TimeshareLeaks has started to investigate the ongoing relationship between Quorum Federal Credit Union (Purchase, NY) and The Berkley Group, a leading timeshare developer.
Quorum FCU entered the timeshare lending business in late 2009, when it founded a credit union service organization (CUSO) called Vacation Ownership Funding Company (VOFCO). Quorum owns 79 percent of VOFCO.
In its 2009 Annual Report, Quorum wrote about how VOFCO will help to facilitate the relationship between Quorum and the vacation ownership companies and would fuel future growth of the credit union.
In its 2012 Annual Report, Quorum wrote that it "entered into agreements with several vacation ownership companies to provide indirect loans for the purchase of vacation ownership intervals."
TimeshareLeaks noted that between 2010 and 2011 vacation ownership loans grew by 302 percent and between 2011 and 2012 vacation ownership loans almost doubled, growing by 90 percent.
At the end of 2012, the credit union held $103.5 million in vacation ownership loans, which equated to 18 percent of its loan portfolio.
In fact, almost 94 percent of the growth in the credit union's outstanding loan balances between 2009 and 2012 has come from vacation ownership loans.
No wonder Quorum in a 2011 letter opposed a proposed rule by NCUA that would have subjected its CUSO to additional regulatory oversight.
Thursday, September 19, 2013
Wednesday, September 18, 2013
Unrealized Gains or Losses in AFS Securities
The recent rise in medium-term and long-term interest rates has caused many credit unions to report unrealized losses on their available-for-sale (AFS) securities portfolios. While these unrealized losses on AFS securities do not affect current earnings, they do have implications for future earnings if the securities are sold.
According to NCUA, the accumulated unrealized gain or loss on AFS securities at federally insured credit unions went from an unrealized gain of $2 billion as of March 31, 2013 to a unrealized loss of $614 million at the end of the second quarter of 2013.
Alaska USA FCU reported the largest unrealized loss on AFS securities at almost $63 million. See the table below for the 25 federally insured credit unions with the largest unrealized losses on AFS securities. Click on image to enlarge.
For federally insured credit unions that reported holding AFS securities as of June 2013, the median ratio of unrealized gain or loss on AFS securities to total assets was minus .03 percent. However, 54 credit unions had unrealized losses on AFS securities that were at least 1 percent of the credit union's total assets.
The following table list the 25 credit unions with at least $50 million in assets that have the largest exposure to unrealized losses on AFS securities as a percent of assets.
According to NCUA, the accumulated unrealized gain or loss on AFS securities at federally insured credit unions went from an unrealized gain of $2 billion as of March 31, 2013 to a unrealized loss of $614 million at the end of the second quarter of 2013.
Alaska USA FCU reported the largest unrealized loss on AFS securities at almost $63 million. See the table below for the 25 federally insured credit unions with the largest unrealized losses on AFS securities. Click on image to enlarge.
For federally insured credit unions that reported holding AFS securities as of June 2013, the median ratio of unrealized gain or loss on AFS securities to total assets was minus .03 percent. However, 54 credit unions had unrealized losses on AFS securities that were at least 1 percent of the credit union's total assets.
The following table list the 25 credit unions with at least $50 million in assets that have the largest exposure to unrealized losses on AFS securities as a percent of assets.
Monday, September 16, 2013
Undercapitalized Credit Unions, June 2013
There were 82 credit unions that were undercapitalized as of June 2013. Seven credit unions were critically undercapitalized and 15 credit unions were significantly undercapitalized.
Click on the images to enlarge.
Click on the images to enlarge.
Thursday, September 12, 2013
Housing Authority Inappropriately Used Program Funds to Supprt Credit Union
The U.S. Department of Housing and Urban Development Inspector General (IG) in July 2013 found that the Stark Metropolitan Housing Authority used public housing operating and capital funds for ineligible programs, including its credit union -- Stark Metropolitan Housing Authority FCU (Canton, Ohio).
The report noted that the Housing Authority inappropriately allocated $190,547 to pay the salaries and benefits of credit union employees.
The report also noted that the Housing Authority did not provide documentation to justify paying $1,170,364 in credit union salaries and benefits, $227,500 in annual contributions to the credit union, $18,423 lawn and maintenance expenses; $14,472 in training expenses; and $32,270 in utility expenses.
In addition, the Housing Authority purchased a non-interest bearing account at the credit union despite the Housing Authority's general depository agreement noting that all funds should be deposited in an interest bearing account. As a result, the Housing Authority failed to earn almost $16,000 in interest income.
Furthermore, the IG report found that the Housing Authority provided a significant subsidy to the credit union by leasing its office space to the credit union for $1 per year over 12 years, when the monthly fair market value rental value of the property was approximately $10 per square. The report, using an $8 per square foot rental value, found that the Housing Authority could have earned almost $226,000 in rent from the credit union.
The IG report recommended that the Housing Authority reimburse its operating and capital funds and charge and collect fair market rent from its credit union.
In a related story, the credit union has filed a complaint in Stark County Common Pleas Court claiming the Housing Authority has wrongly attempted to recoup $2 million allocated to the credit union over the years; withheld $100,000 in promised subsidies; and threatened to raise the credit union's rent.
Read the report.
The report noted that the Housing Authority inappropriately allocated $190,547 to pay the salaries and benefits of credit union employees.
The report also noted that the Housing Authority did not provide documentation to justify paying $1,170,364 in credit union salaries and benefits, $227,500 in annual contributions to the credit union, $18,423 lawn and maintenance expenses; $14,472 in training expenses; and $32,270 in utility expenses.
In addition, the Housing Authority purchased a non-interest bearing account at the credit union despite the Housing Authority's general depository agreement noting that all funds should be deposited in an interest bearing account. As a result, the Housing Authority failed to earn almost $16,000 in interest income.
Furthermore, the IG report found that the Housing Authority provided a significant subsidy to the credit union by leasing its office space to the credit union for $1 per year over 12 years, when the monthly fair market value rental value of the property was approximately $10 per square. The report, using an $8 per square foot rental value, found that the Housing Authority could have earned almost $226,000 in rent from the credit union.
The IG report recommended that the Housing Authority reimburse its operating and capital funds and charge and collect fair market rent from its credit union.
In a related story, the credit union has filed a complaint in Stark County Common Pleas Court claiming the Housing Authority has wrongly attempted to recoup $2 million allocated to the credit union over the years; withheld $100,000 in promised subsidies; and threatened to raise the credit union's rent.
Read the report.
Tuesday, September 10, 2013
North Dade Community Development FCU Cited for BSA and Money Laundering Deficiencies
The National Credit Union Administration has issued a cease and desist order to North Dade Community Development Federal Credit Union of Miami Gardens, Florida for weaknesses in the credit union's bank secrecy, anti-money laundering, and foreign assets control programs.
The order requires the credit union to stop transacting all business activity for money services businesses not located within the credit union’s geographic field of membership and to suspend transacting business activity for all remaining member money services businesses until an adequate Bank Secrecy Act/Anti-Money Laundering/Office of Foreign Assets Control program is developed and implemented.
NCUA also ordered the credit union to verify that all members are within the credit union’s field of membership; identify all bank secrecy/anti-money laundering/foreign assets control compliance deficiencies; designate a Bank Secrecy Act compliance officer; complete a comprehensive bank secrecy/anti-money laundering/foreign assets control risk assessment; and revise and document board approval for all policies relating to bank secrecy, anti-money laundering, and foreign assets control.
Read the press release.
Read the cease and desist order.
The order requires the credit union to stop transacting all business activity for money services businesses not located within the credit union’s geographic field of membership and to suspend transacting business activity for all remaining member money services businesses until an adequate Bank Secrecy Act/Anti-Money Laundering/Office of Foreign Assets Control program is developed and implemented.
NCUA also ordered the credit union to verify that all members are within the credit union’s field of membership; identify all bank secrecy/anti-money laundering/foreign assets control compliance deficiencies; designate a Bank Secrecy Act compliance officer; complete a comprehensive bank secrecy/anti-money laundering/foreign assets control risk assessment; and revise and document board approval for all policies relating to bank secrecy, anti-money laundering, and foreign assets control.
Read the press release.
Read the cease and desist order.
Do CUs Need a Tax Exemption to Survive?
Apparently credit union lobbyists believe the tax exemption is essential for survival.
Politico's Morning Money on September 5 reported that NAFCU's Vice President of Legislative Affairs Brad Thaler in an e-mail to members of Congress wrote: "Simply put, the tax exemption is an issue of survival for credit unions."
That is a pretty sad commentary from credit union lobbyists that the credit union industry cannot be competitive without its government subsidy.
I wonder how many credit union CEOs share this attitude.
Politico's Morning Money on September 5 reported that NAFCU's Vice President of Legislative Affairs Brad Thaler in an e-mail to members of Congress wrote: "Simply put, the tax exemption is an issue of survival for credit unions."
That is a pretty sad commentary from credit union lobbyists that the credit union industry cannot be competitive without its government subsidy.
I wonder how many credit union CEOs share this attitude.
Monday, September 9, 2013
ASI Announces Special Assessment for Privately Insured Credit Unions
Both Credit Union Journal and Credit Union Times are reprting that ASI Inc. of Dublin, Ohio announced a special premium assessment for 2013 of 7.5 basis points. In the past five years, ASI has assessed its members a total of 61.50 basis points. The ASI premium will be assessed of all privately insured credit unions of record with ASI as of September 30.
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