Volume 26, Number 24                                 December 30, 2006

HEADLINE NEWS

Friends Bid Farewell to Sam Simpson    
     Samuel Simpson – credit union advocate, community leader, friend, and family man – is dead at age 75, after a courageous eight-year battle with cancer.
     A retired major in the U.S. Army, Sam served a total of 38 years on active duty and with the Delaware Army National Guard. Following his active duty military service, Sam was named managing director for the Delaware Credit Union League where he served from 1978-1983. He then became manager of Delaware Alliance Federal Credit Union for 13 years and most recently the DuPont Stine-Haskell Employees FCU.
     Sam was recognized for his credit union service when he was honored by the Delaware Credit Union League as its “Professional of the Year” for 2003. The following comments from the nomination letter written by CU board chairman John Tedesco sum up Sam’s life:
     “The credit union philosophy of ‘service to others’ is consistent with Sam’s view on life. He has molded relationships in his community and as far reaching as on an international level. Educated in the humanities in college and working in the military, he has always been drawn to organizations that place service to others and community above profits. Examples of this are his participation in Scouting and Rotary. The philosophy of Rotary is ‘service above self,’ and that fits him to a ‘T.’ When he is not working for the credit union, he is out trying to make the world a better place to live. He volunteers many hours of his time for various causes. The man is truly a public servant, and we are fortunate he chose to work within the credit union movement.”    

Credit Unions Reflect the Holiday Spirit
     Delaware credit unions provided service to others beyond their members this holiday season. The following credit unions reported ways in which staff and members contributed to those less fortunate.
     Chestnut Run FCU – Filled 14+ stockings for the Salvation Army and dressed down on Tuesdays for Children’s Miracle Network.
     Del-One (Delaware FCU) – Toys for Tots Campaign (the CU earned the Commander’s Award  for donating more than $2000 worth of toys), Delaware Hospice Festival of Trees, and DART First State’s “Stuff the Bus” Campaign. The CU also held employee-driven campaigns to raise funds for staff members’ needs including a sick child and property damage from a fire.

Del-One staff members with 14 bikes collected for the Marine Corps’ Toys for Tots Program

DEXSTA FCU Basket Brigade at Thanksgiving

     DEXSTA FCU – Became a sponsor of Wilmington’s First Night – an arts and cultural family-friendly event held on New Year’s Eve. In addition on November 18, fifteen staff members spent Saturday afternoon preparing food packages for the Thanksgiving Basket Brigade organized by the Food Bank of Delaware.
     First State FCU – Supported Children’s Miracle Network and adopted a family, including a single mother and three children, through Caring Hearts, Helping Hands, Inc.
     Louviers FCU – Adopted six families through the Adopt-a-Family Program, supported Children’s Miracle Network, and contributed over 30 winter coats through WJBR’s Operation Warm.
     New Castle County School EFCU – Supported Children’s Miracle Network.
     Newport Site EFCU – Provided greeting cards for its members to sign which were mailed to our troops overseas. Also collected winter coats for a warm clothing drive.
     Wilmington Police & Fire FCU – Made a contribution to the Firefighters’ Holiday Fund.
    
NCUA NOTES

1. Changes in lending policies and procedures, including those in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;
2. Changes in international, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio, including conditions of various market segments;
3. Changes in the nature and volume of the portfolio and in the terms of loans;
4. Changes in the experience, ability, and depth of lending management and other relevant staff; and
5. Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans.

     NCUA cautions that CUs need to add some qualitative and environmental factors to their methodology—especially larger CUs. However, under full and fair disclosure rules, even those CUs with less than $10 million (in assets), would be expected to fund their ALLLs consistent with GAAP (generally accepted accounting principles).
     The good news for credit unions regarding NCUA expectations was that both officials from the agency agreed that if credit union management can show their methodology is sound and demonstrate how they figured in the environmental factors with their historical analysis, examiners will be advised to accept what management has done.

NCUA Board Okays Mortgage Note Repurchases
     The NCUA Board has approved federal credit unions to participate in repurchase transactions in which the instruments are comprised of first-lien mortgages. Federal credit unions have been permitted by the Federal Credit Union Act to invest in mortgage-backed and mortgage-related securities pursuant to the Securities Act of 1933, but NCUA has limited that authority through regulation. The current rule only permits federal credit unions to purchase mortgage notes of its members or those needed to complete a pool. However, when the final rule becomes effective, 30 days after publication in the Federal Register, federal credit unions will be permitted to invest in mortgage note repurchase transactions with six conditions of credit concentration, minimum credit ratings, independent assessment of market value, maximum maturity, custodial requirements, and undivided interests in mortgage notes.

2006 NCUSIF Dividend Possible
     The NCUA Board also voted to retain the National Credit Union Share Insurance Fund (NCUSIF) normal operating level for 2007 at its present level of 1.3 percent. Using total insured shares as of June 30, 2006, the NCUSIF's equity ratio for November was 1.31%. With a projected total insured share growth of 3% for all of 2006, the equity ratio is expected to remain at approximately 1.31% as of December 31, 2006.
     Based on these projections, it is expected that a dividend will be paid. The exact amount will be determined after staff reviews the December 31, 2006, Call Report. It is expected that the amount will be approved at the February 2007 Board meeting.

Regulatory Alert for SARs Filings
     NCUA has issued a December regulatory alert #06-RA-07 to federal credit unions concerning recent changes to the filing requirements for Suspicious Activity Reports (SARs). The new filing rules, approved by the agency on November 27, made changes in six areas of 12 CFR Part 748. Those areas include: 1) notification of the board of directors, 2) definition of reportable activity, 3) timing, 4) content and compliance issues connected to filing procedures, 5) record retention, 6) report confidentiality, and 7) safe harbor—or liability—issues.
     For instance, regarding board notification, the regulatory alert states:
•   Credit union management must promptly notify its board of directors, or a committee designated by the board, to receive notice of any SAR filed. Notification must be at least monthly and notification at a monthly board meeting is adequate, unless the seriousness of an activity merits immediate reporting;
•   Part 748 does not specify a notification format. Credit unions have the necessary flexibility to tailor the format to their particular needs and circumstances. Credit unions may use the formats included in the Federal Financial Institutions Examination Council Bank Secrecy Act/Anti-Money Laundering Examination Manual; and
•   If a SAR suspect is a director or committee member designated to receive SAR filing notices, the credit union may not notify the suspect. However, the credit union must notify the remaining directors, or designated committee members, who are not suspects.
     The alert noted four categories of reportable activity. They are 1) insider abuse involving any amount; 2) transactions aggregating $5,000 or more where a suspect can be identified; 3) transactions aggregating $25,000 or more regardless of potential suspects; and 4) transactions aggregating $5,000 or more that involve potential money laundering or violations of the BSA.
     To read the full regulatory alert (06-RA-07), go to http://www.ncuagov/reg_alerts/2006/06-RA-07.doc. The CUNA final rule analysis is available at http://www.cuna.org/reg_advocacy/member/analysis/ncua_102706.html.

NCUA Makes Changes to Fourth Quarter Call Report
     On Friday, NCUA announced changes to the 5300 Call Report, effective for the December 2006 reporting cycle. The changes were made as a result of NCUA’s final rule to amend “Share Insurance and Appendix, Part 745.” Call reports must be submitted by January 22, 2007.
     The changes, which will help NCUA properly track the new insurance coverage, include:
•   The addition of eight new accounts to the computation section to make certain that the NCUA Insured Savings computation on page four of the 5300 Call Report is properly completed.
•   Ten new tracking accounts were added to page three, which includes accounts held by member and nonmember government depositors, employee benefit member shares and deposits (pass-through), and 529 plan deposits.

CU Conversion Rule Finalized
     The NCUA Board approved final rule Part 708a to improve the information available to the members and the board of directors who are considering converting an insured credit union to a mutual savings bank or mutual savings association, which NCUA considers to be a fundamental shift. The rule revisions ensure credit union members are fully informed of the reasons for a conversion, have adequate time to weigh the pros and cons, and have an opportunity to communicate with one another and share their views with credit union directors.
     Specifically, the amended rule revises disclosures and voting procedures and adds procedures to facilitate member intercommunication and for members to provide their comments to directors before the credit union board votes on a conversion proposal. Final rule Part 708a is effective 30 days after publication in the Federal Register.

     For the second year in a row, Dover FCU shared its success with its members. In December $120,000 in additional dividends was distributed to members due to earnings that exceeded the projections necessary to run the credit union. “We are grateful for the continued support of our members – our owners,” stated Martin Talmud, board chairman. “Their commitment has enabled us to grow to meet their needs, and we hope to be part of their future financial success.”

EDUCATIONAL OPPORTUNITIES

January QuickBites Teleconferences
One-hour sessions – 11 a.m.-noon
1/9    Member Service
1/17  ABCUs: Teaching Educators, Students and Parents
1/30  Getting the Most out of Boss/Peer Relationships
Two-hour session – 11 a.m.-1 p.m.
1/11  Regulation CC
The fee for one-hour sessions is $99; the two-hour session is $169. Deadline to register: one week prior to the session. Call Bernadette Hines to enroll.

2007 CEO Summit – January 13-16 in Naples, FL. Co-hosted by the Delaware League and other leagues in the region. Cost: $550 for the seminar. For a link to more information, go to the right hand column of the Delaware League’s website: http://www.dcul.org/creditunions/index.htm.

CenterOne Financial Services: Vehicle Repossession & Remarketing Informational Session – Thursday, January 25, from 9-11 a.m. at the League office. This complimentary session will give attendees information on how to set up a vehicle repossession program by using a secure website. Register with Jane Bailey by January 19.

Records Retention: Help! I’m Running out of Storage Space! – Tuesday, January 30, from 9 a.m.-noon at the League office. This seminar will cover how long to keep records and what records you can destroy. The fee of $99 will include an electronic version record retention workbook. Registration deadline: January 18.

Board/CEO Training: Building a Better Board Package – Tuesday, January 30, from 5:30-8:30 p.m. at the League office. Participants will evaluate a traditional board packet to see how it can be improved to support a board’s decision-making needs. Fee: $85 per person, including a light meal. The speaker for both January 30th sessions is Carolyn Warden. Registration deadline: January 18.

Information on 2007 League council membership has been sent to all CU managers/CEOs. Registration is due by January 31, 2007.

2006 Delaware Credit Union League Highlights

            At the beginning of 2006, the League, in cooperation with Visions, Ink., redesigned our website, www.dcul.org, to be more attractive and easier to navigate, thereby making information more accessible to credit unions and consumers.

            The League organized visits to the offices of all three Delaware members of Congress for the annual Hike the Hill in February. In addition, the League hosted a luncheon for Mike Quaranta, chief of staff for Congressman Castle, and legislative assistant Lauren Todorovich in August.

            The League’s 48th annual meeting was held April 20-22 in Dewey Beach. John Tedesco of Dupont Stine-Haskell EFCU and Sam Minutola of ICI America FCU were named outstanding CU volunteer and professional at the event. Sharon Schaeffer of Delaware First FCU was elected as a new member of the League board, and Joel Romaine of DPL FCU succeeded Jim Everhart of Louviers FCU as board chairman.

            Phishers, counterfeiters, and other fraudsters were busy with scams this year. The League’s risk alert system communicates important, time-sensitive information to help keep credit unions and their members from sustaining losses.

            On July 10, Delaware Governor Ruth Ann Minner signed the security freeze bill into law. The Delaware League, spearheaded by George Fitzgerald, was the leader of a coalition – Delawareans for a Security Freeze – to help promote passage of the bill that allows consumers to “freeze” access to their credit files, thereby cutting down on identity theft. The coalition was made up of 94 organizations and elected officials, including 21 credit unions.

            The Financial Services Regulatory Relief Act of 2006 (S. 2856) was signed into law on September 27, 2006. The legislation reduces the excessive regulatory burden on America’s insured financial institutions in order to benefit consumers and the economy. The Regulatory Relief Act will benefit credit unions by: (1) Permitting CUs to offer check-cashing and money-transfer services to non-members; (2) Allowing CUs to have low to no cost leases on military bases; (3) Increasing loan maturity from 12 to 15 years; and (4) Correcting the unintended consequence of merger accounting changes expected from the Financial Accounting Standards Board.

            The League worked with Delaware credit unions to publish the annual Credit Union Week Supplement in the October Business Ledger. The previous year’s supplement, “Credit Unions: Get the Difference,” received an award as the “best league piece on the uniqueness of credit unions” from the American Association of Credit Union Leagues.

            For 22 years in a row, credit unions have ranked higher than banks and thrifts in the “customer satisfaction” category, as reported in the 2006 American Banker/Gallup Consumer Survey, published in October.

            2006 was the 10th anniversary of the Volunteer Leadership Conference, which was held on October 27-29 in Ocean City, Maryland. The VLC, originally conceived of by the Delaware League, continues to grow in the number of attendees from Delaware, Maryland, and D.C.

            The National Credit Union Administration in November published the results of its “Member Service Assessment Pilot” on credit union service to members, including those of “modest means.” The survey verifies that credit unions are serving exactly whom the Congress has intended: Middle income, working Americans seeking to improve their lives but who live largely from paycheck to paycheck, according to the Credit Union National Association. The Government Accounting Office (GAO) report released a few days later showed nothing that would refute NCUA’s conclusions.

            In December, Patrick Mahaney completed one year as the new president and CEO of the Delaware Credit Union League.  

November/December Education Sessions

TOGETHER is published on the 15th and 30th of each month by the Delaware Credit Union League, 4 Quigley Boulevard, New Castle, DE19720. Information to be published should be sent or phoned into the League no later than the Monday of the week preceding the publication date. Telephone: (302) 322-9341 or (800) 292-7875. This newsletter can also be found on the League website: www.dcul.org. Hard copies of the newsletter will be mailed to each credit union CEO/manager for distribution to those without computer access. Readers can receive a reminder when the newest edition is posted to the Web by emailing susan@dcul.org. Editor: Alice Smith (alice@dcul.org).