Posts tagged ‘Call Reports’

Muddled Economic Outlook for CUs Continues to Challenge Industry

The economy continues to send out mixed signals when it comes to the environment in which credit unions will be operating for at least the next year. Unfortunately, the conditions seem to be ideally suited to accelerate the bifurcation of the industry between those credit unions large enough to compensate for historically low interest rates with increased lending and those primarily dependent on investment income.

That is the take of this armchair-economist-wannabe of the NCUA’s first quarter summary of the industry’s financial performance. It paints a picture of an improving economy which will nonetheless continue to squeeze the profits of many small to medium sized credit unions.  For example, credit union share deposits rose 23 percent over the last year to $1.69 trillion (incidentally, money market accounts were up 28.5 percent.) Unfortunately, the statistics underscore that loan demand has not increased nearly fast enough to make money off these deposits. The industry’s loan-to-share ratio currently stands at 68.8 percent down from 81.1 percent in the first quarter of 2020. In the aggregate, credit unions are seeking higher yields by putting some of this money into longer term investments. Investments with maturities of 5-10 years rose $54.4 billion to $86.5 billion. Investments with maturities greater than 10 years increased to $9.4 billion.

The bottom-line is many credit unions continue to be caught in a classic vice in which the economy is growing but not fast enough to nudge up interest rates. Furthermore, the consumer is saving more money than ever before and has even dramatically decreased credit card debt over the last year.

In contrast, the number of federally insured credit unions with assets of one billion dollars increased to 388. These intuitions experienced a net worth increase of almost 14 percent. They now hold 72 percent of the industry’s combined assets and experienced robust loan growth at 8.3 percent.  In contrast, net worth for the industry as a whole decreased from 11 to 10 percent. 

Not surprisingly, consolidation is continuing. The number of federally insured credit unions declined to just over 5,000.  There are now 3,167 federal credit unions and 1,901 state chartered credit unions.

June 7, 2021 at 10:10 am Leave a comment

On Guns, Pot and Banking

Yesterday, New York’s Assembly passed a bill that would legalize the possession of Marijuana for medical purposes in New York State.  If the Senate and Governor agree with the Assembly, then New York would become the 22nd state that has legalized, to some extent, Marijuana possession.  The problem is that Marijuana possession is illegal under federal law.

Recently, the Washington Times reported that gun advocates are concerned that the administration is pressuring banks to stop providing banking services for gun dealers.  In a blog, the Justice Department explained that it was not trying to take away the rights of law abiding citizens but simply clamp down on illegal activity.  I purposely chose two examples from opposite ends of the political spectrum to highlight a disturbing trend:  increasingly, regulators and law enforcement officials on both the state and federal level are picking and choosing the laws they think should be enforced more aggressively and those that they do not and then pressuring financial institutions to go along to get along.

For instance, as I’ve explained in a previous blog, the Justice Department issued guidance to credit unions and banks explaining the conditions under which these institutions could open accounts for pot businesses and still be in compliance with the BSA.  As explained by the Northwest Credit Union Association in an April 17th posting, state regulators are encouraging financial institutions to set up accounts because, after all, there is a difference between a law and the decision about whether or not to enforce it.

Here’s my concern.  whether you are a Republican, Democrat , Socialist or Anarchist, financial institutions ultimately have a difficult enough job to do without picking and choosing whose money to accept and under which circumstances.  The existing BSA framework, for all its faults, is widely understood and does not seek to penalize financial institutions for accepting deposits, but rather provides a mechanism for law enforcement officials to investigate suspicious financial activities.  What we are seeing with issues as diverse as consumer lending laws and drug possession is an appropriation of banking to accomplish policy aims that have absolutely nothing to do with financial institutions or the role they should play.

NCUA To Fine Tardy Call Report Filers

In case you missed it, the NCUA says it is following through on threats it made earlier this year to fine credit unions that are late getting in their call reports.  At the time NCUA issued its somewhat didactic admonishment for credit unions to start getting their reports in on time, I criticized the agency for its tone.  But, keeping in mind that the views I express in this blog don’t necessarily reflect those of the Association or its members, NCUA has given credit unions more than enough notice that they expect timely filing and, with the inevitable introduction of a more sophisticated risk-based capital system, call reports are going to become even more important.  I think a reasonable fine or two may be justified.

May 28, 2014 at 8:20 am Leave a comment

NCUA Is Mad As Hell And Not Going To Take It Anymore

Here are some quick hits to get your day started, including my bet=the=mortgage football picks.

With the tone of a once indulgent teacher who has let her students hand in late homework once too often, NCUA issued a letter to credit unions on Wednesday warning them to get their Call Reports in on time. . .or else!!!

Specifically, NCUA warned credit unions that, starting with the January 24th filing deadline for the fourth quarter 5300 Call Reports, tardy and/or sloppy credit unions face fines ranging from $2,000 to $1 million for knowingly false filings. (A little free legal advice: if you think your credit union might be slapped with the $1 million grand prize you should stop reading this blog and contact a really good lawyer). NCUA is threatening to use its power to fine credit unions out of frustration that more than one thousand credit unions were late getting their Call Reports filed last quarter.
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Speaking of NCUA, it released its agenda for the first meeting of the year and among the topics to be considered are a final rule to permit a limited number of credit unions to be given limited authority to use derivatives and consideration of risk-based capital reform.
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The Target data breach was even more sophisticated and extensive than originally thought, according to a report forwarded to financial institutions yesterday. The Wall Street Journal quotes one analyst saying “what’s really unique about this one is it’s the first time we’ve seen the attack method at this scale. It conceals all the data transfers. It makes it really hard to detect it in the first place.” For those of you interested in learning more about the breach, a great source of up-to-date information is once again the Krebs on Security website.
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A survey of business sentiment in the New York Metropolitan Area conducted by the Federal Reserve Bank of New York revealed that a positive view of the economy reached its highest level since 2007, but still remained negative “ suggesting that on balance, respondents continued to view the business climate as worse than normal.” The survey, which tracks the service sector, revealed that many businesses are seeing an increase in business that they expect to grow stronger over the next six months. At this point, the businesses are still holding back on new hires.
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Finally, here are my long awaited, bet-the-mortgage championship game football picks: these babies are so solid that credit unions should be able to make these bets and classify them as Tier I capital. First, it’s always dangerous to question the wisdom of Las Vegas, but I don’t know what they were thinking making Denver a 5.5 point favorite over New England. Take the points and the money, New England wins outright. In the battle of former Pack-10 coaches who really don’t like each other, give the 3.5 points and take Seattle. On that note, have a great weekend. See you Tuesday.

January 17, 2014 at 8:11 am Leave a comment

On Foreclosures and Fiscal Cliffs

imagesIt takes a big blogger to admit when he’s wrong and it appears that this blogger may have been wrong when he predicted that the $26 billion robo signing settlement with major banks combined with new requirements being placed on lawyers in New York State to affirm the accuracy of foreclosure papers would lead to a glut of foreclosures.  So far, the dam has not broken.  As Bloomberg News reports this morning, the number of properties for sale has shrunk to its lowest level in a decade and housing prices nationally are rising at a healthy pace.

Meanwhile in New York, a report released by the State’s Office of Court Administration indicates that the number of foreclosures in New York has risen in 2012, but will not reach the State’s peak set during 2009-2010.  As a result, foreclosure actions continue to represent a significant percentage of the State’s overall caseload, but it appears to be manageable.  One interesting note:  it appears that banks are still having trouble complying with the State’s new affirmation requirements so there still is a large number of shadow foreclosures taking place, those in which the actions have been commenced but no judicial intervention has been requested.

Not surprisingly, if Congress and the President cannot agree on a deficit reduction plan, sending the Country over the dreaded fiscal cliff, the Wall Street Journal points out that this would have an impact on the number of foreclosures being carried out.  The paper points out that one of the reasons foreclosures have declined is that banks have more aggressively turned to short sales, loan modifications and principal reductions as an alternative to more lengthy litigation, but unless Congress agrees by early January federal law exempting income saved on these modifications from a homeowner’s income tax will expire.

NCUA statitstic released

NCUA released a summary of the third quarter 5300 reports.  The news is generally positive.  If I wanted to be a glass half-empty kind of guy, I would point out that the industry’s loan to share ratio continues to languish and that some credit unions are apparently making up some of the difference by aggressively moving into taking on student loans.  While it makes sense to try to tap into this growing industry, not to mention help your members and their kids, these loans are tricky and I wouldn’t be surprised to see them be a point of emphasis when your examiner comes calling.  So, in the immortal words of Phil Esterhaus, let’s be careful out there.


November 30, 2012 at 7:55 am Leave a comment

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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