Compliance Blog

Posted by Anthony Demangone

I should have a sign in my office that reads "Things will hopefully slow down tomorrow." If I sold that sign to compliance officers, I might be writing this blog from my boat in the Bahamas. 

Indirect lending.  NCUA Board Member Gigi Hyland announced that NCUA will host a free webinar on indirect lending on Tuesday, November 9.  If you look at the panel of speakers, you'll see that NCUA is having senior members of its staff make the presentation.  They always answer a ton of questions and answers, so these webinars are a good place to measure NCUA's expectations on a topic.

RESPA.  The OCC has updated its RESPA exam procedures. They might come in handy, as RESPA is RESPA is RESPA, no matter if you are a bank, thrift or credit union. 

Fixed assets.  The NCUA is not the only financial regulator to issue material loss reviews.  OTS's inspector general wrote this report looking at the reasons why MainStreet Savings Bank failed.  The reason?  Fixed assets, to a certain degree. It brings home (a bit) at what NCUA may have been worried about regarding fixed assets and its RegFlex rule. (Hat tip to Mr. Clarke.)

The primary causes of MainStreet’s failure were its large investment in fixed assets, high overhead costs, and a very competitive local market. In 1998, MainStreet purchased a $22 million branch office and constructed a $4 million main office, which represented approximately 30 percent of the thrift’s total assets. The occupancy and related personnel expense increased the thrift’s overhead costs significantly and resulted in weak earnings. Management tried to implement a growth strategy in deposits and commercial real estate lending but was unsuccessful due to the highly competitive local market and a low net interest margin. Consequently, MainStreet could not absorb the increased overhead costs and incurred losses in 8 of the previous 11 years. These conditions were exacerbated by the deterioration in the Michigan economy. Loan delinquencies and classified assets increased significantly, which resulted in higher net operating losses that further diminished earnings and capital, and ultimately, led to MainStreet’s failure.

Sleep.  A certain set of twins in Arlington, Virginia seem to think it is perfectly acceptable to get up somewhere between 3:30 and 5 a.m. each morning.  They generally fall back asleep just as their father heads out the door for work.  Their father is not amused, but he is keeping tabs on the behavior and will dock their future allowances accordingly.