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Weekly recap — Bank proponent sues to keep CUs from becoming more bank-like

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.

News

* The American Bankers Association filed a lawsuit against the National Credit Union Administration over the regulator's field of membership rule. The NCUA board on Oct. 27 approved the much-debated rule, which it said will make it easier for U.S. credit unions to expand their reach and was necessary to keep up with the many societal and technological changes that have occurred since the Federal Credit Union Act was passed in 1934. The ABA's suit was filed Dec. 7 in the United States District Court for the District of Columbia and will seek to overturn the NCUA rule.

* And the ABA suit is not the only pending litigation against the NCUA. Both the Independent Community Bankers of America and the ABA have recently filed lawsuits that amplify the two groups' long-running concerns about credit unions effectively morphing into banks while retaining their nonprofit tax exemptions. Critics say credit unions unfairly capitalize on their lower tax burden to offer customers more favorable interest rates on loans and deposits, squeezing out banks that shoulder a full tax load. Bankers and their advocates have maintained that banks welcome competition, but they want to face it on a level playing field.

* U.S. banks and thrifts made up some ground on credit unions in the third quarter of 2016 in the pace of both loan and deposit growth. Credit unions grew total loans to $857.31 billion at Sept. 30, an S&P Global Market Intelligence study found. That marked a 2.9% increase from the linked quarter and a 10.1% rise year over year. By contrast, the year-over-year growth rate was 10.5% in the second quarter and 10.8% in the first quarter of the year. The third-quarter growth was mainly driven by vehicle loans and closed-end first-lien one- to four-family loans.

* The NCUA reported an increase in insured shares and deposits in federally insured credit unions to more than $1 trillion in the third quarter. Membership reached 106.2 million during the period. In addition, total loans outstanding grew 10.1% year over year to $847.1 billion at the end of the third quarter. Total investments by federally insured credit unions dipped 1.4% year over year to $266.3 billion at the end of the period.

* Former Tazewell County School Employees Credit Union President and CEO Charles Juska was sentenced to three years in prison for bank fraud and was also ordered to serve five years of supervised release, the Credit Union Times reported Dec. 9. U.S. District Court Chief Judge James Shadid in Peoria, Ill., said that in March 2017, he would issue a ruling over the disputed restitution amount, according to the news story. Juska, who was found guilty of bank fraud and other felonies by a federal jury in May, is set to start his sentence April 4, 2017.

Regulation/legislation

* The NCUA board meets Dec. 15 and is not expected to charge credit unions an assessment for the Temporary Corporate Credit Union Stabilization Fund, which funds the guaranty of payment of interest and principal at maturity for the NCUA Guaranteed Notes. "Notwithstanding a major, unexpected development, such as a severe economic downturn, the stabilization fund assessment is expected to be zero for 2017," a letter that went out to credit unions last week stated. "However, if adverse conditions develop, the NCUA board may have to reconsider an assessment."

* Alliance Credit Union became the latest credit union to switch to a state charter and obtained private insurance. Alliance was the fourth credit union to do so in the last 18 months, according to American Share Insurance, the private insurer of credit union deposits. Others that have converted in the last year and a half are Latah Credit Union, Eastex Credit Union and Glendale Area Schools CU, ASI said.

* The Credit Union National Association, the National Association of Federal Credit Unions, the Independent Community Bankers of America and the Consumer Bankers Association submitted a letter to Senate leaders calling for the implementation of a five-person bipartisan commission at the Consumer Financial Protection Bureau.

M&A

* Beech Island Credit Union members officially became members of Peach State Federal Credit Union when the financial merger of the two institutions took effect Nov. 1, according to a Dec. 9 press release posted on CUInsight.com. SNL data shows that as of Sept. 30, Lawrenceville, Ga.-based Peach State FCU had assets of $328.8 million, while Beech Island, S.C.-based Beech Island CU had assets of $6.7 million.