Tuesday, July 13, 2010

Undercapitalized CUs Exceeding Member Business Loan Limit

There are 74 undercapitalized federally-insured credit unions, which report holding outstanding member business loans, that cannot increase the total amount of outstanding member business loans as of March 2010. The Federal Credit Union Act states that an insured credit union that is undercapitalized may not increase the total amount of member business loans outstanding until such time as the credit union becomes adequately capitalized.

Furthermore, the maximum amount of outstanding member business loans must equal 1.75 times the credit union's net worth and cannot exceed 12.25 percent of assets. An exception to the maximum cap of 12.25 percent of assets is granted to an insured credit union chartered for the purpose of making, or that has a history of primarily making, member business loans to its members; or an insured credit union that serves predominantly low-income members or is a community development financial institution is not subject to the 12.25 percent cap.

Out of these 74 undercapitalized federally-insured credit unions, 14 credit unions will need to shrink their member business loan portfolios to be in compliance with the Federal Credit Union Act. Two of these credit unions have subsequently failed -- Tracy FCU and Southwest Community FCU. Below is a list of the 14 credit unions that are exceeding their statutory member business lending limit. (click on image to enlarge)


  1. This makes me think maybe Arrowhead wasn't just an anomaly and that NCUA may not be requiring other CUs over the limit to stop making member business loans either.

  2. what volume of mbl has telesis and evangelical sold in participation?
    how do you find what has been sold thru the cuso?

  3. Remember the MBL cap was not applicable to credit unions in the business of primarily making MBLs when that stupid provision of the Federal Credit Union Act was foisted upon credit unions in 1998. In addition, there was no "form of the verb to be" on the language "chartered" to make MBLs. In fact, the current FCU Bylaws give an out to every FCU who wants to exceed that bogus 12.25% cap.



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