Sunday, March 18, 2018

Class Action Lawsuit Proceeds Against Northeast Credit Union over Overdraft Fees

A federal judge is allowing a class action lawsuit to proceed against Northeast Credit Union (Portsmouth, NH) over its overdraft practices.

The complaint alleged that Northeast Credit Union imposes overdraft fees using the customers' available balances not actual or ledger balances.

The plaintiff, Joseph Walbridge, claims that he had $111.09 in his checking account and made a debit card payment of $32.43. Northeast Credit Union determined that Walbridge had insufficient funds in his account and assess an overdraft fee of $32. The credit union assessed two more overdraft fees of $32 each.

The federal judge allowed three counts against Northeast Credit Union to proceed, including that the credit union breached its account opt-in agreement.

The complaint seeks to include anyone who incurred an overdraft fee from Northeast Credit Union.

Read the order.

Read the story.

Friday, March 16, 2018

Merger Would Create $2.2 Billion CU with Branches in 5 States

Denali Federal Credit Union (Anchorage, AK) and NuVision Credit Union (Huntington Beach, CA) are proposing a merger.

The combined $2.2 billion institution would have branches in the five states of Alaska, Washington, Arizona, California and Wyoming.

According to a fact sheet, Denali FCU looked at 30 potential credit union merger partners inside and outside of Alaska before deciding to partner with NuVision.

Branches in Washington and Alaska will retain the Denali name and brand.

Denali FCU stated that the proposed merger would diversify the credit union's economic base, improve operational efficiency, and put it in a stronger competitive posture.

The deal requires approval from the National Credit Union Administration and Denali FCU's members. If all approvals are received, the deal is expected to be finalized by the end of 2018.

Read more.

Thursday, March 15, 2018

Beverly Bus Garage FCU Conserved

The National Credit Union Administration (NCUA) on March 14 placed Beverly Bus Garage Federal Credit Union, in Chicago, Illinois, into conservatorship.

The NCUA placed Beverly Bus Garage Federal Credit Union into conservatorship because of unsafe and unsound practices at the credit union.

The credit union had a net worth ratio of 41.92 percent, according to its most recent Call Report. However, the credit union at the end of 2017 had a delinquency rate of 5.96 percent and net charge-off rate of 5.26 percent -- both measures were well above their peer average.

Beverly Bus Garage Federal Credit Union is a federally insured credi union with 1,300 members and assets of $4,029,521.

This is the second credit union to be placed into conservatorship this year.

Read the press release.

Bill Excludes Non-Owner Occupied Home Loans from Member Business Loan Cap

The Senate passed on March 14 S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act. A section of the bill would exempt one-to-four family non-owner occupied home loans at credit unions from the aggregate member business loan (MBL) cap of 12.25 percent of assets.

According to the Congressional Budget Office (CBO), there is an estimated $18 billion of such loans on the balance sheets of credit unions.

CBO believes that credit unions holding approximately 20 percent of these non-owner occupied home loans would benefit from this section of the bill, "because they are approaching the cap on the amount of member business loans."

If S. 2155 becomes law, CBO estimates that these credit unions "would issue about 10 percent more loans for non-owner occupied homes each year."

The growth in non-owner occupied home loans at these credit unions would come at the expense of taxable financial institutions -- primarily commercial banks and thrifts.

CBO expects this provision to increase the federal deficit by $10 million over the 2018 - 2027 time period.

However, the CBO analysis does not look at the impact of this section on the ability of credit unions to originate more business loans, as these credit unions will have more breathing room relative to the MBL cap. Presumably the expansion in business lending would come at the expense of taxpaying financial institutions. This would suggest that CBO's estimate of this section of the bill understates the federal deficit.

Read CBO's analysis (go to page 9).

Tuesday, March 13, 2018

Half of CUs Report Fewer Members in 2017 Compared to 2016

While overall credit union membership grew in 2017, the membership growth was largely concentrated at larger credit unions.

The National Credit Union Administration reported that half of federally insured credit unions had fewer members at the end of the fourth quarter of 2017 than a year earlier.

About 75 percent of credit unions with declining membership had assets of less than $50 million.

Median membership growth was negative in 20 states. At the median, membership declined the most in New Jersey (-1.2 percent), the District of Columbia (-1.1 percent), and Pennsylvania (-1.0 percent).

On the other hand, Vermont had the highest median membership growth rate at 3.3 percent, followed by New Mexico at 2.8 percent and Oregon at 2.5 percent.

Read the report.

Evansville Teachers FCU to Acquire American Founders Bank

Louisville Business First is reporting that Evansville Teachers Federal Credit Union (Evansville, IN) plans to acquire American Founders Bank of Louisville (KY).

Evansville Teachers FCU has $1.5 billion in assets. American Founders Bank has $113 million in assets.

The acquisition will allow the credit union to expand its presence in the Louisville market.

The price of the deal was not disclosed.

The transaction is subject to regulatory approval and is not expected to close until later in the year.

Read the story.

Monday, March 12, 2018

Notre Dame FCU's Highly Redacted Application for Secondary Capital

Notre Dame Federal Credit Union (Notre Dame, IN) issued $12 million in secondary capital with a maturity of 10-years during the fourth quarter 2017, according to its secondary capital application.

A Freedom of Information Act (FOIA) obtained copies of highly redacted initial and revised applications of the credit union and a copy of the National Credit Union Administration's approval letter.

The credit union stated that the secondary capital will be used to expand deposit and credit services of its members and its communities without curtailing expected future growth of the credit union. It will also assist the credit union in providing mission-related loans, such as zero percent holiday loans up to $1,000, favorable rates for first-time car buyer, and loans for home/appliance repairs up to $5,000.

The application redacts information on the ratio of qualified secondary capital to regular reserves plus retained earnings in 2017, but also the ratio in 2027 at maturity. However at the end of 2017, the ratio of qualified secondary capital to regular reserves plus retained earnings was 27.76 percent.

The credit union further stated that the issuance of secondary capital will strengthen its capital base. With the injection of secondary capital, the credit union's net worth ratio went from 8.06 percent at the end of the third quarter of 2017 to 9.74 percent at the end of 2017.

The National Credit Union Administration (NCUA) wanted to know how the credit union will repay its secondary capital at maturity. The credit union stated it would use liquid accounts at correspondent institutions and its available lines of credit. However, several lines of the application were redacted. This might suggest that the credit union will issue new secondary capital to repay maturing secondary capital.

The NCUA redacted information on how Notre Dame FCU will offset the cost of secondary capital. Also, there was no information on the cost of the secondary capital.


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