Texas Credit Union Commission Meeting Results

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On March 22, the Texas Credit Union Commission met at the Texas Credit Union Department building in Austin. Below is a summary of the meeting. 

Rules Committee Report

• The Rules Committee recommended that the Commission withdraw the proposed amendments to Rule 7 TAC Section 97.113 Concerning Fees and Charges. 
• The Commission voted to withdraw the proposal and study the issue further. 

TCUD Fiscal Year 2024 Budget and Financial Performance

• No action taken.
• In 2022 the Commission adopted a strategic plan for Fiscal Years 2023–2027. The $5.6 million FY 2024 Budget approved by the Commission in August 2023 includes the maintenance and operating budget and capital improvement budget in support of the Strategic Plan.
• The report highlights TCUD’s FY 2024 financial results for the period ending Jan. 31, 2024. At the end of the five months, total expenditures were $400,105 or approximately 17.9% less than budgeted projections. The primary expense category below budget estimates is Professional Services and Fees ($148,925), as the database conversion costs have not yet been billed. Other below-budget items include personnel expenses ($141,567) and travel expenses ($65,760).

General Budget Assumptions and Parameters to be Used in Guiding the Development of the Department’s FY 2025 Budget

• The Commission voted to adopt the proposed budget assumptions and parameters for FY 2025 as recommended by staff.
• One change was made to the posted parameter on Merit Increases, which raised the proposed staff merit increases from 4% to 5% due to inflation.
• Other parameters include Balanced Budget, Contingency Fund Reserve, Contractual Obligations, Compliance, Strategic Plan Initiatives, Salary and Benefits, Retiree Insurance Cost, Inflation Factor, Statewide Indirect Cost, Out of State Travel, Commission Travel, Internal Audit Services, Electronic Document Management System, Information Technology, Improvements, NASCUS Dues, Accreditation Fees, Overnight Travel Stipend, Examiners’ Laptops and Support, and Legal Research Tools.
• These parameters will establish the foundation for the development of TCUD’s 2025 budget.

Strategic Plan for FY 2025–2028

• The Commission approved the draft strategic plan and authorized its submission.
• Each even-numbered year, TCUD must issue a plan covering five fiscal years beginning with the next odd-numbered fiscal year.
• The strategic plan summarizes TCUD’s analysis of the internal and external environment impacting credit unions and the department and provides goals and objectives for the next five years.
• The four strategic goals for 2025–2029 are to:
• Ensure a safe and sound state credit union system in Texas;
• Provide a flexible regulatory framework that enables credit unions to provide a full competitive array of financial services;
• Safeguard the interest of credit union members; and
• Develop a professional and motivated staff that provides quality service to the citizens of Texas and supports achievement of the Department’s statutory mission. 

Status of the State Credit Union System

• No action taken.
• While the financial performance of Texas credit unions has remained satisfactory during 2023, there has been a weakening of some key financial trends. Specifically, Texas credit unions have experienced a notable uptick in loan delinquencies and losses, as well as a decline in earnings performance. The reduction in earnings has been driven primarily due to increased credit loss expenses, coupled with a rapid rise in operating expenses. However, a rise in funding costs which occurred during 2023, was offset by increased income driven by higher loan and investment yields. One favorable financial trend worth noting has been the ongoing strengthening of net worth ratios for Texas chartered credit unions, as capital growth has outpaced asset growth each of the last two years. 
• While the performance outlook for Texas industry still appears good, it will remain essential for credit unions to adapt to the ever-changing political events and economic trends to safeguard the financial interests of Texas credit unions and their four million members.
  

• INDUSTRY STATUS:
• On Dec. 31, 2023, there were 167 state-chartered credit unions in Texas, down four charters from one year ago. Total assets in these credit unions are $57.67 billion, an increase of $0.68 billion since Dec. 31, 2022, for an annualized growth rate of 1.2%. The average net worth ratio is 11.36%, a 52-basis point increase from 10.84% 12 months ago.
• Loans for Texas chartered credit unions totaled $42.82 billion as of Dec. 31, 2023. This is an increase of $1.15 billion since Dec. 31, 2022, for an annualized growth rate of 2.8%.
• Shares for Texas chartered credit unions totaled $48.32 billion as of Dec. 31, 2023. This is a slight increase of $101.6 million, or 0.02% since Dec. 31, 2022.
• Texas chartered credit unions’ average loan delinquency ratio has increased 20 basis points to 0.81% as of Dec. 31, 2023, compared to a ratio of 0.61% as of Dec. 31, 2022.
• As of Dec. 31, 2023, 167 state-chartered credit unions reported aggregate net income of $397.3 million. This is a considerable decline from the net income level of $541.8 million at year-end 2022.
• PROBLEM INSTITUTIONS:
• As of Dec. 31, 2023, 25 credit unions were assigned a CAMELS rating of 3 or higher, compared to 24 credit unions as of Dec. 31, 2022. Credit unions in this category are monitored through a combination of off-site monitoring, regular on-site or remote contacts, and ongoing reviews for compliance with outstanding Documents of Resolution and other supervisory agreements or orders.
• ENFORCEMENT ISSUES:
  The Department had the following administrative sanctions outstanding as of Dec. 31, 2023: 

• Dividend Restrictions: 0
• LUAs: 0
• Determination Letters: 2
• Conservatorships: 0
• Cease and Desist: 1

Annual Risk Assessment Report

• The Commission approved TCUD’s Internal Risk Assessment Report for FY 2024 and authorized its submission to the State Auditor’s Office. 

Rulemaking Matters

• The Commission approved the four-year rule review plan as presented. 

Update Regarding Pending Litigation 

• Credit Union Department v. Ken Paxton, Attorney General of Texas; Cause No. D-1-GN-21-007168
• No action taken.
• TCUD is seeking protection from a letter advice ruling by the Texas Attorney General related to an information request under the Public Information Act. It is an active case in Travis County District Court.  
• Cooperative Teachers CU v. Texas Credit Union Department
• CTCU is pursuing administrative appeal of a modified application approval related to a request to expand its geographic field of membership.
• A final SOAH hearing has been continued to set for May 13, 2024. 

Future Commission Meetings: Agenda Items, Arrangements, and Dates

• The next regular meeting of the Commission is scheduled for July 19, 2024. Future meetings will be held Nov. 1, 2024, and March 21, 2025.

Questions?

Email Suzanne Yashewski, regulatory compliance counsel, Cornerstone League.