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Weekly Recap: Credit union deposits grow more than 8% YOY in Q1

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Weekly Recap: Credit union deposits grow more than 8% YOY in Q1

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

U.S. credit unions continued to outpace banks in year-over-year growth for both loans and deposits at the end of the first quarter of 2017. Credit unions grew total loans to $895.51 billion at March 31. That marked a 1.8% increase from the linked quarter and a 10.7% rise from the year-ago quarter. At the same time, deposits at credit unions increased 8.4% year over year to $1.153 trillion, bringing the industry's loan-to-deposit ratio to 77.65% at the end of the first quarter, up from 76.01% a year earlier.

In a subsequent interview, Hershey FCU President and CEO Paul Wagner said share growth has "taken off" for the Hummelstown, Pa.-based credit union. Hershey FCU picked up about 5% growth in shares during the first quarter alone, which Wagner called "baffling" because the credit union is paying just 0.10% interest on regular share accounts. He said some members continue to deposit hundreds of thousands of dollars and "let it sit" in low-interest paying accounts. "And it continues," he said. "And you can't turn it off."

Hershey FCU, with total assets of $64.1 million, had total loans and leases of $37.9 million at the end of the first quarter of 2017, which represented year-over-year growth of 2.96%. Total deposits stood at $59.2 million at the end of the most recent quarter, which represented year-over-year growth of 7.1%.

Wagner said growth in shares is coming from both existing members and new members. He said it appears some people are just looking for a safe place to park their money rather than risk investing it. Hershey FCU has also seen a high percentage of members moving their funds from time deposits to money market shares. During the past five years, Hershey FCU has seen time deposits shrink by 33%, while regular share accounts have grown 29% and money market shares have grown by 16%, Wagner said.

In other news

* South Carolina state credit unions will have easier access to interstate branching with the the recent signing of a cooperative agreement that includes 10 other states. In addition to South Carolina, the Southeastern Regional Cooperative Interstate Agreement includes Alabama, Florida, Georgia, Illinois, Mississippi, Missouri, North Carolina, Tennessee, Texas and Washington. The agreement was developed by the engaged states and the National Association of State Credit Union Supervisors. It went into effect in 2009.

* A credit union proponent urged the Financial Accounting Standards Board to delay its controversial new approach to loan-loss reserving. The National Association of Federally-Insured Credit Unions, in a letter to FASB last week, called for an indefinite suspension of the current expected loss model to allow for the accounting standards board to reassess the pending rule and its potentially negative impact on small institutions. This comes ahead of a FASB meeting with credit union leaders, bankers, their auditors and other stakeholders on June 12.

* Newly released data from the National Credit Union Administration shows that total assets for federally insured credit unions rose $97 billion, or 7.8%, to $1.34 trillion in the first quarter of 2017. The agency's new credit union system financial performance figures released June 5 also show that net income totaled $9.4 billion at an annual rate in the first quarter, up $0.2 billion, or 2.6%, from the year-ago period. The data was based on call report data submitted to and compiled by the NCUA for the quarter ended March 31, 2017.

* The U.S. House of Representatives passed the Financial CHOICE Act, capping off months of hearings and debate between lawmakers about the overhaul of financial regulations. The vote passed 233-186 with one Republican, Rep. Walter Jones of North Carolina, voting no. No Democrats voted yes. The bill would dramatically reduce the power and scope of the Consumer Financial Protection Bureau and strip the Financial Stability Oversight Council's authority to designate companies as systemically important financial institutions. Opponents of the bill say it would roll back essential protections and safeguards put into place after the financial crisis.

* Former Valley State Credit Union CEO Stanley Hayes is facing 13 felony charges for allegedly stealing more than $710,000 from the Saginaw, Mich.-based institution, according to the Michigan Attorney General's website. The charges filed by Michigan Attorney General Bill Schuette against Hayes are conducting a continuing criminal enterprise; two counts of embezzlement over $20,000; seven counts of embezzlement over $1,000; and three counts of using a computer to commit a crime.

* The Maine legislature voted to override Governor Paul LePage's veto of L.D. 1055, an act to update the state credit union charter, CUToday reported June 8. As a result, the bill has been passed into law. The Maine Credit Union League said one of the primary updates in the act puts state-chartered credit unions in line with federally chartered institutions by repealing the guaranty fund requirements and allowing dividend payments when a credit union establishes and maintains adequate levels of net worth.