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ALEXANDRIA, Va. (Sept. 9, 2016) – National Credit Union Administration leadership marked this weekend’s fifteenth anniversary of the Sept. 11, 2001, terrorist attacks in comments today.

“It’s a time for reflection on our values and our national identity,” NCUA Board Chairman Rick Metsger said, “a day to commemorate those who sacrificed so much and be thankful for what we have and what we share. As we remember those we lost, we will redouble our efforts to strengthen the ties that bind us together. The idea of America, a democracy that embraces many races, cultures, and beliefs, has, if anything, taken on greater importance, and the credit union movement has always embodied that diversity that makes our nation stronger.”

“It is important that we, as individuals and as a federal agency, remember Sept. 11, 2001, and the horrific losses and noble sacrifices of that day, including the impact on so many members of the credit union community,” NCUA Board Member J. Mark McWatters said.

Aircraft operated by American and United airlines, both of which have credit unions serving their members, were hijacked and used in the attacks.

Credit unions in lower Manhattan, including four credit unions that had offices in or near the World Trade Center, suffered damage or disruption of operations from the attacks, but all of them either continued to operate from other locations or were back in operation within 48 hours. Credit union staff members and officials were able to evacuate safely.
Pentagon Federal Credit Union, the only credit union with an office in that building when the attack occurred, was not damaged, nor were staff injured; however, access to the credit union’s branch office in the Pentagon was not available for several days.

ALEXANDRIA, Va. (Sept. 9, 2016) – The Federal Financial Institutions Examination Council (FFIEC) members today issued a revised Information Security booklet, which is part of the FFIEC Information Technology Examination Handbook (IT Handbook).

The revised booklet addresses the factors necessary to assess the level of security risks to a financial institution’s information systems. The booklet also helps examiners evaluate the adequacy of the information security program’s integration into overall risk management.

The Information Security booklet describes effective information security program management, including the following phases of the life cycle of information security risk management:

• Risk identification
• Risk measurement
• Risk mitigation
• Risk monitoring and reporting

The booklet provides an overview of information security operations, including the need for effective (1) threat identification, assessment, and monitoring and (2) incident identification, assessment and response. It discusses methods to achieve and assess information security program effectiveness, including assurance and testing. It also incorporates cybersecurity concepts, such as threats, controls, and resource requirements for preparedness. The booklet contains updated examination procedures to help examiners measure the adequacy of an institution’s culture, governance, information security program, security operations, and assurance processes.

The IT Handbook is available at
http://ithandbook.ffiec.gov/ (opens new window).

Read the Latest Issue of “The NCUA Report” Online

ALEXANDRIA, Va. (Sept. 13, 2016) – Disasters may be infrequent, but they are a fact of life. When a disaster strikes, the National Credit Union Administration works with the credit union system to determine which credit unions are affected and what assistance they may need.

In the latest issue of The NCUA Report, NCUA’s Office of Continuity and Security Management outlines how the agency’s new Incident Management System will improve the agency’s ability to assist credit unions as they respond to disasters like hurricanes, floods and wildfires.

The September 2016 issue of The NCUA Report newsletter is available online here.

The agency’s newsletter features columns from NCUA Board Chairman Rick Metsger and Board Member J. Mark McWatters, as well as articles from several NCUA offices on the agency’s initiatives and information on supervisory, regulatory and compliance issues that are important to all federally insured credit unions.

Articles in this month’s issue include:

• Chairman’s Corner: Fall Is Here: Start Preparing for Winter and the New Year
• The Basics of Vulnerability Management
• Board Member McWatters’ Perspective: Opinions Are Not Facts, Including When It Comes to the Stabilization Fund
• Help Deter, Detect and Report Insider Fraud
• Back to School Is an Excellent Time to Talk to Your Members about Personal Finance
• New Guidebook Can Help Credit Unions Expand Their Digital Services

Published monthly, The NCUA Report is NCUA’s flagship publication. The newsletter highlights important Board activity and key issues that credit union managers, staff and volunteers need to know. If interested, you can subscribe to the online version of the newsletter here (opens new window). Previous issues of The NCUA Report are available online here (opens new window).

Median Delinquency Rate Down Slightly; Return on Average Assets Up

ALEXANDRIA, Va. (Sept. 14, 2016) – Federally insured credit unions experienced continued improvement in nearly every category in the second quarter of 2016, according to state-level data compiled by the National Credit Union Administration and released today.

Nationally, median loan growth in federally insured credit unions was 4.3 percent during the year ending in the second quarter. In the same period, median asset growth was 3.2 percent, the median rate of growth in deposits and shares was 3.3 percent, and the median loans-to-shares ratio rose to 62 percent.

The NCUA Quarterly U.S. Map Review, available online here, tracks performance indicators for federally insured credit unions in all 50 states and the District of Columbia. The review also includes information on two key state-level economic indicators: unemployment rates and home price changes.

Median Loan Growth Positive in Every State; Nevada, Washington Highest

Nationally, median growth in loans outstanding was 4.3 percent over the year ending in the second quarter of 2016, up from 4.0 percent the previous year. The highest median growth rates for loans were in Nevada (10.0 percent) and Washington (9.2 percent). Median loan growth was slowest in Pennsylvania (0.8 percent) and the District of Columbia (1.3 percent).

Median Asset Growth Rate 3.2 Percent; South Carolina, Nevada Lead

Median asset growth was 3.2 percent nationally in the year ending in the second quarter of 2016, up from 1.9 percent a year earlier. Median asset growth was fastest in South Carolina and Nevada (both 6.4 percent). Median asset growth was slowest in Louisiana (0.8 percent) and Connecticut (0.9 percent).

Idaho, Washington Report Highest Median Growth Rates in Shares and Deposits

At the median, shares and deposits rose in every state over the year ending in the second quarter. The median growth rate in shares and deposits was 3.3 percent, up from 1.8 percent a year earlier.

The median growth rate in shares and deposits was highest in Idaho (7.3 percent) and Washington (6.5 percent). The median growth rate in shares and deposits was lowest in Louisiana (0.7 percent) and the District of Columbia (0.9 percent).

More Credit Unions Reporting Positive Net Income

Nationally, 79 percent of federally insured credit unions had positive net income during the first half of 2016, up from 77 percent in the first half of 2015.

At least half of credit unions in every state had positive net income in the first half of this year. The share of credit unions with positive net income was highest in Nevada (100 percent) and North Dakota (95 percent). The share was lowest in Delaware (55 percent), followed by Arkansas, New Jersey, and the District of Columbia (all 66 percent).

Vermont, Nevada Lead on Annualized Returns on Average Assets

Nationally, the median annualized return on average assets at federally insured credit unions was 35 basis points in the first half of 2016, up from 33 basis points in the first half of 2016.

Vermont (72 basis points) had the highest median return on average assets in the first half of the year, followed by Nevada (71 basis points). Delaware (6 basis points) reported the lowest median return, followed by New Jersey and the District of Columbia (both 18 basis points).

Idaho and Alaska Again Report Highest Median Loans-to-Shares Ratios

Nationally, the median ratio of loans outstanding to total shares and deposits was 62 percent at the end of the second quarter of 2016, compared to 60 percent a year earlier. The median loans-to-shares ratio was highest among credit unions in Idaho and Alaska (both 86 percent). The median loans-to-shares ratio was lowest in Delaware (44 percent) and Hawaii (45 percent).

Median Total Delinquency Rate Down Slightly

The median total delinquency rate at federally insured credit unions was 0.7 percent nationally in the second quarter of 2016, down from 0.8 percent a year earlier. At the end of the second quarter, the median delinquency rate was lowest in New Hampshire (0.3 percent) and highest in New Jersey (1.7 percent), followed by Delaware and the District of Columbia (both 1.3 percent).

Membership Growth Continues in Larger Credit Unions

Overall, credit union membership continued its growth during the year ending in the second quarter of 2016; however, at the median, it was unchanged.

Zero median membership growth means that, overall, 50 percent of federally insured credit unions had fewer members at the end of the second quarter of 2016 compared with a year earlier, while 50 percent had more members. The median membership growth rate was negative 0.3 percent in the previous year.

Falling membership continued to be concentrated in smaller credit unions. Approximately 75 percent of credit unions with declining membership had assets of less than $50 million.

Alaska (3.1 percent) had the highest median membership growth rate over the year ending in the second quarter of 2016, followed by Idaho (2.4 percent). Median membership growth was negative in 18 states. At the median, Pennsylvania membership declined the most (-1.6 percent).

Board Action Bulletin

Stabilization Fund’s Net Income in Second Quarter Tops $425 Million

ALEXANDRIA, Va. (Sept. 15, 2016) – The National Credit Union Administration Board held its eighth open meeting of 2016 at the agency’s headquarters here today and received a briefing from the Office of Examination and Insurance on the rapidly changing nature of cybersecurity.

The Chief Financial Officer also briefed the Board on the performance of the Temporary Corporate Credit Union Stabilization Fund, which performed well in the first half of 2016.

New Technologies Mean New Risks and New Cybersecurity Demands

The financial services sector is experiencing an “Uber moment,” experts with NCUA’s Office of Examination and Insurance told the Board, and technological innovation, the expansion of social networking and growing interconnectivity are fueling fundamental change in cybersecurity procedures and processes.

That change carries with it more sophisticated risks and more numerous vulnerabilities for community-based financial institutions like credit unions. Potential effects on credit unions include higher mitigation costs and lower consumer confidence, as well as greater financial and legal risks.

“Cyber criminals and cyber terrorists are increasingly using innovative online services, new ways to transmit financial information and off-the-shelf toolkits to invade computer networks, snatch personal information and steal money,” NCUA Board Chairman Rick Metsger said. “Credit unions, therefore, must evolve to stay a step ahead of the hackers and thieves knocking on their doors. To help credit unions, NCUA has made cybersecurity a supervisory priority since 2013, and we have conducted extensive training for our examiners along with considerable outreach to credit unions in this area. We will continue to provide these services in the future.”

Investors poured more than $19 billion into financial technology companies in 2015, spurring payment, lending, banking and wealth management innovations that may replace current service models. That kind of disruption will, in turn, force rapid adjustments by financial institutions and regulators to their security strategies, including their ability to detect, prevent or recover from cyberattacks.

With cybersecurity now an integral part of the credit union business model, NCUA will continue to refine its approach to supervision in this area to strengthen the system’s resilience to attacks. The agency maintains a cybersecurity resources webpage that offers extensive, detailed information on cybersecurity matters. Credit unions are encouraged to use this resource.

NCUA and its partners in the Federal Financial Institutions Examination Council, an interagency body that promotes uniformity in the supervision of financial institutions, have worked to help financial institutions develop better cybersecurity processes and policies. The council offers services at no charge that include outreach and industry education.

Last year, the council introduced its cybersecurity assessment tool (opens new window) to help credit unions and other institutions determine how prepared they are to address cybersecurity risks. NCUA is developing a new cybersecurity component to its examination process that embodies the comprehensive risk-management approach of the cybersecurity assessment tool.

Stabilization Fund Continues Positive Net Position

For the quarter ending June 30, 2016, the Temporary Corporate Credit Union Stabilization Fund’s net position increased from $618.6 million to just over $1 billion.

NCUA’s Chief Financial Officer briefed the Board on the performance of the Stabilization Fund, based on the best available preliminary and unaudited information.

“NCUA, from the outset, has been committed to reaching a resolution of the corporate crisis at the lowest cost to credit unions,” Metsger said. “We’re doing this by managing the Stabilization Fund with the utmost prudence. The continuing improvements in the Stabilization Fund’s performance is evidence we’re doing our job well and staying on the right course.”

The change in the Stabilization Fund’s net position resulted primarily from legal recoveries and improvements in projected cash flows relating to the legacy assets that secure the NCUA Guaranteed Notes Program.

A $419.3 million reduction to insurance loss expense and $8.2 million from guarantee fees contributed to the Stabilization Fund’s $425.7 net income for the second quarter.

A $700 million payment from available cash to the U.S. Treasury in May decreased outstanding Treasury borrowings to $1 billion during the second quarter from $1.7 billion in the first quarter.

While the Stabilization Fund continues to have a positive net position for 2016, no funds are available to provide federally insured credit unions with an immediate rebate. NCUA must first repay the $1 billion in outstanding Treasury borrowings. Future changes in the economy or the performance of the legacy assets securing the NCUA Guaranteed Notes are likely to change the value of the assets the agency and the Stabilization Fund can eventually access at the end of the NCUA Guaranteed Notes Program.

Created by Congress in 2009, the Stabilization Fund has reduced the impact on credit unions of the costs of resolving the corporate credit union crisis. It is scheduled to expire in 2021. Based on current projections, NCUA expects no future Stabilization Fund assessments to credit unions.

NCUA tweets all open Board meetings live. Follow @TheNCUA (opens new window) on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. NCUA also live streams, archives and posts videos of open Board meetings online.

CUSO Registry Information No Longer Necessary on Call Reports

ALEXANDRIA, Va. (Sept. 19, 2016) – Beginning with the Sept. 30 reporting cycle, the National Credit Union Administration will require less information from credit unions about credit union service organizations on Call Reports.

“NCUA is working to make reporting easier and Call Reports more informative,” NCUA Board Chairman Rick Metsger said, “and this is another part of that important process. It’s also part of my Continual Quality Improvement effort to find ways to streamline agency operations by looking at the nuts and bolts of agency operations and finding new ways, both large and small, to improve the NCUA’s processes and programs.”

Going forward, credit unions will only be required to submit aggregate CUSO loan and investment information on the Call Report. All other required information is now being collected directly from CUSOs through the agency’s CUSO Registry.

Direct reporting eliminates redundancy, increases data integrity, and reduces credit unions’ reporting burdens. It also improves data quality, as CUSOs are in the best position to provide accurate and timely information.

NCUA has required CUSOs to agree to provide information directly to the agency effective June 30, 2014, and registration for the CUSO Registry was held between Feb. 1 and March 31 this year.

In May, NCUA announced a comprehensive review of Call Report and Credit Union Profile content. An agency working group has been gathering information through a public comment-and-review process. NCUA has extended the reporting deadline for third-quarter Call Reports to Oct. 24.

The announced changes to the Call Report came on the fifth anniversary of NCUA’s Regulatory Modernization Initiative. The initiative aims to strengthen the agency’s regulations to address safety-and-soundness risks and streamline the agencies rules, where possible, to reduce burdens. Since its inception, the initiative has resulted in 24 actions to cut red tape (opens new window) and provide lasting benefits to credit unions of all sizes.

ALEXANDRIA, Va. (Sept. 21, 2016) – Donations from National Credit Union Administration staff to the annual Feds Feed Families food drive will provide 57,308 meals in the coming year.

Agency employees donated a total of 68,770 pounds of food during the 2016 drive, which ran from June 1 through Aug. 31. The total includes 13,894 pounds of fresh food from local farms saved by several NCUA employees and family members in a warehouse gleaning operation.

“NCUA staff has once again demonstrated generosity and community spirit in giving back to help people in need,” NCUA Board Chairman Rick Metsger said. “As a result of their selfless efforts, thousands of people in the around the country will be able to sit down to meals they might have missed otherwise.”

The annual food drive is part of the agency’s long-standing efforts to be a model corporate citizen. In the last four years, NCUA has collected 337,540 pounds of food through Feds Feed Families. Donations this year included fresh food, canned fruits and vegetables, soups and stews, juices, baking goods, whole-grain foods, and baby food. NCUA’s 2016 donation is the equivalent of 85,296 bunches of carrots, 169,280 medium russet potatoes, or 550,160 large eggs.

NCUA’s Region V office, in Tempe, Arizona, led the agency for the third time by contributing 23,770 pounds of food. The Region III office, in Atlanta, contributed 15,820 pounds. The largest contribution in the agency’s central office came from the Office of Public and Congressional Affairs, which collected 11,794 pounds of food.

Fifty-seven NCUA employees reached the Feds Feed Families Hall of Fame this year by making individual contributions of at least 250 pounds of food. Eighteen employees the platinum level (1,000 pounds or more), 23 reached the gold level (500 to 999 pounds) and 16 reached the silver level (250 to 499 pounds).

Donations from NCUA’s central office employees went to the Capital Area Food Bank (opens new window). Through direct delivery and partnership with 444 community organizations in the District of Columbia, Maryland and Virginia, the organization serves more than 540,000 people annually. Food pantries around the country benefitted from donations from NCUA’s regional offices.

Federal workers have donated more than 57 million pounds of food and other non-perishable items to support families in need across America during the annual Feds Feed Families food drives, which began in 2009.

Metsger: “Credit Unions Can Expect No Further Stabilization Fund Assessments” 

ALEXANDRIA, Va. (Sept. 21, 2016) – Updated information on the costs of the Corporate Resolution Program and the performance of the NCUA Guaranteed Notes Program is now available online, the National Credit Union Administration announced today.

The upper and lower ends of the projected assessment range for the Temporary Corporate Credit Union Stabilization Fund remain negative, from negative $2.4 billion to negative $4 billion, respectively. As long as both ends of the range remain negative, it is unlikely NCUA will charge credit unions future Stabilization Fund assessments.

“We have come a long way since the days when the credit union system faced up to $10.5 billion in possible Stabilization Fund assessments,” NCUA Board Chairman Rick Metsger said. “The carefully guided corporate resolution strategy, an improving economy and the agency’s determination to hold Wall Street firms accountable have together put federally insured credit unions in a position for a much less intimidating outcome. If these trends continue, credit unions can expect no further Stabilization Fund assessments.”

Credit unions have paid $4.8 billion in assessments since the creation of the Stabilization Fund in 2009. The Stabilization Fund is scheduled to close in 2021.

The assessment projections are based on the performance of the failed corporates’ legacy assets, legal recoveries and economic variables such as interest rates, unemployment and housing costs. Those variables and projections are subject to change. NCUA uses BlackRock, an independent securities valuation firm, to project the future performance of the legacy assets in the NCUA Guaranteed Notes Program.

NCUA is still obligated to repay $1 billion in outstanding borrowings from the U.S. Treasury, down from a peak of $5.1 billion in 2012. Principal and interest on the NCUA Guaranteed Notes, as well as other obligations of the Stabilization Fund, also must be fully repaid before NCUA can distribute any remaining funds to credit unions.

More information about Corporate Resolution Program costs incurred to date and projected future Stabilization Fund assessments is available online at the Questions and Answers (opens new window) page.

NCUA also has recovered approximately $3.2 billion from the Wall Street firms that sold the faulty mortgage-backed securities to the failed corporate credit unions. NCUA is using the net proceeds from these settlements to reduce the costs that federally insured credit unions need to pay for the corporate resolution.

NCUA will continue providing periodic updates on the estimates of the costs associated with the Corporate Resolution Program, the performance of the NCUA Guaranteed Notes Program, and the total anticipated assessments credit unions will pay during the life of the Stabilization Fund.

ALEXANDRIA, Va. (Sept. 27, 2016) – Consumer access to affordable financial services is essential to strong consumer financial protection, so National Credit Union Administration Board Chairman Rick Metsger is proposing rebranding the agency’s Office of Consumer Protection.

Pending Board approval, the office will be re-named the Office of Consumer Financial Protection and Access, reflecting its role in facilitating access to credit unions through the chartering and field-of-membership functions.

“The Federal Credit Union Act created a system of cooperative credit to promote thrift among its members and create a source of credit for provident and productive purposes,” Metsger said. “One of the best ways to protect consumers is to ensure access to desired products and services from reputable financial services providers. Consumer protection is not just regulating what a credit union can’t do. It’s also about making sure regulations do not inhibit credit unions’ ability to serve members, including those of modest means, with safe and sound products that are financially sustainable for the credit unions.”

As part of the Chairman’s Continual Quality Improvement initiative, the office’s mandate will include several initiatives to promote improved consumer access to credit union services, including:

• Developing a comprehensive online tracking system to determine the status of charter and field-of-membership applications to improve efficiency and accountability;
• Re-evaluating the payday alternative loan product to consider improvements to enhance credit unions’ ability to offer members responsible alternatives to predatory payday loans offered by unregulated and non-insured lenders;
• Increasing coordination with the Office of Small Credit Union Initiatives to better address field-of-membership challenges confronting small credit unions; and
• Providing continued assistance to credit unions seeking NCUA’s low-income credit union designation to better serve the underserved.

The Office of Consumer Protection, established in 2010 and currently headed by Director Gail Laster, is responsible for consumer financial protection policy and outreach, fair lending, consumer complaint processing, financial literacy activities, and promoting access to credit unions.

Royal Bank of Scotland to Pay $1.1 Billion to Settle Claims

ALEXANDRIA, Va. (Sept. 27, 2016) – The National Credit Union Administration will receive $1.1 billion to settle legal claims against Royal Bank of Scotland arising from the sale of faulty mortgage-backed securities to two corporate credit unions, the agency announced today.

A settlement agreement was reached, and once payment is made, NCUA’s recoveries from various financial institutions will reach $4.3 billion.

NCUA was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. Net proceeds from recoveries are used to pay claims against five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.

“NCUA is pleased with today’s settlement and fully intends to stay the course in fulfilling its statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms that we maintain contributed to the corporate crisis,” NCUA Board Chairman Rick Metsger said.

The settlement covers claims asserted in 2011 by the NCUA Board as liquidating agent for Western Corporate Federal Credit Union and U.S. Central Federal Credit Union in federal district courts in California and Kansas, respectively. In connection with the settlement, NCUA will dismiss its pending suits against RBS. RBS does not admit fault as part of the agreement. NCUA in 2015 accepted an offer of judgment from the bank for $129.6 million to resolve similar claims relating to securities sales to Members United and Southwest corporate credit unions.

NCUA still has litigation pending against other financial institutions, including Credit Suisse and UBS Securities, alleging they sold faulty mortgage-backed securities to corporate credit unions. NCUA also has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses.