AUSTIN, Texas–The National Credit Union Administration is making an effort to adapt to changing times and advances to technology to help all credit unions thrive – especially smaller ones.

That was the message from Tracy Bombarger, NCUA’s associate regional director-operations, who told attendees at the CUNA CFO Council conference here approximately 1,000 credit unions have disappeared over the past four years.

“If there is any ‘good’ news there, we had been losing about 350 credit unions per year, while now we are losing 200 per year – but, of course, now there are fewer credit unions to lose,” she said ruefully.

 Tracy Bombarger, NCUA’s associate regional director-operations
Tracy Bombarger, NCUA’s associate regional director-operations

Most of the CUs that have ceased operations are smaller credit unions that have been merged out, Bombarger said, adding in the past two years there have been more instances of similar-sized credit unions merging. “NCUA is working with those smaller credit unions to help them serve their niche. Many are having trouble attracting members, so their loans are not growing, and their returns are marginal or negative.”

The NCUA board members are political appointees, so every time there is party change in a presidential election, new members join the board and a new chairman takes the helm, Bombarger said. She characterized previous board meetings as being “like reality TV” due to political differences between the members. She said the present board is “harmonious” and the two members [Chairman J. Mark McWatters and board member Rick Metsger] “have been able to accomplish a lot.”

NCUA has a mandate to review one-third of its regulations every year. This year, Bombarger reported, the agency looked at all regulations in totality.

“We took everything we felt needed to be changed and put it on a matrix with three tiers. The plan is to amend all Tier 1 regulations in the first two years,” she explained.

Bringing call reports up to date

NCUA also is looking to “modernize” the call report. Bombarger said comments on this topic were due April 2. “We are looking to enhance the value of data collected, improve the user experience, protect the security of data collected and minimize the reporting burden. Once comments have been analyzed, we will revise the form and put that out for a new round of comments.”

“We want to evaluate what we are doing and how we are doing it,” Bombarger said. “Credit unions are growing and moving on and implementing a lot of technology. Just like our small credit unions, we need to survive.”

To that end, NCUA currently is performing a pilot program in the Austin Region for exam modernization. Where it can, the agency is starting to allow examiners to do exams from off-site.

“Many of our examiners travel 100-plus nights per year. It is a grueling job and some very talented folks get wrung out,” she explained. “In the next two to three years NCUA looking to change the examination tool itself, which was written in 2000. The goal is to create a one-stop portal that is more efficient for credit unions to use. This is enterprise solutions modernization.”

Long-term, defined as three years to seven years, NCUA is looking to develop a “virtual examination program” that takes exams completely off-site. “There are a lot of tools that need to be put in place before this can happen,” she said.

Back in 2016, NCUA passed a field of membership rule relating to the definition of the term “community.” On March 29 of this year, a U.S. District Court invalidated two parts of membership rule: adding combined statistical areas up to 2.5 million as local community, or a rural district up to 1 million. Bombarger said this ruling directly affected 40 CUs.

“Our district offices have reached out to all of those credit unions. We are still considering whether we will appeal the court’s decision, but we cannot make it entirely on our own. The Department of Justice has to defend NCUA, so we are coordinating with them. We will know in the next week if we will be appealing decision.”

Bombarger listed NCUA’s supervisory priorities for 2018: cybersecurity, the Bank Secrecy Act, internal controls, interest rate risk and liquidity risk, compliance, auto and commercial lending. She said cybersecurity has been on this list “for a few years now.” In 2018, NCUA will be unveiling tools for examiners to make a “robust review” of cybersecurity for CUs with $1 billion in assets or more.

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