The National Credit Union Administration (NCUA) liquidated Vensure Federal Credit Union of Mesa, Arizona. NCUA placed the credit union into conservatorship on April 15 of this year and made the decision to close Vensure FCU after determining the credit union was insolvent and has no prospects for restoring viable operations. At the time of liquidation the credit union served 140 members and had deposits of approximately $8.1 million.
Vensure FCU is the twelfth federally-insured credit union liquidation in 2011.
Read the press release.
Tuesday, July 12, 2011
CU Exposure to State and Local Government Debt
The Great Recession and subsequent sub-par recovery has significantly stressed the finances of state and local governments. This has increased the probability that some municipalities may default on their obligations and bondholders will experience losses on these investments.
For example, Nouriel Roubini's consulting firm has estimated that about $100 billion of state and local debt will default over the next five years, with about $20 billion in actual losses.
Recently, the Office of the Comptroller of the Currency has begun asking bank risk management officers to evaluate the potential for defaults and losses on their municipal bonds. Additionally, examiners are looking for insight into interest-rate risks banks could face from their municipal bond portfolios.
The following analysis looks at credit union exposure to state and local government debt.
As of March 31, 2011, there were 106 credit unions that reported holding state and local government bonds. While few credit union reported holding state and local debt, these institutions are significantly larger than the average credit union (asset size of $735 million versus an industry average of almost $130 million).
While the risk from local government debt to the National Credit Union Share Insurance Fund appears to be minimal at this time, there are some credit unions that have significant exposure to state and local government debt. Seven credit unions report that their exposures to state and local governments exceed their net worth, including to $4 billion-plus credit unions (Bethpage and Alaska USA).
The following table lists the 25 credit unions with the greatest exposure to state and local government debt as a percent of the credit union's net worth (click on image to enlarge).
For example, Nouriel Roubini's consulting firm has estimated that about $100 billion of state and local debt will default over the next five years, with about $20 billion in actual losses.
Recently, the Office of the Comptroller of the Currency has begun asking bank risk management officers to evaluate the potential for defaults and losses on their municipal bonds. Additionally, examiners are looking for insight into interest-rate risks banks could face from their municipal bond portfolios.
The following analysis looks at credit union exposure to state and local government debt.
As of March 31, 2011, there were 106 credit unions that reported holding state and local government bonds. While few credit union reported holding state and local debt, these institutions are significantly larger than the average credit union (asset size of $735 million versus an industry average of almost $130 million).
While the risk from local government debt to the National Credit Union Share Insurance Fund appears to be minimal at this time, there are some credit unions that have significant exposure to state and local government debt. Seven credit unions report that their exposures to state and local governments exceed their net worth, including to $4 billion-plus credit unions (Bethpage and Alaska USA).
The following table lists the 25 credit unions with the greatest exposure to state and local government debt as a percent of the credit union's net worth (click on image to enlarge).
Friday, July 8, 2011
Borinquen FCU Closed
The National Credit Union Administration liquidated Borinquen Federal Credit Union of Philadelphia. NCUA made the decision to liquidate Borinquen Federal Credit Union and discontinue its operations after determining the credit union was insolvent and had no prospect for restoring viable operations.
The credit union was placed into conservatorship on June 24 of this year.
Borinquen FCU is the eleventh credit union to be closed this year.
Read the press release.
The credit union was placed into conservatorship on June 24 of this year.
Borinquen FCU is the eleventh credit union to be closed this year.
Read the press release.
Large State Chartered CU Executive Compensation, 2009
Below is the compensation data from Form 990 filings for large state chartered credit unions for 2009 (click on the images to enlarge).
I was unable to find information for 6 state chartered credit unions as their Form 990s were not available through GuideStar. Also, federal credit unions are excluded from this analysis because they are exempt from filing Form 990s.
Total compensation includes base compensation, bonus and incentive compensation, other compensation, deferred compensation, and nontaxable benefits.
The CEO with the largest compensation package is Gordon Simmons of Service Credit Union (NH). Simmons received slightly more than $2 million in total compensation. The credit union official with the second highest compensation package is David Maus of Public Service Employees Credit Union (CO).
I was unable to find information for 6 state chartered credit unions as their Form 990s were not available through GuideStar. Also, federal credit unions are excluded from this analysis because they are exempt from filing Form 990s.
Total compensation includes base compensation, bonus and incentive compensation, other compensation, deferred compensation, and nontaxable benefits.
The CEO with the largest compensation package is Gordon Simmons of Service Credit Union (NH). Simmons received slightly more than $2 million in total compensation. The credit union official with the second highest compensation package is David Maus of Public Service Employees Credit Union (CO).
Tuesday, July 5, 2011
Failure Not An Option Is Bad Policy
In a speech before the National Association of Federal Credit Union's Annual Conference on June 30th, NCUA Chairman Debbie Matz stated that creative remedies that prevented the failure of large troubled credit unions staved off significant losses to the National Credit Union Share Insurance Fund (NCUSIF).
She decided that the failure of these large credit unions would not happen on her watch.
Debbie Matz said: "I was adamant. Failure was not an option."
These creative solutions included finding merger partners, replacing CEOs, and prescriptive enforcement actions.
In addition, some of these large troubled credit unions were placed into conservatorship. By conserving these credit unions, NCUA manages these zombies and the NCUSIF does not have to recognize the losses.
To use an overused expression, NCUA kicked the can down the road.
But conservatorship is just another word for forbearance. And let me be clear, I believe forbearance is wrong whether it is practiced by a bank regulator or a credit union regulator.
Through the use of forbearance, this agency is keeping open institutions that should be closed.
For example, why is A.E.A. FCU of Yuma, Arizona still open?
According to A.E.A. FCU's latest call reports, its net worth ratio has been negative for two consecutive quarters. Somehow I don't think control of this credit union will be returned to its members anytime soon, if ever.
This question can be asked about other credit unions that have been conserved.
When failure is not an option for large credit unions, NCUA is admitting that these credit unions are "too big to fail." This is bad public policy and sends the wrong signal to credit unions and the marketplace. Moreover, this policy is contrary to congressional intent that "too big to fail" must end.
She decided that the failure of these large credit unions would not happen on her watch.
Debbie Matz said: "I was adamant. Failure was not an option."
These creative solutions included finding merger partners, replacing CEOs, and prescriptive enforcement actions.
In addition, some of these large troubled credit unions were placed into conservatorship. By conserving these credit unions, NCUA manages these zombies and the NCUSIF does not have to recognize the losses.
To use an overused expression, NCUA kicked the can down the road.
But conservatorship is just another word for forbearance. And let me be clear, I believe forbearance is wrong whether it is practiced by a bank regulator or a credit union regulator.
Through the use of forbearance, this agency is keeping open institutions that should be closed.
For example, why is A.E.A. FCU of Yuma, Arizona still open?
According to A.E.A. FCU's latest call reports, its net worth ratio has been negative for two consecutive quarters. Somehow I don't think control of this credit union will be returned to its members anytime soon, if ever.
This question can be asked about other credit unions that have been conserved.
When failure is not an option for large credit unions, NCUA is admitting that these credit unions are "too big to fail." This is bad public policy and sends the wrong signal to credit unions and the marketplace. Moreover, this policy is contrary to congressional intent that "too big to fail" must end.
Sunday, July 3, 2011
Banks and Credit Unions Work Together on Patent Reform
On June 29, the American Bankers Association and the Credit Union National Association along with 11 other trade associations wrote to the Senate leadership encouraging them to bring House-passed patent-reform legislation (H.R. 1249) to the floor as soon as possible. The legislation includes provisions (Section 18) supported by the banking and credit union industries to create a procedure to re-examine business-method patents as an alternative to costly litigation.
Here is the text of the letter.
We are writing to encourage you to bring H.R. 1249, the “Leahy-Smith America Invents Act,” to the Senate floor at your earliest possible convenience and send the bill to the President’s desk to be signed into law. H.R. 1249 closely mirrors the Senate bill that passed earlier this year by an overwhelming 95-5 vote.
Patent reform is essential legislation: enactment will spur innovation creating jobs and ensure that the Patent and Trademark Office (PTO) has the tools necessary to maintain our patent system as the best in the world. We strongly support the improved re-examination procedures in H.R. 1249, which will allow the experts at PTO to review low-quality business-method patents against the best prior art. Equally important, the bill provides the PTO with increased and predictable funding. This certainty is absolutely critical if the PTO is to properly allocate resources and hire and retain the expertise necessary to benefit the entire user-community.
This bill has been nearly a decade in the making and is supported by a vast cross-section of all types of inventors and businesses. It is time to send patent reform to the President for signature, and we strongly encourage the Senate to take up and pass H.R. 1249 without delay.
Here is the text of the letter.
We are writing to encourage you to bring H.R. 1249, the “Leahy-Smith America Invents Act,” to the Senate floor at your earliest possible convenience and send the bill to the President’s desk to be signed into law. H.R. 1249 closely mirrors the Senate bill that passed earlier this year by an overwhelming 95-5 vote.
Patent reform is essential legislation: enactment will spur innovation creating jobs and ensure that the Patent and Trademark Office (PTO) has the tools necessary to maintain our patent system as the best in the world. We strongly support the improved re-examination procedures in H.R. 1249, which will allow the experts at PTO to review low-quality business-method patents against the best prior art. Equally important, the bill provides the PTO with increased and predictable funding. This certainty is absolutely critical if the PTO is to properly allocate resources and hire and retain the expertise necessary to benefit the entire user-community.
This bill has been nearly a decade in the making and is supported by a vast cross-section of all types of inventors and businesses. It is time to send patent reform to the President for signature, and we strongly encourage the Senate to take up and pass H.R. 1249 without delay.
Friday, July 1, 2011
Conversion Chatter
If you have not done so, I encourage you to read Rob Garver's article in American Banker Magazine entitled Conversion Conversation.
Several experts are predicting that there is a wave of conversions that are ready to come.
The article cites issues confronting credit unions that makes charter choice more desirable, including future premium assessments, lack of access to capital, and limited growth opportunities.
Read the article.
Several experts are predicting that there is a wave of conversions that are ready to come.
The article cites issues confronting credit unions that makes charter choice more desirable, including future premium assessments, lack of access to capital, and limited growth opportunities.
Read the article.
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