EDINBURGH, Texas–Regulators taking over credit unions via conservatorship isn’t unusual, although it has occurred much less frequently in recent years. But what is unusual, as CUToday.info reported here, is taking over a credit union with 22.97% capital.
In this case, the Texas Credit Union Department took over the state-chartered, $106-million Edinburg Teachers Credit Union. It then appointed NCUA as conservator. Regulatory agencies typically do not provide specifics around conservatorships unless the issue is significant.
“The Texas Credit Union Department remains focused on continuing our efforts to provide appropriate regulatory oversight of state-chartered credit unions. We work to ensure that the businesses within these industries are safe, sound, and entitled to the public's confidence,” said Texas CU Commissioner John Kolhoff in a statement.
At the time of the conservatorship, the credit union’s 5300 showed it had 12,572 members at year end, with net income of $692,722 and ROA of .68%. Similarly, it closed out 2019 by reporting $775,084 in net income.
The Other Numbers
But other numbers in its 5300 hint at other issues that may have played a role in the conservatorship.
At year-end 2020, Edinburg Teachers CU reported it had 2,578 loans outstanding for $15.4 million, giving it a 14.5% loan-to-share ratio. It’s loan-to-share ratio was similar, albeit slightly higher, at year-end 2019. ETCU showed $194,000 in delinquencies at year-end 2020.
Another number also shows it is an outlier: compensation. The credit union’s 5300 shows seven full-time employees and three-part time employees, to whom it paid $1,898,659 in total compensation, including benefits. With the part-timers included, that would mean average compensation of $189,865.90.
The credit union remains open and is serving members during its normal hours.
Agencies Seek AI Feedback
Separately, NCUA joined with four other federal agencies in seeking to gather insight on financial institutions’ use of artificial intelligence (AI). The agencies seek information from the public on how financial institutions use AI in their activities, including fraud prevention, personalization of customer services, credit underwriting, and other operations.
Joining NCUA, the Federal Reserve, the CFPB, FDIC, and the Office of the Comptroller of the Currency (OCC) announced the request for information (RFI) to gain input from financial institutions, trade associations, consumer groups, and other stakeholders on the growing use of AI by financial institutions. More specifically, the RFI seeks comments to better understand the use of AI, including machine learning, by financial institutions; appropriate governance, risk management, and controls over AI; challenges in developing, adopting, and managing AI; and whether any clarification would be helpful.
Comments will be accepted for 60 days following publication in the Federal Register.