Monday, November 19, 2018

International Training Trips May Signal a Corporate Governance Problem

If your credit union board members are rewarding themselves through international or luxury training trips or other perks that are not available to other members of the credit union, your credit union may have a corporate governance problem.

At least that is the opinion of Sarah Moore, the Administrator of the Alabama Credit Union Administration.

During the November 9, 2018 presentation to the League of Southeastern Credit Unions, Ms. Moore discussed a corporate governance health checklist for credit union boards and supervisory committees.

She posed the following question:
Are Board members rewarding themselves through international or luxury training trips or other perks not available to other members of the credit union?
If your credit union answered yes to this question, this could indicate an unhealthy corporate governance at your credit union.

There is a whole industry catering to the education of credit union leaders and their elected boards.

However, some of these training programs are on luxury cruises or at exotic locations.

For example, the Credit Union National Association's Volunteer Conference will meet in January 2019 at Montego Bay, Jamaica. Educruises is promoting a Seine River Cruise in June of next year or a voyage of the Norwegian fjords in July 2019.

These look like junkets rewarding credit union officials and volunteers.

OIG Investigations Clear NCUA Chairman McWatters

The Office of Inspector General (OIG) of the National Credit Union Administration (NCUA) closed two investigations into NCUA Chairman McWatters with no action taken between April 1 and September 30, 2018.

According to the OIG, it opened a conflict of interest investigation into Chairman McWatters. The complaint alleged that McWatters participated in a vote to rescind the Financial Stability Oversight Committee's Systemically Important Financial Institution designation of American International Group (AIG), while he owned stock and warrants in AIG at the time of the vote. McWatters stated that he believed that his holdings fell under the Office of Government Ethics (OGE) de minimis exemption and he was not required to recuse himself. OGE informed McWatters and the OIG that the exemption only applied to stock holdings, not warrants. McWatters provided information from security lawyers and accountants that warrants are the same as stocks and are publicly traded. The investigation was closed with no action taken against the Chairman.

A second complaint accused McWatters of misuse of NCUA funds for extravagant travel. This included premium air travel and expensive meals. The investigation found that McWatters was reimbursed for alcohol expenses of almost $150 associated with 3 meals. While there was no violation of law, NCUA policy did not permit for the reimbursement of alcohol expenses. NCUA changed its policy after the investigation closed to allow for the reimbursement of alcohol expenses. The OIG also found that the reimbursement of the Chairman for other expenses including premium air travel, UberBlack, and hotels did not violate the agency's policy.

These findings were reported in the agency's Semiannual Report to the Congress.

Read the OIG report.

Saturday, November 17, 2018

Texas Trust CU Buys Naming Rights to Epic Theater

Texas Trust Credit Union (Arlington, TX) bought the naming rights to the Epic Theater in the City of Grand Prairie (TX).

The five-year agreement gives Texas Trust naming rights along with signage and advertising opportunities, and more.

The price tag of the five-year sponsorship agreement was not disclosed.

Read more.

Thursday, November 15, 2018

Problem CUs Fell During Q3 2018, NCUSIF Liquidation Charges of $743.4 Million

The number of problem credit unions fell during the third quarter of 2018, according to the National Credit Union Administration (NCUA).

At the end of the third quarter of 2018, there were 203 problem credit unions. In comparison, there were 210 problem credit unions at the end of the second quarter of 2018.

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

Total assets and shares (deposits) in problem credit unions fell during the third quarter. Assets in problem credit unions were $11.5 billion at the end of the third quarter compared to $12.9 billion at the end of the second quarter of 2018. Shares in problem credit unions were $10.4 billion as of September 2018 versus $11.8 billion as of June 30, 2018.

NCUA reported that 88 percent of problem credit unions have less than $100 million in assets, while almost 1.5 percent have more than $500 million in assets.

At the end of the third quarter, 0.91 percent of total insured shares were in problem credit unions. As of June 2018, 1.04 percent of total insured shares were in problem credit unions.

In addition, NCUA reported $743.4 million in liquidation charges to the National Credit Union Share Insurance Fund (NCUSIF) due to credit union failures during the third quarter. NCUSIF recaptured $57.4 million in reserves during the third quarter. As a result of the liquidation charge and recapture of reserves, NCUSIF reserve balance was $156.2 million at the end of the third quarter, down from $957 million as of the beginning of the third quarter.

Wednesday, November 14, 2018

Advia CU to Acquire Illinois Bank

Advia Credit Union (Parchment, MI) has announced that it plan to acquire Golden Eagle Community Bank (Woodstock, IL).

The deal awaits bank shareholder and regulators approvals.

Golden Eagle Community Bank has $155 million in assets and three offices.

When the deal is completed, this will be the third bank acquired by #1.7 billion Advia CU.

The price tag of the deal was not disclosed.

The transaction is expected to be completed in the second quarter of 2019.

Read the press release.

ACSI: Banks and Credit Unions Tie in Customer Satisfaction

Banks match credit unions in consumer satisfaction.

According to the American Customer Satisfaction Index (ACSI®), banks and credit unions both scored an 81. Regional and community banks had a score of 84.

Credit unions saw a dip in customer satisfaction of 1.2 percent year over year, while banks were unchanged.

ACSI found that credit unions offered better in-person customer service than banks, but not by much. Credit unions scored an 89, while banks scored 88.

Credit unions also led banks in speed of service at branches (88 to 85) and call center satisfaction (84 to 81).

However, banking mobile apps were superior in quality (86 to 85) and more reliable (85 to 83).

Read the press release.

Tuesday, November 13, 2018

Taxi Medallion Loans Wreck Progressive CU

Defaulting taxi medallion loans continue to wreck the financial performance of Progressive Credit Union (New York, NY).

During the third quarter of 2018, the credit union reported a 9.7 percent decline in its assets to $382.8 million. Year-over-year, assets at the credit union fell by almost 23.7 percent.

Progressive CU posted a loss of $53.3 million for the first three quarters of 2018. During the third quarter of 2018, the credit union posted a loss of $35.3 million.

The credit union increased provision for loan and lease losses during the third quarter of 2018 by almost $26.6 million. As of September 2018, provision for loan and lease losses was $46.8 million.

Due to the third quarter loss, the credit union's net worth fell from $80.5 million as of June 2018 to $44.5 million as of September. Between June and September, the credit union's net worth ratio tumbled from 19 percent to 11.63 percent.

Delinquent loans increased by 14.3 percent during the third quarter to almost $98 million. As of September 30, the credit union's delinquency rate was 24.75 percent.

Also, early delinquencies (30 to 59 days past due) rose by 32.9 percent during the most recent quarter to approximately $15.8 million.

As of September 2018, $39.1 million of commercial loans not secured by real estate, presumably taxi medallion loans, were 60 days or more past due. This means that 13.69 percent of the credit union's $285.8 million in commercial loans not secured by real estate were delinquent.

In addition, the credit union reported $133.2 million in troubled debt restructured non-real estate secured commercial loans, of which $45.3 million were delinquent. This indicates that about 34 percent of these loans were 60 days or more past due.

The credit union recorded as of September 2018 year-to-date net charge-offs of almost $34.4 million. Almost all of the net charge-offs were commercial loans not secured by real estate.

Allowance for loan and lease losses increased by 25.5 percent during the third quarter to $108.5 million at the end of the third quarter. The credit union's coverage ratio (allowance for loan and lease losses to delinquent loans) was 110.75 percent.

Interestingly, the credit union reported a large increase in uninsured non-member deposits compared to a year ago. On September 2018, uninsured non-member deposits were $40.3 million, up from $10 a year earlier.

Furthermore, total non-member deposits were almost $84.6 million as of the most recent call report. Non-member deposits were approximately 32.5 percent of all shares and deposits at Progressive Credit Union.

Progressive is the last remaining major New York City taxi medallion lending credit union. Melrose CU and LOMTO FCU were closed this year by the National Credit Union Administration and Montauk CU was merged into Bethpage FCU in 2016.
 

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