Fox Business Bankruptcy Adviser wrote "don't fear banks when you file bankruptcy, but you and other readers should know that you need to proceed cautiously with credit unions."
The issue is cross-collateralization clauses, which means all your credit union debt and savings are connected. So if you are late in paying your loan at a credit union, a credit union can take funds out of your checking or savings account.
Read more.
Monday, April 8, 2013
Thursday, April 4, 2013
MECU to Acquire Advance Bank
Municipal Employees Credit Union of Baltimore, Inc. (MECU), and Advance Bank (Advance) signed a definitive Purchase and Assumption agreement under which MECU will acquire substantially all of the assets and assume substantially all of the liabilities of Advance.
Under the terms of the Agreement, MECU will purchase all loans, investments, real estate, accrued interest receivables, and other banking-related assets of Advance and will assume all deposits, Federal Home Loan Bank advances, and accrued interest payable. Advance will be retaining certain assets that will be used to fund certain liabilities that will not be acquired by MECU in the transaction.
MECU represents over 100,000 members, with assets approximately $1.2 billion, and operates nine locations. Advance has total assets of approximately $61 million at December 31, 2012, and operates two locations. Both institutions are mutuals.
This is the fourth transaction involving a credit union acquiring a bank in the last two years.
Read the press release.
Under the terms of the Agreement, MECU will purchase all loans, investments, real estate, accrued interest receivables, and other banking-related assets of Advance and will assume all deposits, Federal Home Loan Bank advances, and accrued interest payable. Advance will be retaining certain assets that will be used to fund certain liabilities that will not be acquired by MECU in the transaction.
MECU represents over 100,000 members, with assets approximately $1.2 billion, and operates nine locations. Advance has total assets of approximately $61 million at December 31, 2012, and operates two locations. Both institutions are mutuals.
This is the fourth transaction involving a credit union acquiring a bank in the last two years.
Read the press release.
Arizona FCU Charging a $3 Monthly Membership Fee
DepositAccount.com is reporting that Arizona FCU is charging members a $3 per month membership fee.
The fee started in January of this year; but is waived for members under age 18 and for Representative Payee accounts. In other words, almost all adult members pay this fee.
I wonder what the Move Your Money crowd thinks about this fee.
The fee started in January of this year; but is waived for members under age 18 and for Representative Payee accounts. In other words, almost all adult members pay this fee.
I wonder what the Move Your Money crowd thinks about this fee.
Wednesday, April 3, 2013
Why So Long?
According to the Material Loss Review (MLR) on Telesis Community Credit Union, the credit union was first identified as a problem institution in September 2007. At that time, its CAMEL composite rating was downgraded to "4". A credit union with a CAMEL 4 rating is designated as a problem institution.
In December 2006, Telesis Community Credit Union had a CAMEL composite rating of "2".
According to a colleague who was a former bank regulator, you usually don't see a two notch downgrade. So, the CAMEL "2" rating was probably a dirty two or alternatively there was a material decline in the credit union's performance.
However, it was not until June 2010 that Telesis Community was subject to a Letter of Understanding and Agreement.
This period of more than 2 1/2 years between first receiving a CAMEL 4 rating and the formal enforcement action seems like a long time.
So, why did it take so long to issue a Letter of Understanding and Agreement to Telesis Community Credit Union?
That is the question that credit union officials, policymakers and the media should be asking credit union regulators.
In December 2006, Telesis Community Credit Union had a CAMEL composite rating of "2".
According to a colleague who was a former bank regulator, you usually don't see a two notch downgrade. So, the CAMEL "2" rating was probably a dirty two or alternatively there was a material decline in the credit union's performance.
However, it was not until June 2010 that Telesis Community was subject to a Letter of Understanding and Agreement.
This period of more than 2 1/2 years between first receiving a CAMEL 4 rating and the formal enforcement action seems like a long time.
So, why did it take so long to issue a Letter of Understanding and Agreement to Telesis Community Credit Union?
That is the question that credit union officials, policymakers and the media should be asking credit union regulators.
Tuesday, April 2, 2013
NCUA Announces Settlement with Bank of America
The National Credit Union Administration (NCUA) announced a settlement with Bank of America and certain of its subsidiaries for $165 million for losses related to purchases of residential mortgage-backed securities by failed corporate credit unions. As part of the settlement, Bank of America did not admit fault.
The settlement with Bank of America follows three similar agreements with Citigroup, Deutsche Bank Securities and HSBC totaling $170.75 million. In total, NCUA has obtained more than $335 million in legal settlements.
Twenty-five percent of the settlement is being paid to the two law firms representing the agency in these legal proceedings.
Read the press release.
The settlement with Bank of America follows three similar agreements with Citigroup, Deutsche Bank Securities and HSBC totaling $170.75 million. In total, NCUA has obtained more than $335 million in legal settlements.
Twenty-five percent of the settlement is being paid to the two law firms representing the agency in these legal proceedings.
Read the press release.
Oregon CUs Can Accept Public Funds In Excess of Deposit Insurance Limit
Yesterday, qualified Oregon credit unions could start accepting public deposits in excess of the federal deposit insurance limit through the Oregon Credit Union Public Funds Collateralization Program.
Legislation passed in 2010 and clarified in 2011 authorized the State Treasury to establish a collateralization program to protect public deposits at credit unions.
Participating institutions protect public deposits above the insured threshold by posting securities as collateral against the uninsured balances.
Ten credit unions will initially participate in the program. The credit unions are Unitus, Pacific Crest, OSU Federal Credit Union, OnPoint, Advantis, MAPS Credit Union, Northwest Community, Old West, Wauna Federal Credit Union, and Oregon Community.
The cities of Portland, Beaverton, Corvallis, Independence, and Klamath Falls have signed letters pledging to deposit funds in excess of $250,000 in one or more of the participating credit unions.
Read the announcement.
Legislation passed in 2010 and clarified in 2011 authorized the State Treasury to establish a collateralization program to protect public deposits at credit unions.
Participating institutions protect public deposits above the insured threshold by posting securities as collateral against the uninsured balances.
Ten credit unions will initially participate in the program. The credit unions are Unitus, Pacific Crest, OSU Federal Credit Union, OnPoint, Advantis, MAPS Credit Union, Northwest Community, Old West, Wauna Federal Credit Union, and Oregon Community.
The cities of Portland, Beaverton, Corvallis, Independence, and Klamath Falls have signed letters pledging to deposit funds in excess of $250,000 in one or more of the participating credit unions.
Read the announcement.
Monday, April 1, 2013
NCUA Explains How to Cook the Net Worth Ratio
The transcript from NCUA's February 20, 2013 webinar has a NCUA staffer telling credit unions how to cook their books to inflate their net worth ratio for Prompt Corrective Action purposes.
The transcript quotes Dominic Carullo, who is an Economic Development Specialist with the Office of Small Credit Union Initiatives, saying:
This is crazy.
It is one thing for NCUA to inform credit unions that they have four options available to them for calculating the denominator of the net worth ratio. It is another thing for NCUA to tell credit unions to use whatever method that puts their net worth ratio in the best light.
In addition, if a credit union can change the method it uses for calculating its net worth ratio every quarter, then it is more difficult to evaluate the capital adequacy of a credit union over time. Consistency in reporting is needed for comparability.
The transcript quotes Dominic Carullo, who is an Economic Development Specialist with the Office of Small Credit Union Initiatives, saying:
"Okay, there are four basic methods available to federally insured credit unions for computing your assets on your quarterly call reports. The first one is using quarter end assets, which is the actual assets at the end of that quarter. There are also three other options. There is the average daily assets over the quarter. There is the average of the three month end balances over the quarter. There is the average of the past four quarter ends."Dominic Carullo goes on to say:
"The credit union has the option of using any one of the four methods and can use whichever denominator gives it the best net worth ratio. You do not need to be consistent from one quarter to the next. The credit union can change the method is [sic] uses for computing the new worth ratio every quarter. If you get a result that does not please you, you can try the other three methods to see if it can give you a better ratio."
This is crazy.
It is one thing for NCUA to inform credit unions that they have four options available to them for calculating the denominator of the net worth ratio. It is another thing for NCUA to tell credit unions to use whatever method that puts their net worth ratio in the best light.
In addition, if a credit union can change the method it uses for calculating its net worth ratio every quarter, then it is more difficult to evaluate the capital adequacy of a credit union over time. Consistency in reporting is needed for comparability.
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