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Texas Credit Union Commission Approves Changes; Meeting Report
Monday, March 12, 2018 7:00 AM

At the Texas Credit Union Commission meeting on Friday, March 9, the Commission approved proposed adoptions of new sections:

  • 7 TAC Section 91.1010 that provides guidance to credit unions considering voluntary liquidation of a solvent institution;
  • Adoption of proposed 7 TAC Section 91.4001 which imposes a new requirement that credit unions using electronic means or facilities to employ a tested incident response to minimize the impact of a data breach or other electronic incident on members, expands the examples of electronic means or facilities to include mobile applications, and eliminates the reference to the World Wide Web;
  • 7 TAC Section 91.4002, which requires a credit union to review the adequacy of its website’s security measures annually instead of once every two years and updates the rule for clarification and better readability;
  • 7 TAC Section 91.5001 that encourages credit unions to post notice of emergency closing of an office or operation on its website and social media pages. It is not a requirement, according to Commissioner Feeney, because some credit unions do not have a web presence and circumstances, such as natural disasters, could prevent a credit union from being able to post the notice;
  • 7 TAC Section 91.5005, which requires credit unions to post notice of a permanent closing of an office on its website and social media pages at least 30 days prior to the closing.

The proposed amendments, new section, and repeal in 7 TAC, Part 8, Chapter 153, concerning home equity lending were approved with non-substantive changes made to the new section. The changes for clarity were based on public comments received after publication for comment in the Texas Register. The Finance Commission approved the amendments new section with changes and repeal in 7 TAC, Chapter 153 on Feb. 16, 2018. Commissioner Feeney reported the home equity interpretations will go into effect March 29, 2018.

The meeting materials with full details can be found here.

Deputy Commissioner Robert Etheredge reported that the operating environment for Texas credit unions continues to be positive and the Texas economy remains sound. To date, the Hurricane Harvey disaster has not had a significant impact to the overall Texas state-chartered system. However, several of the state-chartered credit unions specifically impacted by the hurricane are beginning to see increases in loan delinquencies, and subsequent increases in loan losses are anticipated. The Department continues to closely monitor the financial impact of Harvey for those in the impacted areas.

Overall, Texas credit unions are performing well and continue to realize positive loan growth, strong asset quality trends, good earnings performance and sound net worth positions. Management’s efforts to capture the financial business of their members continues to exhibit positive trends, as the Texas credit union's experienced annualized loan growth of 13.52 percent, and annualized deposit growth of 11.27 percent through Sept. 30, 2017.

As of Sept. 30, 2017, there were 187 state­-chartered credit unions in Texas with:

  • Assets totaling $40.09 billion, an increase of $3.60 billion since Sept. 30, 2016, for an annualized growth rate of 9.87 percent.
  • The average net worth ratio rose to 10.20 percent, similar to the Sept. 30, 2016, level of 10.16 percent.
  • Loans totaling $29.21 billion, an increase of $3.40 billion since Sept. 30, 2016, for an annualized growth rate of 13.17 percent.
  • Shares totaling $34.51 billion as of Sept. 30, 2017, an increase of $2.98 billion, or 9.45 percent since Sept. 30, 2016.
  • The average loan delinquency ratio was 0.64 percent as of Sept. 30, 2017, compared to a ratio of 0.73 percent as of Sept. 30, 2016.

At Sept. 30, 2017, 39 state-chartered credit unions reported year-to-date net operating losses compared to 39 at Sept. 30, 2016. These credit unions reported aggregate year-to-date negative net earnings of $7.90 million, while the remaining 147 credit unions reported aggregate net income of $281.67 million.

As of Dec. 31, 2017, there were 25 credit unions assigned a CAMEL rating of 3 or higher, compared to 19 credit unions at Dec. 31, 2016.

The Commission voted to readopt rule 7 TAC, Part 6, Chapter 93 concerning administrative proceedings and approved for publication and comment on the proposed amendments, new section, and three repeals in 7 TAC, Part 6, Chapter 93. The proposed rule changes generally relate to four areas: (1) consistency with the Administrative Procedure Act Texas Government Code, Chapter 2001 (APA), (2) consistency with the State Office of Administrative Hearings (SOAH) procedural rules, (3) better readability and clarification, and (4) technical corrections.

Submission of the Department’s Annual Risk Assessment report for FY 2018, which Commissioner Feeney described as almost identical to the previous year’s report, was approved. The Department’s Strategic Plan for FYs 2019-2023 was approved and authorized for submission with changes needed to conform to the format required by the Governor’s Office and the Legislative Budget Board.

In the annual review of its policies manual, staff suggested modifications to add new subsections that provide authority to the Commission to recognize and show appreciation to any individual for exemplary achievement or service to the Department or credit unions, addresses political activity/lobbying by members of the Commission in their capacity as private citizens, and addresses the need for the Department to create and maintain an internal infrastructure that protects the confidentiality and integrity of information gathered and maintained by the agency. A new appendix to set a boundary around the amount and type of risk that the Commission is willing to take in order to meet its strategic goals and objectives was also approved.

In the discussion of the general budget assumptions and parameters used in developing the Department’s FY 2019 budget, Commissioner Feeney told the Commission of an unbudgeted issue. The NCUA currently leases 22 laptop computers for examiners to the Department for $1/year. NCUA notified the Department that they will renew the lease for another three years when it expires in April, 2018, but without some of the software currently provided. In addition, technical support will not continue. The lease will not be renewed after the upcoming lease expires in 2021. Commissioner Feeney will provide costs for the unbudgeted items to the Commission at the July meeting.

Commission member Jim Minge suggested that the 3 percent for merit increases may not be sufficient to retain talented staff and the Commission voted for a 4 percent merit increase rate.

Commission member Steve Gilman asked if the Department had a succession plan. The Commissioner Evaluation Committee is responsible for a succession plan for the Commissioner position. Administrative staff are replaced according to the ‘replacement plan’ used by all state agencies, in which positions are filled according to the position rating system provided by the state. A succession plan for specialized positions, such as examination staff, will be developed internally.

Commemorative resolutions were approved for Associated Credit Union of Texas, Mesquite Credit Union, and SPCO Credit Union, all of which are celebrating 50 years of service in 2018.

The next Commission meeting is scheduled for July 13, 2018, at 9 a.m.

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