Morning Consult Finds Majority of Voters Support Eliminating CU Tax Exemption to Pay for Tax Reform

A survey by Morning Consult of 1,990 registered voters conducted for the American Bankers Association found that American voters are overwhelmingly unaware that credit unions pay no federal income taxes. When told that credit unions do not pay corporate income taxes, more than half would support a tax reform plan that eliminates the credit union tax exemption to limit an increase in the deficit.

According to the national survey,

• 85 percent of American voters did not know whether credit unions pay taxes or mistakenly believed they do.
• 51 percent of voters said they would support eliminating the credit union tax exemption if it helped minimize the impact of tax reform on the deficit.
• 56 percent believe it is inappropriate for credit unions to use their tax exemption to buy multimillion-dollar naming rights to arenas and sports sponsorships.

Below is an infographic highlighting the survey results.

Another Georgia Bank to Be Acquired by Credit Union

SRP Federal Credit Union (North Augusta, SC) has reached an agreement to acquire Southern Bank (Sardis, GA).

SRP FCU has $851 million in assets, according to its most recent call report.

Southern Bank is a privately held bank with $80 million in assets and five branches.

The combined entity would have $950 million in assets and more than 20 offices in Georgia and South Carolina.

The acquisition is expected to be complete in the second quarter of 2018.

This is the eighteenth announced or completed merger between a bank and a credit union, since 2012.

Read the story.

United Nations FCU, Clements & Company and Underwriters at Lloyd's of London Fined $1.47 Million

The New York Department of Financial Services (DFS) has entered into a consent order with Clements & Company, Underwriters at Lloyd’s of London, and the United Nations Federal Credit Union (UNFCU) for offering, marketing and underwriting an unlicensed credit and debit card-based life insurance program for UNFCU members.

The insurance program offered guaranteed-issue term life insurance to UNFCU’s members in more than 210 countries and territories. A total of more than 4,300 policies were sold, including to 804 members listing New York as their primary location.

According to the DFS, the insurance offered and sold to UNFCU members did not meet New York standards for policies sold by DFS-approved insurers.

Also, prior to the settlement, the insurance program was operating at a severe loss and was unsustainable.

DFS is requiring the parties to transfer the business over to a New York-licensed insurer, Monitor Life Insurance Company of New York.

The consent order requires the parties to pay a total of $1.47 million in fines for unlicensed life insurance business and to establish an insurance program with a DFS-licensed insurer.

According to the consent order, UNFCU will pay a civil penalty of $250,000.

Additionally, UNFCU will no longer receive "commissions, fees, and other compensation related to coverage offered New York Certificate Holders." The credit union will pay one-third of the first $100,000 cost associated with hiring a third-party vendor to design and build a web portal. UNFCU will be responsible for paying all merchant credit card fees.

Read the press release.

Read the consent order.

Align CU Buys Naming Rights to Pavilion Club at the Tsongas Center

Align Credit Union is sponsoring the Pavilion Club at the Tsongas Center at UMass Lowell.

The “Align Credit Union Pavilion” is a 4,800 square foot multi-level luxury concourse that provides 350 Pavilion Club members with great views and amenities.

The price and terms of the sponsorship was not disclosed.

Read the press release.

CUs Accounted for 9 Percent of All Mortgage Loans in 2016

Credit unions accounted for 9 percent of all mortgage originations in 2016, according to Home Mortgage Disclosure Act (HMDA) data.

There were 1,939 credit unions that filed HMDA reports. A majority of credit unions (1,025) made fewer than 100 loans and 374 credit unions reported fewer than 25 loans.

Credit unions reported 215 thousand home-purchase loans. Almost 87 percent of home-purchase loans were conventional mortgages.

Credit unions, along with small banks, accounted for a highly disproportionate share of conventional higher-priced loans. Five percent of credit unions' conventional loans were high-priced versus 3.7 percent of all conventional mortgages made by all lenders.

Almost one quarter (25.2 percent) of all home-purchase loans were made to low-and moderate-income (LMI) borrowers and 13.2 percent were to LMI neighborhoods.

Credit unions reported 277 thousand refinance loans, of which 96 percent were conventional loans.

Credit unions sold about one-half of the home-purchase loans they originated and about 40 percent of the refinance loans they originated.

Read the Federal Reserve Bulletin article.

Bettendorf City Council Approves TIF for Ascentra's Construction Project

The Quad City Times is reporting that Ascentra Credit Union (Bettendorf, IA) will receive tax-increment financing (TIF) for the construction of its new headquarters.

The Bettendorf (IA) City Council on November 211 approved a development agreement with Ascentra Credit Union by a 6-1 vote that will lead to the construction of an almost 40,000 square-foot headquarters across the street from the Quad-Cities Waterfront Convention Center.

The terms of the agreement call for a 10-year, 100 percent TIF capped at $2 million.

Terms of the agreement call for the city to purchase Ascentra's current headquarters on Grant Street for $1.15 million and bury utilities on the new site and in addition to relocating the traffic signal at the corner of 21st and Grant streets.

Ascentra's obligations include purchasing the north Town Square property for $750,000 and the south property for $1. After an alternative parking structure is constructed, the south property would be conveyed back to the city for $1.

Both the Scott County Board of Supervisors and Bettendorf School District were supportive of the project and the use of tax incentives.

Read the story.

November 21 City Council Agenda.

Bad Taxi Medallion Loans Negatively Affect These NY Credit Unions

Carnage in the taxi industry from ride sharing apps continues to negatively impact several New York credit unions.

Van Cortlandt Cooperative FCU (Bronx, NY)

Over 25 percent of loans at Van Cortlandt Cooperative FCU were delinquent at the end of the third quarter of 2017.

The $72 million credit union reported that $8 million in loans were 60 days or more past due as of September 2017. More than half (57 percent) of the delinquent loans were past due for 360 days or more.

Almost all of the delinquent loans (slightly less than $8 million) were nonmember commercial loans, which presumably were taxi medallion participation loans.

As of September 2017, the credit union reported $10.6 million in purchased commercial loans or participations to nonmembers. Over three-quarters of these loans (75.42 percent) were 60 days or more past due.

The credit union further reported almost $6.7 million of troubled debt restructured commercial loans.

One factor mitigating the dire delinquency ratio is that the credit union has a loan to asset ratio of 38.65 percent.

In addition, the credit union had a year-to-date loss of $409 thousand, after posting a loss for 2016 of $3.2 million.

Over the last year, the credit union's net worth ratio has fallen from almost $11 million to approximately $6.5 million. The credit union's net worth ratio has tumbled from 13.99 percent to 8.97 percent.

The credit union is reporting that it has allowances for loan and lease losses of $4 million. This gives the credit union a coverage ratio of 49.98 percent.

Bay Ridge FCU (Brooklyn, NY)

Bay Ridge FCU reported a loss for the first nine months of 2017 of almost $2.6 million. In comparison, the credit union reported a profit of almost $250 thousand for the same time period in 2016.

The loss was due to provisions for loan and lease losses of $4.3 million as of September 2017.

Due to its loss, the credit union's net worth dropped from $19 million at the end of 2016 to $16.3 million as of September 2017. Over the comparable time period, its net worth ratio fell by 110 basis points to 8.37 percent.

The credit union reported almost $8.3 million in delinquent loans at the end of the third quarter of 2017 -- this was up from $3.8 million from a year ago. The percent age of delinquent loans rose from 2.20 percent to 4.83 percent.

Almost $5.9 million of the delinquent loans were commercial loans not secured by real estate.

In addition, the credit union is reporting almost $21.6 million in troubled debt restructured commercial loans. Troubled debt restructured commercial loans were almost 130 percent of the credit union's net worth.

Due to the increase in provisions for loan and lease losses, the credit union increased its allowance for loan and lease losses to $5.9 million. The portion of allowance for loan and lease losses that were troubled debt restructured loans was $4.3 million.

The credit union's coverage ratio was 71.58 percent as of the end of the third quarter of 2017.

G.P.O. FCU (New Hartford, NY)

Participation loans, presumable taxi medallion participation loans, accounted for most of G.P.O. FCU's non-performing loans.

The credit union reported holding $13.7 million in participation commercial loans, as of September 2017. Participation loans represented 8.10 percent of the credit union's total loans.

Of its $7 million in delinquent loans, almost $5.8 million were delinquent participation loans. The credit union reported 42.11 percent of its participation loans were 60 days or more past due.

Of the $5.7 million delinquent participation loans, approximately $3.7 million were 360 days or more delinquent.

In addition, $1.9 million in participation loans were charged off minus recoveries. The net charge-off rate on participation loans was 16.85 percent.

Despite the non-performance of these participation loans, the credit union was profitable and continued to build its net worth during the third quarter.