Agencies Issue Update on Examination Modernization Project

The Federal Financial Institutions Examination Council (FFIEC) issued a second update on progress made to its Examination Modernization Project.

The update focuses on regulators’ work to tailor examinations based on the risk profiles of individual institutions.

After reviewing and comparing current principles and processes for tailoring community bank and credit union examinations based on risk profile, the agencies committed to issuing reinforcing and clarifying guidance where necessary. This guidance would help ensure that examiners consider the unique risk profile, complexity and business model when developing an examination plan; analyze existing information to identify areas of higher and lower risk; and appropriately tailor document requests based on risk profile, among other things.

Going forward, the issue is how well the regulators execute their plans to tailor examinations to the risk profiles of the individual institutions.

Read more.

NCUSIF: $47.4 Million in Specific Reserves as of September 2018

The September 30, 2018 Preliminary and Unaudited Financial Highlights for the National Credit Union Share Insurance Fund disclosed $47.4 million is specific reserves for natural person credit unions.

General reserves were $108.8 million.

Are these specific reserves associated with the closing of taxi medallion lender LOMTO Federal Credit Union? Or are there other credit unions that the agency has targeted for failure?

Read the report.

NCUA Denies Request on Bids for Two Failed Taxi Medallion Lending CUs

The National Credit Union Administration (NCUA) denied my request for information on bids for failed taxi medallion lenders LOMTO Federal Credit Union and Melrose Credit Union.

Teachers Federal Credit Union assumed the members and most shares as well as some loans and other assets of LOMTO FCU and Melrose CU.

In early October, I contacted NCUA seeking information on the bids for the two failed credit unions.

An NCUA spokesperson replied:

Q: Was Teachers FCU the only bidder for LOMTO? If not, how many bidders were there? If there were multiple bidders, how did Teachers bid compare to others?

A: Decline comment.

Q: Was Teachers FCU the only bidder for Melrose? If not, how many bidders were there? If there were multiple bidders, how did Teachers bid compare to others?

A: Decline comment.

Subsequently, I filed a Freedom of Information Act (FOIA) request seeking written documents, such as a bid summary of winning and losing bids shared with the NCUA Board .

On November 23, NCUA denied my FOIA request citing exemptions at 5 U.S.C. 552(b)(4), (5), (6), and (8).

But why this lack of transparency?

Unlike NCUA, the Federal Deposit Insurance Corporation discloses a bid summary regarding all bids to purchase a failed bank.

It appears that NCUA is abusing FOIA exemptions to deny access to information that another federal agency openly discloses.

Former CEO of Municipal CU Pleads Guilty to Embezzlement

Kam Wong, the former chief executive officer (CEO) and president of Municipal Credit Union (New York, NY), pled guilty in Manhattan federal court on November 19 to embezzling millions of dollars from the credit union.

From 2013 through January 2018, Wong engaged in a long-running multi-faceted scheme to obtain money from the credit union to which he knew he was not entitled and he took steps to conceal what he had done.

Wong pled guilty to one count of embezzlement from a federally insured credit union, which carries a maximum penalty of 30 years in prison.

In addition, as a condition of his plea, Wong also agreed to forfeit at least $9,890,375 and to pay at least $9,890,375 in restitution to the credit union.

Kam Wong is scheduled to be sentenced by Judge Koeltl on April 5, 2019, at 10:00 a.m.

Read the press release.

Credit Union 1 Buys Naming Rights to University Pavilion

Credit Union 1 (Rantoul, IL) bought the naming rights to the pavilion at the University of Illinois at Chicago (UIC).

According to the agreement, Credit Union 1 will pay the university $9.3 million over 15 years for the naming rights to the arena.

The $838 million credit union will also provide $750,000 to support scholarships for students attending UIC.

The arena will be renamed Credit Union 1 Arena.

The agreement needs to be approved by The Board of Trustees of the University of Illinois, which is expected to occur during its January 2019 meeting.

Credit Union 1 is a privately insured credit union operating in Illinois, Indiana, and Nevada.

Read more.

International Training Trips May Signal a Corporate Governance Problem

If your credit union board members are rewarding themselves through international or luxury training trips or other perks that are not available to other members of the credit union, your credit union may have a corporate governance problem.

At least that is the opinion of Sarah Moore, the Administrator of the Alabama Credit Union Administration.

During the November 9, 2018 presentation to the League of Southeastern Credit Unions, Ms. Moore discussed a corporate governance health checklist for credit union boards and supervisory committees.

She posed the following question:

Are Board members rewarding themselves through international or luxury training trips or other perks not available to other members of the credit union?

If your credit union answered yes to this question, this could indicate an unhealthy corporate governance at your credit union.

There is a whole industry catering to the education of credit union leaders and their elected boards.

However, some of these training programs are on luxury cruises or at exotic locations.

For example, the Credit Union National Association's Volunteer Conference will meet in January 2019 at Montego Bay, Jamaica. Educruises is promoting a Seine River Cruise in June of next year or a voyage of the Norwegian fjords in July 2019.

These look like junkets rewarding credit union officials and volunteers.

OIG Investigations Clear NCUA Chairman McWatters

The Office of Inspector General (OIG) of the National Credit Union Administration (NCUA) closed two investigations into NCUA Chairman McWatters with no action taken between April 1 and September 30, 2018.

According to the OIG, it opened a conflict of interest investigation into Chairman McWatters. The complaint alleged that McWatters participated in a vote to rescind the Financial Stability Oversight Committee's Systemically Important Financial Institution designation of American International Group (AIG), while he owned stock and warrants in AIG at the time of the vote. McWatters stated that he believed that his holdings fell under the Office of Government Ethics (OGE) de minimis exemption and he was not required to recuse himself. OGE informed McWatters and the OIG that the exemption only applied to stock holdings, not warrants. McWatters provided information from security lawyers and accountants that warrants are the same as stocks and are publicly traded. The investigation was closed with no action taken against the Chairman.

A second complaint accused McWatters of misuse of NCUA funds for extravagant travel. This included premium air travel and expensive meals. The investigation found that McWatters was reimbursed for alcohol expenses of almost $150 associated with 3 meals. While there was no violation of law, NCUA policy did not permit for the reimbursement of alcohol expenses. NCUA changed its policy after the investigation closed to allow for the reimbursement of alcohol expenses. The OIG also found that the reimbursement of the Chairman for other expenses including premium air travel, UberBlack, and hotels did not violate the agency's policy.

These findings were reported in the agency's Semiannual Report to the Congress.

Read the OIG report.

Texas Trust CU Buys Naming Rights to Epic Theater

Texas Trust Credit Union (Arlington, TX) bought the naming rights to the Epic Theater in the City of Grand Prairie (TX).

The five-year agreement gives Texas Trust naming rights along with signage and advertising opportunities, and more.

The price tag of the five-year sponsorship agreement was not disclosed.

Read more.

Problem CUs Fell During Q3 2018, NCUSIF Liquidation Charges of $743.4 Million

The number of problem credit unions fell during the third quarter of 2018, according to the National Credit Union Administration (NCUA).

At the end of the third quarter of 2018, there were 203 problem credit unions. In comparison, there were 210 problem credit unions at the end of the second quarter of 2018.

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

Total assets and shares (deposits) in problem credit unions fell during the third quarter. Assets in problem credit unions were $11.5 billion at the end of the third quarter compared to $12.9 billion at the end of the second quarter of 2018. Shares in problem credit unions were $10.4 billion as of September 2018 versus $11.8 billion as of June 30, 2018.

NCUA reported that 88 percent of problem credit unions have less than $100 million in assets, while almost 1.5 percent have more than $500 million in assets.

At the end of the third quarter, 0.91 percent of total insured shares were in problem credit unions. As of June 2018, 1.04 percent of total insured shares were in problem credit unions.

In addition, NCUA reported $743.4 million in liquidation charges to the National Credit Union Share Insurance Fund (NCUSIF) due to credit union failures during the third quarter. NCUSIF recaptured $57.4 million in reserves during the third quarter. As a result of the liquidation charge and recapture of reserves, NCUSIF reserve balance was $156.2 million at the end of the third quarter, down from $957 million as of the beginning of the third quarter.

Advia CU to Acquire Illinois Bank

Advia Credit Union (Parchment, MI) has announced that it plan to acquire Golden Eagle Community Bank (Woodstock, IL).

The deal awaits bank shareholder and regulators approvals.

Golden Eagle Community Bank has $155 million in assets and three offices.

When the deal is completed, this will be the third bank acquired by #1.7 billion Advia CU.

The price tag of the deal was not disclosed.

The transaction is expected to be completed in the second quarter of 2019.

Read the press release.

ACSI: Banks and Credit Unions Tie in Customer Satisfaction

Banks match credit unions in consumer satisfaction.

According to the American Customer Satisfaction Index (ACSI®), banks and credit unions both scored an 81. Regional and community banks had a score of 84.

Credit unions saw a dip in customer satisfaction of 1.2 percent year over year, while banks were unchanged.

ACSI found that credit unions offered better in-person customer service than banks, but not by much. Credit unions scored an 89, while banks scored 88.

Credit unions also led banks in speed of service at branches (88 to 85) and call center satisfaction (84 to 81).

However, banking mobile apps were superior in quality (86 to 85) and more reliable (85 to 83).

Read the press release.

Taxi Medallion Loans Wreck Progressive CU

Defaulting taxi medallion loans continue to wreck the financial performance of Progressive Credit Union (New York, NY).

During the third quarter of 2018, the credit union reported a 9.7 percent decline in its assets to $382.8 million. Year-over-year, assets at the credit union fell by almost 23.7 percent.

Progressive CU posted a loss of $53.3 million for the first three quarters of 2018. During the third quarter of 2018, the credit union posted a loss of $35.3 million.

The credit union increased provision for loan and lease losses during the third quarter of 2018 by almost $26.6 million. As of September 2018, provision for loan and lease losses was $46.8 million.

Due to the third quarter loss, the credit union's net worth fell from $80.5 million as of June 2018 to $44.5 million as of September. Between June and September, the credit union's net worth ratio tumbled from 19 percent to 11.63 percent.

Delinquent loans increased by 14.3 percent during the third quarter to almost $98 million. As of September 30, the credit union's delinquency rate was 24.75 percent.

Also, early delinquencies (30 to 59 days past due) rose by 32.9 percent during the most recent quarter to approximately $15.8 million.

As of September 2018, $39.1 million of commercial loans not secured by real estate, presumably taxi medallion loans, were 60 days or more past due. This means that 13.69 percent of the credit union's $285.8 million in commercial loans not secured by real estate were delinquent.

In addition, the credit union reported $133.2 million in troubled debt restructured non-real estate secured commercial loans, of which $45.3 million were delinquent. This indicates that about 34 percent of these loans were 60 days or more past due.

The credit union recorded as of September 2018 year-to-date net charge-offs of almost $34.4 million. Almost all of the net charge-offs were commercial loans not secured by real estate.

Allowance for loan and lease losses increased by 25.5 percent during the third quarter to $108.5 million at the end of the third quarter. The credit union's coverage ratio (allowance for loan and lease losses to delinquent loans) was 110.75 percent.

Interestingly, the credit union reported a large increase in uninsured non-member deposits compared to a year ago. On September 2018, uninsured non-member deposits were $40.3 million, up from $10 a year earlier.

Furthermore, total non-member deposits were almost $84.6 million as of the most recent call report. Non-member deposits were approximately 32.5 percent of all shares and deposits at Progressive Credit Union.

Progressive is the last remaining major New York City taxi medallion lending credit union. Melrose CU and LOMTO FCU were closed this year by the National Credit Union Administration and Montauk CU was merged into Bethpage FCU in 2016.

Report Identifies Top Management and Performance Challenges Facing Federal Financial Regulators

The Council of Inspectors General on Financial Oversight (CIGfO) issued a September 2018 report on top management and performance challenges facing financial regulators.

Cybersecurity was the most frequently identified cross-cutting challenge among CIGFO members. This included risks to the security of information technology (IT) systems and information at financial institutions, those institutions’ third-party service providers, and financial regulatory organizations. For example, the National Credit Union Administration (NCUA) Inspector General noted that "cyber threats continue to pose significant dangers to the stability and soundness of the credit union industry; and credit unions and other small financial institutions are increasingly the target of cyberattacks."

The report also stated that financial-sector regulatory organizations have supervisory responsibilities to identify and mitigate potential systemic problems in the financial sector. With respect to credit unions, The report noted that the NCUA faces several challenges that threaten the safety and soundness of the credit union system and the National Credit Union Share Insurance Fund, including growing disparity in the performance of large and small credit unions specific to loan, net worth, and membership growth; increasing competition in the financial services industry; and continuing consolidation among depository institutions.

Managing human capital is another key challenge facing federal regulators. Federal financial regulators noted that a large percentage of their workforce can retire in the next couple of years. The Office of Personnel Management estimated that 34.3 percent of all Federal employees will be eligible to retire by fiscal year 2020. This pending rollover in the work force will require the “knowledge transfer” from the more experienced personnel to the newer staff to ensure that the federal agencies are able to fulfill their mission critical functions.

Other challenges identified in the report involved the sharing of threat information among government agencies and throughout the entire financial sector and governing risk management and internal control processes to fulfill the agencies' missions and provide stewardship of public resources.

CIGFO members include the Inspectors General of the Department of the Treasury, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission, the Department of Housing and Urban Development, the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection, the Federal Housing Finance Agency, the National Credit Union Administration, the Securities and Exchange Commission, and the Special Inspector General for the Troubled Asset Relief Program.

Read the report.

Judge Rules that Digital FCU Overdraft Lawsuit Can Go Forward

Reuters is reporting that a federal judge ruled that a class action lawsuit can proceed against Digital Federal Credit Union (Marlborough, MA) over its overdraft practices.

The class action lawsuit accuses the credit union of charging overdraft fees to thousands of members based on an artificially low “available balance” when the members had ample money in their accounts.

The judge allowed counts dealing with breach of contract, breach of the implied duty of good faith and fair dealing, and violation of the Electronic Funds Transfer Act (only for claims that occurred on or after June 15, 2017) to stand, while dismissing the count dealing with unjust enrichment.

Read the story.

Read the complaint.

Read the opinion.

Consumer Credit at CUs Grows at Slower Pace in September

The growth of consumer credit at credit unions slowed in September, according to the Federal Reserve.

Outstanding consumer credit at credit unions was $454.6 billion in September, up from $451.3 billion in August.

Revolving credit at credit unions in September increased by about $100 million to $59.9 billion.

Nonrevolving credit rose from $391.5 billion in August to $394.7 billion in September.

Read the G.19 report.

Report Provides Snapshot of CU Remittance Transfers

Credit unions are a small share of the remittance transfer market, according to a recent report by the Bureau of Consumer Financial Protection (Bureau).

The report found that credit unions in 2017 conducted 0.2 percent of remittance transfers and 2.8 percent of the dollar volume based on the average dollar value of remittance transfers by credit unions in the industry survey. Credit unions reported 762,609 remittance transfers in 2017.

The Bureau found that 1,444 credit unions in 2017 offer remittance transfers, up from 863 credit union in 2009.

The number of credit unions that transferred more than 100 remittances in 2017 was 330. In 2014, only 280 credit unions transferred more than 100 remittances, which was down from 372 credit union in 2013. Credit unions that make more than 100 remittance transfers per year are subject to the Bureau's Remittance Rule.

Credit unions that offer and transfer more than 100 remittances are typically larger than credit unions that offer but transfer 100 or fewer remittances. In every year, the median asset size of credit unions that offered and transferred more than 100 remittances exceeded $125 million versus under $20 million for credit unions that offered, but did not transfer 100 remittances.

In 2017, the top 10 credit unions transferred 63 percent of all remittances by credit unions and credit unions that transferred more than 2,000 remittances accounted for 78 percent of all credit union transfers.

Read the report.

Michigan Regulator Approves CUSO to Provide Trust Services

The Michigan Department of Insurance and Financial Services granted regulatory approval to the formation of limited purpose bank, Credit Union Trust, to provide trust services to credit union members.

Credit Union Trust plans to open late in the first quarter of 2019 and will be headquartered in Farmington Hills, Michigan.

Credit Union Trust will operate as both a credit union service organization (CUSO) and a Michigan limited purpose bank.

Prior to a 2016 change in Michigan law, credit unions could not directly offer fiduciary services.

The organizers of the CUSO are seven credit unions -- Alpena Alcona Area Credit Union (Alpena, MI), Community Choice Credit Union (Farmington Hills, MI), ELGA Credit Union (Burton, MI), Frankenmuth Credit Union (Frankenmuth, MI), Honor Credit Union (Berrien Springs, MI), Members First Credit Union (Midland, MI), and Team One Credit Union (Saginaw, MI).

Read more.

Is NCUA AWOL in Examining CUs for SCRA Compliance?

Is the National Credit Union Administration (NCUA) absent without leave (AWOL) with regard to ensuring credit unions are complying with the Servicemembers Civil Relief Act (SCRA)?

On November 2, Hudson Valley Federal Credit Union (Poughkeepsie, NY) settled allegations that it violated the SCRA by repossessing vehicles owned by SCRA-protected service members without first obtaining the required court orders.

But what I found of interest in the press release was that prior to August 2014 Hudson Valley FCU did not have any written policies and procedures that address SCRA's protections against non-judicial auto repossessions.

You would have expected that one of the largest credit unions in the country would have had in place policies and procedures prior to August 2014 to ensure that the credit union was complying with the law.

Also, it is notable that NCUA was not part of this settlement. According to the press release, the Department of Justice launched its investigation after learning about two private SCRA lawsuits filed against the credit union.

This begs the question as to why there was not a referral from NCUA to the Department of Justice regarding these SCRA violations.

The evidence suggests that NCUA has not historically examine federal credit unions for compliance with SCRA. A July 2012 Government Accountability Office (GAO) report found that between 2007 and 2011 NCUA only examined 0.02 percent of federal credit unions for SCRA compliance.

But a NCUA official told GAO that the agency would start to review credit union lending practices to ensure compliance with SCRA.

It is possible NCUA examined Hudson Valley FCU and recommended remedial actions to address the credit union's SCRA issues.

To determine if NCUA has followed through on its pledge to GAO, the NCUA Inspector General should launch an audit reviewing NCUA's examination of credit unions for SCRA compliance.

Scott CU Sponsors NHL's St. Louis Blues

Scott Credit Union (Edwardsville, IL) and the St. Louis Blues announced a five-year sponsorship agreement.

Scott Credit Union’s agreement with the Blues includes naming rights to the new exclusive Rinkside Club & Pub 67 inside of the Enterprise Center.

The agreement also includes signage for the credit union in the arena and in concourse areas during events.

The price tag of the sponsorship deal was not disclosed.

Read the press release.

Several NJ CUs Feel the Impact of Taxi Medallion Loans

The disruption from ride sharing companies of the taxi industry continues to rile the performance of several New Jersey credit unions struggling with loans that financed taxi medallions.

Aspire Federal Credit Union (Clark, NJ)

Aspire Federal Credit Union reported a year-to-date loss of $1.5 million as of September 2018. The credit union posted a loss of $313,741 during the third quarter.

The third quarter loss arose from an increase in provision for loan and lease losses by $795,101 during the quarter.

Due to the third quarter loss, Aspire's net worth fell from $10.26 million as of June 2018 to $9.94 million as of September 2018.

However despite the decline in net worth, Aspire's net worth ratio edged higher by 13 basis points during the third quarter to 6.77 percent. The increase in the net worth ratio was due to $7.67 million decline in assets during the third quarter to $146.8 million. Aspire is adequately capitalized as of September 2018.

The credit union reported a 4.6 percent increase in delinquent loans in the third quarter to almost $5.8 million. As of September 2018, the overall delinquency rate was 5.07 percent, a 31 basis point increase during the quarter.

More than half (51.6 percent) of the delinquent loans were commercial loans not secured by real estate, presumably taxi medallion loans. As of September 2018, almost $3 million in commercial loans not secured by real estate were 60 days or more past due. In other words, 35.70 percent of these loans were delinquent.

Troubled debt restructured (TDR) commercial loans not secured by real estate were $2.7 million at the end of September 2018, a decrease by 22 percent during the quarter. As of September, 20.41 percent of TDR commercial loans were in default.

During the third quarter of 2018, net charge-offs rose by $1.4 million to slightly less than $4.2 million, of which $2.6 million of these net charge-offs were non-real estate secured commercial loans. As of September 2018, the credit union's net charge-off rate was 4.67 percent.

Allowance for loan and lease losses fell by 8.4 percent during the third quarter to $6.7 million. Despite the decline in loan loss reserves, the credit union remained well-reserved with a coverage ratio of 116.91 percent.

United Teletech Financial Federal Credit Union (Tinton Falls, NJ)

Defaulting taxi medallion participation loans at United Teletech Financial FCU caused delinquent loans to surge by almost 72 percent during the third quarter of 2018.

There were $15.9 million in loans that were 60 days or more past due, as of September 2018. This is up from nearly $9.3 million in delinquent loans at the end of June 2018.

The overall delinquency rate between the second and third quarter went from 3.57 percent to 6.28 percent.

Almost 67 percent of all delinquent loans were nonmember commercial loans not secured by real estate, presumably these loans were to finance taxi medallion loans. During the third quarter 2018, delinquent nonmember commercial loans not secured by real estate surged by 123.3 percent to $10.7 million.

The percent of nonmember commercial loans not secured by real estate that were delinquent was 46.18 percent. The credit union reported $23.3 million in nonmember commercial loans not secured by real estate.

The credit union also reported $13 million in troubled debt restructured (TDR) commercial loans not real estate secured. Almost 45 percent of these TDR commercial loans were 60 days or more past due.

Net charge-offs were nearly $2.8 million as of September 2018, up from $1.7 million in June. About one-third of the net charge-offs were participations in commercial loans not secured by real estate.

While the credit union recorded a profit during the third quarter, the credit union had a year-to-date loss of $755,864 as of September 2018.

As a result of the third quarter profit, net worth increased by 3.1 percent during the third quarter to $22.4 million. The credit union's net worth ratio rose by 21 basis points to 7.22 percent at the end of September 2018.

The credit union saw a 3.1 percent decline in its allowance for loan and lease losses (ALLL) to $11.8 million. The combination of a sharp increase in delinquencies coupled with a decline in its ALLL caused the credit union's coverage ratio to fall from 131.89 percent as of June 2018 to 74.43 percent as of September 2018.

First Financial Federal Credit Union (Freehold, NJ)

First Financial FCU reported a year-to-date loss of $1.9 million as of September 2018. During the third quarter, the credit union reported a loss of almost $100 thousand.

Due to the third quarter loss, the credit union's net worth fell by 1.1 percent during the quarter to $9.65 million. Despite the decline in net worth, the credit union recorded an improvement in its net worth ratio from 5.10 percent as of June 2018 to 5.44 percent as of September 2018. The improvement in the net worth ratio arose from a $14.1 million reduction in assets during the third quarter 2018.

Over the last year, the credit union saw a 44.5 percent reduction in nonmember commercial loans not secured by real estate to $8.7 million as of September 2018. Presumably, these commercial loans not secured by real estate were to participate in tax medallion financing.

The $177 million credit union reported a decline in delinquencies during the third quarter. Delinquent loans fell by 9.4 percent during the most recent quarter to $4.8 million. As a result, the percent of loans that were 60 days or more past due fell by 28 basis points during the third quarter to 3.68 percent.

Delinquent nonmember commercial loans not secured by real estate tumbled by 28 percent in the latest quarter to $1.47 million at the end of the third quarter. This means 16.80 percent of these nonmember commercial loans were delinquent.

During the third quarter of 2018, troubled debt restructured commercial loans not secured by real estate increased by 19 percent to $7.1 million. Almost 21 percent of TDR commercial loans not secured by real estate were delinquent.

Net charge-offs as of September 2018 were $2.5 million, up 225 percent from the prior quarter. Almost $1.85 million in delinquent loans were nonmember commercial participation loans.

Due to net charge-offs increasing faster than provision for loan and lease losses during the third quarter, allowance for loan and lease losses fell to $3.5 million on September 30 from $4.9 million on June 30. Over the same time period, the credit union's coverage ratio declined from 92.61 percent to 73.40 percent.

Hudson Valley FCU to Pay $95,000 for Illegally Repossessing Servicemembers' Vehicles

Hudson Valley Federal Credit Union (Poughkeepsie, NY) has agreed to pay $95,000 to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by repossessing vehicles owned by seven SCRA-protected service members without first obtaining the required court orders.

An investigation found that prior to August 2014, Hudson Valley FCU did not have any written policies or procedures that addressed the SCRA’s protections against non-judicial auto repossessions.

Under the agreement, Hudson Valley FCU has agreed to provide $10,000 in compensation to each of the six affected service members, plus any lost equity in the vehicle with interest. An additional service member, whose vehicle was repossessed but returned within 24 hours, will receive $5,000. Hudson Valley has also taken steps to repair the credit of the affected service members.

The credit union will pay a civil penalty of $30,000 to the United States.

Also, the credit union has committed to protecting service members’ rights in the future.

Read the press release.

203 Low-Income CUs Awarded $2 Million in Grants

The National Credit Union Administration announced that it has awarded $2 million in grants to help 203 low-income credit unions improve digital services and security, increase outreach to underserved communities, and train employees.

Grant awards ranged from $1,300 to $20,000.

The NCUA made awards in three categories:

• Digital services and security: 141 grants totaling $1,251,670;
• Leadership development: 40 grants totaling $350,760; and
• Underserved outreach: 22 grants totaling $397,570.

Some of these grants went to large credit unions, including $2.1 billion GTE FCU (Tampa, FL), $2.3 billion Nusenda FCU (Albuquerque, NM), $628 million Notre Dame (Notre Dame, IN), and $926 million Park Community CU (Louisville, KY).

However, is the awarding of grants to large credit unions, which probably have the resources to fund these initiatives on their own, the best use of these grants?

Read the press release.

Navy FCU's Earnings Top $1 Billion

Navy Federal Credit Union (Vienna, VA) is raking in the money through the first 3 quarters of 2018.

Navy FCU reported a year-to-date net income of $1.1 billion through September 30, 2018. A year ago, the credit union reported net income of $978.5 million.

Below is the Statement of Income for the $95 billion credit union (click on image to enlarge).

Evansville Teachers FCU Acquires Small Louisville Bank

Evansville Teachers Federal Credit Union (Evansville, IN) has completed its acquisition of American Founders Bank in Louisville (KY), according to Louisville Business Journal.

The deal closed on November 1 after receiving regulatory approval.

Terms of the deal were not disclosed.

Read the story.

Banks: Credit Unions Are the Chief Nonbank Competitor for Small Business Loans

A survey on Small Business Lending by the Federal Deposit Corporation found that credit unions were the primary nonbank competitor to banks for small business loans.

According to survey responses, both small and large banks (52.3 and 55.0 percent) reported frequent competition with credit unions with regard to small business lending.

The report defined banks with less than $10 billion in assets as small, and banks with at least $10 billion in assets as large.

According to the report, small banks were more concerned than large banks about credit union competition.

Nearly one-third (34.1 percent) of small banks viewed credit unions as a top three competitor, compared with only 12.2 percent of large banks.

Among small banks, those with less than $250 million in assets were about twice as likely as those with $1 billion to $10 billion in assets to view credit unions as a top three competitor (39.0 percent compared with 19.1 percent).

Only 4.5 percent of small banks stated that a credit union was their number one competitor with respect to small business loans.

For banks that identify credit unions as their number one competitor, the top perceived advantages of credit unions dealt with pricing (85.1 percent) and, to a lesser extent, other elements of loan structure. The report noted that the credit union pricing advantage arises from their preferential tax status.

Read the report.

North Island Buys Naming Rights to San Diego Amphitheatre

North Island Credit Union (San Diego, CA) bought the naming rights to San Diego's largest outdoor venue.

The venue will change its name immediately from Mattress Firm Amphitheatre to North Island Credit Union Amphitheatre.

The amphitheatre seats almost 20,000 people.

The naming rights deal is for 10-years.

The price tag of the naming rights agreement was not disclosed.

Read the story.

Taxi Medallion Participation Loans Contribute to YTD Loss of $4.1 Million at Quorum FCU

Taxi medallion participation loans continue to adversely impact the financial performance of Quorum Federal Credit Union (Purchase, NY).

Quorum Federal Credit Union reported a year-to-date (YTD) loss of $4.1 million thru the end of the third quarter of 2018. The loss is up from $493,521 as of June 2018.

The third quarter loss was driven by a large increase in provision for loan and lease losses, which increased by $6.5 million during the third quarter to $15.24 million.

Delinquent loans increased by 6.3 percent during the third quarter to almost $43.9 million at the end of September 2018. As of September 30, 6.09 percent of the credit union's loans were 60 days or more past due.

Almost 71 percent of the delinquent loans ($31 million) were nonmember commercial loans not secured by real estate, which presumably were taxi medallion participation loans.

The credit union reported 58.51 percent of these nonmember commercial loans not secured by real estate were delinquent.

Quorum further reported that troubled debt restructured (TDR) commercial loans not secured by real estate of almost $23.7 million at the end of the third quarter of 2018. Approximately 34.4 percent of the TDR commercial loans were 60 days or more past due.

The credit union reported net charge-offs of $11.4 million as of September 2018, up from $10 million as of June 2018. As of September 2018, net charge-offs from commercial loans not secured by real estate were $6.8 million, of which $5.3 were TDR commercial loans.

Due to the third quarter loss of almost $3.6 million, the credit union's net worth fell to $63.2 million. Quorum's net worth ratio fell by 44 basis points during the third quarter to 7.61 percent, but was only down 4 basis points from a year ago.

However, the increase in provision for loan and lease losses caused the credit union's allowance for loan and lease losses to grow to almost $38 million, up from $32.9 million as of June 2018. As a result, the coverage ratio rose to 86.56 percent as of September 2018 from 79.63 percent on June 30, 2018.