Get NASCUS Report in your in-box; click here

Sept. 7, 2018

States keep pace in asset growth at midyear,
maintain 48% share of now $1.44 trillion total

State-chartered credit unions grew slightly faster in assets during the first half of the year than did their federal credit union counterparts, according to mid-year figures released by NCUA Thursday (and compiled by NASCUS for privately insured, state credit unions). The numbers show state-chartered CUs (including both federally insured and privately insured credit unions) expanded their assets by slightly more than 4%, for a total of $704 billion. Federal credit unions grew by 3.3%, for a total of $742 billion, the numbers show.

The six-month growth by state-chartered credit unions means they now hold 48.7% of all credit union assets. That share of assets has remained relatively static for the past three reporting periods (mid-year 2017, year-end 2017 and mid-year 2018), hovering right around 48%. Total credit union assets are now more than $1.44 trillion.

Membership also expanded at state chartereds in the first half of 2018, by 2.5% to 54.9 million. Federals matched the growth rate, expanding their memberships to 60.4 million. Together, the credit unions now hold more than 115 million members.

However, the number of credit unions continues to shrink, for both types of charters (continuing recent trends), with 1.6% of both state and federally chartered credit unions going away in the year’s first half. Of the 5,595 credit unions as of June 30, 61.6% were FCUs, and 38.4% SCUs.

In other numbers at mid-year 2018, NCUA reported (for state-chartered federally insured credit unions):

  • Return on average assets was 88 basis points, and net worth was 10.9% (compared to 92 bp and 11.13%, respectively, for FCUs), and median net interest margin was 3.18% (3.13% for FCUs).
  • Long-term assets as a share of total assets was 26.8% (29.1% for federals), while median cost of funds was 32 bp (27 bp for FCUs).
  • Delinquency rate was 0.65% (0.69% for federals), and net charge offs to average loans was 0.25% (versus 0.35% for FCUs).

NASCUS compiled data for privately insured credit unions from data posted by American Share Insurance.

LINK:
NCUA Releases Q2 2018 Credit Union System Performance Data


AGENCY CLOSES $1.1 BILLION CU; INSURANCE FUND LOSS POSSIBLE

A $1.1 billion New York City-area credit union -- hobbled by the collapse of the taxicab medallion market in which it had been heavily involved -- was closed by NCUA late last week; reports this week indicated the liquidation will cause a loss to the National Credit Union Share Insurance Fund (NCUSIF). NCUA said it liquidated Melrose Credit Union of Briarwood, N.Y., after “determining the credit union was insolvent and had no prospect for restoring viable operations.” The New York State Department of Financial Services placed Melrose into conservatorship on Feb. 10, 2017, and named the NCUA as conservator.

In its release late last week, NCUA said $6.1 billion Teachers Federal Credit Union, of Hauppauge, N.Y, (which has about 300,000 members) had assumed all of Melrose’s members and shares as well as some loans and other assets. The agency said it had retained some of the Melrose loans.

Melrose, according to NCUA, counted about 20,000 members and held $1.1 billion in assets (based on the credit union’s most recent call report). The credit union was originally chartered in 1922, NCUA said, and served “eligible members subject to the provisions of its bylaws, which could include any person upon approval for membership.”

This week, trade publication Credit Union Times reported that Teachers FCU did not acquire the taxi medallion loans that contributed to Melrose’s troubles. That development, the trade publication reported, could leave the NCUSIF to any losses from those troubled loans. According to an NCUA spokesman quoted by the publication, the agency has already reserved for any potential losses resulting from the liquidation.

LINK:
Melrose Credit Union Closes; Teachers Federal Credit Union Assumes Members, Shares, and Some Loans and Other Assets


BUREAU UNVEILS RULE IMPLEMENTING HMDA EXEMPTIONS

A final interpretive and procedural rule to “implement and clarify” the partial exemptions from requirements of the Home Mortgage Disclosure Act (HMDA) made through this year’s regulatory relief law was issued late last week by the BCFP (formerly known as the CFPB). According to the bureau, the rule was issued to effectuate requirements of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155) and provide answers to financial institutions about the impact of the exemptions, according to a summary included with the final rule notice.

“Financial institutions have raised questions about the new partial HMDA exemptions and how the exemptions affect collection and reporting of data for transactions with final action taken in 2018 or subsequent years,” the notice states. “To provide timely answers to these questions, the Bureau is issuing this interpretive and procedural rule that implements and clarifies section 104(a) of the Act and effectuates the purposes of the Act and HMDA.”

Section 104(a) of the EGGRPA (which was signed into law May 24) contains partial exemptions from HMDA requirements – which are implemented under the bureau’s Regulation C – for federally insured depository institutions (credit unions and banks) regarding closed-end mortgage loans if they originated fewer than 500 such loans in each of the two preceding calendar years; and regarding open-end lines of credit, also if the institutions originated fewer than 500 of them in the two preceding calendar years. However, the statute disallows the exemptions for certain institutions receiving poor ratings under the Community Reinvestment Act (CRA).

NCUA and the federal banking regulators -- and BCFP -- issued statements in July seeking to clarify the impact of the reform law’s partial HMDA exemptions. Briefly, the exemptions pertain to some, but not all, of HMDA’s requirements for the collection, recording and reporting requirements. They do not affect the formatting and submission of the 2018 Loan/Application Register (LAR), regulators noted.

The BCFP said its rule:

  • clarifies that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data;
  • clarifies that only loans and lines of credit that are otherwise HMDA-reportable count toward the thresholds for the partial exemptions;
  • clarifies which of the data points in Regulation C are covered by the partial exemptions;
  • assigns a non-universal loan identifier for partially exempt transactions for institutions that choose not to report a universal loan identifier; and
  • clarifies the exception to the partial exemptions for negative Community Reinvestment Act (CRA) examination history.

Last week’s notice also notes publication of an updated filing instructions guide for the 2018 LAR.

LINK:
Bureau of Consumer Financial Protection Issues Rule to Implement and Clarify New HMDA Amendments


MCWATTERS TO JOIN TESTIMONY ABOUT REG RELIEF IMPLEMENTATION

NCUA Board Chairman J. Mark McWatters will be one of four federal financial institution regulators testifying next week (Thursday) before the Senate Banking Committee about how their agencies are putting into effect regulatory relief legislation enacted earlier this year (the Economic Growth, Regulatory Relief, and Consumer Protection Act, EGRRCPA, S.2155). Also scheduled to testify at the one-day hearing are Federal Reserve Board Vice Chairman for Supervision Randal Quarles, FDIC Chairman Jelena McWilliams and Comptroller of the Currency Joseph Otting.

NCUA’s specific obligations under the new law (which was enacted May 24) are relatively modest compared to the other regulatory agencies. The credit union regulator, about one week after the legislation was signed into law by President Donald Trump, put into effect (with a notation vote by the two board members) one of the two major components in the legislation: allowing credit unions to exclude certain loans from the credit union member business loan cap. When NCUA took the action, it was one of the first federal financial regulators to implement a provision of the new law.

A second major component specifically affecting NCUA requires the agency to annually publish details of and hold a public hearing on its budget, giving credit unions (and others) an opportunity to comment. NCUA has not yet announced plans for implementing the law for this year’s budget cycle (which typically begins next month).

The hearing is set for 10 a.m. on Thursday.


NCUA TO REVISE CALL REPORT FOR ACCOUNTING STANDARDS CHANGES

NCUA is revising its call report and profile to bring it up to date with recent changes in accounting standards and other modifications in reporting requirements, according to agency filings with the Federal Register this week. Comments will be due in 60 days. According to the NCUA’s notice, the changes are attributed to “the issuance of accounting standards codifications (ASC) by the Financial Accounting Standards Board [FASB], revised data selections to the current products and services offered by credit unions, and the removal of other elements deemed no longer necessary to maintain proper credit union supervision; including several pages of Schedule D, Derivative Transactions Report.” The changes are being proposed to the agency’s Call Report and Credit Union Profile, forms 5300 and 4501A.

LINK:
Agency Information Collection Activities: Proposed Collection; Comment Request; NCUA Call Report and Profile


REMINDER: ‘EXCEPTIVE RELIEF’ SLATED TO END ON CDD RULES

Some “exceptive relief” for credit unions and other financial institutions from obligations of “beneficial ownership” rules of customer due diligence requirements (CDD) expires Saturday under a recent extension issued by federal law enforcement in August. That is, unless the effective date – already extended once – is again changed.

The current, Sept. 8 deadline for compliance with the beneficial ownership rule, issued by the Financial Crimes Enforcement Network (FinCEN), applies to accounts that automatically roll over or renew, such as certificates of deposit or loan accounts. The relief was first issued May 16 retroactively for accounts that were established before the beneficial ownership rule’s original applicability date of May 11, 2018. FinCEN issued a 90-day limited exception then in order to determine whether, and to what extent, a further exception would be appropriate for such products and services. That exception was set to expire Aug. 9.

However, on Aug. 8, the law enforcement agency extended the effective date an additional 30 days. It also made clear that the exception could be extended, modified or revoked at FinCEN’s discretion.

Last week, NCUA issued a “letter to credit unions” (LTCU 18-CU-02) noting that NCUA examiners will accept reasonable, good faith efforts to comply with “beneficial ownership” rules, noting that the agency recognizes that some credit unions may need additional time to implement changes and to fully comply with the new requirement

LINK:
NCUA Letter to Credit Unions (18-CU-02)

NCUA Supervisory Letter 18-01


BRIEFLY: NASCUS 101 a-comin’; CA CU reform bill becomes law; cybersecurity study released; new CIO for NCUA; new HR person too

Mark that calendar for Nov. 1 “NASCUS 101,” a no-charge webinar featuring an overview of the benefits of membership in the association. Participants will learn about the NASCUS commitment to the state credit union system, and NASCUS’ unique role … State credit unions in California are cheering the enactment (with the signature of Gov. Jerry Brown, D-Calif.) legislation updating the state charter in the Golden State. Assembly Bill 2862 includes five provisions, including those giving the state CUs parity with FCUs in the state … “Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation” is the eye-catching title of a study released Thursday by the congressional Government Accountability Office (GAO). According to the agency, the study identifies four major cybersecurity challenges and 10 critical actions that the federal government and other entities need to take to address them to the challenges … Robert Foster is the new chief information officer (CIO) for NCUA, beginning Oct. 14, the agency said this week; he has served as the agency’s deputy CIO since August 2017. In the role he’ll deal with information technology and cybersecurity issues … and NCUA selected Towanda Brooks to head its human resources operation; she was most recently the chief human capital officer at the Department of Housing and Urban Development.

LINKS:
Info/registration for NASCUS 101; Thursday, Nov. 1, 2-3 p.m. ET

GAO-18-622: Urgent Actions Are Needed to Address Cybersecurity Challenges Facing the Nation

Information Contact:
Patrick Keefe, pkeefe@nascus.org