Teachers Credit Union (South Bend, IN), and New Bancorp, Inc., the holding company of New Buffalo Savings Bank (New Buffalo, MI), announced on April 26 that the organizations have signed a definitive purchase and assumption agreement whereby Teachers CU will acquire the assets and assume the liabilities of New Bancorp and New Buffalo in an all-cash transaction.
Following the completion of this transaction, New Bancorp will settle its remaining obligations and distribute the remaining transaction proceeds to its shareholders.
New Buffalo operates three bank branches in New Buffalo, Sawyer and Three Oaks, Michigan and had $119.5 million in assets as of December 31, 2018.
The transaction is valued at $21.3 million or approximately 128.5 percent of New Bancorp’s tangible book value as of December 31, 2018.
This strategic acquisition will increase Teachers CU total number of branches to 57 and total assets to approximately $3.2 billion.
Read the press release.
Monday, April 29, 2019
Thursday, April 25, 2019
Texas Regulator: Early Delinquencies on the Rise
The Texas Credit Union Department in its April Newsletter noted that after several years of strong loan growth some credit unions are experiencing an increase in early delinquencies.
The newsletter stated that early delinquencies can result in higher future losses and could impact the financial health of the credit union.
The Texas regulator encouraged that credit union management provide monthly trend reports to its board members regarding loans 30 to 59 days past due. it also encouraged a dialogue between management and board members regarding collection efforts on these loans.
Credit union management and board are encouraged to identify and address causes for the deterioration in loan quality, such as loosening underwriting standards, limited collection activities, and lending by credit risk tiers. This is essential for controlling and managing credit risk.
The newsletter stated that early delinquencies can result in higher future losses and could impact the financial health of the credit union.
The Texas regulator encouraged that credit union management provide monthly trend reports to its board members regarding loans 30 to 59 days past due. it also encouraged a dialogue between management and board members regarding collection efforts on these loans.
Credit union management and board are encouraged to identify and address causes for the deterioration in loan quality, such as loosening underwriting standards, limited collection activities, and lending by credit risk tiers. This is essential for controlling and managing credit risk.
Wednesday, April 24, 2019
Mid East Tennessee Community CU Conserved
The National Credit Union Administration on April 23 placed Mid East Tennessee Community Credit Union in Decatur, Tennessee, into conservatorship.
Mid East Tennessee Community Credit Union is a federally insured, state-chartered credit union with 1,855 members and assets of $12,093,966, according to the credit union’s most recent Call Report.
The credit union at the end of 2018 reported that 4.45 percent of its loans were 60 days or more past due and a net charge-off rate of 2.66 percent.
Read the press release.
Mid East Tennessee Community Credit Union is a federally insured, state-chartered credit union with 1,855 members and assets of $12,093,966, according to the credit union’s most recent Call Report.
The credit union at the end of 2018 reported that 4.45 percent of its loans were 60 days or more past due and a net charge-off rate of 2.66 percent.
Read the press release.
Audit: NCUA Did Not Adequately Monitor, Account, and Dispose of IT Equipment
An audit by the National Credit Union Administration (NCUA) Office of Inspector General (OIG) found that NCUA did not adequately monitor, account, and dispose of all of its information technology (IT) equipment.
The audit had two objectives -- to determine: 1) whether the NCUA has IT equipment inventory policies and procedures; and 2) whether the NCUA adequately monitors and accounts for its IT equipment from acquisition through final disposition.
The audit covered the period from January 1, 2014, through June 30, 2017.
The OIG found that the NCUA did not follow its instruction to dispose of IT equipment “as promptly as possible”. For example, in 2009, management did not dispose of approximately 300 laptops that it had identified as “exhausted or excess” until 2018.
Also, the report concluded that the NCUA did not use existing procedures to remove disposed equipment from its financial systems and that its current financial system did not provide reliable information for inventory verifications and was not a comprehensive asset management system.
The OIG found the 25 percent of the NCUA’s inventory records did not match to items on hand.
In addition, the NCUA does not immediately reconcile what it ordered with what it received. The OIG stated that NCUA ran the risk of paying for IT equipment that it had not received.
The OIG found that NCUA spent $440,000 on IT equipment it did not need. The report noted that NCUA staffing projections failed to materialize due to government-wide hiring freeze and agency reorganization, which reduced staffing levels.
The OIG made seven recommendations to NCUA management that will help with IT equipment inventory management.
Read the report.
The audit had two objectives -- to determine: 1) whether the NCUA has IT equipment inventory policies and procedures; and 2) whether the NCUA adequately monitors and accounts for its IT equipment from acquisition through final disposition.
The audit covered the period from January 1, 2014, through June 30, 2017.
The OIG found that the NCUA did not follow its instruction to dispose of IT equipment “as promptly as possible”. For example, in 2009, management did not dispose of approximately 300 laptops that it had identified as “exhausted or excess” until 2018.
Also, the report concluded that the NCUA did not use existing procedures to remove disposed equipment from its financial systems and that its current financial system did not provide reliable information for inventory verifications and was not a comprehensive asset management system.
The OIG found the 25 percent of the NCUA’s inventory records did not match to items on hand.
In addition, the NCUA does not immediately reconcile what it ordered with what it received. The OIG stated that NCUA ran the risk of paying for IT equipment that it had not received.
The OIG found that NCUA spent $440,000 on IT equipment it did not need. The report noted that NCUA staffing projections failed to materialize due to government-wide hiring freeze and agency reorganization, which reduced staffing levels.
The OIG made seven recommendations to NCUA management that will help with IT equipment inventory management.
Read the report.
Monday, April 22, 2019
Navy FCU Pays $24.5 Million to Settle Improper OD Fee Lawsuit
Navy Federal Credit Union (Vienna, VA) paid $24.5 million to settle overdraft (OD) fee class action lawsuit.
Navy FCU agreed to pay up to $500,000 towards Settlement Administration Cost.
According to the complaint, Navy FCU members were charged overdraft fees under the credit union’s Optional Overdraft Protection Service between July 22, 2012 and Nov. 20, 2017.
The plaintiffs alleged Navy FCU improperly assessed and collected OD fees. Navy FCU also breached its contractual agreement.
It was estimated that if the class action lawsuit went to trial, recoverable damages would have been almost $60 million. The Settlement would provide plaintiffs with a recovery of between 30 and 40 percent of potential damages.
The final approval hearing is set for May 20, 2019.
Click here for documents.
Navy FCU agreed to pay up to $500,000 towards Settlement Administration Cost.
According to the complaint, Navy FCU members were charged overdraft fees under the credit union’s Optional Overdraft Protection Service between July 22, 2012 and Nov. 20, 2017.
The plaintiffs alleged Navy FCU improperly assessed and collected OD fees. Navy FCU also breached its contractual agreement.
It was estimated that if the class action lawsuit went to trial, recoverable damages would have been almost $60 million. The Settlement would provide plaintiffs with a recovery of between 30 and 40 percent of potential damages.
The final approval hearing is set for May 20, 2019.
Click here for documents.
Sunday, April 21, 2019
STCU to Acquire Branch Customers of Banner Bank
Spokane Teachers Credit Union (STCU), headquartered in Liberty Lake, Washington, is acquiring the Bonner County (ID) customers of Banner Bank (Walla Walla, WA).
According to the most recent summary of deposit data, Banner Bank had one branch in Bonner County at Sandpoint with $20.14 million in deposits.
The deal is pending regulatory approval and is expected to close in August.
All employees of the Banner Bank branch in Sandpoint will be offered employment with STCU.
Price of the deal was not disclosed.
This is not the first deal by STCU. In 2003, the credit union acquired a branch and customers of Wheatland Bank.
Read the press release.
Read intergency bank merger act application.
According to the most recent summary of deposit data, Banner Bank had one branch in Bonner County at Sandpoint with $20.14 million in deposits.
The deal is pending regulatory approval and is expected to close in August.
All employees of the Banner Bank branch in Sandpoint will be offered employment with STCU.
Price of the deal was not disclosed.
This is not the first deal by STCU. In 2003, the credit union acquired a branch and customers of Wheatland Bank.
Read the press release.
Read intergency bank merger act application.
Saturday, April 20, 2019
Canvas CU Faces Class Action Lawsuit over OD Fee Practices
Canvas Credit Union (Lone Tree, CO), the former Public Service Credit Union, is being sued over its overdraft (OD) fee practices.
The class action lawsuit, Ronald Brooks v. Canvas Credit Union, alleges that Canvas CU had a routine business practice of (a) assessing overdraft fees on transactions that did not actually overdraw the account; and (b) charging two or three non-sufficient funds fees on a single transaction.
The lawsuit claims that the the credit union violated Colorado consumer protection laws and its disclosures in its account documents.
The lawsuit was filed by Franklin D. Azar & Associates.
Read the press release.
The class action lawsuit, Ronald Brooks v. Canvas Credit Union, alleges that Canvas CU had a routine business practice of (a) assessing overdraft fees on transactions that did not actually overdraw the account; and (b) charging two or three non-sufficient funds fees on a single transaction.
The lawsuit claims that the the credit union violated Colorado consumer protection laws and its disclosures in its account documents.
The lawsuit was filed by Franklin D. Azar & Associates.
Read the press release.
Friday, April 19, 2019
L&N FCU Buys Naming Rights to University Arena
L&N Federal Credit Union (Louisville, KY) recently bought the naming rights to the University of Louisville (UofL) Cardinal Arena.
The $1.2 billion credit union gave a $2 million donation to University of Louisville Athletics to help fund upcoming projects.
In return for the donation, a 1,100-seat venue has been renamed L&N Federal Credit Union Arena.
The facility houses the offices, training and competition facilities for the Cardinals' women's volleyball team.
Read more.
The $1.2 billion credit union gave a $2 million donation to University of Louisville Athletics to help fund upcoming projects.
In return for the donation, a 1,100-seat venue has been renamed L&N Federal Credit Union Arena.
The facility houses the offices, training and competition facilities for the Cardinals' women's volleyball team.
Read more.
Navy Surpasses $100 Billion in Assets Milestone, as of Q1 2019
Navy Federal Credit Union (Vienna, VA) surpassed the $100 billion threshold.
As of March 31, 2019, the credit union reported $103.2 billion in assets. This is up from almost $97 billion at the end of 2018.
Navy is the first credit union to top $100 billion in assets.
Moreover, Navy reported net income for the first quarter of 2019 of approximately $423.6 million.
Interest income was almost $1.5 billion for the first quarter. Non-interest income was $413.1 million. Operating expenses and dividends were $765.9 million and $207.5 million, respectively.
Review the Statement of Financial Condition.
Review the Statement of Income.
As of March 31, 2019, the credit union reported $103.2 billion in assets. This is up from almost $97 billion at the end of 2018.
Navy is the first credit union to top $100 billion in assets.
Moreover, Navy reported net income for the first quarter of 2019 of approximately $423.6 million.
Interest income was almost $1.5 billion for the first quarter. Non-interest income was $413.1 million. Operating expenses and dividends were $765.9 million and $207.5 million, respectively.
Review the Statement of Financial Condition.
Review the Statement of Income.
Thursday, April 18, 2019
Survey: No Change In the Percent of Small Businesses Seeking Credit from CUs
The percentage of small businesses with employees applying for financing from credit unions was flat, according to the latest Small Business Credit Survey — a joint effort by the 12 regional Federal Reserve Banks.
The survey had responses from 6,614 small employer firms.
The 2018 survey found that 43 percent of employer firms applied for financing in the previous 12 months.
Traditional bank lending remains the primary source of financing for the nation’s small businesses, although the share of applicants seeking financing from online borrowers has grown markedly.
The survey found that 9 percent of these small businesses applied for loans, lines of credit, or cash advances from credit unions. The same percentage of small businesses sought credit from credit unions in 2016 and 2017.
There was a slightly higher percentage of medium/high credit risk borrowers that sought financing from from credit unions compared to low credit risk borrowers. The survey found 12 percent of medium/high credit risk borrowers sought credit from credit unions versus 9 percent of borrowers with low credit risk.
Among firms that did not apply for credit, 7 percent identified using credit unions regularly for loans, lines of credit, or cash advances. This is up from 5 percent in 2016, but down slightly from 8 percent in 2017.
Review the results of the survey.
The survey had responses from 6,614 small employer firms.
The 2018 survey found that 43 percent of employer firms applied for financing in the previous 12 months.
Traditional bank lending remains the primary source of financing for the nation’s small businesses, although the share of applicants seeking financing from online borrowers has grown markedly.
The survey found that 9 percent of these small businesses applied for loans, lines of credit, or cash advances from credit unions. The same percentage of small businesses sought credit from credit unions in 2016 and 2017.
There was a slightly higher percentage of medium/high credit risk borrowers that sought financing from from credit unions compared to low credit risk borrowers. The survey found 12 percent of medium/high credit risk borrowers sought credit from credit unions versus 9 percent of borrowers with low credit risk.
Among firms that did not apply for credit, 7 percent identified using credit unions regularly for loans, lines of credit, or cash advances. This is up from 5 percent in 2016, but down slightly from 8 percent in 2017.
Review the results of the survey.
Wednesday, April 17, 2019
CUNA Claims MBL Victory, Then Seeks More Holes in MBL Cap
After declaring victory with respect to the member business loan (MBL) fight, the Credit Union National Association (CUNA) appears to have reversed course.
CUNA is claiming that the enactment of S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, and the National Credit Union Administration's amended member business loan rule have given credit unions ample opportunity to make business loans. In fact, CUNA stated that these two events gave credit unions greater business lending authority than they would have received by just raising the MBL cap from 12.25 percent of assets to 27.5 percent of assets.
Here is what CUNA wrote on January 6, 2019:
Now, CUNA is supporting a bill that would exclude business loans to veterans from the aggregate MBL cap.
If that was victory, what's next on CUNA's wish list?
CUNA is claiming that the enactment of S. 2155, Economic Growth, Regulatory Relief, and Consumer Protection Act, and the National Credit Union Administration's amended member business loan rule have given credit unions ample opportunity to make business loans. In fact, CUNA stated that these two events gave credit unions greater business lending authority than they would have received by just raising the MBL cap from 12.25 percent of assets to 27.5 percent of assets.
Here is what CUNA wrote on January 6, 2019:
"Importantly, this legislation ... carried a major charter enhancement provision, exempting one- to four-family non-owner occupied loans from the member business lending cap. Taken together with our success on the NCUA’s MBL rule, which exempts from the cap loan participations purchased from other credit unions, we can officially declare final victory on the system’s 20-year battle to restore credit union business authority. Indeed, these two changes will provide more cap space than we had been seeking in the old Royce-Udall legislation that aimed to raise the cap to 27.5%."
Now, CUNA is supporting a bill that would exclude business loans to veterans from the aggregate MBL cap.
If that was victory, what's next on CUNA's wish list?
Tuesday, April 16, 2019
Oral Arguments Set Today for NCUA FOM Appeal
A three-judge panel of the D.C. Circuit Court of Appeals is set to hear oral arguments this morning in American Bankers Association’s ongoing legal challenge to the National Credit Union Administration’s field of membership (FOM) rule.
During the hearing, the judges will hear NCUA’s appeal of District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and rural districts. Meanwhile, ABA is cross-appealing Friedrich’s opinion upholding the provision of the rule permitting credit unions to serve core-based statistical areas without serving the urban core that defines the area—provisions the judge upheld despite calling them “troubling,” “jarring” and “a barely reasonably interpretation of the statute.”
During the hearing, the judges will hear NCUA’s appeal of District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and rural districts. Meanwhile, ABA is cross-appealing Friedrich’s opinion upholding the provision of the rule permitting credit unions to serve core-based statistical areas without serving the urban core that defines the area—provisions the judge upheld despite calling them “troubling,” “jarring” and “a barely reasonably interpretation of the statute.”
Kansas and Washington Update CU Acts
Two states, Kansas and Washington, have passed legislation updating their credit union statutes.
In Washington-state, Governor Jay Inslee signed into law House Bill 1247.
The bill permits Washington-state credit unions to hold virtual special membership meetings, amends the duties of a credit union's supervisory committee, modifies field of membership to include groups that are either partially or wholly outside the state, grants Washington-state credit unions parity with out-of-state credit unions, and expands the type of securities that credit unions can invest,
The law becomes effective on July 28, 2019.
The Kansas House and Senate approved a bill (HB 2101) that would update state credit union statutes.
The bill updates several definitions and eliminates outdated or duplicate language.
The Bill also establishes a maximum loan amount as 10 percent of assets, clarifies the duties of a credit union's board, and removes the requirement that investments in corporate credit unions must not exceed 25 percent of a credit union's shares, undivided earnings, and reserves.
In addition, the bill no longer requires the written approval of the Administrator to purchase, lease, hold, or rent real estate in excess of 5 percent of a credit union's shares, undivided earnings, and reserves.
Governor Laura Kelly signed the bill into law.
In Washington-state, Governor Jay Inslee signed into law House Bill 1247.
The bill permits Washington-state credit unions to hold virtual special membership meetings, amends the duties of a credit union's supervisory committee, modifies field of membership to include groups that are either partially or wholly outside the state, grants Washington-state credit unions parity with out-of-state credit unions, and expands the type of securities that credit unions can invest,
The law becomes effective on July 28, 2019.
The Kansas House and Senate approved a bill (HB 2101) that would update state credit union statutes.
The bill updates several definitions and eliminates outdated or duplicate language.
The Bill also establishes a maximum loan amount as 10 percent of assets, clarifies the duties of a credit union's board, and removes the requirement that investments in corporate credit unions must not exceed 25 percent of a credit union's shares, undivided earnings, and reserves.
In addition, the bill no longer requires the written approval of the Administrator to purchase, lease, hold, or rent real estate in excess of 5 percent of a credit union's shares, undivided earnings, and reserves.
Governor Laura Kelly signed the bill into law.
Monday, April 15, 2019
KBW Report Looks at Competitive Impact of CUs on Banks
A report, The Non-Bank Chronicles: The Rise of Credit Unions, by Keefe, Bruyette & Woods (KBW) examines the competitive impact of the credit union industry on banks.
KBW launched The Non-Bank Chronicles with the objective of examining various non-bank competitors, analyzing the scope and methods to which each competes, and how banks can effectively fight back to protect and profitably grow their market share.
The report notes that the credit union tax exemption affords credit unions considerable room to competitively price loan and deposit products, which has helped drive significant growth over the last several decades.
In fact, credit unions are the only non-bank competitor that can offer customers a federally insured deposit product.
Since 2005, credit unions have seen their market share of United States consumers steadily grow, with deposits expanding 108 percent from $578 billion to $1.2 trillion or approximately 9.2 percent of all federally insured deposits in the country.
According to a survey of 114 bank executives covered by KBW, 52 percent identified credit unions as the “greatest threat” to their ability to profitably grow in the future.
Moreover, 68 percent of the respondents indicated that they expect credit union market share to increase in future years.
Bankers noted that the most challenging areas from credit union competition are retail deposits, followed by retail lending. Unsurprisingly, 82 percent of respondents selected “rate offered on loans / deposits” as a credit unions’ top method of competing, followed by 54 percent indicating that loan structure is the second most likely form of competition.
The report also notes that credit unions are expanding into the commercial lending space, which poses a significant competitive threat to for banks with under $10 billion in assets. Eighty-nine percent of the bankers reported noticing an increase focus on small business customers over the last five years.
While KBW analysis found that credit unions offer better rates on loans and deposits, KBW noted that the recent improved profitability of credit unions could suggest the full tax advantage benefit is not being passed through to consumers.
KBW believes competitive challenges posed by credit unions can be added to the list of reasons supporting further bank consolidation.
Despite the challenges posed by credit unions to community banks, KBW does not expect any changes in the political status quo in the near term.
Read the report.
KBW launched The Non-Bank Chronicles with the objective of examining various non-bank competitors, analyzing the scope and methods to which each competes, and how banks can effectively fight back to protect and profitably grow their market share.
The report notes that the credit union tax exemption affords credit unions considerable room to competitively price loan and deposit products, which has helped drive significant growth over the last several decades.
In fact, credit unions are the only non-bank competitor that can offer customers a federally insured deposit product.
Since 2005, credit unions have seen their market share of United States consumers steadily grow, with deposits expanding 108 percent from $578 billion to $1.2 trillion or approximately 9.2 percent of all federally insured deposits in the country.
According to a survey of 114 bank executives covered by KBW, 52 percent identified credit unions as the “greatest threat” to their ability to profitably grow in the future.
Moreover, 68 percent of the respondents indicated that they expect credit union market share to increase in future years.
Bankers noted that the most challenging areas from credit union competition are retail deposits, followed by retail lending. Unsurprisingly, 82 percent of respondents selected “rate offered on loans / deposits” as a credit unions’ top method of competing, followed by 54 percent indicating that loan structure is the second most likely form of competition.
The report also notes that credit unions are expanding into the commercial lending space, which poses a significant competitive threat to for banks with under $10 billion in assets. Eighty-nine percent of the bankers reported noticing an increase focus on small business customers over the last five years.
While KBW analysis found that credit unions offer better rates on loans and deposits, KBW noted that the recent improved profitability of credit unions could suggest the full tax advantage benefit is not being passed through to consumers.
KBW believes competitive challenges posed by credit unions can be added to the list of reasons supporting further bank consolidation.
Despite the challenges posed by credit unions to community banks, KBW does not expect any changes in the political status quo in the near term.
Read the report.
Friday, April 12, 2019
Bill Would Exclude Business Loans to Veterans from MBL Cap
A bill introduced in the United States House of Representatives on April 10 would exclude credit union business loans to veterans from the aggregate member business loan (MBL) cap.
The bill, Veterans Member Business Loan Act, would amend the Federal Credit Union Act to exclude extensions of credit made to veterans for business purposes from the definition of a member business loan.
The bill would cover loans to any veteran who served on active duty and was discharged or released under conditions other than dishonorable.
The statutory aggregate MBL cap is 12.25 percent of assets.
The sponsors of the bill are Representatives Vicente Gonzalez (D-TX), Don Young (R-AK), Paul Cook (R-CA), and Tulsi Gabbard (D-HI).
This bill was introduced in the last Congress.
Read the press release.
Read the bill.
The bill, Veterans Member Business Loan Act, would amend the Federal Credit Union Act to exclude extensions of credit made to veterans for business purposes from the definition of a member business loan.
The bill would cover loans to any veteran who served on active duty and was discharged or released under conditions other than dishonorable.
The statutory aggregate MBL cap is 12.25 percent of assets.
The sponsors of the bill are Representatives Vicente Gonzalez (D-TX), Don Young (R-AK), Paul Cook (R-CA), and Tulsi Gabbard (D-HI).
This bill was introduced in the last Congress.
Read the press release.
Read the bill.
Thursday, April 11, 2019
Commercial Share Accounts Growing by Almost 16.4 Percent Per Year
Another sign of credit unions pursuing small- and mid-sized businesses is the growth of commercial share accounts.
Between 2013 and 2018, commercial share accounts at credit unions have grown at a compound annualized growth rate of approximately 16.4 percent.
The following graph shows the expansion in commercial share accounts at credit unions over the period of 2013 and 2018.
Between 2013 and 2018, commercial share accounts at credit unions have grown at a compound annualized growth rate of approximately 16.4 percent.
The following graph shows the expansion in commercial share accounts at credit unions over the period of 2013 and 2018.
Wednesday, April 10, 2019
138 CU Borrowed from Discount Window in Q1 2017
Credit unions borrowed an aggregate amount of approximately $162.1 million from the Federal Reserve's Discount Window during the first quarter of 2017.
According to the Federal Reserve, 138 credit unions visited the Discount Window 157 times during the quarter.
During the the fourth quarter of 2016, 237 credit unions visited the Federal Reserve's Discount Window 272 times and borrowed an aggregate amount of almost $116.4 million.
The average amount borrowed from the Discount Window was $1,032,787. The median amount borrowed was $10,000.
The was majority of the credit unions borrowing from the Discount Window used the primary credit program, which is reserved for healthy credit unions. Four credit unions borrowed from the secondary credit program. One credit union, United Business and Industry Federal Credit Union (Plainville, CT), used the seasonal credit program, which assists small depository institutions in managing significant seasonal swings in their loans and deposits.
United Business and Industry FCU was the most frequent borrower, visiting the Discount Window a total of 12 times during the quarter.
The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.
According to the Federal Reserve, 138 credit unions visited the Discount Window 157 times during the quarter.
During the the fourth quarter of 2016, 237 credit unions visited the Federal Reserve's Discount Window 272 times and borrowed an aggregate amount of almost $116.4 million.
The average amount borrowed from the Discount Window was $1,032,787. The median amount borrowed was $10,000.
The was majority of the credit unions borrowing from the Discount Window used the primary credit program, which is reserved for healthy credit unions. Four credit unions borrowed from the secondary credit program. One credit union, United Business and Industry Federal Credit Union (Plainville, CT), used the seasonal credit program, which assists small depository institutions in managing significant seasonal swings in their loans and deposits.
United Business and Industry FCU was the most frequent borrower, visiting the Discount Window a total of 12 times during the quarter.
The Federal Reserve is required by law to disclose with a two year delay information on borrowings from the Discount Window.
Tuesday, April 9, 2019
Excite CU Buys Naming Rights to Minor League Ballpark for San Jose Giants
Excite Credit Union (San Jose, CA) on April 3 secured the naming rights to San Jose's Municipal Stadium.
The new name for the stadium is Excite Ballpark, Home of the San Jose Giants.
Alliance Credit Union is re-branding itself as Excite Credit Union.
The naming rights deal is for three years.
Price of the deal was not disclosed.
Read the press release.
The new name for the stadium is Excite Ballpark, Home of the San Jose Giants.
Alliance Credit Union is re-branding itself as Excite Credit Union.
The naming rights deal is for three years.
Price of the deal was not disclosed.
Read the press release.
Monday, April 8, 2019
Impact of Risk-Based Loan Pricing on CU Credit Availability and Risk
Credit unions are increasingly employing risk-based loan pricing models.
A 2018 paper in the Journal of Empirical Finance, Risk-based Loan Pricing Consequences for Credit Unions, examines whether risk-based pricing increases the availability of loans, particularly for high-risk borrowers.
The study uses credit union data obtained from fourth quarter call reports published by the National Credit Union Administration over the period from 2006 through 2015.
The paper found that credit unions that adopt risk-based loan pricing strategies:
Data on the number of loans per credit union member and loan delinquency rates are used to analyze loan access and average risk-levels, respectively.
The authors, Walke, Fullerton, and Tokle, contend that the number of loans issued is a better measure of loan availability than the dollar value of loans.
The study found that risk-based pricing adopters increase the availability of loans relative to otherwise similar non-adopters.
However, delinquency rates were somewhat lower for adopters of risk-based pricing compared to matched non-adopters. This finding appears to be at odds with a priori expectations.
The authors conclude that the lower delinquency rate at risk-based pricing adopters suggests that the increased availability of loans went to lower risk borrowers.
The authors posit that risk-based pricing results in charging higher interest rates to riskier borrowers, which might suppress loan demand by this group of borrowers, and charging lower interest rates to less risky borrowers, which would increase the demand for loans by this group.
A 2018 paper in the Journal of Empirical Finance, Risk-based Loan Pricing Consequences for Credit Unions, examines whether risk-based pricing increases the availability of loans, particularly for high-risk borrowers.
The study uses credit union data obtained from fourth quarter call reports published by the National Credit Union Administration over the period from 2006 through 2015.
The paper found that credit unions that adopt risk-based loan pricing strategies:
- are larger,
- have lower net worth ratios,
- are more dependent on fee income, and
- have higher loan interest rates.
Data on the number of loans per credit union member and loan delinquency rates are used to analyze loan access and average risk-levels, respectively.
The authors, Walke, Fullerton, and Tokle, contend that the number of loans issued is a better measure of loan availability than the dollar value of loans.
The study found that risk-based pricing adopters increase the availability of loans relative to otherwise similar non-adopters.
However, delinquency rates were somewhat lower for adopters of risk-based pricing compared to matched non-adopters. This finding appears to be at odds with a priori expectations.
The authors conclude that the lower delinquency rate at risk-based pricing adopters suggests that the increased availability of loans went to lower risk borrowers.
The authors posit that risk-based pricing results in charging higher interest rates to riskier borrowers, which might suppress loan demand by this group of borrowers, and charging lower interest rates to less risky borrowers, which would increase the demand for loans by this group.
Sunday, April 7, 2019
Blackhawk Community CU Proposes New Deal to City for HQ Building
Blackhawk Community Credit Union is asking the city of Janesville to cover site preparation costs for its proposed downtown headquarters instead of a more traditional tax increment financing deal.
Under the proposed arrangement, the city would pay an estimated $7.1 million upfront to acquire and demolish properties, relocate utilities, and perform an environmental cleanup, according to a city memorandum.
That contrasts with the city’s original offer—a 15-year, $6.1 million, pay-as-you-go TIF deal plus $1.9 million in upfront costs for an $8 million city investment.
Read the memorandum.
Read the story.
Under the proposed arrangement, the city would pay an estimated $7.1 million upfront to acquire and demolish properties, relocate utilities, and perform an environmental cleanup, according to a city memorandum.
That contrasts with the city’s original offer—a 15-year, $6.1 million, pay-as-you-go TIF deal plus $1.9 million in upfront costs for an $8 million city investment.
Read the memorandum.
Read the story.
Class Action Lawsuit Alleges First Community CU Levies Multiple NSF Charges on Same Transactin
A class-action lawsuit accuses First Community Credit Union (St. Louis, MO) of charging members with multiple "insufficient funds" (NSF) fees on a single transaction.
The lawsuit alleges this practice is contrary to the credit union's account agreements.
The plaintiff is Leassa Kellerman.
The lawsuit was filed on March 25, 2019 in St. Louis District Court.
Read the press release.
The lawsuit alleges this practice is contrary to the credit union's account agreements.
The plaintiff is Leassa Kellerman.
The lawsuit was filed on March 25, 2019 in St. Louis District Court.
Read the press release.
Saturday, April 6, 2019
Texas Farm Bureau FCU Sells Loans and Branch to Alliance Bank Central Texas
The American Banker is reporting that Alliance Bank Central Texas (Waco, TX) is buying all the loans and the only branch of Texas Farm Bureau Federal Credit Union (Waco, TX).
Texas Farm Bureau FCU had $6.7 million in assets and $3.4 million in loans, as of December 31, 2018.
The credit union's membership approved the sale on March 25.
The credit union had approached several credit unions about a merger, but was rebuffed when maintaining the headquarter's branch was proposed as a condition of the merger.
The price of the transaction was not disclosed.
Read the American Banker.
Texas Farm Bureau FCU had $6.7 million in assets and $3.4 million in loans, as of December 31, 2018.
The credit union's membership approved the sale on March 25.
The credit union had approached several credit unions about a merger, but was rebuffed when maintaining the headquarter's branch was proposed as a condition of the merger.
The price of the transaction was not disclosed.
Read the American Banker.
Friday, April 5, 2019
CUs Report a Slight Decline in Consumer Credit in February
Outstanding consumer credit at credit unions experienced a slight contraction during February 2019, according to the Federal Reserve.
Outstanding consumer credit fell by almost $200 million at credit unions during February to $471.3 billion.
The decline in outstanding consumer credit was due to revolving credit falling by approximately $600 million during February to $61.5 billion.
Nonrevolving credit was $409.8 billion in February, up from $409.5 billion in January.
Read more.
Outstanding consumer credit fell by almost $200 million at credit unions during February to $471.3 billion.
The decline in outstanding consumer credit was due to revolving credit falling by approximately $600 million during February to $61.5 billion.
Nonrevolving credit was $409.8 billion in February, up from $409.5 billion in January.
Read more.
No Evidence that NCUA Asked for Authority to Curb Concentration in Taxi Medallion Loans
The National Credit Union Administration (NCUA) did not ask Congress for the authority to curb excessive speculative lending in taxi medallions, according to the agency's Office of Inspector General.
Speaking before an Oregon Credit Union CEOs in December 2017, NCUA Board Member Metsger stated that NCUA’s ability to curtail speculative taxi medallion lending was limited by a provision in the Credit Union Membership Access Act. Metsger noted that the Senate Report specifically mentioned taxi medallion lending as an example of loan activity that was exempt from the Member Business Loan (MBL) cap of 12.25 percent of assets.
The Office of the Inspector General wrote:
The Office of Inspector General concluded that such recommendations could have mitigated the loss to the National Credit Union Share Insurance Fund by slowing the growth in taxi medallion portfolios or diversifying lending practices at the three failed taxi medallion lending credit unions.
So why didn't NCUA make a recommendation to Congress?
Speaking before an Oregon Credit Union CEOs in December 2017, NCUA Board Member Metsger stated that NCUA’s ability to curtail speculative taxi medallion lending was limited by a provision in the Credit Union Membership Access Act. Metsger noted that the Senate Report specifically mentioned taxi medallion lending as an example of loan activity that was exempt from the Member Business Loan (MBL) cap of 12.25 percent of assets.
The Office of the Inspector General wrote:
"We found no evidence of NCUA directly communicating a recommendation to congress to rescind or modify the exception to NCUA's Rules and Regulations Part 723 for aggregate MBL limits."
The Office of Inspector General concluded that such recommendations could have mitigated the loss to the National Credit Union Share Insurance Fund by slowing the growth in taxi medallion portfolios or diversifying lending practices at the three failed taxi medallion lending credit unions.
So why didn't NCUA make a recommendation to Congress?
Thursday, April 4, 2019
Marketplace Radio: Relaxed Rules Spur CU Membership Growth
A story on NPR’s “Marketplace” program last night illustrated how credit unions have used ever-looser field of membership regulations to expand beyond their intended communities.
These lax membership rules have helped credit union membership to grow by almost 60 percent over the past 20 years.
The centerpiece of the story is what reporter Nancy Marshall-Genzer calls a “daisy chain” of members—a group of several young people in the D.C. suburbs with no military connection who became members of Navy Federal, the nation’s largest credit union with nearly $100 billion in assets and one with a stated mission of serving “the military community.” In this case, a four-person chain of successive roommates used Navy Federal’s household member loophole to become members.
Read the transcript.
These lax membership rules have helped credit union membership to grow by almost 60 percent over the past 20 years.
The centerpiece of the story is what reporter Nancy Marshall-Genzer calls a “daisy chain” of members—a group of several young people in the D.C. suburbs with no military connection who became members of Navy Federal, the nation’s largest credit union with nearly $100 billion in assets and one with a stated mission of serving “the military community.” In this case, a four-person chain of successive roommates used Navy Federal’s household member loophole to become members.
Read the transcript.
Wednesday, April 3, 2019
IBM Southeast Employees CU Completes Acquisition of Oculina Bank
IBM Southeast Employees Credit Union (Delray, FL) completed its acquisition of Oculina Bank (Vero Beach, FL) on April 3, 2019.
The combined institution, will have almost $1.5 billion in assets.
According to documents obtained from the Florida office of Financial Regulation, the credit union will not engage in any nonconforming or impermissible activities. IBM Southeast Employees CU will not conduct commercial banking powers under Oculina Bank's charter. Within six months of the merger being consummated, the Florida Office of Financial Regulation will be submitted documentation verifying that depositors and borrowers of Oculina Bank have opted-in to become a member of the credit union, have moved their account relationship to another financial institution, closed their account or paid off their loan.
Read the press release.
The combined institution, will have almost $1.5 billion in assets.
According to documents obtained from the Florida office of Financial Regulation, the credit union will not engage in any nonconforming or impermissible activities. IBM Southeast Employees CU will not conduct commercial banking powers under Oculina Bank's charter. Within six months of the merger being consummated, the Florida Office of Financial Regulation will be submitted documentation verifying that depositors and borrowers of Oculina Bank have opted-in to become a member of the credit union, have moved their account relationship to another financial institution, closed their account or paid off their loan.
Read the press release.
Loss to NCUSIF Was $765.5 Million from the Failures of Bay Ridge FCU, LOMTO FCU, and Melrose CU
The National Credit Union Administration (NCUA) Office of the Inspector General (OIG) released its Material Loss Review on the failure of taxi medallion lenders Melrose Credit Union (Briarwood, NY), LOMTO Federal Credit Union (Woodside, NY), and Bay Ridge Federal Credit Union (Brooklyn, NY).
The report found that the aggregate loss to the National Credit Union Share Insurance Fund (NCUSIF) from the failure of these 3 credit unions was $765.5 million. The OIG estimates that the losses to the NCUSIF from the failure of Melrose CU and LOMTO FCU was approximately $726 million; but NCUA will not know the final cost until all assets are sold. The failure of Bay Ridge FCU resulted in a preliminary loss of $39.5 million to the NCUSIF.
The OIG determined the failures were due to: (1) significant concentration of loans collateralized by taxi medallions, (2) unsafe and unsound lending practices, and (3) weak Board and management oversight and inadequate risk management practices.
The report noted that all three credit unions qualified for an exception from the aggregate member business loan cap, because the credit unions were either chartered for the purpose of making member business loans or have a history of primarily making member business loans prior to September 1998.
As of June 30, 2018, all three credit unions had significant concentration in tax medallion loans.
In fact, Melrose requested forbearance in regard to the associated borrower limitation in July of 2014, requesting the 15 percent limitation be increased to 25 percent. The forbearance request was formally denied in October of 2015. However, prior to the denial, Melrose had restructured and extended approximately $113 million in loans to two different associated borrower relationships exceeding the 15 percent concentration during 2015. A September 30, 2015 examination, these two associated borrower relationships accounted for approximately $177 million in loans.
The OIG found that the credit unions engaged in inadequate loan underwriting and monitoring of taxi medallion loans. Examples of inadequate loan underwriting included frequent failure to fully analyze financial information of borrowers, did not look at the borrowers' ability to repay the loan, risky loan terms, unsupported cash out refinancings, and failure to identify and account for modified loans as Troubled Debt Restructures.
All 3 credit unions had significantly underfunded their allowance for loan and lease losses accounts.
The OIG also reported that lending decisions were based on inflated market values for taxi medallions rather than on industry accepted best practices for loan underwriting.
The report found that the credit unions did not adequately respond to issues raised by examiners, including lending practices, concentration, liquidity, and overall risk management. Poor Board oversight allowed for weak risk management practices at the 3 credit unions to go unchecked. The report highlighted the credit unions' Board of Directors, specifically Melrose and LOMTO, exhibited a lack of urgency in addressing their rapidly decreasing financial position.
The OIG concluded that if examiners had acted more aggressively through formal enforcement actions for repeat document of resolutions, NCUA may have reduced the size of the loss to the NCUSIF.
The OIG made 3 recommendations to NCUA management to more effectively capture the concentration and other risks on a credit union’s balance sheet.
NCUA management should:
Read the Material Loss Review.
The report found that the aggregate loss to the National Credit Union Share Insurance Fund (NCUSIF) from the failure of these 3 credit unions was $765.5 million. The OIG estimates that the losses to the NCUSIF from the failure of Melrose CU and LOMTO FCU was approximately $726 million; but NCUA will not know the final cost until all assets are sold. The failure of Bay Ridge FCU resulted in a preliminary loss of $39.5 million to the NCUSIF.
The OIG determined the failures were due to: (1) significant concentration of loans collateralized by taxi medallions, (2) unsafe and unsound lending practices, and (3) weak Board and management oversight and inadequate risk management practices.
The report noted that all three credit unions qualified for an exception from the aggregate member business loan cap, because the credit unions were either chartered for the purpose of making member business loans or have a history of primarily making member business loans prior to September 1998.
As of June 30, 2018, all three credit unions had significant concentration in tax medallion loans.
- Bay Ridge FCU had approximately 40 percent of its loan portfolio in taxi medallion loans;
- LOMTO FCU had approximately 93 percent of its loan portfolio in taxi medallion loans, and
- Melrose CU reported almost 71 percent of its loan portfolio was made up of taxi medallion loans.
In fact, Melrose requested forbearance in regard to the associated borrower limitation in July of 2014, requesting the 15 percent limitation be increased to 25 percent. The forbearance request was formally denied in October of 2015. However, prior to the denial, Melrose had restructured and extended approximately $113 million in loans to two different associated borrower relationships exceeding the 15 percent concentration during 2015. A September 30, 2015 examination, these two associated borrower relationships accounted for approximately $177 million in loans.
The OIG found that the credit unions engaged in inadequate loan underwriting and monitoring of taxi medallion loans. Examples of inadequate loan underwriting included frequent failure to fully analyze financial information of borrowers, did not look at the borrowers' ability to repay the loan, risky loan terms, unsupported cash out refinancings, and failure to identify and account for modified loans as Troubled Debt Restructures.
All 3 credit unions had significantly underfunded their allowance for loan and lease losses accounts.
The OIG also reported that lending decisions were based on inflated market values for taxi medallions rather than on industry accepted best practices for loan underwriting.
The report found that the credit unions did not adequately respond to issues raised by examiners, including lending practices, concentration, liquidity, and overall risk management. Poor Board oversight allowed for weak risk management practices at the 3 credit unions to go unchecked. The report highlighted the credit unions' Board of Directors, specifically Melrose and LOMTO, exhibited a lack of urgency in addressing their rapidly decreasing financial position.
The OIG concluded that if examiners had acted more aggressively through formal enforcement actions for repeat document of resolutions, NCUA may have reduced the size of the loss to the NCUSIF.
The OIG made 3 recommendations to NCUA management to more effectively capture the concentration and other risks on a credit union’s balance sheet.
NCUA management should:
- institute a formal process to regularly identify, analyze, and document concentration risk issues in credit unions or groups of credit unions and develop appropriate thresholds for different concentrations that would require increased levels of risk mitigation.
- revise examination procedures to prioritize assessing and developing risk responses for credit unions with high levels of concentration risk. For repeated unresolved recommendations, informal enforcement actions should be escalated to formal enforcement actions.
- require examiners review credit unions’ lending procedures with respect to analyzing the ability of the borrower to meet debt service requirements.
Read the Material Loss Review.
Tuesday, April 2, 2019
Op-Ed Calls for the End of CU Tax Exemption
Congress cannot proclaim its support for community banks while allowing tax-subsidized credit unions to continue growing and competing against banks on a tilted playing field, Florida Bankers Association President and CEO Alex Sanchez wrote in a Fox Business op-ed.
“Congress cannot have it both ways, publicly proclaiming support for community banks while allowing corporate welfare for credit unions to continue,” he wrote. “Credit unions, awash in cash because of their tax-exempt status, are buying banks in cash deals. Since 2012, credit unions have purchased 29 banks.”
In Florida, Sanchez noted that since the beginning of 2018, credit unions have either bought or announced deals to buy seven banks, with four deals announced in 2019 alone.
Read the op-ed.
“Congress cannot have it both ways, publicly proclaiming support for community banks while allowing corporate welfare for credit unions to continue,” he wrote. “Credit unions, awash in cash because of their tax-exempt status, are buying banks in cash deals. Since 2012, credit unions have purchased 29 banks.”
In Florida, Sanchez noted that since the beginning of 2018, credit unions have either bought or announced deals to buy seven banks, with four deals announced in 2019 alone.
Read the op-ed.
Overdraft Revenues Soar at Credit Unions in 2018
A study found that overdraft (OD) revenues soared at credit unions in 2018.
According to Moebs Services, credit union OD revenues soared +5.72 percent to $6.9 billion. However, OD revenues fell at banks and thrifts by 0.73 percent and 1.83 percent, respectively.
The study, The Moebs OD Revenue Study, found that OD transactions at credit unions rose by 2.19 percent, while OD transaction fell for banks by 6.93 percent and at thrifts for 0.53 percent.
According to Moebs Services, credit union OD revenues soared +5.72 percent to $6.9 billion. However, OD revenues fell at banks and thrifts by 0.73 percent and 1.83 percent, respectively.
The study, The Moebs OD Revenue Study, found that OD transactions at credit unions rose by 2.19 percent, while OD transaction fell for banks by 6.93 percent and at thrifts for 0.53 percent.
Monday, April 1, 2019
Summit CU's New HQ Open for Business
Summit Credit Union (Madison, WI) officially opens its new 152,000-square-foot, six-story headquarters facility and campus.
The new headquarters building is in Cottage Grove.
The new building features improved workspaces for employees, highlighted by eco-friendly flooring and lighting. There is also a 17,500-gallon rainwater harvest cistern to capture and reuse rainwater, as well as electric car chargers for Summit employees and members.
The campus has outdoor recreational spaces, including sand volleyball courts and a bike path.
The new headquarters building is in Cottage Grove.
The new building features improved workspaces for employees, highlighted by eco-friendly flooring and lighting. There is also a 17,500-gallon rainwater harvest cistern to capture and reuse rainwater, as well as electric car chargers for Summit employees and members.
The campus has outdoor recreational spaces, including sand volleyball courts and a bike path.
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