The National Credit Union Administration announced that Montauk Credit Union of New York, New York, has been merged into Bethpage Federal Credit Union of Bethpage, New York.
On September 18, 2015, the New York State Department of Financial Services placed Montauk into conservatorship and appointed the National Credit Union Administration as conservator. The credit union was critically undercapitalized as of the end of 2015. Click here to read my analysis of Montauk's performance at the end of 2015.
Montauk had assets of $162 million and 2,830 members, according to its most recent Call Report.
Bethpage FCU had assets of $6.2 billion at the end of 2015.
It appears that Bethpage FCU has taken a bullet for the credit union industry in order to keep the National Credit Union Share Insurance Fund from recognizing losses associated with problem taxi medallion loans at Montauk.
In my opinion, doing this merger without NCUA assistance is insane and not in the best interest of Bethpage's members.
Read the press release.
Thursday, March 31, 2016
More Community Banks to Be Acquired by Large Credit Unions
The Milwaukee Journal Sentinel has a story about more community banks to be acquired by large credit unions.
The article notes that while these transactions are still rare, they will become more commonplace.
According to Michael Bell, a mergers-and-acquisitions specialist with the law firm of Howard & Howard, this trend is not going to slow down.
In 2014, Landmark Credit Union (New Berlin, WI) acquired Hartford Savings Bank and earlier this year Advia Credit Union (Parchment, MI) announced a deal to take over Janesville-based Mid America Bank.
Bell expects to announce another large credit union acquisition of a community bank in Wisconsin.
However, as I have previously pointed out, these deals should be a two-way street. Unfortunately, the National Credit Union Administration's rules make it almost impossible for banks to acquire credit unions.
In addition, these transactions, where you have a tax exempt credit union take over taxpaying bank, will raise policy concerns about the credit union industry's tax exemption.
Read the story.
The article notes that while these transactions are still rare, they will become more commonplace.
According to Michael Bell, a mergers-and-acquisitions specialist with the law firm of Howard & Howard, this trend is not going to slow down.
In 2014, Landmark Credit Union (New Berlin, WI) acquired Hartford Savings Bank and earlier this year Advia Credit Union (Parchment, MI) announced a deal to take over Janesville-based Mid America Bank.
Bell expects to announce another large credit union acquisition of a community bank in Wisconsin.
However, as I have previously pointed out, these deals should be a two-way street. Unfortunately, the National Credit Union Administration's rules make it almost impossible for banks to acquire credit unions.
In addition, these transactions, where you have a tax exempt credit union take over taxpaying bank, will raise policy concerns about the credit union industry's tax exemption.
Read the story.
Wednesday, March 30, 2016
CUs Sponsor LPGA Symtra Golf Event
A number of New York State credit unions are sponsoring the Danielle Downey Credit Union Classic in Rochester, New York on the LPGA Symetra Tour.
The golf tournament is scheduled for the week of July 11 thru 17.
Credit unions sponsoring the tournament include The Summit Federal Credit Union, St. Pius Federal Credit Union, Advantage Federal Credit Union, Pittsford Federal Credit Union, Reliant Community Credit Union, Family First Federal Credit Union, Visions Federal Credit Union, Xceed Financial Credit Union, Ukrainian Federal Credit Union, SEFCU, Bethpage Federal Credit Union, Empower Federal Credit Union, First Heritage Federal Credit Union, Alloya Corporate Federal Credit Union, and Rochester Area State Employees Federal Credit Union.
Sponsorships range in price from $1,000 to $20,000.
How is the sponsoring of a LPGA golf tournament consistent with the tax exempt purpose of a credit union?
Read the press release.
The golf tournament is scheduled for the week of July 11 thru 17.
Credit unions sponsoring the tournament include The Summit Federal Credit Union, St. Pius Federal Credit Union, Advantage Federal Credit Union, Pittsford Federal Credit Union, Reliant Community Credit Union, Family First Federal Credit Union, Visions Federal Credit Union, Xceed Financial Credit Union, Ukrainian Federal Credit Union, SEFCU, Bethpage Federal Credit Union, Empower Federal Credit Union, First Heritage Federal Credit Union, Alloya Corporate Federal Credit Union, and Rochester Area State Employees Federal Credit Union.
Sponsorships range in price from $1,000 to $20,000.
How is the sponsoring of a LPGA golf tournament consistent with the tax exempt purpose of a credit union?
Read the press release.
Tuesday, March 29, 2016
Veterans Health Administration CU Closed
The State of Michigan Department of Insurance and Financial Services today liquidated Veterans Health Administration Credit Union of Detroit and named the National Credit Union Administration as liquidating agent.
Public Service Credit Union of Romulus, Michigan, immediately assumed Veterans Health Administration Credit Union’s members, assets, and loans and shares.
The Department of Insurance and Financial Services made the decision to liquidate Veterans Health Administration Credit Union and discontinue its operations after determining the credit union was insolvent with no prospect for restoring viable operations on its own.
At the time of liquidation and subsequent purchase by Public Service Credit Union, Veterans Health Administration Credit Union served 1,297 members and had assets of $2 million, according to the credit union’s most recent Call Report. According to the credit union's Financial performance Report, it experienced a significant drop in asset size during the fourth quarter, as assets fell by 46 percent.
Veterans Health Administration Credit Union is the fourth federally insured credit union liquidation in 2016.
Read the press release.
Public Service Credit Union of Romulus, Michigan, immediately assumed Veterans Health Administration Credit Union’s members, assets, and loans and shares.
The Department of Insurance and Financial Services made the decision to liquidate Veterans Health Administration Credit Union and discontinue its operations after determining the credit union was insolvent with no prospect for restoring viable operations on its own.
At the time of liquidation and subsequent purchase by Public Service Credit Union, Veterans Health Administration Credit Union served 1,297 members and had assets of $2 million, according to the credit union’s most recent Call Report. According to the credit union's Financial performance Report, it experienced a significant drop in asset size during the fourth quarter, as assets fell by 46 percent.
Veterans Health Administration Credit Union is the fourth federally insured credit union liquidation in 2016.
Read the press release.
Alabama CU Regulator: Bank, Banker, and Banking Cannot Be Used in CU Ads
In a letter to CEOs of Alabama state chartered credit unions, the Alabama credit union regulator reminded the CEOs that Alabama state chartered credit unions cannot use the words Bank, Banker, and Banking in their advertising.
The March 17 letter was issued because the state regulator became aware of credit unions using these words in their advertisements.
The letter noted that "any violation of this prohibition shall subject the party to penalties of $500 per day up to a maximum of $50,000"
The state regulator wrote that the same restriction applies to any non-credit union entity using the term "Credit Union."
However, the regulator wrote that credit unions may use language to describe a specific product like e-banking or internet banking.
This prohibition does not apply to federal credit unions operating in Alabama.
Read the letter.
The March 17 letter was issued because the state regulator became aware of credit unions using these words in their advertisements.
The letter noted that "any violation of this prohibition shall subject the party to penalties of $500 per day up to a maximum of $50,000"
The state regulator wrote that the same restriction applies to any non-credit union entity using the term "Credit Union."
However, the regulator wrote that credit unions may use language to describe a specific product like e-banking or internet banking.
This prohibition does not apply to federal credit unions operating in Alabama.
Read the letter.
Monday, March 28, 2016
NCUA Agrees to $29 Million Offer of Judgment from Credit Suisse
The National Credit Union Administration (NCUA) announced acceptance of a $29 million offer of judgment from Credit Suisse to resolve claims arising from losses related to purchases of residential mortgage-backed securities by Members United and Southwest corporate credit unions.
The offer of judgment includes $29 million in damages plus prejudgment interest in an amount to be determined by the Court as well as reasonable attorneys’ fees to be determined by agreement between the parties or by the Court.
NCUA has now obtained more than $2.5 billion in legal recoveries in securities cases.
Read the press release.
The offer of judgment includes $29 million in damages plus prejudgment interest in an amount to be determined by the Court as well as reasonable attorneys’ fees to be determined by agreement between the parties or by the Court.
NCUA has now obtained more than $2.5 billion in legal recoveries in securities cases.
Read the press release.
Friday, March 25, 2016
Conserved Clarkston Brandon Community Credit Union Merged into Michigan State University FCU
Clarkston Brandon Community Credit Union, of Clarkston, Michigan, has been merged into Michigan State University Federal Credit Union, of East Lansing, effective March 25, the National Credit Union Administration (NCUA) announced.
At the time of the merger, Clarkston Brandon Community Credit Union was a federally insured, state-chartered credit union with 8,536 members and assets of $68.5 million, according to the credit union’s most recent Call Report.
The State of Michigan Department of Insurance and Financial Services placed Clarkston Brandon Community Credit Union into conservatorship on January 13, 2016 and appointed the National Credit Union Administration as conservator.
The former CFO of Clarkston Brandon Community Credit Union admitted earlier this year to embezzling $20 million from the credit union.
Read the press release.
At the time of the merger, Clarkston Brandon Community Credit Union was a federally insured, state-chartered credit union with 8,536 members and assets of $68.5 million, according to the credit union’s most recent Call Report.
The State of Michigan Department of Insurance and Financial Services placed Clarkston Brandon Community Credit Union into conservatorship on January 13, 2016 and appointed the National Credit Union Administration as conservator.
The former CFO of Clarkston Brandon Community Credit Union admitted earlier this year to embezzling $20 million from the credit union.
Read the press release.
NASA FCU Sued over Overdraft Fee Program
NASA Federal Credit Union (NFCU) of Upper Marlboro, Maryland is being sued over its overdraft fee program.
According to the November 17, 2015 complaint, NFCU charged overdraft fees for transactions for which there was money in the checking account to cover the transactions, thereby breaching the express terms of its consumer contract.
The Plaintiff -- Mary Chambers -- also alleges that because the credit union provided inaccurate and misleading overdraft information to its customers, under the Electronic Funds Transfer Act, 12 C.F.R. § 1005, NFCU was not authorized to assess overdraft fees to consumers for debit card and non-recurring debit card charges. However, NFCU did charge its customers overdraft fees for ATM and debit card charges.
The lawsuit claims that NFCU's contractual promises in the Account Agreement and Opt-In Agreement to only assess overdraft fees when there is not enough money/sufficient funds in the account to pay the item. However, NFCU's practice when assessing an overdraft fee on a transaction is to ignore whether there is money in the account or a negative balance, and instead make the automated decision on assessing overdraft fees based on an artificial internal calculation (available balance) rather than the actual balance.
For example, the Plaintiff claims that on March 20, 2015, she had a balance of $67.74 in her account, when a debit card transaction of $59.99 was posted leaving her with a balance of $7.75. Despite have sufficient funds and money in her account to cover and pay the $59.99 transaction, she was charged a $32.00 overdraft fee by the credit union.
The complaint further alleges that charging overdraft fees on accounts that had sufficient funds to cover the charges caused additional overdraft fees to be assessed.
The complaint is seeking class certification and demanding a jury trial.
Read the complaint.
According to the November 17, 2015 complaint, NFCU charged overdraft fees for transactions for which there was money in the checking account to cover the transactions, thereby breaching the express terms of its consumer contract.
The Plaintiff -- Mary Chambers -- also alleges that because the credit union provided inaccurate and misleading overdraft information to its customers, under the Electronic Funds Transfer Act, 12 C.F.R. § 1005, NFCU was not authorized to assess overdraft fees to consumers for debit card and non-recurring debit card charges. However, NFCU did charge its customers overdraft fees for ATM and debit card charges.
The lawsuit claims that NFCU's contractual promises in the Account Agreement and Opt-In Agreement to only assess overdraft fees when there is not enough money/sufficient funds in the account to pay the item. However, NFCU's practice when assessing an overdraft fee on a transaction is to ignore whether there is money in the account or a negative balance, and instead make the automated decision on assessing overdraft fees based on an artificial internal calculation (available balance) rather than the actual balance.
For example, the Plaintiff claims that on March 20, 2015, she had a balance of $67.74 in her account, when a debit card transaction of $59.99 was posted leaving her with a balance of $7.75. Despite have sufficient funds and money in her account to cover and pay the $59.99 transaction, she was charged a $32.00 overdraft fee by the credit union.
The complaint further alleges that charging overdraft fees on accounts that had sufficient funds to cover the charges caused additional overdraft fees to be assessed.
The complaint is seeking class certification and demanding a jury trial.
Read the complaint.
Thursday, March 24, 2016
Charlotte Metro Credit Union Buys Naming Rights to Amphitheater
Live Nation Entertainment and Charlotte Metro Credit Union announced a multi-year agreement to name the Uptown Amphitheater the Charlotte Metro Credit Union Amphitheatre in Charlotte, NC.
Terms of the deal were not disclosed.
Read the story.
Terms of the deal were not disclosed.
Read the story.
Wednesday, March 23, 2016
CUs Serving Money Service Businesses
At the end of 2015, 252 federally insured credit unions reported serving Money Service Businesses. This is up from 251 federally insured credit unions at the end of 2014.
Federally insured credit unions that serve Money Service Businesses are required to fill out Schedule E - Bank Secrecy Act/Anti-Money Laundering Information of the Call Report.
According to information obtained through a Freedom of Information Act request, the number of accounts to Money Service Businesses were down at the end of 2015 compared to 2014, while the aggregate dollar amount of balances was up. Federally insured credit unions reported 1,514 accounts in 2014 and 1,479 accounts at the end of 2015. However, the aggregate amount in those accounts was $67.9 million at the end of 2014 compared to $70.4 million at the end of 2015.
The aggregate number of accounts at federally insured credit unions for Dealers in Foreign Exchange (Acct Code 1051), Check Cashers (Acct Code 1052), Provider of Prepaid Access (Acct Code 1055), and Seller of Prepaid Access (Acct Code 1056) fell between 2014 and 2015.
The number of accounts for Dealers in Foreign Exchange fell by 40 over the year to 17 at the end of 2015. Federally insured credit unions reported a drop of 30,620 accounts for Check Cashers from 31,543 accounts at the end of 2014 to 923 accounts at the end of 2015. Accounts for Providers of Prepaid Access fell from 92 accounts to 39 accounts. Also, there was a decline in the number of accounts for Sellers of Prepaid Access from 140 accounts to 116 accounts.
However, the aggregate number of accounts for Monetary Instruments (Acct Code 1053) and Money Transmitters (Acct Code 1054) rose between 2014 and 2015. The number accounts for Monetary Instruments rose from 596 accounts to 628 accounts. The aggregate number of accounts for Money Transmitters increased from 598 at the end of 2014 to 693 at the end of 2015.
Federally insured credit unions that serve Money Service Businesses are required to fill out Schedule E - Bank Secrecy Act/Anti-Money Laundering Information of the Call Report.
According to information obtained through a Freedom of Information Act request, the number of accounts to Money Service Businesses were down at the end of 2015 compared to 2014, while the aggregate dollar amount of balances was up. Federally insured credit unions reported 1,514 accounts in 2014 and 1,479 accounts at the end of 2015. However, the aggregate amount in those accounts was $67.9 million at the end of 2014 compared to $70.4 million at the end of 2015.
The aggregate number of accounts at federally insured credit unions for Dealers in Foreign Exchange (Acct Code 1051), Check Cashers (Acct Code 1052), Provider of Prepaid Access (Acct Code 1055), and Seller of Prepaid Access (Acct Code 1056) fell between 2014 and 2015.
The number of accounts for Dealers in Foreign Exchange fell by 40 over the year to 17 at the end of 2015. Federally insured credit unions reported a drop of 30,620 accounts for Check Cashers from 31,543 accounts at the end of 2014 to 923 accounts at the end of 2015. Accounts for Providers of Prepaid Access fell from 92 accounts to 39 accounts. Also, there was a decline in the number of accounts for Sellers of Prepaid Access from 140 accounts to 116 accounts.
However, the aggregate number of accounts for Monetary Instruments (Acct Code 1053) and Money Transmitters (Acct Code 1054) rose between 2014 and 2015. The number accounts for Monetary Instruments rose from 596 accounts to 628 accounts. The aggregate number of accounts for Money Transmitters increased from 598 at the end of 2014 to 693 at the end of 2015.
Tuesday, March 22, 2016
Greater Nevada Credit Union Buys Naming Rights to Baseball Field
The stadium formerly known as Aces Park in Reno, Nevada will be renamed Greater Nevada Field.
The agreement includes exclusive sponsorship and advertising rights and prominent signage on the ballpark’s exterior façade, the scoreboard in left-center field and numerous locations throughout the 9,100 seat ballpark
Outside of disclosing that the deal is for 15 years, the financial terms of the naming-rights deal between Greater Nevada Credit Union and SK Baseball, owners of the Aces and the ballpark, were not released, although naming rights deals for minor league stadiums tend to be at least six figures annually.
Read the story.
The agreement includes exclusive sponsorship and advertising rights and prominent signage on the ballpark’s exterior façade, the scoreboard in left-center field and numerous locations throughout the 9,100 seat ballpark
Outside of disclosing that the deal is for 15 years, the financial terms of the naming-rights deal between Greater Nevada Credit Union and SK Baseball, owners of the Aces and the ballpark, were not released, although naming rights deals for minor league stadiums tend to be at least six figures annually.
Read the story.
Monday, March 21, 2016
Service Credit Union Sponsors Premium Club-Seating Area at UNH Football Stadium
The University of New Hampshire Department of Athletics has reached an agreement with Service Credit Union for the naming rights to premium stadium club-seating area in the new Wildcat football stadium.
The premium stadium club-seating area will be known as the Service Credit Union Victory Club.
According to the press release, "[t]he climate-controlled Service Credit Union Victory Club will provide members with spacious and comfortable indoor and outdoor seating with the best sightlines in the new home of the UNH Wildcats football program ... Before and during all Wildcats’ home games, Service Credit Union Victory Club members will be able to take advantage of an all-you-can-eat buffet with carving stations to go along with an outdoor patio area featuring gameday fare. In addition, club members will receive parking closest to the stadium entrance, one-of-a-kind experiences with the Wildcat football team and the opportunity to use the club on non-gamedays for corporate functions and other outside events."
The agreement did not disclose the price of the deal.
Read the press release.
The premium stadium club-seating area will be known as the Service Credit Union Victory Club.
According to the press release, "[t]he climate-controlled Service Credit Union Victory Club will provide members with spacious and comfortable indoor and outdoor seating with the best sightlines in the new home of the UNH Wildcats football program ... Before and during all Wildcats’ home games, Service Credit Union Victory Club members will be able to take advantage of an all-you-can-eat buffet with carving stations to go along with an outdoor patio area featuring gameday fare. In addition, club members will receive parking closest to the stadium entrance, one-of-a-kind experiences with the Wildcat football team and the opportunity to use the club on non-gamedays for corporate functions and other outside events."
The agreement did not disclose the price of the deal.
Read the press release.
Friday, March 18, 2016
Technology CU Finances $22.4 Million SBA 504 Loan
Technology Credit Union (San Jose, CA) announced on March 17 that the credit union has funded its largest Small Business Administration (SBA) 504 loan to date at $22.4 million.
The loan provided financing to assist a commercial tenant’s purchase of a 112,000 square-foot, multi-tenant office building located in Burlingame, California.
According to the press release, the $2 billion credit union has originated over $300 million in commercial loan commitments to more than 120 middle market businesses.
Read the press release.
The loan provided financing to assist a commercial tenant’s purchase of a 112,000 square-foot, multi-tenant office building located in Burlingame, California.
According to the press release, the $2 billion credit union has originated over $300 million in commercial loan commitments to more than 120 middle market businesses.
Read the press release.
Credit Union Buys Naming Rights to School District's Sports Complex
The Pottsville Area school board agreed to rename one of its sports complexes after it received a donation from CACL Federal Credit Union (Pottsville, PA).
In the deal, CACL will give the school district $150,000 over an 11-year period. The school district will use the funds to replace two scoreboards at the Pottsville Area 16th Street Fields.
In return, the school board will rename the 16th Street Baseball/Softball Complex as CACL Complex.
The agreement will promote the credit union throughout the school district, including a table at two home high school football games.
In addition, the agreement will provide CACL with the opportunity to present a proposal to the school district with regard to the banking opportunities provided the credit union.
CACL representatives will also be given an opportunity to talk to students at Pottsville Area High School about financial literacy.
Read the story.
In the deal, CACL will give the school district $150,000 over an 11-year period. The school district will use the funds to replace two scoreboards at the Pottsville Area 16th Street Fields.
In return, the school board will rename the 16th Street Baseball/Softball Complex as CACL Complex.
The agreement will promote the credit union throughout the school district, including a table at two home high school football games.
In addition, the agreement will provide CACL with the opportunity to present a proposal to the school district with regard to the banking opportunities provided the credit union.
CACL representatives will also be given an opportunity to talk to students at Pottsville Area High School about financial literacy.
Read the story.
Thursday, March 17, 2016
Outstanding Enforcement Orders Down by 21 Percent at the End of 2015
The total number of outstanding enforcement actions for federally insured credit unions at the end of 2015 was down by approximately 21 percent from a year earlier.
The following table appeared in the National Credit Union Administration's 2015 Annual Report (click on image to enlarge). It shows the number of outstanding enforcement actions at year end by type of action against federal credit unions (FCU) and federally insured state chartered credit unions (SCCU) between 2010 and 2015. LUA stands for Letters of Understanding and Agreement.
The 2015 Annual Report noted: "The total number of enforcement actions at federal credit unions decreased by 24.5 percent, from 290 outstanding at the end of 2014 to 219 at the end of 2015. Total enforcement actions against federally insured, state-chartered credit unions decreased 14.6 percent, from 164 as of the end of 2014 to 140 at the end of 2015."
Total outstanding enforcement actions peaked in 2011 at 631 and has steadily declined, as the economy improved and federally insured credit unions worked to address problems.
The following table appeared in the National Credit Union Administration's 2015 Annual Report (click on image to enlarge). It shows the number of outstanding enforcement actions at year end by type of action against federal credit unions (FCU) and federally insured state chartered credit unions (SCCU) between 2010 and 2015. LUA stands for Letters of Understanding and Agreement.
The 2015 Annual Report noted: "The total number of enforcement actions at federal credit unions decreased by 24.5 percent, from 290 outstanding at the end of 2014 to 219 at the end of 2015. Total enforcement actions against federally insured, state-chartered credit unions decreased 14.6 percent, from 164 as of the end of 2014 to 140 at the end of 2015."
Total outstanding enforcement actions peaked in 2011 at 631 and has steadily declined, as the economy improved and federally insured credit unions worked to address problems.
Tuesday, March 15, 2016
52 Percent of CUs Saw a Year-over-Year Membership Decline
The National Credit Union Administration (NCUA) reported that over half of the country's federally insured credit unions saw a year-over-year drop in membership at the end of 2015.
Overall, 52 percent of federally insured credit unions had fewer members at the end of the fourth quarter of 2015 than a year earlier. The median membership growth rate for federally insured credit unions in the United States was negative 0.2 percent.
The report noted that credit unions with falling membership tend to be small; about 75 percent had less than $50 million in assets.
In 20 states, more than half of the federally insured credit unions reported a negative membership growth rate. Pennsylvania credit unions had the worst median membership growth rate at minus 2.1 percent.
Read the report.
Overall, 52 percent of federally insured credit unions had fewer members at the end of the fourth quarter of 2015 than a year earlier. The median membership growth rate for federally insured credit unions in the United States was negative 0.2 percent.
The report noted that credit unions with falling membership tend to be small; about 75 percent had less than $50 million in assets.
In 20 states, more than half of the federally insured credit unions reported a negative membership growth rate. Pennsylvania credit unions had the worst median membership growth rate at minus 2.1 percent.
Read the report.
Monday, March 14, 2016
NCUA Is A "Kid Glove" Regulator
Banks and credit unions are subject to many of the same laws and regulations. But the difference is in how the bank and credit union regulators implement these laws and regulations.
The latest example of these differences was highlighted by Credit Union Times. The article looked at the Office of the Comptroller of the Currency (OCC) recently issued new civil money penalty guidance and Bank Secrecy Act/Anti-Money Laundering (BSA/AML) supervision procedures and then looked at what NCUA is doing.
With regard to civil money penalties, National Credit Union Administration (NCUA) Public Affairs Specialist John Fairbanks stated that the agency has not assessed civil money penalties for regulatory violations since Debbie Matz was named chairman of the NCUA. The only exception is for credit unions that are late in filing their call reports. Debbie Matz was named chairman of NCUA in 2009. Over that same time period, banks have been subject to numerous civil money penalties for various regulatory violations.
The article also noted that NCUA has no plan to follow OCC's lead with regard to BSA/AML enforcement actions outlined in a February 29 bulletin. The bulletin states that OCC is required by statute to issue a cease-and-desist order when citing BSA compliance program violations or violations of 12 USC 1818(s) for repeat or uncorrected BSA compliance problems.
This further illustrates that NCUA is a lax regulator, which treats credit unions with kid gloves.
The latest example of these differences was highlighted by Credit Union Times. The article looked at the Office of the Comptroller of the Currency (OCC) recently issued new civil money penalty guidance and Bank Secrecy Act/Anti-Money Laundering (BSA/AML) supervision procedures and then looked at what NCUA is doing.
With regard to civil money penalties, National Credit Union Administration (NCUA) Public Affairs Specialist John Fairbanks stated that the agency has not assessed civil money penalties for regulatory violations since Debbie Matz was named chairman of the NCUA. The only exception is for credit unions that are late in filing their call reports. Debbie Matz was named chairman of NCUA in 2009. Over that same time period, banks have been subject to numerous civil money penalties for various regulatory violations.
The article also noted that NCUA has no plan to follow OCC's lead with regard to BSA/AML enforcement actions outlined in a February 29 bulletin. The bulletin states that OCC is required by statute to issue a cease-and-desist order when citing BSA compliance program violations or violations of 12 USC 1818(s) for repeat or uncorrected BSA compliance problems.
This further illustrates that NCUA is a lax regulator, which treats credit unions with kid gloves.
Friday, March 11, 2016
Matz: Extended Exam Cycles Will Have to Wait
In a letter to Representative Frank Guinta (R - NH), National Credit Union Administration (NCUA) Chairman Debbie Matz nixed the idea of extending the examination cycle for credit unions to 18 months at this time.
In the letter, she stated that the agency won't be in a position to consider expanding the exam cycle until the beginning of 2018.
She noted that the agency’s 2016 exam cycle and budget was already in place. Therefore, NCUA had limited capacity to make such changes at this time.
Chairman Matz also commented that NCUA had put in motion a number of initiatives that would improve the examination process, which will take time and resources to complete. She further wrote that these initiatives would form the foundation for any future NCUA Board decision to extend the examination cycle.
These initiatives include updating the Call Report and examination software platforms. In addition, recent regulatory changes by NCUA will require the agency to develop examiner guidance and to adopt new and specialized training for examiners.
She wrote that these new procedures and processes are scheduled to be in place by the end of 2017 and at that time, the NCUA Board will be in a better position to consider a comprehensive, well-integrated plan to extend the examination cycle.
She did write that NCUA in the meantime will continue its efforts to conduct streamlined examinations for smaller, well-run credit unions.
In the letter, she stated that the agency won't be in a position to consider expanding the exam cycle until the beginning of 2018.
She noted that the agency’s 2016 exam cycle and budget was already in place. Therefore, NCUA had limited capacity to make such changes at this time.
Chairman Matz also commented that NCUA had put in motion a number of initiatives that would improve the examination process, which will take time and resources to complete. She further wrote that these initiatives would form the foundation for any future NCUA Board decision to extend the examination cycle.
These initiatives include updating the Call Report and examination software platforms. In addition, recent regulatory changes by NCUA will require the agency to develop examiner guidance and to adopt new and specialized training for examiners.
She wrote that these new procedures and processes are scheduled to be in place by the end of 2017 and at that time, the NCUA Board will be in a better position to consider a comprehensive, well-integrated plan to extend the examination cycle.
She did write that NCUA in the meantime will continue its efforts to conduct streamlined examinations for smaller, well-run credit unions.
Thursday, March 10, 2016
Knovxville TVA Employees Credit Union Buys Naming Rights to Ballpark
Knoxville TVA Employees Credit Union has bought the naming rights to the home stadium of the Johnson City (TN) Cardinals.
The Johnson City Cardinals are a minor league affiliate (Appalachian League) of the St. Louis Cardinals.
Details of the sponsorship package was not disclosed.
Maybe a member of this credit union will ask the Board and management at the upcoming March 22 Annual Meeting what is the price tag of this deal and is this the best use of the members' funds.
Read the story.
The Johnson City Cardinals are a minor league affiliate (Appalachian League) of the St. Louis Cardinals.
Details of the sponsorship package was not disclosed.
Maybe a member of this credit union will ask the Board and management at the upcoming March 22 Annual Meeting what is the price tag of this deal and is this the best use of the members' funds.
Read the story.
Wednesday, March 9, 2016
NCUA Issued Fewer Enforcement Actions in 2015
The National Credit Union Administration (NCUA) issued fewer enforcement actions in 2015 compared to 2014.
Enforcement actions include preliminary warning letters, letters of understanding and agreement, and cease and desist orders.
According to information obtained under a Freedom of Information Act request, NCUA in 2015 issued 47 preliminary warning letters, 134 letters of understanding and agreement (all were unpublished), and 2 cease and desist orders.
In comparison, NCUA in 2014 issued 69 preliminary warning letters, 152 letters of understanding and agreement (all were unpublished), and 5 cease and desist orders.
Enforcement actions include preliminary warning letters, letters of understanding and agreement, and cease and desist orders.
According to information obtained under a Freedom of Information Act request, NCUA in 2015 issued 47 preliminary warning letters, 134 letters of understanding and agreement (all were unpublished), and 2 cease and desist orders.
In comparison, NCUA in 2014 issued 69 preliminary warning letters, 152 letters of understanding and agreement (all were unpublished), and 5 cease and desist orders.
Monday, March 7, 2016
Consumer Credit at CUs Up in January
The Federal Reserve reported that outstanding consumer credit at credit unions grew in January 2016.
Total outstanding consumer credit at credit unions rose by $4.2 billion in January to $345.9 billion.
Revolving credit at credit unions fell by almost $400 million during January to $49 billion. On the other hand, outstanding nonrevolving credit at credit unions was $296.9 billion in January -- up from $292.3 billion in December 2015.
Read the G.19 release.
Total outstanding consumer credit at credit unions rose by $4.2 billion in January to $345.9 billion.
Revolving credit at credit unions fell by almost $400 million during January to $49 billion. On the other hand, outstanding nonrevolving credit at credit unions was $296.9 billion in January -- up from $292.3 billion in December 2015.
Read the G.19 release.
Large CUs Prosper, Small CUs Struggle
Credit union industry data tell two stories about the credit union industry. For large credit unions it is the best of times, while for small credit unions it is the worst of times.
Federally insured credit unions with more than $500 million in assets continued to lead the system in most performance measures in the fourth quarter of 2015. With $867.5 billion in combined assets, these 481 credit unions held 72 percent of total system assets.
In fact, it is the 250 credit unions with at least $1 billion in assets that is fueling the industry's growth. These 250 credit unions hold $705.1 billion in assets of 58.5 percent of the industry's assets.
In addition, these large credit unions reported the fastest growth in loans, membership and net worth as well as the highest return on average assets. The return on average assets was 0.86 percent for credit unions with $500 million or more in assets.
On the other hand, smaller credit unions continue to struggle.
Membership in the smallest credit unions continued to decline in 2015. Credit unions with $10 million to $100 million in assets experienced a membership growth of minus 0.1 percent. Credit unions with less than $10 million in assets reported a membership growth rate of negative 1.4 percent.
Credit unions with less than $10 million in assets reported a return on average assets of 4 basis points. While these credit unions have the industry's highest net worth ratio of 15.05 percent, they also have the highest delinquent loan ratio of 1.89 percent.
Federally insured credit unions with more than $500 million in assets continued to lead the system in most performance measures in the fourth quarter of 2015. With $867.5 billion in combined assets, these 481 credit unions held 72 percent of total system assets.
In fact, it is the 250 credit unions with at least $1 billion in assets that is fueling the industry's growth. These 250 credit unions hold $705.1 billion in assets of 58.5 percent of the industry's assets.
In addition, these large credit unions reported the fastest growth in loans, membership and net worth as well as the highest return on average assets. The return on average assets was 0.86 percent for credit unions with $500 million or more in assets.
On the other hand, smaller credit unions continue to struggle.
Membership in the smallest credit unions continued to decline in 2015. Credit unions with $10 million to $100 million in assets experienced a membership growth of minus 0.1 percent. Credit unions with less than $10 million in assets reported a membership growth rate of negative 1.4 percent.
Credit unions with less than $10 million in assets reported a return on average assets of 4 basis points. While these credit unions have the industry's highest net worth ratio of 15.05 percent, they also have the highest delinquent loan ratio of 1.89 percent.
Friday, March 4, 2016
NCUA Closes Education Associations FCU
The National Credit Union Administration liquidated Education Associations Federal Credit Union of Washington, D.C.
NCUA made the decision to liquidate Education Associations Federal Credit Union and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.
The credit union reported a loss of $17,547 for 2015, after reporting a loss of $13,400 for 2014. The credit union was well capitalized as of December 2015 with a net worth ratio of 7.08 percent. In addition, the credit union was reporting a delinquent loan ratio of 1.76 percent.
Education Associations Federal Credit Union served 665 members and had assets of $2,596,701, according to the credit union’s most recent Call Report.
This is the third credit union to be liquidated this year.
Read the press release.
NCUA made the decision to liquidate Education Associations Federal Credit Union and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.
The credit union reported a loss of $17,547 for 2015, after reporting a loss of $13,400 for 2014. The credit union was well capitalized as of December 2015 with a net worth ratio of 7.08 percent. In addition, the credit union was reporting a delinquent loan ratio of 1.76 percent.
Education Associations Federal Credit Union served 665 members and had assets of $2,596,701, according to the credit union’s most recent Call Report.
This is the third credit union to be liquidated this year.
Read the press release.
Chairman of Failed CU Accepted Bribes from Unlawful Bitcoin Exchange
The former Chairman of the Board of failed HOPE Federal Credit Union (NJ), Trevon Gross, was indicted for accepting over $150,000 in bribes from the operators of Coin.mx, an unlawful Bitcoin exchange.
According to the indictment, Gross allowed Anthony Murgio, Yuri Lebedev, and their co-conspirators to acquire control of HOPE FCU and assisted their efforts in exchange for bribes, which Gross directed Murgio to pay to bank accounts under Gross’s control. In total, Murgio and his co-conspirators paid over $150,000 to accounts under Gross’s control. With Gross’s assistance, Murgio installed his co-conspirators, including Lebedev, on HOPE FCU’s Board of Directors and transferred Coin.mx’s banking operations to HOPE FCU.
The indictment stated that Murgio, Lebedev, and their co-conspirators operated HOPE FCU as a captive bank for their unlawful Bitcoin exchange until at least early 2015. At that time, after discovering that substantial payment processing activity was being conducted through HOPE FCU, the National Credit Union Administration (NCUA) forced HOPE FCU to cease engaging in such activity, and Murgio thereafter found new, overseas payment processing channels for his unlawful business. In October 2015, in connection with the charged conduct, the NCUA placed HOPE FCU into conservatorship, and thereafter liquidated it.
Gross is charged with one count of corruptly accepting payments as an officer of a financial institution, which carries a maximum sentence of 30 years in prison.
Read the press release.
According to the indictment, Gross allowed Anthony Murgio, Yuri Lebedev, and their co-conspirators to acquire control of HOPE FCU and assisted their efforts in exchange for bribes, which Gross directed Murgio to pay to bank accounts under Gross’s control. In total, Murgio and his co-conspirators paid over $150,000 to accounts under Gross’s control. With Gross’s assistance, Murgio installed his co-conspirators, including Lebedev, on HOPE FCU’s Board of Directors and transferred Coin.mx’s banking operations to HOPE FCU.
The indictment stated that Murgio, Lebedev, and their co-conspirators operated HOPE FCU as a captive bank for their unlawful Bitcoin exchange until at least early 2015. At that time, after discovering that substantial payment processing activity was being conducted through HOPE FCU, the National Credit Union Administration (NCUA) forced HOPE FCU to cease engaging in such activity, and Murgio thereafter found new, overseas payment processing channels for his unlawful business. In October 2015, in connection with the charged conduct, the NCUA placed HOPE FCU into conservatorship, and thereafter liquidated it.
Gross is charged with one count of corruptly accepting payments as an officer of a financial institution, which carries a maximum sentence of 30 years in prison.
Read the press release.
Thursday, March 3, 2016
CU Loans, Deposits, and Assets Grew in 2015
The National Credit Union Administration (NCUA) reported that shares ((deposits), loans, and assets grew at federally insured credit unions in 2015.
Total shares and deposits at federally insured credit unions surpassed $1 trillion in the fourth quarter of 2015. Overall, share and deposit accounts at federally insured credit unions increased $65.2 billion, or 6.9 percent, from the end of the fourth quarter of 2014. According to NCUA, share drafts posted strong growth of 14.5 percent for the year.
Total loans at federally insured credit unions reached $787 billion in the fourth quarter of 2015, an increase of 2.3 percent from the previous quarter and 10.5 percent from a year earlier, as all major loan categories grew in 2015. Credit unions originated almost $406 billion in loans in 2015, up from $351 billion in 2014.
Outstanding indirect loans constitute 17.34 percent of total loans.
The loans-to-shares ratio at the end of the fourth quarter was 77.5 percent, unchanged from the previous quarter and up 2.5 percentage points from the end of the fourth quarter of 2014.
Total assets in federally insured credit unions rose to $1.2 trillion at the end of the fourth quarter of 2015, an increase of $82.2 billion, or 7.3 percent, from the end of 2014.
Credit Union Profitability Slipped During Fourth Quarter
Net income at federally insured credit unions was $8.7 billion for 2015 -- up 0.3 percent from a year ago.
Provisions for loan and lease losses were a drag on earnings in 2015. Provisions for loan and lease losses increased by almost 30 percent during 2015 to $4 billion at the end of 2015.
In addition, non-interest expenses increased by almost $2.3 billion in 2015 to $36.2 billion at the end of 2015.
However, higher interest and non-interest income positively affected credit union industry earnings.
Return on Average Assets was 0.75 percent at the end of 2015 -- down 5 basis points from the third quarter of 2015 and the end of 2014.
Overall, 79 percent of federally insured credit unions reported positive returns on average assets for 2015.
Net Worth Ratio Edged Lower
The credit union industry's net worth ratio was 10.92 percent at the end of 2015 -- down 7 basis points from the third quarter of 2015 and 4 basis points from the end of 2014.
The percentage of federally insured credit unions that were well-capitalized rose over the past four quarters with 97.9 percent reporting a net worth ratio at or above the statutorily required 7 percent. A year earlier, 97.6 percent of credit unions were well-capitalized. As of December 31, 2015, 0.6 percent of federally insured credit unions were undercapitalized.
Delinquent Loans Up for 3 Straight Quarters
At the end of the fourth quarter of 2015, delinquent loans were at $6.4 billion. This is the third consecutive quarterly increase in past due loans.
The delinquency rate at federally insured credit unions rose slightly in the fourth quarter to 81 basis points from 78 basis points the previous quarter, but remained below the 85 basis-point level in the fourth quarter of 2014.
As of the end of 2015, the coverage ratio (allowances for loan and lease losses to delinquent loans) was 114.66 percent at the end of 2015. In comparison, the coverage ratio was 114.96 percent one year ago.
In addition, loans 30 days thru 59 days past due grew by $2.35 billion in the last quarter of 2015 to almost $8.5 billion.
Net charge-offs were up from $3.36 billion at the end of 2014 to $3.63 billion at the end of 2015. Despite the increase in net charge-offs, the net charge-off rate over the same period fell from 0.50 percent to 0.48 percent. However, between the third quarter of 2015 and the fourth quarter of 2015, the net charge-off rate rose by 2 basis points.
Read the press release.
Total shares and deposits at federally insured credit unions surpassed $1 trillion in the fourth quarter of 2015. Overall, share and deposit accounts at federally insured credit unions increased $65.2 billion, or 6.9 percent, from the end of the fourth quarter of 2014. According to NCUA, share drafts posted strong growth of 14.5 percent for the year.
Total loans at federally insured credit unions reached $787 billion in the fourth quarter of 2015, an increase of 2.3 percent from the previous quarter and 10.5 percent from a year earlier, as all major loan categories grew in 2015. Credit unions originated almost $406 billion in loans in 2015, up from $351 billion in 2014.
Outstanding indirect loans constitute 17.34 percent of total loans.
The loans-to-shares ratio at the end of the fourth quarter was 77.5 percent, unchanged from the previous quarter and up 2.5 percentage points from the end of the fourth quarter of 2014.
Total assets in federally insured credit unions rose to $1.2 trillion at the end of the fourth quarter of 2015, an increase of $82.2 billion, or 7.3 percent, from the end of 2014.
Credit Union Profitability Slipped During Fourth Quarter
Net income at federally insured credit unions was $8.7 billion for 2015 -- up 0.3 percent from a year ago.
Provisions for loan and lease losses were a drag on earnings in 2015. Provisions for loan and lease losses increased by almost 30 percent during 2015 to $4 billion at the end of 2015.
In addition, non-interest expenses increased by almost $2.3 billion in 2015 to $36.2 billion at the end of 2015.
However, higher interest and non-interest income positively affected credit union industry earnings.
Return on Average Assets was 0.75 percent at the end of 2015 -- down 5 basis points from the third quarter of 2015 and the end of 2014.
Overall, 79 percent of federally insured credit unions reported positive returns on average assets for 2015.
Net Worth Ratio Edged Lower
The credit union industry's net worth ratio was 10.92 percent at the end of 2015 -- down 7 basis points from the third quarter of 2015 and 4 basis points from the end of 2014.
The percentage of federally insured credit unions that were well-capitalized rose over the past four quarters with 97.9 percent reporting a net worth ratio at or above the statutorily required 7 percent. A year earlier, 97.6 percent of credit unions were well-capitalized. As of December 31, 2015, 0.6 percent of federally insured credit unions were undercapitalized.
Delinquent Loans Up for 3 Straight Quarters
At the end of the fourth quarter of 2015, delinquent loans were at $6.4 billion. This is the third consecutive quarterly increase in past due loans.
The delinquency rate at federally insured credit unions rose slightly in the fourth quarter to 81 basis points from 78 basis points the previous quarter, but remained below the 85 basis-point level in the fourth quarter of 2014.
As of the end of 2015, the coverage ratio (allowances for loan and lease losses to delinquent loans) was 114.66 percent at the end of 2015. In comparison, the coverage ratio was 114.96 percent one year ago.
In addition, loans 30 days thru 59 days past due grew by $2.35 billion in the last quarter of 2015 to almost $8.5 billion.
Net charge-offs were up from $3.36 billion at the end of 2014 to $3.63 billion at the end of 2015. Despite the increase in net charge-offs, the net charge-off rate over the same period fell from 0.50 percent to 0.48 percent. However, between the third quarter of 2015 and the fourth quarter of 2015, the net charge-off rate rose by 2 basis points.
Read the press release.
Wednesday, March 2, 2016
Commonality of Age Is Not A Permissible Common Bond
The National Credit Union Administration (NCUA) in a February 25, 2016 legal opinion letter wrote that a group's commonality of age and residency alone is not enough to establish a permissible field of membership (FOM) under NCUA's regulation.
This letter was in response to my letter of January 28, 2016.
Specifically, I wrote NCUA seeking a legal opinion about whether a federal credit union's field of membership may be based upon a common bond that is comprised of persons who are age 50 years or older residing in a specific state.
NCUA did note that if the group shared other commonalities in addition to age and residency, it could be possible for a credit union to satisfy the requirements for an associational common bond.
NCUA further indicated in the letter that it was not aware of any federal credit unions operating with a common bond posed by this question.
I found this response to be surprising.
I wrote NCUA almost one year ago about U.S. Eagle Federal Credit Union (Albuquerque, NM). The credit union listed among its common bonds people who are 50 years of age or better and residents of New Mexico (Check out my March 27, 2015 blog). As of February 29, 2016, U.S. Eagle still reports on its website that one way to join is by being 50 years of age or better and a resident of New Mexico.
It seems to me that 50 years of age or better does not meet NCUA's associational common bond requirements.
This would indicate that this common bond is impermissible and needs to be shut down.
NCUA should penalize this credit union for its illegally adding people through this impermissible common bond.
Finally, the agency should hold accountable those staffers in the Office of Consumer Protection that permitted this impermissible common bond to persist for more almost one year after it was brought to their attention.
Letter is below.
This letter was in response to my letter of January 28, 2016.
Specifically, I wrote NCUA seeking a legal opinion about whether a federal credit union's field of membership may be based upon a common bond that is comprised of persons who are age 50 years or older residing in a specific state.
NCUA did note that if the group shared other commonalities in addition to age and residency, it could be possible for a credit union to satisfy the requirements for an associational common bond.
NCUA further indicated in the letter that it was not aware of any federal credit unions operating with a common bond posed by this question.
I found this response to be surprising.
I wrote NCUA almost one year ago about U.S. Eagle Federal Credit Union (Albuquerque, NM). The credit union listed among its common bonds people who are 50 years of age or better and residents of New Mexico (Check out my March 27, 2015 blog). As of February 29, 2016, U.S. Eagle still reports on its website that one way to join is by being 50 years of age or better and a resident of New Mexico.
It seems to me that 50 years of age or better does not meet NCUA's associational common bond requirements.
This would indicate that this common bond is impermissible and needs to be shut down.
NCUA should penalize this credit union for its illegally adding people through this impermissible common bond.
Finally, the agency should hold accountable those staffers in the Office of Consumer Protection that permitted this impermissible common bond to persist for more almost one year after it was brought to their attention.
Letter is below.
Tuesday, March 1, 2016
Eastman CU's CEO Total Compensation in 2014 Was Almost $9.3 Million
According to Kingsport, Tennessee-based Eastman Credit Union's 2014 Form 990, the credit union's CEO, Olan O. Jones Jr., had a total compensation package of $9.26 million in 2014.
The base pay of the credit union's CEO was almost $7 million. Olan Jones Jr. also received $262,440 in bonus and incentive payments in 2014.
In addition, his retirement and other deferred compensation was almost $2 million in 2014.
Mr. Jones' compensation package in 2014 included a $6.4 million payout from a 457(b) plan.
At the end of 2014, Eastman Credit Union reported slightly more than $3 billion in assets.
The base pay of the credit union's CEO was almost $7 million. Olan Jones Jr. also received $262,440 in bonus and incentive payments in 2014.
In addition, his retirement and other deferred compensation was almost $2 million in 2014.
Mr. Jones' compensation package in 2014 included a $6.4 million payout from a 457(b) plan.
At the end of 2014, Eastman Credit Union reported slightly more than $3 billion in assets.