CU Pays $100,00 for Naming Rights to University's Hitting Facility

Members First Credit Union of Florida (Pensacola, FL) will pay $100,000 for the naming rights to the hitting facility used by the baseball and softball teams at the University of West Florida (UWF).

The credit union is scheduled to present the check on Saturday, April 29.

The hitting facility is the UWF’s new multi-purpose, 9,100-square foot indoor training center for baseball and softball, which opened at the beginning of the 2016 season.

The facility is slated to be named Members First Credit Union Hitting Facility, pending UWF Board of Trustees approval.

Read the press release.

Municipal Credit Union Announced as the Official Credit Union of the New York Jets

The New York Jets announced a multi-year partnership with Municipal Credit Union.

Municipal Credit Union will be the official credit union of the New York Jets.

As the official credit union of the Jets, MCU will serve as the presenting partner of the 2017 New York Jets Draft.

The deal also makes the credit union the presenting partner of the New York Jets First Responders’ game.

Furthermore, Municipal Credit Union will support the New York Jets efforts to end bullying.

The price of the deal was not disclosed.

Read the press release.

Rep. Luetkemeyer Reintroduces CLEARR Act

Rep. Blaine Luetkemeyer (R-Mo.) on April 26 re-introduced the CLEARR Act (H.R. 2133), which would provide relief from certain rules and regulations for community banks and credit unions.

In reintroducing the bill Rep. Luetkemeyer stated: "The pendulum has swung too far, and it’s time to return to a common-sense, responsible approach to financial regulation that protects consumers from harm without jeopardizing access to the financial products they need to grow their businesses, invest in their communities, and provide for their families."

The bill would limit the authority of the Consumer Financial Protection Bureau (CFPB) by raising the asset size threshold for CFPB supervision from $10 billion to $50 billion. The bill also removes the term “abusive” from the CFPB’s “unfair, deceptive or abusive” acts or practices authority.

Additionally, it would provide relief in the mortgage lending area by exempting community financial institutions from certain escrow requirements and providing a Qualified Mortgage safe harbor for loans held in portfolio.

Furthermore, H.R. 2133 would repeal the Dodd-Frank Act provision amending the Equal Credit Opportunity Act to require collection of small business and minority-owned business loan data.

The bill would curtail "Operation Choke Point" by prohibiting federal banking agencies from requiring depository institutions to terminate a
specific account or group of accounts unless the agency has a material reason not based solely on reputational risk.

Rep. Luetkemeyer introduced similar legislation in the 113th and 114th Congresses.

TruMark Financial CU Buys Naming Rights to University Arena

TruMark Financial Credit Union (Fort Washington, PA) bought the naming rights to an arena at La Salle University.

The Tom Gola Arena at Hayman Hall will now be known as the Tom Gola Arena at the TruMark Financial Center.

The credit union also will provide scholarship and financial literacy support at the university.

The credit union will operate a student-run branch on the La Salle University campus starting in the fall semester of 2017.

The cost and terms of the naming rights deal were not disclosed.

Read the press release.

Bank and Credit Union Executives Express Concerns over Examinations and Regulations

Members of the Federal Reserve’s Community Depository Institutions Advisory Council (CDIAC) raised concerns about compliance examination processes and the current regulatory landscape in a recent meeting, according to minutes released on Friday by the Fed.

CDIAC members are selected from representatives of banks, thrift institutions, and credit unions serving on newly created local advisory councils at the twelve Federal Reserve Banks. One member of each of the Reserve Bank councils is selected to serve on the CDIAC, which meets twice a year with the Board of Governors in Washington.

“The council is very concerned that the working partnership that has existed for many years between examiners and bankers and credit unions is no longer working well, as manifested by increased examination timeframes, less risky concerns being mentioned as matters requiring attention or documents of resolution, and a lack of exam focus on an institution’s overall risk profile,” the group said.

CDIAC members noted heightened concerns over examination activities related to fair lending, Bank Secrecy Act (BSA), cybersecurity, and vendor management. For example, fair lending exams "seem to continue indefinitely, as if examiners must continue to review until they find a problem."

CDIAC members expressed frustration that agencies are using opaque statistical analyses, but are not willing to share their methodologies with financial institutions. CDIAC members stated: "Being able to use the same tools as examiners would help ensure compliance on their own part and would provide examiners with sound, reliable data analysis, thereby reducing examination burden and allowing examiners to focus on higher-risk areas."

Council members said they observed regulatory expectations for large institutions “trickling down” to community institutions, and they emphasized the need for regulators to tailor examinations based on the risk profiles of individual financial institutions.

They also raised concerns about the reduction in the overall level of examiner experience and expertise, noting that less-experienced examiners tended to take a “check-the-box” approach when conducting an examination, rather than focusing on the bank’s risk profile.

Read questions 4 and 5 of the CDIAC minutes.

Indirect Used Car Lending Contributed to the Failure of Valley State Credit Union

It appears that a rapid growth in indirect used car lending played a significant role in the failure of Valley State Credit Union (Saginaw, MI).

Valley State Credit Union failed on March 31, 2017.

The following graphs provide a visual depiction of rapid growth in used car and indirect lending, the growth in delinquencies in used car and indirect loans, and the subsequent spike in net charge-offs in used car and indirect loans.

Between September 2014 and December 2015, used car loans rapidly expanded by almost 236 percent from $2.3 million to almost $7.86 million.

Over the same time period, indirect lending expanded from 11.08 percent of total loans to peaking at 33.89 percent of all loans.

Used car loan delinquency rate went from 3.02 percent in September 2014 to 30.68 percent as of September 2016.

Indirect loan delinquency rates went from 4.84 percent to 33.35 percent over the same period.

In the fourth quarter of 2016, net charge-offs for used car loans and indirect loans were $1.4 million and $1 million, respectively.

NCUSIF Reserve Balance Increased by $49 Million During the First Quarter of 2017

The National Credit Union Administration reported that reserve expenses for the National Credit Union Share Insurance Fund (NCUDIF) increased during the first quarter.

NCUA had estimated that NCUSIF reserve expenses would increase by $28 million during the first quarter of 2017. However, actual NCUSIF reserve expenses rose by $49.2 million - more than anticipated.

NCUA reported that charges for liquidation declined by about $200 thousand during the first quarter.

As a result, reserve balance at the NCUSIF increased by $49 million from $196.6 million on December 31, 2016 to $245.6 million on March 31, 2017.

According to NCUA, $8.8 million is for specific natural person credit unions and $236.8 million is for general reserves.

Georgia's Community United FCU Conserved

The National Credit Union Administration (NCUA) placed Community United Federal Credit Union, in Waycross, Georgia, into conservatorship.

NCUA placed Community United Federal Credit Union into conservatorship to allow the credit union to correct operational weaknesses.

According to its year end data, the credit union was well-capitalized and profitable. The credit union reported that only 0.97 percent of its loans were delinquent.

Community United Federal Credit Union has 4,844 members and $23,161,861 in assets, according to the credit union’s most recent Call Report.

Read the press release.

Guardian Credit Union Named Title Sponsor of Symetra Golf Tour Event

Guardian Credit Union (Montgomery, AL) was named as the title sponsor for a women's professional golf tour event.

Guardian Credit Union agreed to sponsor the LPGA Symetra Tour event this year and next year.

The Guardian Championship will take place on the Robert Trent Jones Golf Trail September 21 and September 24.

The Symetra Tour is the official qualifying Tour for the LPGA.

The financial terms of the sponsorship were not disclosed.

However, should the credit union tax exemption be used to sponsor a professional golf event?

Read the story.

197 Problem CUs at the End of Q1 2017

The number of problem credit unions edged higher during the first quarter of 2017, according to the National Credit Union Administration (NCUA).

At the end of the first quarter, there were 197 problem credit unions -- an increase of 1 credit union from the prior quarter. A year earlier there were 218 problem credit unions.

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

At the end of the first quarter, 0.83 percent of total insured shares were in problem credit unions -- unchanged from the prior quarter.

68.5 Percent of Quorum's Taxi Medallion Loans Were Current at the End of 2016

According to Quorum Federal Credit Union's 2016 Annual Report, approximately 68.5 percent of its taxi medallion loans were current.

While Quorum never originated a taxi medallion loan, the credit union participated in taxi medallion loans for 13 years. The credit union ended its taxi medallion participation loan program in 2013. These taxi medallion participation loans were primarily in the cities of New York and Chicago; but the credit union did not divulge the portion of taxi medallion loans in each city.

Quorum stated that it owned primarily 90 percent of these taxi medallion loans originated by parter credit unions.

As of December 31, 2016, Quorum Federal Credit Union (Purchase, NY) had $72.6 million of loans collateralized by taxi medallions.

Taxi medallion loans delinquent by 30 days or more totaled $22,871,000. Almost $20.9 million of the these delinquent loans were 90 days past due or in nonaccrual status.

Quorum's financial notes stated that the credit union increased its provisions for taxi medallion loans in 2016 by almost $19.1 million. The credit union ended 2016 with almost $19.6 million in loan loss reserves for taxi medallion loans, of which $19.2 million were specific reserves.

To estimate its underlying value of the collateral, Quorum engaged a third party specialist. According to the third party specialist, the fair value of a taxi medallion is $489,000 in New York City and $91,000 in Chicago. The $91,000 valuation for Chicago is higher than what other lenders have valued their taxi medallion loans.

While Quorum estimated the December 2016 fair value for New York City and Chicago taxi medallions, the credit union had not at the end of 2016 written down the value of these loans to their current fair value.

Quorum Federal Credit Union reported that almost $35.2 million in taxi medallion loans are scheduled to mature in 2017, $20.5 million will mature in 2018, and $13.3 million will mature in 2019. The remainder of the taxi medallion participation loans will mature in 2020 or later.

However, the credit union cautions that disruption in the value of taxi medallions could cause an increase in losses on these loans.

Read the Annual Report.

CU Member Perplexed by Secrecy over CEO's Pay

Recently, I was contacted by a credit union member who was being stonewalled by the member's federal credit union regarding the pay of the credit union's chief executive officer (CEO).

The credit union member wrote:

"I just received a letter from my Credit union that wasn’t even signed by a person ... telling me that they aren’t going to tell me how much we are paying the CEO."

The member further wrote:

"I am confused doesn’t the CU belong to me as a member? And why would I not be entitled to know what the CEO is being paid? I can find that for any corporation that I own shares in. Don’t I in effect own the CU? This is very strange that this seems to be too much secrecy."

This credit union member asked some important questions.

I agree that this secrecy on executive pay at federal credit unions needs to end.

The only way to improve transparency is for the National Credit Union Administration (NCUA) Board to take action to amend the agency's regulations requiring federal credit unions to annually disclose the total compensation of each senior executive officer.

Acting Chairman McWatters the time has come for you to lead on this issue.

Update: The credit union is a federal credit union and does not file a Form 990.

Taxation and Supplemental Capital

In its advanced notice of proposed rulemaking (ANPR), the National Credit Union Administration (NCUA) Board expressed concerns that supplemental capital could adversely impact the credit union industry's tax exemption.

The Board speculated that accessing Wall Street for capital could cause Congress to reconsider the credit union industry's federal tax exemption.

According to the ANPR,

"[T]he Board is aware that part of the basis for the credit union tax exemption was that Congress recognized most credit unions could not access the capital markets to raise capital. If all credit unions ... have the ability to access the capital markets to meet capital standards, it could call into question one of the bases for the credit union tax exemption."

The Board also pointed out that state chartered credit unions could be at risk of losing their tax exemption if they issue capital.

Section 501(c)(14)(A) of the Internal Revenue Code exempts state chartered credit unions from federal income taxation because they are without capital stock organized and operated for mutual purposes without profit. But the ANPR noted that the Internal Revenue Service has not defined "capital stock."

The Board wrote that "it is possible federally insured state chartered credit unions in some states will have broad authority to issue supplemental capital instruments that have the characteristics of capital stock, and by doing so could subject themselves to taxation."

So, the credit union industry's tax exemption could be at jeopardy if credit unions can access financial markets to raise capital.

Shreveport FCU Placed into Conservatorship

The National Credit Union Administration on April 13th placed Shreveport Federal Credit Union, in Shreveport, Louisiana, into conservatorship.

NCUA placed Shreveport Federal Credit Union into conservatorship to correct operational weaknesses.

The credit union's Call report indicated that the credit union was profitable and well-capitalized. The credit union reported that 1.97 percent of its loans were 60 days or more past due, which is higher than the delinquency rate for its peer group.

This would suggest that issues at the credit union may have been identified during a recent examination.

According to its most recent Call Report, the credit union had $106.7 million in assets.

Read the press release.

Landmark CU Granted Exception to MBL Cap

The Wisconsin Office of Credit Unions approved a request from Landmark Credit Union (New Berlin, WI) for an exception to the aggregate member business loan (MBL) cap.

The statutory aggregate MBL cap is 12.25 percent of assets.

But according to the Office of Credit Unions' Activity Report, Landmark Credit Union was granted on March 31, 2017 an exception to make member business loans up to 18 percent of its assets.

This is the second exception granted to Landmark Credit Union with regard to the MBL cap.

On April 8, 2015, the Office of Credit Unions approved Landmark's exception. The credit union can grant MBLs up to 15 percent of its assets.

As of December 31, 2016, Landmark Credit Union had an outstanding MBL to asset ratio of 11.92 percent.

An open records request seeking documents related to the approval of the MBL cap exception was denied by the state regulator.

A One-Off Event Or Harbinger of Things to Come

The New York Post is reporting that a New York City taxi medallion sold in March for $241,000.

Just four years ago some taxi medallions sold for more than $1.3 million.

While one data point does not indicate a trend, this could be a harbinger of future taxi medallion prices in New York City.

The evidence from other cities suggests that medallion values may fall by 80 percent or more.

For example, taxi medallion values in Boston are down almost 85 percent from their peak. In Chicago, taxi medallion values have fallen from a peak price of $349,000 in 2013 to an average price of $66,000 in 2016.

If this happens, this would indicate credit unions that financed New York City taxi medallions are likely to incur more pain.

Bellco Credit Union Sued for Discriminating Against Women On Or About to Start Maternity Leave

Bellco Credit Union (Greenwood Village, CO) is accused that it violated federal fair housing laws by not giving mortgage loans to women while they were on or about to go on maternity leave.

The Denver Metro Fair Housing Center sued Bellco Credit Union in March in U.S. District Court of Colorado for allegedly discriminating against people based on their sex and familial status.

According to the complaint, Bellco continues to deny mortgage loans to women who are either on or facing impending maternity leave until the women return to work for at least 30 days.

Read the story.

Read the complaint.

118 CUs Borrowed from Fed's Discount Window in Q1 2015

The Federal Reserve is reporting that 118 credit unions borrowed almost $397.8 million from its Discount Window during the first quarter of 2015.

In comparison, 324 credit unions borrowed from the Federal Reserve's Discount Window in the fourth quarter of 2014.

The average amount borrowed by credit unions was $2.6 million. The median amount borrowed from the Discount Window was $100,000.

On sixteen separate occasions, credit unions borrowed at less $10 million from the Discount Window. Another 26 transactions involved borrowing between $1 million and $9.99 million.

The maximum amount borrowed from the Discount Window on a single day was $80 million by Visions Credit Union (Endicott, NY).

All credit unions, except for one, borrowed under the Federal Reserve's primary credit program, which is reserved for only well run credit unions.

The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.

TTCU Holds Ribbon Cutting on New HQ

TTCU The Credit Union recently held a ribbon cutting on its new six-story, 90,000-square-foot facility.

The cost of the project was not disclosed.

Read the story.

Consumer Credit at Credit Unions Grew In February

Outstanding consumer credit at credit unions grew in February by $3.3 billion to $389.5 billion, according to the Federal Reserve's G.19 report.

Revolving credit at credit unions fell in February by almost $200 million to approximately $52.3 billion. This was the second consecutive monthly decline in revolving credit by credit unions.

On the otherhand, outstanding nonrevolving credit at credit unions increased by almost $3.6 billion in February to $337.3 billion.

Dearth of De Novo CUs

On March 21, the House Financial Services Committee held a hearing on the dearth of de novo charters.

Between 2000 and 2016 there were 93 new credit unions chartered. Pre-Dodd Frank Act, the number of new charters average 7.7 credit unions per year. After Dodd Frank the number of new charters averaged only 2.3 credit unions per year.

According to the testimony of Keith Stone, President and CEO of The Finest Federal Credit Union, starting a new credit union is an altruistic endeavor. He pointed out that the initial capital infusion and cash outlays are often too great for many communities and associations, thereby hindering the formation of new credit unions. He also blamed the rising cost of compliance for deterring many potential credit union start ups.

But National Credit Union Administration (NCUA) should also be held accountable for the dearth of new credit unions charters.

The Senate Report on the Credit Union Membership Access Act of 1998 encouraged the formation of new credit unions. The Senate Report stated:

The NCUA Board ("Board") shall encourage the formation of a separately chartered credit union instead of approving an additional group within the field of membership of an existing multiple common-bond or single common-bond credit union.

However, the Senate Report provided an exception to a multiple common-bond credit union to add a group with 3,000 or more potential members, if NCUA determines the group is unlikely to succeed as a new credit union.

But it appears that this exception has become the norm. For example, NCUA in 2016 approved adding 89 groups with 3,000 or more potential members to an existing multiple common-bond credit union, while only one credit union was chartered.

The following table shows the trend between the number of new charters compared to the number of groups with 3,000 plus potential members from 2008 through 2016.

In fact, NCUA now believes that a new credit union with fewer than 5,000 potential members is not viable.

It is likely that the drought of new charters will continue without a change in direction at NCUA.

Marine CU to Buy 5 Bank Branches from Bank Mutual Corporation

Bank Mutual Corporation (Milwaukee, WI) entered into an agreement with Marine Credit Union (LaCrosse, WI) to sell five retail branches, along with deposits and loans.

The pending sale consists of one office in Kenosha, two in Racine, and two in Sheboygan, Wisconsin.

Deposits and loans from the five locations are $52.6 million and $13.2 million, respectively.

The deal is expected to close in the third quarter, pending all regulatory approvals.

The terms and price of the transaction were not disclosed.

Read the press release.

GAO: ASI Reserves Are Adequate to Cover Future Losses, But High Geographic and Deposit Concentration Poses Risk

In a recent report, the Government Accountability Office (GAO) found that American Share Insurance (ASI) has adequate reserves and has strong ability to cover present and future losses for the credit unions it insures.

ASI insures 125 privately insured credit unions with $13 billion in insured deposits.

According to its most recent examination by the Ohio Department of Insurance, ASI’s reserves for losses were consistent with Ohio’s legal requirements and were adequate and appropriate. Ohio Department of Insurance staff told GAO that ASI is classified as a nonpriority insurer, which means ASI is considered low-risk and does not require enhanced oversight.

While none of the eight state supervisors interviewed by GAO raised concerns about ASI’s financial condition, one state credit union supervisor worried that during volatile economic times ASI might not be able to cover losses once it had exhausted its capital. The supervisor noted that ASI is not backed by the full faith and credit of the U.S. government and has no access to state guaranty funds. However, in the event ASI becomes impaired, it can charge a special assessment to privately insured credit unions.

ASI told GAO that it has several processes in place to mitigate risk and help prevent and control losses from credit unions it insures. ASI conducts an examination of about 70 percent of its credit unions annually and and the rest on a 2–3 year cycle.

At the end of 2015, ASI had $218 million in assets (cash and investments) available to pay claims. But the GAO report noted at at the end of 2015, 14 privately insured credit unions each had more than that amount in total insured deposits.

GAO found that privately insured credit unions have a similar risk profile with federally insured credit unions. However, GAO found that privately insured credit unions are less geographically diverse and have higher levels of deposit concentration than federally insured credit unions.

• Seventy-two percent of ASI-insured credit unions are located in 3 states -- Ohio, Illinois, and Indiana.
• In 2015, ASI’s 2 largest credit unions (by total assets) represented 15 percent of its total insured deposits, and its 10 largest represented 54 percent of its insured deposits. In comparison, NCUA’s 10 largest insured credit unions (by total assets) made up 15 percent of total insured deposits in 2015.

GAO concludes that given this deposit concentration if one or more large privately insured credit unions failed, ASI could face difficulty paying claims.

Read pages 9 thru 21 of GAO report.

78 Privately Insured CUs Eligible for FHLBank Membership at the End of 2015

The Fixing America’s Surface Transportation Act (FAST Act) authorized Federal Home Loan Bank (FHLBank) membership for eligible privately insured credit unions.

By law, certain types of prospective FHLBank members must have at least 10 percent of their assets in residential mortgage loans to be eligible.

As of December 31, 2015, the Federal Housing Finance Agency estimated that 78 privately insured credit unions met this eligibility requirement. In other words, approximately 62 percent of the 125 privately insured credit unions were eligible for FHLBank membership.

As of December 31, 2016, the FHLBanks had approved 16 privately insured credit unions for membership.

This information appears on pages 7 and 8 of a recently released Government Accountability Office report.

Idaho Central Named the Top Performing CU in 2016

S&P Global Market Intelligence reported that Idaho Central Credit Union (Chubbuck, ID) was the top performing credit union in 2016.

This is the fifth year in a row that Idaho central was named the top performing credit union.

Credit unions were ranked on five performance metrics -- member growth, market growth, operating expense as a percentage of operating revenue, net charge-offs as a percentage of average loans and delinquent loans as a percentage of total loans.

To be eligible for the ranking, a credit union had to report more than $500 million in total assets and a net worth ratio of at least 7.0% as of December 31, 2016.

Superior Credit Union Inc. (Lima, OH) took the number 2 spot and Lake Michigan Credit Union (Grand Rapids, MI) finished in third place.

The following table ranks the top 50 performing credit unions in 2016.

Read more.

First Tech CU Plans Major Expansion

First Tech Credit Union (Beaverton, OR) is planning a major expansion in Hillsboro, Oregon.

The first phase involves the construction of a 150,000 square foot, five-story building.

But according to the Portland Business Journal, the corporate campus is intended to accommodate a second building of comparable size.

The cost of the project was not disclosed.

Read the story (subscription required).