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Report on the July Texas Credit Union Commission Meeting
Monday, July 17, 2017 6:55 AM

The Texas Credit Union Commission held its regularly scheduled meeting on Friday. The Commission accepted the recommendation of the Commissioner Evaluation Committee to use the same performance goals and objectives for Commissioner Feeney’s 2018 performance as the ones being used for his 2017 review, which will occur in November, 2017.

A review of the FY 2017 budget shows that as of May 31, 2017, the year-to-date actual expenditures of $2,705,334 are $55,530 under the budgeted amount of $2,902,148. Actual revenues of $3,704,113 are more than $8,000 over the budgeted amount of $3,695,709.

Texas credit unions continue to perform well and realized positive loan growth, strong asset quality trends, satisfactory earnings performance, and stable net worth positions. However, recent trends reflect a reduction in credit union bottom lines attributed primarily to increased operating costs and provision for loan and lease loss expenses. The costs associated with advancing technology and achieving and maintaining regulatory compliance continues to create challenges for credit unions.

As of March 31, 2017, there were 186 state-chartered credit unions in Texas.

Comparing their status March 31, 2016, to March 31, 2017:

  • Assets totaled $39.14 billion, an increase of $3.37 billion for an annualized growth rate of 9.4 percent.
  • The average net worth ratio is 10.03 percent, up from 9.99 percent.
  • Loans totaled $27.92 billion, an increase of $3.3 billion for an annualized growth rate of 13.4 percent.
  • Shares totaled $33.98 billion, an increase of $2.88 billion, a 9.3 percent increase.
  • Average loan delinquency ratio was 0.60 percent compared to the previous ratio of 0.63 percent.
  • Year-to-date net operating losses for 59 credit unions of $5.98 million while the remaining 127 reported aggregate net income of $46.97 million.
  • There were 22 credit unions assigned a CAMEL rating of 3 or higher, compared to 27 credit unions at May 31, 2016.

The Commission approved the 2018 operating plan and budget of $4,063,453 as proposed, a 3.3 percent increase over the 2017 budget. It contains $3,890,312 required to continue existing services and strategic initiatives of $173,161. The initiatives are $50,000 for a database conversion that will make older records compatible with the new database, $88,026 for a merit increase funding pool, and $35,135 for a secure data transfer portal for credit unions which provides for more secure transmission of sensitive data between credit unions and the Department.

The Commissioner reported that several bills were passed in the regular legislative session that will impact credit unions. The Legislature passed two constitutional amendments that will be on the Nov. 7 ballot. The passage of either or both of them will require rulemaking action by the Commission. One permits financial institutions to award prizes to promote savings and would require the Credit Union Commission to adopt appropriate rules and procedures. The other will update the home equity lending law and necessitate that the Credit Union Commission jointly adopt/amend/repeal certain interpretations with the Finance Commission. A special meeting or rescheduled regular meeting may be required to address these matters due to the timing of the election and the schedule of Commission meetings.

There is also a new bill that requires all state agencies to include a detailed statement describing the impact of the costs to the agency of any proposed rules.

The Commission approved the previously recommended changes to procedures for petitioning for adoption or amendment of rules, the new "Rulemaking" subchapter, and clarification on examination frequency.

  • 7 TAC Section 97.104 will be repealed and relocated to the new Subchapter F of 7 TAC, Chapter 97 named "Rulemaking," for better transparency and ease of reference. The subchapter lists the requirements for petitions to initiate rulemaking proceedings, the Department’s petition review process, and a rule that interested parties can request a hearing before the adoption of any substantive rule.
  • 7 TAC Section 95.105 be updated to clarify that examinations must be conducted at least once within a 12-month period rather than within a calendar year; this clarifies the language and is not a change to the Department’s practice.
  • Annual examination intervals may be extended to a maximum of 18 months, subject to safety and soundness considerations, without Commission approval.

The Commission readopted 7 TAC, Part 6, Chapter 91, Subchapters A (General Rules), B (Organization Procedures), J (Changes in Corporate Status), and L (Submission of Comments by Interested Parties). The Commission approved for publication for comment of amendments to:

  • 7 TAC Section 91.101: to provide clarification, better readability, and technical corrections concerning definitions and interpretations.
  • 7 TAC Section 91.115: to reduce regulatory burdens tied to ATM safety requirements by authorizing delivery of notice by electronic means in certain circumstances.
  • 7 TAC Section 91.121 (b): to update consumer complaint notifications to include the department’s facsimile number and email address and to ease compliance by permitting credit unions to make non-substantive changes to the notice.
  • 7 TAC Section 91.205: to clarify credit union responsibility with proposed name changes to reduce risk of infringement or cause confusion.
  • 7 TAC Section 91.209: to eliminate the specific due date for submission of call reports to avoid any conflict or confusion if the NCUA should establish a different due date for submitting Form 5300.
  • The Commission requested that the proposed amendment to 7 TAC Section 91.1003 (requiring credit unions to include a description in their merger plan of any arrangements providing a material increase in compensation or benefits of any sort to a board member or senior management employee in connection with the merger/consolidation) be changed to clarify that notice is required for "substantial" increase in compensation or benefits and the addition of a corresponding definition of "substantial" as over $1,000.
  • The proposed new 7 TAC Section 91.1010 will provide guidance to credit unions when they are considering a voluntary liquidation of a solvent institution.

Discussion of the process of voluntary liquidation raised the issue of the definition of a quorum needed to approve a voluntary liquidation. Commission Feeney will research possible new rules and report back to the Commission with a recommendation.

The Commission authorized the commissioner to reasonably manage and control access to the Credit Union Department building in a manner that minimizes risks to personal safety and maximizes physical asset and confidential information protection.

The Commission also gave its consent for the commissioner to negotiate and participate in future alternative joint supervision pilot projects with the NCUA.

Former Commission members Manuel "Manny" Cavazos and Gary Tuma were honored with resolutions of appreciation and gratitude for their service. Cavazos served as a public member from 2006–2017. Tuma served as an industry member from 2011–2017.

Commission Chair Missy Morrow named Sherri Merkett as vice chair of the Commission. Kay Stewart will be chair and Yusuf Farran will be vice chair of the Rules Committee. Steve Gilman and Rick Ybarra will be members of that committee.

Becky Stockstill Cobb was named chair and Sherry Merkett named vice chair of Commissioner Evaluation Committee. Jim Minge will serve on the committee.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or