81 Percent of FICUs Reported a Profit

The National Credit Union Administration reported that 81 percent of all federally-insured credit unions (FICUs) reported positive net income through the first 3 quarter of 2017.

A year earlier, 80 percent of FICUs reported positive net income over the same period.

On the other hand, 1,068 FICUs reported a loss through the first 3 quarters of 2017.

Twenty-seven credit unions reported losses in excess of $1 million through the first 3 quarters of 2017. Melrose Credit Union (Briarwood, NY) reported the largest loss of $178.3 million.

The following table lists the 10 credit unions with the largest year-to-date (YTD) losses.

Westconsin CU Granted Exception to Wisconsin MBL Regulation

The Wisconsin Office of Credit Unions approved applications from Westconsin Credit Union (Menominee, WI) seeking two exceptions from the state's Member Business Loan (MBL) regulation.

Westconsin Credit Union sought an exception from the state's Member Business Loan regulation for two non-fleet vehicle loans.

The credit union also sought a blanket waiver to exceed to loan to value ratios for non-fleet vehicle loans.

The Division of Credit Unions received the two applications on September 14, 2017 and the date of the action taken for the two applications was October 18, 2017.

An Open Records Request to the Wisconsin Department of Financial Institutions was denied.

Fox Guarding the Hen House?

The Wall Street Journal is reporting that a bipartisan bill (S. 2155) would force the National Credit Union Administration (NCUA) to hold open hearings on the agency's budget.

Currently, the NCUA Board holds voluntary public meetings on its budget.

However, the bill introduced by Sen. Heller (R - NV) would formalize this process.

The bill passed the Senate Banking Committee on December 5 and awaits action by the full Senate.

If the bill becomes law, the NCUA will be the only financial regulator required to hold a public hearing where the industry could weigh-in on spending decisions by the agency.

But former NCUA Chairman Debbie Matz warned that the bill would represent "an attack on the core of independent oversight."

Read the Wall Street Journal story (subscription required).

NCUA Identifies Supervisory Priorities for 2018

The National Credit Union Administration (NCUA) in a letter to credit unions announced its supervisory priorities in 2018.

The agency identified the following seven areas for supervisory focus in 2018: cybersecurity assessment, Bank Secrecy Act compliance, internal controls and fraud prevention, interest rate and liquidity risk, automobile lending, commercial lending, and consumer compliance.

With respect to automobile lending, NCUA will focus on portfolios with the following concentrations -- extended loan maturities of over 7 years, high loan-to-value ratios, near-prime and subprime, and indirect lending programs.

With regard to consumer compliance, NCUA examiners will focus on three areas -- federal credit unions’ good faith efforts to comply with the Consumer Financial Protection Bureau’s amendments to the regulations implementing the Home Mortgaage Disclsoure Act (HMDA), credit unions' effort to comply with the Military Lending Act, and credit unions' overdraft policies and procedures for compliance with Regulation E.

Read the letter.

39 CUs Fined for Late Filing Q2 Call Report

The National Credit Union Administration announced that 39 credit unions consented to civil money penalties for late filing their second quarter Call Report. This is up from 12 credit unions in the first quarter of 2017 and 24 credit unions from a year ago.

Total penalties were $10,150.

Individual penalties for the second quarter ranged from $57 to $908. The median penalty was $229.

Twenty-nine credit unions had assets of less than $10 million; nine credit unions had assets between $10 million and $50 million; and one credit union had assets between $50 million and $100 million.

Ten credit unions were a repeat offender.

Read the press release.

Frankenmuth CU Buys Naming Rights to Expo Center

A small entertainment and trade show facility in Birch Run, Michigan has signed Frankenmuth Credit Union (Frankenmuth, MI) to a 10-year naming rights deal.

The former Birch Run Expo Center is now called the Frankenmuth Credit Union Event Center.

Frankenmuth Credit Union's name and logo will appear on the outside of the building and inside the 2,500 seat arena. The credit union will also get placement on the venue's social media, website, event tickets, schedules, media releases and advertisements.

The price of the deal was not disclosed.

Read the story.

Notre Dame FCU Raises $12 Million in Secondary Capital

Notre Dame FCU (Notre Dame, IN) received $12 million in secondary capital from the newly formed CU Secondary Capital Fund (CUSCF).

CUSCF is a private vehicle created in a joint effort by CU Capital Market Solutions, LLC and Olden Lane Advisors LLC.

Notre Dame FCU is a low-income designated credit union. Low-income credit unions are authorized to issue secondary capital.

The $530 million credit union plans to use the proceeds to enhance its capital base, increase earnings through loan and deposit growth, and to fund its national expansion efforts.

This is the second credit union in recent months to raise secondary capital.

Read the press release.

NCUA Charters Civic FCU

The National Credit Union Administration (NCUA) chartered Civic Federal Credit Union (Raleigh, NC).

The de novo credit union will serve local government employees in North Carolina. The credit union will be permitted to serve an estimated 283,000 potential members.

In addition, the credit union is being chartered for the purpose of making member business loans.

Read the press release.

Bank and CU Trade Groups Urge Congress to Pursue National Data Breach Standards

Bank and credit union trade associations on December 18 called on Congress to move forward with legislation to implement strong national data security and breach notification requirements that would replace the current inconsistent patchwork of state laws.

“Our existing payments system serves hundreds of millions of consumers, retailers, financial institutions and the economy well,” the groups wrote in a letter to House Energy and Commerce committee leaders, who had requested comments on data breach legislation. “Protecting this system is a shared responsibility of all parties involved and we must work together to invest the necessary resources to combat never-ending threats to the payments system.”

The groups called specifically for legislation that would require all entities to protect consumers’ sensitive personal and financial data, notify consumers in a timely manner in the event of a breach and ensure compliance via appropriate federal and state oversight. They added that any national data breach legislation “must ensure that all entities that handle consumers’ sensitive financial data have in place a robust -- yet flexible and scalable -- process to protect data, which must be coupled with effective oversight and enforcement procedures to ensure accountability and compliance.”

The seven trade associations signing the letter were American Bankers Association, Consumer Bankers Association, Credit Union Nation Association, Financial Services Roundtable, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions, and The Clearing House.

Read the letter.

50 Percent of CUs Experienced Year-over-Year Membership Losses

While overall credit union membership growth increased during the third quarter of 2017, half of federally-insured credit unions reported fewer members at the end of the third quarter of 2017 than a year earlier, according to the National Credit Union Administration.

Median membership growth was negative in 22 states. At the median, membership saw the sharpest decline in the District of Columbia (-1.8 percent) followed by Pennsylvania (-1.2 percent).

Large credit unions saw the strongest year-over-year membership growth. However, about 2,500 credit unions reporting negative membership growth had less than $50 million in assets.

Read the press release.

Problem Taxi Medallion Loans Spread to San Francisco FCU

Problems are brewing with San Francisco Federal Credit Union's taxi medallion portfolio.

According to KPIX 5, the credit union has foreclosed on 70 taxi medallion loans. As of September 2017, the credit union reported $7 million in foreclosed and repossessed other assets, which presumably are all medallion loans.

The $1.1 billion credit union is also treating approximately 480 remaining taxi medallion loans as impaired.

As of September, the credit union reported $52.3 million in commercial loans not secured by real estate. Almost $5.5 million in these loans were delinquent. In other words, 10.42 percent of these loans were 60 days or more past due.

However, San Francisco FCU does not have the same concentration risk to taxi medallion loans as the New York City credit unions that specialized in taxi medallion loans.

Read the story.

Op-Ed Calls for Ending Obsolete Tax Break for Large CUs

In an op-ed in The Daily Caller, David Williams, the President of the Taxpayers Protection Alliance, calls on Congress to end the obsolete tax break for large credit unions.

Williams writes that "the credit union industry today isn’t the mom and pop industry they portray themselves to be" ... but rather a "Washington special interest group — asking for taxpayer benefits at the expense of everyone else."

The op-ed points out that large credit unions are using their tax exemption to fund "bloated CEO salaries, questionable sponsorship deals, and even purchasing for-profit, private banks."

While the credit union tax exemption appears to be safe, there will be more opportunities in the coming years for Congress to address this obsolete tax exemption.

Read the op-ed.

Bill Would Allow All FCUs to Serve Underserved Areas

Representative Gwen Moore (D - WI) introduced a bill (H.R. 4665) that would allow all federal credit unions regardless of common bond type to add underserved areas.

Under current law, only multiple common bond federal credit unions can serve underserved areas.

Representative Paul Cook (R - CA) co-sponsored the bill.

Read the text of the bill.

Federal Bank and CU Regulators Issue Supervisory Guidance for Institutions Affected by Natural Disasters

In the wake of record-setting hurricane and wildfire seasons, the federal banking agencies on Friday issued new guidance on how examiners will approach financial institutions affected by major natural disasters.

The guidance was jointly issued with the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and the National Credit Union Administration and in consultation with the Conference of State Bank Supervisors.

The agencies noted that when evaluating composite ratings for institutions, examiners should review management’s overall response and recovery planning. The agencies also said they would work with institutions to determine needs, reschedule exams and extend deadlines as needed.

“The examiner’s assessment may result in assigning a lower component or composite rating for some affected institutions,” the agencies said. “However, in considering the supervisory response for institutions accorded a lower rating, examiners should give appropriate recognition to the extent to which weaknesses are caused by external problems related to the major disaster and its aftermath.” The agencies also noted that formal actions normally taken for lower-rated banks “may not be necessary,” provided the bank has planned appropriately and is on track for recovery.

The guidance includes instructions for examiners on how to assess component ratings for CAMELS or ROCA, focusing on losses associated with the disaster, identification of credits affected, prudent planning by management, disaster-related effects on earnings and fluctuations in liquidity associated with customer cashflow needs.

Read the guidance.

Agency Appropriations Went to Provide Free Space to CU

The Government Accountability Office (GAO) in a legal decision stated that it was permissible for the National Labor Relation Board (NLRB) to provide free space to NLRB Federal Credit Union.

The Inspector General for the NLRB asked "whether NLRB’s appropriation was available to continue to provide space and associated services to the NLRB Federal Credit Union (credit union) between 2009 and 2015, during which time NLRB was aware that the credit union did not maintain the membership standard referenced in the Federal Credit Union Act of 1934 for agencies to provide such space."

Section 1770 of the Federal Credit Union Act states that, upon application, a credit union may request that an officer or agency of the United States allot the credit union space within the agency’s building. The space and associated services can be allotted without charge if the credit union demonstrates that 95 percent of the members to be served at that location are federal employees, were federal employees at the time of admission into the credit union, or are members of either of the previous group’s family. Services mean, but is not limited to, the provision of “lighting, heating, cooling, electricity, office furniture, office machines and equipment, telephone service . . . and security systems.”

The report noted that the NLRB provided space and associated services free of charge to the NLRB Federal Credit Union since it was established in 1938 until 2015.

In 2015, NLRB moved to a new headquarters building and made a decision to no longer provide rent free space to the credit union due to the low percentage of federal employees within the credit union's membership.

GAO concluded NLRB’s appropriations could be used to provide the credit union with space and associated services from 2009 to 2015.

In a related note, a 2008 NLRB Inspector General report found that in calendar year 2007 the agency provided an estimated $88,778 in support to the credit union with the overwhelming majority of the support being free rent.

In addition, the NLRB provided the credit union older computers no longer used by agency employees, help desk support for agency-owned computers, internet service, network access for file storage and retrieval, and the distribution of members' statements to NLRB employees. The report noted that the NLRB did not incur any additional costs associated with this support, it did provide a cost savings to the credit union.

A final point, NLRB Federal Credit Union was acquired by Department of Labor Federal Credit Union on June 1, 2015. Department of Labor FCU's most current call report is showing that the credit union does not pay any occupancy expenses.

Read the GAO legal decision.

Read the 2008 IG Report.

Louisville Metro Police Officers CU Placed into Conservatorship

The National Credit Union Administration (NCUA) placed Louisville Metro Police Officers Credit Union, in Louisville, Kentucky, into conservatorship on December 15th.

The NCUA placed Louisville Metro Police Officers Credit Union into conservatorship to allow the credit union to continue regular operations with experienced management in place and to correct operational weaknesses.

Various news outlets are reporting that the Federal Bureau of Investigation is investigating possible theft-related incident at the credit union.

Louisville Metro Police Officers Credit Union is a federally insured, state-chartered credit union with 3,564 members and assets of $28,759,623, according to the credit union’s most recent Call Report.

Read the press release.

Consent Order Issued to Mid-Cities Credit Union

The California Department of Business Oversight issued a consent order against Mid-Cities Credit Union (Compton, CA).

Mid-Cities Credit Union is privately insured by American Share Insurance.

As of September 2017, the credit union posted a loss of $703,246.

The consent order requires the credit union to retain management and Board of Directors acceptable to the Commissioner.

Within 45 days of the date of this order, the members of the Board of Directors will attend and participate in financial literacy training that is designed for credit union board of directors.

Also, the $20.1 million credit union needs to start a search to identify mergers partners that are acceptable to the Commissioner.

By December 31, 2018, the credit union would have an operating expense-to-average assets ratio of no more than 6 percent. As of September 2017, the credit union reported an operating expense ratio of 8.70 percent.

Also, the credit union is expected to develop, adopt, and submit a Net Worth Restoration Plan. As part of the plan, the credit union will seek to attain a minimum quarterly profitability of 0.10 percent of total assets.

Furthermore, the credit union was expected to improve procedures for the oversight of any vendors or independent contractors, who provide debt collection services.

The order was signed on December 11, 2017.

Read the consent order.

ABA Chairman Says It's Time to Tax Large CUs

The tax code shouldn’t pick winners and losers, and businesses performing the same service should face the same rules, ABA Chairman Ken Burgess wrote in a letter to the Wall Street Journal. The letter was in response to a Dec. 5 article highlighting the fact that credit unions were left out of the tax reform bill.

“At a time when Congress is asking everyone from teachers to homeowners to give up tax breaks in the name of lowering rates, why is the trillion-dollar credit-union industry still getting a free ride?” wrote Burgess, chairman of FirstCapital Bank of Texas in Midland, Texas.

Burgess added that today’s credit unions look nothing like those of the 1930s, when Congress first exempted credit unions from federal income tax and noted that there are now 282 credit unions with more than $1 billion in assets.

Burgess wrote: “It’s time for Congress to end the uneven playing field and require the nation’s billion-dollar credit unions to pay their fair share.”

Read the letter to the editor (subscription required).

FICUs Earn $7.84 Billion Through the First 9 Months of 2017

The National Credit Union Administration (NCUA) reported that federally-insured credit unions (FICUs) posted aggregate earnings of $7.84 billion through the first 3 quarters of 2017. In comparison, FICUs reported earnings of $7.27 billion for the same period of 2016 -- up 7.8 percent.

At the end of September 2017, FICUs had a return on average assets of 79 basis points -- up 2 basis points from June 2017 and 3 basis point from the end of 2016. The median return on average assets as of September 2017 was 39 basis points.

During the first 3 quarters of 2017, return on average assets was bolstered by higher net interest margin of 9 basis points and lower operating expenses of 4 basis points. This was offset by 6 basis points increase in provisions for loan and lease losses by 6 basis points, lower fee and other income by 4 basis points, and lower non-operating income by 1 basis point.

Net Worth

The industry's net worth increased by $7.8 billion to $148.6 billion. The industry's net worth ratio increased by 9 basis points during the quarter to 10.89 percent, but was unchanged from the end of 2016.

As of September 2017, 97.55 percent of FICUs had a net worth ratio of at least 7 percent. In comparison, 97.87 percent of FICUs had a net worth ratio of 7 percent or better at the end of 2016.

The number of undercapitalized credit unions increased by 11 during 2017 to 48 FICUs. In addition at the end of the third quarter of 2017, 9 credit unions were critically undercapitalized (net worth ratio below 2 percent) with five FICUs reporting a negative net worth ratio.

Loan, Share, and Asset Growth

FICUs reported strong asset, loan, and share (deposit) growth in 2017.

Assets at FICUs increased by $71.1 billion during 2017 to $1.36 trillion.

Loans at FICUs increased by annualized rate of 10.4 percent during the first 3 quarters of 2017 to almost $937 billion. All major loan categories have grown during 2017.

The number of outstanding loans at FICUs increased from 61 million at the end of 2017 to 63.7 million at the end of the third quarter of 2017. During the third quarter, the number of outstanding loans increased by 1.2 million.

Indirect lending helped to fuel expansion in credit union loans -- growing at an annual rate of 19.66 percent to $189.6 billion at the end of the third quarter of 2017. Indirect lending represented 20.23 percent of total credit union loans, up from 19.01 percent at the end of 2016.

FICUs reported shares and deposits of $1.15 trillion at the end of the third quarter of 2017. NCUA reported that shares at FICUs grew at an annualized rate of 7.09 percent through the first 9 months of 2017.

Since loan growth outpaced share growth, the loan-to-deposit ratio increased from 79.55 percent at the end of 2016 to 81.43 percent as of September 2017.

Delinquencies and Net Charge-Offs

Delinquent loans rose by $828 million over the last year to almost $7.4 billion. As a result, delinquency rates edged higher by 4 basis points during the third quarter of 2017 to 0.79 percent. A year ago, the delinquency rate was 0.77 percent.

Net charge-offs at FICUs increased by $538 million over the last year to $3.8 billion as of the end of the third quarter of 2017. The net charge-off rate was 56 basis points as of September 2017 -- up 3 basis points from a year ago.

Credit unions saw a $1 billion year-over-year increase in allowance for loan and lease losses to $8.6 billion. The industry's coverage ratio was 116.79 percent.

Read the press release.

NCUA Chart Pack.

Metsger: Our Hands Were Tied

In a speech last week, National Credit Union Administration (NCUA) Board Member Rick Metsger indicated that the agency's hands were tied to address the excessive exposure of some credit unions to taxi medallion loans.

Metsger stated that NCUA was aware of and had warned about the risk of being too concentrated in taxi medallion loans, but according to the press release, "NCUA’s ability to curtail speculative taxi medallion lending was limited by a provision in the Credit Union Membership Access Act that specifically exempted credit unions chartered for the purpose of making, or had a history of primarily making, member business loans, from the statutory member business lending cap. A Senate report on that legislation specifically noted taxi medallion lending was an example of loan activity that was exempt from the cap."

The Senate Report also mentioned specifically credit unions that financed fishing or shrimp boats, tractor trailers, church construction, or agriculture have an exception from the aggregate business loan cap. So, is NCUA's ability to curb risky lending by credit unions making these type of loans limited?

While the legislation exempted some credit unions from the business loan cap of 12.25 percent of assets, it did not mean that NCUA should abdicate its role of being a safety and soundness regulator.

NCUA did not have to allow these credit unions to put almost all of their assets in taxi medallion loans. NCUA still had the authority to limit these credit unions' exposure to taxi medallion loans, if this lending posed a safety and soundness risk.

For example, it could follow the lead of the Federal Deposit Insurance Corporation (FDIC). The FDIC restricts the amount of taxicab medallion loans that Medallion Bank may finance to three times Tier 1 capital.

As one commenter wrote to my December 8 blog post, NCUA could have issued a document of resolution (DOR) to each medallion lending credit union. This could have limited their concentration in taxi medallion loans and reduce the risk to the National Credit Union Share Insurance Fund.

HFSC to Mark Up Bill to Repeal NCUA's Risk-based Capital Rule

The House Financial Services Committee (HSFC) is marking up a bill (H.R. 4464) today that would repeal the National Credit Union Administration's risk-based capital rule that is scheduled to go into effect on January 1, 2019.

Given what has transpired with taxi medallion lending credit unions, repealing this risk-based capital rule appears to be a bad idea from a policy perspective.

If this rule was in effect in 2012 or 2013, it would have required these taxi medallion lending credit unions to hold more capital or net worth to offset the risk posed by these credit unions to the National Credit Union Share Insurance Fund.

See the bills that are being marked up.

Private Share Insurance Coming to Montana

American Share Insurance (ASI), which is headquartered in Dublin, OH, announced on December 7 that it has been approved to provide private share insurance in the State of Montana.

Montana is the 10th state to permit credit unions to be privately insured.

Read the press release.

KEMBA Financial CU and the Columbus Blue Jackets Renew Partnership

The National Hockey League's Columbus Blue Jackets and KEMBA Financial Credit Union (Gahanna, OH) have announced the renewal of a multiyear partnership.

The credit union will be the presenting sponsor of the Columbus Blue Jackets Foundation's 50/50 Raffle.

Correction: An earlier version identified the credit union as Kemba Federal Credit Union (West Chester, OH).

Read more.

Metsger: The Bill Is About to Come Due on Taxi Medallion Loans

National Credit Union Administration Board member Rick Metsger warned that the bill is about to come due on taxi medallion loans.

In a speech to the Oregon Department of Financial Services CEO roundtable, Metsger stated that National Credit Union Share Insurance Fund (NCUSIF) reserves are likely to rise in the near future, due to much lower prices on New York City taxi medallion and a "continued increase in already high delinquency rates on medallion loans."

Metsger stated that NCUA knew of and warned about the problem associated taxi medallion loans for some times.

But Metsger blamed the pending increase in losses from taxi medallion loans on "a small number of credit unions that gambled on a market that was disrupted and a bubble that burst" and the Credit Union Membership Access Act, which limited the agency's ability to curb speculative taxi medallion loans.

Metsger commented that the reason why the agency is raising the equity ratio on the NCUSIF's normal operating level to 1.39 percent is to account for significant losses from taxi medallion loans and to avoid a sudden and significant increase in premiums.

Furthermore, Metsger defended the agency's risk-based capital requirements from credit union trade association attacks by stating that "situation with the taxi medallion credit unions ... is a prime example off why we need a strong risk-based capital system."

Read the press release.

Three CUs Ink Naming Rights Deals.

Three credit unions have signed naming rights agreements in recent weeks.

Mountain America Credit Union (West Jordan, UT) bought the naming rights to the South Towne Expo Center.

The 258,000 square-foot venue will be called Mountain America Expo Center beginning on January 1, 2018.

The credit union will host quarterly financial seminars at the expo center.

The length of the agreement is for 10-years. But the price of the deal was not disclosed.

Read the press release.

Diamond Credit Union (Pottstown, PA) bought the naming rights to the theater at the Santander Arena.

The theater will be known as the Diamond Credit Union Theater.

Terms of the agreement were not disclosed.

Read the story.

1st Ed Credit Union (Chambersburg, PA) secured the naming tights to the indoor track at at Chambersburg Area Senior High School.

The indoor track will now be called 1st Ed Credit Union Indoor Track.

As part of the deal, the credit union will be allowed two signs in the Field House. Also, the credit union will be allowed two features per year in the school district's internal and external eNewsletter. The credit union's logo will receive placement of its logo on the Chambersburg Area School District's community partners webpage.

The annual cost of the deal is $6,000.

The length of the deal is for three years.

Read the story.

Read the sponsorship agreement.

Read the 1st Ed Credit Union proposal.

Consumer Credit at CUs Rose in October, But at a Slower Pace

The Federal Reserve is reporting that outstanding consumer credit at credit unions expanded in October, but at a slightly slower rate than in September.

Outstanding consumer credit at credit unions rose from $417 billion in September to $420.2 billion in October.

Revolving credit at credit union grew by $300 million in October to $55.6 billion

Nonrevolving credit balances at credit unions advanced by $2.9 billion to $364.6 billion.

Read the G.19 report.

Louisiana Bank Sues CU over Trademark Infringement

The Texarkana Gazette is reporting that Red River Bancshares Inc. and its licensee, Red River Bank LSCB, both based in Alexandria, La., is suing Texarkana-based Red River Employees Federal Credit Union for alleged trademark infringement and unfair competition.

The lawsuit was filed on October 24 in the Western District of Louisiana federal court after the purchase and assumption by Red River Federal Credit Union of liquidated Shreveport Federal Credit Union, which had branches in the trade area of the bank.

The bank contends that the entry of the credit union into its market area has generated customer confusion.

The complaint alleges that the credit union is infringing on its trademark and engaging in unfair trade practices in violation of federal law and in violation of the Louisiana Unfair Trade Practices Act.

The bank wants the court to rule that the credit union cannot use the names Red River Employees Federal Credit Union, Red River Credit Union and the RRFCU logo or any other similar variant.

The bank is also seeking attorney fees and actual damages and want an accounting of Red River FCU's profits in Louisiana and Mississippi.

Read the story.

Greater Transparency Needed at NCUA

I know that I sound like a broken record; however, the National Credit Union Administration (NCUA) needs to become more transparent regarding its decisions with respect to credit union applications.

Recently, NCUA approved an application of Jefferson Financial FCU (Metairie, LA) to issue $12 million in secondary capital.

Unfortunately, the agency did not disclose its decision on this application.

I requested information regarding Jefferson Financial's application. An NCUA spokesperson stated that "as for any specifics regarding the Jefferson Financial Federal Credit Union’s secondary capital plan, those are confidential."

NCUA's behavior is different from the other federal banking regulators. The other federal banking regulators publish their decisions regarding applications from their regulated institutions.

Hopefully, NCUA will alter its behavior and start to disclose its decisions regarding credit union applications.

Reuters: CU Sues to Remove Mulvaney as Acting Head of CFPB

Reuters is reporting that Lower East Side People's Federal Credit Union (New York, NY) has filed a lawsuit in federal court to remove Mick Mulvaney as the head of the Consumer Financial Protection Bureau (CFPB).

Citing regulatory chaos, the credit union is asking a federal court to determine who is in charge of the CFPB. The complaint contends that Leandra English, the CFPB’s deputy director, is the proper acting head of the agency.

The lawsuit was filed in U.S. District Court in Manhattan.

Last week a federal judge sided with the Trump Administration ruling against English and allowing Mulvaney to serve as the agency’s acting head.

English continues to pursue her case.

Read the story.

NCUA Closes Riverdale CU

The National Credit Union Administration on December 4 liquidated Riverdale Credit Union of Selma, Alabama.

Jefferson Financial Federal Credit Union of Metairie, Louisiana, immediately assumed Riverdale Credit Union’s membership, shares, loans, and most other assets.

Riverdale was placed into conservatorship on June 22, 2017, as a result of unsafe and unsound practices at the credit union. NCUA made the decision to liquidate Riverdale and discontinue its operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

Read my November 2 blog post on Riverdale's deteriorating financial condition.

At the time of liquidation, Riverdale served 11,572 members and had assets of $54,924,278, according to the credit union’s most recent Call Report. Chartered in 1967, Riverdale Credit Union served persons who live, work, worship, or attend school in Autauga, Chilton, Dallas, Lowndes, Perry, or Wilcox counties in Alabama as well as various employee groups.

Riverdale is the fifth federally insured credit union liquidation in 2017.

Read the press release.

Bill Would Repeal NCUA's Risk-Based Capital Rule

A bill, The Common Sense Credit Union Capital Relief Act of 2017 (H.R. 4464), was introduced by Rep. Bill Posey (R-Fla.) on November 28th.

The bill would repeal the National Credit Union Administration’s risk-based capital rule, which is currently scheduled to go into effect in January 2019.

The Credit Union National Association is supportive of the legislation.

In related news, National Credit Union Administration Chairman McWatters wrote that the agency will seek to delay the January 2019 compliance date for the risk-based capital rule.

The agency also plans to make additional changes to the risk-based capital rule to reduce its coverage, along with a review of alternative and secondary capital authority.

Read the bill.

Is the Credit Union Tax Exemption the Third Rail of Politics?

An article in today's Wall Street Journal discusses why the credit union tax exemption is untouchable.

The article points out how credit unions have been successful in their grassroot efforts in keeping their preferential tax treatment off the chopping block, while lawmakers were scrambling to find tax breaks to eliminate to fund the tax code overhaul.

For example, the article mentions Project Zip Code, which matches credit union members addresses to Congressional Districts. This allows credit unions to tell Congressional offices how many credit union members would be affected by repealing the tax exemption in their Congressional districts.

The article stated that members of Congress would face "significant political blowback", if they proposed eliminating the credit union tax exemption.

However, I believe that the story overstates the clout of the credit union lobby. While the article mentions the 1998 legislation that overturned the Supreme Court field of membership decision, it failed to mention that the same 1998 legislation capped business lending at credit unions. It also did not point out that credit unions have been unsuccessful in their efforts to raise their business lending limit for more than a decade.

Read the story (subscription required).

IG Recommends Ending Zero-Dollar Leases to CU, Costing Parish Almost $3.7 Million over 25 Years

Jefferson Parish Office of Inspector General (IG) found that the Parish is missing out on almost $3.7 million in revenues over 25 years by providing free space to Jefferson Parish Employees Federal Credit Union (Harahan, LA).

The report noted that the $100 million credit union had offices in three Parish government buildings -- the Yenni Building, the General Government Building, and the Odom Building.

The forgone annual revenue to Jefferson Parish from these 3 zero-dollar leases was estimated at $146,920. The audit report also pointed out that the credit union is not paying its pro-rata share of custodial costs, as well as cost for utilities.

In addition, the Inspector General wrote that the credit union does not pay rent to Hospital Service District #2 on space it leases in East Jefferson General Hospital.

Parish President Mike Yenni’s administration agreed in part with the findings, most notably that the parish should get some form of compensation for the leases and leases should have a cost of living clause.

The audit report also stated that three other properties had zero-dollar leases, but the credit union accounted for a bulk of the forgone revenue.

Read the Audit Report.

Majority of Utahns Support Taxing Large Credit Unions

A survey found that a majority of Utahns support the taxation of large credit unions, while small, traditional credit unions deserve their tax exemption.

The survey was commissioned by UtahPolicy.com. It was conducted on November 21 and November 22.

The survey of 602 registered voters found that:

• 67 percent of respondents said they strongly or somewhat agreed that these financial institutions should be taxed equally. Twenty-eight percent disagreed.
• 72 percent of poll respondents said that if retained earnings of large credit unions are not distributed to members as dividends, then those retained earnings should be taxed, similar to the way bank profits are taxed.
• 84 percent of respondents said credit union members should be allowed to vote on whether retained earnings should be distributed to members, or used for such things as expansion into new locations.
• 75 percent of respondents said that if credit unions make large commercials loans, like banks do, then retained earnings or profits from those loans should be taxed, like profits from a bank would be taxed.

The poll also found that even a strong majority of credit union members support fair taxation of retained earnings of large credit unions that are not returned to members.

Read the press release.

Lake Trust CU Buys Naming Rights to University's Athletic Facility

Lake Trust Credit Union (Brighton, MI) has bought the naming rights to Cleary University's forthcoming athletic facility.

The 150,000-square-foot complex will be christened Lake Trust Credit Union Stadium when it opens next fall on the school's campus in Livingston County's Genoa Township.

Financial terms of the contract, which runs through 2028, were not disclosed.

The deal includes stadium merchandising, signage, and field imagery.

Read the story.

Chartered for the Purposes of Making MBLs

In recent years, the National Credit Union Administration (NCUA) approved four credit unions that were chartered for the purpose of making member business loans (MBLs).

The four credit unions are Funeral Service Credit Union (IL), Members Cooperative Credit Union (MN), Thrivent Federal Credit Union (WI), and Firefighters First Federal Credit Union (CA).

The information was obtained through a Freedom of Information Act request.

As of September 2017, the percent of assets in commercial loans at:

• Thrivent FCU were 27.10 percent;
• Funeral Service Credit Union were 65.46 percent;
• Members Cooperative Credit Union were 8.34 percent; and
• Firefighters First FCU were 8.56 percent.

Credit unions that are chartered for the purpose of making MBLs or have a history of primarily making MBLs are exempt from the MBL cap of 12.25 percent of assets.

Previously, NCUA had provided the names and charter numbers of 120 credit unions that were chartered for the purpose of making MBLs or have a history of primarily making MBLs. NCUA reported that all but 13 of the 120 credit unions are still active.