Thursday, May 30, 2019

Numerica CU Buys Naming Rights to Pavilion

Numerica Credit Union (Spokane Valley, WA) bought the naming rights to the Pavilion at the Southridge Sports and Events Center in Kennewick, Washington.

The credit union will pay $680,000 for the naming rights agreement.

The term of the sponsorship agreement is for 8 years and can be renewed for another 5 years.

The city council approved the naming rights deal on May 21.

Read agenda item 7a.

Tuesday, May 28, 2019

NCUA Board Proposes Expansion in Nonmember Deposit Cap

The National Credit Union Administration (NCUA) Board on May 23 proposed a rule that would significantly expand the ability of a federal credit union (FCU) to use public unit and nonmember deposits to fund its operation.

The proposed rule increases the current nonmember deposit limit from 20 percent of total shares to 50 percent of paid-in capital and unimpaired capital and surplus less any public unit and nonmember shares.

Public units include the federal government, states and territories, counties and municipalities and tribal entities.

NCUA acknowledged in its proposal that the 20 percent cap dates to the late 1980s and was imposed “because of the asset/liability management problems related to public unit and nonmember shares that arose at certain FCUs, which resulted in material losses for the National Credit Union Share Insurance Fund.”

Under the proposal, designated low-income FCUs, which account for 57 percent of all FCUs, would be able to accept deposits from any nonmember up to the 50 percent level.

The proposal would require a federal credit union to develop a specific use plan if its nonmember shares, combined with its borrowings, exceeds 70 percent of paid-in and unimpaired capital and surplus.

Comments on the proposal are due 60 days after publication in the Federal Register.

Read the proposed rule.

Monday, May 27, 2019

Senator Schumer Writes NCUA over Predatory Taxi Medallion Lending

In a May 21 letter to the National Credit Union Administration, Senate Minority Leader Chuck Schumer (D-N.Y.) asked the regulator to conduct an immediate review of its supervisory practices in the wake of “deeply troubling conduct” by credit unions involved in New York’s taxi medallion business.

Schumer pointed to a recent investigation by the New York Times that found that many NCUA-regulated institutions “worked to artificially inflate taxi medallion prices while hooking taxi drivers with reckless, exploitative loans. As a result of these predatory practices, taxi drivers lost their life savings and were left with crushing debt once the market crashed and the value of these medallions rapidly decreased.”

A recent NCUA Inspector General report suggested that with a timelier and more aggressive supervisory approach, some of the losses cab drivers experienced could have been mitigated, Schumer added. He requested that NCUA to respond to Congress with changes that should be made to its current supervisory practices to protect these consumers against this type of predatory lending in the future.

Read the letter.

Sunday, May 26, 2019

Northeast Community CU Buys Naming Rights to Minor League Ballpark

Northeast Community Credit Union (Elizabethton, TN) bought the naming rights to Joe O'Brien Field in Elizabethton, Tennessee.

The ballpark will be called Joe O’Brien Field at Northeast Community Credit Union Park.

The ballpark is the home of the Elizabethton Twins of the Appalachian Rookie League.

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

Read the story.

Saturday, May 25, 2019

American 1 CU Buys Naming Rights to Arena

American 1 Credit Union (Jackson, MI) bought the naming rights to a sports venue at Spring Arbor University.

American 1 CU paid $250,000 for the renovation of McDonald Athletic Center and the naming rights to the Arena.

The sports venue will be called “The Arena Sponsored by American 1 Credit Union”.

Read more.

Thursday, May 23, 2019

Problem CUs Increased during Q1 2019

The number of problem credit unions increased during the first quarter of 2019, according to the National Credit Union Administration (NCUA).

At the end of the first quarter of 2019, there were 202 problem credit unions. In comparison, there were 193 problem credit unions at the end of 2018.

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

Total assets in problem credit unions were unchanged during the first quarter. Assets in problem credit unions were $11.8 billion at the end of the first quarter.

Shares in problem credit unions fell during the first quarter to $10.4 billion as of March 2019 versus $10.6 billion as of December 2018. At the end of the first quarter, 0.91 percent of total insured shares were in problem credit unions. This was down 2 basis points from December 2018.

Most problem credit unions were small credit unions.

The number of problem credit unions with less than $100 million rose by 9 to 174 during the first quarter. But the number of problem credit unions with more than $100 million in assets was unchanged during the quarter.

NCUA reported that 86.1 percent of problem credit unions have less than $100 million in assets, while 1.5 percent of problem credit unions have more than $500 million in assets.

Wednesday, May 22, 2019

Bank and CU Trade Groups Write in Opposition of Amendment to Reinstate Flawed Arbitration Rule

Bank and credit union trade groups wrote a joint letter on May 21 to members of the House of Representatives opposing a proposed amendment to H.R. 1500 (Consumers First Act) that would reinstate the Consumer Financial Protection Bureau's arbitration rule.

The trade group wrote: "Returning to this flawed rule would undermine the ability of the members of our organizations to continue to offer arbitration, which is a convenient, simple, and efficient dispute resolution process for our customers."

Congress under the Congressional Review Act in 2017 disapproved the arbitration rule.

The amendment was introduced by Representative Al Green (D-TX).

The House of Representatives is expected to consider H.R. 1500 and its amendments in the coming days.

The trade groups signing the letter are the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, and the National Association of Federally Insured Credit Unions.

Read the letter.

NCUA to Pay $160.1 Million in NCUSIF Dividends during the Week of May 20

The National Credit Union Administration (NCUA) will pay $160.1 million in dividends to eligible credit unions from the National Credit Union Share Insurance Fund (NCUSIF) during the week of May 20.

NCUA stated that over 5,500 credit unions would be eligible for the distribution from the NCUSIF.

The NCUA Board approved the distribution in March after it was determined that the NCUSIF equity ratio of 1.39 percent at the end of 2018 exceeded the normal operating level of 1.38 percent.

This is the second distribution from the NCUSIF after the merger of the Temporary Corporate Credit Union Stabilization Fund into the NCUSIF.

Read the press release.

Tuesday, May 21, 2019

New York Attorney General to Launch Inquiry into Taxi Medallion Lending

The New York State Attorney General's Office announced on May 20th that it is beginning an inquiry into the lending and business practices that led to the taxi medallion crisis in New York City.

This inquiry comes after a two-part investigative report appearing in the New York Times. I reported on this earlier today.

The Attorney General's Office stated that the allegations in the New York Times story "are serious and must be thoroughly scrutinized."

Investigative Story Looks at the Rise and Fall of the New York City Taxi Medallions

A two-part story in the New York Times (subscription required) investigated the role of lenders, regulators, and city officials in the rise and collapse in taxi medallion values in New York City.

Over 10 months, the New York Times spoke to 450 people, built a database on every medallion sales, and reviewed thousands of loans and other documents,

The articles cited risky lending practices at banks and credit unions, which devastated taxi drivers. For example, many lenders by 2013 were not requiring a down payment. Also, many of these loans were interest only.

According to Monte Silberger, LOMTO Credit Union’s controller and then chief financial officer, “It got to a point where we didn’t even check their income or credit score.”

The article also states that regulators, especially the National Credit Union Administration (NCUA), ignored warnings from examiners regarding these risky lending practices. The story points out that NCUA granted waivers to regulations requiring at least a 20 percent down payment for taxi medallion loans to help credit unions compete with other lenders.

The article notes that the New York City Taxi and Limousine Commission became a cheerleader for medallion sales, as prices for taxi medallions soared. The city collected more than $855 million by selling taxi medallions and collecting taxes on private sales.

The article points out that many people were enriched during the medallion bubble, including Progressive Credit Union's Robert Familant, who made $30 million in salary and deferred payments.

Read Part 1.

Read Part 2.

Monday, May 20, 2019

NCUA Charters Otoe-Missouria FCU

The National Credit Union Administration (NCUA) chartered on May 20th the Otoe-Missouria Federal Credit Union in Red Rock, Oklahoma.

The federal credit union will serve approximately 4,200 members and employees of the Otoe-Missouria Tribe as well as 17 tribal-owned businesses.

The Otoe-Missouria Federal Credit Union was designated by NCUA as a low-income credit union, based on its potential membership. This designation gives the credit union the ability to accept non-member deposits, obtain grants and loans from the Community Development Revolving Loan Fund, offer secondary capital accounts, and qualify for exemptions from statutory limits on member business lending.

This is the first federal credit union to be chartered in 2019.

Read the press release.

Sunday, May 19, 2019

Two CUs Move Forward with New HQ Buildings

Two credit unions are moving forward with new headquarters buildings.

Advia Credit Union (Parchment, MI) broke ground on a new 150,000-square-foot headquarters building in Oshtemo Township.

The new headquarters building will include a branch, ATM and night deposit box.

It will include seminar rooms, as well as retail spaces for lease by local businesses on the first floor.

The design also calls for outdoor terraces that will overlook a landscaped water feature.

Hampden Township Planning Commission (PA) recommended a plan for a three-story 172,000-square-foot corporate headquarters building for Members 1st Federal Credit Union (Mechanicsburg, PA).

The plan can come up for approval before the Hampden Township Board of Commissioners as early as May 30.

The price tag for each project was not disclosed.

Friday, May 17, 2019

Municipal Credit Union Conserved

The New York State Department of Financial Services (DFS) on May 17th took possession of Municipal Credit Union (MCU), located in New York City, and appointed the National Credit Union Administration (NCUA) as conservator.

“DFS is taking possession of MCU and appointing the NCUA as conservator in order to continue the close joint DFS/NCUA monitoring of the credit union’s condition, operations, and controls, to ensure that member funds are protected and that member services continue without interruption,” Acting Superintendent Lacewell said.

In 2017 DFS had uncovered deficiencies in board oversight that had facilitated the multi-million-dollar embezzlement by the former CEO, Kam Wong. Wong was charged by the Manhattan U.S. Attorney with embezzlement and banned from the credit union industry by the NCUA in May 2018. He pleaded guilty to embezzling nearly $10 million from MCU in November 2018.

The Department removed MCU’s Supervisory Committee in May 2018, and its board of directors in June 2018 due to severe deficiencies in their oversight of the over-all management of the affairs of the credit union and designated an on-premises Administrator to oversee the general management of the credit union. Based on ongoing supervision by DFS and NCUA, DFS made the decision today to appoint NCUA as conservator and terminate the Administrator’s engagement.

Municipal Credit Union has more than $3 billion in assets.

Read DFS press release.

Read the NCUA press release.

Thursday, May 16, 2019

Sanders, AOC Propose Postal Banking

Some bad ideas seem to never die.

Last week, Senator Sanders (I - VT) and Representative Ocasio-Cortez (D - NY) advocated for allowing the U.S. Postal Service to engage in basic banking services.

Sanders and Ocasio-Cortez wrote that the Postal Service should use its existing authority to implement a pilot program offering basic and affordable financial services.

They called on Congress to enact the Postal Service Protection Act that Senator Sanders introduced in 2013

Basic financial services would include basic checking and savings accounts, low interest loans, debit cards, automatic teller machines, check cashing, money wiring services, and online banking services.

But does the post office have the expertise to engage in banking?

This idea should be stamped: Return to Sender.

Wednesday, May 15, 2019

Struggling with Taxi Medallion Loans, Van Cortlandt Cooperative CU to Merge into USAlliance FCU (Updated)

Credit unions continue to experience collateral damage from the disruption of the taxi industry from ride sharing apps.

The latest casualty is Van Cortlandt Cooperative Federal Credit Union (Bronx, NY).

The National Credit Union Administration in the first quarter approved the merger of Van Cortlandt Cooperative FCU into USAlliance Federal Credit Union (Rye, NY).

While the official reason cited for the merger is expanded services, the credit union was being negatively impacted by participation loans financing taxi medallions.

Since the beginning of 2018, the credit union charged off almost $6.5 million in commercial loan participations not secured by real estate.

In addition, the credit union recorded losses of $91,630 for 2018 and $69,709 for the first quarter of 2019.

Update: Credit Union Journal is reporting that the merger between the two credit unions has been cancelled.

Tuesday, May 14, 2019

Trade Groups Encourage All Banks and CUs to Join Sheltered Harbor

The CEOs of six major financial industry trade groups wrote to the CEOs of all U.S. banks and credit unions today with “one simple message: Join Sheltered Harbor.”

A non-profit subsidiary of the Financial Services Information Sharing and Analysis Center, Sheltered Harbor was created to protect customers, financial institutions, and public confidence in the financial system if a catastrophic event like a cyberattack causes critical systems—including backups—to fail. Implementing the Sheltered Harbor standard prepares institutions to provide customers timely access to balances and funds in such a worst-case scenario. As of March, Sheltered Harbor members accounted for 71% of U.S. deposit accounts and 55% of U.S. retail brokerage client assets.

“The reason for Sheltered Harbor is simple: once improbable threat scenarios are now plausible,” the CEOs said. “In response, traditional business continuity and disaster recovery planning is not enough. The only way to minimize the impact of a devastating disruption is to prepare for it. Implementing the Sheltered Harbor standard prepares institutions to provide customers timely access to balances and funds in such a worst-case scenario.” Read the letter. Join Sheltered Harbor.

The six financial trade groups that signed the letter are the American Bankers Association, Bank Policy Institute, Credit Union National Association, Financial Services Forum, Financial Services Information Sharing and Analysis Center, and Securities Industry and Financial Markets Association.

Read the letter.

Sufflok FCU to Buy Naming Rights at Community Colllege

Suffolk County Community College is proposing a naming rights deal with Suffolk Federal Credit Union (Medford, NY), according to Newsday.

The credit union will pay at least $1.798 million for the naming rights to various school facilities and campus grounds.

The community college's board will vote on the proposed resolution on May 16. the resolution does not specify the term of the agreement or the type of signage.

Monday, May 13, 2019

Opinion Piece Critical of NCUA's Proposed Appraisal Threshold Rule

The National Credit Union Administration Board's proposal to quadruple the appraisal threshold for nonresidential real estate loans to $1 million could significantly undermines the safety and soundness of the commercial lending market, according to an op-ed in the American Banker.

In a BankThink piece, Stephen Wagner, the president of the Appraisal Institute, expressed deep concerns regarding this proposed rule.

Wagner wrote that increasing the appraisal threshold to $1 million "would drastically increase the number of nonresidential real estate loans that would not require an appraisal."

He worries that this would result in a lower level of risk mitigation and will create an environment of loan driven-production.

Wagner points out that NCUA's threshold would be double that of the other federal banking regulators at $500,000 and he believes that this could cause bank regulators to further relax their appraisal requirements.

Wagner also expressed concern about the lack of experience of NCUA regulating commercial real estate loans. He wrote that NCUA is "the agency with the least direct experience in overseeing business and commercial real estate lending," but it will be driving appraisal policies for the entire financial regulatory system.

Read the BankThink piece.

Thursday, May 9, 2019

9 CUs Agree to Pay Penalties for Late Filing Call Reports in Q3 of 2018

The National Credit Union Administration reported that 9 federally insured credit unions consented to civil monetary penalties for late filing their Call Reports in the third quarter of 2018.

The fines totaled $4,069 and ranged from $205 to $1,368.

Three factors determine the size of the fine: the credit union’s asset size, its Call Report filing history, and the length of the filing delay.

Click here for the list of credit unions and the fines paid.

Wednesday, May 8, 2019

Wealth Management Team Leaves University of Iowa Community CU

The entire wealth management team of University of Iowa Community Credit Union (North Liberty, IA) left the credit union on April 26, according to a story appearing in the Corridor Business Journal.

The wealth management team is launching its own firm, United Iowa Financial, and took their clients' business with them.

The article stated that the wealth management team managed $851 million in custodied assets as of February 2019.

The CEO of the credit union stated that the mass departure will give the credit union an opportunity to review and restructure its wealth management operations.

The credit union's wealth management web page stated the credit union is currently not accepting new wealth management clients.

The article did not give a reason for the mass exodus of the credit union's wealth management team.

The story appeared in the print edition of the Corridor Business Journal.

Tuesday, May 7, 2019

Consumer Credit at CUs Edged Higher During March 2019

Outstanding consumer credit at credit unions inched higher during the month of March 2019, according to the Federal Reserve's G. 19 report.

Outstanding consumer credit at credit unions increased by approximately $300 million during March 2019 to $471.6 billion.

Outstanding revolving credit was flat in March 2019 at $61.5 billion. For the quarter, revolving credit at credit unions fell from $62.6 billion to $61.5 billion.

Nonrevolving credit at credit unions grew by roughly $200 million during March to $410 billion. During the first quarter of 2019, nonrevolving credit increased by almost $3.4 billion.

Bank Groups Write CFPB to Not Cede Supervisory Authority of Large CUs to NCUA

The American Bankers Association and the Consumer Bankers Association on May 3 wrote to the Consumer Financial Protection Bureau (CFPB) director expressing strong opposition to a recent request for the bureau to cede its supervisory authority for the nation’s largest credit unions to the National Credit Union Association (NCUA).

The letter was in response to a years-long campaign waged by credit unions, their trade associations, and, remarkably, their federal prudential regulator, seeking special treatment from the CFPB for the credit union industry.

The associations pointed out that the Dodd-Frank Act clearly communicates Congress’ intention that the credit unions be held to the same supervisory standards as other large depository institutions. Granting the request for special treatment to credit unions with at least $10 billion in assets would be in direct conflict with congressional intent and would contribute to an unlevel regulatory playing field between banks and credit unions, they said.

“While we believe that the bureau should take every opportunity to reduce the regulatory burden for all financial institutions and eliminate duplicative supervision, we strongly disagree with the premise that the consumer financial services offered by credit unions inherently differ from those offered by other financial institutions competing in the marketplace,” the groups wrote. “Policymakers have reason to seriously question the appropriateness of the special treatment being sought by credit unions and their federal prudential regulatory authority, the National Credit Union Administration.”

Read the letter.

Monday, May 6, 2019

St. Louis Fed Examines the Topic of CUs Acquiring Banks

An article in the Federal Reserve Bank of St. Louis Regional Economist examines the topic of credit unions acquiring banks.

The article notes that the acquisition of another financial institution by a credit union is a faster way to grow compared to organic growth.

One possible reason for a credit union acquiring bank is an expansion of its business loan portfolio.

"The average ratio of business loans to total loans for the acquiring credit unions in the quarter before the transaction was 8.6 percent, whereas the average for the acquired banks was 33.8 percent. The acquisitions of the commercial banks raised the business-loans-to-total-loans ratio in the credit unions to 10.9 percent."

In addition, smaller community banks are an attractive acquisition target, because they have a strong relationship their communities.

However, the article points out that field of membership issues can act as an obstacle to these mergers.

Read the article.

Hudson Valley FCU to Defect to State Charter

Another large federal credit union is defecting from the federal charter.

Hudson Valley Federal Credit Union (Poughkeepsie, NY) is seeking to convert to a New York State charter.

In a notice to members, the $5 billion credit union stated that field of membership limitations were restricting its future growth opportunity.

As a federal credit union, the credit union can only serve its four-county footprint of Dutchess, Ulster, Orange and Putnam.

If members vote yes, the credit union will expand its community field of membership to include Westchester, Rockland, Columbia, Greene, Albany, Rensselaer, Schenectady, and Saratoga Counties.

The credit union will change its name to Hudson Valley Credit Union.

Members must approve the switch of charter.

Friday, May 3, 2019

MIDFLORIDA CU to Acquire Community Bank & Trust of Florida

MIDFLORIDA Credit Union (Lakeland, FL) announced its intends to acquire the $739-million Community Bank & Trust of Florida (Ocala, FL).

Community Bank & Trust of Florida has 11 offices in the counties of Alachua, Marion, and Sumter.

If the deal is completed, it will be the largest acquisition of a bank by a credit union to date.

In addition, MIDFLORIDA announced it intends to purchase assets of First American Bank (Fort Dodge, IA), which are in southwest Florida.

The acquisition of the Florida assets of First American Bank of Iowa is expected to happen in November 2019, while the merger with Community Bank & Trust of Florida is expected to close at year end.

Both the acquisition and the merger are subject to all required regulatory requirements and approval as well as fulfillment of all customary closing conditions.

The terms of the deals were not disclosed.

This is the fifth announced acquisition of a Florida Bank this year and the sixth whole bank deal announced this year.

Read the press release.

CUs Offsetting Higher Operating Expenses with Higher Service Charges on Deposits

A study found that credit unions are offsetting higher operating expenses with higher service charges on deposits. But it questions how long this can continue.

According to Moebs Services, non-interest expense-to-asset ratio at credit unions was an average 3.07 percent, almost 20 percent higher than the average at banks.

However, service charges on deposits at credit unions are more than double the service charges on deposits at banks, 61 basis points versus 24 basis points.

But Michael Moebs, Economist & CEO of Moebs Services, noted that "offsetting costly operational expenses with high service charges cannot go on forever.”

Thursday, May 2, 2019

Florida Regulator Approves Vystar's Acquisition of Bank

The Florida Office of Financial Regulation on April 18 approved the application to merge Citizens State Bank (Gainesville, FL) into Vystar Credit Union (Jacksonville, FL).

The shareholders of Citizens State Bank have approved the transaction.

Both applicants state that the transaction will not result in Vystar engaging in any nonconforming or impermissible activities.

Vystar also stated that it would not amend its field of membership to include any customers of Citizens State Bank that do not fall within its fild of membership.

The approval is conditioned on the Federal Deposit Insurance Corporation and the National Credit Union Administration given their written consents to the transaction.

Read the final order.

Wednesday, May 1, 2019

Union Yes FCU Seeks to Raise $4 Million in Secondary Capital

The American Banker is reporting that a undercapitalized credit union in Orange, California, is looking to raise $4 million in secondary capital.

The $63.4 million-asset Union Yes Federal Credit Union recently launched a capital campaign, offering subordinated debt with fixed and variable interest rates of 4 percent to 4.5 percent with maturities of five to seven years.

The minimum size of the investment is $250,000.

While many credit unions can only build capital through retained earnings, low-income credit unions, such as Union Yes FCU, are permitted to raise secondary capital from investors.

According to the prospectus, the credit union has been experiencing very strong growth and needs the capital to fund new membership growth.

However, investors are going to receive a higher rate of return on their investment than credit union members. For example, the highest current rate for the 60-month CD is 0.35 percent.

This higher rate of return is compensation to investors for potential credit risk, if the credit union fails.

But it also means that the credit union tax subsidy is going to investors instead of the members.

Read the article (subscription required).

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