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
The NCUA approved 11 credit union mergers in April, according to the agency's latest Insurance Report of Activity. Nine of the mergers were attributed to "expanded services," while two mergers were due to "poor financial condition."
In a subsequent interview, American Heritage FCU President and CEO Bruce Foulke said the volume of inbound merger calls has not increased dramatically of late, and most of the deals the company is seeing are small. The Philadelphia-based credit union recently completed one deal for $70,000, he said. "Most of them have been somewhat distressed financially and unable to deal with the compliance issues," he said.
Foulke called himself the "number one merger person in the country" and said he has always been interested in helping out the small credit unions in the Philadelphia area in any way possible, including through mergers. "Our reputation is why people want to come with us," he said. "They know we're still truly a credit union."
Members 1st FCU President and CEO Robert Marquette recently told S&P Global that the institution has little interest in mergers because it is hesitant to take on the problems of another credit union. "If they want to talk to us we'll talk to them. But we never initiate those conversations," he said. But Foulke said he feels that taking on such deals is what being a credit union is all about. "We're still a credit union helping people out," he said.
American Heritage is growing its membership by about 1,300 members a month without taking mergers into account. Foulke said it is a "major mistake" that some institutions make to focus on mergers rather than growing their memberships organically.
In other news
* The Pennsylvania Credit Union Association recently held its annual convention in Hershey. In an interview with S&P Global, Members 1st FCU President and CEO Robert Marquette said the credit union has not seen a drop in branch transactions, and he does not believe most financial services companies have either. "Anyone that maintains the same level of hours and convenience and everything else...why would our customers be different than anybody else? They're not. So I think it's bullcrap," he said.
* During a recent review, the National Credit Union Administration found that 75% to 80% of mergers have included "significant" merger-related compensation to executives of the non-surviving institution. Although that is not problematic in itself, the regulator said it wants to ensure that such compensation is fully disclosed to members before they vote on such deals. The NCUA board on May 25 approved a proposed rule that would open up member communications and provide greater transparency in voluntary mergers involving federal credit unions.
* Also during its May meeting, the NCUA board approved two proposed rules aimed at improving the process for credit unions appealing the regulator's decisions. Several existing regulations provide a right of appeal, but the NCUA said they often lack uniformity and may be confusing to parties who believe a decision was unfair. The proposed rules would bring the appeals process under a uniform set of procedures and would aim to enhance due process. Special counsel Ross Kendall said the current rules are often inconsistent with each other and contain varying degrees of clarity. The new rules will provide clear guidelines and increased transparency, he said.
* U.S. credit unions saw a flattening of year-over-year auto loan growth in the most recent quarter. Aggregate auto loans held on U.S. credit union balance sheets rose to $310.08 billion as of March 31, a 13.8% increase year over year, according to SNL data. In the first quarter of 2016, year-over-year growth was 14.1% for credit unions. Aggregate used vehicle loans at credit unions totaled $188.94 billion at the end of the first quarter, while new vehicle loans at credit unions reached $121.14 billion at March 31. A year ago, new vehicle loans totaled $103.86 billion.
* CUMIS Insurance Society Inc. defeated the NCUA's claim that it should pay $5 million for the failure of St. Paul Croatian Federal Credit Union, CUtoday.info reported May 29. CUMIS had issued a fidelity bond to the Eastlake, Ohio-based credit union back in 2010, covering employee or director dishonesty. St. Paul Croatian was placed into conservatorship that same year, and Anthony Raguz, a former COO, was accused of embezzlement.
* The credit union sector is becoming more top-heavy. A significant portion of the industry's membership and balance sheet growth is taking place among the largest institutions. On an aggregate basis, total membership at credit unions reached 109.4 million, showing 4.2% year-over-year growth. Shares and deposits increased 8.4% year over year to $1.153 trillion, while loans and leases increased 10.7% to $895.51 billion.