Wednesday, May 25, 2016

Large State Chartered CU CEOs Earn 13.5 Times More Than Their Average Employee Earns

The total CEO compensation at large federally insured state chartered credit union in 2014 was on average 13.5 times higher than the average compensation of employees at these institutions.

The median ratio of CEO compensation to average employee compensation was 10.6.

Large state chartered credit unions are defined as having at least $1 billion in assets.

Total CEO compensation is pulled from Schedule J of a credit union's Form 990.

To calculate average credit union employee compensation, the analysis divided the Call Report line item Employee Compensation & Benefits by Full Time Equivalent Employees. Full Time Equivalent Employees = The Number of Full Time Employees + (0.5 times the Number of Part Time Employees).

The analysis shows that there is a positive relationship between CEO Compensation and the ratio of CEO compensation and average employee compensation.

Fourteen credit unions reported a ratio of CEO compensation to average employee compensation in excess of 20.

The following table shows the 10 credit unions with the largest multiple between CEO compensation and average employee compensation. Eastman Credit Union reported the largest multiple between CEO compensation and average employee compensation of 127.03.

Tuesday, May 24, 2016

Net Recoveries from Corporate CU Lawsuits -- Who Knows?

National Credit Union Administration (NCUA) has boasted in press releases that its gross recoveries from settlements associated with its corporate credit union lawsuits are $3.1 billion.

However, the agency has failed to disclose its net recoveries from these lawsuits.

Publishing information about net recoveries would enable the public to estimate how much NCUA has paid in contingency fees to outside law firms with respect to its litigation over the failure of five corporate credit unions.

On April 8, I filed a Freedom of Information Act request regarding the agency's net recoveries associated with its litigation over the failure of five corporate credit unions.

On May 20th, NCUA denied my request.

Monday, May 23, 2016

Average CEO Compensation Tops $1 Million for Large State Chartered CUs in 2014

Average total compensation for CEOs of state chartered credit unions with at least $1 billion in assets in 2014 was $1,017,720.

The median total compensation for 2014 was $796,722.

Compensation data are pulled from Form 990s filed by state chartered credit unions. Unfortunately, I was not able to obtain compensation data for four credit unions -- WEOKIE (OK), Advia (MI), DFCU Financial (MI), and American Eagle Financial (CT). American Eagle Financial Credit Union had not filed a Form 990 for 2014, as it switched from a federal to state charter at the end of 2014. The other three credit unions had not responded to requests for information appearing on the Form 990 Schedule J at the time this blog was published.

Federal credit unions are currently exempt from filing Form 990s and the National Credit Union Administration has not acted upon recommendations to require federal credit unions to disclose senior management compensation.

Total compensation includes base salary, bonus and incentives, other reportable income, retirement and deferred compensation, and nontaxable benefits.

Thirty-seven credit union CEOs earned a total compensation package of at least $1 million in 2014. The highest paid CEO was Olan Jones of Eastman Credit Union (Kingsport, TN) at almost $9.3 million. Glen Yeager at Utilities Employees Credit Union (Wyomissing, PA) was the next highest compensated CEO at slightly more than $5 million.

The mean base salary was $510,890. The average bonus and incentive pay was $152,889. The mean other compensation was $165,496. Retirement and deferred compensation was an average of $174,822.

Over the next couple of weeks, I will publish an analysis of CEO compensation relative to other metrics.

Below is compensation data for each CEO (click on images to enlarge).

Friday, May 20, 2016

Cy-Fair FCU Buys Naming Rights to Stadium

Cy-Fair Federal Credit Union (Houston, TX) has purchased the naming rights to the high school football stadium of Cypress-Fairbanks Independent School District in Houston, Texas.

The $220 million credit union will pay $1.5 million over the next 10 years.

The deal, approved by the CFISD board members, still requires the superintendent to finalize and execute the agreement.

Read more.

Thursday, May 19, 2016

Schools FCU Accuses SchoolFirst FCU of Predatory Behavior

The Board of Directors of Schools Federal Credit Union (SFCU), headquartered in Rancho Dominguez, CA, in a letter to its members has accused SchoolsFirst Federal Credit Union (Santa Ana, CA) of trying to poach its members and threatening the viability of the credit union.

The letter states:
As your entrusted Board of Directors, we must alert you to something that jeopardizes the very existence of YOUR credit union. As you know, SFCU serves the employees and family members of the Los Angeles Unified School District (LAUSD) and Community College District, as well as other local educationally-based fields of membership. Now, a predatory credit union from Orange County is attempting to confuse and steal away our members, using its deep pockets to buy access to our field of membership at their work locations.

The tactics of this credit union include misrepresenting itself and confusing our members due to the similarity of its name with ours. This similarity has made it easy for them to gain entry to our campuses. Their representatives regularly attend classified, certificated, and other LAUSD events. They donate generously to these organizations, thus making it very difficult for our credit union to compete and participate.
The letter goes on to point out that SchoolsFirst operates more like a bank than a traditional credit inion.
"Today SchoolsFirst has nearly 700,000 members and $11.7 billion in assets compared to our 15,000 members and our $110 million in assets. Since 2005, using tactics that include mergers and acquisitions, they have become the fifth largest credit union in the United States. Needless to say, these multi-billion dollar credit unions operate more like banks than traditional credit unions."
This letter is a classic tale of a credit union "David" trying to fight off a credit union "Goliath."

Unfortunately, too many of these traditional credit unions have succumbed to these large credit unions.

The time has come to end the favorable tax treatment of these large credit unions.

Wednesday, May 18, 2016

Michigan First CU Signs Sponsorship Deal

Lathrup Village-based Michigan First Credit Union has signed a corporate sponsorship deal to become the first Cornerstone Partner at the $627.5 million Little Caesars Arena under construction.

The deal includes naming rights to the unique rafters-level gondola seating above the ice that is for fans and media attending Detroit Red Wings games or other events.

Financial terms of the deal between the $780 million credit union and Olympia Entertainment, which handles business operations for the Red Wings, were not disclosed.

Read the article.

Massachussets Study: Tax Subsidy Going to Higher Expenses

Credit unions in Massachusetts provide insufficient member benefits to offset the favorable tax and regulatory treatment they enjoy, according to a study released this week by research firm PolEcon.

"The benefits to Massachusetts consumers do not appear significant enough to warrant laws and regulations that, by design, or as a consequence, result in credit unions capturing a larger share of the banking market in Massachusetts," the study found.

The report noted that Massachusetts credit unions have grown in part by gaming the low-income credit union designation, which provides substantial regulatory relief. The number of low-income designated credit unions in Massachusetts has risen from 11 in 2012 to 57 in 2016, in part by counting students within their low-income footprints. However, the study found little benefit to members from the low-income designations.

The four Massachusetts low-income credit unions with assets of more than $1 billion were more likely than banks to make mortgage loans to high-income borrowers and less likely than banks to serve low-income mortgage customers. In addition, since 2002, Massachusetts’ banks have received higher CRA ratings for meeting the needs of lower- and moderate-income individuals than have Massachusetts’ state-chartered credit unions.

Moreover, the study estimated that the corporate tax subsidy provides Massachusetts credit unions with an approximately 32 to 44 basis point annual subsidy that can be allocated toward higher deposit and lower interest rates on loans, higher expense ratios (more overhead expenses), or in greater retained earnings that provide capital for growth. Evidence indicates that while some of the subsidy benefits depositors and borrowers, a greater share goes to retained earnings and higher expense ratios. In fact, Massachusetts’ mutual banks, which have a similar governance structure as credit unions, have significantly lower expense ratios than Massachusetts credit unions.

The study also found that Massachusetts’ largest credit unions are more profitable than Massachusetts’ banks.

The study was funded by the Massachusetts Bankers Association.

Read the study.


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