Tuesday, March 3, 2015

MBL Bill Re-introduced

Reps. Ed Royce (R-Calif.) and Gregory Meeks (D-N.Y.) yesterday re-introduced a bill (H.R. 1188) that would raise the member business-lending cap for certain credit unions from 12.25 percent to 27.5 percent of total assets.

The legislation would raise the cap for well-capitalized credit unions that have a history of member business lending, have operated near the current cap for at least one year and have received approval from the National Credit Union Administration.

Similar bills have failed to move forward in previous Congresses and I suspect the same fate awaits this bill.

Read the bill.

Monday, March 2, 2015

Credit Union Profits Up 8 Percent for 2014

The National Credit Union Administration (NCUA) reported that credit union profits were up 8 percent for 2014 to $8.8 billion.

The return on average assets ratio stood at 80 basis points at the end of 2014, up two basis points higher than at the end of 2013. NCUA noted that higher net interest margins, lower operating expenses, and slightly higher non-operating income as a percent of average assets positively contributed to return on average assets. However, lower fee and other income and higher provisions for loan and lease losses as a percent of average assets negatively impacted return on average assets.

Outstanding loan balances at federally insured credit unions grew 10.4 percent between the end of 2013 and the end of 2014 reaching $712.3 billion. This was the largest year-over-year percentage increase since the end of 2005. NCUA reported all major loan categories saw an increase.

Overall, share and deposit accounts at federally insured credit unions were $951 billion at the end of 2014, compared to $910 billion at the end of the fourth quarter of 2013.

As a result of loans growing at a faster pace than shares, the loan-to-share ratio rose to 74.9 percent, the highest level since the end of 2009

The strong earnings at credit unions caused net worth to grow. Aggregate net worth ratio was 10.97 percent at the end of the fourth quarter, up 20 basis points from the end of 2013 and the highest level since the third quarter of 2008.

The vast majority (97.7 percent) of federally insured credit unions remain well-capitalized at the end of 2014. In comparison, 97.2 percent of credit unions were well-capitalized at the end of 2013.

The delinquency ratio fell to 0.85 percent from 1.01 percent at the end of 2013. The net charge-off ratio was down seven basis points from a year ago to 49 basis points.

In addition, credit unions became less interest rate sensitive as the net long-term asset ratio fell from 35.91 percent at the end of 2013 to 33.62 percent as of December 2014.

Read the press release. Review the Financial Trends Report.

CU Inks Scoreboard Sponsorship Deal

Firstmark Credit Union agreed to a five-year sponsorship deal for the new 44-feet wide by 24-feet tall Alamo Stadium digital scoreboard in San Antonio.

The high school stadium seats 23,000 and will host numerous events.

Terms of the deal were not released.

Read the story.

Bleak Future for Small Credit Unions

The National Credit Union Administration (NCUA) painted a bleak outlook for small credit unions in its proposal to raise the asset threshold for small entities to $100 million in assets.

NCUA described these small credit unions with less than $100 million in assets as competitively disadvantaged and generally facing significant challenges.

NCUA compared the performance of federally insured credit unions (FICUs) with less than $100 million in assets to credit unions with more than $100 million in assets between 2001 and 2013 across a number of performance metrics.

NCUA found that smaller credit unions lagged behind the performance of their larger peers across these different measures during this time period.

For example, NCUA concluded that smaller credit unions consistently demonstrated an inability to grow their deposit base at a rate that keeps pace with larger credit unions making it more difficult for these smaller entities to cover their fixed costs.

NCUA also found that "FICUs with less than $100 million in assets as of the end of the year 2000 had their membership shrink by 0.5 percent annually over the next 13 years. In contrast, FICUs with more than $100 million in assets as of the end of the year 2000 grew their membership by 2.3 percent annually over the same period."

Also, these smaller credit unions had higher operating expenses per unit of assets and per dollar of loan originations relative to their larger peers and were less profitable. NCUA found that the earnings gap between small and large credit unions averaged 40 basis points over this time period.

NCUA further noted that challenges related to lagging deposit growth, stagnant membership, and high operating costs have caused credit unions with less than $100 million in assets to merge and/or fail at higher rates.

My general takeaway from NCUA's analysis is that many smaller credit unions will have difficulty fulfilling their mission and remaining independent in the long-run.

Read the proposal.

Sunday, March 1, 2015

More on Troubled Centra Health Credit Union

An unsealed search warrant describes a potential theft of approximately $1.7 million from the $10.4 million Centra Health Credit Union located in Lynchburg, Virginia.

In January, I reported that the credit union's board placed three employees on administrative leave.

As a result of the potential theft, the credit union's net worth fell from $1.7 million at the end of the third quarter to $327 thousand as of the end of 2014. Its net worth ratio as of December 2014 was 3.13 percent, making the credit union significantly undercapitalized.

The credit union's financial performance report shows that it went from a profit of $51 thousand as of September 2014 to a loss of $1.35 million at the end of 2014.

Read the search warrant.

Friday, February 27, 2015

ACC Is Compliant with NCUA's Associational Common Bond Requirements

American Consumer Council (ACC) is reporting that the National Credit Union Administration (NCUA) has reaffirmed that ACC is compliant with the agency’s Totality of the Circumstances test and thus meets the associational common bond requirements.

As a result, ACC can continue to refer its members to federally chartered credit unions.

However, in practice, the referrals are from the credit union to ACC as the credit union has the individual join ACC at the same time he/she joins the credit union.

According to ACC, it currently partners with 45 credit unions across the United States and approximately 20 credit unions are awaiting action from the NCUA to add ACC as an associational group.

The simple fact is these credit unions are using ACC to qualify individuals for credit union membership, who otherwise could not qualify for membership.

This is just another illustration that some credit unions are open to anyone.

Read the story.

Thursday, February 26, 2015

Are Generals and Admirals Low-Income?

Apparently, National Credit Union Administration (NCUA) Board member Rick Metsger thinks so.

In remarks to the Northern Virginia Chapter of the Virginia Credit Union League in January, Mr. Metsger advocated "[a]llowing active-duty military personnel and their families to automatically qualify as low-income households."

However, I seriously doubt admirals and generals qualify for low-income designation. The same could probably be said for many active-duty military personnel.

This is a cynical ploy by NCUA to expand the number of credit unions that have a low-income designation.

This would exempt these credit unions from the member business loan cap of 12.25 percent of assets and would give them access to supplemental capital.

It is obvious that NCUA is trying to use regulatory fiat to do what it cannot get through legislation.

Read the NCUA press release.


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