Reserve policymakers staying steady Wednesday on keeping the federal funds interest rate at a record low "for an extended period," credit unions can expect the steep yield curve to go even steeper for the summer months, according to Credit Union National Association Senior Economist Steve Rick.

"For those credit unions with strong loan demand, the steep yield curve should increase net interest margins in 2010 as low-rate, short-term deposits are used to fund longer-term higher-rate loans," he told News Now. "The higher net interest margins should help credit unions cover loan chargeoffs and National Credit Union Administration assessments and therefore earn their way out of the current financial crisis."

The Federal Open Market Committee's (FOMC) press release Wednesday "did not provide much in the way of describing the Federal Reserve's exit strategy from its current extraordinary loose monetary policy," said Rick. "The FOMC repeated its earlier language that economic conditions 'are likely to warrant exceptionally low levels of the federal funds rate for an extended period of time.'"

He noted the federal funds future market "is currently pricing in a 25 basis-point increase in the fed funds interest rate target in the fourth quarter of this year, with the target reaching 0.75% by March 2011. The fed funds rate is important because it's used as a benchmark for many business and consumer loans," he told News Now.

"The financial markets were hoping for some guidance on when and how the Federal Reserve plans to drain the $1.162 trillion dollars of excess reserves currently sitting on banks' balances sheets. This is up from $0.002 trillion ($2 billion) in the summer of 2008.

"Bond traders are concerned that strengthening economic activity will entice banks to loan out the excess reserves, thereby creating the proverbial 'too many dollars chasing too few goods,' which is one way to describe inflation," Rick said. "If these concerns become more prevalent, inflation expectations and therefore longer term interest rates will rise. So with the Fed maintaining the target range for the federal funds interest rate at 0 to 1/4 percent, and longer-term interest rates possibly heading up, the yield curve could steepen further through the summer months."

In its press release, noted that "economic activity has continued to strengthen and that the labor market is stabilizing." It pointed out that household spending was stronger, although "constrained by high unemployment, modest income growth, lower housing wealth and tight credit," and noted an increase in business spending. However, housing remained weak.

"While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the committee anticipates a gradual return to higher levels of resource utilization in a context of price stability," said the committee's statement.

The committee "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

The Fed said its purchases of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt are "nearing completion and the remaining transactions will be executed by the end of this month."

It also noted that its Term Asset-Backed Securities Loan Facility--the only special liquidity facility left of the facilities created to support the market during the banking crisis--is scheduled to close June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time, the committee said.

The only dissenter was Thomas M. Hoenig, who for the second consecutive meeting maintained that the exceptionally low levels of the fed funds rate for an extended period was no longer warranted. He said it could lead to a buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

The committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability, it said.

Compliance: Answers to overdraft questions

WASHINGTON (3/17/10)--The Credit Union National Association (CUNA) has added five questions to its "frequently asked questions" (FAQ) on Regulation E's new overdraft rules requiring members to consent before being assessed fees on overdraft services for ATM and one-time debit card transactions.

The Reg E amendments become effective on July 1, 2010.

CUNA will address the new Reg E overdraft requirements, as well as related Truth in Savings changes that became effective at the beginning of 2010, during a March 18 audio conference call. The program will not only review the rules, but will look at some practical issues in developing a compliance program.

Meanwhile, in the FAQs, CUNA answers whether credit unions are still authorized to charge a fee for transferring funds from another account or a line of credit to cover an overdraft created by ATM or debit card usage. The answer is "yes," according to CUNA, but credit unions must comply with Truth in Savings and Truth in Lending rules, CUNA explains. The new FAQs also address questions about how the new overdraft restrictions affect nonsufficient fund fees and negative balance fees that are currently being charged by credit unions.

In another answer, CUNA alerts credit unions that if they want all the opt-in decisions for existing accounts to become effective on the same date, then they should state clearly on the opt-in/consent form that the member's decision will be effective on August 15 or whatever earlier date that the credit union may select. August 15 is the date by which existing accountholders can no longer be charged overdraft fees for ATM and one-time debit transactions unless they have consented to the service.
March 18 overdraft audio-conference

CUNA FAQ on Regulation E overdraft requirements

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