Taxi medallion lenders LOMTO Federal Credit Union (Woodside, NY) and Progressive Credit Union (New York, NY) have filed their Q3 Call Reports.
LOMTO
According to LOMTO's financial performance report, the credit union reported a higher quarter over quarter net worth ratio and a quarterly decline in its delinquency rates. However, the drop in delinquencies was offset by an increase in troubled debt restructurings (TDRs).
LOMTO's net worth ratio increased by 11 basis points during the quarter to 16.84 percent.
Over the same time period, LOMTO reported a decline in its delinquency rate (loans 60 days or more past due) from 3.68 percent on June 30 to 1.53 percent as of September 30. In addition, early delinquencies (loans 30 to 59 days past due) dropped from $5.6 million to $5.3 million over the same time period.
TDRs increased during the quarter from $25 million to approximately $34.4 million. TDRS on September 30 are 14.04 percent of loans and 75.2 percent of net worth.
LOMTO FCU increased its provisions for loan losses during the quarter by almost $700 thousands to $2.8 million as of September 30. As a result, allowances for loan and lease losses rose from $6.56 million to $7.06 million.
As of September 30, the credit union's coverage ratio (allowances for loan and lease losses to delinquent loans) was almost 189 percent, up from 71.28 percent the previous quarter.
Progressive
During the quarter, Progressive built its net worth and coverage ratios, while keeping its delinquency rate largely unchanged.
Progressive Credit Union reported an increase in its net worth ratio during the quarter by 9 basis points to 41.03 percent as of the end of the 3rd quarter.
The delinquency rate on loans 60 days or more past due was almost flat during the quarter. The delinquency rate was 1.05 percent at the end of September compared to 1.04 percent for the previous quarter.
However early delinquencies jumped by almost 239 percent during the third quarter to slightly less than $13.5 million.
Net charge-offs were $3.1 million as of September 30, up from $1.2 million for the previous quarter.
TDRs increased from $18.8 million to $24.4 million during the quarter. This means TDRs on September 30 represented 3.99 percent of loans and 8.8 percent of net worth.
Provisions for loan losses increased by $3 million during the quarter to almost $7.3 million at the end of the third quarter. As a result, allowance from loan and lease losses rose by $1.14 million to $12.86 million.
Progressive's coverage ratio is 199.19 percent as of September 30, up from 179.53 percent the prior quarter.
Thursday, October 29, 2015
Wednesday, October 28, 2015
Charlotte Metro FCU Signs Deal to Sponsor NBA Basketball Team
The National Basketball Association's Charlotte Hornets completed a sponsorship agreement with Charlotte Metro Federal Credit Union that includes Hornets-themed credit and debit cards.
Terms weren’t disclosed, but similar partnerships fall in the range of $100,000 to $250,000 per year, based on analyst estimates.
Read more.
Terms weren’t disclosed, but similar partnerships fall in the range of $100,000 to $250,000 per year, based on analyst estimates.
Read more.
Bakery Employees Credit Union under Enforcement Order
California Department of Business Oversight (DBO) disclosed a final order against Bakery Employees Credit Union (Montebello, CA).
According to the order, Bakery Employees CU shall commence a search to identify a merger partner who is acceptable to the Commissioner of DBO. Bakery Employees shall provide a monthly written progress report to the Commissioner and the Regional Director of the National Credit Union Administration (Regional Director) detailing the due diligence of its search for a merger partner.
The final order also requires the $6.9 million credit union to retain management and maintain a Board of Directors (Board) acceptable to the Commissioner. Such person (or persons) shall be qualified to restore the credit union to a sound condition, operate the credit union in a safe and sound manner, comply with the provisions of this Order, and comply with applicable laws and regulations.
The credit union is ordered to complete corrective actions to address all accounting and internal control deficiencies related to the general ledger account balances that were identified in the examination dated March 31, 2015. Also, the credit union shall engage a qualified independent third party to obtain an opinion audit to validate the reconciliation of the general ledger accounts for Catalyst Corporate Credit Union and Money Gram for the periods beginning 12/31/2013 and continuing to the current month at time of reconciling.
The supervisory committee shall ensure the development and maintenance of a monthly progress report on all concerns noted in regulatory examination reports and independent audits.
Furthermore, the Board shall ensure that management maintains a list of all of vendors, including a description of the service provided by each vendor; the level of importance of each vendor’s service to the credit union’s business; and identification of the vendors that provide critical services to the credit union.
The credit union is required to develop a plan that is satisfactory to the Commissioner and Regional Director to achieve profitability with a benchmark of 0.1% of total assets for each quarter in years 2015 and 2016. At a minimum, the plan shall include the following: (a) Loan growth by type and interest rate; (b) Increased quality control to ensure the loan growth is consistent with current policy and the credit union’s loss reserves; (c) Anticipated provisions for loan loss expense; (d) Reduced operating expenses by amount and category; (e) Fee income by type and amount; (f) Specific quarterly performance benchmarks, minimally to include return on assets, operating expenses and net worth; and (g) Contingency plans in the event the above goals are not met, including trigger points for specific actions.
This order supersedes and replaces the Letter of Understanding dated December 9, 2014.
Read the final order.
According to the order, Bakery Employees CU shall commence a search to identify a merger partner who is acceptable to the Commissioner of DBO. Bakery Employees shall provide a monthly written progress report to the Commissioner and the Regional Director of the National Credit Union Administration (Regional Director) detailing the due diligence of its search for a merger partner.
The final order also requires the $6.9 million credit union to retain management and maintain a Board of Directors (Board) acceptable to the Commissioner. Such person (or persons) shall be qualified to restore the credit union to a sound condition, operate the credit union in a safe and sound manner, comply with the provisions of this Order, and comply with applicable laws and regulations.
The credit union is ordered to complete corrective actions to address all accounting and internal control deficiencies related to the general ledger account balances that were identified in the examination dated March 31, 2015. Also, the credit union shall engage a qualified independent third party to obtain an opinion audit to validate the reconciliation of the general ledger accounts for Catalyst Corporate Credit Union and Money Gram for the periods beginning 12/31/2013 and continuing to the current month at time of reconciling.
The supervisory committee shall ensure the development and maintenance of a monthly progress report on all concerns noted in regulatory examination reports and independent audits.
Furthermore, the Board shall ensure that management maintains a list of all of vendors, including a description of the service provided by each vendor; the level of importance of each vendor’s service to the credit union’s business; and identification of the vendors that provide critical services to the credit union.
The credit union is required to develop a plan that is satisfactory to the Commissioner and Regional Director to achieve profitability with a benchmark of 0.1% of total assets for each quarter in years 2015 and 2016. At a minimum, the plan shall include the following: (a) Loan growth by type and interest rate; (b) Increased quality control to ensure the loan growth is consistent with current policy and the credit union’s loss reserves; (c) Anticipated provisions for loan loss expense; (d) Reduced operating expenses by amount and category; (e) Fee income by type and amount; (f) Specific quarterly performance benchmarks, minimally to include return on assets, operating expenses and net worth; and (g) Contingency plans in the event the above goals are not met, including trigger points for specific actions.
This order supersedes and replaces the Letter of Understanding dated December 9, 2014.
Read the final order.
Tuesday, October 27, 2015
University of Louisville and Commonwealth CU Announce Partnership
The University of Louisville and Commonwealth Credit Union (Frankfort, KY) have announced a new partnership.
The $1 billion credit union will be the preferred credit union for University of Louisville's faculty, staff, students and alumni.
The credit union will also serve as an active sponsor for University of Louisville's academic and athletic programs.
The financial terms of the partnership were not released.
Commonwealth Credit Union is replacing Kentucky Telco Federal Credit Union, which ended its relationship with the university.
Read the news story.
The $1 billion credit union will be the preferred credit union for University of Louisville's faculty, staff, students and alumni.
The credit union will also serve as an active sponsor for University of Louisville's academic and athletic programs.
The financial terms of the partnership were not released.
Commonwealth Credit Union is replacing Kentucky Telco Federal Credit Union, which ended its relationship with the university.
Read the news story.
Taxi Medallion Lender Melrose CU Reports Q3 Loss of $21.57 Million
Melrose Credit Union (Briarwood, NY) posted a loss of $21.57 million for the third quarter as provisions for loan losses increased $28.55 million to $43.5 million during the third quarter.
Delinquent loans continued to grow during the third quarter. According to Melrose's financial performance report, loans 60 days or more delinquent jumped by 127.7 percent during the quarter to almost $125.8 million. As of September 30, delinquent loan rate was 6.28 percent, up from 2.76 percent the prior quarter.
Early delinquencies (30 to 59 days delinquent) at Melrose dropped during the quarter from nearly $149.1 million to $96.1 million.
Troubled debt restructurings (TDRs) increased by 38.7 percent during the third quarter to approximately $219.5 million. As of the end of the third quarter, TDRs were 10.95 percent of loans and 60.86 percent of net worth. All TDRs are in nonaccrual status.
Allowance for loan and lease losses rose by 70.8 percent during the third quarter to $68.1 million. Melrose's coverage ratio (allowance for loan and lease losses to delinquent loans) was 54.15 percent on September 30.
The credit union's third quarter loss caused its net worth to fall to $360.6 million. As a result, the credit union's net worth ratio declined from 18.04 percent on June 30 to 17.30 percent on September 30.
Delinquent loans continued to grow during the third quarter. According to Melrose's financial performance report, loans 60 days or more delinquent jumped by 127.7 percent during the quarter to almost $125.8 million. As of September 30, delinquent loan rate was 6.28 percent, up from 2.76 percent the prior quarter.
Early delinquencies (30 to 59 days delinquent) at Melrose dropped during the quarter from nearly $149.1 million to $96.1 million.
Troubled debt restructurings (TDRs) increased by 38.7 percent during the third quarter to approximately $219.5 million. As of the end of the third quarter, TDRs were 10.95 percent of loans and 60.86 percent of net worth. All TDRs are in nonaccrual status.
Allowance for loan and lease losses rose by 70.8 percent during the third quarter to $68.1 million. Melrose's coverage ratio (allowance for loan and lease losses to delinquent loans) was 54.15 percent on September 30.
The credit union's third quarter loss caused its net worth to fall to $360.6 million. As a result, the credit union's net worth ratio declined from 18.04 percent on June 30 to 17.30 percent on September 30.
Monday, October 26, 2015
Letter to Editor: Buying Naming Rights Not Done for Betterment of Members
A letter to the editor of South Bend Tribune is critical of Teachers Credit Union (TCU) spending $396,000 for the naming rights to a high school football field.
The letter states:
Read the letter.
The letter states:
A credit union's actions are supposed to be for the betterment of all its membership base. Therefore, I find it highly questionable that TCU’s spending of $396,000 to have its name on Penn High School’s football field was done for the betterment of TCU membership base.
Read the letter.
Taxi Medallion Lender Montauk Sees Sharp Rise in Delinquent Loans
Montauk Credit Union's financial performance deteriorated during the third quarter of 2015.
Montauk Credit Union (New York, NY) was placed into conservatorship on September 18, 2015.
According to its financial performance report, loans 60 days or more delinquent increased from $4.95 million on June 30 to $16.28 million as of September 30. In other words, the percent of loans 60 days or more past due went from 2.96 percent to 9.79 percent.
In addition, the pipeline of new delinquencies (30 to 59 days delinquent) rose from $14.3 million to slightly more than $19 million over the same time period.
Furthermore, troubled debt restructurings (TDRs) rose from $28.5 million to $30.4 million during the quarter. TDRs on September 30 as a percent of total loans and net worth were 18.28 percent and 160.6 percent, respectively.
Participation loan delinquency rates rose from 1.02 percent to 6.84 percent. This would indicate the pain from participations is spreading to other credit unions that bough participations from Montauk.
Despite rising delinquencies, provisioning for loan losses was unchanged during the quarter. As a result, allowances for loan and lease losses was unchanged at $5.58 million. This means Montauk's coverage ratio (allowances for loan and lease losses to delinquent loans) fell from 112.71 percent on June 30 to 34.29 percent on September 30.
As of September 30, Montauk reported net worth of $18.9 million. The credit union did report a 20 basis point improvement in its net worth ratio to 10.54 percent as the credit union posted a profit of $454 thousand during the third quarter.
Therefore, the credit union has a total cushion (net worth and allowance for loan and lease losses) to absorb expected and unexpected losses of $24.5 million.
Montauk Credit Union (New York, NY) was placed into conservatorship on September 18, 2015.
According to its financial performance report, loans 60 days or more delinquent increased from $4.95 million on June 30 to $16.28 million as of September 30. In other words, the percent of loans 60 days or more past due went from 2.96 percent to 9.79 percent.
In addition, the pipeline of new delinquencies (30 to 59 days delinquent) rose from $14.3 million to slightly more than $19 million over the same time period.
Furthermore, troubled debt restructurings (TDRs) rose from $28.5 million to $30.4 million during the quarter. TDRs on September 30 as a percent of total loans and net worth were 18.28 percent and 160.6 percent, respectively.
Participation loan delinquency rates rose from 1.02 percent to 6.84 percent. This would indicate the pain from participations is spreading to other credit unions that bough participations from Montauk.
Despite rising delinquencies, provisioning for loan losses was unchanged during the quarter. As a result, allowances for loan and lease losses was unchanged at $5.58 million. This means Montauk's coverage ratio (allowances for loan and lease losses to delinquent loans) fell from 112.71 percent on June 30 to 34.29 percent on September 30.
As of September 30, Montauk reported net worth of $18.9 million. The credit union did report a 20 basis point improvement in its net worth ratio to 10.54 percent as the credit union posted a profit of $454 thousand during the third quarter.
Therefore, the credit union has a total cushion (net worth and allowance for loan and lease losses) to absorb expected and unexpected losses of $24.5 million.
Thursday, October 22, 2015
14 CUs to Pay Fines for Late Filing Q2 Call Reports
The National Credit Union Administration (NCUA) announced that 14 federally insured credit unions have agreed to civil monetary penalties for filing late their second quarter Call Reports. However, 28 federally insured credit unions did not file their call reports in a timely fashion.
The late filers will pay a total of $3,491 in penalties. Individual penalties range from $100 to $576. The median penalty was $185.
Of the 14 credit unions agreeing to pay penalties for the second quarter:
NCUA stated that mitigating circumstances in six cases led to credit unions not being penalized and eight credit unions were granted a waiver that did not consent to the penalty.
Read the press release.
The late filers will pay a total of $3,491 in penalties. Individual penalties range from $100 to $576. The median penalty was $185.
Of the 14 credit unions agreeing to pay penalties for the second quarter:
- Eleven had assets of less than $10 million;
- Two had assets between $10 million and $50 million; and
- One had assets between $50 million and $250 million.
NCUA stated that mitigating circumstances in six cases led to credit unions not being penalized and eight credit unions were granted a waiver that did not consent to the penalty.
Read the press release.
Founders Buys Naming Rights to University of South Carolina's Baseball Stadium
The State is reporting that Founders Federal Credit Union (Lancaster, SC) is buying the naming rights to the baseball stadium at the University of South Carolina.
The University's Board of Trustees unanimously approved a 10-year, $7 million naming rights and advertising deal that will change the name of Carolina Stadium to Founders Park.
This is another case of the credit union tax exemption not being used for its intended public policy purpose.
Read more here.
The University's Board of Trustees unanimously approved a 10-year, $7 million naming rights and advertising deal that will change the name of Carolina Stadium to Founders Park.
This is another case of the credit union tax exemption not being used for its intended public policy purpose.
Read more here.
Wednesday, October 21, 2015
Lawsuit: Large Idaho CU Lost Tax Exemption and Thrived
A lawsuit, Johnson v. Beehive Federal Credit Union Et Al., filed in United States District Court for the District of Idaho states that an Idaho credit union had lost its tax exemption and thrived.
The lawsuit was brought by Chris Johnson, who was president and chief executive officer of the Idaho Credit Union League in 2013.
According to the complaint (Paragraph 2(c)), "one of Idaho’s largest credit unions had recently, for one or more years, lost its federal tax exemption and had paid federal income taxes. This occurrence presented an existential predicament for the credit union movement in Idaho because the cornerstone of credit unions’ federal tax exemption is that without the exemption credit unions cannot be financially viable institutions, and yet the continued financial success of the taxpaying credit union in Idaho had not, in fact, been jeopardized."
Read more here.
The lawsuit was brought by Chris Johnson, who was president and chief executive officer of the Idaho Credit Union League in 2013.
According to the complaint (Paragraph 2(c)), "one of Idaho’s largest credit unions had recently, for one or more years, lost its federal tax exemption and had paid federal income taxes. This occurrence presented an existential predicament for the credit union movement in Idaho because the cornerstone of credit unions’ federal tax exemption is that without the exemption credit unions cannot be financially viable institutions, and yet the continued financial success of the taxpaying credit union in Idaho had not, in fact, been jeopardized."
Read more here.
Monday, October 19, 2015
Wachovia and Barclay's Capital Settle RMBS Lawsuits
The National Credit Union Administration (NCUA) is reporting that Barclay's Capital and Wachovia have agreed to resolve claims arising from losses related to purchases of faulty residential mortgage-backed securities (RMBS) by corporate credit unions.
Barclays Capital and Wachovia will pay $325 million and pay $53 million respectively to resolve these claims.
Neither institution admitted fault as part of their settlement agreements.
NCUA stated total recoveries will have reached $2.2 billion with the completion of these agreements.
Read Barclay's Capital press release.
Read Wachovia press release.
Barclays Capital and Wachovia will pay $325 million and pay $53 million respectively to resolve these claims.
Neither institution admitted fault as part of their settlement agreements.
NCUA stated total recoveries will have reached $2.2 billion with the completion of these agreements.
Read Barclay's Capital press release.
Read Wachovia press release.
What's the Hold Up?
This is the question posed by an American Banker article regarding Monterey Credit Union's conversion to a California state chartered bank.
More than 14 months after its members voted to convert to a bank charter, Monterey Credit Union, a privately-insured credit union, appears to be trapped in regulatory limbo as regulators dither over its application to become a bank.
The article quotes Richard Garabedian, a Washington, DC lawyer, as saying he believes that the bank regulators have "raised the price of admission" by requiring credit unions to have healthier metrics than in past years.
Read the article (subscription required).
More than 14 months after its members voted to convert to a bank charter, Monterey Credit Union, a privately-insured credit union, appears to be trapped in regulatory limbo as regulators dither over its application to become a bank.
The article quotes Richard Garabedian, a Washington, DC lawyer, as saying he believes that the bank regulators have "raised the price of admission" by requiring credit unions to have healthier metrics than in past years.
Read the article (subscription required).
Sunday, October 18, 2015
Quemado FCU Merged with NCUA Assistance
The National Credit Union Administration (NCUA) disclosed that Quemado Federal Credit Union (Quemado, TX) was merged with NCUA assistance.
But don't look for a press release regarding this failure, there is not one. You will only find information about this failure here.
According to its most recent financial data, the credit union reported a loss of $163,243 through the first six months of 2015 after it increased provisions for loan losses by slightly more than $163,000. As a result, the credit union saw its net worth ratio fall from 13.68 percent at the end of the first quarter of 2015 to 2.91 percent as of June 2015.
The credit union reported that over 27 percent of its loans were 50 days or more past due as of June 30.
Border FCU (Del Rio, TX) acquired Quemado FCU.
This is the fourth NCUA assisted merger this year and 11th credit union to be closed during 2015.
But don't look for a press release regarding this failure, there is not one. You will only find information about this failure here.
According to its most recent financial data, the credit union reported a loss of $163,243 through the first six months of 2015 after it increased provisions for loan losses by slightly more than $163,000. As a result, the credit union saw its net worth ratio fall from 13.68 percent at the end of the first quarter of 2015 to 2.91 percent as of June 2015.
The credit union reported that over 27 percent of its loans were 50 days or more past due as of June 30.
Border FCU (Del Rio, TX) acquired Quemado FCU.
This is the fourth NCUA assisted merger this year and 11th credit union to be closed during 2015.
Saturday, October 17, 2015
Golden 1 CU Settles Improper Overdraft Fee Class Action Lawsuit
Golden 1 Credit Union (Sacramento, CA) has agreed to settle a class action lawsuit that it improperly imposed overdraft fees even when members had enough money in their checking account to cover the transaction. The time period covered by the settlement is between April 2, 2009 and April 30, 2015.
Plaintiff Isabel Manwaring filed the overdraft fee class action lawsuit, alleging she was improperly charged the courtesy pay overdraft fees. She alleged it was improper for Golden 1 to charge courtesy pay overdraft fees when there was a positive ledger balance in her checking account that was enough to cover the transaction even though she had a negative available balance on her account.
Further, Manwaring alleges Golden 1 used a process to enroll members on the relevant dates in its overdraft program, which violated federal regulations that require affirmative consent to enrolling in an overdraft program. Her overdraft fee class action lawsuit asserted claims for violations of the California Unfair Competition Law, Breach of Contract, Negligent Misrepresentation, Unjust Enrichment, and Money Had and Received.
Golden 1 denies the allegations but agreed to settle the credit union overdraft fee class action lawsuit to avoid the expense and uncertainty associated with ongoing litigation.
According to the settlement agreement, Golden 1 set aside $5 million to address class members' claims.
Plaintiff Isabel Manwaring filed the overdraft fee class action lawsuit, alleging she was improperly charged the courtesy pay overdraft fees. She alleged it was improper for Golden 1 to charge courtesy pay overdraft fees when there was a positive ledger balance in her checking account that was enough to cover the transaction even though she had a negative available balance on her account.
Further, Manwaring alleges Golden 1 used a process to enroll members on the relevant dates in its overdraft program, which violated federal regulations that require affirmative consent to enrolling in an overdraft program. Her overdraft fee class action lawsuit asserted claims for violations of the California Unfair Competition Law, Breach of Contract, Negligent Misrepresentation, Unjust Enrichment, and Money Had and Received.
Golden 1 denies the allegations but agreed to settle the credit union overdraft fee class action lawsuit to avoid the expense and uncertainty associated with ongoing litigation.
According to the settlement agreement, Golden 1 set aside $5 million to address class members' claims.
Friday, October 16, 2015
Tiny Low Income NJ Credit Union Placed into Conservatorship
The National Credit Union Administration (NCUA) placed Helping Other People Excel Federal Credit Union of Jackson, New Jersey, into conservatorship.
Helping Other People Excel FCU is a federally insured credit union with 96 members and assets of $290,927, according to the credit union’s most recent Call Report.
Various news organizations reported that the credit union was taken over in 2014 by a group running an illegal Bitcoin exchange.
Pinnacle Federal Credit Union of Edison, New Jersey will operate Helping Other People Excel during the conservatorship under a management agreement with NCUA.
Read the press release.
Helping Other People Excel FCU is a federally insured credit union with 96 members and assets of $290,927, according to the credit union’s most recent Call Report.
Various news organizations reported that the credit union was taken over in 2014 by a group running an illegal Bitcoin exchange.
Pinnacle Federal Credit Union of Edison, New Jersey will operate Helping Other People Excel during the conservatorship under a management agreement with NCUA.
Read the press release.
CFPB's Updated HMDA Rule Will Target Banks and CUs for Fair Lending Issues
The Consumer Financial Protection Bureau (CFPB) has finalized its Home Mortgage Disclosure Act (HMDA) rule on October 15, which will place banks and credit unions in the fair lending crosshairs.
According to the agency, mortgage lenders will be required to provide more information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, credit score, the interest rate of the loan, points and fees, loan term, prepayment penalty, and discount points.
In addition, lenders will be required to gather more demographic information about the borrower. For examples, lenders must report the age of the borrower and permit borrowers to self-identify their ethnicity and race using disaggregated ethnic and racial subcategories.
This information will enhance the ability for the CFPB and its consumer allies to monitor lenders for possible fair lending problems.
Read the press release.
According to the agency, mortgage lenders will be required to provide more information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, credit score, the interest rate of the loan, points and fees, loan term, prepayment penalty, and discount points.
In addition, lenders will be required to gather more demographic information about the borrower. For examples, lenders must report the age of the borrower and permit borrowers to self-identify their ethnicity and race using disaggregated ethnic and racial subcategories.
This information will enhance the ability for the CFPB and its consumer allies to monitor lenders for possible fair lending problems.
Read the press release.
Thursday, October 15, 2015
Problem Credit Unions Fell During Q3 2015
The National Credit Union Administration (NCUA) reported that the number of problem credit unions fell during the third quarter of 2015.
At the end of the third quarter, there were 233 problem credit unions -- down from 251 credit unions at the end of the second quarter of 2015. A year ago, the number of problem credit unions was 288.
A problem credit union has a CAMEL Code of 4 or 5.
During the third quarter, both total shares (deposits) and assets in problem credit unions fell. Shares in problem credit unions fell from $10.2 billion as of June 30, 2015 to $7.6 billion as of September 30, 2015. Over the same time period, assets in problem credit unions declined from $11.4 billion to $8.5 billion.
According to NCUA, 0.81 percent of total insured shares and 0.7 percent of industry assets are in problem credit unions at the end of the third quarter.
According to NCUA, 93 percent of all problem credit unions have less than $100 million in assets, while just over 1 percent have assets of $500 million or more. NCUA reported that no credit union with at least $1 billion in assets were a problem credit union. The number of problem credit unions with between $500 million and $1 billion in assets edged lower during the quarter from 4 credit unions to 3 credit unions.
At the end of the third quarter, there were 233 problem credit unions -- down from 251 credit unions at the end of the second quarter of 2015. A year ago, the number of problem credit unions was 288.
A problem credit union has a CAMEL Code of 4 or 5.
During the third quarter, both total shares (deposits) and assets in problem credit unions fell. Shares in problem credit unions fell from $10.2 billion as of June 30, 2015 to $7.6 billion as of September 30, 2015. Over the same time period, assets in problem credit unions declined from $11.4 billion to $8.5 billion.
According to NCUA, 0.81 percent of total insured shares and 0.7 percent of industry assets are in problem credit unions at the end of the third quarter.
According to NCUA, 93 percent of all problem credit unions have less than $100 million in assets, while just over 1 percent have assets of $500 million or more. NCUA reported that no credit union with at least $1 billion in assets were a problem credit union. The number of problem credit unions with between $500 million and $1 billion in assets edged lower during the quarter from 4 credit unions to 3 credit unions.
Wednesday, October 14, 2015
Michigan Combination Will Be Largest Merger in CU History
Lake Michigan Credit Union (LMCU) of Grand Rapids and United Federal Credit Union (UFCU) of St. Joseph announced they will merge, creating the nation's 19th largest credit union.
The combined credit union will serve about 500,000 members with total assets of more than $6 billion with 78 locations in seven states.
United Federal Credit Union will become United Credit Union when the merger is complete and both credit unions are consolidated under Lake Michigan's state charter.
Read more.
The combined credit union will serve about 500,000 members with total assets of more than $6 billion with 78 locations in seven states.
United Federal Credit Union will become United Credit Union when the merger is complete and both credit unions are consolidated under Lake Michigan's state charter.
Read more.
Ent FCU Members to Vote to Become State Charter
By October 29, Ent Federal Credit Union members will vote on whether to change from a federal to a state of Colorado credit union charter.
Ent’s Board of Directors and management team are recommending the charter change to the membership as it will provide the credit union with greater opportunity to expand its geographic field of membership and will provide the credit union with greater flexibility.
Read the press release.
Ent’s Board of Directors and management team are recommending the charter change to the membership as it will provide the credit union with greater opportunity to expand its geographic field of membership and will provide the credit union with greater flexibility.
Read the press release.
Tuesday, October 13, 2015
100 Percent Financing of Taxi Medallions Could Indicate Future NCUSIF Losses
An online survey by Credit Union Times found that a large majority of the respondents believe that taxi medallion loans will result in a loss to the National Credit Union Share Insurance Fund (NCUSIF).
Seventy-three percent of the respondents believe that taxi medallion loans will result in a loss to the NCUSIF, while 27 percent of the respondents don't believe these loans will result in a loss to the NCUSIF.
However, that 27 percent may want to reconsider their position based upon recent research from HVM Capital.
HVM Capital found that some credit unions, as well as other lenders, may have actually financed some medallion sales at above-market prices -- in order to inflate the value of their current holdings at higher prices.
According to HVM Capital, these lenders provided 100 percent financing for taxi medallions and refused to finance taxi medallions that sold for much lower prices. The report specifically identifies Montauk Credit Union and LOMTO Federal Credit Union as providing 100 percent financing.
Providing 100 percent financing for collateral that is falling in value does not appear to be a sound banking practice. Moreover, unless these credit unions received a waiver from the maximum loan-to-value requirement, then these credit unions are in violation of the National Credit Union Administration's Member Business Loan requirement.
This report was written before Montauk Credit Union was seized in September and placed into conservatorship. While I don't know the ultimate fate for Montauk, the odds are much higher today that three months ago that the credit union will end up in receivership.
Also, it is likely that the pain from taxi medallion loans will spread to other credit unions, as many credit unions have bought participations in these loans.
Read the research.
Seventy-three percent of the respondents believe that taxi medallion loans will result in a loss to the NCUSIF, while 27 percent of the respondents don't believe these loans will result in a loss to the NCUSIF.
However, that 27 percent may want to reconsider their position based upon recent research from HVM Capital.
HVM Capital found that some credit unions, as well as other lenders, may have actually financed some medallion sales at above-market prices -- in order to inflate the value of their current holdings at higher prices.
According to HVM Capital, these lenders provided 100 percent financing for taxi medallions and refused to finance taxi medallions that sold for much lower prices. The report specifically identifies Montauk Credit Union and LOMTO Federal Credit Union as providing 100 percent financing.
Providing 100 percent financing for collateral that is falling in value does not appear to be a sound banking practice. Moreover, unless these credit unions received a waiver from the maximum loan-to-value requirement, then these credit unions are in violation of the National Credit Union Administration's Member Business Loan requirement.
This report was written before Montauk Credit Union was seized in September and placed into conservatorship. While I don't know the ultimate fate for Montauk, the odds are much higher today that three months ago that the credit union will end up in receivership.
Also, it is likely that the pain from taxi medallion loans will spread to other credit unions, as many credit unions have bought participations in these loans.
Read the research.
Monday, October 12, 2015
Virginia Credit Union Realty CUSO Launches Division to Serve Nonmembers
A credit union service organization owned by Virginia Credit Union (Richmond, VA), Virginia CU Realty, has launched a new division, Virginia Select Realty, to serve nonmembers.
Read more.
Read more.
Sunday, October 11, 2015
Musicians' Interguild Credit Union Under Enforcement Order
The California Department of Business Oversight published an enforcement order against Musicians' Interguild Credit Union (Los Angeles, CA).
According the final order, the credit union is expected to retain qualified management and maintain Board of Directors that are acceptable to the Commissioner of Business Oversight. At the minimum, the credit union will retain a chief executive officer, chief operating officer, chief lending officer, and controller that will restore the credit union to sound condition, operate the credit union in a safe manner, and comply with applicable laws and regulations.
The final order instructs the credit union to develop a plan to address loans that are delinquent in property tax payments.
The June 2015 call report for the $72 million credit union shows although meeting the requirements of being well-capitalized, 9.02 percent of its loans were 60 days or more past due.
Read more.
According the final order, the credit union is expected to retain qualified management and maintain Board of Directors that are acceptable to the Commissioner of Business Oversight. At the minimum, the credit union will retain a chief executive officer, chief operating officer, chief lending officer, and controller that will restore the credit union to sound condition, operate the credit union in a safe manner, and comply with applicable laws and regulations.
The final order instructs the credit union to develop a plan to address loans that are delinquent in property tax payments.
The June 2015 call report for the $72 million credit union shows although meeting the requirements of being well-capitalized, 9.02 percent of its loans were 60 days or more past due.
Read more.
Friday, October 9, 2015
Cordray Remarks on Electronic Payment System Improvements
Consumer Financial Protection Bureau (CFPB) Director Richard Cordray in his prepared remarks to the Credit Union Advisory Committee identified three areas where the electronic payment system can be improved.
These three areas of concern are transparency, security, and access.
Cordray stated that "transparency can be improved within the electronic payments space to help consumers make more informed decisions and take greater control of their economic lives. When consumers make a deposit into their credit union account, it is often difficult for them to know when the funds will be available...Not knowing when a payment will be credited or debited can cause significant confusion and anxiety for those whose credit union accounts can be precariously low on funds...Consumers deserve better. They deserve transparency. They deserve to know exactly where their money is so they can make informed choices about how best to manage the ways and means of their lives."
Cordray then commented that there is room for improvement to protect "consumers from loss, theft, or mistreatment that may arise from payment security problems." The CFPB believes that consumers should be protected from unauthorized payments and fishing expeditions.
Cordray further believed that there was room for improvement with regard to access to the electronic payment system. He noted that a substantial number of consumers do not have access to the electronic payment system.
Read Cordray's remarks.
These three areas of concern are transparency, security, and access.
Cordray stated that "transparency can be improved within the electronic payments space to help consumers make more informed decisions and take greater control of their economic lives. When consumers make a deposit into their credit union account, it is often difficult for them to know when the funds will be available...Not knowing when a payment will be credited or debited can cause significant confusion and anxiety for those whose credit union accounts can be precariously low on funds...Consumers deserve better. They deserve transparency. They deserve to know exactly where their money is so they can make informed choices about how best to manage the ways and means of their lives."
Cordray then commented that there is room for improvement to protect "consumers from loss, theft, or mistreatment that may arise from payment security problems." The CFPB believes that consumers should be protected from unauthorized payments and fishing expeditions.
Cordray further believed that there was room for improvement with regard to access to the electronic payment system. He noted that a substantial number of consumers do not have access to the electronic payment system.
Read Cordray's remarks.
Thursday, October 8, 2015
Recommendations for Reforming the CLF
While the testimony of National Credit Union Administration (NCUA) Chairman Debbie Matz in July did not mention the Central Liquidity Facility (CLF), the agency has stated previously that reforming the CLF is a legislative priority. However, NCUA has not released any details on how it would reform the CLF.
While I believe the CLF should be dissolved, if Congress decides not to dissolve the CLF but rather to reform the CLF, some of these reforms should closely follow the Federal Reserve's regulation regarding the extension of credit by Federal Reserve Banks.
CLF policies and procedures need to be designed to ensure that any lending program or facility is for the purpose of providing liquidity and not aiding a failing credit union. Legislation should prohibit borrowings from the CLF by credit unions that are insolvent or not viable.
Moreover, the Government Accountability Office (GAO) in 1991 recommended requiring the terms and conditions of CLF loans to be no more liberal than those made by the Federal Reserve.
Also, any reform needs to ensure that the security for CLF loans is sufficient to protect taxpayers from losses. The Federal Credit Union Act (FCUA) states that loans may be advanced to a member of the CLF on terms and conditions prescribed by the Board after giving due consideration to creditworthiness. But FCUA does not require CLF loans to be collateralized.
In addition, a 1997 Treasury Department study noted, "[t]he CLF’s current borrowing authority raises serious policy and budget concerns. It has legal authority to advance several billion dollars to the Share Insurance Fund without regard to its ability to repay. In a systemic crisis, taxpayers could be put at risk if such funds were advanced to shore-up troubled credit unions or a troubled insurance fund."
Furthermore, as I wrote in August 2010, the CLF should be subject to the same disclosure requirements as the Federal Reserve as mandated by Section 1103 of the Dodd Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203).
While I believe the CLF should be dissolved, if Congress decides not to dissolve the CLF but rather to reform the CLF, some of these reforms should closely follow the Federal Reserve's regulation regarding the extension of credit by Federal Reserve Banks.
CLF policies and procedures need to be designed to ensure that any lending program or facility is for the purpose of providing liquidity and not aiding a failing credit union. Legislation should prohibit borrowings from the CLF by credit unions that are insolvent or not viable.
Moreover, the Government Accountability Office (GAO) in 1991 recommended requiring the terms and conditions of CLF loans to be no more liberal than those made by the Federal Reserve.
Also, any reform needs to ensure that the security for CLF loans is sufficient to protect taxpayers from losses. The Federal Credit Union Act (FCUA) states that loans may be advanced to a member of the CLF on terms and conditions prescribed by the Board after giving due consideration to creditworthiness. But FCUA does not require CLF loans to be collateralized.
In addition, a 1997 Treasury Department study noted, "[t]he CLF’s current borrowing authority raises serious policy and budget concerns. It has legal authority to advance several billion dollars to the Share Insurance Fund without regard to its ability to repay. In a systemic crisis, taxpayers could be put at risk if such funds were advanced to shore-up troubled credit unions or a troubled insurance fund."
Furthermore, as I wrote in August 2010, the CLF should be subject to the same disclosure requirements as the Federal Reserve as mandated by Section 1103 of the Dodd Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203).
Tuesday, October 6, 2015
Fryzel: Don't Eliminate MBL Personal Guarantee Requirement
Former National Credit Union Administration (NCUA) Board member Michael Fryzel is urging the NCUA Board to retain the member business loan (MBL) personal guarantee requirement.
In a Credit Union Times opinion piece, Fryzel wrote: "The one change that is proposed, which I feel would be detrimental to credit union operations and not condone a safe and sound best business practice, is the elimination of the personal guarantee for business loans."
While Fryzel acknowledges that the personal guarantee may inhibit the growth of business loans at credit unions, he also notes that it raises questions about loan quality, member responsibility, and protection from loss.
Read the opinion.
In a Credit Union Times opinion piece, Fryzel wrote: "The one change that is proposed, which I feel would be detrimental to credit union operations and not condone a safe and sound best business practice, is the elimination of the personal guarantee for business loans."
While Fryzel acknowledges that the personal guarantee may inhibit the growth of business loans at credit unions, he also notes that it raises questions about loan quality, member responsibility, and protection from loss.
Read the opinion.
Monday, October 5, 2015
CU Borrowings from Fed's Discount Window, Q3 2013
Seventy-six credit unions borrowed 187 times from the Federal Reserve's Discount Window during the third quarter of 2013. Credit unions borrowed an aggregate amount of $676,178,000.
This is up from 58 credit unions in the second quarter of 2013 and 48 credit unions from a year ago.
The Federal Reserve released this data on September 30. The data are published with a two year delay.
Among the most active borrowers were Franklin Mint FCU and Educational Employees CU. Both credit unions visited the Discount Window 22 times during the quarter.
The average amount borrowed from the Discount Window was almost $3.6 million. The median amount borrowed was $1 million. The maximum amount borrowed was $31 million by Genisys CU.
The term of most borrowings was 1 day. Almost all Discount Window loans were through the primary credit program.
Information regarding borrowings disclosed below. (click on images to enlarge)
This is up from 58 credit unions in the second quarter of 2013 and 48 credit unions from a year ago.
The Federal Reserve released this data on September 30. The data are published with a two year delay.
Among the most active borrowers were Franklin Mint FCU and Educational Employees CU. Both credit unions visited the Discount Window 22 times during the quarter.
The average amount borrowed from the Discount Window was almost $3.6 million. The median amount borrowed was $1 million. The maximum amount borrowed was $31 million by Genisys CU.
The term of most borrowings was 1 day. Almost all Discount Window loans were through the primary credit program.
Information regarding borrowings disclosed below. (click on images to enlarge)
Friday, October 2, 2015
Bank and CU Trade Groups Call on the Bureau to Release Draft Overdraft Protection Survey
Five trade groups representing banks and credit unions on September 30 called on the Consumer Financial Protection Bureau (Bureau) to release and accept comments on a draft survey as part of its proposed study of overdraft protection services.
The Bureau said it planned to conduct a survey of 8,000 individuals but did not release the draft survey with its proposal as federal guidance requires.
The trade groups wrote: "[W]e are concerned that the Bureau did not include in its submission to the Office of Management and Budget (OMB) a draft survey instrument on which the public could comment, despite OMB guidance requiring publication of the survey simultaneous with the Bureau’s request for comment. We urge the Bureau to re-submit its information collection request with the draft survey instrument."
The five trade associations signing the letter are the American Bankers Association, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, and the National Association of Federal Credit Unions.
The Bureau said it planned to conduct a survey of 8,000 individuals but did not release the draft survey with its proposal as federal guidance requires.
The trade groups wrote: "[W]e are concerned that the Bureau did not include in its submission to the Office of Management and Budget (OMB) a draft survey instrument on which the public could comment, despite OMB guidance requiring publication of the survey simultaneous with the Bureau’s request for comment. We urge the Bureau to re-submit its information collection request with the draft survey instrument."
The five trade associations signing the letter are the American Bankers Association, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, and the National Association of Federal Credit Unions.
Thursday, October 1, 2015
Florida Regulator Approves Merger of Calusa Bank into Achieva CU
The Florida Office of Financial Regulation approved the merger of Calusa Bank (Punta Gorda, FL) into Achieva Credit Union (Dunedin, FL).
The order requires the consent of the National Credit Union Administration and the Federal Deposit Insurance Corporation.
Also, within six months after consummation of the merger and consolidation of assets and liabilities into Achieva, the Office of Financial Regulation is to be provided written documentation to verify that all existing depositors or borrowers of Calusa at the time of consummation of the transaction have either opted-in to become a member of Achieva or their account relationship has been moved to another financial institution, closed or paid off.
Read the order.
The order requires the consent of the National Credit Union Administration and the Federal Deposit Insurance Corporation.
Also, within six months after consummation of the merger and consolidation of assets and liabilities into Achieva, the Office of Financial Regulation is to be provided written documentation to verify that all existing depositors or borrowers of Calusa at the time of consummation of the transaction have either opted-in to become a member of Achieva or their account relationship has been moved to another financial institution, closed or paid off.
Read the order.
Teachers CU Partners with Pacers Sports and Entertainment, Gets Naming Rights to Practice Court
Pacers Sports & Entertainment and Teachers Credit Union have announced a partnership.
As part of the partnership, the practice court at Bankers Life Fieldhouse, used by both the Indiana Pacers and the Indiana Fever, will immediately be referred to as TCU Court.
Also, the partnership includes a free program to help Indiana high school educators teach financial empowerment.
The price tag of the partnership was not disclosed.
As part of the partnership, the practice court at Bankers Life Fieldhouse, used by both the Indiana Pacers and the Indiana Fever, will immediately be referred to as TCU Court.
Also, the partnership includes a free program to help Indiana high school educators teach financial empowerment.
The price tag of the partnership was not disclosed.
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