New Haven County Credit Union (North Haven, CT) has entered into a consent order on August 5, 2019 with the Connecticut Department of Banking regarding unsafe and unsound banking practices.
The consent order addressed numerous deficiencies at the $20 million credit union that need to be addressed.
The consent order paints a picture of weak board oversight of the credit union. The consent order mandated the active participation of the credit union board of directors in credit union affairs. This included at least a monthly meeting of the board and a minimum attendance requirement for board members of at least 75 percent of the meetings.
In addition, the consent order required that the credit union will retain qualified board members, as well as management and staff.
The credit union is required to put into place internal controls and ensure financial records are complete and accurate.
The credit union is expected to file timely and accurate Call Reports, including ensuring that delinquent loans are properly reported and Allowance for Loan and Lease Losses are adequately funded.
The consent order requires the credit union to develop a strategic plan covering at lease three years. The credit union board is also expected to develop written budget consistent with safe and sound banking practices.
The credit union will ensure that employees and Board members are provided with Bank Secrecy Act training and that there is a comprehensive review of the credit union's BSA program.
The consent order requires the credit union to establish a comprehensive Information Security Program.
In a related story, the former credit union Chief Executive Officer (CEO), James Farrell, pleaded guilty to bank fraud. Farrell was the CEO of the New Haven County Credit Union from approximately 1992 to June 2015 and was then retained by the credit union's board of directors to provide assistance to the new CEO until March 2016.
Between July 2011 and March 2016, Farrell defrauded the credit union by transferring funds from NHCCU’s general ledger account to the account held by The Rib House, a restaurant located in East Haven, Connecticut. Farrell provided financial and bookkeeping services to The Rib House from 2010 to 2016.
Read the order.
Read the Justice Department press release.
Friday, August 30, 2019
Thursday, August 29, 2019
Appeals Court Rules that OD Class Action Lawsuit Can Proceed
The 11th U.S. Circuit Court of Appeals reversed the 2017 dismissal of a potential overdraft (OD) fee class action against LGE Community Credit Union (Marietta, GA) and remanded it back to the lower court for further proceeding consistent with the opinion.
The lawsuit alleges that the credit union assessed OD fees when there was enough money in the account to cover the transaction. The plaintiff alleged that the credit union agreed to only impose an OD fee when the ledger balance was not sufficient to cover the transaction.
The appeals court opined that the account agreement was ambiguous as to whether the credit union could rely on the account's available balance rather than its ledger balance when assessing OD fees.
The appeals court ruled that a federal judge erred in dismissing the plaintiff's lawsuit.
Read the opinion.
The lawsuit alleges that the credit union assessed OD fees when there was enough money in the account to cover the transaction. The plaintiff alleged that the credit union agreed to only impose an OD fee when the ledger balance was not sufficient to cover the transaction.
The appeals court opined that the account agreement was ambiguous as to whether the credit union could rely on the account's available balance rather than its ledger balance when assessing OD fees.
The appeals court ruled that a federal judge erred in dismissing the plaintiff's lawsuit.
Read the opinion.
Tuesday, August 27, 2019
NCUA Board Dismisses Secondary Capital Plan Appeal by LICU
The National Credit Union Administration (NCUA) Board dismissed an appeal of a low-income state chartered credit union's secondary capital plan on procedural grounds.
The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.
The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.
The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.
On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.
Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.
On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.
The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.
Read more.
The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.
The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.
The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.
On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.
Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.
On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.
The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.
Read more.
Sunday, August 25, 2019
Idaho Central CU Buys Naming Rights to Rodeo Arena
Idaho Central Credit Union (Chubbuck, ID) will pay $45,000 per year for the naming rights to the Roundup arena in Lewiston, ID.
The sponsorship agreement is for five-years.
The venue will be called the Idaho Central Credit Union arena.
The sponsorship will include Idaho Central Credit Union signs and banners around the arena, and frequent mentions of the company by the event announcer. The credit union will also be provided with seats at the Roundup for its employees and guests.
Read more.
The sponsorship agreement is for five-years.
The venue will be called the Idaho Central Credit Union arena.
The sponsorship will include Idaho Central Credit Union signs and banners around the arena, and frequent mentions of the company by the event announcer. The credit union will also be provided with seats at the Roundup for its employees and guests.
Read more.
Saturday, August 24, 2019
NCUA Charters New CU in Maine
The National Credit Union Administration granted a federal charter and share insurance coverage to Maine Harvest Federal Credit Union (Unity, ME) on August 14, 2019.
The credit union will serve the employees and roughly 13,000 members of the Maine Organic Farmers and Gardeners Association and the Maine Farmland Trust.
The credit union was chartered for the purpose to offer business loans to small farms, farmers, and other food producers. The credit union will be exempt from the member business loan cap of 12.25 percent of assets.
Read the press release.
The credit union will serve the employees and roughly 13,000 members of the Maine Organic Farmers and Gardeners Association and the Maine Farmland Trust.
The credit union was chartered for the purpose to offer business loans to small farms, farmers, and other food producers. The credit union will be exempt from the member business loan cap of 12.25 percent of assets.
Read the press release.
Friday, August 23, 2019
America First CU Becomes Exclusive CU Partner of NFL's Raiders
America First Credit Union (Riverdale, UT) has entered into a multi-year partnership agreement with the Los Angeles Oakland Las Vegas Raiders of the National Football League (NFL).
The partnership agreement includes America First CU being named as the Raider’s exclusive credit union and official debit card partner as well as introducing a charitable donation component and a community outreach program to support local small businesses.
The partnership will take effect in 2020 when the Raiders move to their new home in Las Vegas.
Read more.
The partnership agreement includes America First CU being named as the Raider’s exclusive credit union and official debit card partner as well as introducing a charitable donation component and a community outreach program to support local small businesses.
The partnership will take effect in 2020 when the Raiders move to their new home in Las Vegas.
Read more.
Wednesday, August 21, 2019
Court of Appeals Rules on FOM Rule
A federal appeals court on August 20 dismissed most of the American Bankers Association’s challenge to the Field of Membership (FOM) updates by National Credit Union Administration (NCUA).
The U.S. Appeals Court for the District of Columbia reversed District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and the increase in the population size of rural districts.
However, with the regard to the elimination of the urban-core requirement for local communities based upon a Core-Based Statistical Areas, the court recognized the potential of gerrymandered redlining. The court ordered the District Court to issue a summery judgement in favor of the American Bankers Association, but stated that the agency may be able to offer a satisfactory reason on remand.
In its decision, the court noted that Congress gave the agency wide discretion to make these policy decisions, but its authority is not limitless.
The court also stated that the plaintiff can bring an applied challenge to local communities that exceed NCUA's authority.
NCUA stated that it is reviewing the Court's decision and will provide guidance to affected credit unions in the near future.
Read the decision.
The U.S. Appeals Court for the District of Columbia reversed District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and the increase in the population size of rural districts.
However, with the regard to the elimination of the urban-core requirement for local communities based upon a Core-Based Statistical Areas, the court recognized the potential of gerrymandered redlining. The court ordered the District Court to issue a summery judgement in favor of the American Bankers Association, but stated that the agency may be able to offer a satisfactory reason on remand.
In its decision, the court noted that Congress gave the agency wide discretion to make these policy decisions, but its authority is not limitless.
The court also stated that the plaintiff can bring an applied challenge to local communities that exceed NCUA's authority.
NCUA stated that it is reviewing the Court's decision and will provide guidance to affected credit unions in the near future.
Read the decision.
Tuesday, August 20, 2019
N.H. Supreme Court Dismisses Defamation Lawsuit Brought by Patent Troll
In a unanimous decision, the New Hampshire Supreme Court on August 16 upheld a lower court ruling that dismissed defamation claims brought by a patent assertion entity against the American Bankers Association (ABA), the Credit Union National Association (CUNA) and other defendants who labeled the company and its operator a “patent troll.”
The suit was brought by David Barcelou and a company he controlled. Barcelou held a commercially unsuccessful patent for cash-dispensing-related technology, and between 2011 and 2012 he generated $3 million in licensing fees from demand letters to banks and credit unions.
Patent trolls work by acquiring patents to common processes and technological elements—such as scan-to-email functionality on a copier or an ATM’s ability to connect to the Internet—then demanding “licensing fees” and threatening litigation. The cost of litigation is intended to pressure businesses to pay the fee, regardless of the patent’s validity.
The court found that the term “patent troll” is a non-actionable expression of opinion.
Read the opinion.
The suit was brought by David Barcelou and a company he controlled. Barcelou held a commercially unsuccessful patent for cash-dispensing-related technology, and between 2011 and 2012 he generated $3 million in licensing fees from demand letters to banks and credit unions.
Patent trolls work by acquiring patents to common processes and technological elements—such as scan-to-email functionality on a copier or an ATM’s ability to connect to the Internet—then demanding “licensing fees” and threatening litigation. The cost of litigation is intended to pressure businesses to pay the fee, regardless of the patent’s validity.
The court found that the term “patent troll” is a non-actionable expression of opinion.
Read the opinion.
Monday, August 19, 2019
NCUA's ONES Providing Adequate Oversight of CU Cybersecurity Programs
The Office of the Inspector General of the National Credit Union Administration (NCUA) concluded that NCUA's Office of National Examinations and Supervision (ONES) has provided adequate oversight of cybersecurity programs of credit unions.
ONES is responsible for supervising federal credit unions and state chartered credit unions with at least $10 billion in assets and corporate credit unions.
The audit assessed whether credit unions were taking sufficient and appropriate steps to protect the confidentiality, availability, and integrity of credit union assets and sensitive credit union data against cyber-attacks.
Read the report.
ONES is responsible for supervising federal credit unions and state chartered credit unions with at least $10 billion in assets and corporate credit unions.
The audit assessed whether credit unions were taking sufficient and appropriate steps to protect the confidentiality, availability, and integrity of credit union assets and sensitive credit union data against cyber-attacks.
Read the report.
Friday, August 16, 2019
Provident CU Buys Naming Rights to University Event Center
San José State University and Provident Credit Union (Redwood City, CA) entered into an $8.1 million, 20-year partnership agreement to rename The Event Center at San José State University to Provident Credit Union Event Center.
The Event Center seats 5,000 and is the home of Spartans basketball.
The agreement includes signage at the facility and on nearby roadways; the opportunity to sponsor or participate in university events; and the opportunity to provide the campus with financial literacy awareness clinics.
The California State University Board of Trustees approved the venue renaming and broader agreement at its July 24 meeting.
The CEO of Provident Credit Union is an alumnus of San José State University.
Read the press release.
The Event Center seats 5,000 and is the home of Spartans basketball.
The agreement includes signage at the facility and on nearby roadways; the opportunity to sponsor or participate in university events; and the opportunity to provide the campus with financial literacy awareness clinics.
The California State University Board of Trustees approved the venue renaming and broader agreement at its July 24 meeting.
The CEO of Provident Credit Union is an alumnus of San José State University.
Read the press release.
Thursday, August 15, 2019
Whistleblower Lawsuit Alleges Retaliation by SEFCU
A lawsuit alleges that State Employees Federal Credit Union (SEFCU), headquartered in Albany, New York, retaliated against an employee for filing a whitleblower complaint.
The plaintiff, David Gosstola, was fired in May 2019 as the Chief Financial Officer (CFO) after filing a whistleblower complaint. The plaintiff was employed as the CFO at SEFCU, since 2008.
The complaint alleges that Michael J. Castellana, President and Chief Executive Office of SEFCU, "had business and personal relationships that created real or potential conflicts of interest" and entered into transactions with such parties that did not adequately protect SEFCU's interest.
For example, the CFO alleges that Castellana had communicated confidential information regarding commercial loans to third parties with whom Castellana had a personal and/or business relationship.
The lawsuit claims that the board of directors relied on information submitted by Castellana and his personal adviser in determining his compensation.
Moreover, Castellana approved projects without competitive bids.
In January 2018, the plaintiff filed a Whistleblower complaint regarding concerns about the governance and direction of SEFCU under Castellana's leadership.
The complaint claims that SEFCU violated its Whistleblower Policy after it retaliated against him.
The plaintiff alleges breach of contract, wrongful termination, and fraud.
The plaintiff claims the firing harmed his professional reputation and inflicted economic loss and emotional pain.
The lawsuit seeks compensatory, punitive damages and attorneys' fees in the amount to be proven at trial.
Read the complaint.
The plaintiff, David Gosstola, was fired in May 2019 as the Chief Financial Officer (CFO) after filing a whistleblower complaint. The plaintiff was employed as the CFO at SEFCU, since 2008.
The complaint alleges that Michael J. Castellana, President and Chief Executive Office of SEFCU, "had business and personal relationships that created real or potential conflicts of interest" and entered into transactions with such parties that did not adequately protect SEFCU's interest.
For example, the CFO alleges that Castellana had communicated confidential information regarding commercial loans to third parties with whom Castellana had a personal and/or business relationship.
The lawsuit claims that the board of directors relied on information submitted by Castellana and his personal adviser in determining his compensation.
Moreover, Castellana approved projects without competitive bids.
In January 2018, the plaintiff filed a Whistleblower complaint regarding concerns about the governance and direction of SEFCU under Castellana's leadership.
The complaint claims that SEFCU violated its Whistleblower Policy after it retaliated against him.
The plaintiff alleges breach of contract, wrongful termination, and fraud.
The plaintiff claims the firing harmed his professional reputation and inflicted economic loss and emotional pain.
The lawsuit seeks compensatory, punitive damages and attorneys' fees in the amount to be proven at trial.
Read the complaint.
Wednesday, August 14, 2019
Indiana Members CU to Acquire Commerce Bank
Indiana Members Credit Union (Indianapolis, IN) and First Light Bancorp, Inc. (Evansville, IN), the holding company of Commerce Bank, announced today that they have signed a definitive purchase and assumption agreement whereby Indiana Members CU will acquire the assets and assume the liabilities of Commerce Bank in an all cash transaction.
Under the terms of the purchase and assumption agreement, First Light Bancorp estimates that its stockholders will receive between $11.25 and $11.40 in cash consideration for each share of First Light Bancorp common stock.
Indiana Members CU has over $2 billion in assets. Commerce Bank has $195.8 million in assets.
The transaction has been unanimously approved by the board of directors of both institutions and is expected to close in the first quarter of 2020, subject to customary closing conditions, and the approval of First Light Bancorp’s stockholders and regulators.
Read the press release.
Under the terms of the purchase and assumption agreement, First Light Bancorp estimates that its stockholders will receive between $11.25 and $11.40 in cash consideration for each share of First Light Bancorp common stock.
Indiana Members CU has over $2 billion in assets. Commerce Bank has $195.8 million in assets.
The transaction has been unanimously approved by the board of directors of both institutions and is expected to close in the first quarter of 2020, subject to customary closing conditions, and the approval of First Light Bancorp’s stockholders and regulators.
Read the press release.
Class Action Lawsuit Filed Against Board of Directors of Failed CBS Employees FCU
Members of failed CBS Employees Federal Credit Union (Studio City, CA) have filed a class action lawsuit against the Board of Directors and Supervisory Committee of the credit union.
The complaint alleged the Board of Directors and Supervisory Committee failed to exercise reasonable oversight of CEO Rostohar, who pleaded guilty to embezzling at least $40 million from the credit union.
The complaint stated that the negligence of the board deprived the members of the anticipated benefits of lower loan rates and higher savings rates.
CBS Employees FCU was liquidated on March 29, 2019.
University Credit Union (Los Angeles, CA), which assumed the shares and loans of the failed credit union, was also named as a defendant.
The plaintiffs are seeking compensatory and consequential damages of at least $40 million and any excess amount to be proven at trial.
Read the complaint.
The complaint alleged the Board of Directors and Supervisory Committee failed to exercise reasonable oversight of CEO Rostohar, who pleaded guilty to embezzling at least $40 million from the credit union.
The complaint stated that the negligence of the board deprived the members of the anticipated benefits of lower loan rates and higher savings rates.
CBS Employees FCU was liquidated on March 29, 2019.
University Credit Union (Los Angeles, CA), which assumed the shares and loans of the failed credit union, was also named as a defendant.
The plaintiffs are seeking compensatory and consequential damages of at least $40 million and any excess amount to be proven at trial.
Read the complaint.
Tuesday, August 13, 2019
Merger Will Create $2.1 Billion CU
Crain's Chicago Business is reporting that Consumers Credit Union (Gurnee, IL) and Andigo Credit Union (Schaumburg, IL) have announced their intention to merge.
Andigo Credit Union has $865 million in assets and Consumers Credit Union has $1.2 billion in assets.
The merger requires regulatory approval and a favorable vote by Andigo CU's members.
The merger is expected to close by the end of the year.
Read the article.
Andigo Credit Union has $865 million in assets and Consumers Credit Union has $1.2 billion in assets.
The merger requires regulatory approval and a favorable vote by Andigo CU's members.
The merger is expected to close by the end of the year.
Read the article.
Monday, August 12, 2019
Is There A Glass Ceiling at Large Credit Unions?
This is a question posed by Jordan van Rijn at the end of a research paper, Does CEO Gender Matter at Financial Institutions? An Event-Study Analysis of Credit Union Data, comparing the impact of gender differences on risk management and performance at credit unions.
The paper noted that 52 percent of all credit union chief executive officers (CEOs) were female, but only 14 percent of large credit unions with over $1 billion in assets have female CEOs.
The paper offered several explanations for this glass ceiling at large credit unions.
The paper noted that 52 percent of all credit union chief executive officers (CEOs) were female, but only 14 percent of large credit unions with over $1 billion in assets have female CEOs.
The paper offered several explanations for this glass ceiling at large credit unions.
- There may be fewer qualified female executives, "due to historically lower numbers of female graduates of MBA, finance, and economics programs."
- Women may place a greater emphasis on flexible work schedules and family time compared to men. Therefore, women would be less likely to apply for jobs with longer work hours.
- Women may desire positions with less competition and prefer working for smaller credit unions.
- Discrimination in hiring practices may play a greater role at larger credit unions.
Saturday, August 10, 2019
United FCU to Pay $1.75 Million to Resolve Class Action Lawsuit
United Federal Credit Union (Saint Joseph, MI) has agreed to pay $1.75 million to settle a class action lawsuit over the credit union's overdraft practices.
The class action lawsuit alleges that United Federal Credit Union did not properly opt members into its overdraft program for ATM and debit card payment transactions, and improperly charged Overdraft Fees when members had enough money in the ledger balances of their checking accounts, but not in their available balances, to pay for the transaction in question.
There are two groups included in this proposed class action settlement. The first is all members of the credit union who were charged an Overdraft Fee for any payment transaction from October 3, 2011 to September 30, 2018, and, at the time such fee was imposed, that person had sufficient funds in the ledger balance but not the available balance in his or her account to complete the transaction. The second group is all members of the credit union who were charged Overdraft Fees for ATM and debit card transaction for the first time from August 15, 2010 to September 30, 2018.
According to an expert witness, 10,297 members were assessed at least one overdraft fee between October 3, 2011 and September 30, 2018, when the member had a positive ledger balance in their account to cover the transaction at issue. There were 64,165 such fees totaling $1,919,818.
Read more.
The class action lawsuit alleges that United Federal Credit Union did not properly opt members into its overdraft program for ATM and debit card payment transactions, and improperly charged Overdraft Fees when members had enough money in the ledger balances of their checking accounts, but not in their available balances, to pay for the transaction in question.
There are two groups included in this proposed class action settlement. The first is all members of the credit union who were charged an Overdraft Fee for any payment transaction from October 3, 2011 to September 30, 2018, and, at the time such fee was imposed, that person had sufficient funds in the ledger balance but not the available balance in his or her account to complete the transaction. The second group is all members of the credit union who were charged Overdraft Fees for ATM and debit card transaction for the first time from August 15, 2010 to September 30, 2018.
According to an expert witness, 10,297 members were assessed at least one overdraft fee between October 3, 2011 and September 30, 2018, when the member had a positive ledger balance in their account to cover the transaction at issue. There were 64,165 such fees totaling $1,919,818.
Read more.
Friday, August 9, 2019
NCUA's Chairman Hood Outlines His Priorities
In a speech to the African-American Credit Union Coalition 21st Annual Conference, National Credit Union Administration (NCUA) Chairman Rodney Hood outlined his priorities for the agency of effective regulation, a forward-looking approach to innovation, and financial inclusion to better serve a changing population and economy.
First, Chairman Hood wants "to see a regulatory system that is effective, but not excessive." He noted that the agency is working to modernize the regulatory system, which involves "modifying, updating, or in some cases, eliminating regulations that no longer fit a changing financial system." He wants the regulatory system to encourage innovation and provide flexibility, while fulfilling NCUA's primary mission of protecting safety and soundness of the credit union industry.
Second, Chairman Hood stated he wanted to steer the industry in the right direction with regard to innovation. He noted that financial innovation is providing new opportunities to credit unions, but also poses new challenges. He further stated that cybersecurity is a significant concern and will remain a supervisory priority of the agency during his tenure.
Third, Chairman Hood commented that diversity and inclusion will be a priority of the agency. Chairman Hood cited that the United States is undergoing rapid and unprecedented demographic change. He stated: "Diversity and inclusion are a fundamental part of our industry’s history."
He mentioned that one tool at the agency's disposal to achieve this priority is the low-income designation of credit unions and noted that the number of low-income designated credit unions have gone from 184 in 1990 to over 2,500 today.
Read the speech.
First, Chairman Hood wants "to see a regulatory system that is effective, but not excessive." He noted that the agency is working to modernize the regulatory system, which involves "modifying, updating, or in some cases, eliminating regulations that no longer fit a changing financial system." He wants the regulatory system to encourage innovation and provide flexibility, while fulfilling NCUA's primary mission of protecting safety and soundness of the credit union industry.
Second, Chairman Hood stated he wanted to steer the industry in the right direction with regard to innovation. He noted that financial innovation is providing new opportunities to credit unions, but also poses new challenges. He further stated that cybersecurity is a significant concern and will remain a supervisory priority of the agency during his tenure.
Third, Chairman Hood commented that diversity and inclusion will be a priority of the agency. Chairman Hood cited that the United States is undergoing rapid and unprecedented demographic change. He stated: "Diversity and inclusion are a fundamental part of our industry’s history."
He mentioned that one tool at the agency's disposal to achieve this priority is the low-income designation of credit unions and noted that the number of low-income designated credit unions have gone from 184 in 1990 to over 2,500 today.
Read the speech.
Ohio Becomes the Latest State to Allow CUs to Compensate Directors
Legislation (House Bill 489) permits Ohio credit unions to compensate their directors.
The bill was signed into law in March 2019.
The legislation states "A credit union may provide any of the following to its directors and supervisory audit committee members: (1) Reasonable compensation for their service as directors or supervisory audit committee members."
Robert Rutkowski, Deputy Superintendent of the Ohio Division of Financial Institutions, wrote in the Credit Union Newsletter setting the Division's expectations for credit unions deciding to pay their directors.
Credit unions should take asset size and financial conditions into consideration when setting director pay.
Credit unions should also set new standards for director competence and performance as part of the compensation arrangement.
Read the newsletter.
The bill was signed into law in March 2019.
The legislation states "A credit union may provide any of the following to its directors and supervisory audit committee members: (1) Reasonable compensation for their service as directors or supervisory audit committee members."
Robert Rutkowski, Deputy Superintendent of the Ohio Division of Financial Institutions, wrote in the Credit Union Newsletter setting the Division's expectations for credit unions deciding to pay their directors.
Credit unions should take asset size and financial conditions into consideration when setting director pay.
Credit unions should also set new standards for director competence and performance as part of the compensation arrangement.
Read the newsletter.
Thursday, August 8, 2019
SAFE CU Pays $23 Million for Naming Rights to Convention and Performing Arts District
SAFE Credit Union (Folsom, CA) and the city of Sacramento announced that the credit union will pay $23 million for the naming rights to the convention center, performing arts center, and outdoor plaza in Sacramento, California.
The naming rights agreement is for 25 years.
The entire complex will be known as the SAFE Credit Union Convention and Performing Arts District. The Convention Center will be called the SAFE Credit Union Convention Center. The theater will be renamed SAFE Credit Union Performing Arts Center. A new outdoor plaza will be called SAFE Credit Union Plaza.
Also as part of the agreement, SAFE CU will offer its credit union membership to all new City of Sacramento employees and will provide a long-term treasury relationship supporting the city’s cash flow and liquidity needs.
Read more.
The naming rights agreement is for 25 years.
The entire complex will be known as the SAFE Credit Union Convention and Performing Arts District. The Convention Center will be called the SAFE Credit Union Convention Center. The theater will be renamed SAFE Credit Union Performing Arts Center. A new outdoor plaza will be called SAFE Credit Union Plaza.
Also as part of the agreement, SAFE CU will offer its credit union membership to all new City of Sacramento employees and will provide a long-term treasury relationship supporting the city’s cash flow and liquidity needs.
Read more.
Technology CU Provided $4.675 Million USDA Business Loan to Buy Boutique Hotel
Technology Credit Union (San Jose, CA) announced it has provided a $4.675 million USDA guaranteed business loan to Oceanic Enterprises, a private property management firm based in San Diego, California.
The loan helped Oceanic Enterprises purchase The Ascot Suites, a 32-room boutique hotel located in Morro Bay, California.
Read more.
The loan helped Oceanic Enterprises purchase The Ascot Suites, a 32-room boutique hotel located in Morro Bay, California.
Read more.
Wednesday, August 7, 2019
Interview with Lawyer Involved in Most Bank-CU Mergers
Recently, I interviewed Michael Bell, an attorney for Howard & Howard. Michael has been involved in more than 30 deals involving credit unions acquiring banks.
Below is the interview.
Q. How many bank – credit union deals have you done?
A. I presume you are referring to just whole bank (not branch deals). I’ve stopped counting by over 30.
Q. What was the first bank – credit union merger you did?
A. UFCU’s acquisition of Griffith Savings Bank started it all.
Q. This year the number of announced bank deals has already topped the number of announced deals in 2018. What does the deal pipeline of deals look like for the remainder of this year and next year?
A. I expect the pace of this year to continue, I have never been this busy. I believe it will go into next year as well.
Q. What is the potential universe (number) of credit unions seeking to acquire banks?
A. I think this type of transaction is applicable for 150-200 Credit Unions, a small portion of the total credit unions.
Q. The acquisition of a bank by a credit union will dilute the credit union’s net worth ratio. Is there a minimum net worth ratio for a credit union bidder?
A. The acquisition will impair/lower the capital ratio in some fashion. That said it will rebuild quickly since the transaction is revenue positive from day 1. Most if not all of my clients have internal policies relating to their capital levels and they typically have a floor of somewhere near 8%-9%.
Q. What are the primary motivations for a credit union to acquire a bank?
A. Generally it falls into four buckets. Geographic expansion, acquisition of loans or deposits, acquisition of talent and capabilities, and general/overall growth to strengthen the Credit Union.
Q. What are the biggest due diligence challenges for credit unions associated with these mergers?
A. I don’t think there are any challenges nor do I think their due diligence differs from a bank buyer. It involved everything a Seller should expect, loan files, contracts, HR matters, facilities, etc.
Q. I’ve read that field of membership(FOM) issues can create a potential roadblock for a bank – credit union merger. How have credit unions gotten around these issues? For example, what mechanism allowed Advia Credit Union to add the customers of Golden Eagle Community Bank to its field of membership?
A. On all the deals I work on we solve FOM PRIOR to our bid. We don’t want to waste any time and we want to reduce the possible deal risk for the Seller. Transactions often involve a parallel FOM expansion but we are comfortable with its likelihood of approval ahead of time. FOM is a restriction and we must operate within its bounds.
Q. Credit unions are not subject to the Community Reinvestment Act. Have any of credit union – bank mergers encountered any resistance from community groups or community activists? bank? If yes, what type of commitments did credit unions make to overcome this opposition?
A. Credit Unions aren’t and shouldn’t be subject to the CRA. Credit Unions by their very nature and make up exceed any CRA requirement they would have placed on them. We have never had any issues here. Once the CU closes support in the community, support for low and moderate income lending and related items will be the same at worst and is always better than before.
Q. What has been the top concerns raised by bank regulators regarding credit union – bank mergers, if any?
A. The main concern usually involves the change of insurance (from FDIC to NCUSIF) and its proper disclosure to the customers. Beyond that concerns are few and far between. The Bank regulators keep their focus on the entity they regulate and its dissolution/liquidation.
Q. Have regulators, especially credit union regulators, ever expressed concerns about the price a credit union is paying for a bank?
A. No, I have never had a transaction where this concern is raised. We are very deliberate in our analysis and share all of it with the regulators so they can see the safe and sound nature of our actions.
Q. It appears that these mergers are concentrated in the Southeast (Florida, Georgia, and Alabama) and the Upper Midwest (Michigan, Wisconsin, Indiana, and Illinois). Why?
A. This largely has to do with the sheer number of small banks in those areas. These transaction happen nationally and will continue to do so.
Q. Have credit unions that acquired banks experienced depositor run-off after the merger? If yes, what has been the typical depositor attrition rate at banks acquired by credit unions?
A. NO. 5% runoff would be catastrophic. This is for two main reasons. First, people don’t move their accounts. Second, the rate and fee structure they have after the closing will be the same or better, never worse.
Below is the interview.
Q. How many bank – credit union deals have you done?
A. I presume you are referring to just whole bank (not branch deals). I’ve stopped counting by over 30.
Q. What was the first bank – credit union merger you did?
A. UFCU’s acquisition of Griffith Savings Bank started it all.
Q. This year the number of announced bank deals has already topped the number of announced deals in 2018. What does the deal pipeline of deals look like for the remainder of this year and next year?
A. I expect the pace of this year to continue, I have never been this busy. I believe it will go into next year as well.
Q. What is the potential universe (number) of credit unions seeking to acquire banks?
A. I think this type of transaction is applicable for 150-200 Credit Unions, a small portion of the total credit unions.
Q. The acquisition of a bank by a credit union will dilute the credit union’s net worth ratio. Is there a minimum net worth ratio for a credit union bidder?
A. The acquisition will impair/lower the capital ratio in some fashion. That said it will rebuild quickly since the transaction is revenue positive from day 1. Most if not all of my clients have internal policies relating to their capital levels and they typically have a floor of somewhere near 8%-9%.
Q. What are the primary motivations for a credit union to acquire a bank?
A. Generally it falls into four buckets. Geographic expansion, acquisition of loans or deposits, acquisition of talent and capabilities, and general/overall growth to strengthen the Credit Union.
Q. What are the biggest due diligence challenges for credit unions associated with these mergers?
A. I don’t think there are any challenges nor do I think their due diligence differs from a bank buyer. It involved everything a Seller should expect, loan files, contracts, HR matters, facilities, etc.
Q. I’ve read that field of membership(FOM) issues can create a potential roadblock for a bank – credit union merger. How have credit unions gotten around these issues? For example, what mechanism allowed Advia Credit Union to add the customers of Golden Eagle Community Bank to its field of membership?
A. On all the deals I work on we solve FOM PRIOR to our bid. We don’t want to waste any time and we want to reduce the possible deal risk for the Seller. Transactions often involve a parallel FOM expansion but we are comfortable with its likelihood of approval ahead of time. FOM is a restriction and we must operate within its bounds.
Q. Credit unions are not subject to the Community Reinvestment Act. Have any of credit union – bank mergers encountered any resistance from community groups or community activists? bank? If yes, what type of commitments did credit unions make to overcome this opposition?
A. Credit Unions aren’t and shouldn’t be subject to the CRA. Credit Unions by their very nature and make up exceed any CRA requirement they would have placed on them. We have never had any issues here. Once the CU closes support in the community, support for low and moderate income lending and related items will be the same at worst and is always better than before.
Q. What has been the top concerns raised by bank regulators regarding credit union – bank mergers, if any?
A. The main concern usually involves the change of insurance (from FDIC to NCUSIF) and its proper disclosure to the customers. Beyond that concerns are few and far between. The Bank regulators keep their focus on the entity they regulate and its dissolution/liquidation.
Q. Have regulators, especially credit union regulators, ever expressed concerns about the price a credit union is paying for a bank?
A. No, I have never had a transaction where this concern is raised. We are very deliberate in our analysis and share all of it with the regulators so they can see the safe and sound nature of our actions.
Q. It appears that these mergers are concentrated in the Southeast (Florida, Georgia, and Alabama) and the Upper Midwest (Michigan, Wisconsin, Indiana, and Illinois). Why?
A. This largely has to do with the sheer number of small banks in those areas. These transaction happen nationally and will continue to do so.
Q. Have credit unions that acquired banks experienced depositor run-off after the merger? If yes, what has been the typical depositor attrition rate at banks acquired by credit unions?
A. NO. 5% runoff would be catastrophic. This is for two main reasons. First, people don’t move their accounts. Second, the rate and fee structure they have after the closing will be the same or better, never worse.
Consumer Credit at CUs Grew by Almost $2.4 Billion for June 2019
Outstanding consumer credit at credit unions grew by almost $2.4 billion to $476.1 billion during June, according to the Federal Reserve's G.19 Report.
Both revolving and nonrevolvoing credit at credit unions expanded during June.
Outstanding revolving credit grew from $63.2 billion for May to $63.7 billion for June.
Nonrevolving credit balances at credit unions increased by $1.8 billion during June to $412.4 billion.
Both revolving and nonrevolvoing credit at credit unions expanded during June.
Outstanding revolving credit grew from $63.2 billion for May to $63.7 billion for June.
Nonrevolving credit balances at credit unions increased by $1.8 billion during June to $412.4 billion.
Tuesday, August 6, 2019
Republican Senators Ask DOJ for Clarity on Website Accessibility under ADA
A group of Republican senators on July 30 wrote to Attorney General William Barr seeking an update on the Justice Department’s (DOJ) efforts to clarify compliance obligations for businesses with respect to website accessibility under the Americans with Disabilities Act (ADA).
The letter marks another attempt by Sen. Chuck Grassley (R-IA) to obtain clarity from the DOJ; last year, lawmakers wrote to then-Attorney General Jeff Sessions raising concerns about a lack of existing guidance.
The senators noted that unclear direction from the DOJ has left businesses, including banks and credit unions, exposed to litigation risk. “We therefore urge the Department to provide further clarity, especially given that the issue of whether the ADA applies to private websites at all—or the scope of such application—continues to be subject to conflicting judicial opinions,” they wrote. “Absent further guidance, compliance will remain a matter of increasing litigation and inconsistent outcomes.”
The other senators that signed unto the letter were Thom Tillis (R-NC), John Cornyn (R-TX), Mike Crapo (R-ID), Joni Ernst (R-IA), Marsha Blackburn (R-TN) and Mike Rounds (R-SD).
Read the letter.
The letter marks another attempt by Sen. Chuck Grassley (R-IA) to obtain clarity from the DOJ; last year, lawmakers wrote to then-Attorney General Jeff Sessions raising concerns about a lack of existing guidance.
The senators noted that unclear direction from the DOJ has left businesses, including banks and credit unions, exposed to litigation risk. “We therefore urge the Department to provide further clarity, especially given that the issue of whether the ADA applies to private websites at all—or the scope of such application—continues to be subject to conflicting judicial opinions,” they wrote. “Absent further guidance, compliance will remain a matter of increasing litigation and inconsistent outcomes.”
The other senators that signed unto the letter were Thom Tillis (R-NC), John Cornyn (R-TX), Mike Crapo (R-ID), Joni Ernst (R-IA), Marsha Blackburn (R-TN) and Mike Rounds (R-SD).
Read the letter.
Monday, August 5, 2019
VyStar CU Acquires Citizens State Bank
VyStar Credit Union (Jacksonville, FL) on August 5 has completed its acquisition of Citizens State Bank (Perry, FL).
VyStar Credit Union has $8.9 billion in assets. Citizens State Bank has $280 million in assets.
Read more.
VyStar Credit Union has $8.9 billion in assets. Citizens State Bank has $280 million in assets.
Read more.
11 NY Lawmakers Write Regulators about Taxi Medallion Lending
Eleven New York lawmakers are calling for tougher oversight of New York City taxi medallion lending.
In a July 25 letter to federal banking regulators, the lawmakers have asked for information about:
The letter went to the heads of the Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and the Office of the Comptroller of the Currency.
The lawmakers signing the letter were Representatives Alexandria Ocasio-Cortez, Adriano Espaillat, Nydia Velazquez, Yvette Clarke, Jerrold Nadler, Carolyn Maloney, Thomas Suozzi, Gregory Meeks, Jose Serrano, Grace Meng, and Hakeem Jeffries.
Read more.
In a July 25 letter to federal banking regulators, the lawmakers have asked for information about:
- entities involved in providing taxi medallion loans;
- whether the agencies have toughened oversight of the industry;
- are the agencies cooperating with any law enforcement investigations into lending practices;
- what extent the agencies or regulated entities have provided loan modifications, repayment plans, forbearances, or loan forgiveness options; and
- what gaps in regulatory oversight should be addressed to better protect taxi drivers and similarly situated individuals.
The letter went to the heads of the Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and the Office of the Comptroller of the Currency.
The lawmakers signing the letter were Representatives Alexandria Ocasio-Cortez, Adriano Espaillat, Nydia Velazquez, Yvette Clarke, Jerrold Nadler, Carolyn Maloney, Thomas Suozzi, Gregory Meeks, Jose Serrano, Grace Meng, and Hakeem Jeffries.
Read more.
Sunday, August 4, 2019
Report Highlights Top Management and Performance Challenges Facing Financial Regulators
The Council of Inspectors General on Financial Oversight (CIGFO) released its second annual report on the top management and performance challenges facing Financial-Sector Regulatory Organizations in 2019.
This report focused on seven areas:
• Enhancing Oversight of Financial Institution Cybersecurity
• Managing and Securing Information Technology at Regulatory Organizations
• Sharing Threat Information
• Ensuring Readiness for Crises
• Strengthening Agency Governance
• Managing Human Capital
• Improving Contract and Grant Management
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.
This report focused on seven areas:
• Enhancing Oversight of Financial Institution Cybersecurity
• Managing and Securing Information Technology at Regulatory Organizations
• Sharing Threat Information
• Ensuring Readiness for Crises
• Strengthening Agency Governance
• Managing Human Capital
• Improving Contract and Grant Management
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.
Friday, August 2, 2019
Florida Regulator Approves Merger of Bank into Fairwinds CU
The Florida Office of Financial Regulation on July 25 approved the application to merge and consolidate the assets and liabilities of Friends Bank (New Smyrna Beach, FL) into and with Fairwinds Credit Union (Orlando, FL).
The approval order noted that Fairwinds CU's field of membership already included all persons who live and work in Volusia County. In addition, Fairwinds has a low-income designation, which permits the credit union to accept deposits from nonmembers. Therefore, all depositors of Friend Bank, even those depositors that do not not live or work in Volusia County, will be able to maintain their deposits with Fairwinds after the merger is completed.
Fairwinds CU stated that it does not intend to acquire and retain Friends Bank stock or power to conduct commercial banking business under Friends Bank charter.
Within six months after the merger is consummated, Fairwinds will need to verify whether depositors and borrowers had opted-in to becoming members of Fairwinds Credit Union, did not opt-in but maintain nonmember deposit accounts with Fairwinds, or whose loans have been transferred to another financial institution, closed, or paid off their loans.
Fairwinds will need to divest any nonconforming activities based upon a time established by the regulator.
Before the merger is consummated, the merger must be approved by the National Credit Union Administration and the Federal Deposit Insurance Corporation.
To read the final approval order, go to the Florida Office of Financial Regulation website and click on Final Administrative Orders, which is under Our Services.
The approval order noted that Fairwinds CU's field of membership already included all persons who live and work in Volusia County. In addition, Fairwinds has a low-income designation, which permits the credit union to accept deposits from nonmembers. Therefore, all depositors of Friend Bank, even those depositors that do not not live or work in Volusia County, will be able to maintain their deposits with Fairwinds after the merger is completed.
Fairwinds CU stated that it does not intend to acquire and retain Friends Bank stock or power to conduct commercial banking business under Friends Bank charter.
Within six months after the merger is consummated, Fairwinds will need to verify whether depositors and borrowers had opted-in to becoming members of Fairwinds Credit Union, did not opt-in but maintain nonmember deposit accounts with Fairwinds, or whose loans have been transferred to another financial institution, closed, or paid off their loans.
Fairwinds will need to divest any nonconforming activities based upon a time established by the regulator.
Before the merger is consummated, the merger must be approved by the National Credit Union Administration and the Federal Deposit Insurance Corporation.
To read the final approval order, go to the Florida Office of Financial Regulation website and click on Final Administrative Orders, which is under Our Services.
Thursday, August 1, 2019
3Rivers FCU to Acquire West End Bank
3Rivers Federal Credit Union (Fort Wayne, IN) has entered into an agreement to acquire West End Bank (Richmond, IN).
West End Bank has $298.8 million in assets and operates 4 offices in Indiana.
3Rivers Federal Credit Union has $1.1 billion in assets with 16 offices in a seven county area in northeast Indiana and northwest Ohio.
Under the terms of the purchase and assumption agreement, West End Bancshares estimates that its stockholders will receive between $34.91 and $36.81 in cash consideration from the all-cash deal for each share of West End Indiana Bancshares common stock they own.
The transaction has been unanimously approved by the board of directors of both institutions and is expected to close in the first quarter of 2020, subject to customary closing conditions, the approval of West End Indiana Bancshares’s stockholders, West End Bank’s depositors and regulatory approvals.
The price of the bank's stock is up 22 percent on the news.
Read the press release.
West End Bank has $298.8 million in assets and operates 4 offices in Indiana.
3Rivers Federal Credit Union has $1.1 billion in assets with 16 offices in a seven county area in northeast Indiana and northwest Ohio.
Under the terms of the purchase and assumption agreement, West End Bancshares estimates that its stockholders will receive between $34.91 and $36.81 in cash consideration from the all-cash deal for each share of West End Indiana Bancshares common stock they own.
The transaction has been unanimously approved by the board of directors of both institutions and is expected to close in the first quarter of 2020, subject to customary closing conditions, the approval of West End Indiana Bancshares’s stockholders, West End Bank’s depositors and regulatory approvals.
The price of the bank's stock is up 22 percent on the news.
Read the press release.
Policy Advocate Calls for Illinois CUs to Pay Their Fair Share of Taxes
Peter Prickett, President of Council for Sound Tax Policy, has called for credit unions, especially the largest, to pay their fair share of the tax burden in Illinois.
Prickett stated that most consumers don't see any differences between banks and credit unions. Credit unions offer the same products and services as banks. And the largest Illinois credit unions tower over the majority of community banks they compete with.
In an opinion letter, Prickett pointed out that if the 16 largest Illinois credit unions had paid their fair share in 2018, this would have resulted in $20 million to $27 million in additional tax revenues to the state.
Prickett noted that 3 of Illinois largest credit union have bought naming rights to sports stadiums and signed exclusive sponsorship deals with sports teams, but paid nothing in income taxes.
Pricket wrote that "Illinois taxpayers should consider whether now is the time to ... end the antiquated income tax exemption for credit unions in Illinois."
Read the Op-Ed.
Prickett stated that most consumers don't see any differences between banks and credit unions. Credit unions offer the same products and services as banks. And the largest Illinois credit unions tower over the majority of community banks they compete with.
In an opinion letter, Prickett pointed out that if the 16 largest Illinois credit unions had paid their fair share in 2018, this would have resulted in $20 million to $27 million in additional tax revenues to the state.
Prickett noted that 3 of Illinois largest credit union have bought naming rights to sports stadiums and signed exclusive sponsorship deals with sports teams, but paid nothing in income taxes.
Pricket wrote that "Illinois taxpayers should consider whether now is the time to ... end the antiquated income tax exemption for credit unions in Illinois."
Read the Op-Ed.
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