New Englander aims to open countrys first mutual thrift since 1970s Posted by AVCU on 10:55 AM

 No mutual thrifts have opened in the U.S. since Richard Nixon was president, but a New England meat distributor aims to change that by chartering a depositor-owned bank that serves the food and agriculture industries.

Charley Cummings said his group expects to file a charter application for the planned bank, Walden Mutual, with the New Hampshire Banking Department by the end of August. Walden Mutual would have an office Concord but would primarily be a digital bank, Cummings said earlier this month in an interview.

We hope to have a provisional charter back in the late fall and open our doors in January of next year, Cummings said.

Its not surprising that Cummings wants to start his own bank; after a multi-year lull following the financial crisis, activity has been on the upswing in recent years and has been particularly robust in 2021. Nine banks have opened their doors this year and another 16 are seeking deposit insurance, according to the Federal Deposit Insurance Corp.

But mutual thrifts, which held more than a quarter of the nations deposits in the late 19th and early 20th centuries, have been vanishing steadily since the 1950s, after Congress eliminated their tax exemption.

Goldman Sachs unveils new cryptocurrency trading team Posted by AVCU on 9:41 AM

 Goldman Sachs has formally kicked off the cryptocurrency trading era on Wall Street.

The bank informed its markets personnel on Thursday that a newly created cryptocurrency trading desk had successfully traded two kinds of bitcoin-linked derivatives, according to an internal memo obtained exclusively by CNBC.

The crypto team exists within the firm’s global currencies and emerging markets trading division, reporting to Goldman partner Rajesh Venkataramani, who authored the memo, and is part of the bank’s overall digital assets effort led by Mathew McDermott.

Goldman Sachs, a dominant global investment bank for trading fixed income and equities, had been mulling the creation of a bitcoin trading desk since at least 2017. The firm tabled those plans initially and restarted the crypto trading team in March, Reuters reported earlier this year. The Thursday memo was the first time New York-based Goldman officially acknowledged its involvement in crytpocurrency trading.

Under CEO David Solomon, Goldman is seeking to broaden its market presence by “selectively onboarding” crypto trading institutions to expand offerings, the bank said. The firm also said it launched a new software platform this week that provides the latest cryptocurrency prices and news to clients.

Banks, including Goldman and rival Morgan Stanley, had announced plans to offer bitcoin investments to rich clients in their wealth management divisions, but have mostly stayed away from the volatile asset in their Wall Street trading operations. Traders at firms including JPMorgan Chase have been asking managers when they could begin handling bitcoin, CNBC has reported.

The derivatives it traded, bitcoin futures and non-deliverable forwards, are ways to wager on the price of bitcoin. The contracts are settled in cash and don’t require that Goldman deals with actual bitcoin, called “physical bitcoin” in the industry, because the bank isn’t yet in a position to do so, Venkataraman noted in the memo.

ABA Launches New Anti-Credit Union Effort Posted by AVCU on 1:26 PM

As thousands of credit union advocates invaded the nation’s capital this week, the American Bankers Association on Monday announced it will step up its campaign against the largest credit unions.

The association said it has purchased ads on Politico’s “Morning Money” newsletter and on digital and social media platforms.

The move came as more than 5,000 credit union advocates arrived at CUNA’s Governmental Affairs Conference. Many of those advocates plan to meet with hometown members of Congress during their visit.

In describing the effort, ABA said, “The ads highlight several ways that large credit unions have far exceeded their statutory mission to serve individuals of modest means – from buying up taxpaying banks to purchasing naming rates to sports stadiums. They also call for a reexamination of the tax exemptions for these institutions.”

The association also said its explorecreditunions.com website will feature blog posts alleging that credit unions have outgrown their “special treatment.”

For a lengthy period, that website did not identify the ABA as its host. It was only after CU Times reported that the association was the website’s sponsor that the ABA acknowledged that.

The Independent Community Bankers of America has its own anti-credit union campaign called “Wake Up.”

Fed Report: CUs Slip on Autos, Gain on Credit Cards Posted by AVCU on 9:26 AM

Credit unions appeared to be falling further behind other automobile lenders in December, while still gaining slightly with credit cards, according to a Fed report released late last week.

The Fed’s G-19 Consumer Credit Report showed all lenders held $1.19 trillion in car loans in December 2019, up 3.5% from a year earlier.

The report did not include balances by lender type; estimates for banks and credit unions from other sources are not yet available for December.

However, CUNA Mutual Group showed credit union auto loan growth has been consistently slowing in recent months, and November 2019 balances were only 2.7% higher than in November 2018.

The 10 largest credit unions, which tend to perform better than smaller ones, did increase their auto loan portfolios faster than the five largest bank lenders at year’s end, according to NCUA Call Report data released in the past 10 days.

The Top 10 credit unions held to $43.7 billion in auto loans as of Dec. 31, up 3.6%. New cars loans fell 0.4% to $19.9 billion, while used car loans grew 7.3% to $23.8 billion.

The five corporate lenders held $301.3 billion in auto loans as of Dec. 31 — 2.5% higher than a year earlier. The five — Ally Financial, Capital One, Wells Fargo, JPMorgan Chase and Bank of America — hold about a quarter of the nation’s auto loans.

CUNA Mutual Group estimated credit unions held $380.3 billion in automobile loans in November. That amount represents 32% of total auto loans estimated by the Fed. That share is down from 32.1% in September 2018, 32.3% in December 2018 and 32.2% in June 2019.

The Fed’s G-19 report consists of two parts.

The first part is revolving debt, or credit cards, which rose 4.2% over 12 months to reach $1.1 trillion as of Dec. 31 among all lenders, and non-revolving debt, which includes auto loans, government and private student loans, and other term loans excluding real estate.

The second part is non-revolving consumer loans, which rose 4.8% to $3.1 trillion as of Dec. 31 among all lenders, with automobile loans represented 38.5% of non-revolving loans, down from 39% in December 2018.

Student loans rose 4.7% to $1.64 trillion, and 53% of non-revolving loans in December 2019, compared with 53.1% a year earlier. Data on student loans and motor vehicle loans are reported quarterly for all lenders.

Credit unions held $414.7 billion in non-revolving consumer loans in December 2019, up 2% from a year earlier, and they continued to gain a slightly larger share of credit card debt in December.

Credit unions held $67.8 billion in credit card debt in December, up 8.3% from a year earlier and representing 6.2% of the debt held by all lenders. Their share was up from 6.1% in November 2019 and 5.9% in December 2018.

Banks held $988.1 billion in credit card debt, up 4.4% from a year earlier. Their share was 90% in December 2019, compared with 89.9% in November 2019 and December 2018.

New Research Projects 52% of ATMs Will Offer Automated Deposits by 2024 Posted by AVCU on 6:41 PM

More than half of the world’s ATMs will offer automated deposits by 2024, according to new projections from banking research and consulting firm RBR. The London, England-based firm also predicted that the United States will see tens of thousands more automated deposit terminals (ADTs) arrive in the next five years.

“In a busy world where time is of the essence, both business and retail customers no longer expect to have to queue for the teller to make everyday deposits,” RBR said. “Banks report that deposit ATMs are an efficient tool for keeping their customers satisfied, while also enabling them to migrate transactions from the teller and achieve cost savings.”

Automated deposit transactions have risen quickly in the last few years, according to the research.
“Excluding China, where a meteoric surge in mobile payments has stifled cash usage, automated deposits grew by 10% in the other core markets covered in the report, contrasting with a fall in cash withdrawals in many of the same markets. Customers increasingly appreciate the benefits offered by automated deposit such as reduced queuing, instant account crediting and out-of-hours availability,” it noted.

RBR said it expected the number of terminals in the markets in the study to hit 1.6 million by 2024, which is a 14% increase. Much of that growth will come from deposit ATMs, which will make up 52% of the ATM population by 2024, it said. In the United States, RBR estimated that 40,000 ADTs will spring up in the next five years.

ADTs do more than just accept deposits. RBR predicted that two-thirds of them will also be able to recycle cash by 2024.

“Although the technology has been available for decades, the number of deposit ATMs installed worldwide continues to demonstrate healthy growth,” RBR researcher Sam Blackwell said. “Banks are now expected to pivot further towards recycling as the ratio of withdrawals to deposits narrows and CIT costs grow, presenting increased opportunities for cost savings.”

‘Weak Spot’ Leads to Rash of New Attacks Against Gas Stations, Pumps Posted by AVCU on 10:04 AM

VISA says North American merchants that operate gas stations and gas pumps are facing a rash of attacks from cybercrime groups wanting to deploy point-of-sale malware on their networks. In two recent security alerts, VISA said its security team investigated at least five incidents of the sort, ZD Net reported.

The payments processor said cybercrime groups carried out attacks with the main purpose of gaining access to fuel dispenser merchants' networks, where they installed POS malware.
This POS malware works by continuously scraping a computer's RAM for what looks like unencrypted payment card data, which it collects, and then uploads to a remote server.

Weak Spot Identified
The VISA Payment Fraud Disruption (PFD) team says cybercrime groups appear to have found a weak spot in how gas stations and gas pump operators work. While the in-store POS terminals of some merchants might support chip transactions, most of the card readers installed on gas pumps do not.

These gas pump card readers still operate on older technology that can only read payment data from the card's magnetic stripe.

Data from these outdated card readers is sent unencrypted to the gas station's main network, where crooks have realized they can intercept it, ZD Net explained.

The attacks on fuel dispenser merchants began over the summer, VISA said. Two of the five attacks were linked to a known cybercrime operation known as FIN8.

How to Safeguard
VISA said the easiest ways for fuel dispenser merchants to safeguard customers is to either encrypt card data while it's being transferred across a network or stored in memory or shift to a chip card acceptance policy.

"Fuel dispenser merchants should take note of this activity and deploy devices that support chip wherever possible, as this will significantly lower the likelihood of these attacks," VISA said.
Fuel dispenser merchants have until October 2020 to deploy chip compatible card readers on their gas pumps.

“Starting October 2020, VISA said liability for any card fraud would shift from card issuers to the merchants, which will likely motivate many operators to update their gas pump card readers,” ZD Net said.

As Subprime Dents Auto Loan Quality, CUs Should Look at Risk Exposure Posted by AVCU on 10:05 AM

Subprime lenders are generating rising automobile delinquencies, but credit unions might suffer collateral damage warned internationally acclaimed economist and public speaker Elliot Eisenberg in a recent webinar sponsored by Association business partner CU Direct. The economist added that altough the chances of a recession are low, lenders nonetheless should prepare for one, including looking at their exposure to areas with rising risk, especially auto lending.

The value of automobile loans delinquent at least 90 days peaked at just over 5% in 2010 in the wake of the Great Recession, and fell to a low near 3% by 2015. Since then, the rate of serious delinquency has slowly crept back up nearly 5% again, according to the New York Fed.

“The amount of delinquent loans in autos is approaching the all-time high,” Eisenberg said. “The whole situation is going to continue to deteriorate depending on how fast auto loans continue to go bad,” adding “if the economy gets meaningfully worse, those default rates are going to go up considerably.”

During the Great Recession, the total value of serious delinquencies was dominated by home lending as the housing bubble burst and foreclosures soared. Those amounts have subsided to pre-recession levels, leaving the biggest amounts of serious delinquencies with student loans followed by credit cards and auto loans.

Most student debt is held by the federal government, but its level is holding back young people from borrowing for homes and cars. The rate of credit cards in serious delinquency is also rising, but the increase is slower and the rate is still below the pre-recession rates of the early and mid-2000s. Total delinquency rates remain low for car loans at credit unions.

NCUA data shows auto loan balances that were at least 60 days delinquent Sept. 30 were $2.2 billion, or 0.58% of total auto loans, up 2 basis points from a year earlier. The delinquency rate was flat at 0.39% for new cars, and down 4 bps to 0.71% for used cars. Over the past three years, car loan delinquency rates have ranged from 0.53% to 0.72% based on rolling 12-month averages.

Among all lenders, Experian estimates that 0.75% of auto loan balances were 60 days or more delinquent as of Sept. 30, up from 0.73% a year earlier. The increase was up almost entirely among finance companies, which tend to cater to subprime borrowers.

• Credit unions’ 60-day delinquency rate stood at 0.23% Sept. 30, down from 0.24% a year earlier.
• Banks’ 60-day delinquency rate was 0.66% Sept. 30, up from 0.65% a year earlier.
• Finance companies, however, had an 1.85% delinquency rate Sept. 30, up from 1.76% a year earlier.

Finance companies accounted for 8.5% of all car loans originated in the third quarter, down from 10.5% a year earlier, according to Experian. Nonprime, subprime and deep subprime accounted fo 38.3% of all loans and leases originated in the third quarter, according to Experian.
Eisenberg said reasons for rising auto loan defaults include:

• Rising payments. Not only are prices rising, but borrowers are also taking on bigger loans to get bigger vehicles. “We drive SUVs; we drive crossovers. You don’t see many four-door sedans anymore.”
• Lengthening terms. Experian shows that 32.2% of new car and 19% of used car loans carried terms over 72 months.
• Sinking equity. Drivers trading an old car with negative equity to buy a new car has risen from 25% in 2013 to 33% this year, according to Edmunds.

“That’s a lot of cars being bought on time with upside-down buyers,” he said, adding that even lenders without subprime loans could be hurt because the used market can be flooded with repossessed vehicles sold at discounts that lower residual values.

House Members Ask Regulators About Concerns with Bank Purchases, CRA, and More Posted by AVCU on 9:43 AM

On Wednesday, several members of Congress had questions for the chairs of the NCUA and the FDIC during testimony before the U.S. House of Representatives. Much of the discussion during the regular appearance by financial institution regulators revolved around credit union purchases of banks. The hearing took place just one day after the largest such deal to date was announced.

NCUA Chairman Rodney Hood (Photo credit: CUtoday.info) and FDIC Chair Jelena McWilliams appeared before the House Financial Services Committee during a regularly scheduled hearing for financial institution regulatory agencies. Following their prepared remarks, during questions by members of the committee, Rep. Blaine Leutkemeyer (R-MO) asked both Hood and McWilliams about their “concerns” over credit unions buying banks.

“These are voluntary, market-based transactions,” responded Hood.

“There have been 28 acquisitions to date and others are pending,” answered McWilliams. “Yes, we have concerns and are looking at this…”

Rep. Trey Hollingsworth (R-IN) said he has had discussions with both Hood and his constituents related to CU acquisitions of banks and has heard both positive and negative views on the issue. Hollingsworth pressed Hood for his view on the issue.

“There have been 32 credit unions that have acquired bank assets since 2013. There have been 250 bank on bank acquisitions over the last year alone,” said Hood. “These are voluntary, market-based transactions. In approving these transactions we at NCUA look to ensure that the bank’s customers qualify for the FOM, and that other statutes of FCU Act are met. And I would note that if not for credit unions acquiring some of these banks, some communities would be left without a financial institution. At the end of the day, the bank does get to choose who that acquiring institution is. It’s not arbitrary or capricious.”

In response to legislator questions regarding the credit union income tax exemption, Hood said, “...in today’s dynamic marketplace, at the end of the day {consumers} are getting access to affordable financial services. I would much rather have both banks and CUs growing…I don’t want to pit banks against credit unions. Credit unions now serve a third of the American public and I think that is due to their commitment to providing access.”

When asked about whether credit unions should be subjected to the Community Reinvestment Act, Hood replied, "Credit unions are based on a mission of people helping people. They are serving low-income people through their products and services they already offer.  I don’t think credit unions need government fiat to encourage them to do the right thing.”

Suncoast CU to Buy $746M Miami-based Bank Posted by AVCU on 1:12 PM

Tampa Florida-based $10.4B Suncoast Credit Union, the 10th largest in the country, has announced plans to purchase Apollo Bank, a $746M financial institution headquartered in Miami. If plans go through, this would be the largest credit union purchase of a bank to date and will continue to shine the spotlight on such transactions. Multiple industry analysts have forecast that more deals of this magnitude and larger are expected to continue well into 2020.

Apollo Bank, which opened its doors in 2010, has approximately 100 employees and five branches in Miami’s Brickell Financial District, Doral, Coral Gables, Kendall and Hialeah markets. The bank has been profitable, making $8.9 million in 2018 and $5.4 million through September of this year.

“We are pleased and enthusiastic to bring the value of Suncoast Credit Union to this important community,” said Suncoast CEO Kevin Johnson. “Our excellent rates, low fees and community service will have a positive impact in South Florida. We look forward to the Apollo team joining our organization and continuing to serve their commercial customer base. Bringing the benefits of membership offered by Florida’s largest credit union to the diverse cultural population in Miami is a privilege that we take great pride in sharing.”

Apollo Bank CEO and Chairman Eddy Arriola, who will serve as Suncoast’s new South Florida market president added, “Apollo Bank has thrived by meeting the needs of South Florida businesses, delivering exceptional service, investing in our communities, and nurturing talent. Nearly a decade after launching, we realized that partnering with a larger institution would put our team in position to offer even more products and services to clients while allowing our bank to scale. After considering a range of options, it became clear that Suncoast Credit Union was the right partner. Suncoast is a Florida market leader that shares Apollo Bank’s deep-rooted commitment to client service and community involvement.”

The transaction is expected to close in 2020, subject to shareholder and regulatory approvals.

UK Financial Institutions are Increasing Use of Machine Learning Posted by AVCU on 9:39 AM

Machine learning (ML) is being used with increasing frequency by financial institutions in the U.K., according to a joint report from the Bank of England (BoE) and Financial Conduct Authority (FCA).

The report summarizes the results of a survey conducted by the Bank of England and Financial Conduct Authority involving 106 respondents from a group of almost 300 banks, credit brokers, e-money institutions, financial market infrastructure firms, investment managers, insurers, non-bank lenders and principal trading firms. It reflects the BoE and FCA’s intention to better understand the interaction between an increasingly data-driven economy and dramatic changes to the structure and nature of the financial system supporting it.

In particular, the report emphasizes the need to strike a balance between supporting development of innovative and transformative technology while also addressing the risks posed by such developments to consumers and the U.K. financial system as a whole, according to Ropes & Gray.

Key findings of the report include:

• Firms in the financial services sector are using machine learning (ML) with increasing frequency. Two-thirds of respondents reported using ML in some form, with most firms expecting usage to increase significantly in the coming years. 
• The insurance and banking sectors use ML most extensively. Overall, ML is deployed most often in relation to anti-money laundering and fraud detection, as well as in customer-facing applications such as customer services and marketing, according to the report. 
• Firms consider improvements in AML, fraud detection and overall efficiency as the biggest benefits of using ML. They identified risks, including a lack of explainability, inadequate controls or governance, data quality issues and poor model performance. To mitigate those risks, firms implement alert systems and so-called “human-in-the-loop” mechanisms to flag when the ML model is not working as intended. 
• The report found firms do not consider regulation to be an unjustified barrier to ML deployment, but some believe there should be additional guidance to clarify existing regulations. Respondents noted that, because ML is a relatively new technology, it may not always be obvious how the existing regulatory framework applies to it. 
• Firms do not believe that ML necessarily creates new risks, but it could amplify existing ones. Respondents recognized that governance and controls processes will need to keep pace with technological development to appropriately manage those risks, the report states. 
• Although most firms reported using their existing risk management frameworks to address risks posed by ML, they noted that these frameworks might have to evolve as ML becomes increasingly mature and sophisticated.

Google May be Getting Into Banking Next Year by Offering Checking Accounts Posted by AVCU on 9:59 AM

Google will offer checking accounts next year, according to a source familiar with the company’s plans, representing Big Tech’s boldest move yet into the consumer banking business. (CNBC.com, 11/13/19)

Most previous efforts have focused on credit cards and payment platforms.

The accounts for the project will be run by Citigroup and the Stanford Federal Credit Union, the source said, confirming a report in The Wall Street Journal.

As part of a project code-named Cache, the company will become the latest Silicon Valley leader to try its hand at the banking space. Previous attempts by Apple and Facebook faced obstacles, with consumers growing increasingly skeptical over providing large technology companies with their personal information.

Google does not intend to sell customers’ data, Caesar Sengupta, an executive at the firm, told the Journal.

“If we can help more people do more stuff in a digital way online, it’s good for the internet and good for us,” Sengupta said.

For years, banks had been concerned about competition from small, nimble fintech upstarts. But it turns out that Big Tech companies like Google and Amazon, already armed with relationships with hundreds of millions of consumers, may prove to be the larger threat.

Last year, Amazon had reportedly been in talks with J.P. Morgan over a checking account. Apple launched a credit card for iPhone users earlier this year with Goldman Sachs. Uber announced its push into financial services last month, and just Tuesday Facebook announced a new system to facilitate payments across its social media and messaging systems.

Apple’s offering has run into multiple issues. Its partnership with Goldman has been tense after Apple said it created the card without help from a bank. Also, complaints have arisen recently that the algorithm used to determine customers’ credit limits is biased toward men.

Google’s plans are to brand the checking accounts with the financial institutions’ names, not its own.

Bank Charters - Variety is Spice of Life Posted by Association of Vermont Credit Unions on 11:07 AM

Credit unions may be state or federally chartered, but chartering a bank has a lot more options.

A blog post by Robert Klingler of Bryan, Cave, Leighton and Paisner Law Firm addresses 5 primary options for chartering a bank.  The author says there are strong, die-hard advocates for the superiority of one over the other, but all are functionally similar.

Looking at the breakdown of charters as of the beginning of 2019, while the majority of all U.S. banks are state, non-member banks (i.e. with primary federal supervision by the FDIC), each charter choice appears to continue to have its advocates.

The Office of the Comptroller of the Currency, the primary federal prudential regulator for national banks, has earned a reputation as the regulator of the largest banks, but the underlying data doesn’t necessarily support that viewpoint. While all of the four largest U.S. banks are national banks, in all asset classifications, there remains a variety of bank charter, showing that no one charter type is necessarily better based purely on asset size.

While national banks represent a plurality of the largest depository institutions (and thus the OCC is the most likely regulator of the largest banks), given the overall landscape of the U.S. banking industry in which smaller institutions absolutely dominate the number of institutions, each of the federal regulators predominantly regulates smaller institutions.

Thus while the OCC may be the most likely to have dealt with an issue for one of the largest banks in the United States, the majority of banks supervised by the OCC are less than $500 million in assets (with over 80% having less than $1 billion in assets).

What About Vermont?

There are only 6 banks chartered in Vermont:

• Brattleboro Savings & Loan
• Northfield Savings Bank
• Passumpsic Savings Bank
• Peoples Trust Company of St. Albans
• Union Bank
• Wells River Savings 

Another 6 are domiciled in Vermont bu have national charters:

• Bank of Bennington
• Community National
• Mascoma
• First National Bank of Orwell
• Ledyard National
• National Bank of Middlebury

And, another 9 out-of-state banks have one or more branches in Vermont:

• Bar Harbor
• Berkshire
• Community
• KeyBank
• NBT
• People's United
• RBS Citizens
• TD
• Trustco

Finally, Vermont has 13 state-chartered and 6 federally-chartered credit unions domiciled in the state with one or more locations each. 

Kansas CUs Fend Off Statehouse Tax Threat Posted by Association of Vermont Credit Unions on 1:26 PM

According to reporting by CU Journal, earlier this month a Kansas state Senate committee met to SB.238, which would decrease the state income tax on banks, and also SB.239 to tax credit unions over $100 million in assets. Both bills were crafted by the Kansas Bankers Association.

On Tuesday of this week the 11-member committee voted to “not recommend” the credit union tax bill and decided to make “no recommendation” on the bank tax bill. Instead, the Kansas legislature called for more research data on the topic. The Kansas legislature's decision on the credit union taxation bill was a win for the the Heartland CU Association and the entire industry.

The CU association said that banks want a double standard in the form of creating a loophole so they can be taxed like not-for-profits without having to play by the same rules as not-for-profits. In its testimony, the association highlighted economic factors, including that banks control 99% of the commercial market in the Sunflower State.

Credit unions may only account for 1% of the commercial market, says the Association, but that includes small businesses and farmers that banks aren’t willing to take a chance on.  It also argued that Kansas has lost 244 credit union charters in the past five decades, declining from 322 credit unions in 1969 to 78 credit unions today.

The battle in Kansas is the latest banker state-level attempt to impose taxes or restrictions on credit unions. In February, the Nebraska Banking, Commerce and Insurance Committee considered a bill that would have required state regulators to notify banks whenever a CU applied to expand its field of membership. An in 2018, an effort to tax Iowa credit unions ultimately failed, but two credit unions were forced to change their names to comply with legislation that prohibits Iowa credit unions from using the name of state universities in their own name.

Read the original CU Journal article.

ABA Chair: Time to Fix CU Tax Exemption Posted by Association of Vermont Credit Unions on 12:37 PM

Laurie Stewart, Chair, American Bankers Association

The new chair of the American Bankers Association, Laurie Stewart, thinks it's time for the banking lobby to address the tax-exempt status of credit unions. That's an age-old song by bankers, but what's different this time is that Stewart's $686 million bank used to be a credit union.  Stewart lead the conversion of Sound Financial in Seattle from a credit union to a bank in 2003.

In a recent American Banker article, Stewart cites the recent trend of credit unions buying banks as a frustration and how the ABA plans to address the issue in the year ahead.

Stewart says she's "fired up about this situation with credit unions buying taxpaying community banks and taking them off the tax rolls of communities around the country."  She goes to take exception to a credit union buying a bank's book of business with the assumption there's a common bond that results.  She objects to credit unions offering the same services as banks but not accountable to the Community Reinvestment Act, having less of a compliance burden, and reduing tax revenues for government.

She also claims that some credit union CEOs believe in future credit union taxation and that they'd be better served if they could get their industry to structure a tax and be more in control rather than have to be on the defensive all the time.

Stewart also feels the most pressure from credit unions on commercial real estate, saying that credidt unions make loans in the bank market at incredibly low rates with very generous terms that she believes are not prudent and are not scrutinized at the same level as banks conduct.

See the full interview online.

ICBA Arms Banks With Tools to Fight Credit Unions on Local Level Posted by AVCU on 9:20 AM

Last week, the Independent Community Bankers of America began arming its members to fight credit unions on the local level.

The effort is part of the organization’s “Wake Up” campaign and tools include customized op-eds that can be sent to local news organizations, talking points, and a white paper for members to use when discussing credit unions, and in particular the credit union tax exemption.

The website also features state-level reports the ICBA said demonstrate the amount of federal income taxes credit unions in each state avoided paying, the total assets that credit unions in that state held, the amount that credit unions used for non-member expenses and the number of teachers, police officers and social workers that could have been hired if credit unions had paid taxes.

A landing page on the ICBA website even plays off CUNA’s “Open Your Eyes to a Credit Union” campaign. (CU Times, 10/25/19)

“The ‘Wake Up’ campaign encourages policymakers to open their eyes to the growing threats posed by credit unions’ abandonment of their founding mission facilitated by their captive federal regulator, the National Credit Union Administration,” the trade group said.

The ICBA op-ed makes clear the group’s efforts and allows banks to insert their own name before sending it to a news organization.

“[BANK NAME] and other community banks encourage policymakers to open their eyes to the threats posed by these financial firms’ abandonment of their founding mission facilitated by their captive federal regulator,” the op-ed states. “We continue our call for Congress to review this industry’s unjust, taxpayer-funded annual subsidy.”

The website also provides tips on how to get an op-ed placed; the pointers are only available to ICBA members.

The ICBA white paper, “Do They Know They’re Tax Exempt,” purports to examine the ways that credit unions have deviated from their original mandate.

“Credit unions do not primarily serve individuals of modest means, nor do they restrict their activities to the specific communities that they are mandated to serve,” the ICBA said.

Credit union trades groups have been firing back at banker attacks for quite some time. CUNA’s website, “Don’t Tax My Credit Union” also features easy ways credit union members may use to contact their members of Congress.

NAFCU’s “Grassroots Action Center” also eases the way for members to contact members of Congress and features a dedicated page, “Defend CUs From Banker Attacks.”

CUNA Advocacy Director Ryan Donovan on Thursday sent a letter to congressional offices noting the renewed effort.

“The bankers are at it again: complaining about the credit union tax status and how credit unions are using their structure and mission to serve their members,” he wrote. “Their complaints aren’t new but that doesn’t mean they can go unanswered.”

Banker Group's New Campaign Wants Congress to "Wake Up" to "Risky, Tax-Subsidized" CUs Posted by AVCU on 9:51 AM

On Monday, the Independent Community Bankers of America (ICBA) launched a nationwide campaign calling on policymakers and the public to “Wake Up” to the “risky practices, costly tax subsidies, and irresponsibly lax oversight of the nation’s credit unions.”

Both credit union trade groups have responded, with CUNA  clarifying the reason for the credit union tax exemption and issuing a statement citing the more than a quarter-trillion dollars paid by banks in fines over the last decade, and NAFCU saying the real issue is big banks "eating community banks' lunch." (CU Today, 10/21/19)

The ICBA said the Wake Up campaign (click here for video) will encourage policymakers to “open their eyes to the growing threats posed by these financial firms’ abandonment of their founding mission facilitated by their captive federal regulator,” the National Credit Union Administration.


“ICBA and the nation’s community banks are calling on Washington to stop pressing the snooze button and wake up to the risks of aggressive, growth-obsessed credit unions and the costs of their taxpayer-funded subsidies,” says ICBA President and CEO Rebeca Romero Rainey repeatedly while berating the viewer to "Wake Up!".

“With credit unions abandoning their founding mission in the name of expansion and risky lending, it is long past time for Congress to level the playing field between community banks and credit unions while reining in the National Credit Union Administration’s expand-at-all-costs agenda.”

Read more on CUToday.info

FDIC "Eats" 3/4 of Failed Texas Bank Posted by AVCU on 10:51 AM

Click to enlarge

As reported in the September 26th edition of American Banker, the Federal Deposit Insurance Corporation (FDIC) plans to scrutinize a small Texas bank that failed under suspicious conditions.
Regulators closed the $37m Enloe State Bank in May after the Texas state regulator revealed “insider abuse and fraud by former officers.”  The failure is expected to cost the FDIC fund $27.6m . . . about 3/4 of Enloe's asset size.  about $500,000 of deposits exceeded FDIC insurance limits.

FDIC says the bank’s board “failed to establish adequate corporate governance to monitor and control management’s activities,” including those of a “dominant bank president.”  The lax oversight led to the origination of a large number of allegedly fraudulent or fictitious loans, which depleted capital and contributed to the failure.  Concerns about the bank’s leadership go back to April 2018 when examiners downgraded Enloe’s Camels rating to “two” from “one,” based on the management component. The bank was instructed to beef up its controls and the board was directed to produce a full financial statement audit for 2018 including proof of the bank’s internal controls and routines. The bank had not provided the FDIC mandated audit report as of March 2019.

Subsequently, a suspicious night-time fire occurred in the bank’s only branch on May 11, two days before a scheduled regulator exam. Local firemen responded to a report of papers being lit on fire.

The Texas Banking Commission asked the FDIC to participate in a post-fire examination.  As a result, the bank’s rating was lowered to a 5, and was designated a troubled and critically under-capitalized institution due to significant losses tied to over 100 fraudulent or fictitious loans.

The bank's board voluntarily agreed to close on May 31st. Enloe was the nation's first bank failure in 17 months.

Out of Network ATM Costs Reach Record High Posted by AVCU on 4:48 PM

As reported this week in CU Times, the average out-of-network ATM withdrawal cost has reached a new record high of $4.72, according to the latest Bankrate.com Checking Account and ATM Fee Study, which surveyed non-interest and interest accounts.

This all-in fee, which includes the ATM surcharge (what ATM owners charge non-customers) as well as the penalty financial institutions charge their own customers to make out-of-network withdrawals is up 33% over the last decade.

Financial institutions are charging non-customers more than ever to use their ATMs. The average ATM surcharge increased 2% to a new record of $3.09, the 15th consecutive year establishing a new record. The average surcharge has increased in 20 of the past 21 years.

The good news, the fee charged by the accountholder’s own financial institution for using another institution’s ATM decreased 2% from $1.66 to $1.63, moving lower for the second year in a row. In fact, the number of financial institution and accounts allowing free out-of-network withdrawals is at a record high, although this still represents less than one-third of accounts (32%).

“While large banks have extensive ATM networks, many smaller banks and credit unions belong to nationwide fee-free alliances that may have significantly more ATMs available than even the ATM networks of big banks,” Greg McBride, CFA, Bankrate.com chief financial analyst said. “One other option to withdraw money for free is to get cash-back at the point of sale when using a debit card. Banks don’t charge for that and very few merchants do either.”

Among the findings:

• Houston has the highest average out-of-network ATM fee of the 25 major metro areas examined ($5.58), while Los Angeles has the lowest ($4.15). Philadelphia has the highest average overdraft fee ($35.50) and Cincinnati has the lowest ($30.95).
  
• Ninety-nine percent of non-interest checking accounts are either free by default or can become free, however less than half (42%) are free without stipulation. Forty-three percent will waive the monthly fee ($5.61, on average) based solely on direct deposit.

Court Upholds NCUA FOM Posted by Association of Vermont Credit Unions on 1:30 PM

Today the D.C. Circuit Court of Appeals issued an opinion upholding almost all of NCUA’s field of membership (FOM) rule.  NCUA finalized its CUNA-supported FOM rule in October 2016, and the American Bankers Association sued the agency in December 2016. The U.S. District Court of the District of Columbia ruled in March 2018, upholding two challenged portions of the rule and striking down two provisions on the basis that the NCUA overstepped its statutory authority regarding the combined statistical area approach and the definition of rural district.

In today’s ruling, the court also considered ABA’s cross-appeal on those portions of District Judge Dabney Friedrich’s opinion upholding the provision of the rule permitting credit unions to serve core-based statistical areas without serving the urban core that defines the area.

CUNA strongly supported NCUA’s rule and the agency’s efforts to defend it in court. CUNA joined CUNA Mutual Group and the National Association of Federally Insured Credit Unions to file a brief in support of the agency in December. CUNA attended oral arguments before a three-judge panel of the D.C. Circuit Court of Appeals in April. During the hearing, the judges considered NCUA’s appeal of Judge Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and rural districts.

Today’s opinion by the D.C. Court of Appeals is a resounding victory for credit unions, their members, and communities across the country.  That the court has recognized the benefits of an expanded field of membership speaks to the important role credit unions play in advancing financial inclusion. This is the second major recent legal victory for credit unions in the face of ill-conceived bank attacks, and speaks to the power of cooperation between CUNA, NAFCU, and CUNA Mutual Group.

CUNA President/CEO Jim Nussle

Bankers Call for CU Tax Again, Calling a Cheerleader Posted by Association of Vermont Credit Unions on 3:16 PM

As reported by CU Times, the Independent Community Bankers Association (ICBA) on Monday renewed their call for Congress to re-examine the credit union tax exemption in an effort to “promote a level playing field” for financial institutions.  The ICBA released its “Community Focus 2020” legislative agenda in which it singled out credit unions and the NCUA for criticism.  In the report, ICBA claims . . .

Today’s credit unions are leveraging their tax subsidy for rapid growth, purchasing multi-million-dollar stadium naming rights, flaunting their nearly unlimited fields of membership, and expanding their activities well beyond their original mission.  ICBA continues to oppose attempts by the NCUA to flout statutory limits and liberalize restrictions on fields of membership, member business lending, and issuing supplemental capital.

The bankers contend that credit unions have become “virtually indistinguishable” from banks.
But having finished a comprehensive tax overhaul effort during the last Congress, the House and Senate may be unwilling to open the tax code for major changes. On the other hand, Congress may make so-called technical corrections legislation making small changes to the bill that was enacted.

In that case, bankers could attempt to convince lawmakers to add credit union provisions to that bill.

The ICBA also said that Congress should:

• subject credit unions to the Community Reinvestment Act
• require greater disclosure of credit union compensation, and
• insure that regulations make it as easy for a bank to acquire a credit union as it is for a credit union to acquire a bank

Ironically, on most other legislative and regulatory issues, the ICBA’s agenda mirrors many of the priorities set by CUNA. For instance, the ICBA called on lawmakers to guarantee that merchants be required to follow the same data security standards that financial institutions must follow and to create a safe harbor to allow financial institutions to serve marijuana-related businesses.