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Texans CU improves under NCUA oversight

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ALEXANDRIA, Va. (4/25/12)—The financial condition of Texans CU, which was taken under conservatorship by the National Credit Union Administration (NCUA) last April, has improved, with that credit union posting $5.87 million in income in the first quarter of 2012, the NCUA reported.

The credit union held $1.48 billion in total assets as of March 31, an increase from the $1.42 billion it held at the end of 2011. The credit union's net worth also improved by 35 basis points during the first quarter of 2012.

NCUA Region IV Director Keith Morton said the agency wants to "continue efforts to transition Texans to a financially strong credit union."

For the past year, we reduced expenses, streamlined operations, retooled infrastructure, and began the process of returning Texans to the core credit union business model," and the NCUA is "very encouraged by the credit union's positive financial results," Morton said. The credit union is planning to introduce new financial products and a new website and online banking and bill payment platform this year, the NCUA added.

The Richardson, Texas-based credit union serves residents of Collin, Dallas, Rockwall, Travis, and Williamson, as well as parts of Denton County.

NCUA reminds of dos-and-donts of compensating loan originators

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ALEXANDRIA, Va. (4/25/12)--Credit unions that make closed-end residential mortgage loans will have "new flexibility" regarding how they compensate some of their loan originators, the National Credit Union Administration (NCUA) said in a letter (12-RA-03) sent to credit unions this week.

Under the terms of the Dodd-Frank Act, loan originators may not be paid funds that originate from any mortgage transaction. The rule is intended to prevent loan originators from increasing their own compensation by raising the consumers' loan costs, such as by increasing the interest rate or points.

However, the CFPB earlier this month said, in its interpretation, that the compensation rules would permit financial institutions to use funds collected from loan originations to pay for employee qualified profit sharing, 401(k), and employee stock ownership plans. This determination is not final, the CFPB said, adding that a rule addressing this issue is expected to be released by the bureau before January 21, 2013.

As a result of the CFPB guidance, Matz said, credit unions may now make contributions to qualified plans for loan originators out of a pool of profits derived from loans originated by employees.

The NCUA Chairman did, however, warn credit unions with discretionary non-qualified pension plans that are tied to profit targets to amend those plans to exclude income from closed-end mortgage loan originations. "If your credit union has a pension plan that establishes the employer's contribution amount based on a loan originator's income, that plan is particularly at risk," Matz said.

For the full NCUA letter, use the resource link.

Pa. primary candidate has CU backing

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WASHINGTON (4/25/12)—The Credit Union Legislative Action Council (CULAC), the Pennsylvania Credit Union Association (PCUA), and local credit unions are among those that helped former State Rep. Scott Perry (R) in his Republican U.S. House primary efforts, which concluded last night.

Perry defeated fellow nomination hopefuls York County Commissioner Chris Reilly, Kevin Downs, Eric Martin, Sean Summers, Mark Swomley and Ted Waga in Tuesday's primary.

He will face Democratic challenger Harry Perkinson in November's general election. The candidates will vye for Pennsylvania's fourth district U.S. House seat, which is being vacated by current congressman Todd Platts (R).

Perry served two terms representing Pennsylvania's 92nd district, which includes parts of Cumberland County and York County. He is also a military veteran and currently serves as a Colonel in the Pennsylvania Army National Guard.

The former state legislator is supportive of credit union member business lending increase legislation and other credit union priorities, and has used his credit union to obtain funding for his own small business. The PCUA and credit unions have supported Perry with canvassing efforts, and CULAC financially supported the candidate.

Credit Union National Association (CUNA) Vice President of Political Affairs Trey Hawkins said CULAC "will continue to be in the game on behalf of credit union-friendly candidates, and will aggressively support credit union friends in this year's elections."

The presidency, congressional seats, and state and local positions are all at stake in 2012.

CUNA backs swaps exemption bill

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WASHINGTON (4/25/12)--The Credit Union National Association (CUNA) on Tuesday said it supports the Small Business Credit Availability Act (H.R. 3336), which would preserve the rights of credit unions and other small financial institutions to use swaps to hedge interest rate risk.

Under the terms of the legislation, credit unions and other small financial institutions with under $1 billion in cumulative current uncollateralized credit risk exposure and potential future credit risk exposure would be granted an exception from portions of the Dodd-Frank Act that barred certain institutions from engaging in swap transactions.

CUNA President/CEO Bill Cheney in the letter thanked H.R. 3336 sponsor Vicky Hartzler (R-Mo.) for introducing the legislation, and said CUNA looks forward to working with her as the bill moves through Congress.

Relatively few credit unions use derivatives to hedge interest rate risk, but the National Credit Union Administration (NCUA) is considering allowing more credit unions to use derivatives to hedge those risks.

The NCUA currently allows a limited number of federal credit unions to engage in derivatives through an investment pilot program, and the agency could permit more credit unions to independently use derivatives to hedge IRR. The agency in an advanced notice of proposed rulemaking has suggested that credit unions that demonstrate a relevant, material IRR exposure, have demonstrated the ability to manage derivatives, and have the net worth and financial health needed to manage derivatives could be allowed to invest in interest rate swaps and interest rate caps.

CUNA earlier this month commended the NCUA for taking on the derivatives issue, and said it supports allowing well-managed credit unions to invest in derivatives through third-parties. CUNA also supports granting independent derivative investment authority for certain credit unions with adequate derivatives experience. (See related April 5 News Now story: Allow CU derivative investments as risk management tool: CUNA to NCUA)

CU short-term loans the safe affordable choice CUNA

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WASHINGTON (4/25/12)--Credit unions and the Credit Union National Association (CUNA) are committed to providing a safe and affordable alternative to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders, CUNA said in a comment letter to the Consumer Financial Protection Bureau (CFPB).

The comment letter followed a recent CFPB hearing on payday lending. That hearing featured testimony from Daryl McMinn, vice president of operations of Listerhill CU of Sheffield, Ala., and various payday lending experts, regulators, and financial industry representatives.

In the comment letter, CUNA Assistant General Counsel Luke Martone said CUNA supports the ability of credit unions to provide beneficial short-term, small amount loans as alternatives to predatory payday lending, which have "no place in the financial marketplace."

Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%. However, under the National Credit Union Administration's (NCUA's) short-term, small amount loan program, federal credit unions may offer certain short-term loans at an APR as high as 28%, provided certain terms are met.

To offer the NCUA-approved higher loan rate, the loan principle must be between $200 and $1,000, and the term of the loan must be between one and six months. Fees tied to the loan may not exceed $20, and lenders may not roll over the short-term loans.

For the full comment letter, use the resource link.

CUNA Will CFPB card limits plan impact CUs

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WASHINGTON (4/25/12)--Credit unions are asked to weigh in on a Consumer Financial Protection Bureau (CFPB) plan to revise Regulation Z regarding credit card fee limitations, and whether the proposal will have any direct impact on their operations.

In a Comment Call to credit unions, the Credit Union National Association noted that the CFPB proposal would amend the provision of Reg Z that limits the total amount of fees that can be charged on a credit card account "prior to account opening and during the first year after account opening." 

Under the proposed rule, this limitation would apply only "during the first year after account opening."

It is CUNA's opinion, the Comment Call said, that overall the proposal is positive and will benefit some credit card issuers, but that it will not have a major impact on credit union issuers directly, based on the fees they typically charge on members' credit card accounts.

The CFPB is accepting public comments on its proposal until June 11. CUNA's comment deadline is May 28.

iAmerican Bankeri survey shows strong reader MBL support

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WASHINGTON (4/25/12)--In a poll of its readers, American Banker  found that 70% of respondents backed the idea of increased member business lending (MBL) authority for credit unions.

The poll results, which first ran in the April 23 issue and were updated Tuesday, showed 60% of respondents flat-out supported more credit union MBLs, choosing the answer option that stated:  Yes--competition is as healthy for lending as it is for other markets.

Another 10% indicated they could support increased MBL authority if credit unions are required to hold plenty of capital to cover losses.

The remaining 31% opposed increased small business lending for credit unions.

American Banker is owned by SourceMedia and is geared toward senior-level financial services executives. SourceMedia's Banking Group is comprised of American Banker  (website, daily newspaper, eNewsletters, and iPad app), Bank Technology News (website and monthly print publication), and American Banker Magazine, formerly USBanker.

Credit Union National Association Executive Vice President John Magill noted that the survey results come in the middle of an all-out assault by banking trade groups trying to block CUNA-backed legislation that would increase the MBL cap to 27.5% of assets, up from 12.25%.

"CUNA, credit unions, small businesses, and consumer and business groups support an increase in the MBL cap and are urging lawmakers to allow credit unions to do more to help the economy through more lending," Magill said Thursday. "Who knew 70% of bankers feel the same way?"

Senate leadership has put Sen. Mark Udall's (D-Colo.) MBL cap increase bill on the voting calendar for this year, and just yesterday that body's third-ranking member, Sen. Charles Schumer (D-N.Y.), reiterated the Senate's commitment to a floor vote.

"While much was made earlier this week of whether the MBL vote will come earlier in this session of Congress or later, the truth is--respect to the procedural status of the MBL bill--nothing has changed," Magill said.

He added, "Scheduling of a vote is always a function of a crowded Senate schedule. What is more important than the timing of the vote is winning the vote."

CFPB extends deadline for overdraft information

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WASHINGTON (4/25/12)--Interested parties now have until June 29 to provide information to the Consumer Financial Protection Bureau (CFPB) about overdraft protection plans and how they affect consumers.

The CFPB launched its comment initiative on Feb. 28 and first intended it to end April 30.

The Credit Union National Association (CUNA) in an April 16 comment letter told the bureau that overdraft protection is an extremely important topic for credit unions, which offer a variety of programs. CUNA asked the CFPB to extend a comment period.

The CFPB has said it is particularly focused on gathering information on the practice of re-ordering purchases and payments to maximize overdraft fee charges, on whether consumers can anticipate and avoid overdraft fees, and on how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.

The longer comment timeframe, CUNA wrote, would help ensure the agency has the information it needs.

Inside Washington (04/24/2012)

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  • WASHINGTON (4/25/12)--Federal Deposit Insurance Corp. (FDIC) staff offered another positive assessment about the Deposit Insurance Fund (DIF) at the FDIC board meeting on Monday. Losses to the DIF from failures are estimated to be $12 billion over the five-year period from 2012 through 2016. That is a $7 billion drop from projections for 2011 through 2015 (American Banker April 25). The DIF's balance has increased for eight consecutive quarters, primarily as a result of increased assessment income and fewer bank failures. The DIF held $11.8 billion in reserves, or 0.17% of the nation's insured deposits at the end of 2011. That balance was $2.6 billion higher than a previously unaudited amount reported in the Quarterly Banking Profile. The board featured two new members at the meeting--former Federal Reserve Bank of Kansas City chief Thomas Hoenig and former Treasury Department official Jeremiah Norton ...
  • WASHINGTON (4/25/12)--The Federal Deposit Insurance Corporation (FDIC) and U.S. Small Business Administration (SBA) Tuesday announced new resources to support small businesses.  FDIC Director for Depositor and Consumer Protection Mark Pearce and SBA's Deputy Associate Administrator for Entrepreneurial Development Michael Chodos released Money Smart for Small Business, a training curriculum for new and aspiring business owners. Developed in partnership between both agencies, this curriculum is the latest offering in the FDIC's 10 year old award-winning Money Smart program. Money Smart for Small Business provides an introduction to day-to-day business organization and planning and is written for entrepreneurs with limited or no prior formal business training.  It is designed to offer practical information that can be applied immediately, while also preparing participants for more advanced training. The curriculum is designed to be delivered to new and aspiring business owners by financial institutions and small-business development centers ...