Small CUs Still Standing
FORT LAUDERDALE, Fla.-Small credit unions have some real disadvantage, but they still have a lot of life in them, according to Dr. Jim Likens, economics professor at Pomona College.
Likens was discussing a variety of balance sheet challenges credit unions of all sizes are facing as part of his presentation at NASCUS's State System Summit, here. "I think in the future we will have small credit unions just not as many of them," he said. "I don't want the message you take away to be that small credit unions are doomed."
Some 200 people gathered here for the State System Summit at the Harbor Beach Marriott here to discuss the challenges and discover solutions that may help state-chartered CUs to strengthen the credit union system.
Two FHLBs Eye Merger
CHICAGO-The Federal Home Loan Bank of Chicago, troubled by its growing secondary market mortgage portfolio, said it is in discussions to combine with the FHLB of Dallas.
The Chicago Bank is the creator of the Mortgage Partnership Finance secondary market program, which buys mortgages from member banks and credit unions as well as other FHLBs, but has been unable to sell or securitize the mortgages to hedge interest rate risk.
This has left the Bank holding almost $38 billion of low-rate mortgages at a time of higher payouts to members.
The difficulties in the secondary market program have prompted the FHLB regulator, the Federal Housing Finance Board, to put the Chicago Bank under a supervisory agreement and close regulatory scrutiny.
The Chicago Bank reported a 63% decline in first quarter earnings and laid off an undisclosed number of workers in the second quarter, but has yet to report its second quarter results. The Chicago Bank has $87 billion in assets and represents 850 banks and credit union in Illinois and Wisconsin, while the Dallas Bank has $53 billion in assets and represents 900 institutions in five Southwest states.
PHH Slips Into the Red
MOUNT LAUREL, N.J.-PHH Corp., the parent of the biggest mortgage bank for CUs, reported a slight loss last night for its second quarter of $1 million, or two cents a share. The loss comes amidst continuing troubles in the mortgage industry and as the company prepares to be taken over.
The takeover, in which PHH will be sold to GE Capital for $1.8 billion, then GE Capital will sell the mortgage business to private equity fund The Blackstone Group, is being contested by the company's largest shareholder, Pennant Capital, which owns a 9% PHH stake.
Pennant see greater benefits in spinning off the mortgage business, which includes relationships with more than 2,000 CUs, most of them acquired with the 2005 acquisition of CUNA Mutual Group's mortgage business.
For the second quarter PHH reported an increase in derivative losses hedging its $165-billion mortgage portfolio to $207 million, and a rise in mortgage delinquencies to 2.66%, from 2.25% for the same period a year ago. Second quarter revenues rose 4% to $610 million.
For the first two quarters, PHH reported a 6% rise in revenues, to $1.2 billion, and net income of $1 million.
FHLB Grant Helps Arizona State CU
SAN FRANCISCO-The Federal Home Loan Bank of San Francisco announced this week it has awarded $450,000 in AHEAD grants, including $25,000 to Arizona State CU, to help plan and develop projects to benefit low-income residents.
With the help of the FHLB grant, Access to Housing and Economic Assistance for Development, the credit union will help the Community Housing Organization employ displaced workers to reclaim electronic materials from landfill for resale to recyclers. The refurbished equipment will be sold to low-income residents and community organizations.
Earnings Fall At FHLB Pittsburgh
PITTSBURGH-The Federal Home Loan Bank of Pittsburgh reported yesterday second quarter earnings fell 3% to $52.1 million, mostly due to fluctuations in the market value of its holdings. Still, net income for the first two quarters of the year inched up to $105.9 million, from $103.6 million for the first half last year. The Pittsburgh Bank set a second quarter dividend of 6%, the same as last quarter. The dividend will be paid to the Bank's 335 members, including two dozen CUs.
