BUENA PARK, Calif – Three local credit unions have agreed to combine their operations. The three, California Agribusiness CU, Knudsen FCU, in nearby City of Industry, and California’s First FCU, in Garden Grove, will form a single credit union with almost $35 million and 8,000 members. The surviving institution will be California Agribusiness CU, the largest of the three, with $21 million in assets.

MADISON, Wis. – A new study by the Filene Research Institute indicates there is a strong correlation between high performing credit unions and exceptional boards. As part of its study, the credit union think tank reviewed a board that drove higher performance through an emotionally powerful vision statement; a board that retained a talented CEO in the face of high turnover among peers; and a board that had a waiting list for seats due to its reputation for having bright people do important work. The study is included in a new monograph published by Filene: The Source for Credit Unions: Twelve Principles of Governance That Power Exceptional Credit Union Boards

MOON TOWNSHIP, Pa. – Clearview FCU, the region's largest credit union, is embarking on an ambitious expansion, adding as many as 15 new branches over the next three years. The $600 million credit union, known until three years ago as US Air Employees FCU, will focus on its immediate surroundings, Allegheny, Washington, Beaver and Butler counties. The credit union also plans to expand its branch network into others counties in its 10-county field of membership.

SEATTLE – The Federal Home Loan of Seattle reported strong earnings for its first quarter. The Seattle Bank reported net income of $10.6 million for the quarter, up 32% from the same period last year. The Seattle Bank attributed the strong earnings to an increase in net interest income from its core advance business and its reinvestment of proceeds from maturing low-yield investments into higher yielding securities. The Bank had been on a strict supervisory agreement with federal regulators until the fourth quarter last year because of troubles in its secondary mortgage market program, which it shed under the supervisory agreement.

ATLANTA– The Federal Home Loan of Atlanta yesterday a new secondary mortgage market program that will help credit unions and banks sell mortgages on the secondary market. The Global Mortgage Alliance LLC will serve as a conduit where the loans will be marketed by Hillenbrand Partners out of Chicago. The program will purchase fixed-rate, conforming residential mortgages from member institutions, including the Atlanta Bank’s 135 credit union members.

HARRISBURG, Pa. – Attorneys for the state Banking Department and the Department of Revenue told the state’s High Court the bankers ought to end their legal challenge to the credit unions’ tax exemption and pursue their efforts to get credit unions taxed before the state legislature, instead. “If changes should be made (in the tax exemption) then change should be made by the General Assembly,” Linda Carroll, counsel for the Department of Banking, asserted during yesterday’s argument before the state Supreme Court. Raymond Pepe, an attorney for the Pennsylvania Bankers Association, asked the court to overturn a Commonwealth Court ruling and order the lower court to hear its argument that the 1968 amendment to the state’s constitution did not allow the legislature to approve the credit union tax exemption. Both parties agreed that the bankers main argument, which is still before the lower court, is that the credit union exemption violates the state’s uniformity clause in the constitution, because it discriminates in favor of one group of competitors. The High Court is expected to eventually review that portion of the case, too. The tax case is an outgrowth of the bankers challenge of two broad community charters granted to Freedom CU and TruMark CU, encompassing more than five million people surrounding Philadelphia.

DENVER – The reconfiguration of Centrix Financial is growing increasingly unlikely as Centrix founder Robert Sutton is being buffeted by allegations of self-dealing in the ongoing bankruptcy case surrounding the subprime auto lender. In separate suits brought in U.S. Bankruptcy Court in Denver; U.S. District Court in Newark, N.J. and in state court in New York, former Sutton partners claim the onetime subprime auto loan king siphoned millions of dollars off his 130 credit union customers and insurers in a sophisticated case of layering of risk. In one case, reinsurance giant Everest National Insurance claims Sutton promised to indemnify 20% of its losses–basically reinsuring his own insurer–through a wholly owned company, called Founders Insurance. In a civil fraud case filed in Newark, Everest, which owns an option to buy 20% of the reconfigured Centrix–now Flatiron Financial–claims Sutton secretly signed a separate deal with a Bermuda-based reinsurer that earned him almost $15 million in commissions. Sutton also controlled a hedge fund, called Centrix Funds LLP, which purchased subprime auto loans from Centrix Financial; often in competition with Centrix’s credit union customers. The Everest suit outlines at least a dozen other entities controlled by Sutton that had close financial relationships with Centrix. Everest National did not return phone calls. Sutton could not be reached. Meantime, losses on the Centrix portfolio, which has a 40% default rate, continue to grow, with Everest adding another $60 million in the first quarter to its reserves to cover its Centrix losses. In an extraordinary plea last Friday, NCUA urged Everest to continue paying millions of dollars in default protection insurance claims to credit unions while it litigates with Sutton, lest credit unions be stuck holding the defaulted loans.

CRANFORD, N.J. – Three former volunteer credit union directors who worked together won the million-dollar lottery yesterday when their credit union-turned-bank agreed to be sold to another bank for $170 million. The agreement by New York Community Bancorp to take over Synergy Financial Group, known until 1999 as Synergy FCU, means that stock owned by each of the three former volunteers is worth more than $1 million, according to the company’s annual proxy statement. The $14.18-a-share deal, coming a year after an ugly proxy battle that left control of the ex-credit union in the hands of a group of S&L speculators, will provide a windfall of almost $6 million for John Fiore, the bank’s president and CEO, who owns more than 290,000 Synergy Financial shares. Ironically, the Wall Street speculators won their proxy battle last year to remove Fiore from the board, partly because of his huge pay package. Two Schering-Plough employees and one retiree–once volunteer directors of the credit union and now on the board of the bank- will also share in the windfall. That includes Nancy Davis who owns $1.1 million worth of stock, Kenneth Kaspar, $1.2 million, and George Putvinski, $1 million. It is the second acquisition in the past month for Long Island, N.Y.-based New York Community, which has $30 billion in assets and more than 30 branches in New York and New Jersey. Synergy Financial has almost $1 billion in assets. Sandler O'Neill & Partners LP, which underwrote Synergy’s 2003 initial public offering, advised the ex-credit union on the deal. Synergy is the 13th credit union to disappear through merger or acquisition after being converted to mutual savings bank.

AUSTIN – A credit union-backed data security standard advance last week when the House unanimously approved the measure and sent it on to the Senate.

With declining net interest margins, rising operating expenses and unprecedented merger and acquisition activity, credit unions face a challenging landscape to remain competitive.

SAN FRANCISCO - Credit unions looking to cut costs and increase efficiencies at their branches may want to take a page from the credit union movement's overarching cooperative spirit and apply it to branch management.

WASHINGTON - The quadrennial speculation about the NCUA Board appointments is starting to rise, with the Chairman JoAnn Johnson nearing the end of her six-year term.

PORTLAND, Ore. - Given the flat-as-a-pancake margin of credit union profitability and the search for merger partners to achieve the scale needed to survive long term, it's no surprise to see a specialty merger company and a CUSO dedicated to making mergers.

SAN DIEGO - One expert has a potential solution for a growth rate that has "pooped out" on credit unions: young adults and near-young adults.

Awareness surveys can be valuable tools in a credit union's marketing toolbox and can be customized for a wide variety of applications. One of the most popular uses is to ascertain non-member awareness of the credit union in conjunction with marketing outreach. These surveys show whether consumers are aware of their eligibility and of the institution's services, which is particularly critical when contemplating a community charter. For example, one institution's awareness survey showed that its marketing messages were not compelling. Potential members were either unaware they could join, or if aware, did not know what the credit union had to offer.

FT. JACKSON, S.C. - AllSouth Federal Credit Union announced it has signed with Wal-Mart Stores to open branches in four Wal-Mart Supercenters this year.

Are credit unions simply looking at the world through rose-colored glasses? In the first part of this two-part series (CU Journal, May 7), we agreed that two industry trends of great concern are lagging membership growth and deteriorating earnings. CU membership growth since 1996 has been a lackluster 2.5%, and only 1.5% since 2002. Factoring out temporary members from indirect lending, net growth has likely been flat, if not negative.

SUITLAND, Md. - During her three-and-a-half years as an NCUA board member, Debbie Matz was known for her focus on membership growth, especially at smaller credit unions. Today, she is working at Andrews FCU, here, and says she has a new perspective on the challenges credit unions face in member retention.

PITTSBURGH - Credit unions talk about "marketing on a shoestring," but can branch expansion be done on a shoestring?

LONDON - NCUA VIce Chairman Rodney Hood met with representatives of the British credit union system and the government to discuss credit union issues. Hood met in England en route to speak at the Defense Council of Credit Unions' meeting in Italy. Also on the trip was Mike Beall, president of the Maryland and District of Columbia Credit Union Association, who joined Hood in meeting with Her Majesty's Treasury, the Financial Services Authority (FSA), the Association of British Credit Unions Limited (ABCUL), and credit union leaders and volunteers.