Thursday, April 24, 2014

Number of Problem CUs Edges Lower by One to 306

The National Credit Union Administration reported that the number of problem credit unions was largely unchanged during the first quarter of 2014.

The number of problem credit unions fell by one during the quarter to 306 credit unions at the end of the first quarter and is down by 33 credit unions from one year ago.

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

Problem credit unions held $11.9 billion in deposits (shares), which equals 1.37 percent of the industry’s insured shares.

Assets at problem credit unions at the end of the first quarter were $13.6 billion, which is 1.3 percent of the industry's assets.

The following slide shows the number of problem credit unions and deposits by asset size.

Six credit unions failed during the first quarter of 2014 -- three involuntary mergers and three assisted mergers.

Wednesday, April 23, 2014

NCUA Offering Consulting Services to Small CUs

NCUA's Office of Small Credit Union Initiatives (OSCUI) provides free consulting services to small credit unions.

OSCUI's website states that consulting services range from operational to strategic management.
"OSCUI’s Consulting Program for operational jobs include budgeting, internal controls, policy development, regulatory compliance, and training of officials and staff. Strategic jobs include developing new products and services, marketing plans, strategic and business plans, field of membership expansion, funding opportunities, and succession planning. Additionally, assistance with Net Worth Restoration Plan (NWRP) or Revised Business Plan (RBP) is offered to small credit unions; plus consulting services to groups wishing to organize a credit union."

In addition, a recent issue of NCUA Report promoted these services in an interview with Bill Myers, Director of OSCUI.

However, I have a real problem with a federal government agency offering free consulting services. I don't believe this is a role for government. Consulting services should be left to the private sector.

Go to the OSCUI website.

Monday, April 21, 2014

Florida CUs Have Highest Complaint Incidence

A report by K. H. Thomas Associates found that two Florida credit unions -- Space Coast and Brightstar -- had the highest Bank Complaint Index (BCI) in Florida.

The report noted that it found it surprising that a growing number of credit unions were in the BCI Top Ten list in recent years, considering that credit unions have a reputation of providing good customer service.

The report found that "[t]wo of the highest BCIs in 2013, both over 6.0, were from credit unions and three of the four highest BCIs in 2013, all over 1.5, were from credit unions."

The BCI is calculated by dividing the complaint market share by deposit market share.

Friday, April 18, 2014

Vystar Credit Union

Vystar Credit Union is a $4.9 billion in assets credit union headquartered in Jacksonville, Florida. The credit union reported net income (profits) of almost $50.2 million and paid NO corporate income taxes.

Wednesday, April 16, 2014

A Disappointing CLF Membership Rate

The National Credit Union Administration (NCUA) is putting its best face on a disappointing Central Liquidity Facility (CLF) report.

NCUA reported that credit union membership in the CLF increased by 69 percent between March 31, 2013 and March 31, 2014 to 218 credit unions and the maximum borrowing base had increased by almost 58 percent to $3.8 billion.

In an April 11 press release NCUA Chairman Debbie Matz said: "It’s most encouraging to see the CLF performing well."

As background, NCUA is requiring all federally-insured credit unions with at least $250 million in assets to establish access to at least one contingent federal liquidity source, either the CLF or the Federal Reserve’s Discount Window, or both by March 31, 2014.

According to year-end data (the most recent available), there were 770 credit unions with at least $250 million in assets. Assuming that all 218 credit unions that are CLF members are $250 million or larger in asset size, this translates into a CLF membership participation rate of credit unions with at least $250 million or more in assets of approximately 28 percent.

However, I suspect the CLF membership rate is even lower among the credit unions with at least $250 million in assets.

Among all credit unions, the CLF membership rate is a paltry 3.33 percent.

This would explain the decision by the NCUA to increase the CLF stock dividend rate from 10 basis points to 25 basis points. A higher stock dividend rate could make CLF membership a little more attractive.

Read the press release.

Tuesday, April 15, 2014

Why is NCUA a Voting Member on FSOC?

The Dodd-Frank Act created the Financial Stability Oversight Council (FSOC). FSOC is made up of ten voting members and five nonvoting members.

But should the National Credit Union Administration (NCUA) be a voting member?

A report by the Bipartisan Policy Center to create a more effective regulatory architecture recommended making NCUA a non-voting member on the FSOC.

The report noted that "while it is useful to have representation on the FSOC from the NCUA, it makes little sense for the NCUA to have a vote equal to the Federal Reserve on all matters before the Council, particularly when the NCUA does not oversee a single institution that meets the criteria established by Congress or the FSOC as requiring enhanced supervision due to systemic importance."

The report recommends that "[t]he chair of the NCUA should become a non-voting member. Credit unions are an important part of the U.S. financial system, but they generally are small and do not figure into macro-prudential discussions. To the extent they do, a credit union voice will still be represented on the FSOC, but without a vote."

This recommendation really irked one credit union blogger, who wrote "[t]his is bureaucratese for patting credit unions on the head and sending them to the corner with crayons while the adults do all the important work."

Read the report.

Monday, April 14, 2014

Quorum FCU and Select Savers Club

Quorum Federal Credit Union (Purchase, NY) is allowing anyone to join the credit union by simultaneously joining an association, Select Savers Club.

Quorum’s online membership application has the following option “I would like to join the Select Savers Club and become a member of Quorum.”

So, what do we know about Select Savers Club and its relationship to Quorum FCU?

Select Savers Club, Inc. was founded in 2006. To become a member of Select Saver Club, you paid a one-time lifetime fee of $5. Starting in November 2007, members of Select Savers Club were eligible to join Quorum FCU.

However, Select Savers Club appears to be closely connected to Quorum FCU.

Three of Select Savers Club's Board members listed on its website either previously worked for Quorum or are currently employed by Quorum -- Heather Sulca, Marisa Conforti, and Danean Sheil. In addition, three other board members have the same last name as three officers of Quorum FCU -- Diane Slifstein, Kimberly Schade, and Tavis Briechle -- and are probably related to these Quorum officers.

In addition, there is no evidence that Select Savers Club is an active association. The last newsletter on its website is from August 2008 and the last announced membership meeting of the club is for the third quarter of 2008.

According to Guidestar, "[t]his organization has not appeared in IRS records for a number of months and may no longer exist."

So, although the club does not appear to be active or may no longer exist, it is still being used by Quorum to qualify people for memberhip in the credit union, who otherwise are not eligible for credit union membership.

As I have previously stated, the simultaneous signing up of an individual to an association in order to make them eligible for credit union membership contradicts congressional intent that there needs to be a genuine affiliation between credit union members in order for credit unions to fulfill their public mission. Membership in Select Savers Club or any other association needs to be more than the checking of a box on a credit union’s membership application.

Read ABA's letter to NCUA.

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