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NCUA Share growth surges in first quarter

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ALEXANDRIA, Va. (5/27/08)--Federally insured credit unions reported significant share growth in the first three months of 2008, the National Credit Union Administration (NCUA) said Thursday. The data were taken from NCUA’s Call Report, which is based on data submitted by the nation’s 8,049 federally insured credit unions. Total shares increased 5.6%, for an annualized 22.4% in the first quarter. Every category of savings, except non-member deposits, grew by annualized double digits. Loan growth was 1.1%, or an annualized 4.5%. “The influx of shares in the first quarter illustrates that credit unions are providing their members with competitive savings products,” said NCUA Chairman JoAnn Johnson in a statement. “Federally insured credit unions reported a 4.8% increase in first-mortgage real estate loans in the first three months of 2008.” Net charge-offs increased to 0.67% from 0.50%, resulting in the loan delinquency ratio declining from 0.93% to 0.91%. The data indicate adverse real estate delinquency trends, Johnson said. But the trends are not indicative of systemic problems in the overall safety, soundness and stability of the credit union industry, she added. “(The trends) underscore the importance of proactivity, diligence and care in credit union underwriting and management of real estate loan portfolios,” Johnson said. Other findings from the report:
* Assets increased 5.1% to $792.2 billion from $753.4 billion; * Loans rose 1.1% to $532.8 billion from $526.9 billion; * Investments were up 8.5% to $154.6% from $142.5 billion; * Shares increased 5.6% to $667.7 billion from $632.4 billion; * Net worth went up 1.8 % to $87.7 billion from $86.2 billion; and * Membership rose 0.8% to 87.5 million members
In large lending categories:
* Total real estate loans increased 3.1% to $279.6 billion; * Used-auto loans increased 0.7% to $89.7 billion; * New-auto loans declined 3.2% to $84.1 billion; and * Unsecured credit card loans declined 1.2% to $29.7 billion.
With the exception of first-mortgage real estate loans, lending was curtailed during the quarter, and the influx of shares resulted in several investment categories expanding significantly, NCUA noted in its statement. Available-for-sale securities increased 16.9 % to $67.9 billion, and deposits in commercial banks, savings and loans, and savings banks grew 27.7% to $21.0 billion. Regarding share growth:
* Money market shares grew 7.9% to $119.9 billion; * Share drafts grew 6.9% to $75.8 billion; * Regular shares grew 5.1% to $177.6 billion; * Share certificates grew 4.6% to $226.1 billion; and * Individual retirement accounts and Keogh accounts were up 4.2% to $59.3 billion for the quarter.
The return on average assets ratio declined to 0.60% from 0.64% at year-end 2007 because of an increase in the provision for loan and lease losses expense from 0.44% to 0.55% as credit unions account for potential loan losses, the NCUA said. Details of first-quarter 2008 data are available in a consolidated balance sheet and a March 2008 Facts/Summary posted online. For more information, use the link.

CU compliance audio conference Thursday

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WASHINGTON (5/27/08)--The Credit Union National Association's (CUNA) regulatory affairs staff will provide information on several key compliance topics during an audio conference Thursday at 2 p.m. EDT. Kathy Thompson, senior vice president for compliance and associate general counsel; Valerie Moss, director of compliance information; Nichole Seabron, federal compliance counsel; and Michael McLain, assistant general counsel and senior compliance counsel, will be a part of the discussion panel. The agenda for the conference is divided into two parts. Part I includes: * Approaching mandatory compliance dates: Fair and Accurate Credit Transactions Act (FACTA) identity theft red flag and affiliate marketing regulations; * National Credit Union Administration examiners’ focus on due diligence with third party vendors; * Points of interest from CUNA’s Bank Secrecy Act conference, which wrapped up last week; and * How to safely use Social Security deposits for overdrafts and overdraft fees. Part II includes:
* New FACTA proposal on risk-based pricing; * Update on the status of the proposed Internet gambling regulation; * The Financial Crimes Enforcement Network’s proposal to amend Currency Transaction Reporting exemption regulations; * Proposed interagency Unfair or Deceptive Credit Card Practice Rule; * The Department of Housing and Urban Development’s proposed amendments to the Real Estate Settlement Procedures Act; and * Other legislative and regulatory developments of interest, such as mortgage reform, flood insurance, regulatory relief, and others.
For more information, use the link.

Inside Washington (05/23/2008)

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* WASHINGTON (5/27/08)--At a House Financial Services Committee hearing Thursday, lawmakers questioned why the temporary increase in Fannie Mae and Freddie Mac’s conforming loan limits haven’t done much to help the mortgage market. Committee Chairman Rep. Barney Frank (D-Mass.) noted his disappointment in the minimal impact (American Banker May 23). The increase in the limits to $729,750 was made three months ago and will expire at the end of this year. Vince Malta, chairman of the National Association of Realtors public policy coordinating committee, said there hasn’t been enough time to see an impact ... * WASHINGTON (5/27/08)--Comptroller of the Currency (OCC) John Dugan said Thursday that home equity loans should be tightened. He encouraged lenders to improve the measures they use to verify income and analyze collateral (American Banker May 27). Loose underwriting and dropping home values triggered big losses--$2.7 billion in the first quarter of 2008 compared with the first quarter of 2007, he said. Lenders also should avoid interest-only loans, because they shift larger levels of debt to borrowers and hamper their ability to make payments, he added ... * WASHINGTON (5/27/08)--Steven Preston, the Bush administration’s pick for head of the Department of Housing and Urban Development, was briefed on the difficulty of the housing job at his confirmation hearing last week before the Senate Banking Committee. Preston would be expected to implement a mortgage rescue program. Senators at the hearing also pushed Preston to approve a bill that would let the Federal Housing Administration back mortgages for more than the homes' value. Sen. Christopher Dodd (D-Conn.) and Sen. Richard Shelby (D-Ala.) both said Preston would need to implement the plan, though the Bush administration has not yet approved it ... * WASHINGTON (5/27/08)--National Credit Union Administration Vice Chairman Rodney Hood spoke to 55 Connecticut credit union leaders at a luncheon May 14 in Berlin, Conn. He reviewed mortgage relief, risk-based capital and member business-lending legislation. He also talked about his new initiative, “Blueprint for 2020: A Plan to Strengthen the Future of Credit Unions,” which addresses succession planning and the challenges credit unions face in recruiting candidates from Generations X and Y. In development is an internship program that would involve colleges and universities working with credit unions. Pictured are (from left): Anthony L. Emerson, Credit Union League of Connecticut president/CEO; Kelly R. Fuhlbrigge, league vice president, government relations; and Hood. (Photo provided by the Connecticut Credit Union League) ... * WASHINGTON (5/27/08)--Members United Corporate FCU, Warrenville, Ill., sponsored its first annual cooperative “Hike the Hill” in Washington, D.C. May 13-14. Over 30 visits were made with legislators and their staff to better acquaint lawmakers about Members United, the credit union network and its functionality, and current legislation of special interest to all credit unions. Members United representatives were joined by leaders from the New York State Credit Union League, New Jersey Credit Union League, Credit Union Association of Rhode Island, Indiana Credit Union League, Mid-America Credit Union Association, Illinois Credit Union League, Association of Corporate Credit Unions and the Credit Union National Association. “This was a great opportunity to walk the halls of our lawmakers with our league and association partners as it clearly demonstrated the cooperative spirit of credit unions,” said Joseph P. Herbst, CEO, Members United, who noted "we were pleased with the very positive reception we received from the legislators and their staff as we discussed the foundations of the Credit Union Network and the vital role it plays with regard to serving American consumers.” Pictured are: (from left) John Fenton, president/CEO, Affinity FCU; Herbst; Rep. Albio Sires (D-N.J.); Paul Gentile, president/CEO, New Jersey league; and Brad Miller, executive director, Association of Corporate Credit Unions. (Photo provided by Members United Corporate FCU) ...

Johnson Safe money management link available

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ALEXANDRIA, Va. (5/27/08)--National Credit Union Administration (NCUA) Chairman JoAnn Johnson announced that a National Hurricane Center link will be available on the website in light of National Hurricane Preparedness Week. The link is available on the “What’s New” section of the main page of the website. It provides consumers with information about safe money management in the event of a natural disaster and emergency. “This educational resource not only contains useful and important financial information, it could also save lives,” Johnson said in a statement. She encouraged credit unions to continue playing an active role in helping Americans with the information they need to protect their families and finances in the event of a natural disaster. National Hurricane Preparedness Week will continue through Saturday.

Second UBIT lawsuit makes strong case says CUNA

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WASHINGTON (5/27/08)--The second lawsuit to be filed over policies imposed by federal tax collectors on payment of unrelated business income tax (UBIT) makes a strong case, said a representative of the UBIT Steering Committee last week. Bellco CU, Greenwood Village, Colo., filed what is now the second lawsuit this year over the UBIT policies. It filed a complaint against the Internal Revenue Service (IRS) May 21. The credit union is seeking a refund of $199,000, based on UBIT taxes paid for 2000, 2001 and 2003. "Bellco CU has made a strong case in its complaint, taking a critical stop toward compelling the tax agency to adopt a more reasonable position,” said Eric Richard, Credit Union National Association (CUNA) general counsel and executive vice president, speaking on behalf of the UBIT Steering Committee. “Bellco deserves the gratitude of the credit union system for taking on this important policy issue, essentially seeking to right a wrong that IRS has committed by forcing cooperatively owned, not-for-profit credit unions to pay tax on some of the financial services they offer,” Richard said. CUNA and the UBIT Steering Committee support Bellco’s position in the case. The UBIT Steering Committee comprises representatives from CUNA, CUNA Mutual Group, the American Association of Credit Union Leagues and the National Association of State Credit Union Supervisors. The Colorado credit union refund claim is based on income generated primarily through sales of credit life and credit disability insurance over those three tax years. Revenue generated from sales of accidental death and disability insurance, and the credit union’s involvement with CFS Member Financial Services, a credit union service organization, were included under the 2003 refund claim. The lawsuit contends that the revenue is substantially or otherwise related to the exempt purposes and functions of the credit union as a tax-exempt, state-chartered credit union. Bellco has asserted that no portion of the taxes paid were legally due. In January, a Wisconsin credit union filed a complaint against IRS seeking a refund of $54,000 in taxes paid in UBIT on income from several insurance products. The Wisconsin lawsuit also contends that the revenue from sale of the products is "substantially related" to the purposes and functions of the tax-exempt, state chartered credit union.

BSA conference provides 100 with regulatory overview

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WASHINGTON (5/27/08)--Roughly 100 credit union professionals received a regulatory overview on the Bank Secrecy Act (BSA) at a recent conference held by the Credit Union National Association (CUNA) and the National Association of State Credit Union Supervisors (NASCUS) in Washington, D.C. last week. The conference was held May 18-22. It featured a number of experts in the field, including representatives from the Financial Crimes Enforcement Network, Office of Foreign Assets Control (OFAC) and the National Credit Union Administration (NCUA). Matt Biliouris, NCUA program officer, gave participants a heads-up on some of the most common BSA violations credit unions still make, including lack of training or failing to document the training, lack of internal controls (such as not having a back-up BSA officer), and failing to conduct independent testing every 12-18 months. "Participants also learned the answers to some of the most frequently asked BSA and OFAC compliance questions, the importance of member due diligence, how to mitigate the risks associated with offering various payment alternatives, handling operating cash transfers and currency transaction reports, and much more," said Valerie Moss, CUNA director of compliance information. Moss, along with Nichole Seabron, CUNA federal compliance counsel, provided a three-hour overview of BSA issues for attendees taking CUNA’s BSA specialist certification exam. Other speakers included:
* Mark Ennis, compliance project officer, Financial Crimes Enforcement Network; * Lorraine Lawlor, OFAC; * Laura Pizzarelli, Credit Union Service Corporation (CUSC); * Frank Drake, Smith Debnam Narron Wyche Saintsing & Myers LL; * Mary Lou Heighes, Compliance Plus, Inc.; * David Abshier, Secura Group; * Carol Van Cleef, Bryan Cave LLP; * Tim McLeod, senior vice president, Singing River FCU, Moss Point, Miss.; and * Andrew King and Jamie King, Verafin.
CUNA’s next BSA conference is scheduled for Oct. 19-22 in Atlanta.