The National Credit Union Administration reported that the number of problem credit unions fell by 18 during the quarter to 258 credit unions at the end of the first quarter of 2015. There are 50 fewer problem credit unions compared to a year ago.
A problem credit union has a CAMEL rating of 4 or 5.
Problem credit unions held $10.3 billion in shares (deposits) and $11.6 billion in assets at the end of the first quarter of 2015. In comparison, shares and assets at problem credit unions were $10.2 billion and $11.5 billion at the end of 2014, respectively.
Shares at problem credit unions equaled 1.14 percent of the industry's insured shares and approximately 1 percent of the industry's assets.
The number of problem credit unions with $500 million or more in assets was unchanged at 5 during the quarter; but shares rose by $100 million to $4 billion.
The number of problem credit unions with assets between $100 million and $500 million increased by 2 during the quarter to 17 credit unions. Shares at these problem credit unions increased from $2.9 billion to $3.2 billion during the quarter.
The number of problem credit unions with $100 million or less in assets fell during the quarter, as did shares.
Thursday, April 30, 2015
Tuesday, April 28, 2015
Secure First CU Placed Under Cease & Desist Order
The Alabama Credit Union Administration on March 17 placed Secure First Credit Union under a cease and desist order for unsafe and unsound practices and violation of the law, rule, and regulation.
The order notes that the Birmingham-based credit union failed to satisfy requirements set forth in an August 5, 2013 Letter of Understanding and Agreement and had not addressed numerous outstanding Document of Resolution in Examination Reports.
The $44.6 million credit union was cited for unsafe and unsound lending practices, including insider loans that did not adhere to lending guidelines; deficiencies in its allowance for loan and lease losses account; and inadequate compliance program, including non-compliance in BSA/AML area.
Read the order.
The order notes that the Birmingham-based credit union failed to satisfy requirements set forth in an August 5, 2013 Letter of Understanding and Agreement and had not addressed numerous outstanding Document of Resolution in Examination Reports.
The $44.6 million credit union was cited for unsafe and unsound lending practices, including insider loans that did not adhere to lending guidelines; deficiencies in its allowance for loan and lease losses account; and inadequate compliance program, including non-compliance in BSA/AML area.
Read the order.
Saturday, April 25, 2015
Impermissible Investment Losses at TVA Community CU
The TimesDaily.com is reporting on possible impermissible investment losses at TVA Community Credit Union.
A September 2014 e-mail from the National Credit Union Administration notes that the agency was monitoring these impermissible investments by the Muscle Shoals-based credit union.
Read the story.
A September 2014 e-mail from the National Credit Union Administration notes that the agency was monitoring these impermissible investments by the Muscle Shoals-based credit union.
Read the story.
Friday, April 24, 2015
Alabama One CU Under Cease & Desist Order
The order, which was issued on April 2, found that Institution-Affiliated Parties at $602 million Alabama One Credit Union had engaged in unsafe and unsound practices.
The enforcement order found that the Board of Directors had failed to provide adequate supervision over and direction to the management of the credit union.
In addition, the credit union operated with inadequate management.
The enforcement order also stated that the credit union operated without proper expertise, policies and procedures with regard to its Member Business Loan (MBL) portfolio.
Furthermore, the credit union had unsafe and unsound loan underwriting and administration practices.
The state regulator found that the credit union granted, renewed, and extended loans to members disguised as straw borrowers. The credit union also modified, extended, deferred, and renewed business loans to a borrower who did not have ability to meet the terms of the loan.
Within sixty days of the order becoming effective, the credit union is to retain qualified management, including CEO, COO, and senior lending officer.
The credit union is required to charge-off those loans classified as a loss. Also, the credit union will cease offering, granting, and issuing MBLs.
Read the Order.
The enforcement order found that the Board of Directors had failed to provide adequate supervision over and direction to the management of the credit union.
In addition, the credit union operated with inadequate management.
The enforcement order also stated that the credit union operated without proper expertise, policies and procedures with regard to its Member Business Loan (MBL) portfolio.
Furthermore, the credit union had unsafe and unsound loan underwriting and administration practices.
The state regulator found that the credit union granted, renewed, and extended loans to members disguised as straw borrowers. The credit union also modified, extended, deferred, and renewed business loans to a borrower who did not have ability to meet the terms of the loan.
Within sixty days of the order becoming effective, the credit union is to retain qualified management, including CEO, COO, and senior lending officer.
The credit union is required to charge-off those loans classified as a loss. Also, the credit union will cease offering, granting, and issuing MBLs.
Read the Order.
Ascend FCU Buys Naming Rights to Nashville Amphitheater
Tullahoma-based Ascend Federal Credit Union has bought the naming rights to the West Riverfront Park amphitheater in Nashville.
The venue will be known as Ascend Amphitheater.
The amphitheater can hold up to 6,800 people and will open July 30.
The deal is for 10 years. However financial terms were not disclosed.
The buying of naming rights to arenas by credit unions is becoming a regular occurrence, but in my opinion represents an abuse of the credit union tax exemption.
Read the article.
The venue will be known as Ascend Amphitheater.
The amphitheater can hold up to 6,800 people and will open July 30.
The deal is for 10 years. However financial terms were not disclosed.
The buying of naming rights to arenas by credit unions is becoming a regular occurrence, but in my opinion represents an abuse of the credit union tax exemption.
Read the article.
Thursday, April 23, 2015
Montgomery County CU Conserved (Updated)
The Superintendent of the Ohio Division of Financial Institutions today placed Montgomery County Credit Union, Inc., located in Dayton, Ohio, into conservatorship and appointed the National Credit Union Administration (NCUA) as agent for the conservator.
The Ohio Division of Financial Institutions wrote:
Montgomery County Credit Union has reported losses of $393,139 and $380,685 for 2013 and 2014, respectively. In addition, the delinquency ratio for the credit union rose during the second half of 2014 from 0.69 percent to 2.53 percent.
According to the Dayton Daily News, "[i]n 2013, the credit union was investigated for allegations of poor management and mishandled money that was found during an ongoing audit. The board of directors of Montgomery County Credit Union Inc. told members that the problems led to an approximately $1.3 million net loss in 2012.
Montgomery County Credit Union, Inc., is a federally insured, state-chartered credit union with 6,605 members and $27.3 million in assets, according to the credit union’s most recent Call Report.
Go to the Ohio Division of Financial Institutions website to read the press release.
Read the NCUA press release.
The Ohio Division of Financial Institutions wrote:
"Over the last several years, the Division has been working closely with the credit union in order to prevent
its financial condition from deteriorating. Unfortunately, certain safety and soundness concerns were not resolved in a timely fashion, and it became necessary for the Division to take action to protect the assets of the credit union for members, depositors and creditors."
Montgomery County Credit Union has reported losses of $393,139 and $380,685 for 2013 and 2014, respectively. In addition, the delinquency ratio for the credit union rose during the second half of 2014 from 0.69 percent to 2.53 percent.
According to the Dayton Daily News, "[i]n 2013, the credit union was investigated for allegations of poor management and mishandled money that was found during an ongoing audit. The board of directors of Montgomery County Credit Union Inc. told members that the problems led to an approximately $1.3 million net loss in 2012.
Montgomery County Credit Union, Inc., is a federally insured, state-chartered credit union with 6,605 members and $27.3 million in assets, according to the credit union’s most recent Call Report.
Go to the Ohio Division of Financial Institutions website to read the press release.
Read the NCUA press release.
CUNA's Alternative Universe
In reading the risk-based capital comment letter from the Credit Union National Association (CUNA), I came to the conclusion that this trade association is operating in an alternative universe from the rest of us.
CUNA writes:
However, this comment by CUNA is disingenuous.
It fails to take into consideration that the cost of the corporate credit union debacle was transferred from the NCUSIF to the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).
If the losses from the corporate credit union debacle stayed with the NCUSIF, the equity ratio would have fallen to 0.11 percent of insured deposits, according to NCUA analysis. This would have been well below the normal operating level set in law for the NCUSIF.
In addition, credit unions paid $4.8 billion in assessments to the TCCUSF.
Maybe in CUNA's alternative universe, the corporate credit union fiasco did not happen. But for the rest of us with our feet firmly planted in reality, we know that without the corporate credit union bailout, the NCUSIF equity ratio would have fallen sharply below the normal operating level.
CUNA writes:
"From 2008 to 2012 the NCUSIF fund balance never fell below its historical range of 1.2% to 1.3% of insured deposits, despite the failures of 124 credit unions. This stability in the fund ratio was accomplished with just two share insurance premiums, in 2009 and 2010, totaling 24 basis points of insured shares."
However, this comment by CUNA is disingenuous.
It fails to take into consideration that the cost of the corporate credit union debacle was transferred from the NCUSIF to the Temporary Corporate Credit Union Stabilization Fund (TCCUSF).
If the losses from the corporate credit union debacle stayed with the NCUSIF, the equity ratio would have fallen to 0.11 percent of insured deposits, according to NCUA analysis. This would have been well below the normal operating level set in law for the NCUSIF.
In addition, credit unions paid $4.8 billion in assessments to the TCCUSF.
Maybe in CUNA's alternative universe, the corporate credit union fiasco did not happen. But for the rest of us with our feet firmly planted in reality, we know that without the corporate credit union bailout, the NCUSIF equity ratio would have fallen sharply below the normal operating level.
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