Sept. 9, ’16 NASCUS Report

States maintain growth, assets share in first half of ‘16

Midyear growthFederally insured, state chartered credit unions expanded their assets by more than 4.4% in the first half of 2016, which kept their share of total assets among all federally insured credit unions at 48%, according to mid-year numbers released by NCUA Tuesday. NASCUS President and CEO Lucy Ito said the first half year’s performance by state credit unions was a clear indication of the viability of the overall state system. “Clearly state chartered credit unions are thriving in a regulatory environment that encourages innovation, but accompanied with commitment to safety and soundness. Congratulations to the state supervisors and boards and management of state credit unions for their achievement – and for more of the same in the future.

By contrast, federal credit unions expanded assets by 3.9% in the first half of the year. FCUs (which account for more than two-thirds of all federally insured CUs) hold 52% of federally insured credit union assets –which now total more than $1.25 trillion, according to the mid-year numbers released by the federal agency.

In other first-half 2016 results, state-chartered credit unions led growth in both loans and deposits, expanding loans by 5% (to $401.7 billion), and shares/deposits by 4.3% (to $515 billion). FCUs, in the same categories, saw growth of 4.2% for loans (total of $421.7 billion) and 4.2% in shares (total of $544 billion). In memberships, the state and federal credit unions grew at nearly the same rate (about 2% each), with FISCUs counting 49.4 million members (47% of all members), and FCUs counting 55.4 million (53%). In key ratios, state CUs had slightly higher results in return on average assets (0.79, compared to 0.76 for FCUs), loan to share ratio (78% to 77.5%), median net interest margin (3.03 to 2.94), and cost of funds over average assets (0.28 to 0.24). The states reported lower ratios in net long-term assets (31.4% to 33%) and net charge offs to average loans (0.2% to 0.3%). States and federals were at the same level for their delinquency rates (0.75%). However, states reported a slightly lower net worth ratio compared to federals (10.82% to 10.88%, respectively).


NCUA press release, 2nd quarter 2016 results

NCUA CU data summary, 2016 Q2


A public briefing about the 2017 NCUA budget is scheduled for Oct. 27, the agency announced this week – and NASCUS is looking at taking part in the program. The briefing – which will focus on the 2017 agency budget, a draft version of which, NCUA said in a statement, will be released the week of Oct. 9 – is being billed as a method for stakeholders to use in bringing constructive comments “to the table,” NCUA Board Chairman Rick Metsger stated. The NCUA leader first announced the briefing in June, saying that he expected it to be more comprehensive than prior briefings by the agency. He said then that includes release of more details on the proposed budget before the briefing, “so stakeholders can review and analyze the information before they participate.” But, as he said in June (and repeated in this week’s statement), final budget decisions remain with the Board.

NASCUS is considering its options for participating in the briefing — which could be an opportunity to discuss the future of the role of the overhead transfer rate in the agency’s funding process. The agency for 90 days this spring collected comments on the OTR. Nearly all submitted comments called for changes to how the funding system works, especially in the transparency of transfers made. Additionally, legislation has been introduced in Congress (H.R. 5869, sponsored by Reps. Mick Mulvaney, R-S.C., and Denny Heck, D-Wash.), which calls for a rationale for any amounts NCUA proposes to use from the National Credit Union Share Insurance Fund, among other things. The legislation mirrors a provision in proposed legislation by House Financial Services Committee Chairman Jeb Hensarling (R-Texas), reforming financial services regulation (see below).

NCUA press release: Oct. 27 budget briefing


Legislation that would essentially replace the Dodd-Frank legislation passed in the wake of last decade’s financial crisis –   and includes provisions Increasing the size of the NCUA Board from three to five members, and requiring the agency annually to accompany its budget with a report detailing the overhead transfer rate – is scheduled to be marked up by the House Financial Services Committee on Tuesday. Chairman Jeb Hensarling (R-Texas) has brought the massive (513 pages) “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs” (CHOICE Act) to the committee to offer amendments, vote on it, and (if passed) send to the House floor. With regard to the size of the NCUA Board, NASCUS’ Lucy Ito wrote this summer to Hensarling and committee Ranking Member Maxine Waters (D-Calif.) suggesting the provision be expanded to include designation of a seat for a state credit union regulator. Other provisions included in the CHOICE Act include allowing for an 18-month exam cycle for certain credit unions, and placing the federal financial institution regulatory agencies in the appropriations process “so that Congress can exercise proper oversight.” While it’s likely the committee will report out the bill to the full House for consideration (and the House may even pass it), the bill’s future from there is much less clear, particularly with the election coming up, and this Congress in its final few months.


Draft CHOICE legislation

Ito letter on five-member NCUA Board, state regulator designation


Meanwhile this week, NCUA’s recent member business loan rule became the target of a lawsuit by a banking trade group, which asked a federal court to invalidate and set aside the rule’s provision allowing federally insured credit unions to exclude purchased commercial loans or participations in such loans from the aggregate cap on MBLs. The lawsuit, filed by the Independent Community Bankers of America (ICBA), asked the court to declare that NCUA acted “arbitrarily and capriciously” and without statutory authority in concluding in the MBL rule (adopted by the agency last spring) that “to purchase a commercial loan or an interest in a commercial loan from another lender is not to ‘make’ a commercial loan within the meaning” of the law. Additionally, the bankers’ group (based in Washington, and representing primarily “community” banks), asked the court to invalidate and set aside the rule to the extent that its provisions “purport to treat any acquired commercial loans or interests in such loans as anything other than a ‘member business loan’ for purposes of the lending restriction.” An NCUA spokesman stated that the agency is reviewing the complaint, and “the agency will respond.” NCUA has 60 days to do so.

ICBA complaint

NCUA ‘Board Action Bulletin’ issued when MBL rule finalized

Supporting materials from NCUA Board meeting (at which rule was adopted)


Interstate branching for Texas state credit unions has become more accessible with the signing by the state of cooperative agreements with 17 other states, as announced this week by Harold E. Feeney, commissioner of the Texas Credit Union Department. The two cooperative agreements that Texas has signed on to are: the 2015 Nationwide Cooperative Agreement for the Supervision of State Chartered Credit Unions (which includes the states of Idaho, Illinois, Indiana, Kentucky, Michigan, Ohio, Oregon, Washington, West Virginia and Wisconsin) and; the Southeastern Regional Cooperative Interstate Agreements (which include Alabama, Florida, Georgia, Mississippi, Missouri, North Carolina and Tennessee; Illinois is also included in the agreement). Both agreements were developed by the engaged states with the National Association of State Credit Union Supervisors (NASCUS).

“By entering into this agreement, Texas is participating in the strength and growth of the state credit union system, as well as promoting interstate commerce and cooperation on a reciprocal basis among the participating states, as well as fostering parity with the federal credit union charter for Texas state-chartered credit unions,” said Lucy Ito. She also extended thanks to Texas Commissioner Feeney for signing the agreements and to the supervisors in the other states for “their vision in creating and supporting these cooperative efforts.”

NASCUS press release/Texas signs interstate branching agreements


State-chartered, privately insured credit unions, banks and other financial institutions lacking a “federal functional regulator” would be subject to new identification programs, anti-money laundering programs, and beneficial ownership requirements to match recently issued “Customer Due Diligence” (CDD) rules, under a proposed rule by the Financial Crimes Enforcement Network (FinCEN). The agency stated that it was making the proposal to “ensure consistent Bank Secrecy Act (BSA) coverage across the banking industry” for those institutions without the “federal functional regulator” to “establish and implement Anti-Money Laundering Programs.” Also proposed are extensions of the Customer Identification Programs (CIP) and beneficial ownership requirements consistent with recently implemented CDD amendments to those financial institutions not already subject to the requirements. “FinCEN anticipates that banks lacking a Federal functional regulator will be able to leverage existing policies, procedures, and internal controls required by other statutory and regulatory requirements to fulfill the proposed obligations,” the agency stated. Comments are due to FinCEN on or before Oct. 24; NASCUS has published (and posted) a summary of the proposal.

NASCUS summary: FinCEN proposed rule removing AML exemption


Change has come to New Mexico financial institution supervision with the retirement last week of the state’s principal financial institution regulator– and the appointment of an acting director. Cynthia Richards retired officially Aug. 31, having served just more than five years (since July, 2011) director of the financial institutions division of the New Mexico Regulation and Licensing Department. Taking her place (as acting director) is Deputy Director Christopher Moya.


Press release/Richards retires, Moya named acting director


CUBroadcast with LitoThe 2016 NASCUS State System Summit is the topic for an appearance on the web-based video show “CU Broadcast,” as Lucy Ito discussed the upcoming meeting, its topics and who will be speaking. In the discussion with host Mike Lawson, Ito explained that the Summit focuses on the issues and trends affecting the state credit union system, with particular emphasis on topics dominating discussion within the system, including the CECL accounting standard, the rise (and future) of FinTech, the upcoming election, cybersecurity and more. She also noted – to the delight of host Lawson — the line-up of key, guest speakers, including Illinois Gov. Bruce Rauner (R), U.S. Rep. Randy Hultgren (R-Illinois, and a member of the House Financial Services Committee) and NCUA Board Chairman Rick Metsger. Check out the complete interview at the link below (or click on the image).

LINKS: interview with Lucy Ito/2016 NASCUS State System Summit

Summit ’16 speaker roster


NCUA Board Member J. Mark McWatters will speak on the first day of the 2016 NASCUS State System Summit (Wednesday, Oct. 5) in Chicago, addressing the group of state credit union system supporters, regulators, credit union practitioners and others. The conference runs through Friday, Oct. 7, at the Westin Chicago River North Hotel … speaking of hotels: the cutoff date is Sept. 17 for guaranteeing a reservation at the Summit headquarters at the Westin (just eight days away). See the links below for both the Summit agenda and for hotel reservation information.


Agenda, 2016 NASCUS State System

Summit hotel information

BRIEFLY: Summary outlines Reg Alert on TILA changes; NCUA Board to discuss cybersecurity; on site with CUAC

A summary of NCUA’s recent “Regulatory Alert” about three final CFPB rules amending Regulation Z (Truth in Lending) has been published and posted by NASCUS (available to members only). The agency alert (16-RA-05) includes two enclosures: charts of changes relating to small creditors and rural or underserved areas under TILA, and; a summary of changes relating to small creditors and rural or underserved areas under TILA … The NCUA Board meets in Washington next Thursday at 10 a.m., with two items on the agenda: a “board briefing” on cyber security in the credit union system, and a Corporate Stabilization Fund quarterly report … A meeting last week of the CFPB’s Credit Union Advisory Council (CUAC) was attended by NASCUS’s Nichole Seabron (VP, legislative and regulatory counsel), where she heard discussion among the credit union representatives – and CFPB Director Richard Cordray – about debt collection issues, and youth financial capability. The council meets no less than twice a year, or at the call of the agency’s director or designee.


NASCUS summary, NCUA regulatory alert on CFPB rules amending Regulation Z (members only)

NCUA 16-RA-05

Summit 2016

Information Contact:
Patrick Keefe, NASCUS Communications, [email protected] or (703) 528-5974

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