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October 24, 2014

No NCUSIF 2014 premium, fund sees $26.4M 3Q net income

ALEXANDRIA, Va. (10/24/14)--National Credit Union Administration staff confirmed earlier indications that there will be no National Credit Union Share Insurance Fund premium for 2014 at the agency's monthly board meeting Thursday. Credit Union National Association analysis earlier this year also concluded that given the health of the credit union system, a premium would not be required.

The fund ended the third quarter of 2014 with a net income of $24.6 million and an equity ratio of 1.3%, which reflects the capitalization deposit adjustment billed in September. Third quarter investment and other income was $54 million, operating expenses were $48.1 million and the provision for insurance losses was reduced by $18.7 million, according to the agency.

The fund's reserves are at approximately $167.3 million.

Shares in CAMEL 4 and 5 credit unions were 1.38% of federally insured credit union shares, an improvement over last quarter's 1.46%. The number of CAMEL 4 and 5 credit unions fell to 288 from the third quarter of last year, a 9.1% drop. Assets for those credit unions declined 10.3% in the past year.
Click to view larger imageA chart showing the percent of CAMEL 4 and 5 credit union shares and how they have dropped over the past several years. Source: NCUA

The number of CAMEL 3 credit unions dropped to 1,450, a 2.2% decline, and with that decline, total assets in CAMEL 3 credit unions dropped 3.4% to $104.7 billion.

According to NCUA staff, there was been 12 credit union failures this year. There were 17 in 2013. Total year-to-date losses due to credit union failures is $30.4 million, $28.6 million of which was related to fraud.

During the report, board member J. Mark McWatters questioned staff about the nature of losses and expenses to the NCUSIF. When staff indicated that they are mostly due to fraud, McWatters raised concerns about the overwhelming emphasis on regulation when a substantial percentage of the losses to the SIF are caused by garden variety fraud that should be addressed in a more aggressive manner by NCUA. ReadMore

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Nussle in American Banker: CUs, small banks can unite to ease burdens

WASHINGTON (10/24/14)--Credit unions and small banks could work together to accomplish a reduction in regulatory burden, says Credit Union National Association President/CEO Jim Nussle. In an op-ed published in American Banker , Nussle said such burdens make "strange bedfellows."

Nussle praised an American Banker article written last week by Sen. Mike Crapo (R-Idaho), who said bold regulatory reforms would help credit unions and other small financial institutions. Nussle said Crapo "hit the ball out of the park," and addressed further impacts of regulatory burden.

"Too often, regulators force credit unions and other smaller financial institutions to comply with rules written to address the misdeeds of Wall Street firms and the largest depository institutions in the country," Nussle wrote. "Credit unions did not engage in the practices that contributed to the financial crisis. But the post-crisis reaction of lawmakers and regulators has been to target everyone, thereby missing the point about what caused this disaster."

With gridlock in Congress giving little hope to regulatory reform measures being passed, regulators might feel they have "carte blanche" when it comes to regulation, Nussle wrote. This makes it important for credit unions to seek alliances with other organizations who also strive for regulatory relief.

"I believe credit unions can work with small banks to create momentum and put pressure on both legislators and regulators to reduce unnecessary and cumbersome regulations," Nussle wrote. "This could be a surprise for us to deliver to Congress. We can create a shared agenda and build momentum in a bipartisan way to help reduce the regulatory burden that small banks and credit unions face." ReadMore

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Mike Mercer recognized with NCUF's Wegner award

CU System
MADISON, Wis. (10/24/14)--For his ground-breaking leadership, innovating contributions, personal commitment and unfaltering dedication to the advancement of credit unions, Mike Mercer, president/CEO of the Georgia Credit Union Affiliates (GCUA), has been named by the National Credit Union Foundation (NCUF) as the recipient of a 2015 Herb Wegner Memorial Award for Lifetime Achievement.

Mercer will receive the award alongside three other honorees at a special dinner hosted by the NCUF March 9 during the Credit Union National Association's 2015 Governmental Affairs Conference.

"Anyone who knows Mike knows he's an innovator and status quo challenger who has always pushed leaders to rethink old habits and consider new ways of doing things," said John Gregoire, chair of the NCUF Wegner Awards selection committee and president of The ProCon Group. "From his role at the Georgia Credit Union Affiliates, time as CUNA chairman, his work with the Polish credit union system and more, Mike always has displayed tremendous insight and innovation."

Among his accomplishments in serving members in the state of Georgia, Mercer was the creator of the Helping People Afford Life outreach campaign that positions members to make good decisions and to thrive financially.

It's also a program that played a part in helping Georgia credit unions save members more than $130 million last year.

"Throughout his career, Mike has preached the power of financial cooperatives, and their ability to empower individuals with the knowledge to succeed," said Doug Fecher, president/CEO, Wright Patt CU, Beaver Creek, Ohio, with $2.8 billion in assets. "He has directly impacted countless individuals across his state, nation and around the world."

No place internationally has felt the effects of Mercer's hard work more than Poland, where Mercer played a key role in creating and implementing a partnership between Georgia and the European country.

The partnership has allowed Polish citizens to improve their financial lives through credit union membership, with more than 62 credit unions now serving more than 1.8 million members.

In 2007, Mercer was awarded the "Order of the Knights Cross," the highest governmental award given to non-Polish citizens.

Additional highlights in Mercer's career:
  • Helping obtain critical support from then-Speaker of the U.S. House of Representatives, Newt Gingrich, for the Credit Union Membership Access Act in 1998;
  • Working his way up at a credit union to second in command in his 20s, up to a leadership role in the corporate credit union network, and finally to president of the Georgia league in 1985;
  • Serving on the board of the National Cooperative Bank, where he remains the only credit union professional to ever hold the position of chairman;
  • Acting as a mentor for instructional and collaborative training seminars within the GCUA Learning Journey program and the GCUA Idea Institute; and
  • Being recognized for his work on behalf of Georgia's credit unions with a Georgia Lifetime Achievement Award in 2005.
"Mike's career with credit unions is totally and fully associated with creative an innovative approaches for credit unions to grow and prosper," said Dan Mica, principal of The DMA Group and former president/CEO of CUNA. "To use Mike's own words, his personal vision and creativity make him a 'center of gravity' for all those interested in unique ways to preserve the best of the past and move forward to the cutting edge of the future." ReadMore

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Press highlights CUNA's strong backing of CU-friendly candidates

WASHINGTON (10/24/14)--The Credit Union National Association's strong commitment to credit-union friendly congressional candidates was highlighted Thursday in Politico and The Hill , two widely read Washington-based political publications that cover the White House, U.S. Congress, politics and policy.

The publications noted that CUNA and its Credit Union Legislative Action Council--CULAC--spent more in the 2014 cycle than in any previous election, backing a bipartisan group of candidates that are attuned to credit union issues.

As part of the $5.6 million spent to date, which CUNA says puts it among an elite group of financial sector campaign contributors during the 2014 midterm elections, CUNA also is sending millions of mail pieces directly to credit union members.
CUNA, the state credit union association, CULAC, and credit unions have deployed direct mail, as well as television, radio and online advertisements for candidates on a bipartisan basis.  In total, $3 million has been spent on direct PAC contributions, $1.2 million on independent expenditures and $1.4M on partisan communications.

Politico notes that credit unions receive bipartisan support on Capitol Hill.  As CUNA leader Jim Nussle said in a recent CUNA release, "There are many candidates and members on both sides of the aisle who are friends of credit unions; the bipartisan makeup of our support demonstrates the strengths of the credit union movement."

CUNA research shows that 65% of credit union members are interested in where their credit union stands on the candidates.
Candidates that have received support during the general election include: Sen. Mark Udall (D-Colo.); Senate Minority Leader Mitch McConnell (R-Ken.); Rep. Bruce Braley (D-Iowa), running for Senate; Pete Aguilar (D-Calif.), a former credit union employee; Rep. Steve Southerland (R-Fla.); Rep. Ami Bera (D-Calif.); Rep. Cheri Bustos (D-Ill.); Rep. Rodney Davis (R-Ill.); Rep. Rick Nolan (D-Minn.); Rep. Joe Heck (R-Nev.); Rep. Tom Reed (R-N.Y.); and Rep. Kurt Schrader (D-Ore.). ReadMore

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3 leagues merge to form Cooperative CU Assn. effective Jan. 1

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MARLBOROUGH, Mass. (10/24/14)--Massachusetts credit unions voted unanimously to join with the credit unions of New Hampshire and Rhode Island in a merged credit union trade association. The result of that vote, together with similar votes taken earlier this month in New Hampshire and Rhode Island, means that the credit union leagues in the three states will merge to form the Cooperative Credit Union Association, effective Jan. 1 ( Daily CU Scan Oct. 23).
"This historic vote is a tremendous testament to the value our credit unions place on cooperation," said league President Paul Gentile. "The credit unions in our states and our trade associations have a long and proud history of working together. We can accomplish so much more when we work together. I want to offer my sincere thanks to the members of the Boards of all three leagues and our member credit unions for their careful and serious consideration of the merger, and the strong and committed support that they showed it."
Massachusetts Credit Union League Chairman David Surface said the governance structure of the merged association will serve the association well for years to come. "We wanted to be certain that large and small credit unions were represented and that no one state dominated the process. I am confident members will see us delivering more value in each of our three states," said Surface.
In each of the three states, local branding will be maintained with the names of "Massachusetts Credit Unions," "New Hampshire Credit Unions," and "Credit Unions of Rhode Island" being used on the local level for all facets of advocacy and social responsibility. The brands carry the common tag line of "Creating Cooperative Power."

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Prize-linked savings bill introduced in New Jersey

CU System
HIGHTSTOWN, N.J. (10/24/14)--New Jersey Credit Union League-supported legislation to enable state-chartered credit unions and banks to offer prize-linked savings accounts has been introduced in the state Senate.
The legislation would authorize the offering of savings promotions, also known as "prize-linked savings accounts," which treat every deposit as a ticket in a prize-winning raffle ( Daily Exchange Oct. 23)

"Low-income people see lotteries as their best chance to pay their bills or to get out of poverty," said Senator Richard Codey (D-Livingston), who along with Sen. Ronald Rice (D-Newark sponsored the bill. "They don't believe they make enough money to maintain a savings account. This would offer the attraction of gambling without any risk because they don't lose any of their savings. They win even if they lose."
The legislation would authorize state-charted credit unions, banks and savings banks to conduct savings promotions in which a minimum deposit qualifies for a chance at winning a designated prize. The idea has been put into practice in a number of states by non-profits and credit unions.
With each deposit in an amount predetermined by the institution, a participant qualifies for a raffle that can win financial prizes while at the same time they build up their savings. The payments go to certificates of deposit managed by credit unions.
"The success other states have demonstrated with regards to prize-linked savings accounts in encouraging consistent saving by individuals who have not done so regularly in the past, is compelling," Greg Michlig, NJCUL president/CEO, told News Now . "By introducing an exciting element to the sound financial practice of saving, this program can stimulate a healthier financial environment for the people of New Jersey. We are encouraged by the introduction of this bill by Senators Codey and Rice and are hopeful that we will join the other states currently offering this tool to encourage savings habits amongst consumers." 
"This is a way for those with modest paychecks and little or no money in the bank to 'play to win'," Rice said. "It's an incentive to save, which can help provide a way out of poverty for those who haven't had the opportunity to put money away."
The bill would require all participants to be at least 18 years of age, that everyone has an equal chance to win, that all the rules and conditions are spelled out, and that interest rates and fees are approximately the same as other accounts.

Ten states--Connecticut, Indiana, Maine, Maryland, Michigan, Nebraska, New York, North Carolina, Rhode Island, and Washington--currently permit credit unions to offer prize-linked savings accounts.  Earlier this session Connecticut legislation to permit prize-linked savings and Oregon legislation to study the feasibility of the programs were introduced but not passed in the state legislatures. ReadMore

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Flood insurance, corporate CU rule changes proposed by NCUA

ALEXANDRIA, Va. (10/24/14)--A proposal to amend rules regarding loans in areas having special flood hazards was issued by the National Credit Union Administration at the agency's monthly meeting, part of a joint proposal with other federal regulators.

The NCUA, Office of the Comptroller of the Currency, Federal Reserve board, Federal Deposit Insurance Corp. and the Farm Credit Administration, all issued the proposal.
From left, CUNA Deputy General Counsel Mary Dunn speaks with NCUA Chair Debbie Matz after the agency's board meeting Thursday. (CUNA Photo)

The rule would amend the agencies' regulations regarding loans in area with special flood hazards by implementing provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The HFIAA amends the Biggert-Waters Flood Insurance Act of 2012, and the regulators' proposal would replace a pending proposal in the Biggert-Waters act.

The proposed rule would:
  • Establish requirements with respect to the escrow of flood insurance payments, as well as implement a HFIAA exemption for certain detached structures from the mandatory flood insurance purchase requirement;

  • Amend provisions that tie the escrow requirement to the origination, refinance, increase, extension, or renewal of a loan after Jan. 1, 2016 and provide additional exceptions to the escrow requirement;

  • Apply a HFIAA mandate for lending institutions to provide an option to borrowers to escrow flood insurance premiums and fees for loans that are outstanding as of Jan. 1, 2016; and

  • Provide a new exemption purchase requirements for a structure that is part of a residential property but is detached from the primary residential structure and does not serve as a residence.
Frank Kressman, association general counsel for the NCUA, said the current proposal is likely to be part of a bigger picture when all is said and done.

"As part of the process, at least at the staff level, there's some disagreement about how to move forward with the private insurance. So there's likely to be a third proposed rule yet to come out to deal with the private insurance issue." He said. "The plan would be, once those proposals make their way through the process, they will all be finalized at once. But we don't know when that will be."

The other proposed rule discussed at the NCUA's meeting Thursday dealt with technical corrections and clarifications of regulatory provisions to corporate credit union regulations. The proposal will clarify the mechanics of a number of substantive regulatory provisions and also make several non-substantive technical corrections, according to the agency.

Some of the changes include:
  • Correcting an error where NCUA staff omitted capturing the retained earnings of a merged credit union when the continuing corporate computes its 2016 or 2020 capital ratios;

  • Allowing corporate credit unions to borrow on a secured basis for 120 days over the current 30 days to better meet seasonal liquidity demands; and

  • Removing a limitation on borrowing that could have impeded a corporate's ability to meet member liquidity needs.
"None of these proposals recommend removing or easing the regulatory constraints and requirements governing minimum capital levels, investment concentrations and maturity limits or asset credit quality standards," said Scott Hunt, director of the NCUA's Office of National Examinations and Supervision. "We continue to believe these elements of the regulation are working as intended, that is, ensuring a healthy and safe corporate credit union system."

Both proposals will be open for 60-day comment periods. ReadMore

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