Privately-insured Silver State Schools Credit Union received a capital injection from its insurer, American Share Insurance (ASI).
According to the Las Vegas Review-Journal, ASI provided $4.4 million in capital assistance in December to Silver State Schools CU. ASI had previously provided $22 million in capital assistance to this troubled credit union.
Over the last three years, Silver State Schools Credit Union has reported losses of almost $80.7 million.
Without this capital assistance, Silver State Schools Credit Union would be insolvent.
Tuesday, January 31, 2012
Monday, January 30, 2012
Breaking News: Texans CU Receives $60 Million in Capital Assistance
It appears that NCUA provided Section 208 assistance to Texans Credit Union (Richardson, Texas) during the fourth quarter.
Texans is reporting $60 million in subordinated debt, which is counted as net worth.
Even with the capital assistance, the credit union is critically undercapitalized.
Without the capital assistance, Texans Credit Union would be insolvent with a net worth of minus $44.7 million.
Texans is reporting $60 million in subordinated debt, which is counted as net worth.
Even with the capital assistance, the credit union is critically undercapitalized.
Without the capital assistance, Texans Credit Union would be insolvent with a net worth of minus $44.7 million.
Exceeding the MBL Cap
How many credit unions are exceeding the cap for member business loans?
That has been a question posed as a possible new report by the NCUA's Office of the Inspector General (IG) for the last couple of years. The report would have also looked at how well NCUA is monitoring and enforcing the Member Business Lending rules.
However, the IG never started this study.
To find out which credit unions are exceeding the cap, I first excluded any CU that was grandfathered in 1998 for the purpose of making business loans or had a history of making business loans. Next, I excluded any credit union that has a low-income designation or is a community development financial institution.
According to my analysis, 13 credit unions at the end of the third quarter of 2011 exceeded the member business loan (MBL) cap of 12.25 percent of assets. Below is the list.
I will acknowledge that Houston Musicians FCU, which has a member business loan to asset ratio of 22.84 percent, may have been recently added to the grasndfathered list.
In a legal opinion letter denying the credit union's request to treat musical instrument loans to professional musicians as consumer loans, NCUA wrote: "{Y]ou mentioned Houston Musicians’ long history of making instrument loans to its members. We encourage you to discuss your credit union’s possible qualification for an exception to the aggregate MBL limit, as either a credit union chartered for the purpose of making MBLs or as a credit union with a history of primarily making MBLs, with the region."
That has been a question posed as a possible new report by the NCUA's Office of the Inspector General (IG) for the last couple of years. The report would have also looked at how well NCUA is monitoring and enforcing the Member Business Lending rules.
However, the IG never started this study.
To find out which credit unions are exceeding the cap, I first excluded any CU that was grandfathered in 1998 for the purpose of making business loans or had a history of making business loans. Next, I excluded any credit union that has a low-income designation or is a community development financial institution.
According to my analysis, 13 credit unions at the end of the third quarter of 2011 exceeded the member business loan (MBL) cap of 12.25 percent of assets. Below is the list.
I will acknowledge that Houston Musicians FCU, which has a member business loan to asset ratio of 22.84 percent, may have been recently added to the grasndfathered list.
In a legal opinion letter denying the credit union's request to treat musical instrument loans to professional musicians as consumer loans, NCUA wrote: "{Y]ou mentioned Houston Musicians’ long history of making instrument loans to its members. We encourage you to discuss your credit union’s possible qualification for an exception to the aggregate MBL limit, as either a credit union chartered for the purpose of making MBLs or as a credit union with a history of primarily making MBLs, with the region."
Saturday, January 28, 2012
Eastern New York FCU Closed
The National Credit Union Administration (NCUA) liquidated Eastern New York Federal Credit Union of Napanoch, N.Y. USAlliance Federal Credit Union of Rye, N.Y. immediately assumed Eastern New York Federal Credit Union’s members, assets, loans and debts.
NCUA made the decision to liquidate Eastern New York Federal Credit Union and discontinue its operations after determining the credit union was insolvent and has no prospect for restoring viable operations on its own. At the time of liquidation, the credit union served approximately 6,800 members and had deposits of approximately $49 million.
Over the last two years, the credit union had reported a loss of almost $2 million.
Read the press release.
NCUA made the decision to liquidate Eastern New York Federal Credit Union and discontinue its operations after determining the credit union was insolvent and has no prospect for restoring viable operations on its own. At the time of liquidation, the credit union served approximately 6,800 members and had deposits of approximately $49 million.
Over the last two years, the credit union had reported a loss of almost $2 million.
Read the press release.
Thursday, January 26, 2012
Did A. E. A. FCU Receive Section 208 Assistance?
The financial statements for Yuma-based A. E. A. FCU show that the credit union received a capital injection of $20 million in the form of subordinated debt during the fourth quarter.
As a result, the net worth ratio of this troubled credit union went from minus 6.89 percent at the end of the third quarter to 2.69 percent at the end of the fourth quarter.
I suspect that the $20 million in subordinated debt is Section 208 assistance from NCUA.
I wonder what other moribund credit unions are receiving open bank assistance from NCUA.
Unfortunately, we will not know the answer because NCUA has decided not to disclose this information.
As a result, the net worth ratio of this troubled credit union went from minus 6.89 percent at the end of the third quarter to 2.69 percent at the end of the fourth quarter.
I suspect that the $20 million in subordinated debt is Section 208 assistance from NCUA.
I wonder what other moribund credit unions are receiving open bank assistance from NCUA.
Unfortunately, we will not know the answer because NCUA has decided not to disclose this information.
Wednesday, January 25, 2012
NCUA Overusing Systemic Risk
The National Credit Union Administration (NCUA) has become very fond of tossing about the term "systemic risk" when justifying changes to its regulations.
Sometimes the use of systemic risk is warranted, as in the case of the new corporate credit union regulations. But in other cases, it appears that the this agency has not done the necessary analysis to justify the regulatory change -- so it leans on systemic risk as a justification for the regulatory changes.
The latest example is where the agency justifies it loan participation proposal by stating that "loan participations ... create more systemic risk to the share insurance fund (NCUSIF) due to the resulting interconnection between participants."
I will grant you that loan participations result in greater interconnectiveness between participants; but do loan participations at federally-insured credit unions really rise to the level of systemic importance to the NCUSIF?
According to NCUA, 1,458 federally-insured credit unions reported almost $12.8 billion in outstanding loan participations at the end of the third quarter. This is equal to 2.25 percent of the industry's loan balances.
In addition, there are 117 federally-insured credit unions that have outstanding loan participations (lines 691E and 691L from the Call Report) in excess of their net worth. Outstanding loan participations at these credit unions equal $3.2 billion.
There are only 20 credit unions with a risk exposure greater than 300 percent of their net worth with approximately $764 million in outstandings.
While I recognize that some credit unions have gotten into trouble due to loan participations, I don't believe that at this time loan participations represent a systemic threat to the NCUSIF.
Sometimes the use of systemic risk is warranted, as in the case of the new corporate credit union regulations. But in other cases, it appears that the this agency has not done the necessary analysis to justify the regulatory change -- so it leans on systemic risk as a justification for the regulatory changes.
The latest example is where the agency justifies it loan participation proposal by stating that "loan participations ... create more systemic risk to the share insurance fund (NCUSIF) due to the resulting interconnection between participants."
I will grant you that loan participations result in greater interconnectiveness between participants; but do loan participations at federally-insured credit unions really rise to the level of systemic importance to the NCUSIF?
According to NCUA, 1,458 federally-insured credit unions reported almost $12.8 billion in outstanding loan participations at the end of the third quarter. This is equal to 2.25 percent of the industry's loan balances.
In addition, there are 117 federally-insured credit unions that have outstanding loan participations (lines 691E and 691L from the Call Report) in excess of their net worth. Outstanding loan participations at these credit unions equal $3.2 billion.
There are only 20 credit unions with a risk exposure greater than 300 percent of their net worth with approximately $764 million in outstandings.
While I recognize that some credit unions have gotten into trouble due to loan participations, I don't believe that at this time loan participations represent a systemic threat to the NCUSIF.
Monday, January 23, 2012
Medical Marijuana Credit Union Bill
Legislation (SB 75) has been introduced in the Colorado Senate authorizing the creation of a financial cooperative modeled on credit unions to serve the medicial marijuana industry.
The bill authorizes a group of medical marijuana licensees or registered medical marijuana patients or both to form a financial cooperative subject to all of the regulatory provisions for credit unions. The common bond is medical marijuana licensees or registered patients.
It has a once a member, always a member provision stating that a member of a financial cooperative who is no longer licensed or registered may still remain as a member of the cooperative.
The legislation requires the financial cooperative to obtain share insurance from the National Credit Union Share Insurance Fund (NCUSIF), a comparable non-federally backed insurer, or self-insure. Currently, the only provider of private share insurance is American Share Insurance (ASI).
However, the bill bans the proposed financial cooperative from calling itself a “credit union.”
This proposed financial cooperative contemplated by this bill is a credit union except in name.
If it looks like a duck, quacks like a duck, and waddles like a duck, it's a duck. Or should I say a credit union.
Read the bill.
The bill authorizes a group of medical marijuana licensees or registered medical marijuana patients or both to form a financial cooperative subject to all of the regulatory provisions for credit unions. The common bond is medical marijuana licensees or registered patients.
It has a once a member, always a member provision stating that a member of a financial cooperative who is no longer licensed or registered may still remain as a member of the cooperative.
The legislation requires the financial cooperative to obtain share insurance from the National Credit Union Share Insurance Fund (NCUSIF), a comparable non-federally backed insurer, or self-insure. Currently, the only provider of private share insurance is American Share Insurance (ASI).
However, the bill bans the proposed financial cooperative from calling itself a “credit union.”
This proposed financial cooperative contemplated by this bill is a credit union except in name.
If it looks like a duck, quacks like a duck, and waddles like a duck, it's a duck. Or should I say a credit union.
Read the bill.
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