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Weekly Recap: For 2nd time in November, Georgia-based bank sells to credit union

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Weekly Recap: For 2nd time in November, Georgia-based bank sells to credit union

The weekly recap features news on regulatory actions, mergers and other issues facing the credit union space. Send tips, ideas and chatter to ken.mccarthy@spglobal.com.

In the spotlight

As part of its new rule on member business lending, the National Credit Union Administration created distinct definitions for member commercial loans and member business loans. And while credit unions are still getting used to the new definitions, the third quarter of 2017 was the first reporting period in which they were able to put loans into either bucket.

At the end of the third quarter, U.S. credit unions had a total of $61.46 billion in business loans outstanding compared to $65.77 billion at the prior quarter. Credit unions had $54.56 billion in MCLs on their books at the end of the third quarter.

Chris Clepper, senior vice president of business services for Nusenda FCU, said in an interview the Albuquerque, N.M.-based credit union is trying to be selective about new growth on the commercial side because it is a bit concerned about overall asset prices. "We're being a little more picky about what we do with new originations, and we're really focusing on our core market," he said.

Clepper said investor CRE is one area where the credit unions is being particularly selective in what it puts on its books, and instead it is looking for opportunities for growth in other lines including owner-occupied real estate. The problem, he said, is that some larger banks including Wells Fargo & Co., U.S. Bancorp and Washington Federal Inc. are entrenched in the business-lending market, and there are not tons of lending opportunities available. "Those are the ones we're fighting to take business from," he said.

Nusenda had $404.6 million in MCLs at the end of the third quarter.

In other news

* Another credit union announced it is buying a bank. North Augusta, S.C.-based SRP FCU has agreed to acquire $80.3-million in assets Southern Bank, which is based in Sardis, Ga. The deal, which is still subject to regulatory and bank shareholder approvals, is expected to close in the second quarter of 2018. It marks the sixth such deal announced this year and the second in November involving a bank based in Georgia. Atlanta-based Georgia's Own CU previously agreed to acquire Fayetteville, Ga.-based State Bank of Georgia.

* The NCUA approved 16 credit union mergers in October, according to the agency's latest Insurance Report of Activity. Ten of these mergers were attributed to "expanded services," while four mergers were due to "poor financial condition." The merging credit unions totaled approximately $297.7 million in assets.

* Net income at U.S. credit unions reached $2.78 billion in the third quarter, up $1.1 million since the second quarter and up 9.7% year over year to reach the highest level since the second quarter of 2009. Net interest margin was 3.43% in the third quarter, the highest it has been since the first quarter of 2012. Membership continued its upward march, reaching 111.9 million members at Sept. 30. This is the highest membership has ever been at U.S. credit unions and represents the 19th consecutive quarter of membership growth for credit unions.

* A recent ruling by the Consumer Financial Protection Bureau may lead credit unions to consider offering payday alternative loans. The CFPB in early October finalized a rule that would impose new protections on payday loans, auto title loans, deposit advance products and certain high-cost installment and open-end loans. But the CFPB's rule excludes credit union payday alternative loans. It is important for credit unions to offer products that mirror the needs of their communities, said Kara Van Wert, senior vice president of lending for Veridian CU, and that includes PALs.

* Speaking of the CFPB, Mick Mulvaney has taken the top spot at the regulator and is now reviewing his predecessor's still-active investigations. In an interview with The Washington Times, the CFPB's new acting director said the examination was to "make sure that we are not going beyond the mandate, that we are not abusing our position, and that we are not getting in the way of the proper functioning of the financial services and capital markets."