March 6, 2020 NASCUS Report

THIS WEEK: State CUs see strong asset growth, reach for half of total; Iowa regulator stalls CU buy of bank assets; Hemp production gets some leeway; TRANSITIONS in NV, AZ; Report names new bureau deputy director; BRIEFLY: Virus concern postpones conference by bank regulators; FDIC looks to make room for new staff

State CUs bolster share of assets
after robust expansion in 2019

State credit unions grew faster in both assets and memberships in 2019 than their federal credit union counterparts, helping to increase the total share of the market of both categories for the state-chartered financial institutions, according to numbers released Thursday by NCUA and compiled by NASCUS.

State-chartered credit unions – both federally and privately insured – held $781.6 billion in assets at the end of last year, up 9.12% from year-end 2018. Memberships at the SCUs were 58.6 million, up 4.37% from the end of 2018. Assets at federal credit unions, by contrast, grew by 6.56% (for a total of $803 billion), and memberships expanded by 2.94% (to 63.1 million).

The strong growth in assets at SCUs helped to boost their share of the total assets to 49.3% of all assets at credit unions – up from 48.7% at the end of 2018. The SCU share of total memberships likewise expanded, to 48.1% (up from 47.8% the year before).

All of the totals are based on NCUA’s release Thursday of year-end 2019 numbers for federally insured, state-chartered credit unions (FISCUs) and numbers reported by American Share Insurance, Inc. (ASI) for privately insured credit unions (and compiled by NASCUS).

“State credit unions essentially hold half of all credit union assets nationwide, a testament to the enlightened supervision by their state regulators, which permits state credit union boards and management to focus on what is in the best interests of their institutions and members,” said NASCUS President and CEO Lucy Ito.

Other numbers released this week by NCUA for year-end 2019 showed:

  • Deposits at FISCUs expanded by 9.2% (to $648.8 billion), and loans grew by 7% (to $546.8 billion); at FCUs, deposits grew by 7.3% (to $670.9 billion) and loans expanded by 5.4% (to $561.2 billion).
  • Return on average assets was virtually the same for the two types of credit union charters: 0.92% for FISCUs, and 0.95% for FCUs. Net worth ratios were also similar: 11.24% for FISCUs and 11.50% for FCUs.
  • At the end of the year, there were 2,064 SCUs (down 49 from the year before), and 3,283 FCUs (down 93 from year-end 2018).
  • Federally insured credit unions (FICUs) recorded $14.1 billion in net income for 2019 (up 8.8% from the previous year), making last year the most profitable in at least 10 years for the credit unions.

NCUA Releases Q4 2019 Credit Union System Performance Data

Iowa regulator pumps brake on sale of bank assets

The sale of an Iowa bank’s assets to a credit union in the state was blocked this week – at least for now –by the Hawkeye state banking regulator, who asserted that the transaction essentially did not meet criteria set under state law. Attorneys for the credit union, however, dispute that view, and say the sale is completed.

Green State Credit Union of Iowa City (with assets of $5.8 billion) is attempting to purchase all of the assets and liabilities of First American Bank of Fort Dodge, Iowa; the bank then planned to cease operations. However, according to the American Bankers Association (ABA), Iowa Superintendent of Banking Jeff Plagge denied the application, saying he was waiting until the Thursday close to a comment period on the sale before ruling on a final approval for the sale.

He also asserted that the credit union and bank are already proceeding as if the sale is final. However, the regulator noted, final approval of the sale must be provided by the Iowa Division of Banking. He directed the credit union and bank to maintain separate records until the matter is resolved.

According to the bankers’ trade group, Iowa law requires banks that are voluntarily dissolving to adopt plans for their assets and liabilities to pass to another state or national bank or other FDIC-insured institution. The statute does not refer to credit unions as authorized purchasers, the bank group asserts.

However, attorneys for the credit union reportedly wrote this week to the Iowa regulator, disputing the agency’s role in the transaction. According to news reports, the credit union legal representatives wrote that the state regulator has no authority in the matter, and that the deal is now closed.

Agency takes another step on hemp production

Enforcement will be delayed of certain requirements of an interim final rule for industrial hemp producers issued last fall by the U.S. Department of Agriculture (USDA), the agency said last week.

According to a USDA announcement, the requirement for industrial hemp labs to be registered by the Drug Enforcement Administration (DEA), and for producers to use a DEA-registered reverse distributor or law enforcement to dispose of non-compliant plants under certain circumstances, will not be enforced until either Oct. 31 2021 or until a final rule is published.

In October, the USDA issued an interim final rule establishing new regulations and procedures for the legal production of industrial hemp; the rule was widely seen as an on opportunity to open the door to credit unions and other financial institutions receiving deposits from the producers. The interim final rule was important to credit unions and other financials as it points out that “the banking industry is awaiting these regulations in order to develop guidance regarding deposits derived from hemp operations. Without these regulations, the banking industry is not willing to take the risk of accepting deposits or lending money to these businesses.”

The most recent action by USDA is another step in the process for allowing deposits to be accepted by financial institutions from hemp producers.

The NASCUS Hemp and Cannabis Banking Symposium (June 17-18 in Chicago) will explore issues related to the interim rule, and other issues, related to banking for the fast developing, and growing, cannabis and hemp.

TRANSITIONS: Retirement in NV, changes in AZ

Farewell and thanks to Ed Zamora, who has retired as managing examiner for the financial institutions division of the Nevada Department of Business and Industry. Taking his place is Michael Smith, a veteran of the division … similar thanks and fare-thee-well to Keith Schraad, Arizona Department of Financial Institutions superintendent. His replacement, at least for the interim, is Christina Corieri, who also is senior policy advisor to Gov. Doug Ducey (R). According to reports, the state is conducting a national search for a permanent superintendent.

Report: new consumer bureau deputy director appointed

A new deputy director for CFPB will be splitting time between that organization and his current role at the FDIC, according to news reports this week. Leonard Chanin, who has served as deputy to Federal Deposit Insurance Corp. (FDIC) Chairman Jelena McWilliams since last year, will be replacing Brian Johnson as deputy director of the Consumer Financial Protection Bureau (CFPB), according to the reports. However, Chanin – who previously served as CFPB’s assistant director of the Office of Regulation – will continue his role as deputy to McWilliams, according to the reports.

Johnson left the bureau this month to join a Washington law firm. Chanin moved to FDIC last year after serving as deputy general counsel and senior vice president at Fifth Third Bank in Cincinnati, Ohio. His boss there was McWilliams, who served as general counsel.

At his first stint at CFPB, Chanin was responsible for implementing federal consumer financial services laws. Before that, he served for two decades in the Federal Reserve’s division of consumer and community affairs, most recently as the division’s deputy director, providing legal opinions and policy recommendations to the board and other activities.

BRIEFLY: Coronavirus delays bank regulator conference; FDIC offers voluntary retirements, early separations

Federal banking regulators postponed their 2020 interagency Community Reinvestment Act (CRA) conference, previously set to kick off next Monday in Denver, due to public health concerns related to the coronavirus known as COVID-19. The FDIC, Federal Reserve and OCC “jointly made this decision out of an abundance of caution to help safeguard the health and well-being of the more than 1,300 registered conference participants,” they said, adding they intend to reschedule … Meanwhile, the FDIC Thursday announced it was offering voluntary retirement or early separation to up to 20% of its employees “to help reshape the agency’s workforce for the future and to enhance preparedness.” The agency said a recent study found that 42% of the FDIC’s workforce is eligible for retirement within five years, absences which the agency fears could deplete its “institutional experience and knowledge, especially during a crisis.”

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