The National Credit Union Administration (NCUA) assumed control of service and operations at A M Community Credit Union headquartered in Kenosha, Wis.
A M Community Credit Union is a state-chartered, federally insured credit union that serves anyone who lives or works in Wisconsin’s Kenosha and Racine counties, as well as any employee of Chrysler Corporation. The credit union has assets of $125 million.
The credit union reported a loss of $8.2 million for 2011. At the end of 2011, the credit union was significantly undercapitalized with a net worth ratio of 2.78 percent.
The credit union reported that 11.74 percent of its loans were 60 days or more past due.
Read the press release.
Friday, February 17, 2012
What is NCUA's Plan for Texans Credit Union?
This is a question being asked by credit union officials and bankers. Read Texas Bankers Association's letter to NCUA Chairman Matz.
As background, Texans Credit Union (Richardson, Texas) was placed into conservatorship by NCUA on April 15, 2011. During the third quarter of 2011, the credit union became critically undercapitalized. In November 2011, Texans received special capital assistance from NCUSIF in the form of $60 million in subordinated debt; otherwise Texans would have been insolvent. Even after the capital assistance, Texans was still critically undercapitalized at the end of the fourth quarter.
It appears that NCUA is engaged in regulatory forbearance. I know there are some within the credit union industry who believe that this capital infusion and forbearance is good news and if given enough time, the NCUA-controlled Texans might experience a turnaround. (read Chip Filson's latest commentary).
However, allowing an insolvent credit union or bank to continue to operate as a fully functioning depository institution is unfair to its competitors.
Moreover, the odds are that this forbearance will fail and it will only raise the cost of Texans' resolution to the NCUSIF.
But time may be running out for Texans Credit Union.
According to the Federal Credit Union Act and NCUA's regulation, the NCUA Board must place a credit union into liquidation if it remains “critically undercapitalized” for a full calendar quarter, on a monthly average basis, following a period of 18 months from the effective date the credit union was first classified “critically undercapitalized.”
If the ultimate outcome is liquidation, credit union officials should ask NCUA why it did not move sooner and how much more did the delay add to the losses of the NCUSIF.
Also, from what I've heard, NCUA has rejected bids for Texans from credit unions. As I understand it, the obstacle to getting the deal done was that the acquirer wanted NCUA to enter into a loss sharing agreement and NCUA refused to enter into such an arrangement.
I don't understand NCUA's resistance to a loss sharing arrangement. Many of FDIC's transactions involving failed banks included such arrangements.
If NCUA is worried that it can't fetch a good price for Texans, it should expand the pool of potential bidders. There are probably some banks that would be interested in bidding for Texans.
As background, Texans Credit Union (Richardson, Texas) was placed into conservatorship by NCUA on April 15, 2011. During the third quarter of 2011, the credit union became critically undercapitalized. In November 2011, Texans received special capital assistance from NCUSIF in the form of $60 million in subordinated debt; otherwise Texans would have been insolvent. Even after the capital assistance, Texans was still critically undercapitalized at the end of the fourth quarter.
It appears that NCUA is engaged in regulatory forbearance. I know there are some within the credit union industry who believe that this capital infusion and forbearance is good news and if given enough time, the NCUA-controlled Texans might experience a turnaround. (read Chip Filson's latest commentary).
However, allowing an insolvent credit union or bank to continue to operate as a fully functioning depository institution is unfair to its competitors.
Moreover, the odds are that this forbearance will fail and it will only raise the cost of Texans' resolution to the NCUSIF.
But time may be running out for Texans Credit Union.
According to the Federal Credit Union Act and NCUA's regulation, the NCUA Board must place a credit union into liquidation if it remains “critically undercapitalized” for a full calendar quarter, on a monthly average basis, following a period of 18 months from the effective date the credit union was first classified “critically undercapitalized.”
If the ultimate outcome is liquidation, credit union officials should ask NCUA why it did not move sooner and how much more did the delay add to the losses of the NCUSIF.
Also, from what I've heard, NCUA has rejected bids for Texans from credit unions. As I understand it, the obstacle to getting the deal done was that the acquirer wanted NCUA to enter into a loss sharing agreement and NCUA refused to enter into such an arrangement.
I don't understand NCUA's resistance to a loss sharing arrangement. Many of FDIC's transactions involving failed banks included such arrangements.
If NCUA is worried that it can't fetch a good price for Texans, it should expand the pool of potential bidders. There are probably some banks that would be interested in bidding for Texans.
Thursday, February 16, 2012
HarborOne Considering a Mutual Bank Charter
The Board of Directors of HarborOne Credit Union of Brockton, Massachusetts is considering a possible charter conversion in which HarborOne would change from a credit union to a Massachusetts-chartered mutual co-operative bank. As a mutual co-operative bank, HarborOne will be owned by and operated for the benefit of its depositors in a manner similar to the way a credit union is owned by and operated for the benefit of its members.
HarborOne cites three reasons for pursuing a mutual co-operative bank charter:
1. Greater flexibility to expand customer base;
2. Increased lending authority; and
3. Access to additional capital.
HarborOne cites three reasons for pursuing a mutual co-operative bank charter:
1. Greater flexibility to expand customer base;
2. Increased lending authority; and
3. Access to additional capital.
Tuesday, February 14, 2012
MoneyWatch: No Valentine for CEFCU
Last month, I did a post on Citizens Equity First Credit Union (CEFCU) switching the early withdrawal penalty terms on its existing CDs. The story was first reported on DepositAccount.com.
Allan Roth of MoneyWatch dug deeper into this story and his February 14th commentary was not a love note to CEFCU. Roth ripped CEFCU over this practice, as well as Fort Knox FCU.
He wrote that the language allowing CEFCU to change the early withdrawal penalty for existing contracts was buried in section 14, page 22 of the 40 page deposit account agreement, which the credit union "knew few of their members would read and understand." Roth noted that inserting this language into the deposit account agreement made the terms of the CD a virtual etch-a-sketch for the credit union.
Read more of Allan Roth's commentary.
Allan Roth of MoneyWatch dug deeper into this story and his February 14th commentary was not a love note to CEFCU. Roth ripped CEFCU over this practice, as well as Fort Knox FCU.
He wrote that the language allowing CEFCU to change the early withdrawal penalty for existing contracts was buried in section 14, page 22 of the 40 page deposit account agreement, which the credit union "knew few of their members would read and understand." Roth noted that inserting this language into the deposit account agreement made the terms of the CD a virtual etch-a-sketch for the credit union.
Read more of Allan Roth's commentary.
NCUA: Disclosing CAMEL Rating Could Undermine Confidence in CUs
In a letter to North Carolina credit unions, David Marquis, NCUA Executive Director, argues that disclosing a credit union's CAMEL rating could jeopardize the public confidence in credit unions and could lead to a run on credit unions.
Marquis wrote that releasing a credit union's CAMEL rating raises many difficult questions.
Marquis wrote that releasing a credit union's CAMEL rating raises many difficult questions.
What if some credit unions release their CAMEL ratings, but others do not? Will media coverage imply that credit unions which do not release CAMEL ratings are less safe than others? Could this potentially cause runs on credit unions?
Does a released CAMEL rating imply an official government body’s endorsement for one credit union versus another? Will consumers only choose credit unions with the highest possible CAMEL rating as safe, and withdraw from all others?
What happens if a credit union’s publicly disclosed CAMEL ratings decline over time? Would that credit union stop publishing its ratings, and if so, would the public assume the credit union now has something to hide? Would members fear their credit union is becoming less stable, and thus pull out all their money?
What if a state CAMEL rating differs from NCUA’s CAMEL rating, as happens on occasion? Does releasing only one of two ratings truly provide full transparency to the public?
After publicizing CAMEL ratings, will other formerly confidential information be next? Should Documents of Resolution be published?
Monday, February 13, 2012
Out-of-State Branches
While credit unions have the image of being local financial institutions, many credit union operate regional branch networks. And in few cases, a credit union's branch network is almost national.
According to information from Highline FI, 347 credit union in 2011 operate branches in more than one state. Navy FCU has the most out-of-state branches with 142.
Texas and Virginia have the most out-of-state (foreign) credit unions operating in their states with 44 and 32 credit unions, respectively. (see image below)
California reported the most branches owned by credit unions headquartered in another state with 100.
Washington, D.C., Nevada, and Arkansas have the highest percentage of branches in their states owned by foreign credit unions. In Washington, D.C., 43.65% of the branches are owned by out-of-state credit unions; 26.67% of Nevada branches and 19.53% of Arkansas branches are foreigh owned.
Other states with at least 10 percent of their branches belonging to out-of-state credit unions are New Hampshire, Mississippi, Georgia, Kansas, Kentucky, New Jersey, Virginia, and Colorado. (see image below)
According to information from Highline FI, 347 credit union in 2011 operate branches in more than one state. Navy FCU has the most out-of-state branches with 142.
Texas and Virginia have the most out-of-state (foreign) credit unions operating in their states with 44 and 32 credit unions, respectively. (see image below)
California reported the most branches owned by credit unions headquartered in another state with 100.
Washington, D.C., Nevada, and Arkansas have the highest percentage of branches in their states owned by foreign credit unions. In Washington, D.C., 43.65% of the branches are owned by out-of-state credit unions; 26.67% of Nevada branches and 19.53% of Arkansas branches are foreigh owned.
Other states with at least 10 percent of their branches belonging to out-of-state credit unions are New Hampshire, Mississippi, Georgia, Kansas, Kentucky, New Jersey, Virginia, and Colorado. (see image below)
Friday, February 10, 2012
Repeal Outdated ATM Disclosure Requirements
ABA, CUNA and five other trade groups asked the House Financial Services and Senate Banking Committees to pass a bill repealing the outdated requirement that a placard must be attached to ATMs stating that a fee may be charged.
The disclosure is duplicative because the actual fee also appears on the ATM monitor, the trade groups said in a letter. The "requirement ... has encouraged a large and growing number of frivolous lawsuits across the nation" that could reduce both the number of ATMs and consumer convenience, they said.
The trade groups explained that if the placard isn't attached, Regulation E permits successful class action plaintiffs to recover the lesser of $500,000 or 1 percent of the ATM operator's net worth plus attorneys’ fees and costs.
Read the letter.
The disclosure is duplicative because the actual fee also appears on the ATM monitor, the trade groups said in a letter. The "requirement ... has encouraged a large and growing number of frivolous lawsuits across the nation" that could reduce both the number of ATMs and consumer convenience, they said.
The trade groups explained that if the placard isn't attached, Regulation E permits successful class action plaintiffs to recover the lesser of $500,000 or 1 percent of the ATM operator's net worth plus attorneys’ fees and costs.
Read the letter.
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