BCT FCU Liquidated

NCUA liquidated BCT FCU of Binghamton, N.Y. Visions Federal Credit Union of Endicott, N.Y., immediately assumed BCT Federal Credit Union’s assets, liabilities, and member shares.

NCUA made the decision to liquidate BCT Federal Credit Union and discontinue operations after determining the credit union was insolvent and has no prospect for restoring viable operations on its own. At the time of liquidation and subsequent purchase by Visions Federal Credit Union, the former credit union served approximately 3,900 members and had deposits of approximately $41.3 million.

BCT reported a loss of almost $9.6 million as it set aside almost $9.5 million in provisions for loan losses as of September 2011.

This loss caused BCT to become insolvent (net worth of -$3.2 million) with a net worth ratio of -8.44 percent as of the end of September. However, BCT's call report shows that the credit union had a net worth ratio of 12.80 percent as of June 2011.

The credit union reported charging off almost 50 percent of its loan portfolio in the third quarter.

Read the press release.

NCUA Sues Wachovia over the Failures of U.S. Central and WesCorp

The National Credit Union Administration (NCUA) has filed suit in Federal District Court in Kansas against Wachovia and its subsidiaries.

NCUA’s complaint alleges that there were numerous material misrepresentations made by the sellers, issuers and underwriters in the offering documents of securities sold to two failed corporate credit unions -- U.S. Central and WesCorp. These misrepresentations caused the corporate credit unions that bought the securities to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial.

Read the press release.

Read the complaint.

Charter Choice, Obstructionism, and Lawsuits

Several items related to charter choice recently caught my attention.

The first was an update on a lawsuit filed by First Basin Credit Union of Odessa, Texas. The second was a letter to the editor of Credit Union Times by the CEO of First Entertainment Credit Union (Hollywood, CA) cautioning credit union trade associations from meddling in the the internal affairs of credit unions exercising their rights to switch charters.

First Basin Credit Union is seeking $24 million in damages over its aborted attempt to switch to a bank charter.

According to Credit Union Times, First Basin has amended its complaint and is seeking damages from the Texas Credit Union League, the National Center for Member Trust, and North Carolina-based Self-Help Federal Credit Union.

First Basin Credit Union claims that the defendants manufactured the dissident group – Save First Basin – that opposed First Basin’s conversion and caused damages to the credit union.

The lawsuit has been going on for over three years.

Chuck Bruen, the CEO of First Entertainment Credit Union, wrote Credit Union Times that if the California Credit Union League (the League) moves forward with its plan to educate members over Technology Credit Union's decision to seek a mutual savings bank charter, things could get awfully messy.

He points out that NCUA oversees all member communications by a converting credit union. This information is "pre-screened and pre-approved by the NCUA." (emphasis added)

So, how can the member be misinformed?

He further notes that the League is not a neutral by-stander. The League will decide what information will be made available to educate the members and the presentation of the information is unlikely to be "fair and balanced."

The letter states that this attempted obstructionism could become unsavory and may expose the League to legal liability.

Liquidating Western Bridge

NCUA is currently in the process of soliciting bids to acquire the assets and business lines of Western Bridge Corporate Federal Credit Union (San Dimas, CA). NCUA expects the selection process to be completed by the end of 2011.

I have heard from a reputable source that NCUA discouraged banks with large correspondent banking operations from bidding on Western Bridge. By doing so, NCUA has probably increased the cost to the Temporary Corporate Credit Union Stabilization Fund associated with Western Bridge's liquidation.

As of August, Western Bridge reported holding $10.5 billion in assets. No other corporate credit union is close to Western Bridge in size. Therefore, a corporate credit union acquiring all of Western Bridge would experience a substantial dilution of its net worth ratio. On top of that, NCUA's new corporate credit union regulations will make it more difficult for a corporate credit union to generate the returns needed so that this investment would exceed any hurdle rate.

As a result, it is unlikely that Western Bridge can be sold intact. If Western Bridge is broken up and sold off in pieces, NCUA will not fetch as high a value for the assets and operations of Western Bridge.

So, by excluding banks from the bidding process that could have acquired the entire corporate credit union, NCUA has potentially raised the cost on all credit unions associated with the liquidation of Western Bridge's failure.

PenFed's Complimentary Associational Membership

A banker forwarded to me a credit card solicitation that executive management at his bank received from Pentagon Federal Credit Union for a PenFed Premium Travel Rewards American Express Card. (see image below)

The application has a checked box stating "Establish a Complimentary VOICES membership for me. This entitles me to join PenFed."

The application also has a checked box stating "Free $5 Opening Deposit."

So, Pentagon Federal Credit Union qualifies the applicant for membership by signing them up with Voices for America's Troops and paying their membership fee to the association. In addition, PenFed pays the fee for joining the credit union.

There is no common affinity or interaction among the people responding to this solicitation. PenFed is making a joke out of the common bond requirement.

In my opinion, PenFed is a credit union in name only and should have its tax exemption repealed.

Premium Assessments for 2012

The NCUA Board on Thursday announced the range of potential assessments that federally-insured credit unions will pay in 2012 to the National Credit Union Share Insurance Fund (NCUSIF) and the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).

NCUA expects 2012 premium assessments to the NCUSIF to range between 0 basis points and 6 basis points. Premium assessments to the TCCUSF will range between 8 basis points and 11 basis points in 2012.

Cease and Desist Order Against People for People Community Development CU

The National Credit Union Administration issued an Order to Cease and Desist to People for People Community Development Credit Union of Philadelphia. The order requires the credit union to take the following actions:

1. Complete a financial statement audit;
2. Charge off uncollectible loans;
3. Properly fund the Allowance for Loan and Lease Losses;
4. Collect on delinquent loans guaranteed by a third party;
5. Reconcile general ledger accounts monthly; and
6. Establish and maintain a Bank Secrecy Act compliance program.

The $1.1 million credit union was significantly undercapitalized as of September 30, 2011. The low-income designated credit union reported that 16.64% of its $519 thousand in loans were 60 days or more past due and that it had a net charged-off rate of 19.23%.

Read the order.