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Weekly Recap — The challenge of name changes, more CECL opposition


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Investment Banking Essentials Newsletter April Edition - 2022


Banking Essentials Newsletter April Edition - 2022

Weekly Recap — The challenge of name changes, more CECL opposition

The weekly recap featuresnews on regulatory actions, mergers and other issues facing the credit unionspace. Send tips, ideas and chatter to


*Bigger is often better in terms of member generation and loan growth, and analternative M&Aoption now gives credit unions the chance to grow without losingtheir identity – as sellers often do in traditional mergers. Under what iscalled a network merger, the non-surviving credit union becomes part of thesurviving institution, but the merged credit union continues to operate andserve its former members under its own name as a division of the larger creditunion. The continuing credit union can then appoint an advisory committeecomposed of officials from both companies to serve in an advisory role.

*Recent regulatory changes by the National Credit Union Administration couldlead to more credit unions entering the direct , but the timingof such a move could be crucial. Credit unions will be able to pick up deals —especially those valued below $100,000 — that the larger regional banks haveshied away from, Tim Scholten, president of Columbus, Ohio-based consultingfirm Visible Progress, said in an interview. Business deals tend to carrylarger balances and higher margins compared to other loans, but many creditunions will need size, capital and increased staffing to enter the space.

*Job-seeking bank executives often have the option of looking for work in boththe banking and credit union spaces, but it is not always a for credit unionexecutives seeking new opportunities. While credit unions are generally open tolooking at executive talent from a variety of financial backgrounds, banksgenerally will only consider bankers, financial industry headhunters toldS&P Global Market Intelligence.

*Name changes canbreathe new life into financial institutions, but they rarely happen without ahealthy dose of discomfort. Jeffry Pilcher, publisher of the online publicationThe Financial Brand, told S&P Global Market Intelligence that rebranding isoften not motivated by growth. Sometimes old names are tied to dying or deademployee groups, companies or industries. "It looks like a growth playfrom the outsider's point of view, but really what it is often is astop-the-hemorrhaging play," he said.

*The American Association of Credit Union Leagues named Brad Miller as its newexecutive director. Miller, president and CEO of Palmetto Cooperative ServicesLLC and former president and CEO of Tallahassee, Fla.-based ,has 25 years of leadership experience in the financial services industry,according to a March 30 press release. AACUL is comprised of state credit unionleagues that are members of the Credit Union National Association.


*Small credit unions may need external help to implement the FinancialAccounting Standards Board's current expected credit loss standard, orCECL, but the coststhat will accompany the pending accounting change are still difficult to gauge.An S&P Global Market Intelligence survey of bankers and credit unionofficials revealed that lenders are split on where the additional costsassociated with CECL will lie. More than 44% of the 222 respondents saidinvestments in vendor solutions would prove the most expensive aspect ofimplementing and complying with CECL, with another 28% anticipating thatinternal resources will be the most notable cost, and some 22% predicting thatexternal consultants will be the priciest aspect. Only 4.6% said hiring wouldbe the most expensive part of compliance with the rule.

*The regulatory and legislative committees of the National Association ofFederal Credit Unions "strongly urged" the Financial AccountingStandards Board to issue an updated exposure draft for public comment before itfinalizes its credit losses standard. "The additional comment period wouldnot only benefit the nation's credit unions but also provide all stakeholders,large and small, with a crucial opportunity to communicate their views about anaccounting standard that will necessitate the expenditure of considerableresources," the committee said in a letter to FASB. The letter reiteratesNAFCU's view that because credit unions are member-owned, not-for-profit cooperativeswithout investors, they should be exempt entirely from the credit lossesstandard.

*The State of Michigan Department of Insurance and Financial Services , and discontinued theoperations of, Detroit-based Veterans Health Admin CU on March 29 after determiningthat the credit union was insolvent and could not restore viable operations onits own, according to a National Credit Union Administration news release. AndRomulus, Mich.-based PublicService Credit Union immediately assumed Veterans HealthAdministration CU's members, assets, loans and shares. The state-charteredcredit union had $156 million in assets and 23,585 members, as of its mostrecent call report.

*The NCUA has issued a notice ofprohibition against Duane Jones, former CEO of Midland, Texas-basedHeritage USA FCU.Jones pleaded guilty to willful failure to file a return, supply information orpay a tax. Jones received five years' probation and was fined $3,000, accordingto a March 31 NCUA news release. The notice of prohibition effectively bansJones from participating in the affairs of any federally insured financialinstitution, the release noted.

*William Myers, director of NCUA's Office of Small Credit Union Initiatives,is leaving, accordingto the office's March FOCUS e-newsletter. After five years at NCUA, "I ampreparing to move on to my next challenge," Myers said in thee-newsletter, but did not disclose the exact date of his exit. He has led theoffice since June 6, 2011, according to the NCUA's website.


*New York-based Montauk CreditUnion merged into Bethpage, N.Y.-based effective March 31, according to a same-day news release from the NationalCredit Union Administration. As previously reported, the New York StateDepartment of Financial Services placed Montauk Credit Union into Sept. 18, 2015,and appointed the NCUA as conservator. The two agencies worked together toaddress issues affecting the credit union's safety and soundness. Asconservator, the NCUA determined that merging Montauk Credit Union intoBethpage Federal Credit Union was in the best interests of its members.

*Augusta, Maine-based KV FederalCredit Union merged with Waterville, Maine-based ,according to an April 1 news release. The merger integration phase is expectedto be completed by Nov. 1.

*The merger of Oswego,N.Y.-based Compass Federal CreditUnion and Fulton, N.Y.-based Oswego Heritage FCU has been finalized, according to anannouncement on Compass Federal Credit Union's website. Operational integrationwill be completed by Aug. 1. The merger creates a $52 million credit union,which will be headed by Thomas O'Toole, who has been manager of Compass FederalCredit Union since 1989.

*Alexandria, Va.-based PentagonFederal Credit Union will merge with Woodbridge, Va.-based on May 1.Pentagon Federal Credit Union will expand its field of membership to includethe Fort Belvoir military community, which comprises uniformed personnel,government employees, defense contractors and family members.