Links in “Credit Unions”

Four banks have been purchased by credit unions and a fifth transaction is in process. A look at some of the hurdles and why the reverse—banks buying credit unions—is unlikely. [4/9]

Probably not. However, with the annual CEO turnover rate currently at 10% to 15%, your board should be aware of certain pitfalls, such as assuming the CEO is best positioned to pick his/her successor or that boards are prepared to identify the talents of potential CEO candidates. [4/8]

In two related articles, Chip Filson, cofounder of Callahan and Associates, says that after 25 years of attempting to define a risk-based capital methodology for banks and credit unions, the experts agree that RBC and similar Basel approaches don’t work as well as a simple leverage ratio. Filson points out that the risk-based capital format used by banks for many years did not prevent the latest banking crisis or continuing bank failures. Doug Alldredge, CPA and CFO of First Credit Union has done a comparative study of a hypothetical $100 million bank to a $100 million credit union using the current bank risk-based capital formula and the proposed RBC formula for credit unions and found that credit unions would have to maintain a capital level that was 128% higher than a similar bank even though credit unions have outperformed banks in all economic cycles. See also. [4/8]

Although the CFPB has not formally announced plans to draft payday loan regulations, Director Richard Cordray, has certainly dropped hints in that direction. Industry experts anticipate that any new regs would target loan terms and the borrower’s ability to repay; two areas that could have an adverse impact on many credit unions' current payday alternative loan programs. [4/7]

CUNA has asked Congress to conduct a thorough review of NCUA’s proposed Risk Based Capital Rule and to direct the agency to fix what CUNA sees as significant deficiencies in the rule as currently drafted.  Specifically, CUNA notes that:

• The rule is fundamentally flawed due to poorly calibrated risk weightings;
• The rule would significantly adversely affect credit unions’ ability to offer mortgage loans and small business loans; and
• The 18-month implementation period is unreasonably short. [4/7]

Sunday’s annual Credit Union Cherry Blossom Ten Mile Race that benefits the Children’s Miracle Network was again a smashing success. Over 15,000 runners competed in the race and $487,000 was raised for the charity. [4/7]

NCUA has chartered a new community-based credit union for the residents of Greenville County, SC. Community Works Federal Credit Union will serve a low-income area with a potential of 475,000 members. [4/4]

NCUA announced yesterday that it will remove the online risk based calculator on May 28^th, which is the closing date for comments to the proposed Risk Based Capital Rule.  CUNA had urged NCUA to take this action due to concerns that the calculator was also available to the general public who might not understand how to use the calculator properly or understand the results. [4/4]

At a time when most credit unions are moving away from using volunteers on Credit Committees or Loan Review Committees in favor of the professional staff, State Employees’ Credit Union in North Carolina is actively recruiting volunteers to serve on loan review committees. Currently, the credit union has 86 volunteers serving on loan review committees, but is expanding that number to 276 in order to establish loan review committees for each of its 46 districts. [4/4]

NAFCU encourages credit unions to write comment letters to NCUA regarding how the proposed rules would affect credit union industry. [4/4]