Tuesday, June 30, 2020

Trade Groups Call for Inclusion of AML Bill in NDAA

In a June 27 letter to Senate Armed Services Committee leaders, seven financial trade organizations called for the inclusion of the Anti-Money Laundering (AML) Act of 2020 as part of the 2021 National Defense Authorization Act (NDAA).

The bill includes critical provisions for law enforcement investigations into organized transnational criminal operations, human trafficking, terrorism financing and other unlawful activity.

Among other things, the bill would direct the Financial Crimes Enforcement Network to create and maintain a secure beneficial ownership registry of legal entities. “The bill strikes the right balance between imposing minimal requirements on small businesses and providing critical information to law enforcement and financial institutions,” the groups wrote. “In addition, if enacted prior to the COVID outbreak, the bill could have assisted financial institution efforts to serve new customers under the Small Business Administration’s Paycheck Protection Program.”

The bill also modernizes anti-money laundering control and processes, enabling financial institutions to better assist law enforcement efforts to detect and deter financial crime and terrorism, the groups noted.

Monday, June 29, 2020

Certiorari Denied in ABA's Appeal regarding NCUA's FOM

The Supreme Court on June 29 denied to hear an appeal of the American Bankers Association lawsuit against the National Credit Union Administration regarding the agency' field of membership (FOM) rule.

NCUA Provides Update on Minority Depository Institution CUs

Minority Depository Institution (MDI) credit unions lagged behind all federally insured credit unions (FICUs) with respect to most performance metrics for 2019 except net worth ratio, according to the National Credit Union Administration (NCUA) 2019 Annual Report to Congress.

The following table looks at select performance metrics for all FICUs versus MDI CUs for 2019

Also, here is some demographic information about MDI CUs.

As of December 31, 2019, there were 514 federally insured credit unions (FICUs) with the MDI designation in 36 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Approximately 10 percent of all FICUs are MDIs.

The number of MDI credit unions declined by 16 between 2018 and 2019, mirroring the general long-term trend of consolidation in the financial services sector.

MDI credit unions tend to be smaller institutions. Eighty-seven percent reported total assets of $100 million or less at the end of 2019. Fifty-seven percent had less than $10 million in assets. The average asset size was $78.86 million.

Additionally, 79 percent of MDI credit unions had a low-income designation.

Read more.

Saturday, June 27, 2020

CDC Posts Information for Banks and CUs for Keeping Employees Safe from COVID-19

The Centers for Disease Control and Prevention (CDC) has posted webpages for banks and credit unions and their employees with tips for protecting staff and slowing the spread of COVID-19.

The tips for bank employers include creating a COVID-19 workplace health and safety plan, conducting a hazard assessment and developing hazard controls.

Among these controls are engineering controls (isolating workers from hazards through workspace distancing and transparent shields, as well as adjusting HVAC ventilation and adding filtration) and administrative controls (including changing workflows and practices, cleaning facilities and encouraging cloth face coverings as appropriate).

Read the bank employee page.
Read the bank employer page.

Friday, June 26, 2020

Capital Holders of Southwest Corporate FCU Will Receive $171.3 Million Distribution

On June 25 during a briefing on NCUA Guaranteed Notes Program, the President of the National Credit Union Administration’s Asset Management and Assistance Center stated that the capital holders of Southwest Corporate Federal Credit Union will receive a distribution of $171.3 million in July.

This payout equals 42 percent of $403.5 million in claims of capital account holders of the failed corporate credit union.

The Southwest Corporate asset management estate has 1,120 member capital account holders, including 1,092 credit unions. After accounting for mergers, purchases and acquisitions, and liquidations, almost 900 active credit unions will receive a distribution.

Southwest Corporate Federal Credit Union was liquidated on October 31, 2010.

Members Approve Cobalt CU's Switch to Federal Charter

Earlier this year, I wrote that Cobalt Credit Union was seeking to convert from an Iowa state chartered credit union to a federal credit union.

On May 1, the membership of the credit union voted to approve the switch to a federal charter.

According to information obtained from the National Credit Union Administration thru a Freedom of Information Act (FOIA) request seeking Cobalt's charter conversion application, the credit union has applied for a community charter serving the Omaha-Council Bluffs Metropolitan Statistical Area plus additional Iowa counties.

The proposed service area includes the Iowa counties of Pottawattamie, Mills, Harrison, Crawford, Carroll, Shelby, Ida, Monona, and Sac and the Nebraska counties of Sarpy, Douglas, Cass, Saunders, and Washington (counties in italics are part of the Omaha-Council Bluffs Metropolitan Statistical Area).

In response to the FOIA request, NCUA provided 30 pages of information and withheld 190 pages based upon one or more of the exemptions at 5 U.S.C. § 552(b)(4), (5), (6), (7)(C), and (8).

Thursday, June 25, 2020

Y-o-Y Loan Growth Up 71 Percent at Pentagon FCU

Lending at Pentagon Federal Credit Union (McLean, VA) grew by 71 percent during the first five months of 2020 compared to a year ago.

The credit union noted that consumer lending grew by 15 percent and mortgage lending was up 200 percent during the first five months of 2020.

Total membership growth was up 10 percent during the time period of January 2020 thru May 2020.

The credit union announced on June 25 that it topped $26 billion in assets -- two months after it surpassed $25 billion in assets.

I wonder how much of this growth was due to its open charter arising from the emergency merger of Progressive Credit Union.

Read the press release.

Teachers CU Discusses Growth Plans

The CEO of Teachers Credit Union (South Bend, IN) outlined the credit union's expansion plans in MiBiz.com.

In the article, the CEO of Teachers Credit Union stated that the credit union was a Midwest powerhouse.

Indiana's largest credit union is looking to grow strategically into contiguous states of Ohio, Michigan, Kentucky, and possibly Illinois, as well as expanding its presence in Indiana.

The credit union wants to double its footprint over the next decade with between 33 percent to 40 percent of its business coming from Michigan.

The credit union will consider acquisitions, buying branches from other financial institutions, or new office development as potential vehicles to further its expansion plans into new markets.

Read the article.

Wednesday, June 24, 2020

Allegacy FCU Provides $6.5 Million in Financing for Real Estate Project

Richmond BizSense is reporting that Allegacy Federal Credit Union (Winston-Salem, NC) provided $6.5 million line of credit for a development project on the southside of Richmond, Virginia.

The project will redevelop the 15-acre Model Tobacco Company site and transform its main Art Deco-style building into a 275 income-based apartments.

Also, the developers are planning a 47,000-square-foot entertainment venue with a beer garden and restaurant space.

This is an illustration that large credit unions are venturing into financing larger commercial deals.

Read more.

Tuesday, June 23, 2020

Guidance Issued to Examiners for Assessing COVID-19 Impacts

Recognizing the significant and long-lasting effects of the coronavirus pandemic on financial institutions, federal and state financial regulators on June 23 issued joint guidance for how examiners should assess the effects of COVID-19 on the safety and soundness of banks and credit unions.

The guidance directs examiners to assess institutions according to existing agency policies and procedures, and to consider the appropriateness of management actions to address COVID-19 challenges. It provides specific instructions for examiners when considering an institution’s risk assessment, capital adequacy, asset quality, management actions, earnings, liquidity and market risk sensitivity.

“Examiners should assess the reasonableness of management’s actions in response to the pandemic given the institution’s business strategy and operational capacity in the distressed economic and business environment in which the institution operates,” the agencies said. “When assigning the composite and component ratings, examiners will review management’s assessment of risks presented by the pandemic, considering the institution’s size, complexity, and risk profile.”

The guidance states that examiners will not criticize financial institutions for the appropriate use of government backstops to meet liquidity needs, such as the Federal Reserve's discount window or the National Credit Union Administration's Central Liquidity Facility.

When determining whether a formal or informal enforcement is necessary, examiners should consider whether the institution appropriately planned for resiliency and operational continuity, has implemented prudent policies and is pursuing “realistic resolution of the issues confronting the institution,” they added.

Read more.


Truliant FCU Buys Former Macy's Department Store

Triad Business Journal is reporting that Truliant Federal Credit Union (Winston-Salem, NC) purchased the former Macy's department store at Hanes Mall.

While Truliant did not disclose the purchase price for the 154,000 square-foot store, excise tax records indicated a price of $8 million.

According to Todd Hall, president and CEO of Truliant, the purchase meets its expansion needs and will give the credit union "a centrally located new office close to our headquarters with easy access, ample parking, and a ready and flexible infrastructure." He also stated that this will add to the city's tax base.

Read more.

Monday, June 22, 2020

Groups Write in Support of Replacing CFPB Director with Five-Member Commission

A broad coalition of financial and housing industry groups, including bank and credit union trade groups, wrote Sen. Deb Fischer (R - NE) expressing their support for her recent bill, S. 3990, that would replace the Consumer Financial Protection Bureau’s sole director with a bipartisan, five-member commission.

In the June 18 letter, the groups noted that this structure “will provide a balanced and deliberative approach to supervision, regulation and enforcement by encouraging input from all stakeholders.”

They added that there has long been bipartisan support in Congress for a CFPB five-member commission, with several bills passed by the House with both Democratic and Republican support in recent years. Additionally, the House version of the Dodd-Frank Act that passed in 2009 also envisioned a commission governance structure for the bureau, the groups said.‌

The letter came as the Supreme Court prepares to render a decision in Seila Law v. the Consumer Financial Protection Bureau, where the question of the bureau’s governance structure is under review.

Read the letter.

Friday, June 19, 2020

Op-Ed Calls for Equal Treatment of Banks and CUs on Military Bases

In a BankThink op-ed in the American Banker, the CEOs of the American Bankers Association and the Association of Military Banks of America wrote that if Congress truly wanted to help military personnel and their families, it should expand the financial service choices for service members by incentivizing more banks to operate on military bases.

Currently, tax-exempt credit unions are permitted to operate rent-free on military bases, while taxpaying banks do not. The authors argued that banks and credit unions should be granted equal treatment with regard to serving service members.

“As the Senate and House begin their work reauthorizing the National Defense Authorization Act, lawmakers must make this sensible change and push back against credit union lobbying that only limits the financial choices for service members and their families.”

The op-ed also noted that the recent decision by the National Credit Union Administration to presume all active duty military personnel as low-income does not provide any tangible benefits to struggling service members.

Read the op-ed.

Thursday, June 18, 2020

NCUA Urges CUs to Participate in Fed's Main Street Lending Program

The National Credit Union Administration on June 17 urged credit unions to participate in the Federal Reserve's Main Street Lending Program, if appropriate.

The Program is designed to help credit flow to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 crisis, but now need loans to help maintain their operations until they have recovered from, or adapted to, the impacts of the pandemic.

The program offers 5-year loans, with floating rates, and principal and interest payments deferred. The loans range in size from $250,000 to $300 million.

The loans will be offered as a participation with the Federal Reserve providing 95 percent of the loan and the credit union providing 5 percent. Credit unions will service the loans.

Read a review of the program.

ABA Opposes NCUA's CU Bank Acquisition Proposed Rule

In a June 15 letter to the National Credit Union Administration, the American Bankers Association (ABA) vigorously opposed a proposal that would formalize a process for credit unions to purchase taxpaying banks.

ABA opined that credit unions -- aided by their tax advantage position -- are able to outbid taxpaying banks for the same deals.

ABA contended in its letter that credit unions are aggressively targeting banks for acquisition to expand their business lines, such as originating riskier business loans.

ABA also noted that many of these acquisitions are out-of-state. For example, ABA pointed out Grand Rapids, Michigan-based Lake Michigan CU's acquisition of Encore Bank, which operated in southwestern Florida.

Moreover, ABA wrote that these large credit unions are targeting banks serving wealthier communities outside of their chartered mandate to serve low- and moderate-income individuals.

ABA further stated that large credit unions acquiring tax-paying banks should be regulated similarly to the institutions they are purchasing.

Read the letter.

Wednesday, June 17, 2020

Court Compels Arbitration for Two Named Plaintiffs in Overdraft Class Action

A federal court ruled that two of three named plaintiffs in a class action lawsuit could only pursue their claims through arbitration.

The class action lawsuit alleges that Alliant Credit Union charged insufficient funds fees even when there was enough money in their checking accounts. The lawsuit was filed in September 2019 in the United States District Court for the Northern District of Illinois Eastern Division.

At issue is an August 2019 amendment to Alliant's membership agreement that Alliant e-mailed to plaintiff's Muniz and Cooper between July 24 and July 25, 2019.

The amendment stated that unless you opt out of this arbitration agreement, then all disputes shall be decided by arbitration and you have waived your right to participate in a class action lawsuit. The disclosures were the conspicuous and unambiguous.

The plaintiffs had 60 days to opt out of the arbitration agreement and class action waiver.

The plaintiffs claimed that they did not read the July 2019 e-mails or the hyperlinked amendments.

The court opined "[a]lthough plaintiffs claim they did not read the arbitration clause, nothing was hidden from them as they now suggest" and their silence constitutes assent to the arbitration provision.

The court granted Alliant's motion to compel arbitration for plaintiffs Muniz and Cooper.

Read the decision.

Tuesday, June 16, 2020

White House to Nominate Kyle Hauptman to NCUA Board

President Trump has announced his intent on June 15 to nominate Kyle Hauptman to serve as a member of the National Credit Union Administration Board.

Mr. Hauptman is currently Senator Tom Cotton’s advisor on economic policy, as well as Staff Director of the Senate Banking Committee’s Subcommittee on Economic Policy.

Prior to joining Senator Cotton’s office, Mr. Hauptman worked on the 2016 Presidential Transition Team.

Hauptman will replace Board member McWatters, whose term has expired.

Read more.

Monday, June 15, 2020

PPPLF Advances to CUs Topped $410 Million at the End of May

Thru May 31, 16 credit unions received slightly more than $410 million in advances from the Federal Reserve's Paycheck Protection Program Liquidity Facility(PPPLF).

Current outstanding advances were almost $409.6 million.

The Federal Reserve disclosed the data on June 10th.

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.

The following tables list the credit unions with PPPLF advances and the current amount of aggregate outstanding advances.

Thursday, June 11, 2020

Crane CU to Acquire Small Indiana Community Bank

Crane Credit Union (Odon, IN) has signed a definitive agreement to acquire Community State Bank of Southwestern Indiana (Poseyville, IN).

Crane Credit Union has almost $636 million in assets.

Community State Bank of Southwestern Indiana has $89 million in assets and six branches.

The transaction is expected to close later this year and is subject to customary closing conditions, including approval from the bank's shareholders and regulatory agencies.

The price tag of the deal was not disclosed.

Read more.

Southern Pine CU Conserved

The National Credit Union Administration (NCUA) placed Southern Pine Credit Union (Valdosta, GA) in conservatorship on June 11.

The decision to place Southern Pine Credit Union into conservatorship was due to unsafe and unsound practices at the credit union.

The credit union had approximately $46.4 million in assets.

The action to conserve the credit union was taken in consultation with the Georgia Department of Banking and Finance.

Read the press release.

ABA Urges Supreme Court to Restore Limits on Chevron Deference

The American Bankers Association (ABA) on June 8 filed its reply brief urging the U.S. Supreme Court to review a lower court ruling in the association’s challenge of the National Credit Union Administration’s 2016 field of membership rule.

In August, a three-judge panel of the D.C. Circuit Court of Appeals upheld much of rule while remanding a portion related to redlining concerns. The court will grant ABA’s petition if four of the nine justices vote to accept the case.

In appealing, ABA argued that the D.C. Circuit’s decision “stretches Chevron deference past the breaking point” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue.

In its reply brief, ABA said that NCUA sought to “dodge the issue” of Chevron deference. The association argued that the case does in fact present the question of whether an express delegation of definitional authority expands an agency’s discretion at Chevron step two, and that agencies are not granted “vast discretion” simply because of express delegation. “The Court should grant review and restore appropriate limits on Chevron deference,” ABA said.

Read the reply brief.

Wednesday, June 10, 2020

NCUA Denies FOIA Appeal Regarding Sale of Taxi Medallion Loans

The National Credit Union Administration (NCUA) denied an appeal of a Freedom of Information Act (FOIA) request denial for information related to the sale of taxi medallion loans by the agency.

On March 13, a FOIA request was filed seeking a copy of the sale agreement and any supporting documents related to the February 19, 2020 taxi medallion loan sale to Marblegate Asset Management LLC (Marblegate).

On April 14, NCUA denied the FOIA request. NCUA stated that the documents were withheld from public release under one or more of the FOIA exemptions at 5 U.S.C. § 552(b)(4), (5), and (8). In addition, the agency wrote "the requested documents are not agency records subject to the Freedom of Information Act."

On April 16, this denial was appealed. On May 14, NCUA denied the appeal.

This story first appeared at WashingtonCUDaily.com.

Read the letter.

Tuesday, June 9, 2020

NCUA/EXIM Bank Launch 3-Year Partnership

The National Credit Union Administration announced on June 9 a three-year partnership with the Export-Import Bank (EXIM).

The NCUA and EXIM signed a memorandum of understanding to undertake a series of initiatives that will help credit unions better understand and make use of EXIM guaranteed loans and resources.

EXIM guaranteed loans would be exempt from the member business loan cap of 12.25 percent of assets.

Read the press release.

June Call Report Changes Address COVID-19

The National Credit Union Administration has released information related to changes in its June call report.

The changes address issues associated with the COVID-19 pandemic.

For example, credit unions will be expected to report information on Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, CARES Act forbearance loans, SBA PPP loans pledge as collateral to the Federal Reserve's Paycheck Protection Program Lending Facility (PPPLF), and Federal Reserve PPPLF loans.

There are also adjustments in total assets for calculating the net worth ratio and risk-based net worth requirement.

Read more.

Sunday, June 7, 2020

New Buffalo Savings Bank Becomes Teachers Credit Union (Updated)

Teachers Credit Union (South Bend, IN) completed its acquisition of New Buffalo Savings Bank (New Buffalo, MI) on June 5.

The bank will re-open on June 8th as Teachers Credit Union.

Shareholders of New Bancorp, the holding company of the bank, will be paid $26 per share; but the price could be less based on the level of post-closing expenses and other factors.

This is the seventh merger of a bank into a credit union completed this year.

Read more.

Read press release.

Friday, June 5, 2020

Consumer Credit at CUs Fell in April Due to Pandemic Economic Disruption

The Federal Reserve reported on June 5 that outstanding consumer credit at credit unions fell in April, according to its G. 19 report.

Total outstanding consumer credit declined from $489 billion in March to $476.7 billion in April, due to economic disruptions arising from COVID-19. This would translate to an annualized decline in consumer credit at credit unions of $147.4 billion.

Both revolving and nonrevolving credit at credit unions declined in April.

Revolving credit fell by $2.6 billion in April to almost $61.7 billion. This is the fourth consecutive monthly decline in outstanding revolving credit at credit unions.

Nonrevolving credit tumbled in April by $9.6 billion to approximately $415.1 billion.

Wednesday, June 3, 2020

Bank Credit Union Merger News

The Office of the Comptroller of the Currency (OCC) approved on May 19, 2020 the sale of Neighborhood National Bank (Mora, MN) to Wings Financial Credit Union (Apple Valley, MN).

3River Credit Union (Fort Wayne, IN) completed its acquisition of West End Bank (Richmond, IN) on June 1, 2020.

Tuesday, June 2, 2020

NCUA Should Publish Its Analysis

In a May letter to credit unions, the National Credit Union Administration (NCUA) stated that it will no longer exclude military personnel with APO and FPO mailing addresses from calculating whether a credit union qualifies for low-income designation.

This decision was based upon analysis by the agency's Office of Chief Economist, which determined that the majority of military personnel would qualify as low-income members.

However, NCUA has not published the analysis of the Office of Chief Economist.

If NCUA had subjected this action to the rulemaking process, it would have had to disclose details of this analysis.

The agency needs to make public its analysis. It should also make public the data behind the analysis.

Monday, June 1, 2020

Federal Credit Unions Should File Form 990s

The Tax Cuts and Jobs Act of 2017 imposed a new 21 percent excise tax on applicable tax-exempt organizations that pay more than $1 million in remuneration to any covered employee for any taxable years beginning after December 31, 2017.

A covered employee is one of the five highest compensated employees for any taxable year beginning after December 31, 2016. Once a person becomes a covered employee, he or she will remain a covered employee for all subsequent tax years regardless of whether the individual continues to be one of the five highest compensated employees by the organization.

Almost all tax-exempt organizations file Form 990s. The Form 990 includes compensation information for senior management at tax-exempt entities.

However, compensation information is not available for federal credit unions; because federal credit unions are not required to file Form 990s.

The Internal Revenue Service (IRS) should require federal credit unions to file Form 990s.

The Form 990 is an important tool for the IRS to monitor and track potential noncompliance with the new excise tax.

It would also allow the public to determine if federal credit unions are providing excess compensation to senior management.


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