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Weekly Recap — Another CU announces bank buy, the 3rd in 30 days

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Weekly Recap — Another CU announces bank buy, the 3rd in 30 days

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 similar histories and banking-alternative roles of financial technology companies and credit unions may make partnerships between them attractive. Speaking during the Reality Check conference in Valley Forge, Pa., last week, Sam Das, principal at CMFG Ventures, said a recent study revealed that 94% of consumers that received credit from a nonbank said they would do business with those firms again. He said the story of fintechs is not much different than the one that led to credit unions emerging in the early 1900s.

In an interview, Hidden River CU CEO John Murga said new challengers for credit unions' business have always emerged and will continue to do so. And Murga believes that competition such as fintech is actually good for the Pottsville, Pa.-based credit union.

Technology has not always been a strong point for credit unions, and they have traditionally been seen as trailing the banks in that regard. It is more the service-side of the operations where credit unions typically excel.

Murga said credit unions are probably a bit behind the curve in terms of technology partly because it is so expensive. Learning to use it effectively is the real key, he said. And if credit unions can do that in ways to help serve their members better — particularly through data mining — it could be a key growth driver. "But unfortunately I think a lot of credit unions won't," he said. "It's going to be a tough row to hoe."

In other news

* Many community banks and credit unions established in the 1990s have vanished from the U.S. commercial landscape. Only 32% of the 471 credit unions established between 1990 and 1999 are still around today, and only 19% of the 1,773 community banks formed in the '90s are still operating. And since then, the formation of new institutions has fallen off due to the financial crisis and increased regulations. This means the vast majority of assets remain in the hands of older community banks and credit unions — ones that opened before 1990.

* Evansville, Ind.-based Evansville Teachers Federal Credit Union is buying American Founders Bank Inc. of Louisville, Ky., Louisville Business First reported. Terms of the deal were not disclosed. The acquisition brings Evansville Teachers more branches in Louisville, where it already has two mortgage loan offices, according to the publication. And with it, Evansville Teachers will expand mortgage subsidiary First Liberty Financial Group LLC's loan and deposit products. The deal is the third announced in the past month involving a credit union buying a bank.

* Pennsylvania State Employees CU President Greg Smith is retiring following almost three decades of service. He will remain with the Harrisburg, Pa.-based credit union through February 2019 before entering into retirement. PSECU was the 12th-largest credit union in the U.S. by assets with $5.09 billion at the end of the fourth quarter of 2017.

* The National Credit Union Administration on March 14 placed Beverly Bus Garage FCU into conservatorship because of "unsafe and unsound practices" at the Chicago-based credit union, according to a press release from the regulator. While continuing normal member services, the NCUA will work to resolve issues affecting the operations of the credit union, which had assets of $4.0 million as of the end of 2017. The move follows a liquidation and another conservation within the past three weeks.

* At its March 15 board meeting, the NCUA said it is seeking comments on a proposal to adopt contractor suspension and debarment procedures as part of its effort to modernize its procurement process. The NCUA said it is not required to follow federal government acquisition laws and regulations, but believes those include best practices, and suspension and debarment procedures have proven to be an important part of government procurement.