Thursday, July 20, 2017

Problem Credit Unions Increase During Q2 2017

The number of problem credit unions increased during the second quarter of 2017, according to the National Credit Union Administration (NCUA).

At the end of the second quarter of 2017, there were 210 problem credit unions. In comparison, there were 197 problem credit unions at the end of the first quarter. A year earlier there were 209 problem credit unions.

A problem credit union has a composite CAMEL rating of 4 or 5.

Total assets and shares in problem credit unions rose during the quarter. Assets in problem credit unions were $10.6 billion at the end of the second quarter -- up from $9.5 billion at the end of the first quarter of 2017. Shares in problem credit unions increased by approximately $900 million during the second quarter to $9.4 billion.

NCUA reported that 89 percent of problem credit unions have less than $100 million in assets, while only 2 percent have more than $500 million in assets.

At the end of the second quarter, 0.88 percent of total insured shares were in problem credit unions. At the end of the first quarter, 0.83 percent of total insured shares were in problem credit unions.

On June 30, 2017, 0.80 percent of the industry assets were in problem credit unions -- this was an increase from 0.70 percent as of March 2017.

Tuesday, July 18, 2017

IG: Four CUs Caused Losses to NCUSIF Between October 1, 2016 and March 31, 2017

Four credit unions caused losses to the National Credit Union Share Insurance Fund (NCUSIF) between October 1, 2016 and March 31, 2017, according to a Semiannual Report to the Congress issued by the National Credit Union Administration's Office of the Inspector General (IG).

The IG did not perform a material loss review on these failures, because none of the failures resulted in a loss of $25 million or more to the NCUSIF.

The following charts name the credit union, the estimated loss to the NCUSIF, and reasons for the failure of the credit union.

Monday, July 17, 2017

Rochester Area CUs Sponsor Symetra Tour Golf Tournament

Rochester (NY) area credit unions are sponsoring the Symetra Tour's Danielle Downey Credit Union Classic.

The golf tournament is scheduled for the week of July 17 through July 23.

Sponsorships range in price from $1,000 for a hole sponsorship to as much as $100,000 for a featured sponsorship.

Numerous credit unions are title sponsors, including The Summit Federal Credit Union, Reliant Community Credit Union, Alloya Corporate Federal Credit Union, Xceed Financial Credit Union, Visions Federal Credit Union, SEFCU, Pittsford Federal Credit Union, Advantage Federal Credit Union, SPX Federal Credit Union, Family First Federal Credit Union, First Heritage Federal Credit Union, and Ukranian Federal Credit Union.

The Symetra Tour is a developmental golf tour for the LPGA Tour.

But is sponsoring a professional golf tournament the appropriate use of the credit union's tax exemption?

Go to the tournament's website.

Friday, July 14, 2017

166 CUs Borrowed from Fed's Discount Window During Q2 2015

One hundred sixty-six credit unions borrowed from the Federal Reserve's discount window during the second quarter of 2015. In comparison, 118 credit unions borrowed from the discount window during the first quarter of 2015.

These 166 credit unions borrowed from the discount window 192 times for the total amount borrowed of $101.3 million.

The average amount borrowed was $527,672, while the median amount borrowed was $10,000.

The maximum amount borrowed from the discount window was $10 million by two credit unions -- First Financial Credit Union (West Covina, CA) and Houston Federal Credit Union (Sugar Land, TX).

There were 32 discount window loans of $1 million or more during the second quarter of 2015.

Mill City Credit Union (Minnetonka, MN) visited the discount window 7 times during the quarter. Three credit unions visited the discount window 6 times each -- Glendale FCU (Glendale, CA), Services Center FCU (Yankton, SD), and Topline FCU (Maple Grove, MN).

All credit unions, except for four, borrowed under the Federal Reserve's primary credit program, which is reserved for only well run credit unions. One credit union borrowed from the seasonal credit program, while three credit unions borrowed from the secondary credit program.

The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.

Wednesday, July 12, 2017

NCUA Proposes Controversial Voluntary Merger Regulation

The National Credit Union Administration (NCUA) is in the process of amending its regulations that govern a voluntary merger of a federal credit union (FCU). The comment period runs through August 7.

The proposed rule would make several significant changes to NCUA's voluntary merger regulations.

In justifying the changes to its voluntary merger regulation, NCUA Board Member Metsger stated that "[t]he net worth of the credit union belongs to the members, and they deserve a full and transparent accounting of how it is going to be used."

However, this proposal is controversial and not without its critics.

The proposal would require the merging FCU to disclose to its members all merger-related financial arrangements in whatever form they may take that are paid to its CEO, the next four highest paid employees after the CEO, the board of directors, and the supervisory committee. NCUA believes that some prospective merger partners may be seeking to influence the merging credit union by offering financial incentives to management and certain highly compensated employees to support the merger. According to NCUA staff, between 75 percent to 80 percent of all voluntary mergers reviewed had significant merger-related compensation. The transcript from the May NCUA Board meeting noted that one credit union merger had a total payout in the low seven figures to about 18 different people with four people getting the bulk of the payout.

The proposal increases the minimum time period before the member vote that the merging FCU must give to its members. The proposed timeframe is no less than 45 days and no greater than 90 days. This should give the members of the merging FCU adequate time to consider the information.

This proposal would add procedures to enable members to communicate with each other on a large scale regarding the merger. Under this proposed rule, the agency borrowed member-to-member communication provisions from its rule regarding conversion to mutual savings banks. This will allow members to share information and have discussions prior to the membership vote. This will also provide dissenting members with an opportunity to make their views known to the general membership, in hope of torpedoing the merger.

This proposal also revises and clarifies the content and format of the member notice that credit unions must send, and it makes conforming amendments to other provisions in various parts of our regulations to accommodate for these changes.

If adopted, the proposal could make voluntary mergers of FCUs less attractive.

In addition, the NCUA Board is seeking input on whether the proposed voluntary merger rule should be extended to all federally-insured credit unions, just not FCUs. The agency worries that its proposed rule, when finalized, could shift merger targets from FCUs to state chartered credit unions.

Tuesday, July 11, 2017

Kohler CU Buys Naming Rights to High School Gymnasium

Kohler Credit Union (Kohler, WI) will pay the Mequon-Thiensville School District $150,000 for the naming rights of the gymnasium at Homestead High School.

The naming rights agreement is for 15 years with signage both inside and outside the gymnaium.

The credit union will make payments in three increments of $50,000 to the school district in 2017, 2022, and 2027.

The credit union will also operate a branch in the high school, as well as an ATM. The credit union will support the school district's financial literacy efforts.

Read the terms of the agreement.

Read the story in the Milwaukee Journal-Sentinel.

BankThink: Common Bond Is Heading in the Direction of Being Meaningless

In a BankThink opinion piece appearing in the July 10 American Banker, Aaron Klein, a fellow at the Brookings Institution and policy director at the Center on Regulation and Markets, argues that credit union field of membership restrictions have been watered down and is headed towards being meaningless.

For example, he notes that some credit unions are advertising "great rates for everyone."

But he believes that this would have profound consequences for the credit union industry and such radical changes should be openly debated -- not done through legal loopholes and regulatory arbitrage.

He pointed out that National Credit Union Administration (NCUA) Chairman McWatters is a cheerleader for the eradication of common bond, as he recently advocated that Congress should expand the definition of common bond to include web-based communities as a basis of a charter. Klein does acknowledge that McWatters raised valid questions about geographic boundaries in a cyber world.

Klein wrote: "Expanding the definition of common bond to meaningless levels ... appears to be a direction the industry and its regulator is heading."

Klein believes that the public and policymakers need to stop and think about these changes.

Read the BankThink piece.

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