14 In Brief
redit unions are preparing for anotherround of PaycheckProtection Program loans this month as manybusiness members have beenstretched thin by nine months ofdisruption from the pandemic.
The $900 billion relief packageworked out by Congress in December includes $284 billion foranother round of Paycheck Protection Program (PPP) loans forsmall businesses. The loans areguaranteed by the U.S. Small Business Administration, and are designed to be forgiven in whole orpart by the SBA. CUNA and othertrade groups had been pushingCongress for more relief, including PPP funding.
Jordan van Rijn, senior econo-
mist for CUNA, said the relief
will help businesses and allow
credit unions to continue to serve
their members. “It’s getting really
tough,” van Rijn said. “At the be-
ginning, a lot of people thought
businesses could close for two or
three months and reopen again,
but now this is dragging on seven,
eight, nine months, close to a year
now. It’s really hard for businesses
to weather that storm without sig-
The SBA is expected to begin
taking applications Jan. 14, “if not
sooner,” said Jeremy Gilpin, EVP
for Greater Commercial Lending,
a CUSO of Greater Nevada Credit
Union in Carson City, Nev. ($1.3
billion in assets, 77,511 members).
In the first rounds, GreaterCommercial Lending granted$583 million out of a $600 billionpool. Greater Commercial Lending’s share in the first rounds wasabout 0.1%. If that holds for thenew round, as Gilpin expects, itwould grant about $276 millionthis year.
This round allows previous recipients to apply again, but hasrestrictions designed to ensuresmall businesses get more of themoney, including lowering themaximum loan from $10 millionlast year to $2 million this year.
Loan proceeds can be used fora broader array of expenses andremain forgivable, and the lawcontains new provisions designedto allow more tax deductions. Theprogram allows credit unions todeepen their relationships withbusiness members. And it hasmore tangible benefits as well. Forone thing, the SBA pays lendersfees when the amounts are forgiven. Fees are 5% of the amountgranted for loans up to $350,000,3% for loans between $350,000and $2 million, and 1% for loansof $2 million or more.
In the previous rounds, if allcredit union loans had been under $350,000, they would have received $485 million in fee income.An amount that size would havegiven a significant boost to non-interest income, which rose 14.4%to $12.2 billion.
It also comes out to an annualized gain of 0.07% of average assets in the second quarter whenannualized returns on average assets was 0.61%, and another 0.07%
in the third quarter when ROAwas 0.80%.
“We saw a big spike in that and
assumed some of it was related to
the PPP lending. Some of it is also
due to mortgage fees and mortgage
sales to the secondary market,” van
Rijn said. “We thought credit union
income was going to fall due to the
but all of this fee [and other operat-
ing] income actually boosted cred-
it union earnings in the third quar-
ter. Part of that was due potentially
to these PPP loans.”
The PPP loans accounted for
about 4.6% of bank loan portfoli-
os, but less than 1% of credit union
loans as of Sept. 30. However, PPP
loans also had an outsized impact
on parts of credit union portfolios.
For example, the volume of all
non-real estate loans originated
between April 1 and Sept. 30 was
$179.5 billion, 3.7% greater than
the six month period in 2019.
However, if you removed the $9.7
billion in PPP loans, non-real es-
tate loan production fell 1.9%.
PPP loans had to be recordedsomewhere, and the NCUA choseto instruct credit unions to placethem on the balance sheet underthe “All Other Unsecured Loans/Lines of Credit” account – typicallymade up of consumer signatureloans. PPP loans are excluded fromcaps for Member Business Loans,so placing them under unsecuredpersonal loans keeps them out ofcommercial loan calculations.
“That category over the last 12months had grown faster thanany other category,” van Rijn said.“That’s probably a big part of it –the PPP lending. Once they’re forgiven, that could cause a drop inthis category.”
For example, if PPP loans wereexcluded from the Sept. 30 balance, unsecured personal loanswould have fallen 3.6% to $44 billion. And while the loans boost acredit union’s assets, van Rijn saidthe amount is excluded from itsnet worth calculations, preventingthe loans from eroding net worthratios. n
former credit union operations manager, who told federal in- vestigators that herembezzlement was “like stupidfunny,” agreed to plead guilty tostealing more than $328,000 fromthe $340 million CU Hawaii Federal Credit Union in Hilo.
In addition to pleading guiltyto one felony count of embezzlement in federal court, the pleaagreement requires Angela Domingo to pay restitution.
She admitted to taking small
amounts of $4,000 to $8,000
from the vault and teller drawers
for more than three years and
deposited the cash in the ac-
counts of her husband, daugh-
ter, a niece and a nephew. She
lost track of how many times
she did this, according to court
documents. Initially, when
questioned about whether she
stole the funds, Domingo said,
“I know it’s not funny. I’m sorry,
In November 2017, a senior
internal auditor for CU Hawaii
contacted the federal authorities
to report a large cash discrepan-
cy at the Hilo branch following a
surprise cash audit.
That audit was conducted immediately after an employeeallegedly witnessed Domingostuff cash from the vault into herpocket on Oct. 31, 2017, JamesTakamine, president/CEO of CUHawaii, said.
In an interview with federal investigators, she stated that afterworking at the branch for severalyears, she realized they were going to let her take control and sheknew she could get away with it.
Domingo was initially placedon administrative leave and waslater fired based on what the audituncovered.
Her sentencing hearing isscheduled for May. n
CUs and Members Benefit From New PPP Round
Former Manager PleadsGuilty to Embezzlement
embers of the$34.8 millionPost Office CreditUnion in Madison,Wis., voted in favor of mergingwith the $26.5 billion PentagonFederal Credit Union in McLean,Va., on Dec. 28.
PenFed President/CEO JimSchenck said POCU membersvoted by an overwhelming majority for the consolidation. Hedeclined to share how manymembers cast ballots and howmany members voted for andagainst the merger.
Chartered in 1930, POCU’s
seven employees served near-
ly 3,200 members. According
to POCU’s merger documents
filed with the NCUA, all eligible
POCU members will receive a
one-time $200 capital distribu-
tion as a bonus dividend. This
aggregate dividend for all eligi-
ble members will amount to ap-
proximately $640,000. At the end
of the third quarter, the credit
union managed capital of $7.7
PenFed also agreed to donate$50,000 per year for five years tosupport charitable organizationsand community events that arerecommended by POCU’s boardof directors, who will be servingin an unpaid advisory capacityfollowing the consolidation.
PenFed said it will retain the
POCU staff with three-year em-
ployment offers, except for Presi-
dent/CEO Kevin Yaeger and Vice
President Tammie Stuntebeck.
Select employees, not identified
in the POCU merger documents,
will receive a retention bonus of
up to 10% of their annual salary,
which will not exceed $10,000 for
Yaeger was offered a five-year
employment contract that will
include a $13,000 increase in his
annual salary from $112,000 to
$125,000. If termination of em-
ployment by either party occurs
within 18 months after the merg-
er’s completion date, Yaeger’s total
payout will be $437,500, according
to POCU’s merger documents.
Stuntebeck was offered a three-year employment contract thatcomes with a $9,200 annual salaryincrease from $79,500 to $88,700.If termination of employmentby either party occurs within 12months after the merger’s completion date, her payout will be$177,400. n
Post Office Credit Union Members
Vote to Merge With PenFed
‘According to POCU’smerger documents ... alleligible POCU memberswill receive a one-time
$200 capital distributionas a bonus dividend.
This aggregatedividend for all eligiblemembers will amount toapproximately $640,000.’