Thursday, March 23, 2017

1,118 Credit Unions Reported A Loss for 2016

At the end of 2016, 1,118 credit unions reported a loss. This means 19.3 percent of all credit unions were unprofitable for the full year of 2016.

Forty-nine credit unions reported losses in excess of $1 million for all of 2016.

It should not come as a surprise that the three credit unions with the largest losses were the three large New York City taxi medallion lending credit unions -- Melrose, Progressive, and LOMTO.

The following table lists the 10 credit unions with the largest losses for 2016.

Wednesday, March 22, 2017

Disclosures, Supplemental Capital, and Material Risk

The National Credit Union Administration (NCUA) is seeking input regarding disclosures for credit unions issuing supplemental capital.

The credit union Call Report does not provide adequate disclosures about material facts affecting a credit union to protect investors.

According to the Advanced Notice of Proposed Rulemaking, "[t]he disclosure must not contain any untrue statement of a material fact and must not omit to state a material fact ... the disclosure must be clear, accurate and verifiable."

Topics that should be covered in the disclosure include:
  • Material risks relating to the issuer and the industry in which the issuer operates;
  • Material risks relating to the security being offered;
  • The issuer’s planned uses for the proceeds of the offering;
  • Regulatory matters impacting the issuer and its operations;
  • Tax issues associated with the security being offered; and
  • How the securities are being offered and sold, including any conditions to be met in order to complete the offering.
In other words, credit unions issuing supplemental capital will be required to provide details about their business models. This would include discussion about the type of lending by credit unions, risk profile of these loans, geographic diversity of loans, any legal actions that could materially impact the operations of credit unions, and so on.

In addition, to protect investors, credit union regulators will need to end their practices of not publishing enforcement actions. In 2015, there were 286 outstanding unpublished Letters of Understanding and Agreement. These unpublished enforcement actions identify material risks that are affecting the operation of credit unions. This is information that investors would find important.

Moreover, credit unions will be expected to provide "ongoing communications with investors, reporting of compliance with the contractual covenants, and sharing of information with current and prospective investors."

The Board notes that "[f]ailure to comply with the investment contracts or to properly monitor communications and sharing of information could subject the credit union to liability, which could negatively impact the Share Insurance Fund."

Tuesday, March 21, 2017

Teachers Credit Union Signs 10-Year Naming Rights Deal for High School Gym

Teachers Credit Union (South Bend, IN) has signed a 10-year naming rights agreement with Warsaw Community Schools.

The gymnasium at Warsaw High will be called Tiger Den TCU Court.

Signage noting the name change will be installed both outside and inside the building.

The price tag of the 10-year deal was not disclosed.

Read the press release.

Monday, March 20, 2017

Jury Orders 4Front CU to Pay over $1 Million

A jury directed 4Front Credit Union (Traverse, MI) to pay $1,132,124 in damages to John M Floyd & Associates Inc.

John M Floyd & Associates provided overdraft and courtesy pay services for Members First Credit Union.

Members First Credit Union merged with Bay Winds Credit Union to create 4Front in 2015.

Floyd & Associates argued the contract between Members First CU and Floyd & Associates would be extended through 2017 if the credit union shared the company’s services with another entity, according to records filed in 13th Circuit Court.

Jurors determined that 4Front violated the terms of the contract and ordered the credit union to repay John M Floyd & Associates.

Read the story.

Saturday, March 18, 2017

Marketplace: New York Taxi Industry Implodes

Marketplace on Friday night looked at the hardship confronting New York City's Yellow Cabs arising from the growing popularity of ride-sharing apps.

The story notes that taxi medallions were once a solid investment and viewed as low risk by lenders.

However, after Uber entered New York City in 2011, Yellow Cab ridership started to decline. The story notes that Yellow Cab ridership is down 30 percent over the last three years.

This has caused financial hardship for taxi medallion owners and large losses for lenders that financed medallions.

Read and listen to the story.

Friday, March 17, 2017

Florida Conference AME Church FCU Closed

The National Credit Union Administration (NCUA) liquidated Florida Conference AME Church (FCAMEC) Federal Credit Union of Tallahassee, Florida.

Gulf Winds Federal Credit Union, of Pensacola, Florida, has assumed the members and deposits of the former Florida Conference AME Church Federal Credit Union.

NCUA made the decision to liquidate the Florida Conference AME Church Federal Credit Union and discontinue its operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

As of December 31, 2016, the credit union was significantly undercapitalized with a net worth ratio of 2.75 percent. The credit union posted a small loss of $9,601 for 2016 after posting a loss of $104,541 for 2015.

Florida Conference AME Church Federal Credit Union served 560 members and had assets of $1,760,664 at the end of 2016. The credit union had a low-income designation.

This is the first credit union to be liquidated in 2017.

Read the press release.

Read the press release on Gulf Wind's assumption of deposits and members.

Thursday, March 16, 2017

Fifty-one Percent of CUs Had Fewer Members Compared to a Year Ago

The National Credit Union Administration (NCUA) reported that over half of all federally insured credit unions reported a year-over-year decline in credit union membership at the end of 2016.

While overall credit union membership increased for the four quarters ending December 31, 2016, the median membership growth rate fell by 0.1 percent.

In comparison, the median membership growth rate was negative 0.2 percent for the four quarters ending December 31, 2015.

Fifty-one percent of all federally insured credit unions reported fewer members as of December 31, 2016 compared to a year ago.

NCUA noted that 75 percent of the credit unions reporting fewer members compared to a year ago had less than $50 million in assets.

Twenty-three states reported negative median membership growth rate for the four quarters ending on December 31, 2016. At the median, the membership growth rate for credit unions in the District of Columbia was minus 1.9 percent, followed by Pennsylvania at minus 1.5 percent and New Jersey at negative 1.4 percent.

On the other hand, credit unions in Alaska and Maine reported the fastest median membership growth rates at 2.4 percent and 2.0 percent, respectively.

Read the report.

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