Eastman Credit Union

Eastman Credit Union is a state-chartered credit union headquartered in Kingsport, Tennessee. At the end of 2013, the credit union reported assets of $2.8 Billion and net income of $32.3 Million.

However, the credit union reported paying ZERO corporate income taxes.

Lafayette FCU Targets Wealthy Virginia Suburb

Lafayette Federal Credit Union (Kensington, MD) is targetting McLean, Virginia residents -- a wealthy suburb outside of Washington, D.C..

In an advertisement announcing the grand opening of its McLean service center, the credit union stated "McLean Residents We Are Your Credit Union."

The census tract, where the branch opened, has a median family income of $176,027, which has an upper income designation. In fact, the census tract's median family income is 166.22 percent of the median metropolitan statisitical area's family income.

The advertisement was promoting low rate jumbo mortgages. This is not a financial product tailored for people of modest means.

The credit union tax exemption is meant to help credit unions meet the financial needs of people of modest means. However, the truth is that the tax exemption is often diverted to wealthier individuals, who do not need a taxpayer subsidy.

This is clearly bad public policy.

Rapid City Telco Released from Cease and Desist Order

The National Credit Union Administration announced today it has released Rapid City Telco Federal Credit Union of Rapid City, S.D., from a cease and desist order dated Feb. 25, 2010.

Matz Warns CUs about Cyber and Interest Rate Risks

In a speech before the Credit Union National Association, Debbie Matz, the National Credit Union Administration (NCUA) Chairman, stressed that credit unions needed to be prepared for volatile and rising interest rates and also cyber-attacks.

With regard to interest rate risk, Chairman Matz warned that chasing near-term profits by concentrating your portfolio in long-term investments, while long-term rates are rising and short-term rates remain low, may be appealing; but it is ultimately a trap. When short-term rates begin to rise, this strategy will leave your credit union vulnerable.

But the majority of her speech focused on cyber-security issues.

Chairman Matz cited an example where hackers "broke into a medium-size credit union and used the credit union’s passwords to access one of the larger credit bureaus. From there, the hackers stole credit reports on hundreds of people who weren’t even credit union members."

She asked the audience to imagine a scenario where the hackers were not motivated by money, but by terrorism. Imagine the damage the cyber-terrorist could do, if they infilitrated the payment system.

Chairman Matz told the audience that NCUA "examiners will be looking to see how credit unions are implementing appropriate risk mitigation controls to better protect, detect, and recover from cyber-attacks. This includes vendor due diligence, strong password policies, proper patch management, employee training, and network monitoring."

She encouraged the audience to review recently developed voluntary national cyber-security framework by the National Institute of Standards and Technology.

Read the speech.

Radio Ad: Why Should You Pay More Taxes So Credit Unions Can Pay None?

The credit union industry is gathering in Washington, D.C., this week to lobby Congress for preserving its outdated tax exemption. To counter their efforts, ABA is running a drive time radio ad recorded by President and CEO Frank Keating as part of "It's Time to Pay" campaign.

Credit unions are “abusing their taxpayer subsidy, using their untaxed profits to buy huge corporate headquarters and naming rights to stadiums,” Keating says in the ad. “Ask yourself: why should you pay more taxes so that credit unions can pay none?”

Listen to the Radio Ad.

Problem CUs Fell During Q4 2013

The National Credit Union Administration (NCUA) reported that the number of problem credit unions fell by 10 during the fourth quarter to 307 credit unions.

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



Problem credit unions had $13.8 billion in assets and $12.1 billion in shares (deposits). Problem credit unions held 1.40 percent of the industry’s total insured shares and 1.3 percent of the industry’s assets at the end of 2013.



According to NCUA, the number of problem credit unions with at least $1 billion in assets was 3 at the end of 2013, down from 4 a year earlier. Deposits at problem credit unions with at least $1 billion in assets fell from $7 billion at the end of 2012 to $2.9 billion at the end of 2013.

Problem credit unions with between $500 million and $1 billion in assets were 4, up from 3 a year earlier. Deposits increased from $1.5 billion to $2.3 billion for this asset size group of problem credit unions.

Access Credit Union Opts to Be Privately Insured

The members of Access Credit Union (Broadview, IL) voted to leave the National Credit Union Share Insurance Fund and to have their deposits and shares privately insured.

Effective January 31, 2014, all deposits and shares at the $54 million credit union are insured by American Share Insurance.

Troubled Credit Union Mergers, 2013

NCUA approved the merger of 53 financially troubled credit union during 2013. This is down from 73 in 2012.

A merger is defined as a troubled credit union merger if the following three reasons are cited by NCUA when approving the merger: Poor Management, Poor Financial Condition, and Loss/Declining Field of Membership.

The median asset size of a merged troubled credit union was $5.6 million. The average asset size of an acquired troubled credit union in 2013 was $12.4 million.

Below is a table of all troubled credit union mergers approved by NCUA in 2013 (click on the image to enlarge).

Treasury Report Shows Banks Outpacing Credit Unions in Making Loans through Small Business Program

Community banks participating in the Treasury Department’s $1.45 billion State Small Business Credit Initiative (SSBCI), which provides direct funding to states for programs that expand access to credit for small businesses, are vastly outpacing credit unions in making loans through the program.

The SSBCI distributes federal funds to states for programs that partner with private lenders to expand small-business credit. States must demonstrate a minimum “bang for the buck” of $10 in new private lending for every $1 in federal funding.

According to the report, community banks (i.e., those with less than $10 billion in assets) are the most active participants in the SSBCI program. Community banks account for 57 percent of jobs created or saved through the program, 60 percent of the total invested or lent and 42 percent of the total number of loans. Meanwhile, credit unions accounted for less than 1 percent of jobs created or retained and 1 percent each of total loans and total lent or investment.

Fourteen of the 15 most active SSBCI lenders were banks, including seven community banks. No credit unions made the list of most active lenders.

The report noted that credit unions made 37 percent of their SSBCI loans in low- and moderate-income (LMI) areas. However, only 15 percent of their loans by dollar amount were in LMI areas. The report concluded "that credit unions tend to make much smaller loans in LMI areas than they do in non-LMI areas."

On the other hand, 31 percent of community banks’ loan activity and loan dollar volume occurred in LMI areas.

Read the report.

St. Francis Campus CU Closed

The Minnesota Department of Commerce closed St. Francis Campus Credit Union of Little Falls, Minn. and appointed the National Credit Union Administration as receiver.

Central Minnesota Credit Union of Melrose, Minn., assumed St. Francis Campus Credit Union’s members, assets, shares and loans.

The Minnesota Department of Commerce decided to liquidate St. Francis Campus Credit Union and discontinue its operations after conducting an examination and determining the credit union was insolvent with no prospect for restoring viable operations on its own.

At the time of liquidation and subsequent purchase by Central Minnesota Credit Union, the credit union served 3,400 members and had assets of approximately $51 million.

This is the second credit union to fail in 2014.

Read the NCUA press release.

Soliciting CUs to Participate in a Syndicated Loan to U-Haul

BancAssets, LLC is soliciting credit unions to participate in a $50 million loan to AMERCO, the publicly-traded parent of U-Haul.

Last fall, BancAssets, LLC closed on a $100 million loan for AMERCO. Four credit unions participated in this transaction.

The solicitation stated:

We are pleased to offer you the opportunity to participate in financing an additional $50 million loan for U-Haul. We established a corresponding CUSO so that you can participate by loaning and investing dollars into AMERCO Loan 2, LLC.

The solicitation stated that the minimum commitment was lowered to $500,000.

Future Stabilization Fund Assessments Unlikely

The National Credit Union Administration (NCUA) announced that it is highly unlikely that credit unions will pay a future assessment to the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).

NCUA cited the significant recoveries from legal settlements and the improvement in the performance of the underlying legacy assets of the NCUA Guaranteed Note program for the diminished prospect of future assessments.

According to the press release, the net remaining Stabilization Fund projected assessment range now runs from negative $1.9 billion to negative $400 million, compared to the negative $200 million to $1.6 billion projection from the second quarter of 2013.

However, NCUA cautions that the legacy asset cash flows have not been realized and could vary significantly from current projections.

In addition, the agency notes that it must still repay $2.9 billion in outstanding Treasury borrowings before any remaining Stabilization Fund distributions can be legally made to credit unions. As a result, any potential repayment to credit unions is not likely to occur prior to expiration of the Stabilization Fund in 2021.

Read the press release.

Bank and CU Trade Groups Respond to Retailers on Data and Payment Card Security

The American Bankers Association, Consumer Bankers Association, Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federal Credit Unions, issued the following statement on Tuesday in response to the National Retail Federation (NRF) media briefing on data and payment card security:

“Once again, the NRF is more interested in pointing fingers than accepting responsibility for their role in protecting consumer data. That’s a distraction. Plain and simple, the Target breach – and the others recently in the news – had little to do with card technology and everything to do with failed computer security at major retailers.

“Chip-based technology should be part of the discussion, but it’s not the whole solution. Banks and retailers already have a plan in place to adopt its use – in addition to our own industry’s stringent federal data security requirements. Other technologies are emerging to address online and mobile payments fraud, such as tokenization, which is being spearheaded by financial institutions card networks and financial institutions card networks in their effort to protect consumers.

“Protecting consumer data is a shared responsibility, and merchants must have the same tough data security standards as financial institutions to thwart hackers.”

Reporting Requirements for HMDA Filers to Increase

Banks and credit unions that are HMDA (Home Mortgage Discloure Act) filers are going to see an increase in their reporting burden.

In prepared comments on Friday, February 7, Consumer Financial Protection Bureau (CFPB) Overlord Director Richard Cordray stated that the Dodd-Frank Act requires lenders to collect and report on specific new information as part of the HMDA process. The new information to be collected and reported by HMDA filers include: the total points and fees; the term of the loan; the length of any teaser interest rates; and the borrower’s age and credit score.

But Cordray did not stop there.

He stated that the agency is contemplating requiring lenders to collect more information about underwriting and pricing. For example, the CFPB may ask lenders to gather information on the applicant’s debt-to-income ratio, the interest rate, the total origination charges, and the total discount points of the loan.

In addition, the agency is thinking about requiring lenders to explain why they rejected a loan application and whether the lender considered the loan to be a Qualified Mortgage.

Read Cordray's speech.

Business Share Accounts, Q3 2013

There were 1,737 credit unions that reported holding business share accounts, as of September 30, 2013. These credit unions held approximately $15.85 billion in business accounts.

Twenty-nine credit unions reported holding $100 million or more in business share accounts.

Evangelical Christian CU (Brea, CA) held the largest dollar volume at almost $710 million in business accounts. Rounding out the top five are Mountain America (West Jordan, UT) with $415.9 million, American First (Riverdale, UT) with $389.5 million, Alaska USA (Anchorage, AK) with $265.5 million, and Bethpage (Bethpage, NY) with $249.6 million. Below is a table listing the top 25 credit unions with regard to dollar volume of business deposits.



However for most credit unions, business share accounts represent a very small portion of their total deposit base. The median business share account to total deposit ratio was 1.34 percent and 75 percent of all credit unions have a business share account to total deposit ratio below 3.19 percent.

But for some credit unions, business deposits represent a sizable portion of their total deposit base. Twenty-one credit unions reported that business accounts equalled at least 20 percent of their total deposit base.

Northeastern Engineers FCU (Richmond, NY) had the highest concentration of business deposits at almost 90 percent. Evangelical Christian CU was second with approximately 87 percent of its deposits in business share accounts.

The following table lists the 25 credit unions with the greatest reliance on business deposits relative to their total deposits.



Interestingly, 449 credit unions that reported holding business deposits do not report any outstanding member business loans. While most of these credit unions are reporting very small business deposit holdings, nine credit unions had at least $10 million in business deposits as of the end of the third quarter of 2013.

CU CEO Compensation Grew by Over 8 Percent in 2013

An article in the Long Island Business News (LIBN)(paid subscription) looked at the pay increases at credit unions.

Citing results from Credit Union Executive Society survey, the LIBN stated "total credit union CEO compensation rose 8.18 percent in 2013, up from a 5.83 percent increase in 2012 and a 5.07 percent increase in 2011."

According to the article, the average total CEO compensation for all credit unions was $256,339; but the average CEO compensation package at credit unions with more than $1 billion in assets was $552,318.

However, the article noted that "[w]hile most other nonprofits are compelled to disclose their executive compensation levels, multiple credit unions declined to disclose their numbers to LIBN."

The time is now for the National Credit Union Administration to adopt regulations requiring federal credit unions to disclose the salary of their highest paid employees as recommended by the agency's Outreach Task Force report on February 26, 2008. This would treat federal credit unions just like other nonprofit and not-for-profit organizations, including state chartered credit unions.

Mid-Atlantic Corporate Gets Ratings Notch Uplift from Government Support

In a January 31 press release, Fitch affirmed Mid-Atlantic Corporate FCU's Long-term Issuer Default Rating (IDR) and Short-term IDR ratings at ‘A+‘/’F1+’, respectively. In addition, Fitch has upgraded Mid-Atlantic's Viability rating (VR) to 'bb-' from 'b+’.

As the press release points out, the high likelihood of government support accounted for the ratings notch uplift, as its support rating floor was above its standalone or Viability rating.

According to Fitch, Mid-Atlantic Corporate FCU "will continue to benefit from the government support provided to Corporate Credit Unions (CCUs) through the National Credit Union Association (NCUA). Fitch attributes an extremely high probability of support to CCUs from regulatory authorities, as reflected in its high support rating and support rating floor. This view is underpinned by the NCUA’s past actions and the U.S. Treasury’s additional assistance to credit unions by extending the operation of the Temporary Corporate Credit Union Stabilization Fund through 2021."

Read the press release.

Vantage CU Settles Class Action Lawsuit

Missouri Lawyers Weekly recently unearthed a large class action settlement against Vantage Credit Union of St. Louis, Missouri.

According to the story, Vantage Credit Union in early 2013 agreed to write off $28 million in judgments and debts and to try to fix credit reports for more than 3,000 people to settle a complaint over allegedly faulty repossession notices.

Also, $3 million in cash was set aside for certain class members; attorneys’ fees; and an incentive award to the class representative.

The settlement applied to people whose property was repossessed as collateral from January 28, 2006, to January 31, 2011.

Read the story in Missouri Lawyers Weekly (paid subscription required).