Friday, May 29, 2020

NCUA Liquidates IBEW Local Union 712 FCU

The National Credit Union Administration on May 29 liquidated IBEW Local Union 712 Federal Credit Union in Beaver, Pennsylvania.

West Penn P&P Federal Credit Union of Beaver, Pennsylvania, immediately assumed IBEW Local Union 712 Federal Credit Union’s assets, member shares, and loans. West Penn P&P Federal Credit Union has 2,150 members and assets of nearly $14.8 million, according to the credit union’s most recent Call Report.

At the time of liquidation and subsequent purchase by West Penn P&P Federal Credit Union, IBEW Local Union 712 served 2,935 members and had assets of approximately $7.7 million. The credit union was insolvent with a net worth ratio of negative 18.32 percent. The credit union reported net income of minus $2.34 million for the first quarter of 2020, as provision for loan and lease losses was almost $2.37 million.

This is the first credit union liquidation in 2020. The last credit union to be liquidated in Pennsylvania was First African Baptist Church Federal Credit Union (Sharon Hill, PA) on November 29, 2016.

Read the press release.

Coalition Writes Congress for Liability Protection as Economy Reopens from COVID-19 Pandemic

A diverse coalition of over 200 trade associations and other organizations, including bank and credit union trade groups, wrote lawmakers on May 27 to enact “temporary and targeted liability relief legislation” to safeguard businesses, nonprofits and others from frivolous lawsuits as employees return to workplaces.

“Absent a targeted safe harbor for those that work to follow applicable guidelines, the fear and uncertainty from boundless liability threatens to impede our country’s social and economic recovery,” the groups wrote. “In the wake of prior crises, Congress came together to pass timely and targeted liability protections with strong bipartisan support because lawmakers understood the acute economic threat of lawsuits at moments of maximum economic vulnerability.”

The groups stated that these protections would be “limited in scope and preserve recourse for those harmed by truly bad actors who engage in egregious misconduct.”

Read the letter.

Thursday, May 28, 2020

Credit Unions Are Using PPPLF

Credit unions have availed themselves of the Federal Reserve's Paycheck Protection Program Liquidity Facility (PPPLF).

The Federal Reserve created the PPPLF to bolster the effectiveness of the Small Business Administration's Paycheck Protection Program (PPP).

The PPPLF extends credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value.

Small Business Administration-qualified PPP lenders—both depository institutions and non-depository institutions—are eligible to borrow under the PPPLF.

On May 15, the Federal Reserve disclosed the name of the participants using the PPPLF, the amount borrowed, interest rate charged, and the value of collateral.

Credit unions using the PPPLF between April 16 and May 6 include:
  • Potlatch No 1 Financial Credit Union (Lewiston, ID);
  • Greater Nevada Credit Union (Carson City, NV);
  • Carter Federal Credit Union (Springhill, LA);
  • Aneca Federal Credit Union (Shreveport, LA);
  • Elements Financial Credit Union (Indianapolis, IN);
  • United Federal Credit Union (Saint Joseph, MI);
  • Notre Dame Federal Credit Union (South Bend, IN);
  • Capital Area Realtors Federal Credit Union (Rockville, MD);
  • Noteworthy Federal Credit Union (Cleveland, OH);
  • Self-Help Federal Credit Union (Durham, NC);
  • Stepping Stones Community Federal Credit Union (Wilmington, DE); and
  • Empire Financial Federal Credit Union (Bayside, NY).
The outstanding collateral from these credit unions was $119 million.

Wednesday, May 27, 2020

NCUA Writes FCC Regarding Emergency Exception for Automated Calls

National Credit Union Administration Chairman Rodney E. Hood on May 19 wrote to the Federal Communications Commission (FCC) regarding a third-party petition to permit certain automated calls to fall under the Emergency Purposes Exception of the Telephone Consumer Protection Act (TCPA).

Hood wrote: "Autodialed calls providing information about payment deferrals, fee waivers, loan term extensions, other loan modifications, and forbearance could assist consumers during this challenging time."

In the letter, Hood noted that financial institutions are not seeking permission to use automated calls related to advertising, telemarketing, or seeking payment on a debt. Like other financial institutions, federally insured credit unions must comply with all other consumer protection laws governing autodialed calls.

In a related matter, a coalition of financial trade groups on May 21 wrote the FCC requesting an expedited ruling or waiver stating that phone calls and text messages placed by banks, credit unions, and other customer-facing financial service providers using an automatic telephone dialing system or prerecorded or artificial voice on matters related to the COVID-19 pandemic are “call[s] made for emergency purposes."

The trade groups signing the letter were the American Bankers Association (ABA), American Financial Services Association, Consumer Bankers Association, Credit Union National Association, Independent Community Bankers of America, Mortgage Bankers Association, and National Association of Federally-Insured Credit Unions.

Read the NCUA letter.

Read the joint trade group letter.

Tuesday, May 26, 2020

NCUA Makes Two Temporary Changes to PCA Requirements

The National Credit Union Administration (NCUA) Board on May 21 approved an interim final rule making two temporary changes to its prompt corrective action (PCA) requirements for credit unions that become less than well capitalized..

This interim rule temporarily reduces the earnings retention requirement for credit unions classified as adequately capitalized. For those credit unions that do not meet the earnings retention requirement, they will not have to submit a written application requesting approval to decrease its earnings retention amount. But if a credit union poses an undue risk to the National Credit Union Share Insurance Fund or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request.

The interim final rule temporarily permits an undercapitalized credit union to submit a streamlined net worth restoration plan, demonstrating that the reduction in capital was caused predominantly by share growth and that this is a temporary condition because of the pandemic. However, if a credit union becomes less than adequately capitalized for reasons other than share growth, they must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.

The NCUA Board believes that these amendments will provide federally insured credit unions with additional flexibility without jeopardizing the safety and soundness of the credit union system.

The interim final rule will become effective once it is published in the Federal Register.

These temporary changes will be in place until the end of 2020.

Read the interim final rule.

Monday, May 25, 2020

Acquisition of Ben Franklin Bank by CU Completed

Corporate America Family Credit Union (Elgin, IL) completed its acquisition of Ben Franklin Bank of Illinois (Arlington Heights, IL) on April 30, 2020.

The Federal Deposit Insurance Corporation approved the merger on April 13, 2020.

Corporate America Family CU had $617 million in assets, as of March 2020. Ben Franklin Bank had $93 million in assets at the end of the first quarter of 2020.

Saturday, May 23, 2020

499 CUs Had Not Filed Call Reports as of May 15

S&P Global Market Intelligence is reporting that a number of credit unions took advantage of the regulatory delay in filing their call reports during the coronavirus pandemic.

The National Credit Union Administration extended the deadline for federally insured credit unions that file call reports to May 26 from April 26.

According to S&P Global Market Intelligence, 499 credit unions or 9 percent of all federally-insured credit unions had not filed their first quarter 2020 call report as of May 15.

These credit unions held over 8 percent of the industry's assets, based upon December 31, 2019 call reports.

Read more.

Friday, May 22, 2020

Federal Regulators Issue Guidance on Responsible Small-Dollar Lending

To encourage depository institutions to engage in responsible small-dollar lending, federal financial regulators on May 20 issued long-awaited joint guidance for offering these types of loans to consumers and small businesses.

“Well-designed small-dollar lending programs can result in successful repayment outcomes that facilitate a customer’s ability to demonstrate positive credit behavior and transition into additional financial products,” the agencies noted. They added that these programs should be developed in accordance with sound risk management principles.‌‌

When making small-dollar loans, the agencies said that lenders may underwrite loans using internal or external data sources, such as deposit account activity, to assess a customer’s creditworthiness, effectively manage risk, and lower the cost of providing responsible small-dollar loans.

Lenders also should ensure that they comply with all applicable laws and regulations, including fair lending laws, the agencies said. Other core lending principles include effectively managing the risks associated with the products offered and underwriting small-dollar products based on prudent policies and practices. These policies and practices should generally address loan structures, pricing, underwriting, marketing and disclosures, along with servicing and safeguards for customers who may find themselves experiencing stress or unexpected circumstances.

The guidance was issued by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

Read the joint principles.

Thursday, May 21, 2020

Fewer Problem CUs During the First Quarter of 2020, NCUSIF Reserves Up

The number of problem credit unions fell during the first quarter of 2020, according to the National Credit Union Administration (NCUA).

There were 175 problem credit unions at the end of the first quarter of 2020. In comparison, there were 190 problem credit unions at the end of 2019.

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

Shares (deposits) in problem credit unions declined from $9.7 billion at the end of 2019 to $9.4 billion, as of March 2020. At the end of first quarter of 2020, 0.77 percent of total insured shares were problem credit unions compared to 0.79 percent of total insured shares at the end of 2019.

Most problem credit unions were small credit unions.

NCUA reported that almost 88 percent of the problem credit unions have less than $100 million in assets, while 1.7 percent of problem credit unions have more than $500 million in assets.

However, almost 45 percent of insured shares in problem credit unions were in credit unions with $500 million or more in assets.

In addition, NCUA stated that reserves at the National Credit Union Share Insurance Fund increased during the first quarter of 2020 from $117 million to $177.7 million.

Wednesday, May 20, 2020

Moody's Analytics: The Road Ahead for Credit Unions

A webinar by Moody's Analytics looks at the impact of COVID-19 on credit unions.

Here are some insights from the webinar.

Moody's Analytics expects auto and unsecured balances at credit unions to decline. However, mortgage balances are expected to grow.

Credit union default rates on consumer loans will trail initial unemployment claims by six months to one year. This would mean loss rates will peak toward the end of this year or in the first half of next year.

Auto loans are an area of concern. Gross loss rates on auto loans at credit unions will peak at around 3.5 percent, which will be above loss rates during the financial crisis.

According to the webinar, loss rates on credit cards will be in unchartered territory and will come quickly, especially at the largest credit unions.

Click here to watch the webinar.

Tuesday, May 19, 2020

MidFlorida CU's Car Repossession Gets Unwelcomed Media Scrutiny

An investigative reporter for WFLA News Channel 8 was called about Lakeland, Florida-based MidFlorida Credit Union's repossession of a nurse's car.

The nurse was told her car was repossessed due to missed payments. But she was not able to get answers to her question about the missing payments until the reporter got involved.

The car was flagged for repossession by the $4.6 billion credit union because her payments were short by 66 cents each month.

The credit union agreed to pay the $400 repossession fee and to have the nurse's car towed to her driveway.

A spokesperson for the credit union stated that before repossessing a vehicle, the credit union will attempt to contact the member by phone, mail and even door-knock service to make payment arrangements.

The nurse stated she was never contacted by the credit union.

Read more.

A Snapshot of Y-o-Y Performance of the 10 Largest CUs

The 10 largest credit unions at the end of 2019 saw in aggregate increases in provisions for loan and lease losses and allowance for loan and lease losses in the first quarter of 2020 compared to a year earlier. Net income at these 10 credit unions in aggregate fell year-over-year.

These 10 credit unions accounted for almost 18 percent of the industry's assets.

In aggregate, provisions for loan and lease losses grew by 47.2 percent Boeing Employees Credit Union posted the largest year-over-year percentage change in provisions for loan and lease losses of almost 389 percent.

Net income fell by a combined 55 percent year-over-year at these 10 credit unions. two credit union reported a year-over-year increase in net income, while two credit unions posted losses in the first quarter of 2020 after posting positive earnings a year earlier. The credit union with the largest year-over-year percentage decline in net income was Alliant Credit Union of 341 percent.

Allowance for loan and lease losses grew year-over-year by a combined 19.5 percent. Alliant CU posted the largest year-over-year percentage change, followed by Pentagon FCU.

Monday, May 18, 2020

Some CUs Could Be Hit Hard by Coronavirus Layoffs

The Wall Street Journal examined credit unions whose membership have been hit hard by the economic shutdown arising from the coronavirus.

The article noted there are a number of credit unions exposed to casinos, oil, and other industries that have been affected by coronavirus mass layoffs.

According to the Credit Union National Association, almost a third of credit unions are tied to a single employer, industry, or association. This means that these credit unions could see sudden mass layoffs in their membership.

For example, WestStar Credit Union (Las Vegas, NV) is closely tied to the Las Vegas casino industry. On March 18, all casinos were closed by an order from the governor of Nevada. The credit union reported that one in five borrowers have asked for a deferral on a car or home loan.

Provisions for loan and lease losses at WestStar went from $67,300 at the end of the first quarter in 2019 to $553,800 one year later, according to its Financial Performance Report.

Read the story (subscription required).

Thursday, May 14, 2020

Indiana DFI Approved Merger of West End Bank into Three Rivers FCU

The Indiana Department of Financial Institutions (DFI) on May 14 approved the resolution of the Board of Directors of West End Bank, S.B. (Richmond, IN) to sell all of its assets to Three Rivers Federal Credit Union (Fort Wayne, IN).

Three Rivers FCU will also assume most of the liabilities of West End Bank.

National Credit Union Administration (NCUA) worked with the credit union to alter its field of membership from a community charter to a multiple common bond charter, so that it could acquire West End Bank's customers.

West End Bank has $288 million in assets and $30.6 million in bank equity capital, as of December 31, 2019.

Three Rivers FCU has $1.26 billion in assets as of March 31, 2020.

The purchase price is $43.3 million with conditions.

The Federal Deposit Insurance Corporation approved the application last week and the NCUA is expected to approve the application on May 15.

The vote was unanimous.

Wednesday, May 13, 2020

11 Corporate CUs Joined the CLF as Agent Member

The National Credit Union Administration (NCUA) announced on May 11 that all eleven corporate credit unions had joined the Central Liquidity Facility (CLF) as agent members for a subset of their members.

As agent members, the corporate credit unions have purchased the CLF capital stock for their member credit unions with assets less than $250 million.

This means that all credit unions with assets less than $250 million that are members of a corporate credit union are now eligible to apply for a loan from the CLF.

According to NCUA, this action has extended CLF coverage to more than 3,700 credit unions and increased the CLF’s borrowing capacity by over $13 billion.

This arrangement was made possible by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. However, it is temporary and will sunset on December 31, 2020.

Read more.

Tuesday, May 12, 2020

Merger Between Suncoast CU and Apollo Bank Called Off

Apollo Bank (Miami, FL) and Suncoast Credit Union (Tampa, FL) have mutually agreed to terminate their planned merger, according to the Miami Herald.

The decision to withdraw the merger application with Suncoast’s regulator, the National Credit Union Administration, follows a series of coronavirus-related regulatory delays.

Read the story.

Bills Exempt Business Loans Made During Pandemic Emergency from MBL Cap

Legislation has been introduced in the House of Representatives and the Senate that will exempt business loans made during the COVID-19 pandemic from the aggregate member business loan (MBL) cap.

Representative Brad Sherman (D - CA) introduced on May 8 legislation (HR 6789) to exempt business loans originated by insured credit unions during the COVID-19 pandemic from the aggregate member business loan (MBL) cap until one year after the end of the COVID-19 emergency declaration.

The aggregate MBL cap for credit unions is 12.25 percent of assets.

The COVID-19 emergency declaration occurred on March 13, 2020.

The bill also extends temporary provisions dealing with the Central Liquidity Facility in the CARES Act, which were scheduled to expire at the end of 2020. The CARES Act expanded access to and increased the borrowing authority for the Central Liquidity Facility.

Co-sponsors of the bill include Reps. Don Young (R-AK), Brian Fitzpatrick (R-PA), Maxine Waters (D-CA), Suzanne Bonamici (D-OR), Vicente Gonzalez (D-TX), Eleanor Holmes Norton (D-DC), Joe Neguse (D-CO), J. Luis Correa (D-CA), Alan Lowenthal (D-CA), Jeff Van Drew (R-NJ) and David Trone (D-MD).

Senator Ron Wyden (D-OR) announced his intention to introduce a companion bill that would exempt the extension of credit to aid in the recovery of the COVID-19 emergency from the definition of a member business loan and thereby the MBL cap for one year. The bill states that the extension of credit must occur before the end of the one-year period beginning on March 13, 2020.

Monday, May 11, 2020

United 1st FCU to Convert to State Charter

United 1st Federal Credit Union (Kingsland, GA) is seeking to switch from a federal to a state charter.

Management at the $172 million credit union has been meeting with the Georgia Department of Banking and Finance over the last two years exploring the conversion to a state charter.

The credit union submitted its application to the National Credit Union Administration in early 2020 and received approval to move forward with the vote of the membership.

The credit union cited several reasons for converting to a state charter, including:
  • the credit union would have increased field of membership opportunities that would allow for further growth;
  • non-member deposits would be permissible regardless of a low-income designation; and
  • under the state's parity provisions, the credit union would be granted the same rights as all Georgia corporations and state chartered banks.
The ballots from members of United 1st need to be received by May 28, 2020.

Read the Q&A.

Friday, May 8, 2020

NCUA Includes Military Personnel in Calculation of Low-Income Designation

The National Credit Union Administration (NCUA) announced on May 7 that it will include military personnel in its determination of whether a credit union qualifies for a low-income designation.

Under the new approach, military personnel will now be considered in a similar manner as students attending colleges, universities, vocational or technical schools when the NCUA evaluates a federally insured credit union’s low-income designation.

In other words, all military personnel will be treated as presumptive low-income individuals.

However, not all military personnel are low-income. Are admirals and generals low-income?

Credit unions receiving a low-income designation are exempt from the statutory member business loan cap of 12.25 percent of assets, are authorized to obtain secondary capital, are able to accept deposits from non-members, and are eligible for grants and loans from the Community Development Revolving Loan Fund.

But this pronouncement from this rogue regulator appears to violate the Administrative Procedures Act, as this represents a major change in its rules and regulations.

Read the press release.

Thursday, May 7, 2020

Consumer Credit at CUs Increased in March

The Federal Reserve reported on May 7 that outstanding consumer credit at credit unions grew in March, according to its G.19 report.

Outstanding consumer credit at credit unions increased by $4.1 billion in March to $489 billion.

Revolving credit at credit unions fell by $900 million in March to $64.3 billion.

However, outstanding nonrevolving credit rose by $5 billion in March to $424.7 billion.

Wednesday, May 6, 2020

Merger Would Create $3 Billion CU

Firefly Credit Union (Burnsville, MN) and TruStone Financial Federal Credit Union (Plymouth, MN) on May 5 announced their intent to merge subject to regulatory approval and a member vote.

TruStone Financial FCU has almost $1.6 billion in assets at the end of 2019.

Firefly CU has $1.4 billion in assets.

In conjunction with the merger, TruStone Financial will switch from a federal to a state charter.

TruStone Financial stated that as a state-chartered credit union it will have greater ability to expand into new counties throughout Minnesota and Wisconsin.

Read more.

Tuesday, May 5, 2020

Conserved Tennessee CU Is Insolvent as of March 31, 2020

At the end of the first quarter, Mid East Tennessee Community Credit Union (Decatur, TN) was insolvent.

The National Credit Union Administration placed the $10 million credit union into conservatorship on April 23, 2019.

The credit union's net worth was negative $134,539, as of March 31, 2020. It net worth ratio was minus 1.34 percent. The credit union has been critically undercapitalized based upon Call Report information since June 2019.

The credit union posted a loss of $154,819 for the first quarter of 2020, after recording a loss of almost $734 thousand for 2019.

The credit union reported that 3.55 percent of its loans were delinquent or $216,866 of loans were 60 days or more past due.

The credit union reported an annualized net charge-off rate of 10.11 percent for the first quarter, as net charge-offs were $169,853 for the first quarter of 2020. The credit union posted net charge-offs of almost $264 thousand for 2019.

NCUA in 2019 found that two former officials at the credit union had filed false Call Reports containing inaccurate financial information with the intent of manipulating the credit union's net worth ratio. Both individuals consented to orders of prohibition.

Monday, May 4, 2020

NCUA Calls on Exempting CUs from CECL, Provides Guidance on Strategies for Working with Borrowers Affected by COVID-19

In an April 30 letter, National Credit Union Administration (NCUA) Chairman Rodney E. Hood urged the Financial Accounting Standards Board to exempt credit unions from complying with the current expected credit losses (CECL) methodology.

Hood wrote that "compliance costs associated with implementing CECL overwhelmingly exceed the benefits."

In addition, he argued that implementing CECL will have a chilling effect on lending, especially loans to low-income borrowers, and will negatively impact the net worth position of credit unions.

He noted that most credit unions are small and would face data collection challenges required by CECL.

Read the letter.

In a letter to credit unions, NCUA described various strategies that credit unions can employ to work with borrowers who experience financial hardship because of the COVID-19 pandemic.

The letter offers suggestions ranging from providing borrowers new funds to temporarily or permanently modifying loans.

The letter also describes how credit unions should monitor and report loan modifications.

Read the letter.

Sunday, May 3, 2020

New Buffalo Savings Bank and Teachers CU Adjust Price of the Transaction

New Buffalo Savings Bank (New Buffalo, MI) and Teachers Credit Union (South Bend, IN) announced on May 1 an update on the previously-announced purchase and assumption transaction.

The original terms of the transaction had shareholders receiving $28.42 per share in cash for each share of outstanding New Bancorp common stock. Under the revised terms, New Bancorp shareholders will receive $26.00 per share in cash for each share of outstanding New Bancorp common stock.

The adjustment in the per share price was based primarily on a significant increase in the termination cost of New Buffalo’s defined pension plan due to the unprecedented decline in long-term interest rates, as well as significant economic and market uncertainties related to the COVID-19 pandemic.

The transaction has received all regulatory approvals required to complete the transaction and expects to close the transaction on June 5, 2020, subject to obtaining the approval of the New Bancorp stockholders at a special meeting to be held on June 4, 2020 and the satisfaction of customary closing conditions.

Read the press release.

Saturday, May 2, 2020

CP FCU to Seek State Charter

CP Federal Credit Union (Jackson, MI) has started the process of converting to a state charter.

According to the credit union's winter newsletter, the credit union filed an application with the state regulator to switch from a federal to state charter.

The credit union stated that as a state charter the credit union will be able to serve all persons who live, work, worship, or attend school in the State of Michigan. The credit union noted that as a federal credit union it could not serve such a broad field of membership.

The credit union wrote that this decision to become a state charter was to ensure the long-term viability of the credit union.

The Michigan Department of Insurance and Financial Services tentatively approved the credit union's application on March 12, 2020.

The next step is to have the membership vote on this conversion.

CP Federal Credit Union has $468 million in assets.

Friday, May 1, 2020

NCUA Writes Senator Crapo with Legislative Recommendations

In an April 29 letter to Senator Crapo (R-ID), National Credit Union Administration (NCUA) Chairman Rodney Hood identified legislative changes that would benefit the agency during the coronavirus-induced recession.

The recommended legislative changes can be divided into four areas: improving liquidity for credit unions, providing capital relief to credit unions, enhancing community lending activities, and increasing access for remote financial services delivery for credit unions.

Some of these recommended changes are temporary, while others are permanent.

For example, some of the temporary legislative recommendations sought by NCUA are:
  • to lower the net worth ratio for credit unions to be well capitalized and adequately capitalized from 7 percent to 6 percent and from 6 percent to 5 percent, respectively.
  • to raise the member business loan cap from 12.25 percent of assets to 20 percent assets during the recovery period.
The NCUA is requesting that Congress make permanent the temporary changes to the Central Liquidity Facility that was enacted in the CARES Act. NCUA also wants to permanently expand loan maturity limit for federal credit unions from 15 years to 30 years.

Other permanent changes to the Federal Credit Union Act include allowing all federal credit unions, just not multiple common-bond federal credit unions, to add underserved areas and to eliminate or significantly modify the reasonable proximity requirement to a service facility for a multiple common-bond federal credit union to serve select employee groups and associations.

Read the letter.

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