Get NASCUS Report in your in-box; click here

Dec. 7, 2018

Agency board to consider final reg reform task force report

A final report from its “regulatory reform task force” leads the agenda for the NCUA Board at its last meeting for 2018 next Thursday. The agenda also includes consideration of a final rule making technical amendments to the agency’s regulations, and a “board briefing” about blockchain and distributed ledger technology.
The agency established its Regulatory Reform Task Force in 2017 to oversee the implementation of its regulatory reform agenda. In doing so, NCUA said it was being “consistent with the spirit” of President Donald Trump’s executive order issued in February 2017. That order required federal agencies to review all existing regulations; identify those that meet specific review criteria; and make recommendations regarding leaving regulations as they are, or recommending their repeal, replacement, or modification.

As an independent agency, NCUA is not required to comply with the order – but has chosen to do so to “comply with its spirit” and has reviewed all of the agency’s regulations toward that end. The task force made its initial report in August 2017, seeking comments by late November of that year.

In its comments submitted about a year ago, NASCUS recommended (among other things) that the agency co-locate and combine all of its rules related to share insurance in one section of the agency’s list of regulations. NASCUS pointed out that the agency opens the door to doing so (a long-time goal of the association) by proposing in its reform agenda to co-locate several other requirements of its rules into single combined provisions (such as for loan maturity and single borrower provisions).

NASCUS also urged the agency to begin rulemaking for alternative capital, rather than in the third year of the agency’s reform agenda (essentially, 2020). NCUA’s reform agenda proposes to enhance low-income credit union (LICU) secondary capital rules and to establish supplemental capital for risk-based capital (RBC) rulemaking in Tier II of the plan (year three of the overall four-year plan). NCUA has signaled it is moving forward on a timetable similar to that recommended by NASCUS.

The NCUA Board meeting gets underway Thursday at 10 a.m. at agency headquarters in Alexandria, Va.

Board Agenda for the December 13, 2018 Meeting


Credit unions increased their assets, loans and insured shares and deposits during the 12 months ending Sept. 30, but they did so at a slower pace than in the 12 months ending in June, according to third-quarter call report data released Thursday NCUA.

The NCUA third-quarter numbers show credit union assets grew 5.6% to $1.44 trillion during the 12-month period ending Sept. 30. Loans outstanding rose 9.5% to a total of $1 trillion, and insured shares and deposits rose 4.8% to a total of $1.13 trillion. But the pace of growth was slower than during the 12 months ending June 30, when assets had grown 5.8%; loans had grown 9.8%; and insured shares and deposits had grown 5.2%.

NASCUS estimates that state-chartered credit unions (both federally and privately insured) now hold about $708 billion in assets, or 48.6% of all credit union assets. (NCUA does not include state-chartered, privately insured credit unions in its report; NASCUS bases its estimation on growth of state-chartered, federally insured credit unions in the third quarter applied to mid-year results for the PICUs). NASCUS also estimates that the number of memberships in SCUs is now about 56 million (47.6% of all CU memberships), and that there are about 2,131 SCUs.

The number of state-chartered CUs, according to the NCUA numbers, stayed relatively steady in the third quarter, as did deposits/savings, compared to mid-year numbers. Lending totals at the state CUs advanced by about 2.3% over mid-year, and memberships rose by about 1.3%. Assets rose by about .5%.

The NCUA report also shows:

  • The delinquency rate at federally insured credit unions was 67 basis points (bp) in the third quarter of 2018, down from 79bp one year earlier.
  • The net charge-off ratio was 57 bp, little changed from 56bp 12 months ago.
  • The loan-to-share ratio stood at 84.9% in the third quarter of 2018, up from 81.4% in the third quarter of 2017.
  • The credit union system’s net worth ratio was 11.21% in the third quarter of 2018, compared with 10.89% one year earlier.
  • Net income totaled $13.6 billion at an annual rate in the third quarter of 2018, up $3.1 billion, or 30%, from the same period a year ago.
  • The net interest margin for federally insured credit unions was $44 billion in the third quarter of 2018, or 3.1% of average assets. That compares with $39.5 billion, or 3% of average assets, in the third quarter of 2017.
  • The return on average assets for federally insured credit unions was 96bp over the year ending in the third quarter of 2018, up from 79bp in the third quarter of 2017. The median return on average assets across all federally insured credit unions was 60bp, up 21bp from the third quarter of 2017.

Quarterly Credit Union Data Summary


Changes to a list of transactions that are exempted from appraisal requirements as proposed by NCUA raise concerns that appraisals may be required, as a result, even when “no new moneys are advanced,” NASCUS said in a comment letter this week.

In its comments about NCUA’s proposal to raise the threshold for appraisals of non-residential real estate transactions to $1 million (proposed by the agency board in September), NASCUS said that NCUA’s current rule, and the rules for banks of the federal banking agencies, provide greater flexibility in this regard. “NCUA should retain the existing rule for credit unions going forward,” NASCUS wrote.

Under the proposal, federally insured credit unions would still be required to obtain written estimates of market value of the real estate collateral (consistent, the agency board said, with safe and sound lending practices).

NASCUS Comments on Proposed Rule Part 722 Real Estate Appraisals


In the second legal opinion letter published this year addressing “other similar escrow account” share insurance coverage, NCUA has determined that a particular 529 savings account offered by State Employees Credit Union (SECU) in North Carolina appears to qualify for pass-through coverage by the federal Share Insurance Fund.

NCUA General Counsel Michael McKenna wrote that the subject 529 account, if offered in North Carolina by SECU, “qualifies to receive pass-through share insurance coverage as an ‘other similar escrow account.’” He wrote that this is based largely on SECU’s factual representations regarding the nature and structure of the particular account, the structure of the North Carolina State government and its political subdivisions and agents, and applicable North Carolina state law. The letter, dated Aug. 30, was posted by NCUA to its website just this week.

“If qualifying, the account would be eligible for National Credit Union Share Insurance Fund coverage on a pass-through basis (pass-through share insurance coverage) due to the credit union membership of the State Education Assistance Authority (Authority), a political subdivision of the State of North Carolina, and its agent, the College Foundation, Inc. (Foundation), a nonprofit, special purpose corporation organized under the laws of the State of North Carolina,” McKenna wrote. “While not all 529 accounts across the country would necessarily qualify for pass-through share insurance coverage, we believe the subject account does.”

Other Similar Escrow Account Share Insurance Coverage – North Carolina 529 Account (Aug. 30, 2018)


Kathleen (“Kathy”) Kraninger is the new, permanent director of the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB), confirmed to a five-year term for the position Thursday in a 50-49 vote along party lines by the Senate. She succeeds Acting Director John (“Mick”) Mulvaney, appointed just more than a year ago by President Donald Trump; Mulvaney succeeded the first director of the agency, Richard Cordray, who resigned last year.

Kraninger was formerly a staff member at the White House Office of Management and Budget (OMB, which Mulvaney also supervises). An attorney, Kraninger has worked at OMB (as program associate director for general government) since March of last year; before that, she was a staff member of the Senate Appropriations Subcommittee on Homeland Security and, before that, a staff member of the House Appropriations Subcommittee on Homeland Security. She has never supervised financial institutions.

The new BCFP director comes on board as the agency is working through a number of changes Mulvaney started, including tinkering with the agency’s name (from CFPB to BCFP, a move he announced in April). This week, The Hill (a Washington publication covering Capitol Hill and lobbying in the nation’s capital) reported that changing the agency’s name will cost BCFP up to $19 million (for covering updates to internal materials and its website, among other things). The news outlet also reported that the changes will cost the firms the agency regulates up to $300 million (to update their databases, regulatory filings and disclosure forms with the new “BCFP” name to be in compliance with the rules enforced by the agency). The cost estimates are based on an internal analysis generated by the agency, The Hill reported.

Another change: Last week, the agency announced it was hiring a new “cost-benefit analysis” assistant director to head up its new Office of Cost Benefit Analysis (OCBA). The position pays between $200,000 to $247,500, according to the posting by the agency. Applications for the position are due by today (Friday).


The Hill Exclusive: Consumer bureau name change could cost firms $300 million

Assistant Director, Office of Cost-Benefit Analysis


NASCUS congratulates Kathy Kraninger on her confirmation bureau director, association President and CEO Lucy Ito said Thursday. She said the association is looking forward to a constructive relationship with Director Kraninger and “welcomes the opportunity to facilitate collaboration between state credit union regulatory agencies and BCFP.” Ito noted that NASCUS shares many objectives with the Bureau, including gaining efficiencies, minimizing duplication of efforts, and alleviating credit unions from unnecessary burdens while protecting consumers’ financial interests. “Our shared objectives will serve as the basis for future cooperation to benefit the credit union industry,” she said.


In arguably his last act as BCFP director (by his own suggestion), outgoing acting director of the BCFP said Thursday he was not involved in the selection of his successor as permanent director, who was confirmed by the Senate the same day. However, Mulvaney said that – if he had been involved – “I could not have picked somebody better for this job.” Mulvaney, who had served as acting BCFP since late November 2017, was speaking on a conference call with members of the agency’s various advisory councils (including the Credit Union Advisory Council). Mulvaney implied that Treasury Secretary Steven Mnuchin, White House Council of Economic Advisors Chairman Larry Kudlow “and a small group of people in the administration” took the lead in selecting Kraninger for the job. As for his involvement, Mulvaney said “people think that I was, I was not.” He also indicated that Kraninger may have different priorities than he has had at the agency. “So while she has a different style than I do certainly, she’ll have maybe different priorities – I don’t know. The bottom line is I think the transition will be seamless,” he said.


Indirect lending, and its growth among credit unions – as well as the attention it is gaining among state regulators – was the focus of comments by NASCUS’ Lucy Ito this week, as reported by She told the online news publication that state regulators are not yet concerned about the lending practice, its record growth and its impact on credit unions -- but are watching length of terms. “Terms are going out much longer, as we know,” Ito said. “So the question is how, in a rising rate environment, does a credit union respond if it is locked into a six-year loan and a recession arrives in less than six years?” She said that any concern would be for the “less nimble” credit unions that are not able to respond to market changes. “I would not say examiners are worrying about credit union indirect lending, they are just on their toes about what might happen in a changing economy. Credit unions need to be prepared for what might happen in an economic downturn,” she told the news outlet.

CUTODAY.INFO: Indirect Growth Remains On The Accelerator

ON THE ROAD: Sharing the latest with directors, CEOs in TN

Tennessee credit union directors and CEOs gathered in Nashville this week to talk over key issues at both the state and federal level. At left, Anthony Rogers, safety & soundness chief administrator for the credit union division of the Tennessee Department of Financial Institutions (TDFI) discusses his agency’s role in supervising the state’s financial institutions. At right, Attorney Frank Drake discusses board governance with the group. NASCUS collaborated with the TDFI and the Tennessee Credit Union League in presenting the program, which also included sessions on current exam issues, ALM, national issues and the health and vision of the corporate system. Mark your calendar for the next year’s version of the program, set for Dec. 3, 2019, once again in Nashville.

NASCUS 2019 education agenda

TRANSITIONS: Kohloff starts in TX; retirement in WA; new leadership in MA

NASCUS Chairman John Kohloff is now the sixth Texas Commissioner of Credit Unions, starting his new role this week (and succeeding the retiring Harold Feeney, who is staying on to Dec. 31 to help with the transition). Kohloff was formerly the director, Office of Credit Unions for the Michigan Department of Insurance and Financial Services. The Texas Credit Union Department supervises more than 180 credit unions. Kohloff remains the chairman of NASCUS, in addition to his transition to the TCUD.

Meanwhile, Linda Jekel has officially retired (as of Nov. 30) from her post as Washington State Department of Financial Institutions Director of Credit Unions. A 29-year veteran of the WA DFI – 16 of those as DFI director – she also served NASCUS as both a board member and chair. She was winner of the association’s Pierre Jay Award in 2012; the award honors those providing outstanding service, leadership and commitment to NASCUS and the state system. Taking over her post is Amy Hunter, also a veteran of WA state service, in the Washington State Gambling Commission, most recently as deputy director.

Finally, Merrily Gerrish will be the acting banking commissioner for the Massachusetts Division of Banks, following the resignation last week of Terence McGinnis. On the job for just more than two years, McGinnis stepped down about a month after Gov. Charlie Baker (R) won re-election; no reason was given. Gerrish is the former general counsel at the DOB, which she joined in 2013. Before that she was associated general counsel for Bank of America Corp.; she’s also worked for Fleet Bank and BankBoston.

BRIEFLY: L&R Committee meets

NASCUS’ Legislative and Regulatory Committee met this week by teleconference to discuss the association’s 2019 regulatory priorities, including: NCUA rule changes, BCFP rules changes, BSA/AML reform and more. Also discussed: NCUA’s proposed fidelity bond coverage rule, and an assessment of the recent election on states and their regulatory agencies.

Information Contact:
Patrick Keefe,