The Florida Office of Financial Regulation on December 23 approved the application of First Commerce Credit Union (Tallahassee, FL) to purchase certain assets and assume certain liabilities of The Citizens Bank (Nashville, GA).
First Commerce will purchase approximately $193 million in assets and assume approximately $186 million in liabilities.
Both the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation approved First Commerce's request to expand its field of membership in relation to the proposed transaction.
The expanded field of membership includes people who live in the following GA counties of Atkinson, Berrien, Clinch, Colquitt, Cook, Lanier, and Tift (subject to an aggregate maximum of 5,500 new members per calendar year based on this expansion). AND all then-current customers of The Citizens Bank, as of the date of the successful purchase by the credit union.
At closing all customers of The Citizens Bank will temporarily become members of First Commerce. However with six months after the transaction being consummated, all depositors and borrowers of The Citizens Bank will have: (1) opted-in to become a member of the credit union; (2) not opted-in but will maintain a non-member deposit account with the credit union; or (3) not opted-in and their account relationship has been closed, paid off, or moved to another institution.
The purchase and assumption agreement still requires the authorization of the National Credit Union Administration and the Federal Deposit Insurance Corporation.
Tuesday, December 31, 2019
Saturday, December 28, 2019
Centricity CU Donates $1 Million for Artificial Turf, Receives Naming Rights to Stadium
The Duluth News Tribune is reporting that Hermantown Community Schools has received a $1 million donation from Centricity Credit Union (Hermantown, MN), which will help pay for converting the football field to artificial turf at Hermantown High School.
Hermantown superintendent Kerry Juntunen said that in exchange for the donation, the stadium will carry the Centricity name for 15 years.
Read more.
Hermantown superintendent Kerry Juntunen said that in exchange for the donation, the stadium will carry the Centricity name for 15 years.
Read more.
Friday, December 27, 2019
Article Looks at Pay of CEO at AmeriCU
Syracuse.com is reporting that Mark Pfisterer, CEO of AmeriCU Credit Union (Rome, NY), earned $2.5 million in 2018 after earning $7.97 million in 2017.
The article noted that his 2018 salary was comparable to the salaries paid CEOs at much larger banks in the region. The CEO of $120 billion M&T Bank (Buffalo, NY) was paid $4.77 million in 2018, while the CEO of $9.6 billion NBT Bancorp (Norwich, CT) earned $2.2 million in 2018.
In comparison, AmeriCU had $1.7 billion in assets.
The article also compared his compensation to other tax exempt organizations in upstate New York.
Read more.
The article noted that his 2018 salary was comparable to the salaries paid CEOs at much larger banks in the region. The CEO of $120 billion M&T Bank (Buffalo, NY) was paid $4.77 million in 2018, while the CEO of $9.6 billion NBT Bancorp (Norwich, CT) earned $2.2 million in 2018.
In comparison, AmeriCU had $1.7 billion in assets.
The article also compared his compensation to other tax exempt organizations in upstate New York.
Read more.
Thursday, December 26, 2019
OIG Examines Joint Examination Process with State CU Regulators
The National Credit Union Administration (NCUA) Office of Inspector General (OIG) conducted an audit to assess the NCUA’s joint examination process with state supervisory authorities (SSAs).
The report found NCUA provides shared oversight of federally insured state-chartered credit unions (FISCUs) and that the NCUA effectively monitors FISCUs using off-site monitoring tools. However, the OIG determined there are aspects of the joint examination process with the SSAs that need improvement.
The OIG found that NCUA’s regional offices did not have updated operating agreements with each individual SSA that defined roles and responsibilities for joint on-site examinations of FISCUs. The OIG determined that NCUA had 18 signed operating agreements on file and 11 unsigned operating agreements on file. There were no operating agreement on file with 16 SSAs. Five state do not have FISCUs. The OIC concludes that because NCUA did not having updated and useable operating agreements with each SSA, there could be confusion regarding roles and responsibilities during joint on-site examinations. The OIG concluded that having an executed operating agreement in place would help bring consistency to the working relationship and across the joint examination process.
The OIG also determined supervisory examiners did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews. OIG believed that it is a prudent and sound practice to consistently document supervisory examiner decisions regarding examiner recommendations. Doing so would ensure that examiners’ supervisory concerns would be consistently communicated and addressed.
The OIG recommended that NCUA management create a formal process to capture supervisory examiner decisions regarding recommended follow-up actions taken or not taken from work classification code 26 reviews to ensure concerns identified by examiners are properly documented. NCUA management agreed with the recommendation and indicated they will implement a formal process that addresses the recommendation by December 31, 2020.
Read more.
The report found NCUA provides shared oversight of federally insured state-chartered credit unions (FISCUs) and that the NCUA effectively monitors FISCUs using off-site monitoring tools. However, the OIG determined there are aspects of the joint examination process with the SSAs that need improvement.
The OIG found that NCUA’s regional offices did not have updated operating agreements with each individual SSA that defined roles and responsibilities for joint on-site examinations of FISCUs. The OIG determined that NCUA had 18 signed operating agreements on file and 11 unsigned operating agreements on file. There were no operating agreement on file with 16 SSAs. Five state do not have FISCUs. The OIC concludes that because NCUA did not having updated and useable operating agreements with each SSA, there could be confusion regarding roles and responsibilities during joint on-site examinations. The OIG concluded that having an executed operating agreement in place would help bring consistency to the working relationship and across the joint examination process.
The OIG also determined supervisory examiners did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews. OIG believed that it is a prudent and sound practice to consistently document supervisory examiner decisions regarding examiner recommendations. Doing so would ensure that examiners’ supervisory concerns would be consistently communicated and addressed.
The OIG recommended that NCUA management create a formal process to capture supervisory examiner decisions regarding recommended follow-up actions taken or not taken from work classification code 26 reviews to ensure concerns identified by examiners are properly documented. NCUA management agreed with the recommendation and indicated they will implement a formal process that addresses the recommendation by December 31, 2020.
Read more.
Monday, December 23, 2019
Wisconsin CU Regulator Removes MBL Cap for Two CUs
The Wisconsin Office of Credit Unions removed the member business loan (MBL) cap for two credit unions -- Summit Credit Union (Madison, WI) and Landmark Credit Union (New Berlin, WI).
The aggregate MBL cap for Wisconsin credit unions is 12.25 percent of assets.
According to a spokesperson for the Wisconsin Department of Financial Institutions, Summit CU was granted an exception to the aggregate MBL cap on August 19, 2016 for 18 percent of assets. The cap was removed on November 1, 2019.
Landmark CU was granted an exception to the aggregate MBL cap on April 8, 2015 for 15 percent of assets; it was subsequently raise to 18 percent of assets on March 31, 217 and removed on November 18, 2019.
The aggregate MBL cap for Wisconsin credit unions is 12.25 percent of assets.
According to a spokesperson for the Wisconsin Department of Financial Institutions, Summit CU was granted an exception to the aggregate MBL cap on August 19, 2016 for 18 percent of assets. The cap was removed on November 1, 2019.
Landmark CU was granted an exception to the aggregate MBL cap on April 8, 2015 for 15 percent of assets; it was subsequently raise to 18 percent of assets on March 31, 217 and removed on November 18, 2019.
Sunday, December 22, 2019
Arizona FCU Buys Naming Rights to Theatre
Arizona Federal Credit Union has entered into an agreement with Live Nation to buy the naming rights to the former Comerica Theatre in Phoenix.
The venue will now be called Arizona Federal Theatre.
The terms of the agreement were not disclosed.
Read more.
The venue will now be called Arizona Federal Theatre.
The terms of the agreement were not disclosed.
Read more.
Saturday, December 21, 2019
Idaho Central CU Buys Naming Rights to Plaza at Ski Resort
Idaho Central Credit Union (Chubbuck, ID) has bought the naming rights to a plaza at ski resort.
The plaza outside of Bogus Basin’s JR Simplot Lodge will now be called Idaho Central Credit Union Plaza.
The 17,000 square foot plaza features a seating area, fireplaces, landscaping, and the Double R Ranch BBQ Smokehouse.
The sponsorship agreement is for multiple years, but the exact terms and price were not disclosed.
Read more.
The plaza outside of Bogus Basin’s JR Simplot Lodge will now be called Idaho Central Credit Union Plaza.
The 17,000 square foot plaza features a seating area, fireplaces, landscaping, and the Double R Ranch BBQ Smokehouse.
The sponsorship agreement is for multiple years, but the exact terms and price were not disclosed.
Read more.
Friday, December 20, 2019
89 Percent of CUs Profitable During First 3 Quarters on 2019
The National Credit Union Administration reported on December 17 that 89 percent of all federally insured credit unions were profitable during the first three quarters of 2019.
In comparison, 88 percent of all federally insured credit unions were profitable during the first 3 quarters of 2018.
All federally insured credit unions in Alaska, Maine, Nevada, New Hampshire, and Vermont reported positive net income during the first 3 quarters of this year.
Only 75 percent of credit unions in Arkansas were profitable.
Read more.
In comparison, 88 percent of all federally insured credit unions were profitable during the first 3 quarters of 2018.
All federally insured credit unions in Alaska, Maine, Nevada, New Hampshire, and Vermont reported positive net income during the first 3 quarters of this year.
Only 75 percent of credit unions in Arkansas were profitable.
Read more.
Thursday, December 19, 2019
NY Times Examines Taxi King Role in the Bubble and His Relationship to CU
A December 5 New York Times investigative report on the rise and fall of New York's Taxi King, Evgeny A. Freidman, examines the role of Freidman in creating the taxi medallion bubble and his relationship to Progressive Credit Union.
This article is part of an investigative series on the disruption of New York City's taxi industry.
According to the article, Freidman turned to a family friend, Robert Familant, who was the CEO of Progressive Credit Union, to help finance his plans to take on more risk to increase the industry's profit and drive up the value of taxi medallions.
The article noted that between 1997 and 2004, Progressive’s loans enabled Freidman to buy about 100 medallions to expand his taxi fleet. The article further noted that Freidman during this time became a licensed broker helping some drivers to buy medallions, usually with loans from Progressive.
In 2006, Freidman embarked on a new strategy to increase the value of his taxi medallions. New York City was auctioning 54 medallion loans for $350,000. He won all 54 medallions by bidding $477,666.50 apiece.
According to the reporter, Progressive helped finance the purchases.
Records show that Freidman used this strategy at three additional auctions.
By overpaying, this inflated the value of taxi medallions enabling Freidman to borrow even more from lenders.
This inflating of the value of taxi medallions burdened purchasers of medallions with more debt.
This story would suggest that taxi medallion lending credit unions along with other lenders probably contributed to the taxi medallion bubble with their lending practices.
Read more (subscription may be required).
This article is part of an investigative series on the disruption of New York City's taxi industry.
According to the article, Freidman turned to a family friend, Robert Familant, who was the CEO of Progressive Credit Union, to help finance his plans to take on more risk to increase the industry's profit and drive up the value of taxi medallions.
The article noted that between 1997 and 2004, Progressive’s loans enabled Freidman to buy about 100 medallions to expand his taxi fleet. The article further noted that Freidman during this time became a licensed broker helping some drivers to buy medallions, usually with loans from Progressive.
In 2006, Freidman embarked on a new strategy to increase the value of his taxi medallions. New York City was auctioning 54 medallion loans for $350,000. He won all 54 medallions by bidding $477,666.50 apiece.
According to the reporter, Progressive helped finance the purchases.
Records show that Freidman used this strategy at three additional auctions.
By overpaying, this inflated the value of taxi medallions enabling Freidman to borrow even more from lenders.
This inflating of the value of taxi medallions burdened purchasers of medallions with more debt.
This story would suggest that taxi medallion lending credit unions along with other lenders probably contributed to the taxi medallion bubble with their lending practices.
Read more (subscription may be required).
Wednesday, December 18, 2019
BankBeat Publisher: Time Is Right for A Serious Fight Against CUs
Tom Bengston, the publisher of BankBeat, wrote on December 16 that the time is right for a serious fight against credit unions.
He argues that in states where the credit union charter is more liberal than the federal charter, banker advocacy efforts should seek to rollback these state charters putting them on a par with the federal charter.
Second, Bengston states that "bankers in all states should work to level the taxation playing field for smaller institutions." But instead of taxing all credit unions, Bengston advocates banker efforts should focus on exempting smaller banks from taxation.
Finally, he proposes that the net income of larger credit unions should be subject to taxation. He notes that this would place these large credit unions on equal footing with large banks. Bengston suggests that the line for larger credit unions could be drawn at $500 million or $1 billion in assets.
Read the article.
He argues that in states where the credit union charter is more liberal than the federal charter, banker advocacy efforts should seek to rollback these state charters putting them on a par with the federal charter.
Second, Bengston states that "bankers in all states should work to level the taxation playing field for smaller institutions." But instead of taxing all credit unions, Bengston advocates banker efforts should focus on exempting smaller banks from taxation.
Finally, he proposes that the net income of larger credit unions should be subject to taxation. He notes that this would place these large credit unions on equal footing with large banks. Bengston suggests that the line for larger credit unions could be drawn at $500 million or $1 billion in assets.
Read the article.
Tuesday, December 17, 2019
University CU Receives Naming Rights to College Athletic Pavilion
Saint Mary's College will rename its sports pavilion after University Credit Union (Los Angeles, CA), as part of the partnership agreement.
The rebranded 3,500 seat pavilion, which is the home to the Saint Mary's men's basketball, women's basketball and volleyball teams, will be called University Credit Union Pavilion.
The agreement also includes sponsorship opportunities with the Athletic Department.
In addition, University Credit Union will provide multiple ATM locations throughout the campus, a future branch on campus and additional funding to the existing food pantry as well. An affinity alumni debit/credit card program will exist with benefits and incentives.
The price tag of the partnership and naming rights was not disclosed.
Read more.
The rebranded 3,500 seat pavilion, which is the home to the Saint Mary's men's basketball, women's basketball and volleyball teams, will be called University Credit Union Pavilion.
The agreement also includes sponsorship opportunities with the Athletic Department.
In addition, University Credit Union will provide multiple ATM locations throughout the campus, a future branch on campus and additional funding to the existing food pantry as well. An affinity alumni debit/credit card program will exist with benefits and incentives.
The price tag of the partnership and naming rights was not disclosed.
Read more.
At Least Half of CUs in 18 States and DC Had Fewer Members Compared to a Year Ago
The National Credit Union Administration (NCUA) reported on December 17 that almost half of the credit unions at the end of the third quarter 2019 had fewer members than a year earlier.
Credit union membership increased at the median by 0.1 percent compared to a year ago.
Most credit union reporting a year-over-year decline in membership tend to be small with almost 70 percent having less than $50 million in assets.
Eighteen states and the District of Columbia reported that at least half of their credit unions saw a decline in membership compared to a year ago.
At the median, credit union membership declined the most in Pennsylvania at negative 1.4 percent followed by Illinois at minus 1 percent.
In addition, NCUA reported that year-over-year median shares and deposits growth was negative at four states -- New Jersey (-2.1 percent), Connecticut (-0.7 percent), Arkansas (-0.6 percent), and North Carolina (-0.3 percent). Both Kentucky and Pennsylvania reported no change in median shares and deposits growth.
The following chart depicts the relationship between median year-over-year membership growth by state and median shares and deposits growth by state.
Read more.
Credit union membership increased at the median by 0.1 percent compared to a year ago.
Most credit union reporting a year-over-year decline in membership tend to be small with almost 70 percent having less than $50 million in assets.
Eighteen states and the District of Columbia reported that at least half of their credit unions saw a decline in membership compared to a year ago.
At the median, credit union membership declined the most in Pennsylvania at negative 1.4 percent followed by Illinois at minus 1 percent.
In addition, NCUA reported that year-over-year median shares and deposits growth was negative at four states -- New Jersey (-2.1 percent), Connecticut (-0.7 percent), Arkansas (-0.6 percent), and North Carolina (-0.3 percent). Both Kentucky and Pennsylvania reported no change in median shares and deposits growth.
The following chart depicts the relationship between median year-over-year membership growth by state and median shares and deposits growth by state.
Read more.
NY CUs Gain Access to State's Banking Development District Program
New York Governor Andrew Cuomo on December 12 signed into law legislation, S.727-A/A.3320, that will allow credit unions to participate in the state Banking Development District (BDD) Program.
The BDD Program was created in 1997 to encourage financial institutions to establish branches in economically distressed communities throughout New York where there is a demonstrated need for banking services.
Institutions that are approved for a BDD designation are eligible to receive up to $10 million in subsidized public deposits and other benefits, including below market-rate deposits from New York state. These deposits are intended to lower the financial risk that the branch may incur when opening in an underserved community.
The legislation will mark the first time in state history that credit unions will be permitted to receive public deposits.
Read the memo on the legislation.
The BDD Program was created in 1997 to encourage financial institutions to establish branches in economically distressed communities throughout New York where there is a demonstrated need for banking services.
Institutions that are approved for a BDD designation are eligible to receive up to $10 million in subsidized public deposits and other benefits, including below market-rate deposits from New York state. These deposits are intended to lower the financial risk that the branch may incur when opening in an underserved community.
The legislation will mark the first time in state history that credit unions will be permitted to receive public deposits.
Read the memo on the legislation.
Monday, December 16, 2019
Coalition Wrote Senate to Pass the SAFE Act
A coalition of financial services and housing groups in a letter to Senate Banking Committee leaders on December 12 wrote urging them to provide a safe harbor for depository institutions seeking to serve legitimate cannabis related businesses in states where such activity is legal.
The groups urged lawmakers to pass the SAFE Banking Act—the bipartisan bill that was passed by the House earlier this year by a vote of 321 to 103—or a similar measure in the coming days.
“A safe harbor will enable law enforcement and states to effectively monitor and regulate businesses while simultaneously bringing billions into the regulated banking sector,” the groups wrote. “The SAFE Banking Act is a critical first step to ensure that legal cannabis marketplaces are safe, legal, and transparent.”
Read the letter.
The groups urged lawmakers to pass the SAFE Banking Act—the bipartisan bill that was passed by the House earlier this year by a vote of 321 to 103—or a similar measure in the coming days.
“A safe harbor will enable law enforcement and states to effectively monitor and regulate businesses while simultaneously bringing billions into the regulated banking sector,” the groups wrote. “The SAFE Banking Act is a critical first step to ensure that legal cannabis marketplaces are safe, legal, and transparent.”
Read the letter.
Saturday, December 14, 2019
Tucoemas FCU Settles EEOC Discrimination Lawsuit
The U.S. Equal Employment Opportunity Commission (EEOC) announced on December 13 the resolution of a sex, age and retaliatory discrimination lawsuit against Tucoemas Federal Credit Union (Visalia, CA).
The credit union has agreed to pay $450,000, along with certain injunctive relief, to resolve the complaint.
According to the EEOC, Tucoemas FCU failed to hire three qualified internal female applicants over the age of 50 and instead hired a younger male applicant with no prior credit union experience. The charge further claims the company retaliated against two of the female employees after they filed complaints with the EEOC, constructively forcing one employee to quit and firing another.
In addition to monetary relief, Tucoemas FCU has agreed to: retain an external equal employment opportunity consultant to monitor compliance with Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (ADEA), and the decree; review and if necessary revise policies and procedures against all discrimination and retaliation prohibited by Title VII and the ADEA; provide training to all employees on sex and age discrimination and retaliation; and establish a centralized tracking system for recruitment, hiring, promotions, terminations, and sex and age discrimination complaints.
Read more.
The credit union has agreed to pay $450,000, along with certain injunctive relief, to resolve the complaint.
According to the EEOC, Tucoemas FCU failed to hire three qualified internal female applicants over the age of 50 and instead hired a younger male applicant with no prior credit union experience. The charge further claims the company retaliated against two of the female employees after they filed complaints with the EEOC, constructively forcing one employee to quit and firing another.
In addition to monetary relief, Tucoemas FCU has agreed to: retain an external equal employment opportunity consultant to monitor compliance with Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (ADEA), and the decree; review and if necessary revise policies and procedures against all discrimination and retaliation prohibited by Title VII and the ADEA; provide training to all employees on sex and age discrimination and retaliation; and establish a centralized tracking system for recruitment, hiring, promotions, terminations, and sex and age discrimination complaints.
Read more.
Friday, December 13, 2019
Appeals Court Denies ABA's Request for a Rehearing En Banc of FOM Lawsuit
Credit union trades are reporting that the U.S. Court of Appeals for the D.C. Circuit denied the American Bankers Association’s appeal for a rehearing en banc of its lawsuit regarding the National Credit Union Administration’s field of membership (FOM) rule.
Highlights from December NCUA Board Meeting
The National Credit Union Administration (NCUA) Board on December 12 voted to delay for two-years the implementation of its risk-based capital rule until January 1, 2022.
The risk-based capital rule was scheduled to go into effect on January 1, 2020.
In addition, the normal operating level for the National Credit Union Share Insurance Fund (NCUSIF) will remain at 1.38 percent of insured deposits for 2020.
By law, the normal operating level must be set between 1.20 percent and 1.50 percent of insured deposits.
According to staff analysis, setting the normal operating level at 1.38 percent will preserve public confidence in the NCUSUIF, will prevent the impairment of the one-percent NCUSIF capitalization deposit, and will keep the NCUSIF equity ratio from falling below 1.20 percent during a moderate recession over a five-year period.
Also, the Board approved the agency's budget for 2020 and 2021. The combined operating, capital, and Share Insurance Fund administrative budgets for 2020 will be $347.4 million. The combined budgets for 2021 will be $360.1 million.
The agency's budget does not include a proposal from Board member Harper to increase staffing in the Office of Consumer Financial Protection, who would develop a dedicated consumer compliance examination for large, complex credit unions.
Read the proposal.
The risk-based capital rule was scheduled to go into effect on January 1, 2020.
In addition, the normal operating level for the National Credit Union Share Insurance Fund (NCUSIF) will remain at 1.38 percent of insured deposits for 2020.
By law, the normal operating level must be set between 1.20 percent and 1.50 percent of insured deposits.
According to staff analysis, setting the normal operating level at 1.38 percent will preserve public confidence in the NCUSUIF, will prevent the impairment of the one-percent NCUSIF capitalization deposit, and will keep the NCUSIF equity ratio from falling below 1.20 percent during a moderate recession over a five-year period.
Also, the Board approved the agency's budget for 2020 and 2021. The combined operating, capital, and Share Insurance Fund administrative budgets for 2020 will be $347.4 million. The combined budgets for 2021 will be $360.1 million.
The agency's budget does not include a proposal from Board member Harper to increase staffing in the Office of Consumer Financial Protection, who would develop a dedicated consumer compliance examination for large, complex credit unions.
Read the proposal.
Thursday, December 12, 2019
Is Your Institution Ready for the End of LIBOR?
The London InterBank Offer Rate (LIBOR) is likely to cease being an active index by the end of 2021.
I have not seen any guidance issued by the National Credit Union Administration on this issue; however, the Office of the Comptroller of the Currency (OCC) in its most recent Semi-Annual Risk Perspective for Fall 2019 stated the cessation of LIBOR may increase operational risk and other risks at financial institutions.
The OCC recommended that financial institutions perform an accurate inventory of balance-sheet assets, liabilities, and off-balance sheet contracts that could be affected by a movement to an alternative index, including assets serviced by third party providers. This inventory would allow a financial institution to determine its potential exposure to the end of LIBOR.
Additionally, the OCC noted that the anticipated end of LIBOR poses compliance and reputation risks associated with transitioning customers to a new rate or offering new products or services that are tied to a new and untested index. The agency advised that financial institution's risk assessment "should include analysis of customer impact, repapering contracts, updating system applications, revising and testing models, and ensuring appropriate contractual fallback language and disclosures to clients."
The OCC noted that many products may be affected by the transition away from LIBOR including adjustable rate mortgages, private student loans, credit cards, reverse mortgages, and home equity lines of credit.
The OCC wrote that disclosures and communication with consumers about the end of LIBOR and the adoption of an alternative reference rate need to be easily understood. Also, financial institution should limit expected pricing issues with observable and objective rules.
In addition, management should determine whether third-party providers are on track to modify their systems.
Read more.
I have not seen any guidance issued by the National Credit Union Administration on this issue; however, the Office of the Comptroller of the Currency (OCC) in its most recent Semi-Annual Risk Perspective for Fall 2019 stated the cessation of LIBOR may increase operational risk and other risks at financial institutions.
The OCC recommended that financial institutions perform an accurate inventory of balance-sheet assets, liabilities, and off-balance sheet contracts that could be affected by a movement to an alternative index, including assets serviced by third party providers. This inventory would allow a financial institution to determine its potential exposure to the end of LIBOR.
Additionally, the OCC noted that the anticipated end of LIBOR poses compliance and reputation risks associated with transitioning customers to a new rate or offering new products or services that are tied to a new and untested index. The agency advised that financial institution's risk assessment "should include analysis of customer impact, repapering contracts, updating system applications, revising and testing models, and ensuring appropriate contractual fallback language and disclosures to clients."
The OCC noted that many products may be affected by the transition away from LIBOR including adjustable rate mortgages, private student loans, credit cards, reverse mortgages, and home equity lines of credit.
The OCC wrote that disclosures and communication with consumers about the end of LIBOR and the adoption of an alternative reference rate need to be easily understood. Also, financial institution should limit expected pricing issues with observable and objective rules.
In addition, management should determine whether third-party providers are on track to modify their systems.
Read more.
Wednesday, December 11, 2019
Verve, a Credit Union Receives Regulatory Approval to Acquire a Chicago Bank
The Wisconsin Department of Financial Institutions approved on November 12 Verve, a Credit Union (Oshkosh, WI) purchase and assumption of South Central Bank (Chicago, IL).
ABA Says FOM Rule Seriously Flawed, NCUA Tells Appeal Court Rehearing Unwarranted
In a December 9 letter to the National Credit Union Administration (NCUA), The American Bankers Association (ABA) reiterated its strong opposition to two proposed amendments that would further expand the already loose fields of membership (FOM) from which credit unions can draw their customers.
NCUA proposed to re-adopt a recently repealed provision of its rules defining any combined statistical area as a single local community, provided it has a population of 2.5 million people or less.
NCUA also objected to the expansion of the population threshold to 1 million people for a rural district. ABA contended that this would allow whole states to be treated as rural districts.
NCUA also proposed to reaffirm its elimination of a requirement for credit unions serving a core-based statistical area to serve the urban core of the community, which would effectively allow credit unions to engage in redlining by allowing them to construct fields of membership consisting of wealthier suburbs without lower-income core neighborhoods.
ABA, which previously challenged the NCUA’s field of membership rule in federal court, noted that “these proposals are seriously flawed” and called for them to be withdrawn or significantly revised.
In a related news, NCUA on November 21 filed its response to the ABA’s petition for an en banc rehearing of its lawsuit challenging the NCUA's 2016 FOM rule.
In its en banc petition, ABA argued the three-judge panel’s decision “stretches Chevron deference beyond its limits.”
NCUA argued the unanimous panel correctly concluded that NCUA reasonably interpreted the terms “local community” and “rural district” under Chevron. NCUA claimed that it reasonably relied on population size, commuting patterns, population density, and economic activity to determine whether an area is a “local community” or “rural district.”
NCUA argued that the three-judge panel's decision does not warrant rehearing en banc.
Read ABA's comment letter.
NCUA proposed to re-adopt a recently repealed provision of its rules defining any combined statistical area as a single local community, provided it has a population of 2.5 million people or less.
NCUA also objected to the expansion of the population threshold to 1 million people for a rural district. ABA contended that this would allow whole states to be treated as rural districts.
NCUA also proposed to reaffirm its elimination of a requirement for credit unions serving a core-based statistical area to serve the urban core of the community, which would effectively allow credit unions to engage in redlining by allowing them to construct fields of membership consisting of wealthier suburbs without lower-income core neighborhoods.
ABA, which previously challenged the NCUA’s field of membership rule in federal court, noted that “these proposals are seriously flawed” and called for them to be withdrawn or significantly revised.
In a related news, NCUA on November 21 filed its response to the ABA’s petition for an en banc rehearing of its lawsuit challenging the NCUA's 2016 FOM rule.
In its en banc petition, ABA argued the three-judge panel’s decision “stretches Chevron deference beyond its limits.”
NCUA argued the unanimous panel correctly concluded that NCUA reasonably interpreted the terms “local community” and “rural district” under Chevron. NCUA claimed that it reasonably relied on population size, commuting patterns, population density, and economic activity to determine whether an area is a “local community” or “rural district.”
NCUA argued that the three-judge panel's decision does not warrant rehearing en banc.
Read ABA's comment letter.
Tuesday, December 10, 2019
Survey: Compliance Worries Rise in 2019
U.S. banks and credit unions are reporting increased anxiety levels over compliance obligations, according to a survey released on December 4, 2019 by Wolters Kluwer.
This year’s regulatory and risk management indicator score was 95, up 10 points from 2018.
Specific points of high concern contributing to the overall indicator score were the effects of new Home Mortgage Disclosure Act rules, overall risk management concerns, and ongoing challenges from compliance change management.
The report cited that nearly eight in 10 respondents will continue to prioritize cybersecurity risk over the next year. Other areas being prioritize over the next 12 months were credit risk, compliance risk, third-party risk and operational risk, which all saw double-digit percentage increases.
Among top obstacles in implementing effective compliance programs, 47 percent of respondents stated manual compliance processes and 45 percent cited inadequate staffing.
The survey was conducted nationwide between August 7 and September 3, 2019 and generated 704 responses.
Read the press release.
This year’s regulatory and risk management indicator score was 95, up 10 points from 2018.
Specific points of high concern contributing to the overall indicator score were the effects of new Home Mortgage Disclosure Act rules, overall risk management concerns, and ongoing challenges from compliance change management.
The report cited that nearly eight in 10 respondents will continue to prioritize cybersecurity risk over the next year. Other areas being prioritize over the next 12 months were credit risk, compliance risk, third-party risk and operational risk, which all saw double-digit percentage increases.
Among top obstacles in implementing effective compliance programs, 47 percent of respondents stated manual compliance processes and 45 percent cited inadequate staffing.
The survey was conducted nationwide between August 7 and September 3, 2019 and generated 704 responses.
Read the press release.
Monday, December 9, 2019
Credit Unions Lag in Employee Efficiency
A study by Moebs Services found that credit unions lag behind banks and thrifts in employee efficiency.
The study looked at assets per employee at banks, thrifts, and credit unions.
Moebs Services found that assets per employee were $9.7 million at thrifts, $8.8 million at banks, and $5.0 million at credit unions.
According to Moebs Services, credit unions with between $5 billion and $10 billion in assets are the most efficient with assets per employee of $7.1 million per employee. Banks and thrifts with between $25 billion and $50 billion in assets were the most efficient with assets per employee at $10.2 million per employee.
The study looked at assets per employee at banks, thrifts, and credit unions.
Moebs Services found that assets per employee were $9.7 million at thrifts, $8.8 million at banks, and $5.0 million at credit unions.
According to Moebs Services, credit unions with between $5 billion and $10 billion in assets are the most efficient with assets per employee of $7.1 million per employee. Banks and thrifts with between $25 billion and $50 billion in assets were the most efficient with assets per employee at $10.2 million per employee.
Saturday, December 7, 2019
Consumer Credit for CUs Basically Flat for October
The Federal Reserve on December 6 is reporting that outstanding consumer credit at credit unions was basically unchanged as of October 2019.
Outstanding consumer credit at credit unions was $483.7 billion in October. In September, consumer credit was $483.6 billion.
Revolving credit at credit unions increased by $300 million during October to $64.7 billion.
On the other hand, outstanding nonrevolving credit was down $200 million to $419 billion.
Outstanding consumer credit at credit unions was $483.7 billion in October. In September, consumer credit was $483.6 billion.
Revolving credit at credit unions increased by $300 million during October to $64.7 billion.
On the other hand, outstanding nonrevolving credit was down $200 million to $419 billion.
Friday, December 6, 2019
FICUs Post Solid Financials in Third Quarter 2019
The National Credit Union Administration is reporting that assets, loans, and deposits at federally insured credit unions (FICUs) increased during the third quarter 2019.
At the end of the third quarter of 2019,
The total number of FICUs was 5,281 -- down 94 from the start of this year and 27 during the third quarter.
Net income at FICUs was $11 billion through the first nine months of 2019.
The industry's return on average assets (ROA) was 0.98 percent -- up 1 basis point from the end of the previous quarter.
Factors improving profitability were higher net interest margins and Fee and other income, while higher operating expenses had a negative impact on the industry's ROA.
Net interest margins at credit unions edged higher to 3.19 percent as of September 2019 from 3.18 percent as of June 2019. Fee and other income as a percent of averaged assets rose 3 basis points during the quarter to 1.35 percent. Higher operating expenses eroded profitability of FICUs by 3 basis points.
The aggregate net worth for FICUs was $175.2 billion as of the end of the third quarter. This was up $3.8 billion during the quarter. As of September 2019, the industry's net worth ratio was 11.39 percent -- up 12 basis points from the prior quarter.
As of September 2019, 98.41 percent of credit unions had a net worth ratio of at least 7 percent -- the requirement for being well capitalized. Six credit unions had a net worth ratio below 2 percent as of September 2019.
Delinquent loans were $7.3 billion as of September 2019. This was up from $6.8 billion as of June 2019. As a result, the delinquency rate rose by 4 basis points during the quarter to 0.67 percent at the end of the third quarter.
Net charge-offs were $4.4 billion during the first 3 quarters of 2019. As of September 2019, the net charge-off rate was 0.55 percent -- almost unchanged from the prior quarter at 0.56 percent.
Chart Pack.
Read the quarterly summary.
At the end of the third quarter of 2019,
- assets were $1.54 trillion -- up from $1.52 trillion at the end of second quarter
- loans were $1.087 trillion -- up $20.5 billion during the quarter; and
- deposits and shares were $1.29 trillion -- up $12.5 billion during the quarter.
The total number of FICUs was 5,281 -- down 94 from the start of this year and 27 during the third quarter.
Net income at FICUs was $11 billion through the first nine months of 2019.
The industry's return on average assets (ROA) was 0.98 percent -- up 1 basis point from the end of the previous quarter.
Factors improving profitability were higher net interest margins and Fee and other income, while higher operating expenses had a negative impact on the industry's ROA.
Net interest margins at credit unions edged higher to 3.19 percent as of September 2019 from 3.18 percent as of June 2019. Fee and other income as a percent of averaged assets rose 3 basis points during the quarter to 1.35 percent. Higher operating expenses eroded profitability of FICUs by 3 basis points.
The aggregate net worth for FICUs was $175.2 billion as of the end of the third quarter. This was up $3.8 billion during the quarter. As of September 2019, the industry's net worth ratio was 11.39 percent -- up 12 basis points from the prior quarter.
As of September 2019, 98.41 percent of credit unions had a net worth ratio of at least 7 percent -- the requirement for being well capitalized. Six credit unions had a net worth ratio below 2 percent as of September 2019.
Delinquent loans were $7.3 billion as of September 2019. This was up from $6.8 billion as of June 2019. As a result, the delinquency rate rose by 4 basis points during the quarter to 0.67 percent at the end of the third quarter.
Net charge-offs were $4.4 billion during the first 3 quarters of 2019. As of September 2019, the net charge-off rate was 0.55 percent -- almost unchanged from the prior quarter at 0.56 percent.
Chart Pack.
Read the quarterly summary.
Thursday, December 5, 2019
CFPB Remittance Proposal Will Provide Reg Relief to Certain Banks and CUs
The Consumer Financial Protection Bureau (CFPB) on December 3 issues a proposed remittance rule that will provide regulatory relief to certain banks and credit unions.
The CFPB proposed a change to permanently allow depository institutions to estimate certain fees and exchange rates when making disclosures to their customers. Institutions are currently allowed to do so under a temporary provision of the rule, which is set to expire in July 2020.
In addition, the proposed rule would increase the threshold at which institutions are considered to be “remittance transfer providers” from 100 to 500. The CFPB noted that increasing this safe harbor threshold would reduce the regulatory burden on more than 400 banks and almost 250 credit unions that send a relatively small number of remittances each year.
According to CFPB analysis, all credit unions and a majority of the banks affected by the change in the safe harbor threshold have less than $10 billion in assets.
Read proposed rule.
The CFPB proposed a change to permanently allow depository institutions to estimate certain fees and exchange rates when making disclosures to their customers. Institutions are currently allowed to do so under a temporary provision of the rule, which is set to expire in July 2020.
In addition, the proposed rule would increase the threshold at which institutions are considered to be “remittance transfer providers” from 100 to 500. The CFPB noted that increasing this safe harbor threshold would reduce the regulatory burden on more than 400 banks and almost 250 credit unions that send a relatively small number of remittances each year.
According to CFPB analysis, all credit unions and a majority of the banks affected by the change in the safe harbor threshold have less than $10 billion in assets.
Read proposed rule.
Wednesday, December 4, 2019
Arizona Federal Credit Union Completes Acquisition of Pinnacle Bank
Arizona Federal Credit Union (Phoenix, AZ) completed its acquisition of Pinnacle Bank (Scottsdale, AZ) on November 30, 2019.
It is anticipated that the integration of computer systems, accounts, services, processes and branches will be completed in the third or fourth quarter of 2020.
Read more.
It is anticipated that the integration of computer systems, accounts, services, processes and branches will be completed in the third or fourth quarter of 2020.
Read more.
Report: CU Branches Not a Direct Substitute for Bank Branches
A report the the Federal Reserve stated that credit union branches are not direct substitutes for bank branches, especially in rural America.
The study examined the closure of bank branches between 2012 and 2017. The report found that the number of bank branches declined by 7 percent across all counties during the time period studied.
While urban communities lost more branches than rural areas, the study noted that the effect of branch closures tends to be magnified in rural areas.
Participants in listening sessions described instances in which credit unions moved into or expanded their operations in the community in response to the closure of the local bank branch. Participants, who used a credit union, commented that credit unions were able to meet some of their financial needs.
However, some participants noted areas where their local credit union did not meet their financial needs.
For example, participants raised concerns about "a lack of robust small business account and credit products, overly restrictive lending policies, a lack of direct deposit services for employers, and low maximum cash withdrawal limits."
The study was not sure if these challenges identified by participants were due to the fact that the institutions cited were credit unions or these credit unions were smaller financial institutions with a more limited product and service offering.
The report also noted that when a bank branch is closed, the effects are not just limited to financial services access. Communities lose an important source of financial advice and civic leadership.
Read the study.
The study examined the closure of bank branches between 2012 and 2017. The report found that the number of bank branches declined by 7 percent across all counties during the time period studied.
While urban communities lost more branches than rural areas, the study noted that the effect of branch closures tends to be magnified in rural areas.
Participants in listening sessions described instances in which credit unions moved into or expanded their operations in the community in response to the closure of the local bank branch. Participants, who used a credit union, commented that credit unions were able to meet some of their financial needs.
However, some participants noted areas where their local credit union did not meet their financial needs.
For example, participants raised concerns about "a lack of robust small business account and credit products, overly restrictive lending policies, a lack of direct deposit services for employers, and low maximum cash withdrawal limits."
The study was not sure if these challenges identified by participants were due to the fact that the institutions cited were credit unions or these credit unions were smaller financial institutions with a more limited product and service offering.
The report also noted that when a bank branch is closed, the effects are not just limited to financial services access. Communities lose an important source of financial advice and civic leadership.
Read the study.
Tuesday, December 3, 2019
Suncoast CU to Acquire Apollo Bank
Suncoast Credit Union (Tampa, FL) announced today that it signed a definitive agreement to purchase Apollo Bank (Miami, FL).
Suncoast CU has $10.4 billion in assets. Apollo Bank has 5 branches and $746 million in assets.
This is the largest bank to be acquired by a credit union.
The purchase price was not disclosed.
The transaction is expected to close in 2020, subject to customary closing conditions and shareholder and regulatory approvals. The Boards of both financial institutions previously approved the purchase.
Read more.
Suncoast CU has $10.4 billion in assets. Apollo Bank has 5 branches and $746 million in assets.
This is the largest bank to be acquired by a credit union.
The purchase price was not disclosed.
The transaction is expected to close in 2020, subject to customary closing conditions and shareholder and regulatory approvals. The Boards of both financial institutions previously approved the purchase.
Read more.
Ent CU Settles Overdraft Fee Class Action Lawsuit
Ent Credit Union (Colorado Springs, CO) has settled an overdraft fee class action lawsuit, according to The Colorado Springs Business Journal.
The terms of the agreement remain confidential; however, the credit union stated that all impacted members will receive refunds on all identifiable overdraft fees and insufficient funds fees (NSF fees) raised in the lawsuit.
The credit union stated that the excess overdraft fees and NSF fees were primarily caused by software issues that were unknown to the credit union until the lawsuit was filed.
Read more.
The terms of the agreement remain confidential; however, the credit union stated that all impacted members will receive refunds on all identifiable overdraft fees and insufficient funds fees (NSF fees) raised in the lawsuit.
The credit union stated that the excess overdraft fees and NSF fees were primarily caused by software issues that were unknown to the credit union until the lawsuit was filed.
Read more.
Monday, December 2, 2019
WSJ: CUs Have Outgrown Down-Home Reputation
An article in the Wall Street Journal says that credit unions have outgrown their down-home reputation.
The article notes that large credit unions "are using their newfound financial heft to compete aggressively for business."
The article points out that following the financial crisis, credit union regulators took a more hands-off approach compared to other federal banking regulators. The best example of this hands-off approach is the continued delay of the National Credit Union Administration's risk-based capital requirement for credit unions with at least $500 million in assets.
The article states that the National Credit Union Administration does not see large concentrations in high-risk activities at the nation's credit unions, but analysts are uneasy how these large credit unions might fare in a recession.
Read the article (subscription required).
The article notes that large credit unions "are using their newfound financial heft to compete aggressively for business."
The article points out that following the financial crisis, credit union regulators took a more hands-off approach compared to other federal banking regulators. The best example of this hands-off approach is the continued delay of the National Credit Union Administration's risk-based capital requirement for credit unions with at least $500 million in assets.
The article states that the National Credit Union Administration does not see large concentrations in high-risk activities at the nation's credit unions, but analysts are uneasy how these large credit unions might fare in a recession.
Read the article (subscription required).
Texas CU Regulator Says Complaints Up 4 Percent for Fiscal Year 2019
The Texas Credit Union Department announced that the number of complaints against credit unions increased for fiscal year 2019.
For fiscal year 2019, the state regulator stated there were 363 complaints -- up from 349 complaints for fiscal year 2018.
The top five complaint areas were:
For fiscal year 2019, the state regulator stated there were 363 complaints -- up from 349 complaints for fiscal year 2018.
The top five complaint areas were:
- Credit Report Issues (24.5 percent);
- Account/Loan Balances (10.7 percent);
- Customer Service (10.5 percent);
- Fraud/Unauthorized (9.1 percent); and
- Fee Related (7.2 percent).
Sunday, December 1, 2019
Moebs Study: Banks Paying Higher Deposit Rates Than CUs
A study by Moebs Services found that banks are paying higher deposit rates than credit unions.
The study found that for the first time since 2007 total interest expense divided by assets at credit unions is less than banks. So far this year, banks are 90 basis points (BPs), while CUs are 83 BPs or 7.8 percent less.
However, the study found that credit unions with greater than $10 billion in assets are paying 116 BPs, while similarly-sized banks are paying 91 BPs.
In contrast, community banks are paying 66 BPs compared to only 43 BPs by credit unions.
The study found that for the first time since 2007 total interest expense divided by assets at credit unions is less than banks. So far this year, banks are 90 basis points (BPs), while CUs are 83 BPs or 7.8 percent less.
However, the study found that credit unions with greater than $10 billion in assets are paying 116 BPs, while similarly-sized banks are paying 91 BPs.
In contrast, community banks are paying 66 BPs compared to only 43 BPs by credit unions.