Alex Pollock of the American Enterprise Institute has advanced a modest proposal that would increase competition while ensuring competitive fairness.
Alex Pollock proposes raising the cap on business lending for credit unions, but make such lending taxable.
Read his blog post.
Friday, April 20, 2012
Wings Financial's Parish Earns Almost $7.9 Million
I was tipped off to a another big payday for a credit union CEO and two of his subordinates.
According to Wings Financial's 2010 Form 990, the credit union CEO, Paul Parish, reported a total compensation package of almost $7.9 million. Mark Everson's total compensation package was slightly more than $3.2 million and Paul Dinger's compensation package was almost $3.1 million. (see disclosure below)
Several weeks ago, I reported on the $11 million compensation package for David Maus at Public Service Credit Union.
While credit unions say they are looking out for the little guy, it seems some credit union are looking out for their senior managers.
According to Wings Financial's 2010 Form 990, the credit union CEO, Paul Parish, reported a total compensation package of almost $7.9 million. Mark Everson's total compensation package was slightly more than $3.2 million and Paul Dinger's compensation package was almost $3.1 million. (see disclosure below)
Several weeks ago, I reported on the $11 million compensation package for David Maus at Public Service Credit Union.
While credit unions say they are looking out for the little guy, it seems some credit union are looking out for their senior managers.
Thursday, April 19, 2012
Understatement of Allowance for Loan Losses
The Texas Credit Union Department noted that it is continuing to see an understatement of loan loss reserves by some credit unions.
The Department wrote in its April newsletter:
The Department wrote in its April newsletter:
"The Department continues to see instances where a credit union’s Allowance for Loan and Lease Losses (ALLL) is materially understated based on management’s own internal analysis of the loan loss exposure. The failure to accurately record the appropriate loan loss expense is frequently the result of budgetary or other earnings considerations. Credit unions should be aware that any intentional failure to fund the ALLL in a timely manner may be classified as an effort to falsify the accounting records."
Wednesday, April 18, 2012
Property Taxes and CU Managers Pay
The Star-Advertiser on April 16 ran a story on the lack of transparency regarding executive pay at the largest credit unions in Hawaii.
The story about executive pay has become entwined with the credit union industry's efforts to preserve its exemption from Oahu's property tax.
The article notes:
All of Hawaii's credit unions are federally chartered. Federally chartered credit unions are not required to file Form 990s, like other tax exempt organizations. As a result, the pay package of top credit union management is not disclosed.
In addition, credit unions on Oahu are just not exempt from federal and state income taxes; but also exempt from property taxes. Regardless of the value of the property, credit unions only pay a minimum of $300 for each parcel they own. This amounts to real savings for credit unions.
Credit union advocates will contend that executive compensation and their exemption from property taxation are unrelated. I disagree. As tax exempt organizations, federal credit unions receive a valuable public subsidy and there is a need to ensure that this subsidy is going for its intended purpose and not excessive compensation.
Read the Star-Advertiser story (subscription required).
The story about executive pay has become entwined with the credit union industry's efforts to preserve its exemption from Oahu's property tax.
The article notes:
The secretive nature of management pay is raising questions at a time when the industry is lobbying to preserve one of its key public subsidies: an exemption from Oahu property taxes.
The 10 largest credit unions in Hawaii declined or did not respond to a Star-Advertiser request to voluntarily disclose compensation data for their five highest-paid executives.
All of Hawaii's credit unions are federally chartered. Federally chartered credit unions are not required to file Form 990s, like other tax exempt organizations. As a result, the pay package of top credit union management is not disclosed.
In addition, credit unions on Oahu are just not exempt from federal and state income taxes; but also exempt from property taxes. Regardless of the value of the property, credit unions only pay a minimum of $300 for each parcel they own. This amounts to real savings for credit unions.
Credit union advocates will contend that executive compensation and their exemption from property taxation are unrelated. I disagree. As tax exempt organizations, federal credit unions receive a valuable public subsidy and there is a need to ensure that this subsidy is going for its intended purpose and not excessive compensation.
Read the Star-Advertiser story (subscription required).
Tuesday, April 17, 2012
Not All CUs Are Excited About More Business Lending Powers
The American Banker reported on Friday that the head of a credit union in southern California is speaking out against legislation (S 2231) that would allow credit unions to expand their commercial lending authority.
The article notes that there is a silent majority of credit unions that neither want nor need the legislation.
The credit union CEO in a letter to the Senate wrote that the expansion in business lending authority "could easily become the next crisis in the credit union industry, which will require Congress to bailout the industry and its insurance fund."
Read the article (subscription required).
The article notes that there is a silent majority of credit unions that neither want nor need the legislation.
The credit union CEO in a letter to the Senate wrote that the expansion in business lending authority "could easily become the next crisis in the credit union industry, which will require Congress to bailout the industry and its insurance fund."
Read the article (subscription required).
Monday, April 16, 2012
CU Compensation Practices Come Under Increased Scrutiny
Following up on an earlier story about the pay package of Public Service Credit Union's David Maus, the Denver Post looked at the pay packages of other Colorado credit union CEOs.
"As credit unions grow in size and complexity, they are paying their top executives substantially more, and Colorado is front and center in that trend."
Read more here.
"As credit unions grow in size and complexity, they are paying their top executives substantially more, and Colorado is front and center in that trend."
Read more here.
Friday, April 13, 2012
Breaking News: Fitch Says More Business Lending Would Challenge Credit Unions
Fitch Ratings believes credit unions could face significant challenges should they be allowed to make more small business loans. We believe few credit unions might successfully compete with those banks already heavily involved in the small business loan space. Limited experience could increase risk, and while increased business lending exposure might behoove credit unions in the long term, we believe it would ultimately have a measured impact on revenue.
A bill under consideration in Congress would more than double credit unions' current business lending cap of 12.25% to 27.5% of total assets. Credit unions feel an increase would allow additional access to capital for small businesses. However, we believe that in the current environment credit-worthy businesses should experience little to no difficulty securing loans in the banking sector.
Bank lobbyists disagree that loans are hard to come by, underscored by a rebound in commercial and industrial lending. In addition, banking trade groups argue that credit unions do very little business lending, highlighted by the small amount of credit unions in danger of reaching or surpassing their 12.25% limit. Credit unions are also nonprofit organizations, making them income tax exempt. Banks clearly don't enjoy that same tax benefit. And banks and credit unions are also subject to different regulators and government rules.
We feel it would be difficult for credit unions to build up viable business lending activities for several reasons. At the onset, addressing infrastructure and capability would be challenging. As part of business lending, a bank must have and relies upon adequately trained staff (which includes a business credit approval and monitoring infrastructure) and be able to provide competent business cash management services and other ancillary products. We believe smaller credit unions with limited resources might find it difficult to successfully compete in a larger business loan environment.
Fitch rates a limited number of credit unions overall and no retail credit unions. All Fitch-rated credit unions are rated on their support floor based on the level of support received from regulators and the government.
Here is the link to the press release.
A bill under consideration in Congress would more than double credit unions' current business lending cap of 12.25% to 27.5% of total assets. Credit unions feel an increase would allow additional access to capital for small businesses. However, we believe that in the current environment credit-worthy businesses should experience little to no difficulty securing loans in the banking sector.
Bank lobbyists disagree that loans are hard to come by, underscored by a rebound in commercial and industrial lending. In addition, banking trade groups argue that credit unions do very little business lending, highlighted by the small amount of credit unions in danger of reaching or surpassing their 12.25% limit. Credit unions are also nonprofit organizations, making them income tax exempt. Banks clearly don't enjoy that same tax benefit. And banks and credit unions are also subject to different regulators and government rules.
We feel it would be difficult for credit unions to build up viable business lending activities for several reasons. At the onset, addressing infrastructure and capability would be challenging. As part of business lending, a bank must have and relies upon adequately trained staff (which includes a business credit approval and monitoring infrastructure) and be able to provide competent business cash management services and other ancillary products. We believe smaller credit unions with limited resources might find it difficult to successfully compete in a larger business loan environment.
Fitch rates a limited number of credit unions overall and no retail credit unions. All Fitch-rated credit unions are rated on their support floor based on the level of support received from regulators and the government.
Here is the link to the press release.
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