Kolhoff sworn in during Texas Credit Union Department Meeting

John Kolhoff was sworn in as commissioner of the Credit Union Department at the Credit Union Commission meeting on Friday. All meeting materials can be found here.

Following its mandatory rule review, the Commission approved, without changes, the readoption of 7 TAC, Part 6, Chapter 91, Subchapter E concerning Direction of Affairs related to directors’ eligibility, insurance, financial reporting, and audits, and 7 TAC, Part 6, Chapter 91, Subchapter F concerning Accounts and Services.

Deputy Commissioner Robert Etheredge reported on the financial performance and the status of the state credit union system.

Overall, Texas credit unions are performing well and continue to realize positive loan growth, good asset quality trends, high earnings performance, and strengthening net worth positions. Trends throughout 2018 indicate continued improvement in credit unions' bottom lines, driven primarily by increased gross income levels from higher investment yields, as well as reduced provisions for loan and lease losses.

Texas state-chartered credit unions recognized an average return on average assets of 0.88 percent for 2018, surpassing any previous year-end level during the last five years. In addition, the average net worth ratio for a Texas chartered credit union rose rapidly in 2018, increasing by 54 basis points, from 10.30 percent to 10.84 percent.

The rapid increase in net worth ratios realized during 2018 exceeded the combined increase in net worth ratios (29 basis points) for credit unions over the four-year period ending 2017. Regardless of the strong financial performance recognized by credit unions during 2018, the costs associated with advancing technology and achieving and maintaining regulatory compliance will continue to create operational challenges. Thus, improving operational efficiency and diversifying revenue streams remain critical to the long-term viability of the industry.

At Dec. 31, 2018, Texas had 183 state­-chartered credit unions.

Comparing industry statistics as of Dec. 31, 2018 to those at Dec. 31, 2017:

• Assets totaled $41.91 billion, an increase of $1.38 billion for a growth rate of 3.4 percent.
• The average net worth ratio rose to 10.84 percent, up considerably from the previous level of 10.30 percent.
• Loans totaled $31.61 billion, an increase of $1.92 billion for a growth rate of 6.5 percent.
• Shares totaled $35.67 billion, an increase of $0.79 billion, or 2.3 percent.
• Average loan delinquency ratio was 0.75 percent, compared to the previous ratio of 0.89 percent .
• 18 state-chartered credit unions reported year-to-date net operating losses as of 12/31/2018, and 165 reported positive net income. In the aggregate, Texas state-chartered credit unions reported net earnings for 2018 of $364.37 million.
• 13 credit unions were assigned a CAMEL rating of 3 or higher, down from 25 credit unions. 

Commissioner Kolhoff added that, from a national perspective, Texas credit unions are well capitalized and their assets well managed. The Department will be attentive to any indications of a possible economic downturn.

The Commission approved the Department’s annual Risk Assessment Report and authorized its submission to the State Auditor’s Office. The Commission also approved the annual review of the Policies Manual, and no modifications were deemed necessary.

Commissioner Kolhoff reviewed the budget assumptions and parameters to be used to guide development of the Department’s FY 2020 budget. There was discussion of some travel and conference expenses that are expected to rise from previous years due to the increased participation by Commissioner Kolhoff in professional associations and events. Commission member Yusuf Farran requested that the Commission receive reports of the benefits gained in the meetings and conferences.

Kolhoff reported on several bills the Legislature is considering that could impact the CU system or the Department.

The Department will undergo sunset review in 2021, and Department staff will begin the process with a self-assessment in June 2019.

The Commission approved a congratulatory resolution honoring A New Direction Credit Union of Dallas on its 50^th anniversary in business.

The next meeting of the Credit Union Commission is tentatively scheduled for July 12, 2019.

Contact Jeff Huffman at 469-385-6488 or [email protected] for more information.