Morning Consult Finds Majority of Voters Support Eliminating CU Tax Exemption to Pay for Tax Reform

A survey by Morning Consult of 1,990 registered voters conducted for the American Bankers Association found that American voters are overwhelmingly unaware that credit unions pay no federal income taxes. When told that credit unions do not pay corporate income taxes, more than half would support a tax reform plan that eliminates the credit union tax exemption to limit an increase in the deficit.

According to the national survey,

• 85 percent of American voters did not know whether credit unions pay taxes or mistakenly believed they do.
• 51 percent of voters said they would support eliminating the credit union tax exemption if it helped minimize the impact of tax reform on the deficit.
• 56 percent believe it is inappropriate for credit unions to use their tax exemption to buy multimillion-dollar naming rights to arenas and sports sponsorships.

Below is an infographic highlighting the survey results.

Another Georgia Bank to Be Acquired by Credit Union

SRP Federal Credit Union (North Augusta, SC) has reached an agreement to acquire Southern Bank (Sardis, GA).

SRP FCU has $851 million in assets, according to its most recent call report.

Southern Bank is a privately held bank with $80 million in assets and five branches.

The combined entity would have $950 million in assets and more than 20 offices in Georgia and South Carolina.

The acquisition is expected to be complete in the second quarter of 2018.

This is the eighteenth announced or completed merger between a bank and a credit union, since 2012.

Read the story.

United Nations FCU, Clements & Company and Underwriters at Lloyd's of London Fined $1.47 Million

The New York Department of Financial Services (DFS) has entered into a consent order with Clements & Company, Underwriters at Lloyd’s of London, and the United Nations Federal Credit Union (UNFCU) for offering, marketing and underwriting an unlicensed credit and debit card-based life insurance program for UNFCU members.

The insurance program offered guaranteed-issue term life insurance to UNFCU’s members in more than 210 countries and territories. A total of more than 4,300 policies were sold, including to 804 members listing New York as their primary location.

According to the DFS, the insurance offered and sold to UNFCU members did not meet New York standards for policies sold by DFS-approved insurers.

Also, prior to the settlement, the insurance program was operating at a severe loss and was unsustainable.

DFS is requiring the parties to transfer the business over to a New York-licensed insurer, Monitor Life Insurance Company of New York.

The consent order requires the parties to pay a total of $1.47 million in fines for unlicensed life insurance business and to establish an insurance program with a DFS-licensed insurer.

According to the consent order, UNFCU will pay a civil penalty of $250,000.

Additionally, UNFCU will no longer receive "commissions, fees, and other compensation related to coverage offered New York Certificate Holders." The credit union will pay one-third of the first $100,000 cost associated with hiring a third-party vendor to design and build a web portal. UNFCU will be responsible for paying all merchant credit card fees.

Read the press release.

Read the consent order.

Align CU Buys Naming Rights to Pavilion Club at the Tsongas Center

Align Credit Union is sponsoring the Pavilion Club at the Tsongas Center at UMass Lowell.

The “Align Credit Union Pavilion” is a 4,800 square foot multi-level luxury concourse that provides 350 Pavilion Club members with great views and amenities.

The price and terms of the sponsorship was not disclosed.

Read the press release.

CUs Accounted for 9 Percent of All Mortgage Loans in 2016

Credit unions accounted for 9 percent of all mortgage originations in 2016, according to Home Mortgage Disclosure Act (HMDA) data.

There were 1,939 credit unions that filed HMDA reports. A majority of credit unions (1,025) made fewer than 100 loans and 374 credit unions reported fewer than 25 loans.

Credit unions reported 215 thousand home-purchase loans. Almost 87 percent of home-purchase loans were conventional mortgages.

Credit unions, along with small banks, accounted for a highly disproportionate share of conventional higher-priced loans. Five percent of credit unions' conventional loans were high-priced versus 3.7 percent of all conventional mortgages made by all lenders.

Almost one quarter (25.2 percent) of all home-purchase loans were made to low-and moderate-income (LMI) borrowers and 13.2 percent were to LMI neighborhoods.

Credit unions reported 277 thousand refinance loans, of which 96 percent were conventional loans.

Credit unions sold about one-half of the home-purchase loans they originated and about 40 percent of the refinance loans they originated.

Read the Federal Reserve Bulletin article.

Bettendorf City Council Approves TIF for Ascentra's Construction Project

The Quad City Times is reporting that Ascentra Credit Union (Bettendorf, IA) will receive tax-increment financing (TIF) for the construction of its new headquarters.

The Bettendorf (IA) City Council on November 211 approved a development agreement with Ascentra Credit Union by a 6-1 vote that will lead to the construction of an almost 40,000 square-foot headquarters across the street from the Quad-Cities Waterfront Convention Center.

The terms of the agreement call for a 10-year, 100 percent TIF capped at $2 million.

Terms of the agreement call for the city to purchase Ascentra's current headquarters on Grant Street for $1.15 million and bury utilities on the new site and in addition to relocating the traffic signal at the corner of 21st and Grant streets.

Ascentra's obligations include purchasing the north Town Square property for $750,000 and the south property for $1. After an alternative parking structure is constructed, the south property would be conveyed back to the city for $1.

Both the Scott County Board of Supervisors and Bettendorf School District were supportive of the project and the use of tax incentives.

Read the story.

November 21 City Council Agenda.

Bad Taxi Medallion Loans Negatively Affect These NY Credit Unions

Carnage in the taxi industry from ride sharing apps continues to negatively impact several New York credit unions.

Van Cortlandt Cooperative FCU (Bronx, NY)

Over 25 percent of loans at Van Cortlandt Cooperative FCU were delinquent at the end of the third quarter of 2017.

The $72 million credit union reported that $8 million in loans were 60 days or more past due as of September 2017. More than half (57 percent) of the delinquent loans were past due for 360 days or more.

Almost all of the delinquent loans (slightly less than $8 million) were nonmember commercial loans, which presumably were taxi medallion participation loans.

As of September 2017, the credit union reported $10.6 million in purchased commercial loans or participations to nonmembers. Over three-quarters of these loans (75.42 percent) were 60 days or more past due.

The credit union further reported almost $6.7 million of troubled debt restructured commercial loans.

One factor mitigating the dire delinquency ratio is that the credit union has a loan to asset ratio of 38.65 percent.

In addition, the credit union had a year-to-date loss of $409 thousand, after posting a loss for 2016 of $3.2 million.

Over the last year, the credit union's net worth ratio has fallen from almost $11 million to approximately $6.5 million. The credit union's net worth ratio has tumbled from 13.99 percent to 8.97 percent.

The credit union is reporting that it has allowances for loan and lease losses of $4 million. This gives the credit union a coverage ratio of 49.98 percent.

Bay Ridge FCU (Brooklyn, NY)

Bay Ridge FCU reported a loss for the first nine months of 2017 of almost $2.6 million. In comparison, the credit union reported a profit of almost $250 thousand for the same time period in 2016.

The loss was due to provisions for loan and lease losses of $4.3 million as of September 2017.

Due to its loss, the credit union's net worth dropped from $19 million at the end of 2016 to $16.3 million as of September 2017. Over the comparable time period, its net worth ratio fell by 110 basis points to 8.37 percent.

The credit union reported almost $8.3 million in delinquent loans at the end of the third quarter of 2017 -- this was up from $3.8 million from a year ago. The percent age of delinquent loans rose from 2.20 percent to 4.83 percent.

Almost $5.9 million of the delinquent loans were commercial loans not secured by real estate.

In addition, the credit union is reporting almost $21.6 million in troubled debt restructured commercial loans. Troubled debt restructured commercial loans were almost 130 percent of the credit union's net worth.

Due to the increase in provisions for loan and lease losses, the credit union increased its allowance for loan and lease losses to $5.9 million. The portion of allowance for loan and lease losses that were troubled debt restructured loans was $4.3 million.

The credit union's coverage ratio was 71.58 percent as of the end of the third quarter of 2017.

G.P.O. FCU (New Hartford, NY)

Participation loans, presumable taxi medallion participation loans, accounted for most of G.P.O. FCU's non-performing loans.

The credit union reported holding $13.7 million in participation commercial loans, as of September 2017. Participation loans represented 8.10 percent of the credit union's total loans.

Of its $7 million in delinquent loans, almost $5.8 million were delinquent participation loans. The credit union reported 42.11 percent of its participation loans were 60 days or more past due.

Of the $5.7 million delinquent participation loans, approximately $3.7 million were 360 days or more delinquent.

In addition, $1.9 million in participation loans were charged off minus recoveries. The net charge-off rate on participation loans was 16.85 percent.

Despite the non-performance of these participation loans, the credit union was profitable and continued to build its net worth during the third quarter.

GOP Lawmakers Urge HUD to Review and Amend Out-of-Date Disparate Impact Rule

A group of Republican lawmakers wrote Housing and Urban Development Secretary Ben Carson on November 15th about the agency's out-of-date disparate impact stating that the rule is inconsistent with current Supreme Court precedents on disparate impact theory and could be negatively affecting HUD’s housing goals.

“Local governments, commercial and residential lenders, issuers, developers, and other mortgage industry service providers are less inclined to participate in housing projects because HUD’s disparate impact rule does not comply with the Supreme Court’s rulings,” the lawmakers wrote. “This inconsistency will reduce housing production, which in turn will increase housing expenses for many Americans, including those who can least afford it.”

The lawmakers urged HUD to make changes to the rule, adding that it “is a prime candidate for reconsideration” under an executive order issued by President Trump earlier this year calling on agencies to evaluate outdated, unnecessary or ineffective regulations, as well as those that impose costs that outweigh benefits.

Below is the letter.

IH Mississippi Valley CU to Build New $26 Million HQ, Project Receives Tax Incentives

Moline City Council approved the city's development agreement with IH Mississippi Valley Credit Union (Moline, IL).

The city will sell property to the $1.2 billion credit union for $2.925 million, which will be used to construct an 80,000-square-foot, four-story facility.

As part of the agreement, IH Mississippi Valley will receive a tax increment financing (TIF) incentive payment of up to $3.9 million, or 15 percent of the $26 million project. The credit union also will be rebated for eligible TIF expenses, including site work up to $525,000. The total incentive package is up to $4.425 million, which equals 17 percent of the total cost of the project.

One city alderman objected to an incentive package as the credit union does not pay income tax.

Read the story.

Read the agenda of the City Council meeting.

Taxi Medallion Loans Impact Two NJ CUs

Several New Jersey credit unions with exposure to taxi medallion loans experienced additional deterioration in their financial performance.

First Jersey Credit Union (Wayne, NJ)

The $91 million credit union recorded a year-to-date loss of $5.8 million at the end of the third quarter. The loss was ties to a $4.6 million year-to-date increase in provision for loan and lease losses.

As a result of the loss, the credit union's net worth fell to slightly less than $2.2 million. At the end of the third quarter, the credit union was significantly undercapitalized with a net worth ratio of 2.40 percent, down from 3.80 percent as of June 2017.

The credit union reported $5.6 million in delinquent loans. This was down from $6.3 million from the previous quarter. The percent of loans 60 days or more past due was 8.88 percent as of the most recent financial performance report. Delinquent loans as a percent of net worth were 256.29 percent.

Delinquent commercial loans not secured by real estate -- presumably taxi medallion loans -- were almost $4.6 million as of September. The delinquency rate on these loans was 35.05 percent.

In addition, troubled debt restructured commercial loans were nearly $4.7 million.

The credit union reported a September 2017 net charge-offs of $2.3 million, of which $2 million was commercial loans. The net charge-off rate was 4.60 percent; but the net charge-off rate for commercial loans was 17.54 percent -- up from 4.37 percent from a year ago.

Due to the increase in provision for loan and lease losses, the allowance for loan and lease losses was $6.8 million. The coverage ratio was 121.64 percent as of September 2017, up from 114.63 percent on June 2017.

Over the last year, assets at the credit union shrunk by $34.2 million. During the last quarter, assets fell by $10.4 million.

Aspire Federal Credit Union (Clark, NJ)

Aspire FCU reported a year-to-date loss of $5.8 million as the credit union seeks to build reserves to cover bad taxi medallion loans. The $161 million credit union reported almost a doubling of provisions during the third quarter from $3.4 million to $6.7 million.

As a result of the loss, the credit union's net worth fell from $17.5 million at the end of 2016 to $11.7 million as of September 2017. The credit union's net worth ratio dropped by 283 basis points to 7.28 percent.

Delinquent loans rose during the last quarter from $8.2 million to $9.2 million. The delinquency rate on loans rose 106 basis points to 7.21 percent.

Commercial loans not secured by real estate -- presumably taxi medallion loans -- accounted for almost half of the delinquent loans ($4.5 million). The percentage of these commercial loans 60 days or more past due was 34.52 percent.

The credit union is reporting net charge-offs of $2.8 million as of September 2017. The net charge-off rate was 2.80 percent.

Troubled debt restructured commercial loans were approximately $3.9 million at the end of the third quarter of 2017.

Due to the increase in provisions for loan and lease losses, the credit union's allowance for loan and lease losses jumped from $4.3 million at the end of 2016 to $8.2 million as of September 2017. The credit union's coverage ratio was 88.73 percent -- up from 58.64 percent at the end of 2016.

Losses to NCUSIF from Taxi Medallion Could Reduce or Eliminate NCUSIF Distribution in 2018

Losses from taxi medallion loans to the National Credit Union Share Insurance Fund (NCUSIF) could jeopardize 2018 distribution from the the NCUSIF.

According to a presentation at the New York Credit Union Association's Credit Union CEO Roundtable in May 2017, the estimated losses from taxi medallion loans to the NCUSIF could be between $200 million to $719 million.

Below is the slide.

If losses from taxi medallion loans to NCUSIF come in at the upper end of the range, it would be in the middle of the range of the projected NCUSIF distributions of $600 million to $800 million in 2018.

In fact, Chairman McWatter cautioned during the the September National Credit Union Administration (NCUA) Board meeting, "a large increase in insurance losses ... could reduce or eliminate the projected distributions."

As of September 2017, NCUA has only set aside $286 million in reserves for insurance losses, of which $20.1 million is for specific natural person credit unions. In the case of large losses from taxi medallion loans, this $286 million in reserves would not be sufficient to cover these losses. This means NCUA would need to significantly increase reserves to cover these insurance losses going forward.

To maintain the new NCUSIF normal operating level at 1.39 percent, this would require either a reduction or elimination of the 2018 distribution.

Therefore, credit unions should not count their chickens until they are hatched.

Low-Income CU Secures $12 Million in Secondary Capital

Jefferson Financial Federal Credit Union (Metairie, LA) recently completed the first funding installment of its National Credit Union Administration-approved $12 million secondary capital plan.

The $563 million low-income credit union worked with CU Capital Market Solutions (CMS) of Overland Park, Kansas to develop a secondary capital plan, prepare its NCUA application and fund the capital.

The second installment of Jefferson’s secondary capital will be provided by CMS through an exclusive arrangement with CU Secondary Capital Fund.

Read the press release.

UtahPolicy.Com Calls for Scrutiny of CU Tax Exemption

UtahPolicy.Com is calling on Senator Orrin Hatch (R - UT) and Congress to scrutinize the tax exempt status of large credit unions.

According to LaVarr Webb -- the publisher of UtahPolicy.com, some tax credits and exemptions are still warranted, while others are no longer justified.

Webb writes that small traditional credit unions serving people of modest means and having a true common bond should retain their tax exemption.

However, Congress should scrutinize the tax exemptions of credit unions with more than $500 million in assets.

Webb argues that these large impersonal credit unions are just like banks and have no meaningful common bond.

This tax exemption unfairly tilts the playing field in favor of these large credit unions relative to community banks.

Read the commentary.

Delinquencies Up Almost 25 Percent During Q3 at Taxi Medallion Lender Progressive CU

Troubled taxi medallion loans caused a decline in asset quality at Progressive Credit Union (New York, NY) during the third quarter of 2017.

Progressive Credit Union had $74.2 million in delinquent loans at the end of the third quarter of 2017. Delinquent loans were up 24.8 percent during the quarter. The percentage of loans past due was 15.81 percent, up from 12.24 percent from the previous quarter.

The credit union also reported $54.2 million in net charge-offs, as of September 2017. The net charge-off rate on average loans was 13.77 percent.

In addition, outstanding troubled debt restructured loans were $120.5 million.

At the end of the third quarter, the credit union has $26.9 million in foreclosed and repossessed other assets, presumably taxi medallions.

Due to the decline in asset quality, the credit union increased provision for loan and lease losses to build its allowance for loan and lease losses.

Provision for loan and lease losses was $59.9 million at the end of the third quarter, up from $40.4 million from the prior quarter.

Through the first 3 quarters of this year, allowance for loan and lease losses increased by $5.7 million to $76.8 million, as of September 2017. The credit union's coverage ratio dropped to 103.59 percent during the quarter from 115.54 percent and since the beginning of the year from 107 percent.

As a result of the increase in provision for loan and lease losses, the credit union reported a year-to-date loss of $65.7 million, as of September 2017.

This loss caused the credit union's net worth to fall from almost $195 million at the end of 2017 to $129.2 million as of September 2017. The credit union's net worth ratio tumbled from 32.96 percent to 25.77 percent over the same time period.

Bill Would Allow Banks to Merge or Convert into Credit Unions

A bill (H. 2980) has been introduced in the Massachusetts legislature that would permit state chartered banks to convert or merge into a credit union, according to Banker & Tradesman.

A hearing on the bill was held on October 24 by the Joint Committee on Financial Services.

The Massachusetts Bankers Association stated that it was not opposed to a two-way street allowing a bank to convert to a credit union. However, the association noted that a bank to credit union conversion is complex and could result in less tax revenue for the state.

Read the story.

Georgia's Own CU to Acquire State Bank of Georgia

Credit Union Journal is reporting that $2.3 billion Georgia's Own Credit Union (Atlanta, GA) has entered into a definitive agreement to acquire State Bank of Georgia (Fayetteville, GA).

The deal was approved by both boards and will be structured as an asset purchase.

State Bank of Georgia had $90.1 million in assets, as of its most recent Call Report.

The transaction is expected to close during the second quarter of 2018.

Read the story (subscription required).

LOMTO FCU's Net Worth Ratio Plunges to Minus 12.86 Percent

LOMTO Federal Credit Union (Woodside, NY) was insolvent due to bad taxi medallion loans, according to its most recent call report.

LOMTO FCU was placed into conservatorship on June 26, 2017.

The $193.3 million credit union reported a year-to-date loss of $38.5 million as of September 2017. During the third quarter of 2017, the credit union recorded a quarterly loss of $27.7 million.

The year-to-date loss arose from an increase in provision for loan and lease losses over the first 3 quarters of $38 million.

As a result of the loss, the credit union's net worth fell to negative $24.9 million from $2.9 million at the end of June 2017. The credit union's net worth ratio fell from 1.31 percent to minus 12.86 percent over the same time period.

The credit union reported $39.1 million in delinquent loans. As of September 2017, the credit union's delinquency rate was 21.58 percent.

In addition, the credit union is reporting that almost $10 million in loans were in the early stage of delinquency (30 to 59 days past due) at the end of the third quarter.

Furthermore, the credit union is reporting slightly less than $12.2 million in net charge-offs. As of September 2017, the net charge-off rate was 8.18 percent.

At the end of the third quarter, LOMTO had $14.5 million in foreclosed and repossessed assets, down from $23.5 million from the prior quarter.

The increase in provision for loan and lease losses enabled LOMTO to build its allowance for loan and lease losses account to $38.2 million. The coverage ratio as of September 2017 was 97.73 percent, up from 62.39 percent in the previous quarter. Approximately $12.5 million in allowance for loan and lease losses was tied to $20.5 million in troubled debt restructured loans.

During the third quarter, assets at LOMTO fell by $25.6 million to $193.3 million.

Melrose Credit Union Insolvent

Massive losses from bad taxi medallion loans have wiped out the net worth of Melrose Credit Union (Briarwood, NY).

Melrose Credit Union was placed into conservatorship on February 10, 2017.

The $1.49 billion credit union reported a year-to-date loss of almost $178.4 million as of September 2017. The loss arose from an increase in provision for loan and lease losses. Year-to-date provision for loan and lease losses was $178.2 million with $116.3 million increase during the third quarter.

As a result of the massive loss, the credit union's net worth went from $102.2 million at the end of 2016 to minus $76.1 million as of third quarter of 2017. The credit union's net worth ratio was negative 5.10 percent -- meaning it was critically undercapitalized as of the most recent call report.

Loans 60 days or more past due were $668.5 million as of September 2017. Loans 360 days or more past due were approximately $424.7 million -- up from $111.9 million from the previous quarter and $366.9 million from a year ago.

The credit union was also reporting that $37.8 million loans were in the early stage of delinquencies (30 to 59 days past due).

The delinquency rate on loans was 40.01 percent. This was up from 37.85 percent as of June 2017 and 24.12 percent as of September 2016.

Due to the increase in provision for loan and lease losses, the allowance for loan and lease losses rose from $210.3 million as of June 2017 to $326.5 million.

However despite this increase, the credit union's loan loss reserves are underfunded with a coverage ratio of 48.83 percent as of September 2017.

Significantly Undercapitalized Altier CU Affected by Bad Taxi Medallion Participation Loans

Altier Credit Union (Tempe, AZ) reported a deterioration in its financial performance, as taxi medallion participation loans weighed on its operation.

This credit union was brought to my attention by a reader.

In a 2012 comment letter to the National Credit Union Administration, Altier commented that its portfolio was "comprised of indirect lending, taxi medallions and manufactured housing." (Read the comment letter).

The $193 million credit union reported a year-to-date loss of $9.2 million, as the credit union recorded a provision for loan and lease losses during the first 3 quarters of 2017 of $9.1 million.

As a result of the loss, the credit union's net worth fell from $13.7 million at the end of 2016 to less than $4.5 million as of September 2017. The credit union's net worth ratio declined from 7.23 percent to 2.31 percent over the same time period. The credit union was significantly undercapitalized at the end of the third quarter.

The credit union is reporting almost $13 million in commercial loans, presumably taxi medallion participation loans. The credit union had $16.1 million in outstanding participation loans.

As of September 2017, $3.8 million in loans were 60 days or more past due, of which $3.3 million were participation loans. While the overall delinquency rate at Altier Credit Union was 2.68 percent, the delinquency rate on participation loans was 20.61 percent and the delinquency rate on commercial loans was 25.45 percent.

In addition, the credit union charged off $1.15 million in commercial loans through the first 3 quarters of 2017.

Furthermore, troubled debt restructured commercial loans not secured by real estate were approximately $7.4 million as of September 2017.

The increase in provision for loan and lease losses caused the credit union's allowance for loan and lease losses account to increase from almost $2 million at the end of 2016 to $9.8 million. The credit union's coverage ratio (allowance for loan and lease losses divided by delinquent loans) was 254.23 percent as of September 2017.

CU Consumer Credit Increased During September at a Faster Pace

Outstanding consumer credit at credit unions grew by almost $4.5 billion during September 2017 to $417 billion, according to the Federal Reserve.

During the previous month, consumer credit at credit unions grew at a slower pace of approximately $800 million.

Revolving credit edged higher by $200 million to $55.3 billion during September.

Outstanding nonrevolving credit at credit unions increased from $357.4 billion in August to $361.7 billion in September.

View the G.19 Report.

CFPB Flags Risk Associated by Longer Maturity Car Loans

A study by the Consumer Financial Protection Bureau (CFPB) flags the higher risk posed by longer term auto loans.

The study noted that auto loans with longer maturities continue to expand market share, despite a cooling in the auto finance market. According to the CFPB, loans with maturities of six years or longer accounted for 42 percent of the market in 2017 year-to-date, up from 26 percent in 2009.

Six-year auto loans are the most common term used to finance auto loans.

Longer-maturity loans may pose greater risks to consumers. These loans are more likely to be used for larger loan amounts and by borrowers with lower credit scores. The average credit score for a borrower for taking out a six-year auto loans was 674 -- 39 points below the credit score for borrowers taking out a five-year auto loans. And given that the average length of U.S. car ownership is 6.5 years, longer loan maturities may mean borrowers are paying off loans for cars they no longer drive.

The dividing line in loan quality between five-year loans and six-year loans was especially stark, with default rates for the latter roughly double the former at comparable points since origination. For example, a six-year car loan made in 2014 had a cumulative default rate of over 5 percent two years after origination, but a similar five-year loan saw a default rate of just over 2.5 percent.

Read the report.

Delinquencies Rise at Quorum FCU due to Delinquent Taxi Medallion Participation Loans

Quorum Federal Credit Union (Purchase, NY) reported an increase in delinquencies during the third quarter due to troubled participation loans.

During the third quarter, delinquent loans increased by $4.1 or 8.2 percent to $53.7 million.

As of September, Quorum FCU reported that 7.22 percent of its loans were 60 days or more past due. This was up from 6.74 percent as of June 2017 and 4.20 percent from a year ago.

Almost 80 percent of the credit union's delinquencies were participation loans, presumably taxi medallion participation loans. As of September 30, 2017, delinquent participation loans were almost $42.7 million -- up $3.2 million from the previous quarter and $22.6 million from a year ago, respectively.

The credit union reported $113 million in participation loans, of which $79.7 million were commercial loans. It appears that $70.6 million of the commercial loans were taxi medallion participation loans.

As of September 30, the delinquency rate on participation loans was 37.57 percent. This was up from 16.35 percent from a year ago.

Troubled debt restructured commercial loans not secured by real estate were $24.4 million.

The credit union reported a year-to-date profit of $427 thousand; but a third quarter loss of $2.3 million. The loss was driven by a $6.7 million increase in provision for loan and lease losses during the quarter.

The quarterly loss caused the credit union's net worth to fall from $68.2 million as of June 2017 to $65.9 million as of September 2017.

As a result, the net worth ratio fell 15 basis points during the quarter to 7.65 percent on September 30, 2017.

The increase in provisions for loan and lease losses caused the allowances for loan and lease losses to increase to $34.2 million at the end of the third quarter from $28.9 million a quarter earlier.

Quorum's coverage ratio (allowances for loan and lease losses to delinquent loans) was 63.65 percent as of September 2017 -- up from 58.22 percent as of June 2017, but down from 82.57 percent from a year ago.

Quorum ended its taxi medallion participation loan program in 2013.

Two Assisted Mergers Impose Small Losses on the NCUSIF

The National Credit Union Administration's Office of the Inspector General (OIG) recently reported that the National Credit Union Share Insurance Fund (NCUSIF) incurred small losses associated with the assisted merger of two credit unions between April 1, 2017 and September 30, 2017.

According to the Semiannual Report to the Congress, Love Gospel Assembly Federal Credit Union (Bronx, NY) and Madco Credit Union (Edwardsville, IL) imposed an estimated loss to the NCUSIF of $30,771 and $25,000, respectively.

Love Gospel Assembly FCU failed due to poor record keeping and inadequate management. The credit union was closed on August 2. The NCUA approved a voluntarily assisted merger with USAlliance Federal Credit Union (Rye, NY).

Madco Credit Union failed due to severe operational concerns and potential unrecorded liabilities and unrecognized losses. NCUA approved an involuntary assisted merger with with 1st MidAmerica Credit Union (Bethalto, IL).

Read the report.

Bank and Credit Union Trade Groups Call for National Data Breach Standards

Seven financial trade associations wrote to lawmakers calling for a national data security and breach notification standard.

In a letter to Representatives Blaine Luetkemeyer (R-Mo.) and Lacy Clay (D-Mo.), the financial trade associations called for a standard that would require all entities handling sensitive personal and financial data to have robust protections in place and to notify consumers in a timely manner in the event of a breach. They also added that such a standard would help eliminate current inconsistencies between a patchwork of state and federal laws.

“Our existing payments system serves hundreds of millions of consumers, retailers, financial institutions and the economy well,” the groups wrote. “Protecting this system is a shared responsibility of all parties involved and we must work together and invest the necessary resources to combat increasingly sophisticated threats to the payments system.”

The seven financial trade associations that signed the letter are the American Bankers Association, Consumers Bankers Association, Credit Union National Association, Financial Services Roundtable, Independent Community Bankers Association, National Association Federally-Insured Credit Unions, and The Clearing House.

Read the letter.

Bad Loans Push Conserved Riverdale CU Deeper into Insolvency

Massive losses from poor performing loans have pushed conserved Riverdale Credit Union (Selma, AL) deeper into insolvent as of September 2017. performing loans.

The credit union posted a year-to-date loss of $14.3 million, driven by provision for loan and lease losses of $15.6 million through the first 3 quarters of 2017.

As a result of the loss, the credit union's net worth has dropped from almost $8.9 million to a negative $6.1 million.

The credit union's net worth ratio fell from 12.21 percent as of the end of 2016 to minus 11.05 percent as of September 2017.

Delinquent loans rose from $1.6 million at the end of 2016 to $7.1 million at the end of the third quarter 2017. The delinquency rate as of September 2017 was 14.33 percent.

As of September 2017, net charge-offs were $12.8 million. The net charge-off rate was 30.61 percent as of the most recent call report.

Total assets of the credit union have dropped by almost 25 percent from the start of this year to $54.9 million as of the most recent call report. However, the credit union's assets are now less than its total deposits and shares of $57 million.

Surprisingly, the credit union is reporting almost $1.4 million in uninsured deposits and shares.

Large CU Loan and Deposit Growth Outperforms Community Banks

A study by Experian found that smaller community banks and credit unions are losing ground to larger institutions and that large credit unions are outperforming community banks.

Experian noted that credit unions with over $1 billion in assets had faster deposit and loan growth rates than community banks.

The median deposit growth rate for larger credit unions was 8.77 percent versus 4.06 percent for community banks. Median loan growth was 12.23 percent for large credit unions versus 5.62 percent for community banks.

However, large credit unions are less efficient and less profitable than community banks.

Read the report.