MIDFLORIDA Credit Union (Lakeland, FL) completed its acquisition of Community Bank and Trust of Florida (Ocala, FL).
The transaction closed on November 9, 2019.
Friday, November 29, 2019
Proposed Class Action Lawsuit Alleges CU Violated Fair Credit Reporting Act
A proposed class action lawsuit claims that California Coast Credit Union (San Diego, CA) violated the Fair Credit Reporting Act.
The lawsuit alleges that the credit union incorrectly reported certain financial obligations on closed or discharged accounts to Experian.
The complaint was filed on November 19 in US District Court for the Southern District of California.
The lawsuit alleges that the credit union incorrectly reported certain financial obligations on closed or discharged accounts to Experian.
The complaint was filed on November 19 in US District Court for the Southern District of California.
Tuesday, November 26, 2019
Does Your CU Treat Members as Owners?
Credit unions claim that their members are owners.
However, credit union governance practices suggest otherwise.
Federal credit unions are averse to disclosing executive compensation.
Unlike state chartered credit unions, which disclose executive compensation information in individual Form 990s, there is no such requirement for federal credit unions.
However, Robert Hoel in a Filene Research Institute report, Power and Governance: Who Really Owns Credit Unions?, wrote: "Denying credit union owners and the general public executive compensation information in a direct and straightforward manner is difficult to justify objectively. Because transparency is a powerful tool for detecting and preventing insider abuses."
Hoel commented that the National Credit Union Administration "may want to require credit unions to include specific compensation information in call reports and make the information available to credit union members at annual meetings."
In a related matter, credit unions don't give credit union members the ability to have a non-binding say on executive pay, stockholders in publicly traded companies have the right to cast an advisory vote on executive compensation.
.
However, credit union governance practices suggest otherwise.
Federal credit unions are averse to disclosing executive compensation.
Unlike state chartered credit unions, which disclose executive compensation information in individual Form 990s, there is no such requirement for federal credit unions.
However, Robert Hoel in a Filene Research Institute report, Power and Governance: Who Really Owns Credit Unions?, wrote: "Denying credit union owners and the general public executive compensation information in a direct and straightforward manner is difficult to justify objectively. Because transparency is a powerful tool for detecting and preventing insider abuses."
Hoel commented that the National Credit Union Administration "may want to require credit unions to include specific compensation information in call reports and make the information available to credit union members at annual meetings."
In a related matter, credit unions don't give credit union members the ability to have a non-binding say on executive pay, stockholders in publicly traded companies have the right to cast an advisory vote on executive compensation.
.
Friday, November 22, 2019
Collins Community CU to Acquire Small Illinois Bank
Credit Union Times is reporting that Collins Community Credit Union (Cedar Rapids, IA) announced it plans to acquire First Savanna Savings Bank (Savanna, IL).
Collins Community CU will acquire the assets and liabilities of First Savanna Savings Bank.
First Savanna Savings Bank has $12.3 million in assets. Collins Community Credit Union has $1.2 billion in assets.
Financial terms of the cash deal were not disclosed.
Read the story.
Collins Community CU will acquire the assets and liabilities of First Savanna Savings Bank.
First Savanna Savings Bank has $12.3 million in assets. Collins Community Credit Union has $1.2 billion in assets.
Financial terms of the cash deal were not disclosed.
Read the story.
GTE to Issue Almost $185 Million in Auto ABS
GTE Credit Union (Tampa, FL) is planning to issue $184.8 million in prime auto loan asset-backed securities, according to a presale report by S&P Global Ratings. This is the first auto loan securitization by GTE CU.
The deal is expected to close Nov. 26.
The credit quality of the underlying pool, which consists of prime automobile loans, had a weighted average non-zero FICO score of 727.
Robust levels of credit enhancement mitigate the collateral pool's extremely high geographic concentration in and around the Tampa region of approximately 98 percent.
The loan pool has a high concentration of loans with maturities greater than 72 months comprising over 62 percent of the aggregate pool. Approximately 31 percent of the pool is comprised of loans with original terms of 73-75 months, and another 31 percent has terms of 75-84 months.
The underlying pool of auto loans has a weighted average loan-to-value ratio of approximately 92.93%, and approximately nine months of weighted average seasoning.
Read more.
The deal is expected to close Nov. 26.
The credit quality of the underlying pool, which consists of prime automobile loans, had a weighted average non-zero FICO score of 727.
Robust levels of credit enhancement mitigate the collateral pool's extremely high geographic concentration in and around the Tampa region of approximately 98 percent.
The loan pool has a high concentration of loans with maturities greater than 72 months comprising over 62 percent of the aggregate pool. Approximately 31 percent of the pool is comprised of loans with original terms of 73-75 months, and another 31 percent has terms of 75-84 months.
The underlying pool of auto loans has a weighted average loan-to-value ratio of approximately 92.93%, and approximately nine months of weighted average seasoning.
Read more.
Thursday, November 21, 2019
Fewer Problem CUs, But Shares and Assets Up at the End of Q3 2019
The number of problem credit unions edged lower during the third quarter of 2019, according to the National Credit Union Administration (NCUA).
At the end of the third quarter of 2019, there were 200 problem credit unions. In comparison, there were 204 problem credit unions at the end of the second quarter of 2018.
A problem credit union has a composite CAMEL rating of 4 or 5.
Total assets in problem credit unions were $11.2 billion at the end of the third quarter. Assets in problem credit unions were $11 billion at the end of the second quarter.
Shares (deposits) in problem credit unions rose during the third quarter to $10.1 billion from $9.8 billion as of June 2019. At the end of September 2019, 0.84 percent of total insured shares were in problem credit unions. In comparison, 0.82 percent of total insured shares were in problem credit unions as of June 2019.
Most problem credit unions were small credit unions.
The number of problem credit unions with less than $10 million in assets fell by 4 to 99 during the third quarter. But the number of problem credit unions with more than $10 million in assets was unchanged during the quarter.
NCUA reported that 89 percent of problem credit unions have less than $100 million in assets, while 1.5 percent of problem credit unions have more than $500 million in assets.
At the end of the third quarter of 2019, there were 200 problem credit unions. In comparison, there were 204 problem credit unions at the end of the second quarter of 2018.
A problem credit union has a composite CAMEL rating of 4 or 5.
Total assets in problem credit unions were $11.2 billion at the end of the third quarter. Assets in problem credit unions were $11 billion at the end of the second quarter.
Shares (deposits) in problem credit unions rose during the third quarter to $10.1 billion from $9.8 billion as of June 2019. At the end of September 2019, 0.84 percent of total insured shares were in problem credit unions. In comparison, 0.82 percent of total insured shares were in problem credit unions as of June 2019.
Most problem credit unions were small credit unions.
The number of problem credit unions with less than $10 million in assets fell by 4 to 99 during the third quarter. But the number of problem credit unions with more than $10 million in assets was unchanged during the quarter.
NCUA reported that 89 percent of problem credit unions have less than $100 million in assets, while 1.5 percent of problem credit unions have more than $500 million in assets.
Wednesday, November 20, 2019
Banks Top CUs in Customer Satisfaction
The American Customer Satisfaction Index (ASCI) is reporting that banks topped credit unions in customer satisfaction.
This is the first time in the history of the index where banks scored higher than credit unions.
After being tied last year, customers gave banks a satisfaction score of 80 out of 100, while credit union customers rated their satisfaction at 79 out of 100, a 2.5-point dip from 2018.
Banks either tied or outpaced credit unions on every individual element of the satisfaction rating.
What is especially telling is that credit unions lag behind banks with regard to digital satisfaction.
Read the press release.
This is the first time in the history of the index where banks scored higher than credit unions.
After being tied last year, customers gave banks a satisfaction score of 80 out of 100, while credit union customers rated their satisfaction at 79 out of 100, a 2.5-point dip from 2018.
Banks either tied or outpaced credit unions on every individual element of the satisfaction rating.
What is especially telling is that credit unions lag behind banks with regard to digital satisfaction.
Read the press release.
OIG: NCUA Assisted in the Merger of an Alabama CU
In its Semiannual Report to Congress, the Office of the Inspector General (OIG) of the National Credit Union Administration (NCUA) reported that the failure of Monroe Education Employees Federal Credit Union (Monroeville, AL) imposed an estimated loss to the National Credit Union Share Insurance Fund of $335,530.
The credit union failed due to insufficient management, poor internal controls, recordkeeping errors, high loan delinquencies and charge-offs, and undercapitalization.
At the time of the assisted merger, Monroe Education Employees FCU had $4.4 million in assets and 1,578 members.
The failed credit union was merged with Gulf Winds Credit Union (Pensacola, FL) on July 29, 2019.
Read more.
The credit union failed due to insufficient management, poor internal controls, recordkeeping errors, high loan delinquencies and charge-offs, and undercapitalization.
At the time of the assisted merger, Monroe Education Employees FCU had $4.4 million in assets and 1,578 members.
The failed credit union was merged with Gulf Winds Credit Union (Pensacola, FL) on July 29, 2019.
Read more.
Tuesday, November 19, 2019
Truliant Is Not the Only "TRU" Financial Brand
Truliant Federal Credit Union (Winston Salem, NC) is suing SunTrust Banks and BB&T Corp. for trademark-infringement.
BB&T and SunTrust announced that when the merger is completed the combined entity would be called Truist Financial Corporation.
Truliant claims that the proposed name will create digital marketplace confusion, especially in the Charlotte and Triad markets.
But Truliant never protected its trademark from other financial institutions with TRU in their name.
Here is a list of active credit unions with TRU at the start of their names -- Trumark Financial (Fort Washington, PA), TruNorth (Ishpeming, MI), TruService Community (Little Rock, AR), TruStar (International Falls, MN), TruStone Financial (Plymouth, MN), TruWest (Tempe, AZ), TruChoice (South Portland, ME), TruGrocer (Boise, ID), and Truity (Bartlesville, OK).
This list does not include other financial services firms with TRU at the start of their names.
For example, TruWest says on its website that it makes the TruDifference. TruChoice on its website advertises TruAccounts, TruLoans, and TruRates.
It appears that Truliant is not the only TRU financial brand.
BB&T and SunTrust announced that when the merger is completed the combined entity would be called Truist Financial Corporation.
Truliant claims that the proposed name will create digital marketplace confusion, especially in the Charlotte and Triad markets.
But Truliant never protected its trademark from other financial institutions with TRU in their name.
Here is a list of active credit unions with TRU at the start of their names -- Trumark Financial (Fort Washington, PA), TruNorth (Ishpeming, MI), TruService Community (Little Rock, AR), TruStar (International Falls, MN), TruStone Financial (Plymouth, MN), TruWest (Tempe, AZ), TruChoice (South Portland, ME), TruGrocer (Boise, ID), and Truity (Bartlesville, OK).
This list does not include other financial services firms with TRU at the start of their names.
For example, TruWest says on its website that it makes the TruDifference. TruChoice on its website advertises TruAccounts, TruLoans, and TruRates.
It appears that Truliant is not the only TRU financial brand.
Monday, November 18, 2019
NCUA Will Seek Information on CUs' Exposure to LIBOR
The National Credit Union Administration (NCUA) is proposing to add two questions to Form 4501A (Profile) regarding a federally insured credit union (FICU) exposure to London Interbank Offered Rate (LIBOR).
NCUA claims that these questions are needed to identify FICUs that have LIBOR instruments or use LIBOR as a reference rate.
Examiners will use this information to assess a FICU's readiness related to the discontinuation of the LIBOR index after 2021.
NCUA does not expect these questions will impose additional burden on FICUs in filling out the Form 4501A.
Read the Federal Register notice.
NCUA claims that these questions are needed to identify FICUs that have LIBOR instruments or use LIBOR as a reference rate.
Examiners will use this information to assess a FICU's readiness related to the discontinuation of the LIBOR index after 2021.
NCUA does not expect these questions will impose additional burden on FICUs in filling out the Form 4501A.
Read the Federal Register notice.
NCUA Should Seek Feedback on CAMEL Ratings
The National Credit Union Administration (NCUA) should seek feedback from credit unions and other stakeholders concerning the current use of CAMEL ratings by the agency.
The Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System are currently seeking feedback on how the agencies use their CAMELS ratings in enforcement action and application processes.
The two banking agencies stated that this effort is consistent with the agencies' commitment to increase transparency, improve efficiency, support innovation, and provide opportunities for public feedback.
For example, the two banking regulators are looking for input on the extent that they appropriately communicate and support each rating after an on-site examination or at the end of an examination cycle, including communicating the effect of each rating or finding on the composite rating.
The bank regulators are also interested in how the CAMELS rating system vary from one examination, or examination cycle, to the next.
Bank regulators want to know whether the CAMELS rating system is sufficiently flexible to reflect differences between financial institutions such as size, business models, risks, and internal and external operating environments.
Another area that bank regulators want input on is steps, if any, the agencies should take to promote the consistent use of CAMELS ratings in applications and enforcement matters.
These are just some of the topics that the bank regulators are seeking feedback on.
NCUA would benefit from receiving this feedback from stakeholders on its use of CAMEL ratings.
Read the Federal Register notice.
The Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System are currently seeking feedback on how the agencies use their CAMELS ratings in enforcement action and application processes.
The two banking agencies stated that this effort is consistent with the agencies' commitment to increase transparency, improve efficiency, support innovation, and provide opportunities for public feedback.
For example, the two banking regulators are looking for input on the extent that they appropriately communicate and support each rating after an on-site examination or at the end of an examination cycle, including communicating the effect of each rating or finding on the composite rating.
The bank regulators are also interested in how the CAMELS rating system vary from one examination, or examination cycle, to the next.
Bank regulators want to know whether the CAMELS rating system is sufficiently flexible to reflect differences between financial institutions such as size, business models, risks, and internal and external operating environments.
Another area that bank regulators want input on is steps, if any, the agencies should take to promote the consistent use of CAMELS ratings in applications and enforcement matters.
These are just some of the topics that the bank regulators are seeking feedback on.
NCUA would benefit from receiving this feedback from stakeholders on its use of CAMEL ratings.
Read the Federal Register notice.
Saturday, November 16, 2019
Kern School FCU Applies to Switch to State Charter
Another large credit union has applied with a state regulator to flee the federal charter.
Kern Schools Federal Credit Union (Bakersfield, CA) applied on August 15 to convert to a state charter, according to the California Department of Business Oversight.
Kern Schools FCU has almost $1.7 billion in assets, according to its most recent call report.
Kern Schools Federal Credit Union (Bakersfield, CA) applied on August 15 to convert to a state charter, according to the California Department of Business Oversight.
Kern Schools FCU has almost $1.7 billion in assets, according to its most recent call report.
Friday, November 15, 2019
Schools Financial's Merger Notice
Beyond the usual happy talk about how the merger will benefit credit union members, the merger notice of Schools Financial Credit Union (Sacramento, CA) includes information about merger-related compensation and distribution of net worth to members.
Schools Financial Credit Union is proposing to merge with Schoolsfirst Federal Credit Union (Santa Ana, CA).
First, the credit union states that a vote for the merger will result in an up to $4 million special dividend distribution from net worth to the credit union's members. The distribution will take place on a one-time (pro-rata) basis, with individual dividends being calculated based on average month-end deposit balances in the six (6) month period from June 1, 2019 to November 30, 2019.
Second, the notice disclosed the merger-related compensation for five employees of Schools Financial. Tim Marriott, President/CEO of Schools Financial CU, could earn up to a maximum $8,011,532 in merger-related compensation. However, the notice states that the the likely amount of compensation could be significantly lower.
Also, all employees of Schools Financial Credit Union, except Mr. Marriott, are being offered retention bonuses to help ensure a smooth transition and successful integration of the merger.
The date of the member's vote is December 12, 2019.
Merger Notice.
Schools Financial Credit Union is proposing to merge with Schoolsfirst Federal Credit Union (Santa Ana, CA).
First, the credit union states that a vote for the merger will result in an up to $4 million special dividend distribution from net worth to the credit union's members. The distribution will take place on a one-time (pro-rata) basis, with individual dividends being calculated based on average month-end deposit balances in the six (6) month period from June 1, 2019 to November 30, 2019.
Second, the notice disclosed the merger-related compensation for five employees of Schools Financial. Tim Marriott, President/CEO of Schools Financial CU, could earn up to a maximum $8,011,532 in merger-related compensation. However, the notice states that the the likely amount of compensation could be significantly lower.
Also, all employees of Schools Financial Credit Union, except Mr. Marriott, are being offered retention bonuses to help ensure a smooth transition and successful integration of the merger.
The date of the member's vote is December 12, 2019.
Merger Notice.
Wednesday, November 13, 2019
Indiana Bank to Acquire Privately Insured CU
In a rare transaction, an Indiana bank will acquire an Indiana credit union.
ABA Newsbytes is reporting that First Bank of Berne, a $711 million community bank based in Berne, Ind., will acquire the $18.7 million Adams County Credit Union in Monroe, Indiana.
Adams County Credit Union is privately insured by American Share Insurance.
Therefore, this merger will not be hindered by the National Credit Union Administration's burdensome bank-credit union merger regulations.
Details regarding the transaction were not disclosed.
ABA Newsbytes is reporting that First Bank of Berne, a $711 million community bank based in Berne, Ind., will acquire the $18.7 million Adams County Credit Union in Monroe, Indiana.
Adams County Credit Union is privately insured by American Share Insurance.
Therefore, this merger will not be hindered by the National Credit Union Administration's burdensome bank-credit union merger regulations.
Details regarding the transaction were not disclosed.
Financial Institutions Need to Prepare for Climate Risk
Recently, two Federal Reserve officials spoke on the impact of climate-related risks to financial institutions.
Kevin Stiroh, Executive Vice President at the Federal Reserve Bank of New York, noted that there were two climate-related risks confronting financial institutions -- physical risk and transition risk.
Stiroh stated: "Physical risk is the potential for losses as climate-related changes disrupt business operations, destroy capital and interrupt economic activity. Transition risk is the potential for losses resulting from a shift toward a lower-carbon economy as policy, consumer sentiment and technological innovations impact the value of certain assets and liabilities."
In a speech at a San Francisco Federal Reserve Bank conference, Federal Reserve Governor Lael Brainard noted that severe weather events could impact clearing and settlement activities and increase the demand for cash.
Brainard cautioned that financial institutions need to "manage risks surrounding potential loan losses resulting from business interruptions and bankruptcies associated with natural disasters, including risks associated with loans to properties that are likely to become uninsurable or activities that are highly exposed to climate risks."
She stated: "For example, if prices of properties do not accurately reflect climate-related risks, a sudden correction could result in losses to financial institutions, which could in turn reduce lending in the economy."
Brainard commented that this decline in asset prices could result in a negative wealth effect, which could affect economic activity.
Brainard also noted that low-income communities are particularly vulnerable to climate-related disasters, as these communities have less liquid savings to meet emergencies arising from the loss of income and property.
Both officials stated that the Federal Reserve expects financial institutions to have risk management systems that appropriately identify, measure, monitor, and manage climate risks and build resiliency into their business models.
Read Stiroh's speech.
Read Lael Brainard's speech.
Kevin Stiroh, Executive Vice President at the Federal Reserve Bank of New York, noted that there were two climate-related risks confronting financial institutions -- physical risk and transition risk.
Stiroh stated: "Physical risk is the potential for losses as climate-related changes disrupt business operations, destroy capital and interrupt economic activity. Transition risk is the potential for losses resulting from a shift toward a lower-carbon economy as policy, consumer sentiment and technological innovations impact the value of certain assets and liabilities."
In a speech at a San Francisco Federal Reserve Bank conference, Federal Reserve Governor Lael Brainard noted that severe weather events could impact clearing and settlement activities and increase the demand for cash.
Brainard cautioned that financial institutions need to "manage risks surrounding potential loan losses resulting from business interruptions and bankruptcies associated with natural disasters, including risks associated with loans to properties that are likely to become uninsurable or activities that are highly exposed to climate risks."
She stated: "For example, if prices of properties do not accurately reflect climate-related risks, a sudden correction could result in losses to financial institutions, which could in turn reduce lending in the economy."
Brainard commented that this decline in asset prices could result in a negative wealth effect, which could affect economic activity.
Brainard also noted that low-income communities are particularly vulnerable to climate-related disasters, as these communities have less liquid savings to meet emergencies arising from the loss of income and property.
Both officials stated that the Federal Reserve expects financial institutions to have risk management systems that appropriately identify, measure, monitor, and manage climate risks and build resiliency into their business models.
Read Stiroh's speech.
Read Lael Brainard's speech.
Tuesday, November 12, 2019
Bill Would Exempt Veteran-Owned Businesses from MBL Cap
Sens. Dan Sullivan (R-Alaska) and Mazie Hirono (D-Hawaii) introduced a bill on November 12 to exempt loans made to veteran-owned businesses from a credit union’s member business lending (MBL) cap, the Veterans Member Business Loan Act (S. 2834).
The MBL cap is 12.25 percent of assets.
A similar bill was introduced earlier this year in the House of Representatives.
The MBL cap is 12.25 percent of assets.
A similar bill was introduced earlier this year in the House of Representatives.
Auto Loans Are Getting Riskier
Some auto loan metrics indicate car loans are getting riskier.
The Wall Street Journal is reporting that more car loan borrowers are underwater.
According to Edmunds, 33 percent of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity. In comparison, underwater borrowers were 28 percent five years ago and 19 percent a decade ago. The average amount owed by these underwater borrowers through the first 9-months of 2019 was about $5,000.
The amount owed on the trade-in is wrapped into the new auto loan.
To help make the loan payments more affordable, the length of auto loans is becoming longer. But that also means that a smaller share of the monthly payment is going to pay down the principal, which could leave the borrower further underwater when this vehicle is traded-in.
The Wall Street Journal is reporting that more car loan borrowers are underwater.
According to Edmunds, 33 percent of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity. In comparison, underwater borrowers were 28 percent five years ago and 19 percent a decade ago. The average amount owed by these underwater borrowers through the first 9-months of 2019 was about $5,000.
The amount owed on the trade-in is wrapped into the new auto loan.
To help make the loan payments more affordable, the length of auto loans is becoming longer. But that also means that a smaller share of the monthly payment is going to pay down the principal, which could leave the borrower further underwater when this vehicle is traded-in.
Thursday, November 7, 2019
Consumer Credit Growth Slows at CUs during September
Outstanding consumer credit grew at credit unions during September, albeit at a slower pace, according to the Federal Reserve.
September consumer credit at credit unions was $487 billion, up from $485.8 billion in August.
Consumer credit grew at an annualized pace of $92.7 billion during August. The annualized growth in consumer credit tumbled to $13.6 billion during September
Revolving credit at credit unions increased by approximately $100 million during September to $64.4 billion.
Nonrevolving credit at credit unions increased by almost $1 billion during September to $422.6 billion.
Review the G.19 Report.
September consumer credit at credit unions was $487 billion, up from $485.8 billion in August.
Consumer credit grew at an annualized pace of $92.7 billion during August. The annualized growth in consumer credit tumbled to $13.6 billion during September
Revolving credit at credit unions increased by approximately $100 million during September to $64.4 billion.
Nonrevolving credit at credit unions increased by almost $1 billion during September to $422.6 billion.
Review the G.19 Report.
TransUnion: CUs Are Capturing A Greater Share of Auto Loans
A TransUnion blog is reporting that credit unions are capturing a growing share of the auto finance marketplace.
Between 2013 and 2018, credit unions’ market share of the auto loans rose 8 percent.
TransUnion cited several factors contributed to this market share gain.
TransUnion reported that credit unions took advantage of banks tightening their underwriting of auto loans between the third quarter of 2016 thru the fourth quarter of 2017. Credit unions gained market share across all credit tiers, except subprime.
In addition, credit unions were undercutting their competition with respect to interest rates on auto loans and extended the terms of these loans. TransUnion found that credit unions were capturing 55 percent of the share of auto loans with maturities between 76 and 84 months and 53 percent of the share of loans beyond 85 months in maturity. While extending the maturity of the auto loan makes car payments more affordable, consumers will pay more in interest over the life of the loan.
Credit unions have increased their share of used car financing to grow their auto finance market share.
TransUnion also observed that credit unions are dominating the auto refinance market.
Read the blog post.
Between 2013 and 2018, credit unions’ market share of the auto loans rose 8 percent.
TransUnion cited several factors contributed to this market share gain.
TransUnion reported that credit unions took advantage of banks tightening their underwriting of auto loans between the third quarter of 2016 thru the fourth quarter of 2017. Credit unions gained market share across all credit tiers, except subprime.
In addition, credit unions were undercutting their competition with respect to interest rates on auto loans and extended the terms of these loans. TransUnion found that credit unions were capturing 55 percent of the share of auto loans with maturities between 76 and 84 months and 53 percent of the share of loans beyond 85 months in maturity. While extending the maturity of the auto loan makes car payments more affordable, consumers will pay more in interest over the life of the loan.
Credit unions have increased their share of used car financing to grow their auto finance market share.
TransUnion also observed that credit unions are dominating the auto refinance market.
Read the blog post.
Tuesday, November 5, 2019
NCUA Board Upholds Denials of Secondary Capital Plans
The National credit Union Administration Board in October upheld the Supervisory Review Committees (SRC) affirmation of the denials of two unnamed low-income credit unions' applications to accept secondary capital by Regional Directors.
In one appeal, the Board on September 9, 2019 denied a request for an oral hearing from a low-income credit union (LICU); but agreed to consider the merits of the appeal on the basis of the written record.
Chairman Hood and Board Member Harper considered this appeal. Board Member McWatters was recused from this matter.
In its October 24 decision, the Board found that there was ample evidence that the LICU's secondary capital plan was unsound.
The Board viewed that the LICU's secondary plan reflected inadequate due diligence.
The pro forma financial statements lacked detail and had material omissions, which did not allow the agency to properly evaluate the safety and soundness of the plan.
Moreover, the secondary capital plan failed to adequately align with the LICU’s forecasts and strategic plan. Specifically, both the Region and the SRC have determined, and the Board agrees, that because there is a negative spread between the projected interest rate for the secondary capital loan and the average rate of return for the assets in the safety net plan, this negative spread will become a stress on earnings and a duration mismatch between funding sources.
The Board concluded the SRC was correct in affirming the Regional Director's denial.
In the other appeal, the Board on August 8, 2019 granted the LICU's request to present its case orally before the Board. The hearing was held on September 24.
Chairman Hood and Board Member Harper considered this appeal. Board Member McWatters was recused from this matter.
The credit union contended that its secondary capital plan that met the criteria in §701.34(b)(1). Therefore it should receive the requested capital. The LICU stated that the three deficiencies identified by the Region were subjective and should not be a valid basis for denying the secondary capital plan.
The Region, on the other hand, argued that the five enumerated criteria provide for the minimum components that are required to be included in a secondary capital application.
The SRC found ample support for the Region’s assessments that the LICU's secondary capital plan was not sound, and concluded the denial of the plan was reasonable.
In its October 11 decision, the Board did not find the LICU's arguments to be persuasive. The Board stated it should not substitute its judgment for the SRC. Therefore, the Board affirmed the SRC decision.
The Board stated that in both cases the credit unions choose to reapply for secondary capital. But if they decide to re-apply, the agency encourages ongoing dialogue to address deficiencies discussed in previous denials.
In one appeal, the Board on September 9, 2019 denied a request for an oral hearing from a low-income credit union (LICU); but agreed to consider the merits of the appeal on the basis of the written record.
Chairman Hood and Board Member Harper considered this appeal. Board Member McWatters was recused from this matter.
In its October 24 decision, the Board found that there was ample evidence that the LICU's secondary capital plan was unsound.
The Board viewed that the LICU's secondary plan reflected inadequate due diligence.
The pro forma financial statements lacked detail and had material omissions, which did not allow the agency to properly evaluate the safety and soundness of the plan.
Moreover, the secondary capital plan failed to adequately align with the LICU’s forecasts and strategic plan. Specifically, both the Region and the SRC have determined, and the Board agrees, that because there is a negative spread between the projected interest rate for the secondary capital loan and the average rate of return for the assets in the safety net plan, this negative spread will become a stress on earnings and a duration mismatch between funding sources.
The Board concluded the SRC was correct in affirming the Regional Director's denial.
In the other appeal, the Board on August 8, 2019 granted the LICU's request to present its case orally before the Board. The hearing was held on September 24.
Chairman Hood and Board Member Harper considered this appeal. Board Member McWatters was recused from this matter.
The credit union contended that its secondary capital plan that met the criteria in §701.34(b)(1). Therefore it should receive the requested capital. The LICU stated that the three deficiencies identified by the Region were subjective and should not be a valid basis for denying the secondary capital plan.
The Region, on the other hand, argued that the five enumerated criteria provide for the minimum components that are required to be included in a secondary capital application.
The SRC found ample support for the Region’s assessments that the LICU's secondary capital plan was not sound, and concluded the denial of the plan was reasonable.
In its October 11 decision, the Board did not find the LICU's arguments to be persuasive. The Board stated it should not substitute its judgment for the SRC. Therefore, the Board affirmed the SRC decision.
The Board stated that in both cases the credit unions choose to reapply for secondary capital. But if they decide to re-apply, the agency encourages ongoing dialogue to address deficiencies discussed in previous denials.
Monday, November 4, 2019
Chart of the Day: PFI of Retail Consumers and Small Businesses
The following chart from Raddon Research shows the primary financial institution (PFI) of retail consumers and small businesses.
Friday, November 1, 2019
Kansas Bill to Tax Large CUs Won't Move Forward
The Sunflower State Journal is reporting that a joint House-Senate committee on financial institutions in the Kansas Legislature on October 29 recommended against the bill taxing large credit unions.
The bill (SB 239) would have levied a 2.25% tax on the business lending income of credit unions with assets of more than $100 million. It would have assessed another 2.125% tax on such income in excess of $25,000.
A second bill (SB 238) that would allow banks to deduct business loan interest from their net income moved forward with no recommendation from the committee.
Republican state Sen. Rob Olson, chair of the joint committee, said he expected the bill to be considered in the upcoming session, but noted the bill still needs quite a bit of work.
Read the article (subscription required).
The bill (SB 239) would have levied a 2.25% tax on the business lending income of credit unions with assets of more than $100 million. It would have assessed another 2.125% tax on such income in excess of $25,000.
A second bill (SB 238) that would allow banks to deduct business loan interest from their net income moved forward with no recommendation from the committee.
Republican state Sen. Rob Olson, chair of the joint committee, said he expected the bill to be considered in the upcoming session, but noted the bill still needs quite a bit of work.
Read the article (subscription required).
Subscribe to:
Posts (Atom)
