Tuesday, July 31, 2018

Greater Christ Baptist Church CU Closed

The Michigan Department of Insurance and Financial Services on July 31 liquidated the Greater Christ Baptist Church Credit Union (Detroit, MI) and appointed the National Credit Union Administration as liquidating agent.

The Michigan Department of Insurance and Financial Services made the decision to liquidate the Greater Christ Baptist Church Credit Union and discontinue its operations after determining the credit union was in an unsafe and unsound condition.

The credit union has 396 members, $608,000 in assets, and $470,500 in deposits as of its last quarterly filing.

Greater Christ Baptist Church is the fourth federally insured credit union liquidation in 2018.

Read NCUA's press release.

Read the Michigan Department of Insurance and Financial Services press release.

Seven Michigan CUs Apply to Form Bank Offering Trust Services

Crain's Detroit Business is reporting that seven Michigan credit unions have applied to thier state regulator to form a new limited-purpose bank to provide trust services.

Operating a trust bank will allow these credit unions to offer wealth and asset management services to members. Credit unions are not allowed to directly offer wealth and asset management.

The organizers of the new bank, Credit Union Trust, are: Farmington Hills-based Community Choice Credit Union; Alpena Alcona Area Credit Union; Burton-based ELGA Credit Union; Frankenmuth Credit Union; Berrien Springs-based Honor Credit Union; Midland-based Members First Credit Union; and Saginaw-based Team One Credit Union.

The credit union group will supply $5.5 million in capital to launch the new bank, which is expected to open following regulatory approval in the first quarter of 2019.

Read the story.

Monday, July 30, 2018

NCUA to Propose One-Year Delay Risk-Based Capital Rule

In a letter to Representatives Bill Posey (R-Fla.) and Denny Heck (D-Wash.), National Credit Union Administration (NCUA) Chairman Mark McWatters said the agency will consider delaying the effective date of its risk-based capital rule to January 2020 from January 2019.

In addition, the NCUA will consider raising the threshold for which credit unions can qualify as "complex" under the requirements of the rule to $500 million from $100 million.

According to the March 2018 industry data, the proposed increase in the threshold would exempt 1,040 credit unions from the risk-based capital rule. Only 539 credit unions would be subject to the risk-based capital rule, if these changes are made.

McWatters said the change would not impair the safety and soundness of the National Credit Union Share Insurance Fund.

The NCUA Board will vote on the proposal at its August 2 meeting.

The House of Representatives has passed legislation that would delay the implementation date of NCUA's risk-based capital rule for two years.

Read McWatters' letter.

Friday, July 27, 2018

Sharonview FCU to Relocate to 182,000 Square-Foot Facility

Sharonview Federal Credit Union (Fort Mill, SC) is relocating its corporate headquarters.

The corporate headquarters building will be 182,000 square feet. The project is expected to cost $42 million.

It is anticipated that the new headquarters site will open in late 2018.

Sharonview has almost $1.6 billion in assets, as of March 2018.

Read the story.

Thursday, July 26, 2018

IBM Southeast Employees' CU to Acquire Another Bank

IBM Southeast Employees’ Credit Union (Delray Beach, FL) announced the proposed merger and acquisition of The Oculina Bank (Vero Beach, FL), pending regulatory approval.

The Oculina Bank has $342 million in assets and operates 8 offices in Indian River, Martin, and St. Lucie Counties in Florida.

The price tag of the deal was not disclosed.

If completed, this will be the second bank to be acquired by IBM Southeast Employees' Credit Union. In 2017, the $1.1 billion credit union acquired Mackinac Savings Bank.

Read the press release.

Wednesday, July 25, 2018

Narrative Approach Cannot Be Used to Do End-Run Around Court Decision

The National Credit Union Administration (NCUA) stated that federal credit unions cannot use the newly approved narrative approach to regain broad field of memberships vacated by the March 2018 federal court decision.

NCUA acknowledged that a number of federal credit unions took advantage of the expanded rural district and combined statistical area (CSA) parameters permitted by the agency's 2016 amendment to its field of membership rule.

As a result of the court decision, those federal credit unions are no longer permitted to utilize those broad fields of membership.

During the June 21, 2018 open board meeting, Frank Kressman, NCUA Associate General Counsel, stated that it is not possible for federal credit unions to use the narrative approach to do an end-run around the court order.

Kressman said the following:
"No credit union can use the narrative approach to regain the expanded fields of membership they had or expanded rural districts or CSAs. The reason for that, is that the narrative approach only applies to well-defined local communities that are based on commonality of interest and interaction among the residents."

Kressman concluded by saying "[t]here are no provisions in the narrative approach for rural districts or CSAs."

In other words, neither a rural district nor a CSA is a well-defined local community and cannot use the narrative approach to regain their broad fields of membership.

Monday, July 23, 2018

Commercial Bank and Credit Union Failures

A paper by Luis G. Dopico and James A. Wilcox examines the failures of credit union and commercial bank failures.

Between 1980 and 2016, more credit unions failed than commercial banks -- 2,165 versus 1,904. But the paper noted that credit unions had a slightly lower annual failure rates than commercial banks, averaging 0.44 percent for credit unions versus 0.48 percent for commercial banks over the same time period.

However, going back to 1971, the annual failure rate for credit unions was higher than the failure rate for commercial banks.

The study found that the rate of bank and credit union failures varied over time between 1980 and 2016. During the time periods of 1980 and 1986, 1994 - 2007, and 2014 - 2016, credit unions had a higher failure rates than commercial banks. But during 1987 - 1993 and 2008 - 2013, bank failure rates exceeded credit union failure rates.

The paper noted that the National Credit Union Share Insurance Fund had a lower loss rate per insured deposits than the Federal Deposit Insurance Corporation.

The paper stated that many of the reasons associated with the failure of commercial banks were also present with the failure of credit unions. Both credit unions and commercial banks that failed had more commercial mortgages, fewer assets, more delinquent loans, higher noninterest expenses, less capital, and lower return on assets (ROAs).

The authors also found the following differences in bank and credit union failures. "Having more residential mortgages signaled more failures of credit unions, but not of banks. Conversely, having more commercial and industrial (C&I) loans and higher local unemployment rates signaled more failures of banks, but not of credit unions."

The paper further pointed out that many credit union failures are not related to historical financial conditions; but rather due to largely idiosyncratic reasons, such as sponsor failures, poor record keeping, etc.

Read the paper.

Friday, July 20, 2018

NCUA Response to Senator About Consumer Protection Issues at CUs

In response to a written question from Senator Sherrod Brown (D - OH), National Credit Union Administration (NCUA) Chairman McWatters stated that the agency had identified and corrected numerous consumer financial protection issues at credit unions between August 2014 and June 2017.

Senator Brown asked: "During your time on the board, have NCUA supervision teams identified and corrected any consumer protection issues?

McWatters wrote that NCUA examiners had corrected many consumer financial protection issues at credit unions. McWatters further noted that "[t]he majority of Federal consumer financial protection law violations ... involved the Truth in Lending Act, the Equal Credit Opportunity Act, and the Real Estate Settlement Procedures Act."

To address consumer financial protection violations, NCUA required credit unions to revise and implement new policies and procedures, increase staff training, or impose other administrative remedies.

The question and answer were part of the June 22 hearing by the Senate Committee Banking, Housing, and Urban Affairs titled "Fostering Economic Growth: Economic Perspective."

Go to the hearing record.

Thursday, July 19, 2018

Bank and CU Trades Urge Lawmakers to Prohibit Postal Banking

Bank and credit union trade groups agree that allowing the post office to offer banking services is a bad idea.

In a July 17 letter to members of the House, bank and credit union trade groups urged support for Congressman Patrick McHenry’s (R-N.C.) amendment to the Financial Services and General Government appropriations bill that would prohibit the U.S. Postal Service from providing banking services. The bill -- along with its amendments -- is scheduled to be considered on the House floor later this week.

While stressing financial institutions’ longstanding support for the U.S. Postal Service -- and acknowledging the need for postal reform -- the letter outlined the risks of turning the postal service into the world’s largest shadow banking system. Providing banking services, the letter warned, “will be beyond the Postal Service’s core competencies, will raise a number of serious regulatory and consumer protection questions, and will present significant competitive issues for private sector entities.”

The U.S. Postal Service itself has agreed with this position, arguing that postal banking would not address its financial challenges, and would almost certainly cause it to lose money.

The letter was signed by the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federally-Insured Credit Unions.

Read the letter.

Wednesday, July 18, 2018

Nine CUs Fined for Late Filing Their 4th Quarter 2017 Call Reports

The National Credit Union Administration announced that nine federally insured credit unions have agreed to pay civil monetary penalties for filing late Call Reports in the fourth quarter of 2017.

NCUA noted that 17 credit unions were late in filing their Call Reports. Six credit unions were not fined because of mitigating circumstances and two credit unions requested and were granted a waiver.

Fines ranged from $302 to $471 and totaled $3,109. The median fine was $315.

Three factors were used to determine the amount of the fine: the credit union's asset size, its Call Report filing history, and the length of the filing delay.

All nine credit unions had been late in a previous quarter.

Read the press release.

Capital Credit Union Buys Naming Rights to New Stadium

Capital Credit Union (Green Bay, WI) bought the naming rights to a new $10 million multi-purpose stadium in Ashwaubenon (WI).

The stadium will be used for baseball, soccer, concerts and community activities.

The new stadium will be called Capital Credit Union Park.

The price for the naming rights agreement was not disclosed.

Such naming right deals by credit unions are becoming more common.

But is this the best use of the generous taxpayer subsidy that credit unions receive? How does this fulfill the public policy mission of credit unions to serve people of modest means?

Read the story.

Idaho Central CU Pays $1 Million for Naming Rights to Indian Creek Plaza's Main Stage

Idaho Central Credit Union (Chubbuck, ID) and Destination Caldwell entered into a 15-year, $1 million naming and advertising agreement for the Indian Creek Plaza’s main stage.

The Caldwell City (ID) Council authorized the agreement unanimously at a special July 12 meeting.

The $1 million will be paid in a lump sum by August 1.

Idaho Central Credit Union’s name and associated trademarks and logo will be used as part of the plaza’s main stage, according to the agreement.

Read the story.

Tuesday, July 17, 2018

Teachers CU Pays $300,000 for Naming Rights to High School Stadium

Teachers Credit Union (South Bend, IN) bought the naming rights to Schools Field.

The credit union will pay $30,000 per year for 10 years for the naming rights to the 92-year stadium.

The new stadium will be called TCU Schools Field.

South Bend Community Schools Corporation unanimously approved the naming rights deal.

The naming rights deal was part of a new academic and athletic partnership between South Bend Community Schools Corporation and Teachers Credit Union.

Read the story.

NCUA to Distribute Almost $736 Million in Share Insurance Fund Dividends Next Week

The National Credit Union Administration announced on July 17 that it will pay next week $735.7 million in dividends from the National Credit Union Share Insurance Fund (NCUSIF) to over 5,700 credit unions.

If a federally insured credit union that filed a Call Report for at least one quarterly period in 2017, it will be eligible for a pro rata distribution.

Statements will be mailed this week to dividend recipients with the amount to be received.

This will be the largest distribution from the NCUSIF in its history.

Read the press release.

Suffolk FCU Settles Racial Discrimination Lending Complaint

Suffolk Federal Credit Union (Medford, NY) has settled with a Long Island housing group over charges that it discriminated against African-Americans and Latinos who sought information about mortgage loans.

As part of the settlement, the credit union will offer subsidies of up to $1,250 to eight borrowers a year, for three years, in certain Suffolk County ZIP codes. The credit union will also provide more staff training and hire a third-party group to test for discrimination by credit union employees.

The credit union in the agreement denied any allegation of engaging in discriminatory lending.

In a 2016 complaint, Long Island Housing Services claimed that the credit union violated the federal Fair Housing Act as well as state and county laws against discrimination.

Read the article.

Monday, July 16, 2018

CUs Sponsor LPGA Symetra Tour Event

A group of Rochester, New York-area credit unions are this week sponsoring a LPGA Symetra Tour golf tournament, the Danielle Downey Credit Union Classic.

The golf tournament is scheduled for July 16 thru July 22.

Click here to see the list of credit unions and partners that are title sponsors of this tournament.

The Symetra Tour is a developmental golf tour for the LPGA Tour.

As I have previously stated, the sponsoring of a professional golf tournament is not the purpose of the credit union tax exemption.

Saturday, July 14, 2018

Credit Union Sued by EEOC for Retaliation

The Equal Employment Opportunity Commission (EEOC) has sued Lafayette Schools' Federal Credit Union (Lafayette, LA) for unlawfully firing an African-American manager, Connie Fields-Meaux.

According to the EEOC's lawsuit, during a training session, Lafayette Schools' Federal Credit Union used a video depicting a caricature of an African-American fast food worker as an example of "how not to provide customer service." The lawsuit claims that Fields-Meaux was so upset by the video that she momentarily excused herself from the session. Other black employees told Fields-Meaux that they, too, were upset by the video. The EEOC said that Fields-Meaux reported the concerns of one of the African-American employees the next day, and the day after that, Lafayette Schools' Federal Credit Union fired her, without warning or explanation.

The EEOC stated that the alleged conduct violates Title VII of the Civil Rights Act of 1964.

The EEOC filed the lawsuit against the credit union in U.S. District Court for the Eastern District of Louisiana after it was unable to reach a pre-litigation settlement through its conciliation process.

The EEOC has asked the court to permanently enjoin Lafayette Schools' Federal Credit Union from engaging in future retaliation. It has also asked the court to order it to pay Fields-Meaux both punitive and compensatory damages as well as back pay.

Lafayette Schools' FCU recently changed its name to Meritus Credit Union.

Read the EEOC press release.

Friday, July 13, 2018

Subordinated Debt at LICUs Up 57 Percent, Since the End of 2016

Since the end of 2016, subordinated debt counting as net worth has increased by almost 57 percent or $84.4 million.

As of March 2018, total subordinated debt placed with low-income credit unions (LICUs) was $232.8 million. This is up from $148.4 million at the end of 2016.

A number of large LICUs have issued subordinated debt (the dollar amount in parentheses) since the end of 2016, including Advia Credit Union ($5 million), Self-Help Credit Union ($13 million), Self-Help FCU ($5 million), Carter FCU ($6 million), Jefferson Financial FCU ($11,597), and Notre Dame FCU ($12 million).

Carter FCU's issuance of subordinated debt was partially used to repurchase subordinated debt issued from the U.S. Treasury Department as part of the Community Development Capital Initiative.

The following table lists the 10 LICUs holding the most subordinated debt as of March 31, 2018.

It is my belief that this trend of large LICUs issuing subordinated debt will continue.

Thursday, July 12, 2018

Southeast Financial CU Settles with Massachusetts over Financing Fraudulent Academic Services

Southeast Financial Credit Union (Franklin, TN) will provide $650,000 in loan relief and cash refunds to more than 500 Massachusetts students, according to Massachusetts Attorney General Maura Healey.

Southeast Financial Credit Union will discharge approximately $450,000 in loans made to Massachusetts students of The College Network, a for-profit company that marketed online study guides and educational services to consumers, including many prospective nurses. The credit union will also provide almost $200,000 in cash refunds to students.

As part of the settlement agreement, Southeast Financial Credit Union will request the removal of negative loan information from the consumers’ credit reports.

The complaint by the Attorney General's Office alleged that between January 2010 and May 2016, The College Network misled consumers by representing that its educational materials would help them achieve passing scores on equivalency exams and earn college credit in fields such as nursing and healthcare administration.

Attorney General Healey stated: “The College Network cheated hundreds of Massachusetts consumers by making false promises about their online educational materials and services. This settlement holds the lender accountable for profiting from this scheme."

This is the second settlement by Southeast Financial Credit Union regarding its financing loans for The College Network. Earlier this year, Southeast Financial settled with New York issuing a refund of $2.25 million.

In related news, We Florida Financial Credit Union (Margate, FL) provided $898,000 in relief to more than 200 Massachusetts students for financing expensive and ineffective online study materials and educational services from The College Network.

As part of the April settlement agreement, the credit union discharged $748,000 in loans and would provide $150,000 in refunds to students. The credit union will also request the removal of negative loan information from the consumers' credit report.

Read the press release.

Wednesday, July 11, 2018

Public Hearing for CUs Using Narrative Approach Seeking WDLC with Population Over 2.5 Million

The National Credit Union Administration (NCUA) Board will allow federal credit unions to submit a narrative to establish the existence of a well-defined local community (WDLC), if the proposed community extends beyond a single political jurisdiction. If a federal credit union is using a narrative approach for a proposed community with a population in excess of 2.5 million people, NCUA will hold a public hearing.

The Board believes that it is appropriate to require a public hearing, because it would give an applicant, community groups, business, and competitors with the opportunity to present their views.

Here is what you need to know about the public hearing process.
  • Upon receiving such an application, information stating the location, time, procedures and other relevant information about the hearing will be published in the Federal Register at least 30 days prior to the hearing date.
  • The hearing will either be held at the NCUA's Headquarters in Alexandria, VA or a location near the applicant's anticipated community.
  • The public hearing will last no more than four hours with interested parties being permitted to make presentations of no more than 30 minutes each.
  • The applicant along with no more than seven other interested parties may request to make presentations.
  • The first six entities contacting the NCUA in writing will be permitted to make presentations.
  • A seventh entity may be permitted to make a presentation, but only at the discretion of NCUA staff.
In addition to the presentations, interested parties may submit written statements at least twenty business days prior to the hearing.

NCUA has identified 13 criteria that the credit union applicant should address in its narrative to show that the proposed community meets the requirements of common interaction and interest among residents. The NCUA Board believes the more a proposed area satisfies the 13 criteria, the stronger the applicant's case.

However, applicants are not limited to the 13 criteria. Applicants may introduce other evidence that shows the proposed area is a WDLC.

The final rule becomes effective on September 1, 2018.

Read the Federal Register Notice.

Tuesday, July 10, 2018

Outstanding Consumer Credit at CUs Increased by $7.8 Billion in May

The Federal Reserve reported on July 9th that outstanding consumer credit at credit unions grew at a faster rate in May compared to April.

In May, outstanding consumer credit at credit unions advanced by $7.8 billion to $435 billion, after increasing by $5 billion in April.

Revolving credit at credit unions grew by almost $1.2 billion in May to $58.3 billion.

Credit unions reported that nonrevolving credit increased by $6.6 billion in May to $376.7 billion.

Read the G.19 Report.

Monday, July 9, 2018

Advia Issued $5 Million in Subordinated Debt in Q2 2017

During the second quarter of 2017, Advia Credit Union (Parchment, MI) issued $5 million in subordinated debt with a 10 year term.

Advia Credit Union has a low-income designation, which allowed the credit union to raise secondary capital.

On September 1, 2017, Advia Credit Union acquired Peoples Bank (Elkhorn, WI).

While the issuance of subordinated debt and the merger are closely timed, this appears to be a coincidence.

According to Jeff Fielder, EVP of Finance at Advia Credit Union, "[t]he issuance of this debt was not a condition of the acquisition of Peoples Bank. However, our management team and board saw value in raising capital to reduce the minor dilution that would occur with the acquisition."

As of March 2018, the issuance of subordinated debt boosted the $1.7 billion credit union's net worth by almost 30 basis points.

In addition, Fielder noted that Advia saw value in diversifying its capital base, which would position the credit union for future growth.

Fielder further commented that the credit union, at this time, does not plan to issue any additional subordinated debt.

Going forward, more large, low-income designated credit unions will issue subordinated debt.

Thursday, July 5, 2018

The Average NCUA Employee Earned More Than $128,000 in 2017

The average pay of National Credit Union Administration (NCUA) employees topped $128 thousand for 2017, according to FederalPay.org.

NCUA's 1,139 employees earned an average of $128,030.72. In 2016, the average NCUA employee earned $121,180.88.

Pay includes base salary plus bonus.

Eighty-six NCUA employees earned in excess of $200,000 with 17 employees earning more than $250,000.

The following table lists the 10 highest paid employees at NCUA.

Monday, July 2, 2018

186 CUs Accessed the Fed's Discount Window during Q2 2016

During the second quarter of 2016, 186 credit unions borrowed from the Federal Reserve's discount window. This was up from 129 credit unions that borrowed from the discount window during the first quarter of 2016.

These 186 credit unions visited the Federal Reserve's discount window 204 times and borrowed an aggregate $92.92 million during the second quarter of 2016.

The average discount window loan amount was $455,490. The median amount borrowed was $10,000.

The maximum amount borrowed was $10.3 million by Army Aviation Center Federal Credit Union (Daleville, AL).

Army Aviation Center Federal Credit Union was the most frequent borrower from the discount window, visiting the discount window 7 times. The next most frequent borrowers were Richfield-Bloomington Credit Union (Bloomington, MN) and True North Federal Credit Union (Juneau, AK), which each borrowed from the discount window 4 times during the quarter.

Most credit unions borrowing from the Discount Window used the primary credit program, which is reserved for healthy credit unions. Three credit unions used the secondary credit program -- Melrose Credit Union (Briarwood, NY), Caribe Federal Credit Union (San Juan, PR), and Pinnacle Credit Union (Atlanta, GA).

The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.


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