President Trump's Budget estimated that the tax expenditure arising from the credit union tax exemption is $35.3 billion over the next ten fiscal years.
This estimate of forgone tax revenues is up 32 percent from the estimate in last year's Budget by the Obama Administration at $26.7 billion.
According to the American Banker, the jump in the size of the tax expenditure is attracting the attention of both credit union and community banking advocates.
John McKechnie, a credit union industry lobbyist, stated to the American Banker that "this increase is noteworthy"; but also cautioned credit unions to not underreact or overreact to this information.
Read the article (subscription required).
Wednesday, May 31, 2017
Tuesday, May 30, 2017
MADCO Credit Union Operations Suspended for 60 Days
The Illinois Director of the Division of Financial Institutions issued an order suspending the operations of MADCO Credit Union (Edwardsville, IL) for 60 days and appointed 1st Mid-American Credit Union (Bethalto, IL) as Manager-Trustee.
The order was signed on May 23.
The Illinois regulator determined that MADCO Credit Union was in danger of insolvency as the true financial condition of the credit union could not be ascertained during an examination.
According to the order, the credit union was delinquent in paying Illinois withholding taxes and federal payroll taxes.
Also, the credit union is required to hold its annual meeting in the first 3 months of the year; but as of the signing of the order, the credit union had not held its 2017 annual meeting.
The credit union was not in compliance with state law on the number of directors, as it only had 4 board members. In addition, the credit union lacked a quorum, as its bylaws required 9 board members.
The credit union board declared a dividend although the board lacked a legal quorum to do so.
In addition, the order states that the credit union had loans that were either non-performing or showed no signs of being collected.
The order further noted that the loans to directors, officers, loan committee members, and supervisory committee members were not in compliance with Section 52 of the Illinois Credit Union Act.
Moreover, the order cited the credit union for its weak internal controls.
MADCO Credit Union had almost $1.7 million in assets, as of the most recent Call Report.
Read the order.
The order was signed on May 23.
The Illinois regulator determined that MADCO Credit Union was in danger of insolvency as the true financial condition of the credit union could not be ascertained during an examination.
According to the order, the credit union was delinquent in paying Illinois withholding taxes and federal payroll taxes.
Also, the credit union is required to hold its annual meeting in the first 3 months of the year; but as of the signing of the order, the credit union had not held its 2017 annual meeting.
The credit union was not in compliance with state law on the number of directors, as it only had 4 board members. In addition, the credit union lacked a quorum, as its bylaws required 9 board members.
The credit union board declared a dividend although the board lacked a legal quorum to do so.
In addition, the order states that the credit union had loans that were either non-performing or showed no signs of being collected.
The order further noted that the loans to directors, officers, loan committee members, and supervisory committee members were not in compliance with Section 52 of the Illinois Credit Union Act.
Moreover, the order cited the credit union for its weak internal controls.
MADCO Credit Union had almost $1.7 million in assets, as of the most recent Call Report.
Read the order.
Monday, May 29, 2017
Grow Financial Alleges GTE Financial Stole Trade Secrets and Private Member Information
Grow Financial FCU in Tampa has filed suit in federal court against GTE Financial Credit Union (Tampa).
The lawsuit alleges that a former employee conspired with GTE Financial to steal private information from Grow Financial Credit Union, including trade secrets and private member information.
Grow Financial had to hire a forensic firm to uncover the alleged crime and had to notify 13 state attorney generals and the National Credit Union Administration about the breach.
The suit was filed in federal court on May 24 and Grow Financial is seeking a jury trial.
Read the story.
The lawsuit alleges that a former employee conspired with GTE Financial to steal private information from Grow Financial Credit Union, including trade secrets and private member information.
Grow Financial had to hire a forensic firm to uncover the alleged crime and had to notify 13 state attorney generals and the National Credit Union Administration about the breach.
The suit was filed in federal court on May 24 and Grow Financial is seeking a jury trial.
Read the story.
Saturday, May 27, 2017
ABA Files Motion for Summary Judgment in FOM Lawsuit
The American Bankers Association on Friday, May 26 filed a motion for summary judgment in its case challenging the National Credit Union Administration’s final rule expanding community-based credit union fields of membership (FOM) far beyond the limitations imposed by Congress.
The rule allows community credit unions — which Congress by statute limited to serving a single “well-defined local community, neighborhood, or rural district” to serve large regions encompassing multiple metropolitan areas with populations in the millions.
ABA specifically challenged the inclusion of Combined Statistical Areas — which encompass multiple Metropolitan Statistical Areas — as “local communities”; the ability of credit unions to serve Core-Based Statistical Areas without serving the urban core that defines the area; the ability to add “adjacent areas” to existing community fields of membership; and the dramatic expansion of what constitutes a rural district.
In its motion, ABA argued that this expansion of taxpayer-subsidized financial institutions is inconsistent with the limited scope of credit union operations envisioned by Congress, that it authorizes fields of membership that federal courts have previously rejected and that it undermines the ability of taxpaying banks to serve their communities.
ABA is seeking a declaration that the rule exceeded the agency’s statutory authority and is arbitrary and capricious, as well as an injunction prohibiting any community charter expansions pursuant to the challenged portions of the rule.
Read the motion for summary judgment.
The rule allows community credit unions — which Congress by statute limited to serving a single “well-defined local community, neighborhood, or rural district” to serve large regions encompassing multiple metropolitan areas with populations in the millions.
ABA specifically challenged the inclusion of Combined Statistical Areas — which encompass multiple Metropolitan Statistical Areas — as “local communities”; the ability of credit unions to serve Core-Based Statistical Areas without serving the urban core that defines the area; the ability to add “adjacent areas” to existing community fields of membership; and the dramatic expansion of what constitutes a rural district.
In its motion, ABA argued that this expansion of taxpayer-subsidized financial institutions is inconsistent with the limited scope of credit union operations envisioned by Congress, that it authorizes fields of membership that federal courts have previously rejected and that it undermines the ability of taxpaying banks to serve their communities.
ABA is seeking a declaration that the rule exceeded the agency’s statutory authority and is arbitrary and capricious, as well as an injunction prohibiting any community charter expansions pursuant to the challenged portions of the rule.
Read the motion for summary judgment.
Thursday, May 25, 2017
McWatters to CFPB: Provide Reg Relief to CUs
In a May 24th letter to Consumer Financial Protection Bureau (CFPB) Director Cordray, Acting National Credit Union Administration (NCUA) Chairman McWatters requested that the CFPB provide regulatory relief to credit unions.
Specifically, McWatters asked that the CFPB alleviate the compliance burden for credit unions with respect to the Home Mortgage Disclosure Act and Unfair, Deceptive, or Abusive Acts or Practices requirements of the Dodd-Frank Act.
McWatters noted that Section 1022(b)(3)(A) of the Dodd-Frank Act permits the CFPB to "exempt any class of persons, service providers, or consumer financial services from certain regulations." However, this section of the Dodd-Frank Act has been underutilized by the CFPB.
McWatters points out that the unique structure and small size of many credit unions warrants this regulatory relief. The median size for credit unions is less than $30 million in assets and the median staff size is a mere 8 employees.
The letter is below.
Specifically, McWatters asked that the CFPB alleviate the compliance burden for credit unions with respect to the Home Mortgage Disclosure Act and Unfair, Deceptive, or Abusive Acts or Practices requirements of the Dodd-Frank Act.
McWatters noted that Section 1022(b)(3)(A) of the Dodd-Frank Act permits the CFPB to "exempt any class of persons, service providers, or consumer financial services from certain regulations." However, this section of the Dodd-Frank Act has been underutilized by the CFPB.
McWatters points out that the unique structure and small size of many credit unions warrants this regulatory relief. The median size for credit unions is less than $30 million in assets and the median staff size is a mere 8 employees.
The letter is below.
Another Ohio CU Defects from Federal Share Insurance
The National Credit Union Administration approved on March 27 the request of GenFed Financial Credit Union (Akron, OH) to switch from federal share (deposit) insurance to private share insurance.
Earlier this year, Day-Met (Dayton, OH) converted from federal share insurance to private share insurance.
Going forward, GenFed Financial Credit Union will be insured by American Share Insurance.
Earlier this year, Day-Met (Dayton, OH) converted from federal share insurance to private share insurance.
Going forward, GenFed Financial Credit Union will be insured by American Share Insurance.
Wednesday, May 24, 2017
The Supreme Court Limits Ability of Patent Trolls to Cherry-Pick Friendly Courts
In the case of TC Heartland v. Kraft, the Supreme Court on May 22 unanimously affirmed prior precedents that patent infringement lawsuits can be brought only where defendants are incorporated or doing business.
The decision reversed a lower court decision.
The appellate court upheld a much broader understanding of corporate residence that would allow patent assertion entities -- often called “patent trolls” -- to continue cherry-picking friendly courts for patent cases against faraway defendants, further increasing pressure to settle cases.
In 2015, 40 percent of patent suits were filed in just one of 94 federal judicial districts: the Eastern District of Texas. That court is known for its friendliness to patent assertion entities, which hold unused patents, often of dubious quality, and employ them primarily as the basis for collecting licensing fees and threatening litigation.
Read the court opinion.
The decision reversed a lower court decision.
The appellate court upheld a much broader understanding of corporate residence that would allow patent assertion entities -- often called “patent trolls” -- to continue cherry-picking friendly courts for patent cases against faraway defendants, further increasing pressure to settle cases.
In 2015, 40 percent of patent suits were filed in just one of 94 federal judicial districts: the Eastern District of Texas. That court is known for its friendliness to patent assertion entities, which hold unused patents, often of dubious quality, and employ them primarily as the basis for collecting licensing fees and threatening litigation.
Read the court opinion.
Tuesday, May 23, 2017
25 CUs Fined for Late Filing Q4 2016 Call Report
Twenty-five federally insured credit unions have consented to pay civil monetary penalties for filing late Call Reports in the fourth quarter of 2016.
Total penalties assessed by the National Credit Union Administration totaled $10,365.
Individual penalties ranged from $151 to $2,509. The median penalty was $253.
Of the 25 credit unions agreeing to pay penalties for the fourth quarter of 2016:
Four of the late-filing credit unions had been late in a previous quarter.
Read the press release.
Total penalties assessed by the National Credit Union Administration totaled $10,365.
Individual penalties ranged from $151 to $2,509. The median penalty was $253.
Of the 25 credit unions agreeing to pay penalties for the fourth quarter of 2016:
- Eleven had assets of less than $10 million;
- Nine had assets between $10 million and $50 million;
- Four had assets between $50 million and $250 million; and
- One had assets greater than $250 million.
Four of the late-filing credit unions had been late in a previous quarter.
Read the press release.
Credit Union Tax Expenditure Is $35.31 Billion over the Next 10 Fiscal Years
The tax expenditure arising from the credit union industry's exemption from the corporate income tax will equal $35.31 billion over fiscal years 2017 thru 2026, according to President Trump's 2018 Budget released today.
Read the Analytical Perspectives.
Read the Analytical Perspectives.
Bad Taxi Medallion Loans and New York Credit Union Merger
Credit Union Times is reporting that potential losses from taxi medallion loans played a role in the merger of Northwell Health Federal Credit Union (Jericho, NY) with Bethpage Federal Credit Union (Bethpage, NY).
The Northwell Health Federal Credit Union reported a loss of $2.1 million for 2016, as the credit union increased loan loss provisions for anticipated losses associated with taxi medallion participation loans.
At the end of the first quarter of 2017, Northwell Health had approximately $10.6 million in business participation loans, presumably most of the loans, if not all, were taxi medallion loans. Almost one-third (32.5 percent) of participation loans were 60 days or more past due.
Last year, Bethpage acquired troubled taxi medallion lender Montauk Credit Union.
I suspect that this latest merger will not be the last credit union merger due to taxi medallion loan losses.
Read the Credit Union Times article.
The Northwell Health Federal Credit Union reported a loss of $2.1 million for 2016, as the credit union increased loan loss provisions for anticipated losses associated with taxi medallion participation loans.
At the end of the first quarter of 2017, Northwell Health had approximately $10.6 million in business participation loans, presumably most of the loans, if not all, were taxi medallion loans. Almost one-third (32.5 percent) of participation loans were 60 days or more past due.
Last year, Bethpage acquired troubled taxi medallion lender Montauk Credit Union.
I suspect that this latest merger will not be the last credit union merger due to taxi medallion loan losses.
Read the Credit Union Times article.
Monday, May 22, 2017
Banks and CUs Are Seeking Part of The Payday Lending Market
The Wall Street Journal is reporting that banks and credit unions are hoping that the Trump Administration will block the Consumer Financial Protection Bureau (CFPB) proposed payday lending rule and will scrap 2013 guidelines that forced banks to abandon the short-term loan market.
The article notes that "[s]ome credit unions continue to offer payday alternative loans"; however, the proposed requirement that lenders assess borrowers’ ability to repay could make this product too expensive to offer.
Proponents argue that letting banks and credit unions offer payday loans would benefit U.S. households that have paid billions in fees annually to payday and auto title lenders.
Read the article (subscription required).
The article notes that "[s]ome credit unions continue to offer payday alternative loans"; however, the proposed requirement that lenders assess borrowers’ ability to repay could make this product too expensive to offer.
Proponents argue that letting banks and credit unions offer payday loans would benefit U.S. households that have paid billions in fees annually to payday and auto title lenders.
Read the article (subscription required).
Saturday, May 20, 2017
Colorado and Kansas CUs Buy Corporate Office Buildings
Elevations Credit Union (Boulder, CO) and Meritrust Credit Union (Wichita, KS) have purchased corporate office buildings.
Office-supply chain Staples has sold its four-story corporate office building in Broomfield for $16.5 million to Elevations Credit Union.
According to public records, Staples Contract and Commercial Inc., sold its 149,038-square-foot building and 17.6 acres at 1 Environmental Way in the Interlocken business park to One Environmental Way LLC, an entity created by Elevations.
In Wichita, Meritrust Credit Union announced that it has reached an agreement to buy the current headquarters building of Cargill Meat Solutions.
The building will house the credit union’s administrative departments and offices for mortgage services, wealth management advisors and small business services.
Terms of the deal were not disclosed.
Read the story.
Meritrust press release.
Office-supply chain Staples has sold its four-story corporate office building in Broomfield for $16.5 million to Elevations Credit Union.
According to public records, Staples Contract and Commercial Inc., sold its 149,038-square-foot building and 17.6 acres at 1 Environmental Way in the Interlocken business park to One Environmental Way LLC, an entity created by Elevations.
In Wichita, Meritrust Credit Union announced that it has reached an agreement to buy the current headquarters building of Cargill Meat Solutions.
The building will house the credit union’s administrative departments and offices for mortgage services, wealth management advisors and small business services.
Terms of the deal were not disclosed.
Read the story.
Meritrust press release.
Friday, May 19, 2017
HUD Secretary Signals Possible Policy Shift on PACE Loans
Housing and Urban Development (HUD) Secretary Ben Carson signaled this week that the administration may revisit an Obama-era policy on Property Assessed Clean Energy, or PACE, loans, a controversial financial product that allows homeowners to pay for energy-efficient retrofitting -- such as solar panels and high-efficiency air conditioners -- through their property tax assessments.
Guidance issued last year allowed the Federal Housing Administration to approve mortgage and refinance applications for properties with PACE loans outstanding. “We are very, very amenable to adjusting that policy,” Carson said at an industry conference. “I’m concerned about it. It really does create a burden and an extra complication.”
Financial and housing trade groups, the Federal Housing Finance Agency (FHFA), and the housing GSEs have long expressed concern about PACE loans -- currently available in about 30 states -- taking lien priority over the first mortgage lien.
FHFA has prohibited Fannie Mae and Freddie Mac from purchasing loans with PACE liens which take precedence over the first mortgage, citing concerns about taxpayer risk.
As PACE loans have come under fire in the media for their lack of consumer protections, legislation has been introduced in Congress that would ensure PACE lenders provide full consumer disclosures. (See earlier post)
Guidance issued last year allowed the Federal Housing Administration to approve mortgage and refinance applications for properties with PACE loans outstanding. “We are very, very amenable to adjusting that policy,” Carson said at an industry conference. “I’m concerned about it. It really does create a burden and an extra complication.”
Financial and housing trade groups, the Federal Housing Finance Agency (FHFA), and the housing GSEs have long expressed concern about PACE loans -- currently available in about 30 states -- taking lien priority over the first mortgage lien.
FHFA has prohibited Fannie Mae and Freddie Mac from purchasing loans with PACE liens which take precedence over the first mortgage, citing concerns about taxpayer risk.
As PACE loans have come under fire in the media for their lack of consumer protections, legislation has been introduced in Congress that would ensure PACE lenders provide full consumer disclosures. (See earlier post)
Thursday, May 18, 2017
Group Asks NCUA to Stop Bullying Medallion Owners
The Committee for Taxi Safety has requested that the National Credit Union Administration (NCUA) stop its assault on the taxi industry and show some human decency.
In a May 12 letter, David Beier, president of the Committee for Taxi Safety, wrote that "NCUA's unwillingness to work with medallion owners has put the very survival of our industry at risk."
The letter stated that the only lender not working with medallion owners is Melrose Credit Union, which is currently under conservatorship with NCUA.
The NCUA conserved lender is accused of taking a hardline stance with medallion owners by demanding large down payments or liens on primary residences to renew loans.
Even when borrowers comply with these demands, borrowers face substantial increases in the interest rates on their medallion loans.
The letter contends that NCUA's actions are that of a bully and will result in the financial ruin for thousands of medallion borrowers.
Beier asks "NCUA to act responsibly" and to work with struggling medallion owners.
Moreover, the letter suggests that NCUA is making things worse, which could adversely impact other medallion lenders.
Read the letter below.
In a May 12 letter, David Beier, president of the Committee for Taxi Safety, wrote that "NCUA's unwillingness to work with medallion owners has put the very survival of our industry at risk."
The letter stated that the only lender not working with medallion owners is Melrose Credit Union, which is currently under conservatorship with NCUA.
The NCUA conserved lender is accused of taking a hardline stance with medallion owners by demanding large down payments or liens on primary residences to renew loans.
Even when borrowers comply with these demands, borrowers face substantial increases in the interest rates on their medallion loans.
The letter contends that NCUA's actions are that of a bully and will result in the financial ruin for thousands of medallion borrowers.
Beier asks "NCUA to act responsibly" and to work with struggling medallion owners.
Moreover, the letter suggests that NCUA is making things worse, which could adversely impact other medallion lenders.
Read the letter below.
Tuesday, May 16, 2017
Additional NY CUs with Problem Taxi Medallion Loans
The following credit unions either have or appear to have exposure to taxi medallion loans. These credit unions continue to report a growth in problem taxi medallion loans.
Quorum Federal Credit Union (Purchase, NY)
Quorum Federal Credit Union participated in taxi medallion lending, although the program was ended in 2013.
The credit union is reporting that $31.1 million in participation loans were 60 days or more past due as of March 2017. Presumably these delinquent participation loans are primarily taxi medallion loans. This is up from $21.5 million at the end of 2016.
The delinquency rate on participation loans were 27.36 percent as of March 2017, up from 18.78 percent.
In addition, Quorum reported $24.4 million in outstanding troubled debt restructured business loans at the end of the first quarter of 2017. This is down slightly from $25.1 million at the end of 2016.
After posting a loss of $6.7 million for 2016, the credit union reported a profit of almost $1.9 million. Provisions for loan loses were $1.8 million for the first quarter of 2016, down from $6.8 million one year ago.
Bay Ridge Federal Credit Union (Brooklyn, NY)
Bay Ridge Federal Credit Union appears to have exposure to taxi medallion loans.
The credit union is reporting $80.8 million in non-real estate member business loans at the end of the first quarter of 2017. One would expect some of these business loans are taxi medallion loans.
Delinquent non-real estate business loans grew from 737,501 as of the first quarter of 2016 to almost $4.8 million as on March 2017. The percentage of non-real estate member business loans that are 60 days or more past due rose from 0.88 percent to 5.91 percent over the same period.
In addition, troubled debt restructured business loans, which are not secured by real estate, were $22.6 million as of the first quarter of 2017 -- up from $23.1 million at the end of 2016 and from $14.4 million one year earlier.
The credit union is well capitalized with a net worth ratio of 9.34 percent. It reported a small profit of $19,195 for the first quarter of 2017 -- down from a profit of 532,372 from one year ago.
G.P.O. Federal Credit Union (New Hartford, NY)
According to GPO Federal Credit Union's Call Report, the credit union reported almost $15.1 million in non-member business participation loans at the end of the first quarter of 2017. Total participation loans were $16.3 million.
I suspect most of these non-member participation loans were taxi medallion loans.
The credit union reported that $5.4 million in participation loans were delinquent. This means that almost one-third of all participation loans were past due 60 days or more.
In comparison, 3.98 percent of all loans were delinquent.
In addition, the credit union is reporting that $1.9 million in outstanding troubled debt restructured business loans.
Quorum Federal Credit Union (Purchase, NY)
Quorum Federal Credit Union participated in taxi medallion lending, although the program was ended in 2013.
The credit union is reporting that $31.1 million in participation loans were 60 days or more past due as of March 2017. Presumably these delinquent participation loans are primarily taxi medallion loans. This is up from $21.5 million at the end of 2016.
The delinquency rate on participation loans were 27.36 percent as of March 2017, up from 18.78 percent.
In addition, Quorum reported $24.4 million in outstanding troubled debt restructured business loans at the end of the first quarter of 2017. This is down slightly from $25.1 million at the end of 2016.
After posting a loss of $6.7 million for 2016, the credit union reported a profit of almost $1.9 million. Provisions for loan loses were $1.8 million for the first quarter of 2016, down from $6.8 million one year ago.
Bay Ridge Federal Credit Union (Brooklyn, NY)
Bay Ridge Federal Credit Union appears to have exposure to taxi medallion loans.
The credit union is reporting $80.8 million in non-real estate member business loans at the end of the first quarter of 2017. One would expect some of these business loans are taxi medallion loans.
Delinquent non-real estate business loans grew from 737,501 as of the first quarter of 2016 to almost $4.8 million as on March 2017. The percentage of non-real estate member business loans that are 60 days or more past due rose from 0.88 percent to 5.91 percent over the same period.
In addition, troubled debt restructured business loans, which are not secured by real estate, were $22.6 million as of the first quarter of 2017 -- up from $23.1 million at the end of 2016 and from $14.4 million one year earlier.
The credit union is well capitalized with a net worth ratio of 9.34 percent. It reported a small profit of $19,195 for the first quarter of 2017 -- down from a profit of 532,372 from one year ago.
G.P.O. Federal Credit Union (New Hartford, NY)
According to GPO Federal Credit Union's Call Report, the credit union reported almost $15.1 million in non-member business participation loans at the end of the first quarter of 2017. Total participation loans were $16.3 million.
I suspect most of these non-member participation loans were taxi medallion loans.
The credit union reported that $5.4 million in participation loans were delinquent. This means that almost one-third of all participation loans were past due 60 days or more.
In comparison, 3.98 percent of all loans were delinquent.
In addition, the credit union is reporting that $1.9 million in outstanding troubled debt restructured business loans.
Monday, May 15, 2017
How Underwater Are Medallion Loan Portfolios?
Medallion Financial's Form 10-Q filed with the Securities and Exchange Commission discloses how underwater its medallion loans are.
According to its 10-Q,
While information on the geographic mix of taxi medallion loans, down payments, and loan structures are not known, this loan-to-value statistic provides a good approximation of how underwater are the medallion loan portfolios at taxi medallion lending credit unions.
According to its 10-Q,
"Decreases in the value of our medallion loan collateral have resulted in an increase in the loan-to-value ratios of our medallion loans. We estimate that the weighted average loan-to-value ratio of our managed medallion loans was approximately 124% as of March 31, 2017 and 129% as of December 31, 2016."
While information on the geographic mix of taxi medallion loans, down payments, and loan structures are not known, this loan-to-value statistic provides a good approximation of how underwater are the medallion loan portfolios at taxi medallion lending credit unions.
Friday, May 12, 2017
Wescom Central CU Settles Maternity Discrimination Complaint
The U.S. Department of Housing and Urban Development announced an agreement between Wescom Central Credit Union (Pasadena, CA) and a married couple from Santa Ana, CA, resolving allegations the credit union denied the couple’s mortgage loan application because the wife was on maternity leave.
The couple alleged that Wescom Credit Union unfairly denied their mortgage loan and that the lender requested the woman return to work and provide a current pay stub before they would approve the loan application.
However, refusing to provide a mortgage loan or mortgage insurance because a woman is pregnant or on family leave violates the Fair Housing Act’s prohibition against sex and familial status discrimination, which includes discrimination against individuals who have or are expecting a child.
Under the terms of the agreement, Wescom Central will:
The couple alleged that Wescom Credit Union unfairly denied their mortgage loan and that the lender requested the woman return to work and provide a current pay stub before they would approve the loan application.
However, refusing to provide a mortgage loan or mortgage insurance because a woman is pregnant or on family leave violates the Fair Housing Act’s prohibition against sex and familial status discrimination, which includes discrimination against individuals who have or are expecting a child.
Under the terms of the agreement, Wescom Central will:
- Refinance the couple’s existing mortgage at a lower rate;
- Create a $50,000 compensation fund for applicants who were similarly denied loans or withdrew mortgage applications from Wescom during calendar year 2015;
- Ensure its lending policies regarding parental leave comply with the Fair Housing Act;
- Provide fair lending training to its employees; and
- Send a notice to its employees regarding its parental leave lending policies.
Thursday, May 11, 2017
CFPB Seeks Information on the Small Business Lending Market
The Consumer Financial Protection Bureau (CFPB) has issued a request for information on various aspects of the market for small business loans.
Section 1071 of the Dodd-Frank Act calls for the CFPB to collect data on women-owned, minority-owned and small businesses to help identify needs and opportunities in the small business lending market and to facilitate enforcement of fair lending laws.
The CFPB is seeking information in five broad categories: the definition of a small business; what data points the bureau should require to be collected; what lenders should be encompassed by the data collection; what kinds of financial products and credit are offered to small businesses; and privacy concerns related to the data collection. Comments are due 60 days after the filing is published in the Federal Register.
The CFPB also released a preliminary report providing the agency's perspective on the market for lending to small, minority-owned and woman-owned firms and gaps in its understanding of the small business lending market.
The report discussed the role of credit unions, along with other lenders, in financing small businesses. For example, the report cites a Federal Reserve Survey that found "11 percent of all surveyed employer firms and 13 percent of non-employer firms applied for financing at a credit union" with 46 percent of employer businesses and 33 percent of non-employer businesses being approved for credit.
Read the request or information.
Read the CFPB report.
Section 1071 of the Dodd-Frank Act calls for the CFPB to collect data on women-owned, minority-owned and small businesses to help identify needs and opportunities in the small business lending market and to facilitate enforcement of fair lending laws.
The CFPB is seeking information in five broad categories: the definition of a small business; what data points the bureau should require to be collected; what lenders should be encompassed by the data collection; what kinds of financial products and credit are offered to small businesses; and privacy concerns related to the data collection. Comments are due 60 days after the filing is published in the Federal Register.
The CFPB also released a preliminary report providing the agency's perspective on the market for lending to small, minority-owned and woman-owned firms and gaps in its understanding of the small business lending market.
The report discussed the role of credit unions, along with other lenders, in financing small businesses. For example, the report cites a Federal Reserve Survey that found "11 percent of all surveyed employer firms and 13 percent of non-employer firms applied for financing at a credit union" with 46 percent of employer businesses and 33 percent of non-employer businesses being approved for credit.
Read the request or information.
Read the CFPB report.
Wednesday, May 10, 2017
Q1 2017 Delinquent Loans Fall at Progressive CU, as Net Charge-off Rate Surges
Taxi medallion lender Progressive Credit Union (New York, NY) reported a loss of $25.6 million for the first quarter. The loss was primarily due to a $26.4 million increase in provisions for loans and lease losses.
The loss caused the credit union's net worth to fall from almost $195 million at the end of 2016 to $169.4 million as of March 31, 2017. As a result, the credit union's net worth ratio fell from 32.96 percent to 31.10 percent over the same time period.
The credit union reported a decline in delinquent loans during the first quarter of 2017. Loans 60 days or more past due fell from slightly less than $66.5 million at the end of 2016 to $46.1 million at the end of the first quarter of 2017. Its delinquency rate fell from 11.45 percent to 9.16 percent.
However, early delinquencies increased during the first quarter of 2017. Loans 30 to 59 days past due rose from $14.6 million at the end of 2016 to $21.1 million as of March 31, 2017.
Net charge-offs were $34.8 million during the first quarter of 2017. The net charge-off rate was 25.71 percent. At the end of 2016, the net charge-off rate was 6.32 percent.
Progressive reported a decline in outstanding troubled debt restructured (TDR) loans during the first quarter -- falling from $124.3 million as of December 2016 to slightly less than $117 million as of March 2017. TDR loans were 23.23 percent of total loans and 69.05 percent of net worth.
Foreclosed and repossessed other assets were $29.9 million as of March 31, 2017 -- up from $7.1 million at the end of 2016 and $1.2 million from a year ago.
Given that net charge-offs exceeded provisions for loan and lease losses, Progressive Credit Union's allowance for loan and lease losses fell by $8.4 million during the quarter to $62.7 million on March 31, 2017. The TDR portion of allowance for loan and lease losses was approximately $24.6 million at the end of the first quarter.
the credit union's coverage ratio rose during the first quarter to 135.88 percent.
The loss caused the credit union's net worth to fall from almost $195 million at the end of 2016 to $169.4 million as of March 31, 2017. As a result, the credit union's net worth ratio fell from 32.96 percent to 31.10 percent over the same time period.
The credit union reported a decline in delinquent loans during the first quarter of 2017. Loans 60 days or more past due fell from slightly less than $66.5 million at the end of 2016 to $46.1 million at the end of the first quarter of 2017. Its delinquency rate fell from 11.45 percent to 9.16 percent.
Net charge-offs were $34.8 million during the first quarter of 2017. The net charge-off rate was 25.71 percent. At the end of 2016, the net charge-off rate was 6.32 percent.
Progressive reported a decline in outstanding troubled debt restructured (TDR) loans during the first quarter -- falling from $124.3 million as of December 2016 to slightly less than $117 million as of March 2017. TDR loans were 23.23 percent of total loans and 69.05 percent of net worth.
Foreclosed and repossessed other assets were $29.9 million as of March 31, 2017 -- up from $7.1 million at the end of 2016 and $1.2 million from a year ago.
Given that net charge-offs exceeded provisions for loan and lease losses, Progressive Credit Union's allowance for loan and lease losses fell by $8.4 million during the quarter to $62.7 million on March 31, 2017. The TDR portion of allowance for loan and lease losses was approximately $24.6 million at the end of the first quarter.
the credit union's coverage ratio rose during the first quarter to 135.88 percent.
LOMTO FCU Posted Small Profit in Q1 2017, As Delinquent Loans Increase
Taxi medallion lender LOMTO Federal Credit Union (Woodside, NY) posted a small profit for the first quarter of 2017, despite an increase in delinquent loans.
LOMTO FCU recorded a profit of $462,019 for the first quarter of 2017, after posting a 2016 loss of almost $18.6 million. The return to profitability was primarily due to a recapture of $309,621 in loan loss reserves during the first quarter.
As a result, the credit union experienced a 3.4 percent increase in net worth during the quarter to $14.1 million as of March 2017. However, compared to a year ago the credit union's net worth was down 50.3 percent.
The credit union's net worth ratio edged higher to 5.97 percent at the end of the first quarter of 2017. The credit union is currently undercapitalized.
LOMTO FCU reported an increase in delinquent loans during the first quarter. Loans 60 days or more delinquent increased from $30.9 million at the end of 2016 to almost $42.8 million at the end of the first quarter of 2017. As a result, the delinquency rate went from 14.36 percent to 20.55 percent over the same time period.
LOMTO also reported $12.7 million in loans that were 30 to 59 days past due as of the first quarter of 2017 -- up from $10.9 million at the end of 2016.
The credit union charged off $2.9 million in loans during the first quarter. The net charge-off rate was 5.53 percent as of March 31, 2017 -- up from 4.90 percent at the end of 2016.
Foreclosed and repossessed other assets, presumably taxi medallions, were $13.7 million as of March 2017 -- up from $11.3 million the previous quarter.
Outstanding troubled debt restructured (TDR) loans were $23.2 million at the end of the first quarter of 2017. TDR loans were 11.16 percent of all loans and 164.45 percent of net worth.
LOMTO reported that it has $21.9 million in allowances for loan and lease losses at the end of the first quarter, of which $9.3 million was allocated to cover TDR loans. The combination of a decline in loan loss reserves and an increase in delinquent loans caused LOMTO's coverage ratio to fall from 81.37 percent at the end of 2016 to 51.21 percent on March 31, 2017.
In addition, the Chicago Tribune is reporting that LOMTO has filed 28 lawsuits against taxi companies so far this year in Cook County Circuit Court.
LOMTO FCU recorded a profit of $462,019 for the first quarter of 2017, after posting a 2016 loss of almost $18.6 million. The return to profitability was primarily due to a recapture of $309,621 in loan loss reserves during the first quarter.
As a result, the credit union experienced a 3.4 percent increase in net worth during the quarter to $14.1 million as of March 2017. However, compared to a year ago the credit union's net worth was down 50.3 percent.
The credit union's net worth ratio edged higher to 5.97 percent at the end of the first quarter of 2017. The credit union is currently undercapitalized.
LOMTO FCU reported an increase in delinquent loans during the first quarter. Loans 60 days or more delinquent increased from $30.9 million at the end of 2016 to almost $42.8 million at the end of the first quarter of 2017. As a result, the delinquency rate went from 14.36 percent to 20.55 percent over the same time period.
The credit union charged off $2.9 million in loans during the first quarter. The net charge-off rate was 5.53 percent as of March 31, 2017 -- up from 4.90 percent at the end of 2016.
Foreclosed and repossessed other assets, presumably taxi medallions, were $13.7 million as of March 2017 -- up from $11.3 million the previous quarter.
Outstanding troubled debt restructured (TDR) loans were $23.2 million at the end of the first quarter of 2017. TDR loans were 11.16 percent of all loans and 164.45 percent of net worth.
LOMTO reported that it has $21.9 million in allowances for loan and lease losses at the end of the first quarter, of which $9.3 million was allocated to cover TDR loans. The combination of a decline in loan loss reserves and an increase in delinquent loans caused LOMTO's coverage ratio to fall from 81.37 percent at the end of 2016 to 51.21 percent on March 31, 2017.
In addition, the Chicago Tribune is reporting that LOMTO has filed 28 lawsuits against taxi companies so far this year in Cook County Circuit Court.
Tuesday, May 9, 2017
Melrose CU Is Significantly Undercapitalized
Melrose Credit Union (Briarwood, NY) was significantly undercapitalized at the end of the first quarter 2017.
Due to losses of $38.2 million in the first quarter, the credit union's net worth fell from $102.2 million at the end of 2016 to $64 million at the end of the first quarter of 2017. As a result, the credit union's net worth ratio fell 198 basis points during the quarter to 3.75 percent at the end of the first quarter of 2017.
The $38.2 million loss for the first quarter was due to the credit union increasing provisions for loan and lease losses by almost $40.8 million during the first quarter.
Loans 60 days or more delinquent rose by over $76 million during the first quarter to $577.8 million. As a result, delinquency rate was 33.71 percent a the end of the first quarter.
In addition, $60.4 million in loans were 30 days to 59 days more past due.
After charging off almost $194 million in loans in 2016, the credit union recorded only $1.8 million in net charge-offs during the first quarter of 2017.
The increase in loan loss provisions during the first quarter caused the allowances for loan and lease losses account to increase from $149.2 million at the end of 2016 to almost $188.2 million at the end of the first quarter of 2017.
The coverage ratio edged higher from 29.76 percent at the end of 2016 to 32.57 percent at the end of the first quarter of 2017.
The following table looks at key performance metrics for Melrose Credit Union.
Due to losses of $38.2 million in the first quarter, the credit union's net worth fell from $102.2 million at the end of 2016 to $64 million at the end of the first quarter of 2017. As a result, the credit union's net worth ratio fell 198 basis points during the quarter to 3.75 percent at the end of the first quarter of 2017.
The $38.2 million loss for the first quarter was due to the credit union increasing provisions for loan and lease losses by almost $40.8 million during the first quarter.
Loans 60 days or more delinquent rose by over $76 million during the first quarter to $577.8 million. As a result, delinquency rate was 33.71 percent a the end of the first quarter.
In addition, $60.4 million in loans were 30 days to 59 days more past due.
After charging off almost $194 million in loans in 2016, the credit union recorded only $1.8 million in net charge-offs during the first quarter of 2017.
The increase in loan loss provisions during the first quarter caused the allowances for loan and lease losses account to increase from $149.2 million at the end of 2016 to almost $188.2 million at the end of the first quarter of 2017.
The coverage ratio edged higher from 29.76 percent at the end of 2016 to 32.57 percent at the end of the first quarter of 2017.
The following table looks at key performance metrics for Melrose Credit Union.
Monday, May 8, 2017
McCoy FCU Buys Naming Rights to High School Sports Complex
McCoy Federal Credit Union (Orlando, FL) bought the naming rights to Boone High School sports complex.
The sports complex will now be referred to as the McCoy Federal Credit Union Athletic Complex.
The naming-rights agreement with McCoy Federal Credit Union is for five years, with an option for five additional years.
The agreement includes an initial payment of $250,000 to provide for the installation of an artificial turf at Boone High School’s stadium along with other stadium improvements.
The agreement was approved by the Orange County Board of Education.
Read the term sheet.
Read the agreement.
The sports complex will now be referred to as the McCoy Federal Credit Union Athletic Complex.
The naming-rights agreement with McCoy Federal Credit Union is for five years, with an option for five additional years.
The agreement includes an initial payment of $250,000 to provide for the installation of an artificial turf at Boone High School’s stadium along with other stadium improvements.
The agreement was approved by the Orange County Board of Education.
Read the term sheet.
Read the agreement.
Two Credit Unions Announce Deals to Buy Banks
On May 5, two separate deals were announced regarding a credit union acquiring a bank.
Honor Credit Union of Berrien Springs, Michigan has agreed to buy the assets and liabilities of Citizens State Bank of Ontonagon (Michigan).
Citizens State Bank of Ontonagon has three offices. The bank has $52.8 million in assets and $46.1 million in deposits, according to its most recent Call Report.
Honor Credit Union has 19 offices and $734.9 million in assets.
In another deal, Trona Valley Community Federal Credit Union, Green River, Wyoming and State Bank, Green River, Wyoming jointly announced the execution of an Asset Purchase and Liability Assumption Agreement whereby Trona Valley Community Federal Credit Union will acquire substantially all of the assets and assume substantially all of the liabilities of State Bank.
Trona Valley Community Federal Credit Union has approximately $181 million in assets, while State Bank has $37 million in assets.
This acquisition will result in a credit union with over $218 million in total assets.
The price of each deal was not disclosed.
Both mergers are pending regulatory and shareholder approvals.
Read the Honor CU acquisition story.
Read Trona Valley Community FCU merger story.
Honor Credit Union of Berrien Springs, Michigan has agreed to buy the assets and liabilities of Citizens State Bank of Ontonagon (Michigan).
Citizens State Bank of Ontonagon has three offices. The bank has $52.8 million in assets and $46.1 million in deposits, according to its most recent Call Report.
Honor Credit Union has 19 offices and $734.9 million in assets.
In another deal, Trona Valley Community Federal Credit Union, Green River, Wyoming and State Bank, Green River, Wyoming jointly announced the execution of an Asset Purchase and Liability Assumption Agreement whereby Trona Valley Community Federal Credit Union will acquire substantially all of the assets and assume substantially all of the liabilities of State Bank.
Trona Valley Community Federal Credit Union has approximately $181 million in assets, while State Bank has $37 million in assets.
This acquisition will result in a credit union with over $218 million in total assets.
The price of each deal was not disclosed.
Both mergers are pending regulatory and shareholder approvals.
Read the Honor CU acquisition story.
Read Trona Valley Community FCU merger story.
Friday, May 5, 2017
Consumer Credit at CUs Grew at a Faster Pace in March
The Federal Reserve reported that outstanding consumer credit at credit unions grew in March.
Outstanding consumer credit increased by $4.2 billion in March to $393.7 billion. In comparison, consumer credit grew by $3.3 billion in February.
The expansion in consumer credit at credit unions was driven by an expansion in non-revolving credit, as revolving credit fell in March.
Non-revolving credit increased by almost $4.3 billion in March to $341.6 billion. Revolving credit slipped from approximately $52.3 billion in February to almost $52.1 billion in March.
Read the G. 19 release.
Outstanding consumer credit increased by $4.2 billion in March to $393.7 billion. In comparison, consumer credit grew by $3.3 billion in February.
The expansion in consumer credit at credit unions was driven by an expansion in non-revolving credit, as revolving credit fell in March.
Non-revolving credit increased by almost $4.3 billion in March to $341.6 billion. Revolving credit slipped from approximately $52.3 billion in February to almost $52.1 billion in March.
Read the G. 19 release.
Massachusetts Regulator Fines LPL $1 Million for Failing to Supervise Advisers Operating at CU
The Boston Globe is reporting that the Massachusetts Securities Division has fined LPL Financial Holdings Inc. $1 million for allegedly failing to supervise advisers operating out of Digital Federal Credit Union (Marlborough, MA).
LPL is a broker-dealer and investment adviser headquartered in Boston, Massachusetts.
The state regulators alleged that LPL agents were working for both the brokerage and the credit union.
The advisers were being paid bonuses by the credit union and used the name “DCU Financial” for their operation.
According to the Massachusetts Securities Division, the employees did not make it clear to customers that they were being paid by both the credit union and LPL.
The credit union was not cited because the Massachusetts Securities Division does not regulate credit unions.
Read the Boston Globe article.
Read the consent order.
LPL is a broker-dealer and investment adviser headquartered in Boston, Massachusetts.
The state regulators alleged that LPL agents were working for both the brokerage and the credit union.
The advisers were being paid bonuses by the credit union and used the name “DCU Financial” for their operation.
According to the Massachusetts Securities Division, the employees did not make it clear to customers that they were being paid by both the credit union and LPL.
The credit union was not cited because the Massachusetts Securities Division does not regulate credit unions.
Read the Boston Globe article.
Read the consent order.
Thursday, May 4, 2017
Supreme Court Rules that Cities May Sue Banks under the FHA
On May 1, the Supreme Court in a 5 to 3 decision ruled that cities may sue lenders under the Fair Housing Act (FHA), alleging reduced property tax revenues due to predatory lending.
However, the Supreme Court found that the lower court should have used a more stringent test to determine whether the city of Miami was entitled compensation for its losses. The Supreme Court explained that the plaintiff suing under the FHA must show a direct connection between the injury and the violation.
As a result, the court sent the case back to a lower court to determine whether banks’ lending practices were responsible for Miami’s economic injuries to a degree that justify holding the banks financially liable.
This more stringent test regarding damages could stop many lawsuits from cities.
The case involves a lawsuit brought by Miami against Bank of America and Wells Fargo alleging FHA violations. The complaints were initially dismissed by a Miami federal district court but were reversed by the Eleventh Circuit, which stated Miami had standing under the FHA to sue the banks because the city demonstrated a nexus between the alleged injuries and the banks’ conduct.
Read the opinion.
However, the Supreme Court found that the lower court should have used a more stringent test to determine whether the city of Miami was entitled compensation for its losses. The Supreme Court explained that the plaintiff suing under the FHA must show a direct connection between the injury and the violation.
As a result, the court sent the case back to a lower court to determine whether banks’ lending practices were responsible for Miami’s economic injuries to a degree that justify holding the banks financially liable.
This more stringent test regarding damages could stop many lawsuits from cities.
The case involves a lawsuit brought by Miami against Bank of America and Wells Fargo alleging FHA violations. The complaints were initially dismissed by a Miami federal district court but were reversed by the Eleventh Circuit, which stated Miami had standing under the FHA to sue the banks because the city demonstrated a nexus between the alleged injuries and the banks’ conduct.
Read the opinion.
Wednesday, May 3, 2017
Credit Suisse Settles with NCUA over Toxic Mortgage Securities
The National Credit Union Administration (NCUA) announced that it received $400 million from Credit Suisse for claims arising from losses related to purchases of toxic residential mortgage-backed securities by U.S. Central Federal Credit Union, Southwest Corporate Federal Credit Union, and Western Corporate Federal Credit Union.
As a result of the settlement agreement, NCUA will dismiss its pending lawsuit against Credit Suisse, which does not admit fault as part of the agreement.
NCUA announced that aggregate gross legal recoveries by the NCUA on behalf of five failed corporate credit unions that purchased residential mortgage-backed securities have reached $5.1 billion.
Read the press release.
As a result of the settlement agreement, NCUA will dismiss its pending lawsuit against Credit Suisse, which does not admit fault as part of the agreement.
NCUA announced that aggregate gross legal recoveries by the NCUA on behalf of five failed corporate credit unions that purchased residential mortgage-backed securities have reached $5.1 billion.
Read the press release.
Taxi Medallion Loans Stress Two New Jersey Credit Unions
Taxi medallion loans continue to stress the performance of two New Jersey credit unions in the first quarter of 2017. Both credit unions owned credit union service organizations that financed taxi medallions.
First Jersey Credit Union
The increase in provisions for loan and lease losses caused First Jersey Credit Union (Wayne, NJ) to go from a profit of 82,404 in the first quarter of 2016 to a loss of $847, 040 at the end of the first quarter of 2017.
The credit union reported approximately $862 thousand in provisions for loan and lease losses as of March 31, 2017. A year earlier, the credit union did not report any provisions for loan and lease losses.
First Jersey Credit Union reported a year-over-year reduction in its net worth due to large losses. The credit union's net worth fell from almost $12.4 million to slightly less than $7.2 million. As a result, the credit union's net worth ratio declined by 263 basis points over the last year to 6.44 percent as of March 31, 2017. The credit union currently meets the requirement of being adequately capitalized.
At the end of March 31, 2017, almost $4.1 million in delinquent loans, of which $1.9 million were member business loans (MBL). Early delinquencies (30 to 59 days past due) were $4.6 million, of which $3.1 million are MBLs.
However, the delinquency rate fell from last quarter and from one year ago. At the end of March 31, 2017, the delinquency rate was 5.80 percent compared to 7.82 percent at the end of 2016 and 8.71 percent from a year ago.
Member business loans 60 days or more delinquent was 14.43 percent -- down from 28.57 percent a year earlier. However, there was little change in the 30 day plus delinquency rate for business loans over the last year. Almost one-third of all business loans are 30 days or past due.
Troubled debt restructured business loans increased by 86 percent over the last year to almost $2.9 million.
First Jersey had $2 million in foreclosed and repossessed other assets as of March 31, 217 -- up from zero a year ago.
The credit union has a total buffer of net worth and allowances for loan and lease losses of $11.7 million to absorb expected and unexpected losses at the end of March 2017.
Aspire Federal Credit Union
Aspire Federal Credit Union (Wayne, NJ) reported a loss of $519,386 during the first quarter of 2017. In comparison, the credit union recorded a quarterly loss of $93,723 one year earlier.
The first quarter 2017 loss was partly due to the credit union setting aside $884,357 in provisions for loan and lease losses.
As a result of a 2016 loss of $1.6 million and a first quarter loss of $519 thousand, the credit union's net worth fell from slightly more than $19 million to $17 million. The credit union's net worth ratio fell by 34 basis points over the prior year to 9.81 percent as of March 2017.
Year-over-year loans 60 days or more past due were up by almost $1 million to just below $5.7 million. Early delinquencies were up about $327 thousand to $5.85 million.
The percentage of loans 60 days or more past due were up from last year; but down from the previous quarter. The delinquency rate as of March 2017 was 4.16 percent, down from 5.18 percent as of the end of 2016 and up from 3.09 percent from a year ago.
The credit union reported that $2.6 million in business loans were 60 days or more past due. Early delinquencies for business loans were $3.15 million. Almost one-third of Aspire's business loans were 30 days or more delinquent and 14.96 percent of business loans were 60 days or more past due.
Outstanding troubled debt restructured business loans were $4.3 million as of March 31, 2017.
The credit union reported as of March 31, 2017 foreclosed and repossessed other assets, presumably taxi medallion loans, were almost $1.9 million -- up over 900 percent from a year ago.
The credit union has a combined net worth and loan loss reserve buffer of $21.7 million to absorb expected and unexpected losses.
First Jersey Credit Union
The increase in provisions for loan and lease losses caused First Jersey Credit Union (Wayne, NJ) to go from a profit of 82,404 in the first quarter of 2016 to a loss of $847, 040 at the end of the first quarter of 2017.
The credit union reported approximately $862 thousand in provisions for loan and lease losses as of March 31, 2017. A year earlier, the credit union did not report any provisions for loan and lease losses.
First Jersey Credit Union reported a year-over-year reduction in its net worth due to large losses. The credit union's net worth fell from almost $12.4 million to slightly less than $7.2 million. As a result, the credit union's net worth ratio declined by 263 basis points over the last year to 6.44 percent as of March 31, 2017. The credit union currently meets the requirement of being adequately capitalized.
At the end of March 31, 2017, almost $4.1 million in delinquent loans, of which $1.9 million were member business loans (MBL). Early delinquencies (30 to 59 days past due) were $4.6 million, of which $3.1 million are MBLs.
However, the delinquency rate fell from last quarter and from one year ago. At the end of March 31, 2017, the delinquency rate was 5.80 percent compared to 7.82 percent at the end of 2016 and 8.71 percent from a year ago.
Member business loans 60 days or more delinquent was 14.43 percent -- down from 28.57 percent a year earlier. However, there was little change in the 30 day plus delinquency rate for business loans over the last year. Almost one-third of all business loans are 30 days or past due.
Troubled debt restructured business loans increased by 86 percent over the last year to almost $2.9 million.
First Jersey had $2 million in foreclosed and repossessed other assets as of March 31, 217 -- up from zero a year ago.
The credit union has a total buffer of net worth and allowances for loan and lease losses of $11.7 million to absorb expected and unexpected losses at the end of March 2017.
Aspire Federal Credit Union
Aspire Federal Credit Union (Wayne, NJ) reported a loss of $519,386 during the first quarter of 2017. In comparison, the credit union recorded a quarterly loss of $93,723 one year earlier.
The first quarter 2017 loss was partly due to the credit union setting aside $884,357 in provisions for loan and lease losses.
As a result of a 2016 loss of $1.6 million and a first quarter loss of $519 thousand, the credit union's net worth fell from slightly more than $19 million to $17 million. The credit union's net worth ratio fell by 34 basis points over the prior year to 9.81 percent as of March 2017.
Year-over-year loans 60 days or more past due were up by almost $1 million to just below $5.7 million. Early delinquencies were up about $327 thousand to $5.85 million.
The percentage of loans 60 days or more past due were up from last year; but down from the previous quarter. The delinquency rate as of March 2017 was 4.16 percent, down from 5.18 percent as of the end of 2016 and up from 3.09 percent from a year ago.
The credit union reported that $2.6 million in business loans were 60 days or more past due. Early delinquencies for business loans were $3.15 million. Almost one-third of Aspire's business loans were 30 days or more delinquent and 14.96 percent of business loans were 60 days or more past due.
Outstanding troubled debt restructured business loans were $4.3 million as of March 31, 2017.
The credit union reported as of March 31, 2017 foreclosed and repossessed other assets, presumably taxi medallion loans, were almost $1.9 million -- up over 900 percent from a year ago.
The credit union has a combined net worth and loan loss reserve buffer of $21.7 million to absorb expected and unexpected losses.
Tuesday, May 2, 2017
CU and Bank Trades Call for the Repeal of the Durbin Amendment
In a joint op-ed published in Morning Consult, the heads of seven financial trade associations called for the repeal of the Durbin amendment, which imposed government price controls on debit card interchange.
According to data from the Federal Reserve Bank of Richmond, the Durbin amendment has “siphoned upwards of $6 billion to $8 billion a year from the revenue banks and credit unions use to serve their customers and members, respectively,” the groups wrote, totaling $42 billion since it was passed as part of the Dodd-Frank Act in 2010. The trade groups pointed out that the amendment has greatly limited banks’ and credit unions’ ability to provide their customers with low-cost financial products and services, and that in the meantime, retailers’ profits have grown.
In addition, they noted that the amendment has done significant harm to small businesses, which have seen increased costs for processing small-dollar transactions and fewer choices for payment processing services since the law took effect. Smaller card issuers have also struggled with added compliance costs and lower revenues as a result of the amendment.
The House Financial Services Committee will start today to mark-up the Financial CHOICE Act (H.R. 10), which includes an amendment to repeal the Durbin Amendment.
Read the op-ed.
According to data from the Federal Reserve Bank of Richmond, the Durbin amendment has “siphoned upwards of $6 billion to $8 billion a year from the revenue banks and credit unions use to serve their customers and members, respectively,” the groups wrote, totaling $42 billion since it was passed as part of the Dodd-Frank Act in 2010. The trade groups pointed out that the amendment has greatly limited banks’ and credit unions’ ability to provide their customers with low-cost financial products and services, and that in the meantime, retailers’ profits have grown.
In addition, they noted that the amendment has done significant harm to small businesses, which have seen increased costs for processing small-dollar transactions and fewer choices for payment processing services since the law took effect. Smaller card issuers have also struggled with added compliance costs and lower revenues as a result of the amendment.
The House Financial Services Committee will start today to mark-up the Financial CHOICE Act (H.R. 10), which includes an amendment to repeal the Durbin Amendment.
Read the op-ed.
Firefighters First Switches to Federal Charter and Federal Insurance, Exempted from MBL Cap
The National Credit Union Administration (NCUA) has granted a federal charter and federal share insurance coverage to Firefighters First Federal Credit Union of Los Angeles, which became effective on April 18.
NCUA granted Firefighters First a Trade-, Industry-, Profession-wide (TIP) field of membership to serve the 510,000 employees and independent contractors who work in the fire protection industry in the United States.
NCUA also approved the credit union’s request for the designation of being chartered for the purpose of granting member business loans. This means the credit union is not subject to the member business loan (MBL) cap of 12.25 percent of assets.
However, the historical evidence indicates Firefighters First was not an active business lender. In 2004, the credit union had only $1 million in outstanding member business loans. The credit union had a MBL to asset ratio of 0.15 percent. If you add in purchased business loans or participation interests to nonmembers, the ratio of business loans to assets increases to 2.1 percent. It was only in the last four years that the credit union reported a business loans to asset ratio above 10 percent.
I wonder what tortured reasoning NCUA used to come to the conclusion that the credit union was chartered for the purpose of making member business loans.
Furthermore, the conversion to a federal charter means that Firefighters First will no longer be subject to the requirement to disclose the compensation of the highest paid individuals at the credit union.
Firefighters First was originally chartered in 1935 by the state of California as the Los Angeles Firemen’s Credit Union. The credit union obtained federal insurance in 1975 but converted to private insurance in 1984 and changed its name to Firefighters First Credit Union in 2014.
Prior to its conversion to a federal charter, Firefighters First had $1.18 billion in assets, making it one of the largest single-common-bond federal credit unions in the United States.
NCUA granted Firefighters First a Trade-, Industry-, Profession-wide (TIP) field of membership to serve the 510,000 employees and independent contractors who work in the fire protection industry in the United States.
NCUA also approved the credit union’s request for the designation of being chartered for the purpose of granting member business loans. This means the credit union is not subject to the member business loan (MBL) cap of 12.25 percent of assets.
However, the historical evidence indicates Firefighters First was not an active business lender. In 2004, the credit union had only $1 million in outstanding member business loans. The credit union had a MBL to asset ratio of 0.15 percent. If you add in purchased business loans or participation interests to nonmembers, the ratio of business loans to assets increases to 2.1 percent. It was only in the last four years that the credit union reported a business loans to asset ratio above 10 percent.
I wonder what tortured reasoning NCUA used to come to the conclusion that the credit union was chartered for the purpose of making member business loans.
Furthermore, the conversion to a federal charter means that Firefighters First will no longer be subject to the requirement to disclose the compensation of the highest paid individuals at the credit union.
Firefighters First was originally chartered in 1935 by the state of California as the Los Angeles Firemen’s Credit Union. The credit union obtained federal insurance in 1975 but converted to private insurance in 1984 and changed its name to Firefighters First Credit Union in 2014.
Prior to its conversion to a federal charter, Firefighters First had $1.18 billion in assets, making it one of the largest single-common-bond federal credit unions in the United States.
Monday, May 1, 2017
UBS Settles Lawsuit with NCUA
The National Credit Union Administration (NCUA) has recovered $445 million from UBS for claims arising from losses related to purchases of residential mortgage-backed securities by U.S. Central Federal Credit Union and Western Corporate Federal Credit Union.
The settlement covers claims asserted in 2012 by the NCUA Board as liquidating agent for U.S. Central Federal Credit Union and Western Corporate Federal Credit Union in federal district court in Kansas.
As part of the settlement, NCUA will dismiss its pending suit against UBS, which does not admit fault as part of the agreement.
Net proceeds from recoveries are used to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.
Read the press release.
The settlement covers claims asserted in 2012 by the NCUA Board as liquidating agent for U.S. Central Federal Credit Union and Western Corporate Federal Credit Union in federal district court in Kansas.
As part of the settlement, NCUA will dismiss its pending suit against UBS, which does not admit fault as part of the agreement.
Net proceeds from recoveries are used to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.
Read the press release.
Financial and Housing Groups Support Bills Targeting PACE Loans
In a joint letter, financial and housing trade associations on April 24 expressed support for legislation to require more consumer disclosures for Property Assessed Clean Energy (PACE) loans, a controversial financial product that allows homeowners to pay for energy-efficient retrofitting -- such as solar panels and high-efficiency air conditioners -- through their property tax assessments.
More than 30 states currently allow PACE loans, which may take first-lien position over the primary mortgage on a residence but are not currently subject to federal consumer protection requirements. The bills -- S. 838 and H.R. 1958 -- would subject PACE loan originators and sales personnel to Truth in Lending Act requirements, enhancing pre-origination disclosures of total loan amounts and loan terms and bringing the loans explicitly under the oversight of the Consumer Financial Protection Bureau.
“PACE loans are -- in substance -- consumer loans secured by real property and should be subject to federal consumer protection requirements, not dependent on a patchwork of limited or non-existent state/municipal laws that do not adequately protect homeowners,” the trades said.
The letter went to the Senate bill authors, Senators John Boozman, R-Ark., Tom Cotton, R-Ark., and Marco Rubio, R-Fla.; and House bill authors, Representatives Ed Royce, R-Calif., and Brad Sherman, D-Calif.
Read the House letter.
More than 30 states currently allow PACE loans, which may take first-lien position over the primary mortgage on a residence but are not currently subject to federal consumer protection requirements. The bills -- S. 838 and H.R. 1958 -- would subject PACE loan originators and sales personnel to Truth in Lending Act requirements, enhancing pre-origination disclosures of total loan amounts and loan terms and bringing the loans explicitly under the oversight of the Consumer Financial Protection Bureau.
“PACE loans are -- in substance -- consumer loans secured by real property and should be subject to federal consumer protection requirements, not dependent on a patchwork of limited or non-existent state/municipal laws that do not adequately protect homeowners,” the trades said.
The letter went to the Senate bill authors, Senators John Boozman, R-Ark., Tom Cotton, R-Ark., and Marco Rubio, R-Fla.; and House bill authors, Representatives Ed Royce, R-Calif., and Brad Sherman, D-Calif.
Read the House letter.