Thursday, January 30, 2020

Day Air CU Buys Naming Rights to Minor League Ballpark

The Dayton Dragons on January 29 announced a new naming rights agreement with Day Air Credit Union, re-branding the stadium as Day Air Ballpark.

The naming rights deal is for 10-years. The financial terms of the deal were not disclosed.

Day Air Ballpark has a seating capacity of 6,831 and has 28 luxury suites.

The Dayton Dragons are the minor league affiliate of the Cincinnati Reds.

Read more.

Wednesday, January 29, 2020

Indiana Regulator Approves Bank's Acquisition of CU

Credit Union Times is reporting that Indiana's Department of Financial Institutions on January 24 approved the application of Adams County Farm Bureau Cooperative (Monroe, IN) to merge with First Bank of Berne (Berne, IN).

The transaction first required the privately-insured credit union to convert from a state-chartered credit union into a state-chartered mutual savings bank.

Immediately after that application was approved, the Indiana regulator approved the application First Bank of Berne for the converted credit union to merge into the bank.

This is the first Indiana credit union to be acquired by a bank.

Tuesday, January 28, 2020

Bethpage FCU Provides $27.5 Million Loan to Refi Student Housing at University of Maryland

The Commercial Observer is reporting that Bethpage Federal Credit Union (Bethpage, NY) provided a $27.5 million loan to Columbia, Md.-based Star Global Ventures to refinance student housing property at the University of Maryland.

The 10-year, non-recourse debt pays interest at a fixed rate of 4.5 percent, according to sources. The loan-to-value ratio was 60 percent — established over a 1.25x debt service coverage ratio — indicating that the asset’s value is approximately $49 million.

This commercial real estate loan should cause policymakers to rethink the tax exemption of large credit unions.

Read more.

Monday, January 27, 2020

In Op-Ed ABA Chair Stewart Highlights CUs Acquiring Banks

In an American Banker op-ed On January 23, ABA Chair Laurie Stewart called attention to the “disturbing trend” of large, tax-exempt credit unions purchasing taxpaying community banks. “Taxpayers didn’t get a say in these deals, but they unknowingly helped subsidize them,” Stewart wrote. “And the credit unions buying those banks will be able to grow well beyond their legitimate membership boundaries, while not paying taxes that would otherwise fund the nation’s schools, roads and infrastructure.”‌

Stewart shared her story as a former credit union CEO who converted her institution to a taxpaying bank when it became necessary to extend beyond the “common bond” of its membership base in order to grow. As the current president and CEO of Sound Community Bank, she reflected that “I still believe we made the right call, in both the letter and the spirit of the law. I wish today’s credit union CEOs felt the same need to play by the rules.”‌

Stewart added that a current push by the National Credit Union Administration to allow credit unions to put outside capital on their balance sheets could give credit unions even more buying power to purchase community banks without paying federal income taxes. “Should the NCUA approve this proposal . . . then Congress should intervene."

Read the op-ed.

Sunday, January 26, 2020

Navy FCU Reported Earnings of $1.64 Billion for 2019

Navy Federal Credit Union (Vienna, VA), the largest credit union in the world, reported net income of $1.64 billion for 2019. In comparison, the $112 billion credit union had a profit of $1.28 billion for 2018.

Navy FCU had total interest revenues of almost $6.27 billion and non-interest revenues of $1.7 billion for 2019.

Operating expenses were $3.25 billion. Dividends were slightly above $1 billion, while non-operating expenses were just shy of $2.1 billion.

Read the Statement of Income.

Saturday, January 25, 2020

CFPB Policy Statement Clarifies Abusive Practices

The Consumer Financial Protection Bureau (CFPB) on January 24 issued a policy statement outlining how it intends to cite and challenge “abusive” conduct in supervision or enforcement actions. The statement provides some long-awaited guidance on how the bureau views abusive conduct versus conduct which is unfair or deceptive. The policy statement is effective immediately.

When determining whether conduct meets the “abusive” standard in its supervision and enforcement activities, the CFPB said it will consider whether the harm to consumers outweighs the benefit to consumers. The bureau will also generally avoid “dual pleading” both abusiveness and unfairness or deception violations that stem from the same or nearly all of the same facts. Finally, the CFPB said it generally does not intend to seek monetary relief for abusive violations in instances where there is good-faith effort to comply with the abusiveness standard, except to address consumer injuries caused by the conduct.

“We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future,” said CFPB Director Kathy Kraninger. The CFPB did not rule out a future rulemaking to further define the abusiveness standard.

Read more.

Friday, January 24, 2020

NCUA Board Proposes Sub Debt and Combination Transaction Rules

The National Credit Union Administration (NCUA) Board on January 23 proposed a rule governing the issuance of subordinated debt by credit unions.

The rule would update the authority of low-income-designated credit unions to issue subordinated debt.

The proposed rule also would authorize complex credit unions subject to the agency’s risk-based capital requirements and new credit unions to use subordinated debt under certain circumstances.

The proposal will permit aspiring low-income credit unions and complex credit unions to issue subordinated debt.

The proposed rule will allow federal credit unions to borrow from any source.

The proposal will expand the eligible investors from institutional investors to accredited investors.

Plus, the proposed rule would incorporate enhanced investor protections.

This proposal will have a comment period of 120 days.

In addition, the NCUA Board proposed a rule providing greater clarity regarding the regulations governing transactions where a federally insured credit union proposes to assume liabilities from or merge with another institution that is not a credit union.

The proposed rule:
  • simplifies the basic requirements that apply to combination transactions between a federally insured credit union and another type of financial institution;
  • ensures that the directors of a federally insured credit union proposing such a transaction understand the nature and ramifications of the proposed transaction; and
  • makes regulatory provisions applicable to all asset purchases and lists other NCUA regulations that apply to each particular transaction.
All such transactions will require the NCUA’s approval, and state-chartered, federally insured credit unions also must obtain approval from their state regulator.

NCUA estimates that there will be approximately 20 transactions per year.

Wednesday, January 22, 2020

Indiana Members CU Completes Acquisition of Bank

Indiana Members Credit Union (Indianapolis, IN) announced that it has completed its acquisition of Commerce Bank (Evansville, IN), effective January 21, 2020.

Commerce Bank's customers became members of Indiana Members Credit Union.

Read the press release.

NCUA Is Reviewing Rep. Maloney's Letter

Below is the response from the National Credit Union Administration (NCUA) to a question regarding Representative Maloney's January 17 letter about taxi medallion loans in its possession.
Q: In light of Carolyn Maloney's January 17 letter calling for a moratorium on taxi medallion loan foreclosures and sales to Chairman Rodney Hood, will NCUA stop foreclosing and selling taxi medallion loans in its possession?
A: The NCUA is reviewing Rep. Maloney’s letter. Because any disposition of these assets involves sensitive, personal financial information, the agency is unable to comment on any specifics regarding its resolution strategy. The NCUA remains committed to finding a solution that is sensitive to the needs of medallion holders and their families and that meets its statutory obligations to minimize potential losses to the Share Insurance Fund.

Tuesday, January 21, 2020

Credit Union Odds and Ends

You might have missed the following news from around the country about credit unions.

The City of Sarasota announced a partnership with Manatee Community Federal Credit Union, a Bradenton, Florida-based Community Development Financial Institution, on December 30 to provide financial services and programs to unbanked, underbanked and underserved residents. Through the “Reliable Ride” program, residents will have an opportunity to open an account with the credit union and take advantage of low-interest vehicle loans in order to secure reliable transportation. Credit union members will also be able to apply for business startup loans through participation in Community Entrepreneur Opportunity courses.

Union Township Board of Trustees at its December 19 meeting approved a new tax increment financing district for Cincinnati, Ohio-based General Electric CU property. The amount of the tax increment financing was not disclosed.

On December 31, the Chillicothe City School District (OH) and Homeland Credit Union (Chillicothe, OH) entered into a naming rights agreement for a fitness center, according to the Highland County Press. In early 2019, the Chillicothe City School District obtained ownership of the Chillicothe Fitness and Racquet Club, which was in dire need of repairs and modernization. The credit union paid $250,000 for the naming rights to help cover the cost of repairs at the fitness center.

In other news, two credit unions spent millions of dollars on new office buildings. Financial Partners Credit Union (Downey, CA) paid $13 million for a 51,176-square-foot, two-story building in a Costa Mesa, California office park. Arkansas Federal Credit Union (Jacksonville, AR) purchased a 97,000-square-foot headquarters building in Little Rock (AR) for slightly more than $12 million.

Old Hickory Credit Union (Nashville, TN) last year agreed to pay $500,000 to settle a class action overdraft fees lawsuit. The credit union was alleged to improperly charge overdraft fees on available balances between January 1, 2013 and December 31, 2018, when the account's ledger balances were positive. Despite settling the lawsuit, the credit union claims it did nothing wrong.

Sunday, January 19, 2020

Maloney Calls for NCUA To Immediately Stop Taxi Medallion Loan Foreclosures and Sales

Congresswoman Carolyn B. Maloney, Chairwoman of the Oversight and Reform Committee, on January 17 called on the National Credit Union Association (NCUA) to place an immediate moratorium on both taxi medallion loan foreclosures and sales of taxi medallion loans currently owned by the NCUA.

Earlier this month, it was reported that NCUA was seeking to sell approximately 3,500 taxi medallions loans from failed credit unions in its possession by the end of January.

The letter comes in light of a New York City Medallion Task Force proposal to provide as much as $500 million in debt relief to borrowers.

Representative Maloney wrote that any foreclosure or sales of taxi medallion loans would be both premature and harmful to the many borrowers who were innocent victims of fraudulent lending practices.

Maloney argued that if NCUA sells its portfolio of taxi medallion loans before the Medallion Task Force recommendations can be implemented, then much of this relief will never reach the borrowers.

Read more.

Friday, January 17, 2020

Colorado State Regulator Blocks the Sale of Bank to CU

The Colorado State Banking Board on January 16 denied the sale of a Colorado community bank to one of the state’s largest credit unions. The board found that the deal—in which Boulder, Colorado-based Elevations Credit Union would purchase the assets of Cache Bank and Trust, headquartered in Greeley—did not meet the requirements of state law.

According to the American Banker, only one of the seven board members voted in favor of the acquisition.

In a letter to the state regulator earlier this week, the Colorado Bankers Association cited a state statute regarding the sale of assets between state-chartered banks, which essentially establishes “that a bank may only sell the bulk of its assets to another bank.”

Read the American Banker story (subscription required).

Scott CU Accused of Deceptive Overdraft Fee Practices

Scott Credit Union (Edwardsville, IL) has been accused of deceptive practices with respect to its charging overdraft fees, according to a potential class action lawsuit.

The complaint alleges the credit union violated the Illinois Consumer Fraud and Deceptive Practices Act.

In addition, Scott Credit Union is accused of breaching its duty of good faith and fair dealing as well as unjust enrichment.

The lawsuit was filed in St. Clair County Circuit Court on November 12.

Read more.

Thursday, January 16, 2020

Blue FCU to Buy Two Bank Branches and Deposits in Colorado

Blue Federal Credit Union (Cheyenne, WY) has agreed to buy two branches in Colorado from Liberty Savings Bank, FSB (Wilmington, OH).

The $1.1 billion-asset credit union said in a January 14 press release that it will also gain $101 million in deposits and 2,149 customers when it purchases the offices in Denver and Granby.

Blue FCU did not disclose the price of the deal.

The transaction, which was approved by regulators in November, is expected to close in February.

Read the press release.

Wednesday, January 15, 2020

Colorado Bankers Association Objects to CU Acquisition of Bank

The Colorado Bankers Association (CBA) on January 13 wrote State Bank Commissioner Ken Boldt objecting to Elevations Credit Union (Boulder, CO) proposed acquisition of Cache Bank & Trust (Greeley, CO).

This is the first announced acquisition of a bank by a credit union in Colorado.

The CBA cited existing statutes, which prohibit the acquisition as state laws hold that banks can only sell a substantial portion of their assets to other banks, with a similar prohibition in place for credit unions.

The CBA contended that the state banking board may be using the state's wildcard statute to authorize this transaction, which states that the banking board may allow a state chartered bank to conduct any banking activity a national bank is permitted to, so long as that activity is not legally prohibited.

However, the CBA wrote that the wildcard statute is not permissible, because liquidation is not a banking activity and the bank won't be engaging in it.

CBA stated that the proper forum for this change in policy is the Legislature, not by regulatory interpretation.

A hearing regarding this transaction is scheduled for January 16.

Read the letter.

Tuesday, January 14, 2020

3 CUs Remain in TARP's CDCI Program

At the end of 2019, four finacial institutions, including 3 credit unions, remain in the U.S. Department of the Treasury's Community Development Capital Initiative (CDCI) program.

The three credit unions are Cooperative Center Federal Credit Union (Berkeley, CA), D.C. Federal Credit Union (Washington, D.C.), and Buffalo Cooperative Federal Credit Union (Buffalo, NY).

During 2019, three credit unions repurchased their securities owned by the U.S. Treasury.

However, it is doubtful that two remaining credit unions will be able to exit the CDCI program. Both credit unions are undercapitalized.

CDCI program is part of the Troubled Asset Relief Program (TARP).

Monday, January 13, 2020

NCUA Seeks to Unload Portfolio of Taxi Medallion Loans

Crain's New York (subscription required) is reporting that the National Credit Union Administration (NCUA) is seeking to unload its entire portfolio of approximately 3,500 taxi medallion loans.

NCUA wants bidders to take all medallion loans, not just those loans for New York City medallions. The agency is hoping to wrap up the sale by the end of January.

NCUA took possession of these loans after the failure of several credit unions that specialized in taxi medallion loans.

To enhance transparency, NCUA should summarize the book value, appraised value, and sales price of these loans. The agency should report this information by whether the loan is performing or nonperforming.

The Federal Deposit Insurance Corporation publishes this information on loan sales.

If NCUA fails to disclose this information, the NCUA's Inspector General should disclose this information.

Friday, January 10, 2020

Verve to Complete Acquisition of South Central Bank

At the close of business on January 10, South Central Bank (Chicago, IL) will be officially acquired by Verve, a Credit Union (Oshkosk, WI).

On January 7, 2020, the Wisconsin Department of Financial Institutions approved adding the Illinois counties of DuPage and Cook (the portions north of Highway 20/95th Street) to the credit union's field of membership, as well as the members of South Central Bank as of the date of the purchase.

This is the second completed deal of a credit union acquiring an Illinois bank.

Read more.

Thursday, January 9, 2020

Alaska USA to Acquire 7 Arizona Branches from TCF Bank

Alaska USA Federal Credit Union (Anchorage, AK) and TCF National Bank, a subsidiary of TCF Financial Corporation (Wayzata, MN), announced on January 8 that Alaska USA has signed a definitive agreement to acquire TCF Bank’s seven branches located in the greater Phoenix, Arizona market, along with deposits and certain related assets.

As of June 30, 2019, TCF Bank's 7 Arizona branches had $191.5 million in deposits.

Also as part of the agreement, Alaska USA will extend employment offers to all TCF Bank team members who work at the seven branches.

Financial terms of the agreement were not disclosed, and the transaction is expected to close in the second quarter of 2020.

Read press release.

NCUA Supervisory Priorities for 2020

The National Credit Union Administration (NCUA) released a letter on its supervisory priorities for 2020.

The primary areas of supervisory focus are:
  • Bank Secrecy Act (BSA)/Anti-Money Laundering (AML);
  • Consumer Financial Protection;
  • Credit Risk Management;
  • Preparation for Implementing Current Expected Credit Losses;
  • Cybersecurity;
  • LIBOR Cessation Planning; and
  • Liquidity Risk
With regard to consumer financial protection, NCUA examiners will be required to review complaince with Electronic Fund Transfer Act (Regulation E), Fair Credit Reporting Act (FCRA), Gramm-Leach-Bliley (Privacy Act), Small dollar lending (including Payday Alternative Lending), Truth in Lending Act (Regulation Z), Military Lending Act (MLA), and Servicemembers Civil Relief Act (SCRA).

The focus on credit risk will place an emphasis on reviewing credit union’s loan underwriting standards and procedures, especially on the ability of borrowers to meet debt service requirements without undue reliance on the value of any collateral. Also, NCUA examiners will closely review credit unions with very high concentrations in specific type of loans.

NCUA further stated it will assess credit unions' exposure to LIBOR and planning related to the discontinuance of LIBOR.

Read more.

Wednesday, January 8, 2020

Outstanding Consumer Credit at CUs Fell in November 2019

The Federal Reserve reported on January 8 that outstanding consumer credit at credit unions fell in November 2019, according to the G.19 report.

In October, outstanding consumer credit at credit unions was $483.7 billion. In November, outstanding consumer credit was $482 billion.

While revolving credit at credit unions increased during November, outstanding nonrevolving credit fell.

Revolving credit at credit unions was up $400 million to $65.1 billion during November.

Nonrevolving credit at credit unions fell by $2.1 billion to $416.9 billion in November.

Tuesday, January 7, 2020

Section 337 of the Tax Code Applies to CUs Buying Banks

An article in Business Observer regarding the acquisition of Apollo Bank (Miami, FL) by Suncoast Credit Union (Tampa, FL) noted that the credit union will pay a 24.5 percent tax on the transaction.

According a Michael Bell, who is a lawyer with the law firm of Howard & Howard and has done a majority of bank mergers into credit unions, this tax deals with Section 337 of the Internal Revenue Code.

Michael Bell stated that Section 337 is a tax that "gets paid when when a for profit merges with a non profit." However, he notes this tax does not receive a lot of attention.

Bell pointed out these deals are heavily taxed and have resulted in hundreds of million dollars in taxes being paid.

The tax is on the difference between the fair market value and the tax basis of the bank.

The CEO of Suncoast CU said that the tax is worth gaining access to a new market.

Monday, January 6, 2020

Several Large CUs Switch to State Charters

in the new year, several large credit unions switched from a federal to state charter.

Dort Federal Credit Union (Grand Blanc, MI) converted to a state charter and changed its name to Dort Financial Credit Union. As a result of the charter conversion, membership at the $978 million credit union is open to anyone who lives, works, worships, or attends school in the State of Michigan.

The New York Department of Financial Services in December approved the conversion of Hudson Heritage Federal Credit Union (Middletown, NY) and Sunmark Federal Credit Union (Latham, NY) from a federal charter to a New York State-chartered credit union.

A state charter will give Hudson Heritage Credit Union more flexibility related to its field of membership and the ability to expand in the future. The $425 million credit union will now serve a community-based field of membership of Orange, Dutchess, Ulster, Rockland and Sullivan Counties in New York; Pike County in Pennsylvania; and Sussex County, New Jersey.

Sunmark Credit Union's field of membership will include the communities of Fulton, Warren, Saratoga, Schoharie, Albany, Greene, Montgomery, Schenectady, Rensselaer, Dutchess, Westchester, Putnam, Columbia, and Rockland Counties; certain occupational groups and associations of Onondaga County; and 307 select employer groups. Sunmark has $730 million in assets.

Friday, January 3, 2020

257 CUs Borrowed from Federal Reserve Discount Window During Q4 2017

The Federal Reserve released data on December 31 that 257 credit unions visited the Discount Window 322 times and borrowed an aggregate $344,854,639 during the fourth quarter of 2017.

In the third quarter of 2017, 188 credit unions borrowed from the Federal Reserve's Discount Window.

The average amount borrowed by credit unions from the Discount Window was $1,074,314. However, the median amount borrowed was $10,000.

The maximum amount borrowed was $90 million by Great Lakes Credit Union (Bannockburn, IL).

United Business and Industry Federal Credit Union (Plainville, CT) visited the Discount Window 19 times during the the quarter, followed by Aurora Credit Union (Milwaukee, WI), which visited the Discount Window 15 times during the quarter.

The vast majority of the credit unions borrowing from the Discount Window used the primary credit program, which is available for the healthiest institutions. Five credit unions borrowed from the seasonal credit program, which assists small depository institutions in managing significant seasonal swings in their loans and deposits.

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

Thursday, January 2, 2020

Fed Analysis Found CU Competition Mitigated Anti-Competitive Impacts of Bank Merger

In its approval of First Citizens BancShares (Raleigh, NC) acquisition of Entegra Financial Corp. and its subsidiary Entegra Bank (Franklin, NC), the Federal Reserve Board (Board) found that in several North Carolina banking markets that credit unions exerted competitive influences mitigating the anti-competitive effects of the merger.

The Board specifically evaluated the competitive impact of the merger on the banking markets of Cherokee, Transylvania County, Jackson, and Macon County.

The Board found in these four banking markets, North Carolina’s State Employee’s Credit Union (SECU) exerted a competitive influence.

For example, the Board found in the Cherokee banking market, which is comprised of Cherokee and Clay Counties, that 21 percent of the residents were members of SECU. In addition, SECU operates street-level branches that are easily accessible to residents in the market and controlled approximately $166 million in deposits in the Cherokee banking market. Board also noted that there was another credit union in the market offered a wide range of products and its field of membership included almost all of the residents in the banking market.

In the other three banking markets, almost 28 percent of market residents in the Jackson banking market, approximately 21 percent of market residents in the Macon County banking market, and 12 percent of market residents in the Transylvania County banking market were members of the SECU. In addition to SECU, two of the banking markets has other credit union competitors.

Read more.


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