Friday, September 20, 2019

Mountain America CU Sponsoring Dixie State University Athletics

Mountain America Credit Union (Sandy, UT) is the exclusive credit union sponsor of Dixie State University Athletics (St. George, UT).

Funds from this multi-year sponsorship will go to new videoboards inside Burns Arena and at Trailblazers Stadium.

In return, $9 billion Mountain America will have its brand prominently displayed at all home athletic games including football, basketball, women's volleyball, men's and women's soccer, softball, and baseball.

The price of the sponsorship agreement was not disclosed.

Read more.

Thursday, September 19, 2019

Problem CUs Rose in 2nd Quarter, But Shares and Assets Fell

The number of problem credit unions edged higher during the second quarter of 2019, according to the National Credit Union Administration (NCUA).

At the end of the second quarter of 2019, there were 204 problem credit unions. In comparison, there were 202 problem credit unions at the end of the first quarter of 2018.

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

Total assets in problem credit unions were $11 billion during the second quarter. Assets in problem credit unions were $11.8 billion at the end of the first quarter.

Shares (deposits) in problem credit unions fell during the second quarter to $9.8 billion from $10.4 billion as of March 2019. At the end of the second quarter, 0.82 percent of total insured shares were in problem credit unions. In comparison, 0.91 percent of total insured shares were in problem credit unions as of March 2019.

Most problem credit unions were small credit unions.

The number of problem credit unions with less than $100 million in assets rose by 8 to 182 during the first quarter. But the number of problem credit unions with more than $100 million in assets fell during the quarter by 6 to 22.

NCUA reported that 89.2 percent of problem credit unions have less than $100 million in assets, while 1.47 percent of problem credit unions have more than $500 million in assets.

Wednesday, September 18, 2019

Sharonview FCU Partners with Topgolf

Sharonview Federal Credit Union (Fort Mill, SC) announced a partnership with Topgolf Entertainment Group.

The $1.6 billion credit union signed a two-year contract with Topgolf venues in Charlotte (NC) and Greenville (SC).

The partnership will include Sharonview branding on the second level of the Charlotte venue and advertising, social media presence and digital signage for both venues.

The price tag of the partnership was not disclosed.

Read the press release.

Tuesday, September 17, 2019

First Commerce CU to Acquire Georgia Bank

First Commerce Credit Union (Tallahassee, FL) announced on September 16 that it would purchase and assume certain assets and liabilities of The Citizens Bank (Nashville, GA).

The purchase has been approved by the boards of directors of both institutions and is expected to close in the second quarter of 2020, subject to customary closing conditions and shareholder and regulatory approvals.

First Commerce CU has $620 million in assets.

The Citizens Bank has $248 million in assets and $212 million in deposits and almost 15,000 customers. The bank has 4 offices -- 2 in Berrien County and 1 each in Cook and Lowndes Counties.

The price of the transaction was not disclosed.

Read more.

Read FAQ.

NCUA Issues Guidance on Secondary Capital Plans

The National Credit Union Administration (NCUA) issued guidance to staff on credit unions offering secondary capital.

NCUA wrote that many low-income credit unions (LICUs) have a record of prudently using secondary capital; however, some planned uses of secondary capital can be complex and involve higher risk.

NCUA re-iterated in its letter to staff that there is no "one size fits all" secondary capital plan for LICUs.

The supervisory letter should help LICUs to better understand the secondary capital plan submission process.

The letter also explains the safety and soundness expectations of the agency regarding secondary capital plans.

Appendix A includes examiner review questions. A LICU should be prepared to discuss these questions with their examiner and address these questions in its written plan.

This letter makes it clear that if a LICU plans to offer secondary capital, the LICU will need to follow NCUA's lead.

Read the letter.

Monday, September 16, 2019

Kitsap CU Buys Naming Rights to High School Outdoor Athletic Complex

Central Kitsap School District entered into a naming rights agreement with Kitsap Credit Union (Bremerton, WA) for the new high school outdoor athletic facilities.

The credit union paid $500,000 for the naming rights of the outdoor athletic complex.

The agreement includes naming rights and advertising space in the athletic facilities for six years.

The outdoor athletic facilities includes football field and track, baseball field, softball field, and tennis courts on the Central Kitsap High School campus.

The outdoor facilities will be known as the “Kitsap Credit Union Athletic Complex.”

The funds will go for new bleachers.

Read more.

NCUA's Harper Says the Agency Lacks Rigor on Consumer Compliance

The National Credit Union Administration’s current method of examining and enforcing consumer protection laws and regulations for institutions with less than $10 billion in assets is “not comparable to our sister agencies,” NCUA Board Member Todd Harper said in a Washington speech on September 10. He noted that bank regulators conduct regular risk-focused consumer compliance exams and assign separate consumer compliance ratings.

“Decades ago, the NCUA conducted full consumer financial protection compliance reviews as part of its examination program, but the agency has increasingly focused on safety and soundness over time,” Harper said. “NCUA’s different approach to consumer financial protection reviews runs counter to the congressionally mandated mission of the Federal Financial Institutions Examination Council.”

Harper noted that more rigorous examination and enforcement of consumer compliance regulations could potentially address principal-agent issues at credit unions by aligning management’s actions with the best interests of members.

Harper also criticized the NCUA board’s recent vote to delay its 2015 risk-based capital rule, cautioning that without it, a potential economic downturn could amplify losses to the National Credit Union Share Insurance Fund. He added that he is concerned about the liquidity of federally insured credit unions.

Read the speech.

Sunday, September 15, 2019

155 LICUs Receive $1.9 Million in Grants from NCUA

The National Credit Union Administration (NCUA) reported that it awarded $1.9 million in grants to 155 low-income credit unions.

Grants ranged from $1,900 to $100,000.

The NCUA made awards in four categories:
  • Underserved outreach: 11 grants totaling $972,742;
  • Digital services and security: 73 grants totaling $550,612;
  • Training: 46 grants totaling $217,369; and
  • Counselor certification: 35 grants totaling $161,925.
Several large credit unions were grant recipients, including $1.8 billion Dupaco Community Credit Union (Dubuque, IA), $1.2 billion Greylock FCU (Pittsfield, MA), $397 million Pelican State CU (Baton Rouge, LA), and $469 million Global Credit Union (Spokane, WA).

Funding for the grants is provided by the Community Development Revolving Loan Fund, which receives appropriations from Congress.

Here is the list of grant recipients and the amount awarded.

Read the press release.

Friday, September 13, 2019

CUs O-fer in Secondary Capital Plan Appeals to SRC

Credit unions have a zero batting average for secondary capital plan appeals to the Supervisory Review Committee (SRC) of the National Credit Union Administration (NCUA) during the first seven months of 2019.

Five credit unions appealed the denial of their secondary capital plans from the NCUA Region Directors. Four of the appeals involved applications to accept secondary capital and one appeal was to increase the amount of secondary capital accepted by the credit union.

The SRC upheld the denial of the Region Directors in all five cases.

Below are some of the highlights from the SRC decisions.

In several cases, credit unions stated that they met the five requirements of the rule and should be allowed to accept secondary capital. (12 C.F.R. § 701.34) However, the SRC opined that "there is no duty for the Regional Director to approve a secondary capital application simply because the plan meets the five requirements of the rule." The SRC concluded that it is within the authority and discretion of the Regional Director to review the safety and soundness exposure of the credit unions.

The SRC found deficiencies in various credit union's plans, which in some cases were overly simplistic or inadequate. In a couple cases, the credit unions stated the secondary capital was meant to support loan growth without specifying the types of loans the credit union will add to their balance sheets. The SRC believed that subject ambiguity posed a safety and soundness concern.

In one case, the Region Director sought to reduce the amount of secondary capital that the credit union could accept because of safety and soundness concerns due to interest rate risk associated from concentration in real estate secured assets. The Regional Director wanted to reduce the amount of balance sheet leverage at the credit union. In addition, the credit union should not make unsecured secondary capital loans to other credit unions. (Read the decision SRC-03-19).

Another credit union's secondary capital plan posed safety and soundness concerns due to inadequate liquidity risk assessment, incomplete interest rate risk assessment, and no exit or stop-loss strategy. (Read the letter SRC-02-19).

In another decision, the SRC concluded that "the credit union failed to assess key risks arising from the plan’s reliance on high levels of market sensitive wholesale funding (nonmember deposits and borrowing) and deployment of funds into higher risk assets." Here is letter SRC-01-19.

Furthermore, as part of a credit union's board of directors due diligence, the board is expected to address the pros and cons of the specific secondary capital plan, not a generic discussion about the pros and cons of secondary capital. In one case, there was not evidence that the board discussed the specifics of the secondary capital plan.

Read SRC-06-19.

Read SRC-05-19.

Thursday, September 12, 2019

Half of CUs Reported a Y-o-Y Drop in Membership

The National Credit Union Administration reported on September 11 that almost half of all federally insured credit unions had fewer members at the end of the second quarter of 2019 compared to a year ago.

Credit unions that are experiencing a decline in their membership tend to be smaller. Approximately 70 percent of credit unions reporting an annual decline in membership had less than $50 million in assets.

In 18 states, the median membership growth rate was negative. At the median, 3 states had the weakest membership growth rates of negative 1.3 percent -- Illinois, Pennsylvania, and New Jersey.

Other states reporting negative median year-over-year growth rates are North Dakota (-0.9%), Connecticut (-0.8%), Arkansas (-0.5%), Rhodes Island (-0.5%), Massachusetts (-0.4%), Oklahoma (-0.4%), Indiana (-0.3%), Kentucky (-0.3%), Maryland (-0.3%), Michigan (-0.3%), Nebraska (-0.3%), District of Columbia (-0.3%), New York (-0.2%), Vermont (-0.2%), and Louisiana (-0.1%).

In addition, credit unions in Arkansas and New Jersey reported that the median year-over-year growth rate of loans and shares (deposits) were negative.



Wednesday, September 11, 2019

Groups Call for Changes to QM Framework Ahead of GSE Patch Expiration

A broad coalition of financial industry stakeholders, civil rights groups and other advocacy organizations wrote the Consumer Financial Protection Bureau (CFPB) on September 9 offering feedback on the expiration of the temporary “GSE patch,” which grants Qualified Mortgage (QM) status to loans eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac.

The letter was sent in response to an advanced notice of proposed rulemaking by the CFPB.

With the CFPB poised to allow the GSE patch to expire as scheduled in January 2021, “or after a short extension,” the groups proposed several changes to the QM framework. The groups called on the CFPB to eliminate from the general QM category the debt-to-income ratio and the associated Appendix Q. They noted that doing so is “the best way to enable fair market competition across all lending channels while also ensuring that these creditworthy individuals can be served in a safe and sound manner under the existing ATR-QM framework.”

The groups also called on the bureau to maintain and enhance the existing Ability-to-Repay Rule’s regulatory language and maintain the existing QM statutory safe product restrictions that prohibit certain risky loan features—such as loan terms over 30 years, negative amortization or interest-only payments—and clarify provisions related to documentation and verification of income.

Both the American Bankers Association and the Credit Union National Association signed the letter.

Read the letter.

Tuesday, September 10, 2019

Michigan Charters LGBTQ CU

Multiple news outlets are reporting that Michigan Department of Insurance and Financial Services has approved a charter for a credit union serving the LGBTQ community.

The credit union, Superbia, expects to begin operations in early 2020.

The credit union will offer traditional banking products and services, but will also tailor products and services to the specific needs of the LGBTQ community.



Federal Prosecutors Open Probe into New York City Taxi Medallion Lending

The New York Times is reporting that the United States Attorney’s Office for the Southern District of New York has opened an investigation into possible lending fraud in the New York City taxi industry.

Federal agents have started to interview cabdrivers, who took on massive amounts of debt to purchase taxi medallions and were not fluent in English.

The investigation appears to be focused on possible crimes including bank, wire or mail fraud.

Read the story.

FL Regulator Approves Purchase of Certain Bank Assets and Liabilities by MidFlorida CU

The Florida Office of Financial Regulation on August 19 issued a Notice of Intent to Approve the application of MidFlorida Credit Union (Lakeland, FL) to purchase certain assets and liabilities of First American Bank (Fort Dodge, IA).

On April 26, the bank entered into a branch purchase agreement with the credit union.

The credit union would acquire 3 branches -- one in Lee County and two in Collier County -- and one loan production office in Boca Raton, Palm Beach County..

MidFlorida CU will purchase approximately $250 million in assets and assume almost $122 million in liabilities.

The transaction is contingent upon the approval or non-objection by the National Credit Union Administration.

Monday, September 9, 2019

Outstanding Consumer Credit at CUs Grew by $2 Billion During July

The Federal Reserve reported on September 9 that outstanding consumer credit at credit unions grew by $2 billion during July to $478.1 billion.

Outstanding consumer credit grew at a slightly slower annual pace in July compared to June.

Revolving credit balances grew by approximately $800 million during July to $64.5 billion.

Nonrevolving credit advanced by $1.2 billion in July to $413.6 billion.

Read the G. 19 Report.

Addition Financial CU Completes Acquisition of Fidelity Bank of Florida

On September 1, Addition Financial Credit union, the former CFE Federal Credit Union, (Lake Mary, FL) completed its acquisition of Fidelity Bank of Florida, N.A. (Merritt Island, FL).

Fidelity Bank of Florida had almost $169 million in assets and $137 million in deposits. The bank had two offices.

Addition Financial CU had $1.9 billion in assets.

Under the agreement, Addition Financial stated "it does not intend to acquire, own, or retain Fidelity's stock or the power to conduct commercial banking business granted under its charter."

The state credit union regulator approved the transaction in May.

Saturday, September 7, 2019

Michigan State University FCU to Build 3-Story Administrative Office Building

Michigan State University Federal Credit Union (East Lansing, MI) is planning to construct a three-story administrative building in Auburn Hills, Michigan.

According to The Oakland Press, the City Council recently approved the multi-million dollar project.

The new facility will become the regional office for $4.5 billion credit union and will house support services, such a a call center, IT help desk and human resources. The building will also include four guest suites and a community meeting room.

Read the story.

Friday, September 6, 2019

Little to No Progress in Reforming COSSEC

Two years later, The Financial Oversight and Management Board for Puerto Rico reported little to no progress in reforming the Public Corporation for the Supervision & Insurance of Cooperatives in Puerto Rico (COSSEC).

COSSEC is responsible for overseeing and insuring the island's credit unions or cooperatives.

On August 4, 2017, The Financial Oversight and Management Board had certified the Fiscal Plan for COSSEC. On August 19, 2018, COSSEC issued its revised Fiscal Plan for COSSEC, which was never certified by The Financial Oversight and Management Board.

The Financial Oversight and Management Board wrote in its Fiscal Year 2019 Annual Report that "there is a need for COSSEC to have stronger and independent governance in order to to exercise its role as a regulator and insurer."

Reforms would also include adopting regulatory and accounting reporting standards and capital levels more consistent with to that of Federal regulators.

Without meaningful reforms, federally-insured credit unions could face potential reputation risk from bad headlines about COSSEC.

Go here to read the Annual Report.

Wednesday, September 4, 2019

CU Profitability Improved in the 2nd Quarter of 2019


The credit union industry reported net income of $7.19 billion through the first two quarter of 2019, according to the National Credit Union Administration.

A vast majority of credit unions posted a profit through mid-year 2019 with only 610 federally-insured credit unions reporting a loss through the first two quarter.

Return on average assets for federally-insured credit unions was 0.97 as of June 2019. This was up 2 basis points from the prior quarter. The median return on average assets was 0.63 percent -- this is up 7 basis points from the first quarter of 2019.

Net interest margins improved by 7 basis points during the second quarter to 3.18 percent. Non-operating income as a percent of average assets edged lower by 1 basis points between the first quarter and the second quarter to 0.06 percent. However, operating expenses as a percent of average assets rose by 4 basis points during the quarter to 3.16 percent.

At the end of June 2019, industry net worth was $171.41 billion, up from $167.78 billion at the end of March 2019. The net worth ratio for the credit union industry rose from 11.13 percent as of March 2019 to 11.27 percent as of June 2019.

At the end of June 2019, 98.42 percent of credit unions had a net worth ratio of at least 7 percent, the minimum requirement for being well-capitalized. On the other hand, 0.59 percent of credit unions or 31 credit unions had a capital ratio below 6 percent.

Assets, Loans, Shares, and Members Increase

Total assets were $1.5203 trillion at the end of the quarter, up $14.3 billion during the quarter.

Outstanding loans at credit unions were $1.0664 trillion at the end of the second quarter. This was up $18.1 billion from March 2019. All major loan categories posted a gain during the second quarter.

Shares (deposits) at credit unions increased by $7 billion during the quarter to $1.2798 trillion.

Since loan growth outpaced share growth during the second quarter of 2019, the loan-to-share ratio rose from 82.4 percent at the end of the first quarter to 83.3 percent at the end of the second quarter. The loan-to-share ratio exceeded the 10-year average of 76.32 percent.

There were 118.3 million credit union members as of June 2019, up from 117.2 million members as of March 2019.

Delinquencies Rise, Net Charge-offs Lower

Delinquent loans increased from $6 billion as of March 2019 to $6.8 billion as of June 2019. The industry's delinquent loan ratio went from 0.58 percent to 0.63 percent.

Over the same period, net charge-offs fell from $6 billion to 5.9 billion. The net charge-off rate declined by 1 basis point to 0.56 percent at the end of June 2019.

Fewer Credit Unions, But More Are Low-Income

The number of credit unions fell by 27 during the second quarter to 5,308. The number of low-income credit unions increased by 47 during the second quarter to 2,618.

Review the quarterly data summary.

Read the Trend Chartbook.

Elevations CU to Acquire Cache Bank & Trust

Elevations Credit Union (Boulder, CO) has announced its intention to acquire the assets of Cache Bank & Trust (Greeley, CO).

Elevations CU has almost $2.1 billion in assets. Cache Bank & Trust has $121.7 million in assets and three locations in Denver, Fort Collins, and Greeley, Colorado.

It is anticipated that the acquisition will be finalized in the first quarter of 2020 with full integration of the two organizations by the third quarter of 2020. The acquisition is subject to regulatory approval.

The price tag of the deal was not disclosed.

This deal will be the first community bank in Colorado to be acquired by a credit union.

Press release can be found here.

Tuesday, September 3, 2019

The Wall Street Journal Reports on CUs' Bank Buying Spree

Credit unions buying banks have attracted the attention of The Wall Street Journal.

The story notes that while most credit union mergers are with other credit unions, credit unions have recently gone on a buying spree.

Since the beginning of 2018, credit unions have announced 21 banks deals. In comparison, there were only 12 deals announced during the prior five years.

In fact, this year a record number of deals have been announced.

Critics point out these "deals illustrate how competitive credit unions have become, given their tax advantages, lack of shareholders and diminishing constraints on growth."

Credit unions contend that these deals allows them to expand their footprint and product offerings. In addition, credit unions claim these acquisitions represent a good return on their investment.

Making news, National Credit Union Administration (NCUA) Chairman Rodney Hood told The Wall Street Journal that the agency plans to introduce a proposed rule later this year clarifying the regulatory responsibilities of credit unions when acquiring banks.

I will be interested in reading what NCUA proposes. Hopefully, the agency will remove many of the barriers that keep banks from acquiring credit unions.

Read the story (subscription required).

Average CEO Compensation at Large State Chartered CUs Was $1.16 Million for 2017

The average total compensation for CEOs at large state chartered credit unions with at least $1 billion in assets was $1.16 million for 2017. This is the fourth consecutive year were the average compensation topped $1 million.

The median total compensation for 2017 was almost $803 thousand.

Total compensation includes base salary, bonus and incentives, other reportable income, retirement and deferred compensation, and nontaxable benefits.

Compensation information was obtained from Form 990s filed by 154 state chartered credit unions with at least $1 billion in assets.

At the time this blog post was being written, Form 990s for 2017 were not available for the following credit unions -- Collins Community Credit Union (IA), CFCU Community Credit Union (NY), Melrose Credit Union (NY), Municipal Credit Union (NY), Public Service Employees Credit Union (CO), and Rogue Credit Union (OR).

Mean and median base compensation was $512,148 and $489,783, respectively. The CEO with the highest base salary was Crystal Long of GECU (El Paso, TX) at $1,680,474.

Mean and median incentives and bonuses were $212,134 and $116,416, respectively. Most large CU CEOs received some sort of incentive or bonus compensation.

The data on base compensation and incentives and bonuses excludes information from Lake Michigan Credit Union (MI), because Lake Michigan CU combined base compensation with bonuses and incentives.

Fifty-eight credit union CEOs earned total compensation of $1 million or more in 2017.

The highest paid CEO was R. Heldebrant of Star One Credit Union (CA) with total compensation of $12,465,866 for 2017.

Update

The Form 990s are now available for Canvas CU, CFCU Community CU, Collins Community CU, and Rogue CU. This information has not been incorporated into the statistical analysis of CEO compensation.

Darryl Marksberry of Canvas CU (CO) had total compensation of $771,721 with base pay of $500,941 and bonus and incentive compensation of $225,000.

Lisa Whitaker of CFCU Community CU (NY) had total compensation of $1,283,914. Base compensation was $498,687 and incentive and bonus compensation was $173,918.

Stephanie Rupert of Collins Community CU (IA) had total compensation of $476,183 with a base pay of $308,653 and incentive and bonus pay of $112,499.

Eugene Pelham of Rogue CU (OR) had total compensation of $940,376. Base pay was $472,885. Bonus and incentive pay was $117,248.

The following table lists the 10 highest paid large state chartered credit union CEOs in 2017.


Below is the list of CEO compensation at state chartered credit unions with at least $1 billion in assets (click on images to enlarge).

Monday, September 2, 2019

First Community CU Pays $2.3 Million for Naming Rights to University Arena

First Community Credit Union (Chesterfield, MO) has acquired the naming rights for the arena within Southern Illinois University Edwardsville’s Vadalabene Center for $2.3 million over the next 10 years.

The facility will be known as First Community Arena at the Vadalabene Center.

The naming rights deal can be extended for an additional two years.

Read the press release.

Sunday, September 1, 2019

Alliant CU Provides $12.1 Million in Commercial Real Estate Financing

Alliant Credit Union (Chicago, IL) refinanced three-property self-storage portfolio for the principal amount of $12.1 million.

According to RE Journal, the properties in Evansville (IN) and Pine Bluff (AR) encompass 1,565 total units, including a mix of standard units, climate-controlled units and outdoor vehicle storage.

Read the story.

Friday, August 30, 2019

New Haven County CU Enters into Consent Order, Former CEO Pleads Guilty to Bank Fraud

New Haven County Credit Union (North Haven, CT) has entered into a consent order on August 5, 2019 with the Connecticut Department of Banking regarding unsafe and unsound banking practices.

The consent order addressed numerous deficiencies at the $20 million credit union that need to be addressed.

The consent order paints a picture of weak board oversight of the credit union. The consent order mandated the active participation of the credit union board of directors in credit union affairs. This included at least a monthly meeting of the board and a minimum attendance requirement for board members of at least 75 percent of the meetings.

In addition, the consent order required that the credit union will retain qualified board members, as well as management and staff.

The credit union is required to put into place internal controls and ensure financial records are complete and accurate.

The credit union is expected to file timely and accurate Call Reports, including ensuring that delinquent loans are properly reported and Allowance for Loan and Lease Losses are adequately funded.

The consent order requires the credit union to develop a strategic plan covering at lease three years. The credit union board is also expected to develop written budget consistent with safe and sound banking practices.

The credit union will ensure that employees and Board members are provided with Bank Secrecy Act training and that there is a comprehensive review of the credit union's BSA program.

The consent order requires the credit union to establish a comprehensive Information Security Program.

In a related story, the former credit union Chief Executive Officer (CEO), James Farrell, pleaded guilty to bank fraud. Farrell was the CEO of the New Haven County Credit Union from approximately 1992 to June 2015 and was then retained by the credit union's board of directors to provide assistance to the new CEO until March 2016.

Between July 2011 and March 2016, Farrell defrauded the credit union by transferring funds from NHCCU’s general ledger account to the account held by The Rib House, a restaurant located in East Haven, Connecticut. Farrell provided financial and bookkeeping services to The Rib House from 2010 to 2016.

Read the order.

Read the Justice Department press release.




Thursday, August 29, 2019

Appeals Court Rules that OD Class Action Lawsuit Can Proceed

The 11th U.S. Circuit Court of Appeals reversed the 2017 dismissal of a potential overdraft (OD) fee class action against LGE Community Credit Union (Marietta, GA) and remanded it back to the lower court for further proceeding consistent with the opinion.

The lawsuit alleges that the credit union assessed OD fees when there was enough money in the account to cover the transaction. The plaintiff alleged that the credit union agreed to only impose an OD fee when the ledger balance was not sufficient to cover the transaction.

The appeals court opined that the account agreement was ambiguous as to whether the credit union could rely on the account's available balance rather than its ledger balance when assessing OD fees.

The appeals court ruled that a federal judge erred in dismissing the plaintiff's lawsuit.

Read the opinion.

Tuesday, August 27, 2019

NCUA Board Dismisses Secondary Capital Plan Appeal by LICU

The National Credit Union Administration (NCUA) Board dismissed an appeal of a low-income state chartered credit union's secondary capital plan on procedural grounds.

The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.

The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.

The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.

On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.

Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.

On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.

The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.

Read more.

Sunday, August 25, 2019

Idaho Central CU Buys Naming Rights to Rodeo Arena

Idaho Central Credit Union (Chubbuck, ID) will pay $45,000 per year for the naming rights to the Roundup arena in Lewiston, ID.

The sponsorship agreement is for five-years.

The venue will be called the Idaho Central Credit Union arena.

The sponsorship will include Idaho Central Credit Union signs and banners around the arena, and frequent mentions of the company by the event announcer. The credit union will also be provided with seats at the Roundup for its employees and guests.

Read more.

Saturday, August 24, 2019

NCUA Charters New CU in Maine

The National Credit Union Administration granted a federal charter and share insurance coverage to Maine Harvest Federal Credit Union (Unity, ME) on August 14, 2019.

The credit union will serve the employees and roughly 13,000 members of the Maine Organic Farmers and Gardeners Association and the Maine Farmland Trust.

The credit union was chartered for the purpose to offer business loans to small farms, farmers, and other food producers. The credit union will be exempt from the member business loan cap of 12.25 percent of assets.

Read the press release.

Friday, August 23, 2019

America First CU Becomes Exclusive CU Partner of NFL's Raiders

America First Credit Union (Riverdale, UT) has entered into a multi-year partnership agreement with the Los Angeles Oakland Las Vegas Raiders of the National Football League (NFL).

The partnership agreement includes America First CU being named as the Raider’s exclusive credit union and official debit card partner as well as introducing a charitable donation component and a community outreach program to support local small businesses.

The partnership will take effect in 2020 when the Raiders move to their new home in Las Vegas.

Read more.

Wednesday, August 21, 2019

Court of Appeals Rules on FOM Rule

A federal appeals court on August 20 dismissed most of the American Bankers Association’s challenge to the Field of Membership (FOM) updates by National Credit Union Administration (NCUA).

The U.S. Appeals Court for the District of Columbia reversed District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and the increase in the population size of rural districts.

However, with the regard to the elimination of the urban-core requirement for local communities based upon a Core-Based Statistical Areas, the court recognized the potential of gerrymandered redlining. The court ordered the District Court to issue a summery judgement in favor of the American Bankers Association, but stated that the agency may be able to offer a satisfactory reason on remand.

In its decision, the court noted that Congress gave the agency wide discretion to make these policy decisions, but its authority is not limitless.

The court also stated that the plaintiff can bring an applied challenge to local communities that exceed NCUA's authority.

NCUA stated that it is reviewing the Court's decision and will provide guidance to affected credit unions in the near future.

Read the decision.

Tuesday, August 20, 2019

N.H. Supreme Court Dismisses Defamation Lawsuit Brought by Patent Troll

In a unanimous decision, the New Hampshire Supreme Court on August 16 upheld a lower court ruling that dismissed defamation claims brought by a patent assertion entity against the American Bankers Association (ABA), the Credit Union National Association (CUNA) and other defendants who labeled the company and its operator a “patent troll.”

The suit was brought by David Barcelou and a company he controlled. Barcelou held a commercially unsuccessful patent for cash-dispensing-related technology, and between 2011 and 2012 he generated $3 million in licensing fees from demand letters to banks and credit unions.

Patent trolls work by acquiring patents to common processes and technological elements—such as scan-to-email functionality on a copier or an ATM’s ability to connect to the Internet—then demanding “licensing fees” and threatening litigation. The cost of litigation is intended to pressure businesses to pay the fee, regardless of the patent’s validity.

The court found that the term “patent troll” is a non-actionable expression of opinion.

Read the opinion.

Monday, August 19, 2019

NCUA's ONES Providing Adequate Oversight of CU Cybersecurity Programs

The Office of the Inspector General of the National Credit Union Administration (NCUA) concluded that NCUA's Office of National Examinations and Supervision (ONES) has provided adequate oversight of cybersecurity programs of credit unions.

ONES is responsible for supervising federal credit unions and state chartered credit unions with at least $10 billion in assets and corporate credit unions.

The audit assessed whether credit unions were taking sufficient and appropriate steps to protect the confidentiality, availability, and integrity of credit union assets and sensitive credit union data against cyber-attacks.

Read the report.

Friday, August 16, 2019

Provident CU Buys Naming Rights to University Event Center

San José State University and Provident Credit Union (Redwood City, CA) entered into an $8.1 million, 20-year partnership agreement to rename The Event Center at San José State University to Provident Credit Union Event Center.

The Event Center seats 5,000 and is the home of Spartans basketball.

The agreement includes signage at the facility and on nearby roadways; the opportunity to sponsor or participate in university events; and the opportunity to provide the campus with financial literacy awareness clinics.

The California State University Board of Trustees approved the venue renaming and broader agreement at its July 24 meeting.

The CEO of Provident Credit Union is an alumnus of San José State University.

Read the press release.

Thursday, August 15, 2019

Whistleblower Lawsuit Alleges Retaliation by SEFCU

A lawsuit alleges that State Employees Federal Credit Union (SEFCU), headquartered in Albany, New York, retaliated against an employee for filing a whitleblower complaint.

The plaintiff, David Gosstola, was fired in May 2019 as the Chief Financial Officer (CFO) after filing a whistleblower complaint. The plaintiff was employed as the CFO at SEFCU, since 2008.

The complaint alleges that Michael J. Castellana, President and Chief Executive Office of SEFCU, "had business and personal relationships that created real or potential conflicts of interest" and entered into transactions with such parties that did not adequately protect SEFCU's interest.

For example, the CFO alleges that Castellana had communicated confidential information regarding commercial loans to third parties with whom Castellana had a personal and/or business relationship.

The lawsuit claims that the board of directors relied on information submitted by Castellana and his personal adviser in determining his compensation.

Moreover, Castellana approved projects without competitive bids.

In January 2018, the plaintiff filed a Whistleblower complaint regarding concerns about the governance and direction of SEFCU under Castellana's leadership.

The complaint claims that SEFCU violated its Whistleblower Policy after it retaliated against him.

The plaintiff alleges breach of contract, wrongful termination, and fraud.

The plaintiff claims the firing harmed his professional reputation and inflicted economic loss and emotional pain.

The lawsuit seeks compensatory, punitive damages and attorneys' fees in the amount to be proven at trial.

Read the complaint.

Wednesday, August 14, 2019

Indiana Members CU to Acquire Commerce Bank

Indiana Members Credit Union (Indianapolis, IN) and First Light Bancorp, Inc. (Evansville, IN), the holding company of Commerce Bank, announced today that they have signed a definitive purchase and assumption agreement whereby Indiana Members CU will acquire the assets and assume the liabilities of Commerce Bank in an all cash transaction.

Under the terms of the purchase and assumption agreement, First Light Bancorp estimates that its stockholders will receive between $11.25 and $11.40 in cash consideration for each share of First Light Bancorp common stock.

Indiana Members CU has over $2 billion in assets. Commerce Bank has $195.8 million in assets.

The transaction has been unanimously approved by the board of directors of both institutions and is expected to close in the first quarter of 2020, subject to customary closing conditions, and the approval of First Light Bancorp’s stockholders and regulators.

Read the press release.

Class Action Lawsuit Filed Against Board of Directors of Failed CBS Employees FCU

Members of failed CBS Employees Federal Credit Union (Studio City, CA) have filed a class action lawsuit against the Board of Directors and Supervisory Committee of the credit union.

The complaint alleged the Board of Directors and Supervisory Committee failed to exercise reasonable oversight of CEO Rostohar, who pleaded guilty to embezzling at least $40 million from the credit union.

The complaint stated that the negligence of the board deprived the members of the anticipated benefits of lower loan rates and higher savings rates.

CBS Employees FCU was liquidated on March 29, 2019.

University Credit Union (Los Angeles, CA), which assumed the shares and loans of the failed credit union, was also named as a defendant.

The plaintiffs are seeking compensatory and consequential damages of at least $40 million and any excess amount to be proven at trial.

Read the complaint.


Tuesday, August 13, 2019

Merger Will Create $2.1 Billion CU

Crain's Chicago Business is reporting that Consumers Credit Union (Gurnee, IL) and Andigo Credit Union (Schaumburg, IL) have announced their intention to merge.

Andigo Credit Union has $865 million in assets and Consumers Credit Union has $1.2 billion in assets.

The merger requires regulatory approval and a favorable vote by Andigo CU's members.

The merger is expected to close by the end of the year.

Read the article.

Monday, August 12, 2019

Is There A Glass Ceiling at Large Credit Unions?

This is a question posed by Jordan van Rijn at the end of a research paper, Does CEO Gender Matter at Financial Institutions? An Event-Study Analysis of Credit Union Data, comparing the impact of gender differences on risk management and performance at credit unions.

The paper noted that 52 percent of all credit union chief executive officers (CEOs) were female, but only 14 percent of large credit unions with over $1 billion in assets have female CEOs.

The paper offered several explanations for this glass ceiling at large credit unions.
  • There may be fewer qualified female executives, "due to historically lower numbers of female graduates of MBA, finance, and economics programs."
  • Women may place a greater emphasis on flexible work schedules and family time compared to men. Therefore, women would be less likely to apply for jobs with longer work hours.
  • Women may desire positions with less competition and prefer working for smaller credit unions.
  • Discrimination in hiring practices may play a greater role at larger credit unions.

Saturday, August 10, 2019

United FCU to Pay $1.75 Million to Resolve Class Action Lawsuit

United Federal Credit Union (Saint Joseph, MI) has agreed to pay $1.75 million to settle a class action lawsuit over the credit union's overdraft practices.

The class action lawsuit alleges that United Federal Credit Union did not properly opt members into its overdraft program for ATM and debit card payment transactions, and improperly charged Overdraft Fees when members had enough money in the ledger balances of their checking accounts, but not in their available balances, to pay for the transaction in question.

There are two groups included in this proposed class action settlement. The first is all members of the credit union who were charged an Overdraft Fee for any payment transaction from October 3, 2011 to September 30, 2018, and, at the time such fee was imposed, that person had sufficient funds in the ledger balance but not the available balance in his or her account to complete the transaction. The second group is all members of the credit union who were charged Overdraft Fees for ATM and debit card transaction for the first time from August 15, 2010 to September 30, 2018.

According to an expert witness, 10,297 members were assessed at least one overdraft fee between October 3, 2011 and September 30, 2018, when the member had a positive ledger balance in their account to cover the transaction at issue. There were 64,165 such fees totaling $1,919,818.

Read more.

Friday, August 9, 2019

NCUA's Chairman Hood Outlines His Priorities

In a speech to the African-American Credit Union Coalition 21st Annual Conference, National Credit Union Administration (NCUA) Chairman Rodney Hood outlined his priorities for the agency of effective regulation, a forward-looking approach to innovation, and financial inclusion to better serve a changing population and economy.

First, Chairman Hood wants "to see a regulatory system that is effective, but not excessive." He noted that the agency is working to modernize the regulatory system, which involves "modifying, updating, or in some cases, eliminating regulations that no longer fit a changing financial system." He wants the regulatory system to encourage innovation and provide flexibility, while fulfilling NCUA's primary mission of protecting safety and soundness of the credit union industry.

Second, Chairman Hood stated he wanted to steer the industry in the right direction with regard to innovation. He noted that financial innovation is providing new opportunities to credit unions, but also poses new challenges. He further stated that cybersecurity is a significant concern and will remain a supervisory priority of the agency during his tenure.

Third, Chairman Hood commented that diversity and inclusion will be a priority of the agency. Chairman Hood cited that the United States is undergoing rapid and unprecedented demographic change. He stated: "Diversity and inclusion are a fundamental part of our industry’s history."

He mentioned that one tool at the agency's disposal to achieve this priority is the low-income designation of credit unions and noted that the number of low-income designated credit unions have gone from 184 in 1990 to over 2,500 today.

Read the speech.

Ohio Becomes the Latest State to Allow CUs to Compensate Directors

Legislation (House Bill 489) permits Ohio credit unions to compensate their directors.

The bill was signed into law in March 2019.

The legislation states "A credit union may provide any of the following to its directors and supervisory audit committee members: (1) Reasonable compensation for their service as directors or supervisory audit committee members."

Robert Rutkowski, Deputy Superintendent of the Ohio Division of Financial Institutions, wrote in the Credit Union Newsletter setting the Division's expectations for credit unions deciding to pay their directors.

Credit unions should take asset size and financial conditions into consideration when setting director pay.

Credit unions should also set new standards for director competence and performance as part of the compensation arrangement.

Read the newsletter.

Thursday, August 8, 2019

SAFE CU Pays $23 Million for Naming Rights to Convention and Performing Arts District

SAFE Credit Union (Folsom, CA) and the city of Sacramento announced that the credit union will pay $23 million for the naming rights to the convention center, performing arts center, and outdoor plaza in Sacramento, California.

The naming rights agreement is for 25 years.

The entire complex will be known as the SAFE Credit Union Convention and Performing Arts District. The Convention Center will be called the SAFE Credit Union Convention Center. The theater will be renamed SAFE Credit Union Performing Arts Center. A new outdoor plaza will be called SAFE Credit Union Plaza.

Also as part of the agreement, SAFE CU will offer its credit union membership to all new City of Sacramento employees and will provide a long-term treasury relationship supporting the city’s cash flow and liquidity needs.

Read more.

Technology CU Provided $4.675 Million USDA Business Loan to Buy Boutique Hotel

Technology Credit Union (San Jose, CA) announced it has provided a $4.675 million USDA guaranteed business loan to Oceanic Enterprises, a private property management firm based in San Diego, California.

The loan helped Oceanic Enterprises purchase The Ascot Suites, a 32-room boutique hotel located in Morro Bay, California.

Read more.

Wednesday, August 7, 2019

Interview with Lawyer Involved in Most Bank-CU Mergers

Recently, I interviewed Michael Bell, an attorney for Howard & Howard. Michael has been involved in more than 30 deals involving credit unions acquiring banks.

Below is the interview.

Q. How many bank – credit union deals have you done?

A. I presume you are referring to just whole bank (not branch deals). I’ve stopped counting by over 30.

Q. What was the first bank – credit union merger you did?

A. UFCU’s acquisition of Griffith Savings Bank started it all.

Q. This year the number of announced bank deals has already topped the number of announced deals in 2018. What does the deal pipeline of deals look like for the remainder of this year and next year?

A. I expect the pace of this year to continue, I have never been this busy. I believe it will go into next year as well.

Q. What is the potential universe (number) of credit unions seeking to acquire banks?

A. I think this type of transaction is applicable for 150-200 Credit Unions, a small portion of the total credit unions.

Q. The acquisition of a bank by a credit union will dilute the credit union’s net worth ratio. Is there a minimum net worth ratio for a credit union bidder?

A. The acquisition will impair/lower the capital ratio in some fashion. That said it will rebuild quickly since the transaction is revenue positive from day 1. Most if not all of my clients have internal policies relating to their capital levels and they typically have a floor of somewhere near 8%-9%.

Q. What are the primary motivations for a credit union to acquire a bank?

A. Generally it falls into four buckets. Geographic expansion, acquisition of loans or deposits, acquisition of talent and capabilities, and general/overall growth to strengthen the Credit Union.

Q. What are the biggest due diligence challenges for credit unions associated with these mergers?

A. I don’t think there are any challenges nor do I think their due diligence differs from a bank buyer. It involved everything a Seller should expect, loan files, contracts, HR matters, facilities, etc.

Q. I’ve read that field of membership(FOM) issues can create a potential roadblock for a bank – credit union merger. How have credit unions gotten around these issues? For example, what mechanism allowed Advia Credit Union to add the customers of Golden Eagle Community Bank to its field of membership?

A. On all the deals I work on we solve FOM PRIOR to our bid. We don’t want to waste any time and we want to reduce the possible deal risk for the Seller. Transactions often involve a parallel FOM expansion but we are comfortable with its likelihood of approval ahead of time. FOM is a restriction and we must operate within its bounds.

Q. Credit unions are not subject to the Community Reinvestment Act. Have any of credit union – bank mergers encountered any resistance from community groups or community activists? bank? If yes, what type of commitments did credit unions make to overcome this opposition?

A. Credit Unions aren’t and shouldn’t be subject to the CRA. Credit Unions by their very nature and make up exceed any CRA requirement they would have placed on them. We have never had any issues here. Once the CU closes support in the community, support for low and moderate income lending and related items will be the same at worst and is always better than before.

Q. What has been the top concerns raised by bank regulators regarding credit union – bank mergers, if any?

A. The main concern usually involves the change of insurance (from FDIC to NCUSIF) and its proper disclosure to the customers. Beyond that concerns are few and far between. The Bank regulators keep their focus on the entity they regulate and its dissolution/liquidation.

Q. Have regulators, especially credit union regulators, ever expressed concerns about the price a credit union is paying for a bank?

A. No, I have never had a transaction where this concern is raised. We are very deliberate in our analysis and share all of it with the regulators so they can see the safe and sound nature of our actions.

Q. It appears that these mergers are concentrated in the Southeast (Florida, Georgia, and Alabama) and the Upper Midwest (Michigan, Wisconsin, Indiana, and Illinois). Why?

A. This largely has to do with the sheer number of small banks in those areas. These transaction happen nationally and will continue to do so.

Q. Have credit unions that acquired banks experienced depositor run-off after the merger? If yes, what has been the typical depositor attrition rate at banks acquired by credit unions?

A. NO. 5% runoff would be catastrophic. This is for two main reasons. First, people don’t move their accounts. Second, the rate and fee structure they have after the closing will be the same or better, never worse.

Consumer Credit at CUs Grew by Almost $2.4 Billion for June 2019

Outstanding consumer credit at credit unions grew by almost $2.4 billion to $476.1 billion during June, according to the Federal Reserve's G.19 Report.

Both revolving and nonrevolvoing credit at credit unions expanded during June.

Outstanding revolving credit grew from $63.2 billion for May to $63.7 billion for June.

Nonrevolving credit balances at credit unions increased by $1.8 billion during June to $412.4 billion.

Tuesday, August 6, 2019

Republican Senators Ask DOJ for Clarity on Website Accessibility under ADA

A group of Republican senators on July 30 wrote to Attorney General William Barr seeking an update on the Justice Department’s (DOJ) efforts to clarify compliance obligations for businesses with respect to website accessibility under the Americans with Disabilities Act (ADA).

The letter marks another attempt by Sen. Chuck Grassley (R-IA) to obtain clarity from the DOJ; last year, lawmakers wrote to then-Attorney General Jeff Sessions raising concerns about a lack of existing guidance.

The senators noted that unclear direction from the DOJ has left businesses, including banks and credit unions, exposed to litigation risk. “We therefore urge the Department to provide further clarity, especially given that the issue of whether the ADA applies to private websites at all—or the scope of such application—continues to be subject to conflicting judicial opinions,” they wrote. “Absent further guidance, compliance will remain a matter of increasing litigation and inconsistent outcomes.”

The other senators that signed unto the letter were Thom Tillis (R-NC), John Cornyn (R-TX), Mike Crapo (R-ID), Joni Ernst (R-IA), Marsha Blackburn (R-TN) and Mike Rounds (R-SD).

Read the letter.



Monday, August 5, 2019

VyStar CU Acquires Citizens State Bank

VyStar Credit Union (Jacksonville, FL) on August 5 has completed its acquisition of Citizens State Bank (Perry, FL).

VyStar Credit Union has $8.9 billion in assets. Citizens State Bank has $280 million in assets.

Read more.

11 NY Lawmakers Write Regulators about Taxi Medallion Lending

Eleven New York lawmakers are calling for tougher oversight of New York City taxi medallion lending.

In a July 25 letter to federal banking regulators, the lawmakers have asked for information about:
  • entities involved in providing taxi medallion loans; 
  • whether the agencies have toughened oversight of the industry; 
  • are the agencies cooperating with any law enforcement investigations into lending practices; 
  • what extent the agencies or regulated entities have provided loan modifications, repayment plans, forbearances, or loan forgiveness options; and 
  • what gaps in regulatory oversight should be addressed to better protect taxi drivers and similarly situated individuals.
The lawmakers requested that federal banking regulators respond in writing by August 30.

The letter went to the heads of the Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and the Office of the Comptroller of the Currency.

The lawmakers signing the letter were Representatives Alexandria Ocasio-Cortez, Adriano Espaillat, Nydia Velazquez, Yvette Clarke, Jerrold Nadler, Carolyn Maloney, Thomas Suozzi, Gregory Meeks, Jose Serrano, Grace Meng, and Hakeem Jeffries.

Read more.

Sunday, August 4, 2019

Report Highlights Top Management and Performance Challenges Facing Financial Regulators

The Council of Inspectors General on Financial Oversight (CIGFO) released its second annual report on the top management and performance challenges facing Financial-Sector Regulatory Organizations in 2019.

This report focused on seven areas:
• Enhancing Oversight of Financial Institution Cybersecurity
• Managing and Securing Information Technology at Regulatory Organizations
• Sharing Threat Information
• Ensuring Readiness for Crises
• Strengthening Agency Governance
• Managing Human Capital
• Improving Contract and Grant Management

CIGFO members include the Inspectors General of the Department of the Treasury, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission, the Department of Housing and Urban Development, the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection, the Federal Housing Finance Agency, the National Credit Union Administration, the Securities and Exchange Commission, and the Special Inspector General for the Troubled Asset Relief Program.

Read the report.

Friday, August 2, 2019

Florida Regulator Approves Merger of Bank into Fairwinds CU

The Florida Office of Financial Regulation on July 25 approved the application to merge and consolidate the assets and liabilities of Friends Bank (New Smyrna Beach, FL) into and with Fairwinds Credit Union (Orlando, FL).

The approval order noted that Fairwinds CU's field of membership already included all persons who live and work in Volusia County. In addition, Fairwinds has a low-income designation, which permits the credit union to accept deposits from nonmembers. Therefore, all depositors of Friend Bank, even those depositors that do not not live or work in Volusia County, will be able to maintain their deposits with Fairwinds after the merger is completed.

Fairwinds CU stated that it does not intend to acquire and retain Friends Bank stock or power to conduct commercial banking business under Friends Bank charter.

Within six months after the merger is consummated, Fairwinds will need to verify whether depositors and borrowers had opted-in to becoming members of Fairwinds Credit Union, did not opt-in but maintain nonmember deposit accounts with Fairwinds, or whose loans have been transferred to another financial institution, closed, or paid off their loans.

Fairwinds will need to divest any nonconforming activities based upon a time established by the regulator.

Before the merger is consummated, the merger must be approved by the National Credit Union Administration and the Federal Deposit Insurance Corporation.

To read the final approval order, go to the Florida Office of Financial Regulation website and click on Final Administrative Orders, which is under Our Services.

Thursday, August 1, 2019

3Rivers FCU to Acquire West End Bank

3Rivers Federal Credit Union (Fort Wayne, IN) has entered into an agreement to acquire West End Bank (Richmond, IN).

West End Bank has $298.8 million in assets and operates 4 offices in Indiana.

3Rivers Federal Credit Union has $1.1 billion in assets with 16 offices in a seven county area in northeast Indiana and northwest Ohio.

Under the terms of the purchase and assumption agreement, West End Bancshares estimates that its stockholders will receive between $34.91 and $36.81 in cash consideration from the all-cash deal for each share of West End Indiana Bancshares common stock they own.

The transaction has been unanimously approved by the board of directors of both institutions and is expected to close in the first quarter of 2020, subject to customary closing conditions, the approval of West End Indiana Bancshares’s stockholders, West End Bank’s depositors and regulatory approvals.

The price of the bank's stock is up 22 percent on the news.

Read the press release.

Policy Advocate Calls for Illinois CUs to Pay Their Fair Share of Taxes

Peter Prickett, President of Council for Sound Tax Policy, has called for credit unions, especially the largest, to pay their fair share of the tax burden in Illinois.

Prickett stated that most consumers don't see any differences between banks and credit unions. Credit unions offer the same products and services as banks. And the largest Illinois credit unions tower over the majority of community banks they compete with.

In an opinion letter, Prickett pointed out that if the 16 largest Illinois credit unions had paid their fair share in 2018, this would have resulted in $20 million to $27 million in additional tax revenues to the state.

Prickett noted that 3 of Illinois largest credit union have bought naming rights to sports stadiums and signed exclusive sponsorship deals with sports teams, but paid nothing in income taxes.

Pricket wrote that "Illinois taxpayers should consider whether now is the time to ... end the antiquated income tax exemption for credit unions in Illinois."

Read the Op-Ed.

Wednesday, July 31, 2019

CU CEO Earns Almost $1.9 Million in 2017, Despite Problems with Taxi Medallion Loans

Despite losing almost $97.2 million for 2017, the CEO of Progressive Credit Union (New York, NY) was paid approximately $1.9 million.

The credit union's performance was adversely affected by defaulting taxi medallion loans arising from the disruption of the taxi medallion industry.

Robert Familant, CEO and Treasurer of Progressive Credit Union, had total compensation of $1,931,827 for 2017 with a base compensation of $1,870,722, according to the credit union's Form 990 (click on image to enlarge).


While Familant's compensation was scaled back from almost $2.3 million in 2016, this 2017 pay package seems to deny the reality of depth and scope of the problems facing the credit union.

The credit union had $470.6 million in assets at the end of 2017.

Progressive Credit Union was taken over by Pentagon Federal Credit Union (McLean, VA) via an emergency merger in early 2019.

Tuesday, July 30, 2019

Greater Iowa CU Buys Naming Rights to Ball Field

The City of Waukee (Iowa) and the Waukee Betterment Foundation announced that Greater Iowa Credit Union will be the sole naming rights sponsor of Waukee’s Miracle League™ ball field, which is slated to open in 2022.

Greater Iowa Credit Union donated $250,000 to the project.

But it seems to me that the credit union received something in value --- the naming rights to the ball field -- in return for the funds. So, is this really a donation.

Read the press release.

Monday, July 29, 2019

Benefits and Challenges of A Bank Buying A CU

There has been a recent trend of credit unions buying banks; however, a bank buying a credit union remains very rare.

But in an article on the Credit Union Executive Society website, Steve Morrissette examines the value proposition of a bank acquiring a credit union.

The article discusses benefits for a bank buying a credit unions and the benefits to a credit union in selling to a bank.

For example, Morrissette writes that credit unions tend to hold core deposits and have an expertise in consumer banking. This would make them attractive to banks trying to deepen their retail banking operations.

Credit unions would benefit from selling to a bank because they would gain access to capital and business lending expertise.

The article noted that members would benefit from a one time special dividend, but also, from technology, especially mobile banking technology and cybersecurity.

However, Morrissette believes these acquisitions will remain rare. He points out the regulatory approval process can be daunting. Additionally, there is the potential for large attrition of members and employees.

Despite these concerns, this article is worth reading.

Read the article.

Sunday, July 28, 2019

SF Taxi Drivers Receiving Letters Demanding Full Repayment

KPIX E is reporting that some San Francisco taxi drivers are receiving letters from a credit union demanding full repayment of balloon loans on their taxi medallions.

The drivers said they cannot afford to make the payments.

The loans were originated by San Francisco Federal Credit Union, which had the exclusive right to fund the purchase of taxi medallions. These loans were later sold as participation interests to other financial institutions.

Read the story.



Saturday, July 27, 2019

Landmark CU Signs Sponsorship Deal with Pro Hockey Team

The Milwaukee Business Journal is reporting that Landmark Credit Union (New Berlin, WI) has entered into a three-year sponsorship agreement with the Milwaukee Admirals of the American Hockey League.

The Milwaukee Admirals will play on the Landmark Credit Union Rink at UW-Milwaukee Panther Arena over the duration of the deal.

Landmark will be the sponsor of the Admirals' smartphone app and the Admirals Pucks for Patriots Program.

Also, Landmark will have signage throughout the arena, including a ticket window, and have an animated Landmark Lighthouse that will be displayed on the arena's video board following each Admirals home game.

The price tag of the sponsorship deal was nor disclosed.

Read the story.

Friday, July 26, 2019

Trade Groups Urge FCC to Protect Lawful Calls

In a comment letter filed on July 24, a coalition of trade groups urged the Federal Communications Commission (FCC) to protect lawful calls placed by legitimate businesses from telephone companies’ call-blocking programs.

The letter came as the FCC seeks to encourage the implementation of a framework for authenticating calls — called “SHAKEN/STIR” — by providing a safe harbor from liability for telephone companies that block calls that are not authenticated under the framework.

The groups reiterated previous concerns that legitimate calls are currently being incorrectly labeled as spam or nuisance and may be blocked. To ensure legitimate calls are not blocked, the trade groups urged the FCC to prohibit telephone companies from blocking “unsigned” calls under the SHAKEN/STIR framework until that framework is fully implemented. Once the framework has been implemented, the FCC should permit telephone companies to block only calls that are not authenticated or, if authenticated, those calls that the telephone company has determined, with a high degree of certainty, are illegal calls.

The trade groups also urged the FCC to expand its proposed “Critical Calls List” of numbers from which outbound calls may not be blocked to include numbers used to place fraud alerts, data breach notifications, remediation messages, electric service notifications, product recall notices, prescription notices and mortgage servicing calls required by federal or state law.

The trade groups signing onto the letter include the American Association of Healthcare Administrative Management, American Bankers Association, ACA International, American Financial Services Association, Consumer Bankers Association, Credit Union National Association, Edison Electric Institute, Independent Community Bankers of America, Mortgage Bankers Association, National Association of Federally-Insured Credit Unions, and National Retail Federation.

Read the letter.

Thursday, July 25, 2019

Troubling Proposal from NCUA

The National Credit Union Administration is proposing that an FCU will be required to develop and maintain a written plan if its public unit and nonmember shares, taken together with borrowings, exceed 70 percent of paid-in and unimpaired capital and surplus.

This proposal ignores that the reliance on volatile and expensive nonmember deposits and borrowed funds could expose the National Credit Union Share Insurance Fund (NCUSIF) to a loss.

For example, Beehive Credit Union, which failed, held up to 18 percent of its deposits in high-cost nonmember deposits. The Material Loss Review of this failure noted that these high-cost nonmember deposits partially contributed to the $27.6 million loss to the NCUSIF.

According to the Material Loss Review of Chetco Federal Credit Union. the credit union's management failed to develop an adequate liquidity plan to address rapid loan growth. The report noted that management funded its rapid loan growth through a combination of borrowed funds and deposit products with above-market rate. But as Chetco's financial condition deteriorated, a corporate credit union reduced its line of credit, subjecting the credit union to liquidity risk. The failure of Chetco resulted in an estimated loss to the NCUSIF of $76.5 million.

The NCUA Board should require all FCUs to develop and maintain written plans when an FCU is relying on high-cost, volatile nonmember shares and borrowings to fund its operations above a de minimis threshold.

Wednesday, July 24, 2019

MidFlorida CU to Buy Naming Rights of Civic Center

Port St. Lucie (FL) City Council approved selling the naming rights of the Civic Center to MidFlorida Credit Union (Lakeland, FL).

The 100,000 square-foot Civic Center will be called MidFlorida Civic Center.

The naming rights deal is for five years. The credit union will pay $195,000 annually for the naming rights and has the option to renew for an addition five years.

More details can be found here.



Tuesday, July 23, 2019

First South Financial CU to Buy WinFirst Bank

First South Financial Credit Union (Bartlett, TN) has entered into an agreement to acquire WinFirst Financial Corp., the holding company for $138 million WinFirst Bank (Winchester, KY).

First South Financial is a $589 million credit union with 18 locations. WinFirst Bank has two locations in Winchester.

The transaction is expected to close during the fourth quarter of 2019, subject to customary regulatory approval and completion of closing conditions.

Read more.

Proposal Would Allow FCUs to Leverage Nonmember Funding

The National Credit Union Administration has proposed a rule that will allow a federal credit union (FCU) to leverage funding sources other than member shares.

The proposed rule will allow an FCU to receive public unit and nonmember shares up to 50 percent of the credit union's paid-in and unimpaired capital and surplus less any public unit and nonmember shares.

Also, the proposed rule would only require an FCU to develop and maintain a written plan if its public unit and nonmember shares combined with total borrowings exceed 70 percent of paid-in and unimpaired capital and surplus.

According to the transcript from the May 2019 NCUA Board meeting, the proposed rule would potentially allow an FCU to increase its funding from sources other than member shares, from 56 percent of assets to 65 percent of assets.

In other words, this proposal could potentially increase leverage for the entire credit union industry by 6 percent or $135 billion, based on current net worth levels.

Unfortunately, the proposal could erode the cooperative character of the credit union industry.

The hallmark of credit unions is that member savings fund member loans. This proposed rule would permit an FCU to finance a greater percentage of its loans to members with nonmember funds.

Monday, July 22, 2019

Opinion: Congress Should Address Large CU Unfair Tax Advantages and Increase Transparency

An opinion piece by Thomas Aiello in RealClear Markets called on Congress to address the unfair tax advantages of large credit unions, as they have strayed from their mission.

Aiello wrote that the industry's deferential regulator has turned a blind eye to large credit unions' abuses of their preferential tax treatment.

For example, Aiello noted that many of these large credit unions allow virtually anyone to join.

In addition, he pointed out that these big credit unions are buying taxpaying community banks, "permanently taking taxpaying business entities off treasuries’ tax rolls and shrinking the tax base." Aiello wrote this is a "textbook example of poor tax policy."

He called on Congress to require all credit unions to file Form 990s, as federal credit unions are not required to file Form 990s. He stated that the "Form 990 is the main enforcement mechanism to ensure compliance with Section 13602 of the Tax Cuts and Jobs Act, which requires a 21 percent excise tax on not-for-profit executive compensation above $1 million."

The op-ed noted that this preferential tax treatment should be retained for small credit unions with a limited common bond.

Thomas Aiello is a policy and government affairs associate with the National Taxpayers Union.

Read the opinion piece.

Sunday, July 21, 2019

Latest Auction Results: NYC Taxi Medallion Prices Tumble Further

Crain's New York Business is reporting that 60 New York City (NYC) taxi medallions sold in auction on July 17 for $110,500 per medallion.

The auction began with a stalking horse bid of $6.5 million, or about $108,000 per medallion.

Last week, only 3 out of 16 medallions to be auctioned off were sold with the top bid of $138,000.

These prices are not good news for the National Credit Union Share Insurance Fund and suggests losses may come in higher than initially estimated.

Read more.

Saturday, July 20, 2019

Sunmark Federal Credit Union to Defect from Federal Charter

Sunmark Federal Credit Union (latham, NY) has applied to federal and state regulators to convert from a federal to a state-chartered credit union and for an expansion in its geographic footprint.

According to the $678 million credit union, the National Credit Union Administration has already approved the conversion, but still needs the approval of the New York Department of Financial Services and the credit union's members.

The credit union stated that the New York state charter is more flexible than the federal charter.

Currently, Sunmark is limited to serving people who live, work, worship, attend school, volunteer, or regularly conduct business in Schenectady, Albany, Rensselaer, Saratoga, Montgomery and Schoharie Counties. As a state chartered credit union, Sunnmark will be able to add the counties of Columbia, Greene, Onondaga, Putnam, Rockland and Westchester.

In addition, the credit union will be able to serve persons that belongs to a business or association that has signed up with the Sunmark to make membership available to its employees or association members outside of New York State.

Members of Sunmark will vote on the proposed charter conversion on July 31.

This would be the second large federal credit union headquartered in New York to defect from the federal charter. Earlier this year, Hudson Valley Federal Credit Union voted to switch from a federal to a state charter.

Read more.

Friday, July 19, 2019

Class-Action Lawsuit Alleges VyStar CU Charged Multiple NSF Fees on Same Item

The Jacksonville Daily Record is reporting that a class=action lawsuit has been filed against VyStar Credit Union (Jacksonville, FL) alleging that the credit union non-sufficient-funds (NSF) fees on the same item.

The complaint states the assessment of multiple NSF fees on the same transaction violated the credit union's account agreement.

The lawsuit is asking for "the court or a jury to award the plaintiffs damages and for the court to prohibit VyStar from continuing the policy of charging multiple NSF fees for rejecting the same item."

Read more.

Thursday, July 18, 2019

NCUA Raises the CRE Appraisal Threshold to $1 Million

By a two-to-one vote, the National Credit Union Administration board on July 18 finalized a proposal to raise the threshold at which credit unions must obtain appraisals for commercial real estate (CRE) transactions from $250,000 to $1 million.

However, this new level is out of step with other federal financial regulators, which have set the CRE appraisal threshold for banks at $500,000.

The final rule also exempts real estate transactions located in rural areas from appraisal requirements if certain conditions are met.

Cato Institute: Don't Extend CRA to CUs

The Cato Institute recently wrote that it would be a mistake to extend the Community Reinvestment Act (CRA) to credit unions.

According to the paper, applying CRA regulations to credit unions would be counterproductive and impose additional compliance burden.

The Cato Institute argues that the credit union common-bond requirements are at once redundant and incompatible with CRA. The article notes that common-bond provisions ensure that credit unions are serving their constituents, which is the objective of CRA.

But the existence of a common-bond is not prima facie evidence that a credit union is serving its entire field of membership. It is possible that the credit union is only serving a small segment of its membership.

The paper also states that CRA compliance relates to bank lending activities within a geographic area. The author argues that there are credit unions with a common-bond based upon profession, social, or demographic groups and thus, CRA is not applicable.

There are two problems with this argument. First, the number of credit unions with community or geographic common-bonds has grown. These credit unions should be subject to a lending test. Second, the paper ignores the fact that Massachusetts examines all state chartered credit unions regardless of common bond. This suggests that CRA can be structured in such a way to evaluate whether a credit union is serving its defined community.

Furthermore, the paper states that evidence shows that credit unions are already serving CRA-targeted populations. But the paper ignores research by the National Community Reinvestment Coalition, which found that state chartered credit unions in Massachusetts outperformed federal credit unions in Massachusetts in serving underserved communities.

The paper makes an additional argument that the common-bond provisions facilitate risk management by giving credit unions information about the credit quality of their borrowers. This is a quaint old-fashion notion about how credit unions operated. While this may be true for tiny church-run credit unions, it does not reflect today's risk management practices of large credit unions.

The paper does conclude that if policymakers have issues about the changing nature of the credit union business model, this can be addressed by revising the Federal Credit Union Act.

Read the paper.

Wednesday, July 17, 2019

Mountain America CU Buys Naming Rights to Event Center

Mountain America Credit Union (Sandy, UT) will pay $4.5 million for the naming rights to the proposed Idaho Falls Event Center, according to the Idaho Falls Auditorium District.

The proposed event center will be called the Mountain America Center.

Mountain America’s branding will be visible throughout the facility, with Mountain America Center prominent on the interior and exterior of the building, including a digital marquee sign along the freeway.

The 48,000 square-foot facility will include 11,500 square feet of meeting space and a 5,500 seat arena, which will host sporting and entertainment events.

Read the press release.

Corporate America Family CU to Acquire Ben Franklin Financial

Corporate America Family Credit Union (Elgin, IL) has purchased Ben Franklin Financial (Arlington Heights, IL) , the holding company for Ben Franklin Bank of Illinois, in an all-cash transaction.

As of March 31, 2019, Ben Franklin Bank operated two bank branches in Arlington Heights and Rolling Meadows, Illinois and had $93.2 million in assets.

Under the terms of the purchase and assumption agreement, Ben Franklin Financial stockholders are currently estimated to receive between $10.33 and $10.70 in cash consideration for each share of Ben Franklin Financial common stock.

The transaction has been unanimously approved by the board of directors of each party and is expected to close in early 2020, subject to customary closing conditions, the approval of Ben Franklin Financial stockholders, regulatory approvals, and if required, approval of the depositors of Ben Franklin Bank.

This is the third Illinois bank to be acquired by a credit union.

Read the press release.

Tuesday, July 16, 2019

Golden Eagle Community Bank Officially Joins Advia CU

The acquisition of Golden Eagle Community Bank (Woodstock, IL) by Advia Credit Union (Parchment, MI) was completed on July 15.

The Illinois Department of Financial and Professional Regulation approved the acquisition on May 30.

This is the third bank to be acquired by Advia Credit Union.

Monday, July 15, 2019

Pentagon FCU Settles Claim Filed with NLRB

Pentagon Federal Credit Union (McLean, VA) settled in June a claim filed with the National Labor Relations Board (NLRB), according to the Register-Guard.

PenFed Workers United, a group of employees in Eugene, Oregon, filed the complaint against the credit union for “protected concerted activity” including removing fliers put up by Workers United spreading its message, coercive actions and retaliations against workers.

The company settled the claim June 21 by agreeing to put up signage that confirms that the protected activity is allowed, according to the case docket.

There are two other related cases against Pentagon Federal Credit Union.

Read more.

Saturday, July 13, 2019

Taxi Medallion Sold for $138,000 in Auction

Crain's New York Business is reporting that the auction of foreclosed New York City taxi medallions owned by Aspire Federal Credit Union (Clark, NJ) on July 11 hit a new record low auction price.

Sixteen medallions were being auctioned, but only 3 medallions were sold.

The auction started at a price of $130,000 with the highest bid being $138,000 for one medallion. Two other medallions sold for $136,000 and $137,000.

When the auctioneer moved to a group of medallions with a floor price of $140,000, there were no bidders.

A year earlier, 131 medallions were sold in auction for $170,000 each.

The article notes that private sales of taxi medallions have recently gone for as low as $100,000, according to the Taxi and Limousine Commission.

This new price information would suggest that taxi medallion assets that are the possession of the National Credit Union Administration could experience an additional haircut.

Read the article.

Friday, July 12, 2019

Former Melrose CU CEO Indicted

Former Melrose Credit Union CEO, Alan Kaufman, along with Long Island businessman, Tony Georgiton, were indicted on July 11 in a bribery scheme.

According to the indictment, Kaufman accepted free housing and financing for the purchase of his personal residence from Georgiton in exchange for the approval of millions of dollars in loans to Georgiton’s companies at favorable terms. Kaufman approved the loans, even though the head of the loan department refused to sign off on the loans.

Kaufman also is alleged to have arranged for Melrose CU to pay $2 million to a company owned by Georgiton for the naming rights to a ballroom in Queens, New York, despite Melrose's marketing director stating that the naming rights deal was only worth $50,000 per year and had minimal value to the credit union.

In addition, Kaufman is charged with accepting lavish vacations, including to Paris and Hawaii, as bribes from a media company, in exchange for Melrose CU purchasing increased advertising with that company.

Kaufman is charged with one count of conspiracy to commit bribery and two counts of bribery of a financial institution officer, while Georgiton is charged with one count of conspiracy to commit bribery and one count of bribery of a financial institution officer.

According to U.S. Attorney Geoffrey S. Berman, both men "face criminal charges for their self-dealing."

Melrose Credit Union specialized in taxi medallion lending and was liquidated on August 31, 2018, becoming the most expensive natural person credit union failure to the National Credit Union Share Insurance Fund.

Read the press release.

Read the indictment.

Thursday, July 11, 2019

Six CUs Agree to Fined for Late Filing Q4 2018 Call Reports

The National Credit Union administration is reporting that 6 federally insured credit unions have agreed to pay civil monetary penalties for filing late Call Reports in the fourth quarter of 2018.

The total amount of penalties paid was $5,073.

Penalties for credit unions filing late Call Reports ranged from $156 to $2,665.

The size of the civil monetary penalties is based on three factors: the credit union’s asset size, its Call Report filing history, and the length of the filing delay. The Federal Credit Union Act requires any funds received through civil monetary penalties be sent to the U.S. Treasury.

Three of the six credit unions had assets of less than $10 million, and three had assets between $10 million and $50 million. Four of the six credit unions had been late in at least one prior quarter.

CUs Paying Up in Bank Deals

At the halfway point of 2019, the number of announced deals by credit unions acquiring banks has surpassed the number of announced deals for all of 2018, according to S&P Global Market Intelligence.

In some of these deals, credit unions are offering a higher price than other financial institutions.

For example, the price of the deal between Verve Credit Union (Oshkosh,WI) and South Central Bank (Chicago, IL) was reported to be above the going rate of 1.5 times book value for Chicago community banks.

There are several reasons why credit unions can pay a higher multiple for a community bank versus other financial institutions.

The credit union tax exemption gives credit unions the ability to offer a higher price for community banks.

But also, credit unions are not subject to shareholder pressure.

If a bank overpays in an acquisition, it will see the market value of its stock drop. However, this is not the case for credit unions, which do not have shareholders.

I suspect most credit union members are not aware that their credit union is acquiring a bank or how much their credit union is paying bank shareholders.

If the members did know, they would probably wonder why this money is not going to them.

Wednesday, July 10, 2019

Lawsuit Alleges Improper OD Practices by Elevations CU

A class action lawsuit has been filed against Elevations Credit Union (Boulder, CO) for improper overdraft (OD) practices, according to the Daily Camera.

The lawsuit alleges that the credit union assessed OD fees on purchases even though the account had enough funds to cover the transaction.

The lawsuit filed on July 3 in the Boulder District Court.

Read the story.

Tuesday, July 9, 2019

Report Criticizes NCUA for Not Working with Struggling Taxi Medallion Owners

A report from the New York City Mayor's Office is critical of the National Credit Union Administration (NCUA) over its failure to work with struggling taxi medallion owners.

The report found that drivers had median debt of $500,000 -- well above the current value for New York City taxi medallions in the secondary market. Only 35 percent of the drivers owe less today than they originally borrowed. The report found that many drivers borrowed against their medallions for other purposes, such as home purchase, buying a car, or paying for college or education.

Fifty-one percent of the surveyed drivers stated they are struggling to pay their monthly bills and 26 percent were considering bankruptcy.

According to the report, credit unions and credit unions in NCUA receivership held about two-third of all medallion loans based upon survey results.

The report found that LOMTO Federal Credit Union and Melrose Credit Union had among the highest interest rates on taxi medallion loans at 4.6 percent and 4.5 percent, respectively. It also found that First Jersey Credit Union had the highest average monthly loan payment at $3,825.22.

The report noted that only 15 percent of drivers indicated that their lender had lowered their monthly payment or reduced their loan principal.

The report stated that credit unions taken over by NCUA are among the least likely lenders to work with taxi drivers struggling to afford their loan payments. For example, drivers reported that Melrose Credit Union had taken actions on only 9 percent of their loans to either lower their monthly payments or reduce their loan principal. Only 8 percent of drivers with a loan from LOMTO Federal Credit Union saw a lower monthly payment or a reduction in loan principal and no borrower from First Jersey Credit Union received a lower monthly payment or a principal reduction.

The report does not address the role of ride-sharing companies in disrupting the New York City taxi market.

If Congress decides to investigate NCUA's supervision with regard to medallion lending by credit unions, this report should provide grist for the mill.

Read the report.

 

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