Rep. Kurt Schrader has introduced "Restore Main Street's Credit Act of 2012" (H.R. 4293).
While the text of the bill has not been published, the bill proposes to exempt brick-and-mortar businesses with 20 or fewer full-time employees from having their loans count against the aggregate business lending cap placed on credit unions.
According to the Census Bureau, there are roughly 5.2 million firms with fewer than 20 employees in the United States as of 2009. In addition, there are over 21 million businesses without any employees.
This would mean a huge expansion in the amount of business loans that credit unions could grant, as these loans would not count against the cap. It would also significantly increase the risk to the National Credit Union Share Insurance Fund.
Friday, March 30, 2012
Wednesday, March 28, 2012
FCU CEO Compensation Needs to Be Disclosed
On March 23, I published that David Maus, the President and CEO of Public Service Credit Union, had a total compensation package of $11 million for 2010.
This information is available, because state chartered credit unions are required to file Form 990s with the Internal Revenue Service.
However, federal credit unions are exempt from filing Form 990s. So, unless the federal credit union on its own discloses executive compensation, the members are in the dark regarding executive compensation.
In 2008, NCUA's Outreach Task Force in 2008 concluded that since federal credit unions are cooperatives, the NCUA Board should adopt an amendment to its regulations requiring federal credit unions to annually disclose the total compensation of each senior executive officer to their membership; but the Outreach Task Force recommended that the public is not entitled to individual senior executive compensation information.
The NCUA Board has put in place these disclosure requirements for corporate credit unions; however, the NCUA Board has not done so for federal credit unions.
More than 4 years have passed since the NCUA Outreach Task Force published its recommendation. The NCUA Board should move forward in proposing a rule requiring federal credit unions to annually disclose the compensation of senior executives.
Moreover, any proposal should make this information available not only to the members, but to the public.
This would ensure comparable treatment with other tax-exempt entities, especially state chartered credit unions.
It would also help ensure that federal credit unions are fulfilling their public policy objectives.
Without transparency, there is not accountability.
This information is available, because state chartered credit unions are required to file Form 990s with the Internal Revenue Service.
However, federal credit unions are exempt from filing Form 990s. So, unless the federal credit union on its own discloses executive compensation, the members are in the dark regarding executive compensation.
In 2008, NCUA's Outreach Task Force in 2008 concluded that since federal credit unions are cooperatives, the NCUA Board should adopt an amendment to its regulations requiring federal credit unions to annually disclose the total compensation of each senior executive officer to their membership; but the Outreach Task Force recommended that the public is not entitled to individual senior executive compensation information.
The NCUA Board has put in place these disclosure requirements for corporate credit unions; however, the NCUA Board has not done so for federal credit unions.
More than 4 years have passed since the NCUA Outreach Task Force published its recommendation. The NCUA Board should move forward in proposing a rule requiring federal credit unions to annually disclose the compensation of senior executives.
Moreover, any proposal should make this information available not only to the members, but to the public.
This would ensure comparable treatment with other tax-exempt entities, especially state chartered credit unions.
It would also help ensure that federal credit unions are fulfilling their public policy objectives.
Without transparency, there is not accountability.
Monday, March 26, 2012
NCUA Closes Shepherd's FCU
The National Credit Union Administration (NCUA) decided to liquidate Shepherd’s Federal Credit Union of Charlotte, N.C. after determining the credit union was insolvent and had no prospect for restoring viable operations.
Shepherd’s Federal Credit Union served 1,397 members and had deposits of approximately $379,000. Chartered in 2010, Shepherd’s Federal Credit Union served members and employees of Unity, the Way of Holiness Christian Church in Charlotte and Clarkton, N.C.
Shepherd’s Federal Credit Union is the fourth federally insured credit union liquidation in 2012.
Read the press release.
Shepherd’s Federal Credit Union served 1,397 members and had deposits of approximately $379,000. Chartered in 2010, Shepherd’s Federal Credit Union served members and employees of Unity, the Way of Holiness Christian Church in Charlotte and Clarkton, N.C.
Shepherd’s Federal Credit Union is the fourth federally insured credit union liquidation in 2012.
Read the press release.
Report Critical of Handling REO from CU Failures
NCUA's Inspector General (IG) issued a report critical of the Asset Management Assistance Center's (AMAC) handling of properties associated with the failures of Norlarco and Huron River Area Credit Unions.
The IG report found that AMAC management's analysis was not sufficiently comprehensive to support its decision to hold onto the properties. Specifically, the IG found deficiencies over the valuation process of real estate owned (REO). AMAC did not perform valuations on these properties in accordance with industry standards and did not always maintain proper support for the valuations that were completed. In addition, the IG determined AMAC did not formally complete a cost to carry analysis on REO.
The IG report determined that AMAC management estimated they could manage the loans at a cost of 59 percent of members’ value. However, when factoring in known expenses to carry the properties, the estimated cost to manage the loans is reduced to 33.8 percent. This 33.8 percent does not take into account vandalism, theft, and outside contractor expenses, which would further reduce this recovery percentage.
The IG report noted that AMAC has sold 409 of the approximately 850 properties originally taken over as a result of the liquidation of Norlarco and Huron. As of June 30, 2011, AMAC has sold 409 properties for a total of $41.0 million. These properties had an estimated member value of $95.8 million, which resulted in AMAC realizing 42.8 percent of the member’s value based on sales figures alone, but does not factor in expenses incurred for the properties sold.
The IG report estimated that NCUA should recognize 28.7 percent net realization on all properties obtained through liquidation of Norlarco and Huron River credit unions.
Read the report.
The IG report found that AMAC management's analysis was not sufficiently comprehensive to support its decision to hold onto the properties. Specifically, the IG found deficiencies over the valuation process of real estate owned (REO). AMAC did not perform valuations on these properties in accordance with industry standards and did not always maintain proper support for the valuations that were completed. In addition, the IG determined AMAC did not formally complete a cost to carry analysis on REO.
The IG report determined that AMAC management estimated they could manage the loans at a cost of 59 percent of members’ value. However, when factoring in known expenses to carry the properties, the estimated cost to manage the loans is reduced to 33.8 percent. This 33.8 percent does not take into account vandalism, theft, and outside contractor expenses, which would further reduce this recovery percentage.
The IG report noted that AMAC has sold 409 of the approximately 850 properties originally taken over as a result of the liquidation of Norlarco and Huron. As of June 30, 2011, AMAC has sold 409 properties for a total of $41.0 million. These properties had an estimated member value of $95.8 million, which resulted in AMAC realizing 42.8 percent of the member’s value based on sales figures alone, but does not factor in expenses incurred for the properties sold.
The IG report estimated that NCUA should recognize 28.7 percent net realization on all properties obtained through liquidation of Norlarco and Huron River credit unions.
Read the report.
Saturday, March 24, 2012
Telesis Community Placed into Conservatorship
The California Department of Financial Institutions placed Telesis Community Credit Union into conservatorship and appointed the National Credit Union Administration (NCUA) as conservator. Telesis Community Credit Union is a state-chartered, federally insured credit union headquartered in Chatsworth, Calif.
The California Department of Financial Institutions placed Telesis Community Credit Union into conservatorship due to a declining financial condition.
Over the last five years, Telesis Community has reported almost $48 million in losses. The credit union went from $600.9 million in assets at the end of 2007 to $318.3 million in assets.
Over the last year, the credit union's net worth fell from $22.1 million to $17.5 million. As of December 2011, Telesis Community CU had a net worth ratio of 5.48 percent.
The credit union reported that 12.24 percent of it loans were 60 days or more past due. Total delinquent loans stood at $29.8 million at the end of 2011.
Business lending is a significant line of business for Telesis Community. In 2007, Telesis Community reported almost $338 million in business loans. By the end of 2011, Telesis Community had $175.5 million in outstanding business loans and unfunded commitments on its books. Business loans represented approximately 55 percent of the credit union's assets at the end of 2011.
More than $26 million in business loans were at least 60 days past due or 15.07 percent of all business loans were nonperforming. The credit union reported almost $18 million in business loans that had been in default for more than one year.
Additionally, Telesis Community had charged off $5.7 million in business loans in 2011.
Telesis is also under funding pressure. Its line of credit at a corporate credit union was cut from $100 million at the end of 2010 to less than $2.4 million. In addition, the credit union reported that non-member deposits fell from $32 million to $4.1 million.
Read the press release.
The California Department of Financial Institutions placed Telesis Community Credit Union into conservatorship due to a declining financial condition.
Over the last five years, Telesis Community has reported almost $48 million in losses. The credit union went from $600.9 million in assets at the end of 2007 to $318.3 million in assets.
Over the last year, the credit union's net worth fell from $22.1 million to $17.5 million. As of December 2011, Telesis Community CU had a net worth ratio of 5.48 percent.
The credit union reported that 12.24 percent of it loans were 60 days or more past due. Total delinquent loans stood at $29.8 million at the end of 2011.
Business lending is a significant line of business for Telesis Community. In 2007, Telesis Community reported almost $338 million in business loans. By the end of 2011, Telesis Community had $175.5 million in outstanding business loans and unfunded commitments on its books. Business loans represented approximately 55 percent of the credit union's assets at the end of 2011.
More than $26 million in business loans were at least 60 days past due or 15.07 percent of all business loans were nonperforming. The credit union reported almost $18 million in business loans that had been in default for more than one year.
Additionally, Telesis Community had charged off $5.7 million in business loans in 2011.
Telesis is also under funding pressure. Its line of credit at a corporate credit union was cut from $100 million at the end of 2010 to less than $2.4 million. In addition, the credit union reported that non-member deposits fell from $32 million to $4.1 million.
Read the press release.
Friday, March 23, 2012
Saguache County Credit Union Liquidated
The Colorado Division of Financial Services appointed the National Credit Union Administration (NCUA) as liquidating agent of Saguache County Credit Union of Moffat, Colorado. Immediately following appointment as liquidating agent of Saguache County Credit Union, NCUA entered into an agreement with Aventa Credit Union of Colorado Springs, Colo., to purchase and assume membership shares and certain assets of Saguache County Credit Union.
The Colorado Division of Financial Services made the decision to liquidate Saguache County Credit Union and discontinue its operations after determining the credit union was insolvent with no prospect for restoring viable operations. At the time of liquidation, Saguache County Credit Union served 3,185 members and had assets of approximately $17 million.
As of December 2011, Saguache was critically undercapitalized with a net worth ratio of 1.14 percent. The credit union reported that 8.09 percent of its loans were 60 days or more past due. The credit union reported that its only business loan has been delinquent for at least one year.
Saguache was placed into conservatorship on July 22, 2011.
Saguache County Credit Union is the third federally insured credit union liquidation in 2012.
Read the press release.
The Colorado Division of Financial Services made the decision to liquidate Saguache County Credit Union and discontinue its operations after determining the credit union was insolvent with no prospect for restoring viable operations. At the time of liquidation, Saguache County Credit Union served 3,185 members and had assets of approximately $17 million.
As of December 2011, Saguache was critically undercapitalized with a net worth ratio of 1.14 percent. The credit union reported that 8.09 percent of its loans were 60 days or more past due. The credit union reported that its only business loan has been delinquent for at least one year.
Saguache was placed into conservatorship on July 22, 2011.
Saguache County Credit Union is the third federally insured credit union liquidation in 2012.
Read the press release.
The $11 Million Man
David Maus, the President and CEO of Public Service Credit Union (Denver, Colorado), had a total compensation package in excess of $11 million for 2010.
According to Public Service's Form 990 for 2010, David Maus's base compensation was $9.8 million. On top of his base salary, the Form 990 revealed $1.2 million in retirement and other deferrred compensation.
In comparison, the average base compensation for CEOs at banks with between $1 billion and $2.9 billion in assets in 2010 was $395,000.
This pay package seems to be excessive, especially for a not-for-profit credit union with slightly more than $1 billion in assets at the end of 2010.
Form 990's for tax exempt organizations can be downloaded for free at Guidestar.
According to Public Service's Form 990 for 2010, David Maus's base compensation was $9.8 million. On top of his base salary, the Form 990 revealed $1.2 million in retirement and other deferrred compensation.
In comparison, the average base compensation for CEOs at banks with between $1 billion and $2.9 billion in assets in 2010 was $395,000.
This pay package seems to be excessive, especially for a not-for-profit credit union with slightly more than $1 billion in assets at the end of 2010.
Form 990's for tax exempt organizations can be downloaded for free at Guidestar.
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