The U.S. Department of the Treasury announced that 22 additional credit unions received secondary capital in the form of subordinated debt from the Community Development Capital Initiative. The aggregated amount invested by Treasury was almost $32.7 million.
Below is a list of credit unions along with the amount invested.
Lower East Side People's Federal Credit Union (New York, NY) $ 898,000
Atlantic City Federal Credit Union (Lander, WY) $ 2,500,000
Neighborhood Trust Federal Credit Union (New York, NY) $ 283,000
Gateway Community Federal Credit Union (Missoula, MT) $ 1,657,000
Union Baptist Church Federal Credit Union (Fort Wayne, IN) $ 10,000
Buffalo Cooperative Federal Credit Union (Buffalo, NY) $ 145,000
Tulane-Loyola Federal Credit Union (New Orleans, LA) $ 424,000
Alternatives Federal Credit Union (Ithaca, NY) $ 2,234,000
Liberty County Teachers Federal Credit Union (Liberty, TX) $ 435,000
UNO Federal Credit Union (New Orleans, LA) $ 743,000
Butte Federal Credit Union (Biggs, CA) $ 1,000,000
TULIP Cooperative Credit Union (Olympia, WA) $ 75,000
Phenix Pride Federal Credit Union (Phenix City, AL) $ 153,000
Pyramid Federal Credit Union (Tucson, AZ) $ 2,500,000
Cooperative Center Federal Credit Union (Berkeley, CA) $ 2,799,000
Prince Kuhio Federal Credit Union (Honolulu, HI) $ 273,000
Community First Guam Federal Credit Union (Hagatna, GU) $ 2,650,000
Brewery Credit Union (Milwaukee, WI) $ 1,096,000
Tongass Federal Credit Union (Ketchikan, AK) $ 1,600,000
Santa Cruz Community Credit Union (Santa Cruz, CA) $ 2,828,000
Community Federal Credit Union (San Francisco, CA) $ 350,000
Fairfax County Federal Credit Union (Fairfax, VA) $ 8,044,000
I was shocked to learn that Fairfax County FCU is a community development financial institution. Fairfax County is the second richest county in the country with a 2008 median household income of almost $107,000, according to the Census Bureau.
Thursday, September 30, 2010
Tuesday, September 28, 2010
IG Report on Clearstar Financial CU Failure
The NCUA's Inspector General (IG) issued its Material Loss Review on the failure of Clearstar Financial Credit Union in Reno, Nevada.
The failure resulted in an estimated $12.2 million loss to the National Credit Union Share Insurance Fund (NCUSIF).
The IG found that "Clearstar failed because its Board and management did not implement proper risk management policies and procedures related to credit and concentration risk. Specifically, management originated and funded a significant amount of loans that were both poorly underwritten and to many borrowers that had poor credit histories."
In order to accelerate growth in its loan portfolio, liberal credit policies, minimum underwriting standards, and excessive loan modifications were approved and implemented. The credit union was extending 100 percent financing for RV, new and used motorcycle loans, jet ski and real estate loans. Its lending policy allowed loan-to-value ratio on indirect auto loans of up to 135 percent.
The report noted that Clearstar "used modified borrower classification matrixes that allowed them to approve loans to borrowers that were of a much higher credit risk than industry standards." (See Table 1 in the IG Report).
Additionally, a large portion of the loans originated between 2004 and 2008 were through an indirect loan program in partnership with new and used automobile and recreational vehicle (RV) dealers. The report notes that approximately 34 percent of the indirect vehicle loan portfolio was considered subprime.
A December 2008 examination found that "approximately $22.5 million (approximately 20 percent) of Clearstar‟s loan portfoilo had credit scores of less than 600, with a probability of default ranging from 21 to 57 percent."
Moreover, the report also cited that management in late 2008 to slow the flow of collection issues from delinquent loans started to extend an inordinate number of delinquent loans even when it was obvious that borrowers did not have the ability to meet their obligations.
As a result of the poor credit administration and assumption of excessive credit risk, between July 2007 and September 2009, Clearstar charged off in excess of $9 million in loans, which ultimately contributed to the credit union's failure. Fifty-three percent of the charge-offs were associated with indirect auto loans.
The failure resulted in an estimated $12.2 million loss to the National Credit Union Share Insurance Fund (NCUSIF).
The IG found that "Clearstar failed because its Board and management did not implement proper risk management policies and procedures related to credit and concentration risk. Specifically, management originated and funded a significant amount of loans that were both poorly underwritten and to many borrowers that had poor credit histories."
In order to accelerate growth in its loan portfolio, liberal credit policies, minimum underwriting standards, and excessive loan modifications were approved and implemented. The credit union was extending 100 percent financing for RV, new and used motorcycle loans, jet ski and real estate loans. Its lending policy allowed loan-to-value ratio on indirect auto loans of up to 135 percent.
The report noted that Clearstar "used modified borrower classification matrixes that allowed them to approve loans to borrowers that were of a much higher credit risk than industry standards." (See Table 1 in the IG Report).
Additionally, a large portion of the loans originated between 2004 and 2008 were through an indirect loan program in partnership with new and used automobile and recreational vehicle (RV) dealers. The report notes that approximately 34 percent of the indirect vehicle loan portfolio was considered subprime.
A December 2008 examination found that "approximately $22.5 million (approximately 20 percent) of Clearstar‟s loan portfoilo had credit scores of less than 600, with a probability of default ranging from 21 to 57 percent."
Moreover, the report also cited that management in late 2008 to slow the flow of collection issues from delinquent loans started to extend an inordinate number of delinquent loans even when it was obvious that borrowers did not have the ability to meet their obligations.
As a result of the poor credit administration and assumption of excessive credit risk, between July 2007 and September 2009, Clearstar charged off in excess of $9 million in loans, which ultimately contributed to the credit union's failure. Fifty-three percent of the charge-offs were associated with indirect auto loans.
Saturday, September 25, 2010
Corporate CU Legacy Plan Unveiled
NCUA on Friday unveiled its plan to deal with the toxic assets on the books of corporate credit unions.
As part of its plan, NCUA assumed control of United Corporate Federal Credit Union of Warrenville, Illinois; Southwest Corporate Federal Credit Union of Plano, Texas; and Constitution Corporate Federal Credit Union of Wallingford, Connecticut.
In March 2009, NCUA placed U.S. Central Federal Credit Union in Lenexa, Kansas and Western Corporate Federal Credit Unions in San Dimas, California into conservatorship.
NCUA determined that these five corporate credit unions are not financially viable institutions because they are critically undercapitalized with high concentrations of distressed long-term assets. Without permanent government guarantees, those five corporates have no reasonable prospects of returning to independent operations.
The legacy plan unveiled by NCUA will seek to isolate the legacy assets at these corporate credit unions bu using a "Good Bank/Bad Bank" model.
"The legacy assets stay in the current charter, the “bad bank”. NCUA charters a new bridge corporate, the “good bank” which will purchase the good assets and assume the liabilities and share deposits from the conserved corporate. Simultaneous to this purchase and assumption, the conserved corporate is placed into an asset management estate."
After isolating the legacy assets, NCUA will securitize these assets. The new securities will have a guarantee from the NCUA.
For the securitization process to be successful, NCUA wrote in a letter to credit unions that "it is imperative that, at least in this interim period, credit unions maintain excess liquidity within the corporate system."
NCUA expects the cost to credit unions to conservatively range between approximately $8.3 to $10.5 billion.
Treasury secretary, Timothy F. Geithner, agreed to postpone the deadline for the credit union industry to cover the cost of the mortgage-related losses at corporate credit unions until June 2021. Previously, they had until 2016.
As part of its plan, NCUA assumed control of United Corporate Federal Credit Union of Warrenville, Illinois; Southwest Corporate Federal Credit Union of Plano, Texas; and Constitution Corporate Federal Credit Union of Wallingford, Connecticut.
In March 2009, NCUA placed U.S. Central Federal Credit Union in Lenexa, Kansas and Western Corporate Federal Credit Unions in San Dimas, California into conservatorship.
NCUA determined that these five corporate credit unions are not financially viable institutions because they are critically undercapitalized with high concentrations of distressed long-term assets. Without permanent government guarantees, those five corporates have no reasonable prospects of returning to independent operations.
The legacy plan unveiled by NCUA will seek to isolate the legacy assets at these corporate credit unions bu using a "Good Bank/Bad Bank" model.
"The legacy assets stay in the current charter, the “bad bank”. NCUA charters a new bridge corporate, the “good bank” which will purchase the good assets and assume the liabilities and share deposits from the conserved corporate. Simultaneous to this purchase and assumption, the conserved corporate is placed into an asset management estate."
After isolating the legacy assets, NCUA will securitize these assets. The new securities will have a guarantee from the NCUA.
For the securitization process to be successful, NCUA wrote in a letter to credit unions that "it is imperative that, at least in this interim period, credit unions maintain excess liquidity within the corporate system."
NCUA expects the cost to credit unions to conservatively range between approximately $8.3 to $10.5 billion.
Treasury secretary, Timothy F. Geithner, agreed to postpone the deadline for the credit union industry to cover the cost of the mortgage-related losses at corporate credit unions until June 2021. Previously, they had until 2016.
Thursday, September 23, 2010
Two Credit Unions Get TARP Funds
Hope FCU (Jackson, MS) and Genesee Co-op FCU (Rochester, NY) have received TARP funds in the form of subordinated debt through the Community Development Capital Initiative. Hope FCU and Genesee Co-op FCU received $4,520,000 and $300,000, respectively.
Wednesday, September 22, 2010
Credit Union Participations
As of June 2010, credit unions reported $12.4 billion in outstanding loan participations.
The majority of the loan participations were business loans. Participations in member business loans (minus construction and development (C&D) loans) was slightly more than $3.1 billion and nonmember business loan participations (minus C&D loans) exceeded $4 billion. Federally-insured credit unions also reported holding almost $462 million in C&D participations.
Outstanding participations in real estate and consumer loans were $2.9 billion and $1.1 billion, respectively.
NCUA has cautioned credit unions to do their due diligence when engaging in loan participations due to the high delinquency rate ($4.14 percent) associated with participation loans.
The following table lists the 50 credit unions with the largest amount of loan participations and the percent of loan portfolio comprised of loan participations. (click on image to enlarge)
The majority of the loan participations were business loans. Participations in member business loans (minus construction and development (C&D) loans) was slightly more than $3.1 billion and nonmember business loan participations (minus C&D loans) exceeded $4 billion. Federally-insured credit unions also reported holding almost $462 million in C&D participations.
Outstanding participations in real estate and consumer loans were $2.9 billion and $1.1 billion, respectively.
NCUA has cautioned credit unions to do their due diligence when engaging in loan participations due to the high delinquency rate ($4.14 percent) associated with participation loans.
The following table lists the 50 credit unions with the largest amount of loan participations and the percent of loan portfolio comprised of loan participations. (click on image to enlarge)
Monday, September 20, 2010
NCUSIF Premiums for 2011
The NCUA Board stated that at its November meeting it will provide federally-insured credit unions with an estimate of their 2011 premium assessments for the NCUSIF and Corporate Credit Union Stabilization Fund.
Going to pages 1 and 2 of the NCUA's Board Action Memorandum, NCUA staff provides three different scenarios for the NCUSIF equity ratio through the end of 2011 -- optimistic, base, and pessimistic.
NCUA staff estimates that by the end of 2011 the NCUSIF equity ratio will fall below 1.20 percent of insured shares under the base and pessimistic scenarios, which would require the Board to implement a NCUSIF Restoration Plan. The NCUSIF equity ratio is expected to equal 1.17 percent at the end of 2011 under the base scenario and is anticipated to equal 1.12 percent under the pessimistic scenario. Under the optimistic scenario, the NCUSIF equity ratio will equal 1.22 percent.
Assuming that the NCUA Board will maintain the NCUSIF equity ratio at 1.30 percent, then potential NCUSIF premium assessments could range between 8 basis points to 18 basis points. However, the cost and pace of credit union failures and the rate of share (deposit) growth could cause a change in premiums.
The estimated range of premiums does not take into considerations premiums associated with the Corporate CU Stabilization Fund.
Going to pages 1 and 2 of the NCUA's Board Action Memorandum, NCUA staff provides three different scenarios for the NCUSIF equity ratio through the end of 2011 -- optimistic, base, and pessimistic.
NCUA staff estimates that by the end of 2011 the NCUSIF equity ratio will fall below 1.20 percent of insured shares under the base and pessimistic scenarios, which would require the Board to implement a NCUSIF Restoration Plan. The NCUSIF equity ratio is expected to equal 1.17 percent at the end of 2011 under the base scenario and is anticipated to equal 1.12 percent under the pessimistic scenario. Under the optimistic scenario, the NCUSIF equity ratio will equal 1.22 percent.
Assuming that the NCUA Board will maintain the NCUSIF equity ratio at 1.30 percent, then potential NCUSIF premium assessments could range between 8 basis points to 18 basis points. However, the cost and pace of credit union failures and the rate of share (deposit) growth could cause a change in premiums.
The estimated range of premiums does not take into considerations premiums associated with the Corporate CU Stabilization Fund.
Saturday, September 18, 2010
Problem Credit Union Update
NCUA reported that the number of problem credit unions increased in August; however, assets and shares (deposits) in problem credit unions fell. A problem credit union is defined as having a CAMEL Code of 4 or 5.
As of August, there were 360 problem credit unions -- an increase of 10 credit unions -- holding $39.5 billion in shares (or 5.26 percent of all credit union insured shares) and $44.8 billion in assets (or 4.95 percent of assets). (click on images to enlarge)
Additionally, NCUA reported that the number of $1 billion plus problem credit unions increased from 13 to 14 in August. These billion-dollar plus credit unions account for almost 48 percent of the shares in problem credit unions.
The percent of assets and shares in problem credit unions has declined over the last couple of months peaking in May at 6.23 percent of shares and 5.75 percent of assets.
However, a troubling sign was the increase in assets and shares in CAMEL 3 credit unions (a CAMEL 3 credit union has some supervisory issues). Shares in CAMEL 3 credit unions rose $9 billion in August to $141.1 billion and assets increased $9.2 billion to $159.3 billion.
Since May 2010, the percent of the industry's assets in CAMEL 3 credit unions have grown by more than 400 basis points from 13.58 percent to 17.62 percent.
As of August, there were 360 problem credit unions -- an increase of 10 credit unions -- holding $39.5 billion in shares (or 5.26 percent of all credit union insured shares) and $44.8 billion in assets (or 4.95 percent of assets). (click on images to enlarge)
Additionally, NCUA reported that the number of $1 billion plus problem credit unions increased from 13 to 14 in August. These billion-dollar plus credit unions account for almost 48 percent of the shares in problem credit unions.
The percent of assets and shares in problem credit unions has declined over the last couple of months peaking in May at 6.23 percent of shares and 5.75 percent of assets.
However, a troubling sign was the increase in assets and shares in CAMEL 3 credit unions (a CAMEL 3 credit union has some supervisory issues). Shares in CAMEL 3 credit unions rose $9 billion in August to $141.1 billion and assets increased $9.2 billion to $159.3 billion.
Since May 2010, the percent of the industry's assets in CAMEL 3 credit unions have grown by more than 400 basis points from 13.58 percent to 17.62 percent.
Subscribe to:
Posts (Atom)
