Texas Credit Union Commission Meeting Results

On Sept. 16, the Texas Credit Union Commission met at the Texas Credit Union Department building in Austin, Texas. Below is a summary of the meeting.  

Big News!

The Texas Credit Union Commission conducted the final round of interviews to replace the Credit Union Commissioner position formerly held by John Kolhoff. Effective Oct. 1, 2022, Michael Riepen will serve as the new Commissioner.

Riepen has a depth of knowledge and experience in the credit union system. Prior to his brief retirement, he served as TCUD’s director of examination support. Prior to that, he served as president and CEO of DPS Credit Union for 26 years. He holds an MBA in finance from the University of Missouri-Columbia.

Cornerstone League congratulates future Commissioner Riepen and looks forward to working with him in his new position. 

• No action taken.
• Overall, the financial performance of Texas credit unions has remained strong during the first half of 2022. Capital strength is sound, and earnings and asset quality performance ratios continue to be at their strongest levels over the last seven years.  
• Earnings performance data for Texas credit unions reflects that strong net income performance continues to strengthen net worth ratios. Further, deposit growth has slowed slightly during the first half of 2022 and, if this trend continues, will result in further enhancement of net worth positions for Texas charters.
• While the outlook for Texas credit unions remains positive, TCUD reminds credit unions that it will remain imperative for credit unions to adapt to the ever-changing economic trends (inflation) and political implications (local, national, and worldwide).
• As of June 30, 2022, there were 174 Texas state-chartered CUs, down one charter from the prior 12 months. Assets in these credit unions totaled $59.17 billion, an increase of $4.95 billion since June 30, 2021, for an annualized growth rate of 9.1%. The average net worth ratio is 10.49%, up 28 basis points from the 10.21% level on June 30, 2021.
• Loans are at an annualized growth rate of 15.2%. Shares increased 7.7% since June 30, 2021. Average loan delinquency ratio is at 0.45% as of June 30, 2022, compared to a ratio of 0.52% as of June 30, 2021.
• As of June 30, 2022, there were 23 credit unions assigned a CAMELS rating of 3 or higher, compared to 16 credit unions on June 30, 2021. Although the number of problem institutions has increased, the aggregate regulated assets of these institutions has declined by 53.5% during the same 12-month period.
  

Rulemaking Matters

Adoption of the Rule Review of 7 TAC, Part 6, Chapter 91, Subchapter E, §§91.501; 91.502, 91.503, 91.510 and 91.516 (Direction of Affairs), Subchapter F, §§91.601, 91.602, 91.608 and 91.610 (Accounts and Services), and Re-adoption of Rules 

• The Commission readopted the rules as previously published.
• The Government Code requires state agencies to review and consider for readoption each rule not later than the fourth anniversary of the date on which the rule took effect and every four years after that date. The agency must determine whether the reason for adopting the rule continues to exist.
• The Commission determined that the reasons for these rules continue to exist.

Adoption of Proposed Amendments to 7 TAC, Part 6, Chapter 91.515 (Financial Reporting)

• The Commission voted to adopt the amendments as previously published.
• The purpose of the amendments is to align state and federal regulatory requirements relating to small institutions implementation of Generally Accepted Accounting Principles (GAAP).
• NCUA’s rule part 702 enables institutions of $10 million in assets or less to determine their charges for loan losses outside GAAP, by not requiring implementation of current expected credit loss (CECL).
• The amendment will raise the current threshold for small Texas state-chartered credit unions to utilize an accounting methodology outside of GAAP from the current maximum asset size of $5 million to $10 million.
• This change was originally suggested to TCUD by the Cornerstone League advocacy staff, and we are please to see that it has been adopted.
  

Adoption of Proposed Amendments to 7 TAC, Part 6, Chapter 91.901 (Reserve Requirements)

• The Commission adopted the amendments as previously published.
• The revised rule will amend the state’s reserve requirements relative to institutions whose net worth falls below 7% to align with requirements recently amended by the NCUA and found in NCUA rule 702.106. The amendments will require such institutions to increase “net worth” instead of “net worth reserves” and simplify the calculation of the amount of required earning retention by providing only a quarterly measurement regardless of the period the credit union pays dividends. 

Adoption of Proposed New Rule 7 TAC, Part 6, Chapter 97.208 (Vendor Protests)

• The Commission voted to adopt the new rule as previously published.
• The purpose of the amendments is to set forth TCUD’s procedures for resolving vendor protests relating to purchases as required by the Texas Government Code. The new rule would replace any formal or informal policies or procedures governing the resolution of contract disputes.
  

Litigation Update Regarding Pending Litigation: Credit Union Department v. Ken Paxton, Attorney General of Texas; Cause No. D-1-GN-21-007168

• No action taken.
• Session closed to the public.
• The litigation is related to a Texas Public Information Act request where TCUD believes certain requested information to be confidential while the attorney general’s office disagrees.