Bruen's Blog

Why did this Credit Union fail?

It looks like this one can be chalked up to “member business loans/participations.” They had 60 MBLs for about $40 million of which 13.63% were 60 days or more delinquent. I’ll be interested to read more about these loans that buried the Credit Union. Their indirect lending program was a loser also with a delinquency ratio of 2.41% on their $13 million portfolio.

The Credit Union didn’t offer credit cards which probably would have been a much safer risk than their MBLs or indirect loans.

There is another First American Credit Union ($75 million) which is located in Casa Grande, AZ. I’m sure they wince at the name association.

Charles Bruen

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CUSAG

 

It's easy to overlook the cost of auto loans with mortgage rates grabbing all the attention.

Yet rates on auto loans have edged lower as the cost of lending has gone down for banks. And car buyers who didn't get the best terms in the past year or so can capitalize by refinancing their loans.

The option should be of particular interest to anyone who obtained a loan from a car dealership. That's because dealers are a middleman in the transaction. They typically mark up the interest rates they get from lenders to make money. Another reason to check how much you're paying? Dealers are leaning more heavily on auto loans for profits as shoppers get savvier about researching car prices online.

The result is that refinancing could bring significant savings. [Read story at The Washington Post/by Candice Choi].

I’ve read several articles, including the editorial page of the Wall Street Journal, about the increasing interest rates on credit cards and the decreasing availability of credit.

The new rules governing our credit cards kicked in this month following the passage of the Credit Card Accountability and Responsibility Act, signed into law last year. The point of the CARD Act is to protect us consumers from the scheming bankers, including credit unions, from whom we get our credit cards.

Because of these new protections, we can be grateful that credit card interest rates are the only interest rates that are not now dropping. According to the Wall Street Journal, the average card interest rate is now 1.6% higher than last year and the gap between credit card rates and the prime lending interest rate is the highest it’s been in 22 years.

It’s my observation that many credit unions have increased their interest rates also but probably not as steeply as banks and other issuers.

More good news for consumers is that there is less credit available. The average credit limit on new cards being issued is down 11% from last year.

And, because the CARD Act implements new rules limiting the flexibility that card issuers have, for example, in changing rates on balances of overdue accounts or on exceeding credit limits, credit card issuers are looking for and finding new ways to raise revenue.

Over the last year median annual fees on cards increased 18% and median fees on cash advances increased 33%.

Soon we will have the Bureau of Consumer Financial Protection in place, as result of the Dodd-Frank financial regulation bill just signed into law. The new bureau was set up in about 400 pages of the several thousand page bill, and, with a $500 million dollar budget and several thousand employees, will protect us in every other aspect of our financial lives.

As usual the folks most negatively impacted by these new rules are the everyday consumers/card holders/members who use their cards responsibly and pay their bills on time.

Are Americans getting tired yet on having the government control every aspect of their lives including their financial transactions? We’ll find out in November.

Charles Bruen

This is a nice feel good story. BECU ($8.9B), the largest credit union in Washington, is helping one of the state’s smallest by funding a marketing campaign for Tulip Cooperative Credit Union ($2.2 million – 1.013 members), a seven-year-old credit union based at the Olympia Food Co-op.

Tulip was created to serve low-to-moderate-income and wants to grow loans (don’t we all). The marketing campaign involves changing the credit union’s logo, creating internet video and print advertising.

Tulip also receives daily operations support from Washington State Employees Credit Union, and Generations Credit Union, also in Olympia, has helped Tulip with collections. A credit union spokesman quoted in the article said, “It takes a village.”

This support by larger credit unions is very commendable.

Charles Bruen

Casebine Community Credit Union

I give up!  When I see a name that is unknown to be I try to learn what it means.  Sometimes the "About Us" page helps and other times it's necessary to use Google and do some research.  I tried everything I could think of to figure out the derivation of "Casebine."  It doesn't seem to be a geographic reference to a city or county or area.  Best I can tell it isn't a company.  It doesn't look like a made up name.  So I'm filing this away as an unsolved mystery for now.

Charles Bruen

 

 

 

I wrote yesterday that this election cycle is very different from past elections. The Credit Union Times reported on Arizona’s 3rd Congressional District race:

In Arizona, CULAC gave $5,000 to former state Sen. Jim Waring, who finished third in a five-candidate race for an open U.S. House seat. CULAC also gave $50,000 to the Arizona Credit Union League for member communications on behalf of Waring. Ben Quayle, the son of former Vice President Dan Quayle, won the GOP nomination.

There were originally 10 candidates in this election and State Sen. Jim Waring was the leader of the pack. He was an excellent candidate, a great credit union supporter had a solid, but boring, record as a state senator.

So why did Ben Quayle win? Some might argue name recognition or money but that wasn’t the reason. Ben Quayle ran against President Obama. And we all know how popular Obama is in Arizona. Quayle’s ads and even his victory speech all started off with these 8 words, “President Obama is the worst president in history.” His message included this promise, "Someone has to go to Washington and knock the hell out of the place." With this strategy Quayle easily beat out the other candidates including the CULAC supported candidate Jim Waring.  

Picking the winning candidates in this election cycle is going to be very difficult.

Chuck Bruen

 

 

The Credit Union Times reports that the lawyers for KAPFCU have called their NCUA lawsuit a "landmark constitutional and civil rights case."  The spokesperson for KAPFCU says that the NCUA turned their back on the fledging credit union that was trying to grow.

What a joke! Actually the NCUA turned their back on a credit union that couldn't make auto safe loans.  The KAPFCU members are the ones to blame and not the NCUA.  This has nothing to do with civil rights.  I reported earlier that auto loans delinquent one or more months was an astounding 72.5%. Auto loans delinquent 2 months or more are 30.9%. If this is the best they can do after being in operation for 6 years, then it was past time for the Credit Union to be closed.

The KAPFCU also said that they were a victim to a surprise liquidation.  Come on ... how surprised could they have been.  Clueless yes ... surprised no.

Of course the National Federal of Community Development Credit Unions weighs in by saying that the NCUA proceeding had an "Alice in Wonderland" quality.  These are the same community development credit unions that had their hand out for TARP money and got it most likely with NCUA's backing and support.

Chuck Bruen

 

 

I have been impressed with CUNA and NAFCUs ability to handicap past election races. It is critical that our PAC dollars go to candidates who are most likely to win and who have demonstrated or expressed support for credit unions. But my confidence in CUNA/NAFCU being able to adapt to the new reality wanes.

So what is the new reality? I have read that there are two types of midterm elections. They can be described as “local elections” or a “wave election.” This November midterm is a wave election where the Democrats are finding themselves underneath the wave. The GOP base is showing a lot of enthusiasm and forecasters predict a massive GOP turnout and significant GOP wins.  And a lot of this winners are not the same old establishment GOP dinasaurs.  These are candidates supported by the local grassroots, tea parties and leaders such as Sarah Palin.

So what does this mean for CUNA? It means that they need to start right now and create credit union friends among the new challengers. These folks are likely to be swept into office in November and we need them as credit union industry friends.

The Credit Union Times on August 24th reported on CUNA and NAFCU backed two sides in the Florida race. Both sides backed are most liked going to be losers. CUNA/NAFCU supported Charlie Crist and Kendrick Meeks. Maybe the thinking is that by supporting both candidates you may get a winner. Not so. The Republican candidate, Marco Rubio will most likely win this Senate election.

Then CUNA and NAFCU supported Senator Lisa Murkowski in the Alaska primary. She just got trounced by Joe Miller (It's Miller Time), an unknown lawyer from Fairbanks, who is supported by Sarah Palin. He still has to win about 40% of the absentee ballots but it is pretty much a certainty that he will be the next Senator from Alaska.  Just a reminder about the Murkowski nepotism ... Alaska governor Frank Murkowski appointed his own daughter to this Senate seat.

I suppose there are some elections that you throw money at just as a kind gesture for the candidate’s past support. The perfect example of this would be support for Rep. Paul Kanjorski who has been a great credit union supporter but who will likely lose this election to challenger Lou Bartlett.

Another credit union supporter is Sen. Harry Reid who is locked in a dead heat race with Sharron Angle. Anything can happen with this race and I’m sure all the credit union support will go to Reid.

What is the lesson here? The point is that voters are angry. Many voters don’t like the policies and legislation that has been getting passed. Voters don’t like the loss of their freedom and they don’t like the heavy hand of government controlling every aspect of their lives. Voters want jobs and want the economy to recover and are convinced that we are headed in the wrong direction. Credit unions need to see the wave coming and support candidates who are most likely to win. For this election cycle those candidates usually have a (R) attached to their name.

Chuck Bruen