Americans for Tax Reform last week likened the tax exemption of credit unions to the tax treatment of pass-through businesses, such as partnerships and S-corporations.
Ryan Ellis, who wrote the piece, stated that the only difference is the incidence of the tax.
Unfortunately, Mr. Ellis does not seem to understand the difference in the tax treatment of credit unions versus pass-through businesses.
The owners of partnerships and S-corporations are responsible for paying taxes on the earnings (profits) of the business.
In contrast, credit unions do not pay taxes at the corporate level on their retained earnings (profits), nor do they have an outstanding tax liability that is passed through to their members.
Monday, September 9, 2013
Friday, September 6, 2013
Craftsman CU Closed
The Michigan Department of Insurance and Financial Services today liquidated Craftsman Credit Union of Detroit and appointed the National Credit Union Administration (NCUA) as liquidating agent. Security Credit Union of Flint, Mich., immediately assumed Craftsman’s members and deposits, as well as 50 percent of its loans.
The Michigan Department of Insurance and Financial Services made the decision to liquidate Craftsman Credit Union and discontinue its operations after determining the state-chartered credit union was insolvent and had no prospect for restoring viable operations.
As of June 30th, the credit union was critically undercapitalized with a net worth ratio of 1.46 percent. The credit union reported that 6.54 percent of its loans were 60 days or more past due at the end of the second quarter of 2013. In addition, the credit union reported a loss of almost $2.1 million for the first six months of 2013.
At the time of liquidation and subsequent purchase and assumption by Security Credit Union, Craftsman Credit Union served 6,403 members and had assets of $24.1 million, according to its most recent Call Report.
This is the 12th credit union to be liquidated in 2013.
Read the press release.
The Michigan Department of Insurance and Financial Services made the decision to liquidate Craftsman Credit Union and discontinue its operations after determining the state-chartered credit union was insolvent and had no prospect for restoring viable operations.
As of June 30th, the credit union was critically undercapitalized with a net worth ratio of 1.46 percent. The credit union reported that 6.54 percent of its loans were 60 days or more past due at the end of the second quarter of 2013. In addition, the credit union reported a loss of almost $2.1 million for the first six months of 2013.
At the time of liquidation and subsequent purchase and assumption by Security Credit Union, Craftsman Credit Union served 6,403 members and had assets of $24.1 million, according to its most recent Call Report.
This is the 12th credit union to be liquidated in 2013.
Read the press release.
Thursday, September 5, 2013
NCUA Warns FCUs About Potential Violations of Common Bond Advertising
The National Credit Union Administration has called on federal credit unions to stop advertising that anyone can join a credit union.
“If your credit union is advertising that anyone, without limitation, is able to become a member of your credit union, then you may be in violation of federal law and regulation,” the NCUA said (emphasis in original). “Some overly aggressive marketing campaigns by federal credit unions to facilitate membership through associational groups are providing consumers with misleading information about single and multiple common bond membership requirements.”
The NCUA also reminded credit unions of the limitations on using third-party associations to establish a common bond for membership. “NCUA’s Office of Consumer Protection has begun conducting quality control reviews of federal credit unions that may be improperly using associations to sign up members without a common bond,” the agency said.
NCUA warned that "[u]pholding the membership standards of every federal credit union charter is essential to maintaining the integrity of the federal credit union system."
Read the letter.
“If your credit union is advertising that anyone, without limitation, is able to become a member of your credit union, then you may be in violation of federal law and regulation,” the NCUA said (emphasis in original). “Some overly aggressive marketing campaigns by federal credit unions to facilitate membership through associational groups are providing consumers with misleading information about single and multiple common bond membership requirements.”
The NCUA also reminded credit unions of the limitations on using third-party associations to establish a common bond for membership. “NCUA’s Office of Consumer Protection has begun conducting quality control reviews of federal credit unions that may be improperly using associations to sign up members without a common bond,” the agency said.
NCUA warned that "[u]pholding the membership standards of every federal credit union charter is essential to maintaining the integrity of the federal credit union system."
Read the letter.
Wednesday, September 4, 2013
Alabama Credit Union to Buy Georgia Bank
The American Banker is reporting that Five Star Credit Union of Dothan, Alabama has agreed to purchase Flint River National Bank in Camilla, Georgia.
Five Star CU will buy all the loans and deposits at the $23 million bank. The credit union is valuing the bank assets at $21 million.
This would be the fifth transaction involving a credit union buying a bank.
Read the story.
Five Star CU will buy all the loans and deposits at the $23 million bank. The credit union is valuing the bank assets at $21 million.
This would be the fifth transaction involving a credit union buying a bank.
Read the story.
Redacted Report Issued on El Paso's FCU Failure
The National Credit Union Administration's Office of the Inspector General (IG) issued a highly redacted Material Loss Review on the failure of El Paso's Federal Credit Union.
The IG report noted senior management displayed a lack of integrity and did not manage the credit union in the best interest of its members. The report pointed out that credit union's fee income was excessive. During the period examined, fee and other operating income as a percent of average total assets averaged 3.73 times higher than its peers.
The report stated that "senior management displayed a lack of competence and training appropriate to their position."
In addition, the credit union had deficiencies with regard to record keeping and internal controls and ineffective oversight by its Board of Directors and Supervisory Committee.
For example, "examiners found problems with the execution of loan collections and charge offs, the sufficiency of Board minutes, identification of delinquent loans, backdating of transactions, and the Credit Union's advertised field of membership."
The report also noted that the Board Chairman received questionable payments associated with Board meetings and expenses.
Read the report.
The IG report noted senior management displayed a lack of integrity and did not manage the credit union in the best interest of its members. The report pointed out that credit union's fee income was excessive. During the period examined, fee and other operating income as a percent of average total assets averaged 3.73 times higher than its peers.
The report stated that "senior management displayed a lack of competence and training appropriate to their position."
In addition, the credit union had deficiencies with regard to record keeping and internal controls and ineffective oversight by its Board of Directors and Supervisory Committee.
For example, "examiners found problems with the execution of loan collections and charge offs, the sufficiency of Board minutes, identification of delinquent loans, backdating of transactions, and the Credit Union's advertised field of membership."
The report also noted that the Board Chairman received questionable payments associated with Board meetings and expenses.
Read the report.
Tuesday, September 3, 2013
The Haves and Have Nots
The National Credit Union Administration (NCUA) noted that in the second quarter large credit unions fared better than small credit unions.
NCUA stated that "federally insured credit unions with more than $500 million in assets continued to lead the industry in most performance measures."
These large credit unions, which held more than two-thirds of industry total assets, reported a higher return on average assets and had stronger loan, net worth, and membership growth than smaller credit unions.
For credit union with less than $10 million in assets, membership, net worth and loan growth were negative during the first six months of 2013.
NCUA stated that "federally insured credit unions with more than $500 million in assets continued to lead the industry in most performance measures."
These large credit unions, which held more than two-thirds of industry total assets, reported a higher return on average assets and had stronger loan, net worth, and membership growth than smaller credit unions.
For credit union with less than $10 million in assets, membership, net worth and loan growth were negative during the first six months of 2013.
Sunday, September 1, 2013
De Novo CU Suspends Services to Bitcoin Accounts
Last week I reported that Tradehill Inc., an exchange for virtual currencies such as Bitcoin, was moving customer accounts to Internet Archive Federal Credit Union of New Brunswick, New Jersey.
Internet Archive FCU has reversed its decision to service accounts linked to Bitcoin.
In an August 29 blog post, the credit union wrote: "Certain operational and regulatory issues came up including some that apply to new credit unions like ours... Until we have further clarity, we are unable to service some of our corporate members."
Internet Archive FCU has reversed its decision to service accounts linked to Bitcoin.
In an August 29 blog post, the credit union wrote: "Certain operational and regulatory issues came up including some that apply to new credit unions like ours... Until we have further clarity, we are unable to service some of our corporate members."
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