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Weekly Recap — CRA simply not applicable to many credit unions, SECU CEO says

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Weekly Recap — CRA simply not applicable to many credit unions, SECU CEO says

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

Credit unions would be interested in banking more underserved consumers, but they do not want to do it under the Community Reinvestment Act. Massachusetts Sen. Elizabeth Warren recently proposed legislation to subject credit unions and other mortgage originators to the act, aiming to make housing more affordable for lower-income families.

Michael Lord, President and CEO of Raleigh, N.C.-based State Employees' Credit Union, the second-largest credit union in the U.S. by assets, told S&P Global Market Intelligence that the credit union has a defined occupational field of membership and is not permitted to serve all citizens of the state or even all citizens of a specific city or county.

"We do serve folks in all demographic categories in North Carolina, but only because we have been around 81 years and there are teachers, state employees and retirees of same in every county," he said.

The credit union reviews its lending originations for fair lending compliance on an annual basis, Lord said, and it has an "admirable" record of fair lending and serving its members, which fall in all demographic categories. But the CU is only permitted to lend to its members, and not everyone in the city or county is eligible for membership. "So being under CRA, which was first intended to stop redlining lending practices in a specific area of a city or community, is not appropriate unless you are a community-based charter," he said. "And many credit unions do not fall in that category — including SECU."

In other news

* While concerns about deposit gathering among credit unions continue to fester, the sector hit a lending landmark in the second quarter of 2018. Deposits at credit unions increased 5.4% year over year to $1.222 trillion in the second quarter, but growth at the end of the year-ago quarter was 8.11%. Credit unions grew total loans to $1.013 trillion, crossing the $1 trillion threshold for the first time at June 30, marking a 9.7% rise from the year-ago quarter. Real estate loans grew by $43.89 billion to $500.49 billion, whereas consumer loans grew by $42.35 billion to $459.95 billion.

* The National Credit Union Administration liquidated Staten Island, N.Y.-based Radio Television & Communication FCU. Pearl River, N.Y.-based Palisades FCU assumed most of Radio Television & Communication FCU's assets and all of its members, shares and loans. At the time of liquidation, Radio Television & Communication FCU served 416 members and had assets of $3 million, according to its most recent call report. The credit union was chartered in 1964 and served various groups in New York. The NCUA said it liquidated the credit union after determining it was insolvent with no prospect for restoring viable operations on its own.

* U.S. credit unions added only two new branches in the third quarter, down from 11 net openings in the second quarter. As of Sept. 30, there were 21,254 active credit union branches in the U.S., up 47 year over year. Chicago-based Alliant CU closed nine of its branches during the third quarter, the most of any credit union, and closed another branch Oct. 3. The company is now operating with only two active branches and only one of these is open to the public as it continues its transition toward digital banking.

* After a federal court ruling thwarted the first merger attempt of Bridgewater, Mass.-based Bridgewater CU and Lawrence, Mass.-based Merrimack Valley Credit Union, the two are again pursuing a merger, the Boston Business Journal reported Oct. 9. The two credit unions first proposed to merge in January 2018 but withdrew their merger application after a federal judge quashed portions of a new NCUA rule that would have provided credit unions greater expansion ability, according to the report.

* The NCUA will vote on finalizing changes to its risk-based capital rule at its Oct. 18 meeting. The regulator's board in August approved proposed changes to the controversial rule that would result in a one-year delay in its implementation. At its Aug. 2 meeting, the NCUA board also raised the asset threshold of credit unions that would be impacted by the rule from $100 million to $500 million.