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Report on Texas Credit Union Commission Meetings
Monday, November 6, 2017 6:45 AM

The Texas Credit Union Department Rules Committee and the Credit Union Commission held their regularly scheduled meetings Nov. 2-3. The Rules Committee recommended that the Commission readopt the following rules:

  • 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.
  • 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.
  • Withdrawal of the previously proposed new 7 TAC Section 91.1010 and republish the revised proposal for comment, designed to provide guidance to credit unions when they are considering a voluntary liquidation of a solvent institution.
  • Adoption of the Completed Rule Review of 7 TAC, Part 6, Chapter 91, Subchapters D (Powers of Credit Unions), M (Electronic Operations), and N (Emergency or Permanent Closing of Office or Operation).

These rules were approved by the Commission on Friday.

The Rules Committee also recommended that the following proposed amendments be approved for publication and comment:

  • 7 TAC Section 91.4001, which would impose a new requirement that credit unions using electronic means or facilities 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 would require 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, which would encourage credit unions to post notice of emergency closing of an office or operation on its website and social media pages.
  • 7 TAC Section 91.5005, which would require 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.
  • 7 TAC, Part 8, Chapter 153, to implement the changes to the home equity lending law if SJR 60 (Proposition 2) is approved by the voters on Nov. 7, 2017. The law would change on Jan. 1, 2018.

The recommendations were approved by the Commission on Friday.

The Rules Committee discussed, but took no action, on potential rules to implement HB 471 (Proposition 7 on the Nov. 7 Ballot), the enabling legislation for HJR 37, which would allow credit unions and other financial institutions to hold savings promotion raffles. If proposition 7 is approved on Nov. 7, HB 471 goes into immediate effect.

In executive session, the Commission members heard a report from the Commissioner Evaluation Committee on Commissioner Feeney’s FY 2017 performance review and FY 2018 Remuneration. After the closed executive session concluded, a one-time merit award of $6,126 was approved for the Commissioner.

The Commission received a report from Deputy Commissioner Robert Etheridge that the financial performance and status of the state credit union system continues to be good for Texas credit unions due, in part, to a sound economy. The recent damage in Houston and surrounding areas due to Hurricane Harvey was extensive. Many credit unions located in the storm ravaged areas will realize dramatic shifts in real estate and auto loan volume, as well as increased delinquencies and losses. Regardless, it will be some time before the full extent of Hurricane Harvey's financial impact to Texas credit unions can be measured. A recent estimate indicated the damage caused by Hurricane Harvey could be as much as $190 billion.

Overall, Texas credit unions continue to perform well and realize positive loan growth, strong asset quality trends, satisfactory earnings performance, and stable net worth positions. Trends for the 2nd quarter of 2017 reflect an improvement in credit unions ' bottom lines compared to the first quarter of the year. The improvement appears to be driven by increased gross income levels from higher investment yields. Earnings performance, however, is slightly below the levels realized during 2016, due primarily to an increase in operating costs and provision for loan and lease losses expenses.

At June 30, 2017, there were 186 state-chartered credit unions in Texas with assets totaling $39.36 billion, an increase of $3.48 billion since June 30, 2016, for an annualized growth rate of 9.7 percent. The average net worth ratio is 10.15 percent, up slightly from the 10.14 percent level at June 30, 2016. Loans totaled $28.57 billion as of June 30, 2017, an increase of $3.36 billion since June 30, 2016, for an annualized growth rate of 13.3 percent.

For Texas-chartered credit unions, shares totaled $34.01 billion as of June 30, 2017, an increase of $2.82 billion, or 9.0 percent since June 30, 2016; loan delinquency ratio was 0.63 percent compared to a ratio of 0.70 percent as of June 30, 2016; 46 state-chartered credit union reported year-to-date net operating losses of $7.44 million, while the remaining 140 credit unions reported aggregate net income of $117.82 million.

As of August 31, 2017, 21 credit unions were assigned a CAMEL rating of 3 or higher, compared to 25 credit unions at August 31, 2016.

The Commission readopted the equal employment policy for the Department. Finance Code Section 15.313 requires the Commission to prepare and maintain a written policy statement to assure implementation of a program of equal employment and approve it annually.

The Rules Committee meeting materials can be found here, and the Commission meeting materials are here.

Tentative date for the next meeting of the Rules Committee is March 8, 2018, at 1:00 p.m. and March 9 at 9:00 a.m. for the Commission meeting.

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