United Federal Credit Union headquartered in St. Joseph, Michigan, and Griffith Savings Bank, headquartered in Griffith, Indiana, have jointly announced the signing of a definitive agreement under which United FCU will purchase substantially all of the assets and assume deposits and other liabilities of Griffith.
Under the terms of the Agreement, $1.3 billion United FCU will purchase all loans, investments, real estate, accrued interest receivables, and other banking-related assets of Griffith and will assume all deposits, Federal Home Loan Bank advances, and accrued interest payable of approximately $81 million.
Griffith intends to liquidate following the closing and distribute any remaining net assets at the time of liquidation to its depositors. Although the amount of the distribution cannot be determined at this time, depositors who retain accounts at United FCU will be credited with their pro rata distribution upon Griffith’s liquidation. Other depositors will be sent their distributions.
Last year, Royal Credit Union purchased 11 branches from Anchor Bank along with deposits and loans.
Read the press release.
Wednesday, July 27, 2011
Tuesday, July 26, 2011
Non-member Deposits
The Material Loss Review on the failure of Beehive Credit Union noted that high cost non-member deposits rose to 18 percent of the credit union's deposits.
This got me thinking about how prevalent are non-member deposits as a source of funds for credit unions.
Federal credit unions are allowed to accept non-member deposits, as are state chartered credit unions. [Editorial note: This acceptance of non-member deposits seems to be at odds with the basic principle of a credit union as a membership organization.]
NCUA's regulations specify that the maximum amount of all public unit and non-member shares that a federal credit union can receive cannot, at any given time, exceed 20 percent of the total shares or $1.5 million, whichever is greater. However, this threshold can be waived by a NCUA Regional Director.
But if a federal credit union qualifies for reg flex designation, the federal credit union is exempted from the maximum amount of non-member deposits a credit union can accept. Also, credit unions that are designated as serving predominately low-income members are not subject to the cap on non-member deposits.
As of March 31, 2011, 831 credit unions reported accepting non-member deposits, worth slightly less than $2.4 billion. Almost 70 percent (576 credit unions) were not designated as serving predominately low-income members.
For these 831 credit unions, non-member deposits were about 1 percent of their total deposits.
The following analysis focuses on those credit unions without a low-income designation. Some of these credit unions reported substantial holdings of non-members deposits.
For example, ESL Federl Credit Union reported $316 million in non-member deposits, which represented 12.6 percent of its total deposit base.
There are 13 credit unions that report at least 10 percent of their total shares and deposits are from non-members. First General Credit Union has more than 25 percent of its deposits from non-members.
Additionally, some credit unions appear to be paying above market interest rates for these non-member deposits. According to its financial statement, Granite FCU reported paying an interest rate of 4.45 percent on non-member deposits.
Table 1 lists the 25 credit unions with at least $50 million in assets and not a low-income designation that have the largest holdings of non-member deposits.
Table 2 lists the 25 credit unions with at least $50 million in assets and not a low-income designation that have the most non-member deposits as a percent of total deposits and shares.
This got me thinking about how prevalent are non-member deposits as a source of funds for credit unions.
Federal credit unions are allowed to accept non-member deposits, as are state chartered credit unions. [Editorial note: This acceptance of non-member deposits seems to be at odds with the basic principle of a credit union as a membership organization.]
NCUA's regulations specify that the maximum amount of all public unit and non-member shares that a federal credit union can receive cannot, at any given time, exceed 20 percent of the total shares or $1.5 million, whichever is greater. However, this threshold can be waived by a NCUA Regional Director.
But if a federal credit union qualifies for reg flex designation, the federal credit union is exempted from the maximum amount of non-member deposits a credit union can accept. Also, credit unions that are designated as serving predominately low-income members are not subject to the cap on non-member deposits.
As of March 31, 2011, 831 credit unions reported accepting non-member deposits, worth slightly less than $2.4 billion. Almost 70 percent (576 credit unions) were not designated as serving predominately low-income members.
For these 831 credit unions, non-member deposits were about 1 percent of their total deposits.
The following analysis focuses on those credit unions without a low-income designation. Some of these credit unions reported substantial holdings of non-members deposits.
For example, ESL Federl Credit Union reported $316 million in non-member deposits, which represented 12.6 percent of its total deposit base.
There are 13 credit unions that report at least 10 percent of their total shares and deposits are from non-members. First General Credit Union has more than 25 percent of its deposits from non-members.
Additionally, some credit unions appear to be paying above market interest rates for these non-member deposits. According to its financial statement, Granite FCU reported paying an interest rate of 4.45 percent on non-member deposits.
Table 1 lists the 25 credit unions with at least $50 million in assets and not a low-income designation that have the largest holdings of non-member deposits.
Table 2 lists the 25 credit unions with at least $50 million in assets and not a low-income designation that have the most non-member deposits as a percent of total deposits and shares.
Friday, July 22, 2011
Saguache County Credit Union Placed into Conservatorship
NCUA assumed control of Saguache County Credit Union in Moffat, Colorado.
The Commissioner of the Colorado Division of Financial Services appointed NCUA as conservator for Saguache County Credit Union due to the credit union's declining financial condition.
As of June 30, Saguache County Credit Union reported $17.7 million in assets and 3,165 members.
The credit union reported a loss of almost $205,000 for the first six months of 2011.
The credit union's net worth ratio was 2.19 percent -- making it significantly undercapitalized. It reported that 5.05 percent of its loans were at least 60 days or more past due.
Read the press release.
The Commissioner of the Colorado Division of Financial Services appointed NCUA as conservator for Saguache County Credit Union due to the credit union's declining financial condition.
As of June 30, Saguache County Credit Union reported $17.7 million in assets and 3,165 members.
The credit union reported a loss of almost $205,000 for the first six months of 2011.
The credit union's net worth ratio was 2.19 percent -- making it significantly undercapitalized. It reported that 5.05 percent of its loans were at least 60 days or more past due.
Read the press release.
Problem Credit Union Update, June 2011
NCUA reported 381 problem credit unions as of June -- the fourth consecutive monthly increase and the highest total since the beginning of the financial crisis in 2008. A problem credit union is defined as having a CAMEL code of 4 or 5.
As of June, assets and deposits (shares) in problem credit unions were April to $39.8 billion and $35.5 billion, respectively.
Since the end of last year, problem credit unions are holding a smaller percentage of the industry's assets and shares. At the end of 2010, 5.13 percent of shares and 4.79 percent of assets were in problem credit unions. As of June, NCUA reported that 4.51 percent of all insured shares and 4.13 percent of the industry's assets were in problem credit unions.
There were 11 credit unions with $1 billion or more in assets on the problem list holding $18.7 billion in shares. This is unchanged from May.
Four credit unions with between $500 million and $1 billion were rated a CAMEL 4 or 5, while 47 credit unions with between $100 million and $500 million were on the problem list.
As of June, assets and deposits (shares) in problem credit unions were April to $39.8 billion and $35.5 billion, respectively.
Since the end of last year, problem credit unions are holding a smaller percentage of the industry's assets and shares. At the end of 2010, 5.13 percent of shares and 4.79 percent of assets were in problem credit unions. As of June, NCUA reported that 4.51 percent of all insured shares and 4.13 percent of the industry's assets were in problem credit unions.
There were 11 credit unions with $1 billion or more in assets on the problem list holding $18.7 billion in shares. This is unchanged from May.
Four credit unions with between $500 million and $1 billion were rated a CAMEL 4 or 5, while 47 credit unions with between $100 million and $500 million were on the problem list.
Thursday, July 21, 2011
TCCUSF to Borrow Up to $4 Billion from Treasury
The NCUA Board today approved that the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) may borrow up to $4 billion from Treasury through the end of 2011.
The borrowings will be used to retire the Asset Management Estate (AME) $36 billion in promissory notes to the bridge corporate credit unions and to address any additional cash needs that may arise from the ultimate resolution of the bridge corporate credit unions.
NCUA expects to borrow between $3.1 billion and $3.5 billion from the U.S. Treasury to retire these promissory notes.
Later this year $2 billion in Medium Term Notes are coming due. Funding needed to retire these liabilities will be brought to the Board at a later date.
Read the board action memo.
The borrowings will be used to retire the Asset Management Estate (AME) $36 billion in promissory notes to the bridge corporate credit unions and to address any additional cash needs that may arise from the ultimate resolution of the bridge corporate credit unions.
NCUA expects to borrow between $3.1 billion and $3.5 billion from the U.S. Treasury to retire these promissory notes.
Later this year $2 billion in Medium Term Notes are coming due. Funding needed to retire these liabilities will be brought to the Board at a later date.
Read the board action memo.
Prohibition on Paying Interest on Demand Deposit Accounts Ends Today
The ban on banks paying interest on business checking accounts ended today.
Section 627 of the Dodd-Frank Act repealed the prohibition on banks paying interest on demand deposit accounts, which became effective one year after the enactment of the legislation.
When interest rates were higher, I regularly heard from bankers about credit unions paying interest on business checking accounts, as credit unions were never subject to this prohibition.
Banks now have the option of paying interest on demand deposit accounts.
This measure should help community banks compete with credit unions for business customers, especially once rates begin to rise.
Section 627 of the Dodd-Frank Act repealed the prohibition on banks paying interest on demand deposit accounts, which became effective one year after the enactment of the legislation.
When interest rates were higher, I regularly heard from bankers about credit unions paying interest on business checking accounts, as credit unions were never subject to this prohibition.
Banks now have the option of paying interest on demand deposit accounts.
This measure should help community banks compete with credit unions for business customers, especially once rates begin to rise.
Tuesday, July 19, 2011
NCUA Sues RBS Securities over Failure of WesCorp
The National Credit Union Administration (NCUA) filed a second lawsuit against RBS Securities, Inc. alleging violations of federal and state securities laws and misrepresentations in the sale of securities to the failed Western Corporate Federal Credit Union (WesCorp). NCUA is seeking damages in excess of $629 million.
NCUA “claims the sellers and underwriters of the questionable securities made numerous material misrepresentations in the offering documents. These misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial. The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering WesCorp insolvent.”
NCUA anticipates filing additional lawsuits over the failure of five corporate credit unions.
Read the press release.
NCUA “claims the sellers and underwriters of the questionable securities made numerous material misrepresentations in the offering documents. These misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial. The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering WesCorp insolvent.”
NCUA anticipates filing additional lawsuits over the failure of five corporate credit unions.
Read the press release.
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