It's None of Your Business!

That was the response of the Oregon credit union regulator to a 1994 interim final rule issued by NCUA on credit union conversions to non-credit union status.

The regulator was incensed by NCUA's arrogance and pointed out that if the members democratically voted to change charters, so be it.

I think there are credit union managers and regulators that today share that same sentiment with Oregon's CU regulator and would love to tell NCUA to mind its own business.

Read the letter below.

ABA: It’s Time to End $2 Billion Annual CU Tax Subsidy

Now is the time to eliminate the $2 billion annual credit-union tax subsidy, ABA said yesterday in a question-and-answer-formatted email message to all House and Senate members.

ABA questioned why tax-paying households are still subsidizing the $1 trillion credit union industry, given the current challenges in managing the federal debt.

The credit-union tax exemption “costs the U.S. Treasury about $2 billion each year in forgone tax revenues, while hard working Americans foot the bill,” ABA said. “This bill will continuously grow as credit unions become larger.”

The association explained that there are 195 large credit unions with more than $1 billion in assets. “That’s larger than 90 percent of banks,” ABA said. “Banks, like households, pay taxes. It’s time for credit unions to do so as well.”

Troubled CU Mergers in 2012

There were 73 troubled credit union mergers in 2012.

A troubled credit union merger occurs if the following three reasons are cited by NCUA when approving the merger: Poor Management, Poor Financial Condition, and Loss/Declining Field of Membership.

The median size of a troubled credit union acquired in 2012 was approximately $5.4 million. The average asset size was almost $24.4 million.

Montgomery County Teachers FCU was the largest troubled credit union to be acquired in 2012 with $393 million in assets.

Letter to NCUA on Common Bond Expansion

ABA wrote National Credit Union Administration (NCUA) Chairman Debbie Matz regarding the potential problematic expansion of Thrivent FCU's field of membership.

Members of Thrivent Financial for Lutherans are part of Thrivent FCU's field of membership. Thrivent Financial for Lutherans is voting to expand its common bond from Lutherans to Christians. The voting will take place between March 1 and April 30.

NCUA has an affirmative obligation to limit this type of expansion and to ensure a genuine affiliation among credit union members.

Read the letter below (click on image to enlarge).

Below is NCUA's response. The agency stated that Thrivent FCU has not notified the agency that the credit union's sponsor is in the process of amending its common bond. In the event of a change in the sponsor's bylaws, Thrivent FCU will need to submit this information to NCUA to see whether it still complies with the associational common bond.

Three Strikes, You're Out, Maybe?

The Director of the Division of Financial Institutions for the Illinois Department of Financial & Professional Regulation suspended the operations of Bagumbayan Credit Union of Chicago for the third time in 2012 because the credit union was operating in an unsafe and unsound manner.

The first suspension order was issued on July 26, 2012. The second order issued on September 21, 2012. The third order was issued on November 21, 2012.

This means the operations of the credit union have been effectively suspended for six months.

In baseball, the batter is out after three strikes.

How many strikes is the Illinois regulator going to give this credit union before liquidating or involuntarily merging the credit union?

Corporate CU Merger Receives NCUA Assistance

The merger of Corporate One Federal Credit Union and Southeast Corporate Federal Credit Union was facilitated by special assistance provided by NCUA.

According to Corporate One's Unaudited Q4 2012 Financial Statement (footnote 9),

"[i]n order to accomplish the merger of a $1.5 billion institution into Corporate One, the NCUA provided certain assistance up to $15 million. The assistance was in the form of cash and a conditional indemnification to cover losses on certain assets acquired by Corporate One. In NCUA Rules and Regulations Part 704.2, intangible assets in excess of one half percent of MDANA must be deducted from a corporate's adjusted core capital. For eight years, the NCUA is allowing Corporate One to add back such adjustment to adjusted core capital for any excess intangibles related to core deposits."

Supervisory Focus for 2013

NCUA issued a letter to federally-insured credit unions regarding its supervisory focus for 2013.

In the letter, NCUA wrote that examiners will evaluate credit union’s capacity to manage risk in the following two areas -- operational risk and balance sheet management.

According to the letter, "[o]perational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events." The two areas that it will focus on are technology and internal controls.

With regard to balance sheet management, NCUA examiners will focus on three areas -- interest rate and liquidity risk, concentration risk, and less established products. In the case of less established products, NCUA examiners are going to verify whether credit unions have "the appropriate expertise and risk-mitigation controls over such products with which credit unions have historically had limited experience."

In addition , NCUA stated that it plans to issue a supervisory letter this year to address the process and expectations for member business loan rule waiver requests, in particular waivers for personal guarantees and blanket waivers versus individual loan waivers.

NCUA will also provide guidance for alternative standards replacing credit ratings when assessing the creditworthiness of securities.

Credit unions should expect additional information related to troubled debt restructurings.

Read the letter.