States closing gap on half of all CU assets

State-chartered credit unions continue to inch toward holding fully half of all assets in credit unions, with just under 49% of the total $1.3 trillion in assets held by all U.S. credit unions at year-end 2016, according to numbers released this week by NCUA, and additional numbers compiled by NASCUS. The figures combine totals from federally insured credit unions (released by NCUA, and including both federally insured, state chartered credit unions and federal credit unions (FCUs)) and privately insured credit unions (compiled by NASCUS as reported by American Share Insurance, Inc., for year-end 2016). The combined figures show SCUs hold 48.8% of all CU assets; FCUs hold 51.2%.

“Over the last 10 years, state credit unions have closed a fairly sizable gap in the assets they hold compared to FCU assets,” said NASCUS President and CEO Lucy Ito. “At year-end 2006, SCUs held 46.2% of all assets, seven points below FCUS. Since then, continued solid leadership by management and enlightened supervision by regulators have brought state charters to about even. We anticipate that, soon, states will reach fully the 50% mark, and likely even exceed it.”

The numbers released this week also show SCUs now counting just under 48% of all memberships at credit unions nationwide (which totals more than 108 million memberships). States have improved their share of memberships over the past 10 years by more than nine points; at YE ’06, states counted 45.3% of all CU memberships (figures from CUNA Long Run Trends (1939 – Present)). Additionally, the year-end ’16 numbers show that state chartered credit unions hold nearly 50% (49.5%) of all outstanding loans at credit unions, and about the same percentage (49.4%) of total deposits (savings and shares).

In terms of growth, state-chartered credit unions expanded faster than FCUs in each category except membership. SCUs expanded their total of assets by 8.1% (to $639 billion); FCUs expanded by 6.7% (to $670 billion). Other growth figures include shares/total deposits (states: 7.9% growth, to $547 billion; FCUs: 7.2%, to $560 billion), loans (states, 11.1% to $435 billion; federals, 9.8% to $444 billion). FCUs expanded their memberships by 4.2% (to 56.6 million), versus 3.9% for SCUs (to 51.6 million).

The number of credit unions overall continued to decline, by 239, a drop of just under 4% (to 5,906). More FCUs went away (156) than did states (83), a rate of about two to one. The number of FCUs continue to make up the majority of credit unions, at 61%.

LINK:
NCUA press release: NCUA: Q4 2016 Credit Union System Financial Performance Data Now Available

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CONVERSIONS A CONTRIBUTING FACTOR TO STATE GROWTH

One contributing factor in the growth of state credit unions vis-à-vis federals is the disproportionate number of charter conversions from state to federal over the last three years, in which converting credit unions – with large asset bases — have favored a state charter over the federal by more than two to one. According to figures compiled by NASCUS, since 2013 (and through January of this year), 39 credit unions have converted, with 27 of them changing from federal to state (representing $17.9 billion in assets), and the 12 remaining moving the opposite way (representing assets of $1.6 billion). More than three-quarters of the federal-to-state conversions occurred in 2014-15, with the flow reduced to just four conversions last year (five credit unions moved from state to federal in 2016). In January, there were two changes to both state and federal. NASCUS’ Ito noted that 2016-2017 may reflect an adjustment in the conversion trend for credit unions, as they respond to a new field of membership rule adopted by NCUA.

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REGULATORS ‘ENCOURAGED’ TO CONSIDER OFFSETTING RULE COSTS

Independent federal agencies – including NCUA – are being encouraged to identify cost savings through regulatory reduction to offset costs of planned new, significant regulations, even though the independent regulators are not required to do so, according to a memo from the Office of Management and Budget (OMB). In the message issued this week by OMB’s Office of Information and Regulatory Affairs (OIRA) announcing the start of the 2017 “Spring Data Call for the Unified Agenda of Federal Regulatory and Deregulatory Actions,” federal agencies submitting data for the 2017 unified agenda are urged to keep in mind the various executive orders, memos and interim guidance issued by the Trump administration in January and February.

In particular, the memo points to the Jan. 30 executive order stating that any new, proposed federal regulation would have to be offset by repeal of “at least two” existing regulations (the “1-for-2” order). “We remind agencies of EO 13771’s directives that ‘for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process,’” the OIRA memo states. In February, interim guidance issued by OIRA clarified that “significant actions” by the independent agencies are not covered under the order. However, the March 6 memo repeats language that was contained in the interim guidance, which encouraged the independent agencies to “identify existing regulations that, if repealed or revised, would achieve cost savings that would fully offset the costs of new significant regulatory actions.”

The “1-for-2” order was referenced by NCUA Acting Board Chairman Mark McWatters in his first column for the NCUA quarterly newsletter, issued late last month. He wrote that the order is “of significance” to the agency, and stated that he remains committed to bringing “true regulatory relief” to the extent permitted by applicable law and to protecting the deposits of credit union members.

LINKS:
Memorandum: Spring 2017 Data Call for the Unified Agenda of Federal Regulatory and Deregulatory Actions
McWatters’ column: A New Chairman’s Corner

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BILL GIVES WHITE HOUSE REVIEW POWER OF INDEPENDENTS’ RULES

Legislation that would give the White House final say over regulations from independent federal regulators – including NCUA and the CFPB – is now under consideration in the Senate after being passed last week by the House, 241-184. H.R. 1009, the “OIRA Insight, Reform, and Accountability Act” (sponsored by Rep. Paul Mitchell, R-Mich.) would expand the review authority of the information and regulatory action office (OIRA) within the OMB (a branch of the White House) to regulations issued by independent regulators (which also includes the FDIC, OCC and Federal Reserve). Under current law, the OMB does not have that express review authority; however, rules by other, non-independent federal agencies have long been subject to the assessment. Under the legislation, rules deemed “significant regulatory actions” that lead to proposed or final rules would trigger the review. “Significant” actions are defined by the bill as (among other things): having an annual effect on the economy of $100 million or more; adversely affecting “in a material way” the economy, (including productivity, competition, jobs, the environment, public health or safety, or communities); or creating a “serious inconsistency” or otherwise interfering with an action taken or planned by another agency. The bill has been referred to the Senate Homeland Security and Governmental Affairs Committee.

LINK:
H.R. 1009, OIRA INSIGHT, REFORM, AND ACCOUNTABILITY ACT

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MEASURE MANDATES CFPB EXEMPTION FOR MOST CUS

Meanwhile, on the House side, legislation has been introduced that would exempt nearly all credit unions and “community financial institutions” (at least those with assets less than $50 billion) from CFPB rules. The “Community Financial Institution Exemption Act” (H.R. 1264, introduced by Rep. Roger Williams, R-Texas) would only allow CFPB to revoke the exemption if it can provide written details that the institutions have engaged in “a pattern or practice of activities that have been detrimental to the interests of consumers and are of a type that the specific rule or regulation is intended to address.” Additionally, the bureau would have to talk over the revocation with federal banking agencies (including NCUA) and obtain from each written approval of the agencies’ agreement. The bill has been referred to the House Financial Services Committee.

LINK:
H.R. 1264: Community Financial Institution Exemption Act

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NCUA BOARD REFORM, OTR, ALT. CAPITAL HIGHLIGHT WEB INTERVIEW

Reform of the NCUA Board — to increase the number of members from three to five (and designate one seat for someone with state credit union regulator experience) – and the next step in increasing transparency for the overhead transfer rate (OTR) are among the issues addressed by NASCUS President and CEO Lucy Ito during an interview streamed by the web video program CUbroadcast.com. In her discussion with host Mike Lawson (recorded last week during the CUNA GAC in Washington), Ito noted the NCUA Board reform, and the OTR transparency, as two key issues on the radar for her association. She also discussed the NCUA advance notice of proposed rulemaking on alternative capital as a top issue for the association. Additionally, the NASCUS leader said she had been meeting with various interest groups, as well as federal lawmakers and regulators, during the GAC to give them an update on NASCUS priorities and goals.

LINK:
Video of Lucy Ito on CUBroadcast.com during GAC

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CYBERSECURITY SPEAKER SLATE GROWS TO 16 EXPERTS

Our Cybersecurity Symposium June 5-6 in San Diego– sponsored with CUNA – continues to expand its slate of speakers, now with 16 experts from in fields as varied as cyber crime to managing public relations related to a cyber crisis. In addition to cyber expert Jim Stickley, our MC Randy Romes of CliftonLarsonAllen and NCUA Board Member Rick Metsger, participants will also hear from credit union experts Gene Fredriksen of PSCU, Patrick Sickels of CU*Answers, Chad Carrington of The Golden 1 CU, and Pete Sedgwick (formerly of Baxter CU). Other experts include Matthew Froning of Security Compliance Associates, Marshall Heilman of Mandiant, and Jonathan Cohen of law firm Joseph & Cohen. Find out more at the symposium’s official website – including our updated agenda, registration and hotel reservation access, and help for making the most of your visit to San Diego.

LINK:
NASCUS/CUNA Cybersecurity Symposium 2017 – agenda, registration and more

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BRIEFLY: The history of the OTR – updated; no NCUA Board meeting; prepaid rule delay proposed

We’ve updated our “history of the OTR” (see link below) through 2017, which gives a quick rundown of how much state and federal CUs have been contributing to NCUA expenses over the five-year period beginning in 2013 … The NCUA Board March meeting (scheduled for next Thursday) is canceled; no reason was given in a notice circulated yesterday by the agency. Other than the usual August meeting break, this will be the first open monthly meeting that the board has skipped in at least the past seven years. The next scheduled meeting is April 20 … the CFPB is proposing a delay of the effective date for its rule on prepaid accounts for six months to facilitate compliance by “industry participants.” Comments will be taken on the proposal for three weeks (21 days) after the notice is published in the Federal Register.

LINK:
History of the OTR updated

CFPB proposes effective date extension for prepaid accounts rule

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