A recent study by Moebs $ervices found that banks have more consumer friendly overdraft (OD) features than credit unions.
The study looked at the De Minimis and Daily Cap features of 3,800 credit unions and banks.
De Minimis means that when a transaction causes an account to become overdrawn with a very minimal negative balance, the account will not be charged an overdraft fee.
A Daily Overdraft Cap limits the number of overdraft fees that will be charged in one day.
Moebs $ervices found that 33.8 percent banks had De Minimis features versus 12.9 percent of credit unions.
In addition, Moebs $ervices found that 29.2 percent of banks had Daily Caps on the number of overdraft fees. However, only 7.4 percent of credit unions used Daily Caps.
Wednesday, August 31, 2016
Tuesday, August 30, 2016
FinCen Proposes AML, CIP Rules be Extended to Non-federally Insured CUs
The Financial Crimes Enforcement Network (FinCEN) issued a proposed rule imposing -- for the first time -- anti-money laundering (AML) program and Customer Identification Program (CIP) requirements for banks without a federal functional regulator, including non-federally insured credit unions.
The proposed rule would prescribe minimum standards for AML programs and include these institutions in CIP, thus “eliminat[ing] the present regulatory ‘gap’ in AML coverage” and “reduc[ing] the opportunity for criminals to seek out and exploit banks with less rigorous AML requirements.”
Covered institutions are already subject to various Bank Secrecy Act recordkeeping and reporting requirements, so FinCEN said the proposal would not be “unduly burdensome.”
Read the proposed rule.
The proposed rule would prescribe minimum standards for AML programs and include these institutions in CIP, thus “eliminat[ing] the present regulatory ‘gap’ in AML coverage” and “reduc[ing] the opportunity for criminals to seek out and exploit banks with less rigorous AML requirements.”
Covered institutions are already subject to various Bank Secrecy Act recordkeeping and reporting requirements, so FinCEN said the proposal would not be “unduly burdensome.”
Read the proposed rule.
Monday, August 29, 2016
Royal CU Completes Acquisition of Capital Bank
The $1.8 billion Royal Credit Union (Eau Claire, WI) completed its acquisition of Capital Bank in Saint Paul (MN).
The transition of Capital Bank’s branch took place over the weekend. On August 29, Capital Bank customers became members of Royal CU.
Royal CU assumed approximately $35 million in assets of the former bank.
Read the story.
The transition of Capital Bank’s branch took place over the weekend. On August 29, Capital Bank customers became members of Royal CU.
Royal CU assumed approximately $35 million in assets of the former bank.
Read the story.
CU Buys Naming Rights to Aloha Stadium Field
Hawaiian Tel Federal Credit Union (Honolulu, HI) bought the naming rights to the field of Aloha Stadium.
The credit union will pay $275,000 per year as part of the agreement. The deal is for three years.
The field will be officially called the Hawaiian Tel Federal Credit Union Field at Aloha Stadium.
Read the story.
The credit union will pay $275,000 per year as part of the agreement. The deal is for three years.
The field will be officially called the Hawaiian Tel Federal Credit Union Field at Aloha Stadium.
Read the story.
Saturday, August 27, 2016
TV Commercial -- Great Rates for Everyone, No Military Service Required
Pentagon Federal Credit Union (Alexandria, VA) is airing a commercial on CNBC, which makes it clear that the credit union was open to the public.
The commercial has the tagline "Great Rates for Everyone" and ends with "No Military Service Required."
If anyone can do business with Pentagon Federal Credit Union, then why should the credit union retain its tax exemption.
See the commercial.
The commercial has the tagline "Great Rates for Everyone" and ends with "No Military Service Required."
If anyone can do business with Pentagon Federal Credit Union, then why should the credit union retain its tax exemption.
See the commercial.
Friday, August 26, 2016
Another Alabama CU to Acquire a Bank
Family Security Credit Union (Decatur, AL) has agreed to purchase the Bank of Pine Hill, located in Pine Hill, Ala.
The $580-million credit union will substantially purchase all of the assets and assume the deposits of the one-office, $25-million bank.
State and federal bank and CU regulators still need to approve the deal, which is expected to close in the first quarter of 2017.
The $580-million credit union will substantially purchase all of the assets and assume the deposits of the one-office, $25-million bank.
State and federal bank and CU regulators still need to approve the deal, which is expected to close in the first quarter of 2017.
Clinton Campaign Proposes Reg Relief for Community Banks and CUs
Hillary Clinton's campaign released a list of proposals to reduce the regulatory burden on community banks and credit unions.
Her proposal would exempt community banks and credit unions from regulatory creep. The proposal notes that many regulations, which are intended for larger institutions, end up being applied to community banks and credit unions. Her proposal would ensure that credit unions and community banks are only subject to rules that makes sense for their size and mission.
She proposes to eliminate duplicative examinations for community banks and credit unions. This would include better coordination of examinations between state and federal regulators. Also, she supports greater examination schedule flexibility for healthy credit unions.
Her proposal would expand the safe harbor protections for mortgages made by community banks and credit unions with less than $10 billion in assets, as long as the mortgages have appropriate documentation, do not have excessive fees or interest rates, and are held on the books of community banks and credit unions.
The proposal would streamline the reporting requirement for banks with under $1 billion in assets. I suspect this would be extended to smaller credit unions.
Furthermore, she will designate senior officials at the Department of Treasury to work closely with community banks and credit unions to ensure that economic policy and financial regulations are helping them to succeed and grow.
Read her proposal.
Her proposal would exempt community banks and credit unions from regulatory creep. The proposal notes that many regulations, which are intended for larger institutions, end up being applied to community banks and credit unions. Her proposal would ensure that credit unions and community banks are only subject to rules that makes sense for their size and mission.
She proposes to eliminate duplicative examinations for community banks and credit unions. This would include better coordination of examinations between state and federal regulators. Also, she supports greater examination schedule flexibility for healthy credit unions.
Her proposal would expand the safe harbor protections for mortgages made by community banks and credit unions with less than $10 billion in assets, as long as the mortgages have appropriate documentation, do not have excessive fees or interest rates, and are held on the books of community banks and credit unions.
The proposal would streamline the reporting requirement for banks with under $1 billion in assets. I suspect this would be extended to smaller credit unions.
Furthermore, she will designate senior officials at the Department of Treasury to work closely with community banks and credit unions to ensure that economic policy and financial regulations are helping them to succeed and grow.
Read her proposal.
Thursday, August 25, 2016
Oregon State CU Moves into New HQ Building
Oregon State Credit Union (Corvallis, OR) has moved into its new 65,000 square-foot headquarters building.
Among the amenities in the new headquarters building are a courtyard and a locker room with showers for employees.
The $1 billion credit union is pursuing LEED certification for the new building.
Read the story.
Among the amenities in the new headquarters building are a courtyard and a locker room with showers for employees.
The $1 billion credit union is pursuing LEED certification for the new building.
Read the story.
Wednesday, August 24, 2016
Semi-Annual Call Reports Are At Odds With An Extended Exam Cycle
Some comment letters regarding the National Credit Union Administration (NCUA) Call Report Modernization proposal are calling for the NCUA to allow some credit unions to file their call reports semi-annually. The recommendations included some combination of asset size with risk profile.
For example,
Prior to July 1, 2002, only credit unions with excess of $50 million in assets were required to submit quarterly call reports. In requiring credit unions to file quarterly call reports, the NCUA Board stated in 2002 that the quarterly filings of call reports were a necessary component of its risk-focused examinations and extending the examination cycle. NCUA believed that the benefits from an extended examination cycle outweigh the costs of filing two additional call reports per year.
Clearly, less frequent filing of call reports are at odds with extending the examination cycle.
For example,
- The Credit Union National Association advocated for eliminating odd-quarter reporting for any credit union below the $50 million asset thresholds that report a net worth ratio above 10 percent.
- Credit Union of Vermont (Rutland, VT) recommended "semi-annual filings of call reports for low risk credit unions."
- FIG FCU requested that credit unions with strong net worth ratios be allowed to submit call reports semi-annually.
- Stuart Lynn wrote that credit unions with CAMEL ratings of 1 - 3 should be required to submit their call reports semi-annually. This recommendation will not take place, as it would divulge information about credit unions that are a problem institutions.
Prior to July 1, 2002, only credit unions with excess of $50 million in assets were required to submit quarterly call reports. In requiring credit unions to file quarterly call reports, the NCUA Board stated in 2002 that the quarterly filings of call reports were a necessary component of its risk-focused examinations and extending the examination cycle. NCUA believed that the benefits from an extended examination cycle outweigh the costs of filing two additional call reports per year.
Clearly, less frequent filing of call reports are at odds with extending the examination cycle.
Tuesday, August 23, 2016
CFPB's Cordray Responds on Tailored Regulation
Consumer Financial Protection Bureau (CFPB) Director Richard Cordray replied Wednesday to a letter spearheaded by Senate Banking Committee members Joe Donnelly (D-Ind.) and Ben Sasse (R-Neb.) that urged the bureau to exempt community banks and credit unions from certain regulations. The letter, cosigned by a bipartisan group of 70 senators, had cited a provision of the Dodd-Frank Act allowing the bureau to exempt “any class” of entity from its rulemakings.
In his response, Cordray stressed that the Dodd-Frank Act also charges the bureau with enforcing consumer financial protection laws “consistently” in order to promote fair competition. However, he also listed actions the CFPB has taken to tailor regulations, including an expanded safe harbor for small creditors, expanded exemptions for rural and underserved areas, relaxed appraisal requirements for small creditors, and a Home Mortgage Disclosure Act reporting exemption for lower-volume depository institutions.
Cordray also noted the CFPB’s required use of Small Business Review Panels in its rulemakings, its Community Bank and Credit Union Advisory Councils, and the compliance resources posted on its website. “[T]he Bureau recognizes that community banks and credit unions did not cause the financial crisis,” Cordray concludes. “For that reason, the Bureau is committed to ensuring that the regulations that we promulgate are well-tailored and effective.”
Read the letter.
In his response, Cordray stressed that the Dodd-Frank Act also charges the bureau with enforcing consumer financial protection laws “consistently” in order to promote fair competition. However, he also listed actions the CFPB has taken to tailor regulations, including an expanded safe harbor for small creditors, expanded exemptions for rural and underserved areas, relaxed appraisal requirements for small creditors, and a Home Mortgage Disclosure Act reporting exemption for lower-volume depository institutions.
Cordray also noted the CFPB’s required use of Small Business Review Panels in its rulemakings, its Community Bank and Credit Union Advisory Councils, and the compliance resources posted on its website. “[T]he Bureau recognizes that community banks and credit unions did not cause the financial crisis,” Cordray concludes. “For that reason, the Bureau is committed to ensuring that the regulations that we promulgate are well-tailored and effective.”
Read the letter.
Monday, August 22, 2016
Latah FCU Converts to Privately-Insured, State Chartered CU
Effective September 15, 2016, Latah Federal Credit Union (Moscow, ID) will become a privately-insured, state-chartered credit union.
Accounts will be insured by American Mutual Share Insurance.
The National Credit Union Administration approved the conversion vote.
Up to the date the conversion becomes effective, the credit union will allow all members who have share certificates and other term accounts to close the federally-insured portion without an early withdrawal penalty.
Read the notice.
Accounts will be insured by American Mutual Share Insurance.
The National Credit Union Administration approved the conversion vote.
Up to the date the conversion becomes effective, the credit union will allow all members who have share certificates and other term accounts to close the federally-insured portion without an early withdrawal penalty.
Read the notice.
Thursday, August 18, 2016
Valley State CU Placed into Conservatorship
Valley State Credit Union in Saginaw, MI has been placed into conservatorship by the Michigan Department of Insurance and Financial Services to address issues affecting the credit union's financial stability.
According to the order, the state regulator has determined that Valley State was "operating in an unsafe and unsound condition."
As of the second quarter of 2016, the $24.9 million credit union reported a mid-year loss of almost $300 thousand. The credit union reported that 12.9 percent of its loans were 60 days or past due.
Read the press release/a>.
Read the conservatorship order.
According to the order, the state regulator has determined that Valley State was "operating in an unsafe and unsound condition."
As of the second quarter of 2016, the $24.9 million credit union reported a mid-year loss of almost $300 thousand. The credit union reported that 12.9 percent of its loans were 60 days or past due.
Read the press release/a>.
Read the conservatorship order.
Wednesday, August 17, 2016
Appeals Court: NCUA Filed Complaint in Timely Manner
United States Court of Appeals for the Ninth Circuit reversed a lower court decision that stated the National Credit Union Administration (NCUA) had not filed its lawsuit in a timely manner.
According to the Appeals Court opinion, the Extender Statute of the Financial Institution Reform, Recovery and Enforcement Act of 1989 supplants the requirement that a lawsuit be brought with 3 years after the security was offered or sold under the Securities Act.
The decision will allow NCUA to pursue its lawsuit against Wachovia Trust and Nomura Home Equity over making false and misleading statements in their offerings of residential mortgage-backed securities purchased by the failed Western Corporate Federal Credit Union.
Read the opinion.
According to the Appeals Court opinion, the Extender Statute of the Financial Institution Reform, Recovery and Enforcement Act of 1989 supplants the requirement that a lawsuit be brought with 3 years after the security was offered or sold under the Securities Act.
The decision will allow NCUA to pursue its lawsuit against Wachovia Trust and Nomura Home Equity over making false and misleading statements in their offerings of residential mortgage-backed securities purchased by the failed Western Corporate Federal Credit Union.
Read the opinion.
Tuesday, August 16, 2016
Melrose CU under Enforcement Order
Melrose Credit Union (Briarwood, NY) is under a consent order with the New York Department of Financial Services (Department), which was issued in July.
The consent order cited the credit union for unsafe and unsound banking practices and apparent violations of laws and regulations.
The consent order stated that the Board of Directors and Supervisory Committee needed to increase their participation in the affairs of the credit union, including meeting no less than monthly.
The credit union shall retain qualified management, including chief executive officer, senior lending officer, and chief financial officer.
The credit union will submit within 90 days of the order a plan to reduce each asset classified as substandard or doubtful. In the order, reduce means collect, charge-off, sell, or improve the quality of an asset.
In addition, the credit union shall not extend any additional credit to borrowers that has been charged-off the books are classified as a loss. Furthermore, no more credit will be extended to borrowers whose loans are classified as doubtful, substandard, or special mention in the 2015 Report of Examination.
Also, the credit union shall eliminate from its books by sale, collections, or charge-offs all loans classified as loss.
The order will require the credit union to develop a plan to reduce and manage its exposure to taxi medallion loans for New York, Philadelphia, and Chicago.
The credit union will also fully fund all allowance for loan and lease losses shortfalls.
Melrose will be required to improve its liquidity. The credit union will increase its primary liquid assets to at least 3 percent of total assets or to a level necessary to meet projected cash requirements for a ninety day period, whichever is greater. in addition, the credit union will be required to maintain primary liquid assets plus investments that are investment grade and held as available for sale of at least 5 percent of total assets.
Read the consent order.
The consent order cited the credit union for unsafe and unsound banking practices and apparent violations of laws and regulations.
The consent order stated that the Board of Directors and Supervisory Committee needed to increase their participation in the affairs of the credit union, including meeting no less than monthly.
The credit union shall retain qualified management, including chief executive officer, senior lending officer, and chief financial officer.
The credit union will submit within 90 days of the order a plan to reduce each asset classified as substandard or doubtful. In the order, reduce means collect, charge-off, sell, or improve the quality of an asset.
In addition, the credit union shall not extend any additional credit to borrowers that has been charged-off the books are classified as a loss. Furthermore, no more credit will be extended to borrowers whose loans are classified as doubtful, substandard, or special mention in the 2015 Report of Examination.
Also, the credit union shall eliminate from its books by sale, collections, or charge-offs all loans classified as loss.
The order will require the credit union to develop a plan to reduce and manage its exposure to taxi medallion loans for New York, Philadelphia, and Chicago.
The credit union will also fully fund all allowance for loan and lease losses shortfalls.
Melrose will be required to improve its liquidity. The credit union will increase its primary liquid assets to at least 3 percent of total assets or to a level necessary to meet projected cash requirements for a ninety day period, whichever is greater. in addition, the credit union will be required to maintain primary liquid assets plus investments that are investment grade and held as available for sale of at least 5 percent of total assets.
Read the consent order.
Bipartisan Agreement to Examine CU Taxation and Regulation
During a Candidate Forum in Iowa, the Quad City Times reported that candidates for federal office indicated a willingness to examine how credit unions are taxed and regulated.
The willingness to examine the regulation and taxation of credit unions was bipartisan.
Kim Weaver, a Democrat running for Congress in western Iowa’s 4th District, stated: "I would definitely support reviewing the regulations and seeing if they actually fit today, They are, in some parts, unfair to community banks."
Chris Peters, a Republican running for Congress in eastern Iowa’s 2nd District, said: "If they do the same things (as banks), they should be taxed at the same rate. If they’re straying outside their original charter, I think they should be taxed the same (as banks)."
The forum was hosted by the Community Bankers of Iowa at Prairie Meadows Convention Center on Thursday, August 11. Other issues explored during the candidate forum were the regulatory burden from Dodd-Frank Act and the Farm Credit System -- a retail government sponsored enterprise.
Read the story.
The willingness to examine the regulation and taxation of credit unions was bipartisan.
Kim Weaver, a Democrat running for Congress in western Iowa’s 4th District, stated: "I would definitely support reviewing the regulations and seeing if they actually fit today, They are, in some parts, unfair to community banks."
Chris Peters, a Republican running for Congress in eastern Iowa’s 2nd District, said: "If they do the same things (as banks), they should be taxed at the same rate. If they’re straying outside their original charter, I think they should be taxed the same (as banks)."
The forum was hosted by the Community Bankers of Iowa at Prairie Meadows Convention Center on Thursday, August 11. Other issues explored during the candidate forum were the regulatory burden from Dodd-Frank Act and the Farm Credit System -- a retail government sponsored enterprise.
Read the story.
Monday, August 15, 2016
Alaska USA Closes Members Accounts Serving Recreational Pot Business
Alaska USA Federal Credit Union (Anchorage, AK) has closed accounts of members starting marijuana businesses.
A spokeswoman for Alaska USA Federal Credit Union confirmed that 10 accounts linked to people starting a marijuana-related business have been restricted.
The credit union in July sent a letter to account holders applying for a state cannabis business license notifying them to close their credit union accounts by August 19.
In 2014, Alaska voters in 2014 voted to legalize recreational pot. However, Federal law classifies marijuana as a top-tier illegal controlled substance.
Read more here.
A spokeswoman for Alaska USA Federal Credit Union confirmed that 10 accounts linked to people starting a marijuana-related business have been restricted.
The credit union in July sent a letter to account holders applying for a state cannabis business license notifying them to close their credit union accounts by August 19.
In 2014, Alaska voters in 2014 voted to legalize recreational pot. However, Federal law classifies marijuana as a top-tier illegal controlled substance.
Read more here.
Privately Insured Ohio CU Approved for FHLB Membership
AurGroup Financial Credit Union (Fairfield, OH) has been approved for membership in the Federal Home Loan Bank (FHLB) of Cincinnati.
The Fixing America’s Surface Transportation Act or “FAST Act” authorized privately insured credit unions could become members of a FHLB.
The $148 million credit union is the fourth privately insured credit union to be granted FHLB membership since June.
The other three privately insured credit unions to receive FHLB membership are Beacon CU (Wabash, IN), Credit Union 1 (Rantoul, IL), and Interra CU (Goshen, IN).
Read more.
The Fixing America’s Surface Transportation Act or “FAST Act” authorized privately insured credit unions could become members of a FHLB.
The $148 million credit union is the fourth privately insured credit union to be granted FHLB membership since June.
The other three privately insured credit unions to receive FHLB membership are Beacon CU (Wabash, IN), Credit Union 1 (Rantoul, IL), and Interra CU (Goshen, IN).
Read more.
Friday, August 12, 2016
Estimated NCUSIF Losses from Taxi Medallion Loans
What will be the impact of losses from taxi medallion loans on the National Credit Union Share Insurance Fund (NCUSIF)?
The level of losses to the NCUSIF depends on your loss assumptions on taxi medallion loans.
Earlier this year, research by Morgan Stanley estimated a base case cumulative loss rate on taxi medallion loans of 25 percent. Morgan Stanley assumed a worst case loss rate scenario of 50 percent and a mid-range loss rate scenario of 38 percent.
Applying these scenarios to the three New York City taxi medallion lending credit unions will provide estimates of the potential loss to the NCUSIF from taxi medallion loans.
This analysis is static. It only looks at the equity and allowance for loan and lease losses (ALLL) for the three credit unions as of June 2016 and determines if equity and ALLL are sufficient to cover the estimated losses on the taxi medallion portfolio at these three credit unions.
This analysis does not look at credit unions that have participated in taxi medallion loans.
Under the base case scenario, the loss to the NCUSIF appears to be manageable at $7.4 million. Only one credit union would fail, as its losses on medallion loans would exceed its equity plus ALLL. Another credit union would be crippled and likely merged.
Under the worst case scenario, the aggregate loss to the NCUSIF from taxi medallion loans would approach $400 million with two credit unions placed into receivership.
See the table below (click image to enlarge).
The level of losses to the NCUSIF depends on your loss assumptions on taxi medallion loans.
Earlier this year, research by Morgan Stanley estimated a base case cumulative loss rate on taxi medallion loans of 25 percent. Morgan Stanley assumed a worst case loss rate scenario of 50 percent and a mid-range loss rate scenario of 38 percent.
Applying these scenarios to the three New York City taxi medallion lending credit unions will provide estimates of the potential loss to the NCUSIF from taxi medallion loans.
This analysis is static. It only looks at the equity and allowance for loan and lease losses (ALLL) for the three credit unions as of June 2016 and determines if equity and ALLL are sufficient to cover the estimated losses on the taxi medallion portfolio at these three credit unions.
This analysis does not look at credit unions that have participated in taxi medallion loans.
Under the base case scenario, the loss to the NCUSIF appears to be manageable at $7.4 million. Only one credit union would fail, as its losses on medallion loans would exceed its equity plus ALLL. Another credit union would be crippled and likely merged.
Under the worst case scenario, the aggregate loss to the NCUSIF from taxi medallion loans would approach $400 million with two credit unions placed into receivership.
See the table below (click image to enlarge).
Thursday, August 11, 2016
CommunityAmerica CU Signs Sponsorship Deal with NFL Chiefs
Kansas City Chiefs have signed a new sponsorship agreement with $2.3 billion CommunityAmerica Credit Union (Lenexa, KS).
The sponsorship will start off with typical in-game marketing and an aligning the two organizations' brands.
The terms of the deal were not disclosed but it is believed to be a multi-year agreement.
Read the story.
The sponsorship will start off with typical in-game marketing and an aligning the two organizations' brands.
The terms of the deal were not disclosed but it is believed to be a multi-year agreement.
Read the story.
Wednesday, August 10, 2016
Apple FCU to Build New 150,000 Square-Foot HQ Building
Apple Federal Credit Union with $2.1 billion in assets has broken ground on a six-story, 150,000 square-foot headquarters building in Fairfax, Virginia.
The headquarters will include an Apple FCU branch, conference and training areas, and a fitness center for employees.
Apple FCU plans to occupy three floors and will seek to lease the remaining office space.
Rental income from leased office space will not be subject to unrelated business income taxes.
The building is expected to be completed in the Fall of 2017. The cost of the project was not disclosed.
Read the article.
The headquarters will include an Apple FCU branch, conference and training areas, and a fitness center for employees.
Apple FCU plans to occupy three floors and will seek to lease the remaining office space.
Rental income from leased office space will not be subject to unrelated business income taxes.
The building is expected to be completed in the Fall of 2017. The cost of the project was not disclosed.
Read the article.
Tuesday, August 9, 2016
CU Uses Cross-Collateralization Clause to Get Paid Even from the Grave
Recently, a relative had an unpleasant experience with a large Tennessee credit union due to the credit union's use of cross-collateralization clauses.
Her father had died. At the time of his death, he had outstanding car and credit card loans with the credit union.
She paid off the car loan but the credit union refused to release the title until she paid off the outstanding debt on his credit card. The credit union had cross-collateralized the credit card loan with the car loan.
This costs her several thousand dollars more that she could hardly afford.
If it had been me, I would have given the credit union the keys to the car and walked away.
It seems to me that the Consumer Financial Protection Bureau should examine this practice by credit unions to determine if it is abusive.
Her father had died. At the time of his death, he had outstanding car and credit card loans with the credit union.
She paid off the car loan but the credit union refused to release the title until she paid off the outstanding debt on his credit card. The credit union had cross-collateralized the credit card loan with the car loan.
This costs her several thousand dollars more that she could hardly afford.
If it had been me, I would have given the credit union the keys to the car and walked away.
It seems to me that the Consumer Financial Protection Bureau should examine this practice by credit unions to determine if it is abusive.
Monday, August 8, 2016
Consumer Credit at CUs Fell in June
The Federal Reserve reported that outstanding consumer credit at credit unions fell by $2.8 billion during June to $357.8 billion.
The drop in outstanding consumer credit was due to a decline in outstanding non-revolving credit.
Revolving credit at credit unions increased from $48.5 billion in May to $49.7 billion in June.
On the other hand, non-revolving credit fell from $312 billion in May to $308.1 billion in June.
Read the G.19 Release.
The drop in outstanding consumer credit was due to a decline in outstanding non-revolving credit.
Revolving credit at credit unions increased from $48.5 billion in May to $49.7 billion in June.
On the other hand, non-revolving credit fell from $312 billion in May to $308.1 billion in June.
Read the G.19 Release.
CEFCU Pays $8.7 Million for Naming Rights to University Stadium
San Jose State University will rename Spartan Stadium after Citizen Equity First Credit Union (Peoria, IL).
The credit union will pay $8.7 million over 15 years for the naming rights.
The stadium will be renamed CEFCU Stadium -- Home of the Spartans.
The CEFCU deal is the university's largest corporate sponsorship to date.
Read the press release.
The credit union will pay $8.7 million over 15 years for the naming rights.
The stadium will be renamed CEFCU Stadium -- Home of the Spartans.
The CEFCU deal is the university's largest corporate sponsorship to date.
Read the press release.
Saturday, August 6, 2016
Delinquent Loans at Progressive CU Almost Doubled During the Second Quarter
Taxi medallion lender Progressive Credit Union (New York, NY) experienced a jump in problem loans during the second quarter of 2016.
Delinquent loans rose from almost $24.6 million as of March 2016 to $48.6 million as of June 2016. The delinquency rate on loans jumped from 4.07 percent to 8 percent over the same time period.
In addition, early delinquencies were $20.3 million as of June 2016. The good news is this was down from $32.3 million at the end of the first quarter.
Troubled debt restructured (TDR) loans increased by 21.1 percent during the quarter to $107.8 million as of mid-year 2016. All TDR loans were in non-accrual status. TDR loans were 17.74 percent of loans and 46.27 percent of net worth.
Progressive Credit Union reported a mid-year loss of almost $19.4 million. Its loss for the second quarter was slightly less than $3.6 million.
The loss was driven by an increase in provisions for loan losses. The credit union added $5.9 million to its provisions for loan losses during the second quarter -- bringing total provisions for loan losses to almost $25.1 million as of mid-year 2016.
The credit union reported an 11.9 percent increase in allowance for loan and lease losses (ALLL) during the second quarter of 2016 to $62.3 million as of June 2016. This resulted in a June 2016 coverage ratio of 128.24 percent. However, the coverage ratio is overstated as $25.5 million was allocated to TDR loans.
The credit union is holding almost $233 million in net worth. Its net worth ratio was 36.71 percent on June 30, 2016 -- down from 37.22 percent for the prior quarter.
This would indicate that the credit union has a buffer to absorb expected and unexpected losses of approximately $295 million.
Delinquent loans rose from almost $24.6 million as of March 2016 to $48.6 million as of June 2016. The delinquency rate on loans jumped from 4.07 percent to 8 percent over the same time period.
In addition, early delinquencies were $20.3 million as of June 2016. The good news is this was down from $32.3 million at the end of the first quarter.
Troubled debt restructured (TDR) loans increased by 21.1 percent during the quarter to $107.8 million as of mid-year 2016. All TDR loans were in non-accrual status. TDR loans were 17.74 percent of loans and 46.27 percent of net worth.
Progressive Credit Union reported a mid-year loss of almost $19.4 million. Its loss for the second quarter was slightly less than $3.6 million.
The loss was driven by an increase in provisions for loan losses. The credit union added $5.9 million to its provisions for loan losses during the second quarter -- bringing total provisions for loan losses to almost $25.1 million as of mid-year 2016.
The credit union reported an 11.9 percent increase in allowance for loan and lease losses (ALLL) during the second quarter of 2016 to $62.3 million as of June 2016. This resulted in a June 2016 coverage ratio of 128.24 percent. However, the coverage ratio is overstated as $25.5 million was allocated to TDR loans.
The credit union is holding almost $233 million in net worth. Its net worth ratio was 36.71 percent on June 30, 2016 -- down from 37.22 percent for the prior quarter.
This would indicate that the credit union has a buffer to absorb expected and unexpected losses of approximately $295 million.
Friday, August 5, 2016
Melrose Sinks Under the Weight of Bad Taxi Medallion Loans
Melrose Credit Union (Briarwood, NY) continues to sink under the weight of bad taxi medallion loans.
The $1.9 billion credit union reported a mid-year loss of almost $57 million, as the credit union increased provisions for loan losses.
The credit union reported an increase of provisions for loan losses by $51.5 million during the second quarter to $62.8 million as of June 2016.
Due to the loss, the credit union's net worth ratio fell to 7.49 percent as of June 2016 -- down from 10.37 percent at the end of the first quarter of 2016. While its leverage ratio was above 7 percent, the credit union was classified as undercapitalized because its risk based net worth requirement was 9.89 percent as of June 2016.
The credit union reported a 17.4 percent increase in delinquent loans during the second quarter to $435.3 million. As of June, loans 60 days or more past due were 22.59 percent of total loans and 302.59 percent of net worth.
Melrose also reported that early delinquencies (30 to 59 days past due) were $67.1 million as of June 2016. This suggests more pain is to come.
Troubled Debt Restructured (TDR) loans fell by almost $18 million during the second quarter to $358.8 million. Almost all TDR loans were in non-accrual status. TDR loans were 18.62 percent of loans and 249.43 percent of net worth as of mid-year 2016.
Net charge-offs were $22.6 million as of June 2016.
Allowance for loan and lease losses (ALLL) rose by almost $29 million during the second quarter to $270.5 million as of June 2016. The coverage ratio (the ratio of ALLL to delinquent loans) was 62.14 percent.
Below is a table that highlights the key credit metrics for Melrose between June 2015 and June 2016. (click on image to enlarge).
The $1.9 billion credit union reported a mid-year loss of almost $57 million, as the credit union increased provisions for loan losses.
The credit union reported an increase of provisions for loan losses by $51.5 million during the second quarter to $62.8 million as of June 2016.
Due to the loss, the credit union's net worth ratio fell to 7.49 percent as of June 2016 -- down from 10.37 percent at the end of the first quarter of 2016. While its leverage ratio was above 7 percent, the credit union was classified as undercapitalized because its risk based net worth requirement was 9.89 percent as of June 2016.
The credit union reported a 17.4 percent increase in delinquent loans during the second quarter to $435.3 million. As of June, loans 60 days or more past due were 22.59 percent of total loans and 302.59 percent of net worth.
Melrose also reported that early delinquencies (30 to 59 days past due) were $67.1 million as of June 2016. This suggests more pain is to come.
Troubled Debt Restructured (TDR) loans fell by almost $18 million during the second quarter to $358.8 million. Almost all TDR loans were in non-accrual status. TDR loans were 18.62 percent of loans and 249.43 percent of net worth as of mid-year 2016.
Net charge-offs were $22.6 million as of June 2016.
Allowance for loan and lease losses (ALLL) rose by almost $29 million during the second quarter to $270.5 million as of June 2016. The coverage ratio (the ratio of ALLL to delinquent loans) was 62.14 percent.
Below is a table that highlights the key credit metrics for Melrose between June 2015 and June 2016. (click on image to enlarge).
Thursday, August 4, 2016
Nonperforming Taxi Medallion Participation Loans Contribute to Quorum's Woes
Quorum Federal Credit Union (Purchase, NY) reported a mid-year loss of almost $6 million, as the credit union continued to build its loan loss reserves to address problems loans, including taxi medallion participation loans.
As I reported earlier, Quorum Federal Credit Union held $76.3 million portfolio of taxi medallion participation loans. Total non-member business participation loans at the credit union were $95.5 million as of June 2016. So, most of these non-member participation loans are taxi medallion loans.
Through the first six months of 2016, provisions for loan and lease losses were approximately $14.9 million. The credit union added slightly more than $8 million in provisions for loan and lease losses during the second quarter.
As a result, allowances for loan and lease losses rose from $7.74 million at the end of 2015 to $21 million as of mid-year 2016. The credit union's coverage ratio is 69.91 percent as of mid-year.
Delinquent participation loans were $17.9 million or 14.12 percent of its participation loans, as of June 2016. An additional $10.5 million in participation loans were 30 to 59 days past due. Unfortunately, the Call Report does not break out delinquent participation loans by type of loan.
All delinquent loans (60 days or more past due) were $30 million as of June 2016. The delinquency rate was 3.58 percent.
In addition, Troubled Debt Restructured (TDR) business loans were $15 million as of June 30, 2016. This is up 61 percent during the quarter. TDR business loans in non-accrual status were $10.8 million. Total TDR loans were $21.8 million.
Due to the loss, Quorum experienced a decline in its net worth. Net worth was $66.2 million and the credit union's net worth ratio was 7.04 percent as of June 2016. Quorum's net worth ratio is down from 7.56 percent at the end of 2015. Quorum was barely well-capitalized as of June 2016.
It is clear that the disruption in the taxi medallion market is weighing on the performance of Quorum Federal Credit Union.
As I reported earlier, Quorum Federal Credit Union held $76.3 million portfolio of taxi medallion participation loans. Total non-member business participation loans at the credit union were $95.5 million as of June 2016. So, most of these non-member participation loans are taxi medallion loans.
Through the first six months of 2016, provisions for loan and lease losses were approximately $14.9 million. The credit union added slightly more than $8 million in provisions for loan and lease losses during the second quarter.
As a result, allowances for loan and lease losses rose from $7.74 million at the end of 2015 to $21 million as of mid-year 2016. The credit union's coverage ratio is 69.91 percent as of mid-year.
Delinquent participation loans were $17.9 million or 14.12 percent of its participation loans, as of June 2016. An additional $10.5 million in participation loans were 30 to 59 days past due. Unfortunately, the Call Report does not break out delinquent participation loans by type of loan.
All delinquent loans (60 days or more past due) were $30 million as of June 2016. The delinquency rate was 3.58 percent.
In addition, Troubled Debt Restructured (TDR) business loans were $15 million as of June 30, 2016. This is up 61 percent during the quarter. TDR business loans in non-accrual status were $10.8 million. Total TDR loans were $21.8 million.
Due to the loss, Quorum experienced a decline in its net worth. Net worth was $66.2 million and the credit union's net worth ratio was 7.04 percent as of June 2016. Quorum's net worth ratio is down from 7.56 percent at the end of 2015. Quorum was barely well-capitalized as of June 2016.
It is clear that the disruption in the taxi medallion market is weighing on the performance of Quorum Federal Credit Union.
Taxi Medallion Lender LOMTO FCU Reports Continued Asset Quality Problems
Taxi medallion lender LOMTO Federal Credit Union (Woodside, NY) reported continued asset quality concerns.
According to the credit union's Call Report, loans 60 days or more delinquent edged higher during the second quarter. At the end of the second quarter, loans 60 days or more delinquent were almost $23.5 million. This is up from $22.4 million at the the end of the first quarter of 2016.
In addition, the credit union reported $2.6 million in net charge-offs as of mid-year 2016. This was up from approximately $1 million at the end of the first quarter.
The delinquency rate rose from 9.59 percent at the end of the first quarter to 10.18 percent at the end of the second quarter. Delinquent loans were 83.91 percent of the credit union's net worth.
Over the same time period, LOMTO FCU reported a drop in early delinquencies from $15.3 million to $9.1 million.
Troubled Debt Restructured (TDR) loans edged lower during the quarter from $35.8 million to $34.3 million. According to its Call Report, nearly $18.5 million in TDR loans were in accrual status. As of June 2016, TDR loans were 14.90 percent of loans and 122.7 percent of net worth.
Foreclosed assets at LOMTO FCU were almost $8.5 million at the end of the second quarter, down slightly from $8.6 million at the end of the first quarter.
LOMTO FCU reported a six month loss of almost $4.3 million. For the second quarter, the credit union recorded a loss of $476,000 for the quarter.
The credit union reported provisions for loan and lease losses of $5.2 million as of June, up almost $900,000 from the first quarter.
The credit union reported an allowance for loan and losses (ALLL) of $21.9 million as of June 2016. The credit union's coverage ratio (ALLL divided by delinquent loans) was 93.37 percent. However, the credit union reported that $9.1 million in ALLL was attributed to TDR loans.
As of June 2016, net worth was almost $28 million. Its net worth ratio was 11.05 percent -- down 5 basis points from the first quarter of 2016.
According to the credit union's Call Report, loans 60 days or more delinquent edged higher during the second quarter. At the end of the second quarter, loans 60 days or more delinquent were almost $23.5 million. This is up from $22.4 million at the the end of the first quarter of 2016.
In addition, the credit union reported $2.6 million in net charge-offs as of mid-year 2016. This was up from approximately $1 million at the end of the first quarter.
The delinquency rate rose from 9.59 percent at the end of the first quarter to 10.18 percent at the end of the second quarter. Delinquent loans were 83.91 percent of the credit union's net worth.
Over the same time period, LOMTO FCU reported a drop in early delinquencies from $15.3 million to $9.1 million.
Troubled Debt Restructured (TDR) loans edged lower during the quarter from $35.8 million to $34.3 million. According to its Call Report, nearly $18.5 million in TDR loans were in accrual status. As of June 2016, TDR loans were 14.90 percent of loans and 122.7 percent of net worth.
Foreclosed assets at LOMTO FCU were almost $8.5 million at the end of the second quarter, down slightly from $8.6 million at the end of the first quarter.
LOMTO FCU reported a six month loss of almost $4.3 million. For the second quarter, the credit union recorded a loss of $476,000 for the quarter.
The credit union reported provisions for loan and lease losses of $5.2 million as of June, up almost $900,000 from the first quarter.
The credit union reported an allowance for loan and losses (ALLL) of $21.9 million as of June 2016. The credit union's coverage ratio (ALLL divided by delinquent loans) was 93.37 percent. However, the credit union reported that $9.1 million in ALLL was attributed to TDR loans.
As of June 2016, net worth was almost $28 million. Its net worth ratio was 11.05 percent -- down 5 basis points from the first quarter of 2016.
Wednesday, August 3, 2016
Comments on Call Report Modernization Initiative
On August 1, I filed a comment letter with the National Credit Union Administration (NCUA) regarding the agency's Call Report/Profile Modernization initiative.
As an end user of this information, I made the following general comments:
In addition, I made five specific recommendations regarding the Call Report/Profile.
As an end user of this information, I made the following general comments:
"Federally-insured credit unions (FICUs) are growing larger and more complex. As a result, NCUA’s data-collection vehicles need to evolve with changes at FICUs. As the agency seeks to modernize its Call Report, NCUA needs to ensure that its off-site monitoring tools are sufficiently robust and granular to capture risk posed by FICUs to the National Credit Union Share Insurance Fund (NCUSIF). This is extremely important given that the agency is currently studying an extension in the time between on-site examinations for FICUs.
Furthermore, the reporting burden of a FICU is commensurate with the level of complexity associated with a FICU. For example, FICUs that do not originate or participate in business loans do not have to fill out Section 4 of Schedule A dealing with business lending. Moreover, only 44 credit unions currently fill out the Schedule D “Derivative Transaction Report” – less than one percent of the industry."
In addition, I made five specific recommendations regarding the Call Report/Profile.
"First, beginning on January 1, 2019, FICUs with more than $100 million in assets will be subject to a risk-based capital requirement. This will require these credit unions to fill out a new schedule on risk weighted assets. This schedule should be comparable to Schedule RC-R Part II filled out by banks. In addition, the agency will need a new schedule regarding the data items comprised in the numerator of the risk-based capital ratio, which would be comparable to RC-R Part I filled out by banks. However, since the risk-based capital requirement is replacing the risk-based net worth requirement, NCUA can delete line items 14a and 14b in the PCA NET WORTH CALCULATION WORKSHEET, once the risk-based capital requirement becomes effective.
Second, the Call Report should require an FICU to report on its aggregate investment in the Central Liquidity Facility as part of the Statement of Financial Condition. This data item would provide a more complete picture of sources of emergency liquidity for an FICU.
Third, NCUA should report annually the compensation of a federal credit union’s senior executives. The Government Accountability Office (GAO) in 2006 pointed out that executive compensation at federal credit unions lacks transparency; because federal credit unions are not required to file the Internal Revenue Service’s Form 990 information return. GAO in its report recommended to NCUA that the agency needs to improve transparency of credit union senior executive compensation. Furthermore, in 2008 NCUA's Outreach Task Force recommended that since federal credit unions are cooperatives, the NCUA Board should adopt an amendment to its regulations requiring federal credit unions to annually disclose the total compensation of each senior executive officer. Requiring the reporting of this information would ensure comparable treatment with other tax-exempt entities, especially state chartered credit unions. Reporting this information would enhance good corporate governance and promote greater transparency. This information could be included as part of the Profile.
Fourth, the Profile captures information on the address of credit union offices for an FICU. However, this information has limited value. To improve the quality of this information, NCUA should collect annually information on deposits by branch location for each FICU. This is equivalent to the Federal Deposit Insurance Corporation’s Summary of Deposit data. Gathering this information would permit NCUA to assess the impact of credit union mergers on credit union competition and concentration in local markets. In other words, would a credit union merger reduce individuals’ access to FICUs in a local market?
Fifth, NCUA should end the collection of interest rate information on loans and dividend rates for deposit accounts in the Statement of Financial Conditions. It has been my experience that this information adds very little value. Therefore, I recommend that NCUA should no longer gather information for the following Acct Codes: 521, 522, 522A, 595A, 523, 524, 563, 562, 565, 595, 553, 552, 532, 547, 554, 585, and 599."
Tuesday, August 2, 2016
TransUnion: Millennials Central to CU Growth
According to new research by TransUnion, TransUnion found that credit unions continue to grow at a faster rate than other financial institutions and millennials are a key driver of this loan growth.
TransUnion found that in the first quarter of 2016, credit union membership grew at more than three times the rate of credit activity among consumers across other lender types.
Credit unions experienced a year-over-year growth rate of 6.35 percent at the beginning of 2016, while industry credit active consumers grew at 1.86 percent in Q1 2016.
According to TransUnion data, 25 percent of credit union members in the first quarter of 2016 were millennials compared to 20 percent in the first quarter of 2013. In comparison, millennials at non-credit unions were 25 percent in the first quarter of 2016 from 23 percent in the first quarter of 2013.
A survey of 96 credit union executives noted that auto loans rank as the top loan growth area by credit union executives. mortgage loans are ranked as the second best loan growth prospect.
Read the press release.
TransUnion found that in the first quarter of 2016, credit union membership grew at more than three times the rate of credit activity among consumers across other lender types.
Credit unions experienced a year-over-year growth rate of 6.35 percent at the beginning of 2016, while industry credit active consumers grew at 1.86 percent in Q1 2016.
According to TransUnion data, 25 percent of credit union members in the first quarter of 2016 were millennials compared to 20 percent in the first quarter of 2013. In comparison, millennials at non-credit unions were 25 percent in the first quarter of 2016 from 23 percent in the first quarter of 2013.
A survey of 96 credit union executives noted that auto loans rank as the top loan growth area by credit union executives. mortgage loans are ranked as the second best loan growth prospect.
Read the press release.
Glendale Area Schools FCU Switches to a Privately Insured, State Charter
Glendale Area Schools Federal Credit Union has successful converted to a California state charter and private share insurance.
Going forward, the credit union will be insured by American Share Insurance (ASI), the nation’s only alternative to federal share insurance.
The credit union viewed the benefits of federal share insurance were outweighed by the costs of the federal charter.
In addition, Latah Federal Credit Union in Idaho is currently finalizing its share insurance and charter conversion following its membership vote of approval and according to Dennis Adams, CEO and President of ASI, a federally chartered Texas credit union is queuing up to start its vote later this summer to become a state charter and privately insured.
Read the press release.
Going forward, the credit union will be insured by American Share Insurance (ASI), the nation’s only alternative to federal share insurance.
The credit union viewed the benefits of federal share insurance were outweighed by the costs of the federal charter.
In addition, Latah Federal Credit Union in Idaho is currently finalizing its share insurance and charter conversion following its membership vote of approval and according to Dennis Adams, CEO and President of ASI, a federally chartered Texas credit union is queuing up to start its vote later this summer to become a state charter and privately insured.
Read the press release.
Monday, August 1, 2016
Evangelical Christian Credit Union Issued Final Order
The California Department of Business Oversight (DBO) issued a final order against Evangelical Christian Credit Union (Brea, CA).
This final order supersedes a September 2, 2014 order that the credit union was under.
According to the final order, Evangelical Christian Credit union shall retain management, including chief executive officer, a chief financial officer, and a senior lending officer, and maintain a Board of Directors acceptable to the Commissioner and the National Credit Union Administration (NCUA). Such management will restore the credit union to a sound condition, operate the credit union in a safe and sound manner, comply with this Order, and comply with applicable laws and regulations.
Evangelical Christian Credit Union shall not award or pay its chief executive officer, president or CFO any bonus, profit sharing, or any other additional remuneration without the Commissioner’s and NCUA’s prior written approval. This provision also applies to any changes in or increased funding of any retirement plan, such as a tax advantaged deferred-compensation retirement plan (e.g., a 457 plan). In addition, the credit union shall not pay or enter into any agreement with an institution-affiliated party to pay any indemnification or golden-parachute compensation.
The final order imposes limits on uninsured deposits and member business loans for Evangelical Christian Credit Union.
The credit union shall maintain its uninsured shares at no more than one hundred twenty-five (125) percent of its cash and short-term investments. As of June 30, the credit union had $195.5 million in uninsured deposits. Cash on hand and deposits at financial institutions were $92.5 million. Investments with 1 year or less in maturity was $76.7 million.
Also, the credit union shall maintain its total concentration of member business loans at no more than 65 percent of assets, excluding loan interests sold on a non-recourse basis. As of June 30th, the $911 million credit union reported $550 million in member business loans.
As of June 30th, the credit union was in compliance with these two limitations.
The credit union will also develop a Strategic Plan, which describes how management and the Board of Directors will restructure the balance sheet to bring the credit union's credit, interest-rate and liquidity-risk exposure levels within risk tolerances acceptable to the Commissioner and the NCUA.
Violation of any provision of this Order could result in further enforcement actions.
Read the final order.
This final order supersedes a September 2, 2014 order that the credit union was under.
According to the final order, Evangelical Christian Credit union shall retain management, including chief executive officer, a chief financial officer, and a senior lending officer, and maintain a Board of Directors acceptable to the Commissioner and the National Credit Union Administration (NCUA). Such management will restore the credit union to a sound condition, operate the credit union in a safe and sound manner, comply with this Order, and comply with applicable laws and regulations.
Evangelical Christian Credit Union shall not award or pay its chief executive officer, president or CFO any bonus, profit sharing, or any other additional remuneration without the Commissioner’s and NCUA’s prior written approval. This provision also applies to any changes in or increased funding of any retirement plan, such as a tax advantaged deferred-compensation retirement plan (e.g., a 457 plan). In addition, the credit union shall not pay or enter into any agreement with an institution-affiliated party to pay any indemnification or golden-parachute compensation.
The final order imposes limits on uninsured deposits and member business loans for Evangelical Christian Credit Union.
The credit union shall maintain its uninsured shares at no more than one hundred twenty-five (125) percent of its cash and short-term investments. As of June 30, the credit union had $195.5 million in uninsured deposits. Cash on hand and deposits at financial institutions were $92.5 million. Investments with 1 year or less in maturity was $76.7 million.
Also, the credit union shall maintain its total concentration of member business loans at no more than 65 percent of assets, excluding loan interests sold on a non-recourse basis. As of June 30th, the $911 million credit union reported $550 million in member business loans.
As of June 30th, the credit union was in compliance with these two limitations.
The credit union will also develop a Strategic Plan, which describes how management and the Board of Directors will restructure the balance sheet to bring the credit union's credit, interest-rate and liquidity-risk exposure levels within risk tolerances acceptable to the Commissioner and the NCUA.
Violation of any provision of this Order could result in further enforcement actions.
Read the final order.