NCUA Exam Priorities - cunacouncils.org · A word about examinations 3 • Communication is key – 98% of CUs well run, interested in doing the right thing for the organization and

NCUA Exam Priorities

CUNA Councils WebcastApril 3, 2018

Tim Segerson, Deputy DirectorOffice of Examination and Insurance

Agenda

CUNA Exam Priorities 2

Process Mechanics of the Priorities Letter Exam Process Improvements

Issues ACET Implementation Bank Secrecy Act Compliance Internal Controls and Fraud Prevention Interest Rate and Liquidity Risk Auto Loan Portfolios Commercial Lending Consumer Compliance

Q&A

A word about examinations

3

Communication is key 98% of CUs well run, interested in doing the right thing for the organization and

members. For the 98% providing insight and context to examiners can make a big difference

smooth the road, shorten the exam, and improve the experience. Examiners are expected to be open and collaborative wherever possible.

Set Expectations up Front Work out exam administration details ahead of time. Work space, conducting meetings and interviews, touch points on issues and concerns. Questions/call examiner in advance to get answers. Expect logical and professional rationale and justification. Offer solutions no one has all the answers or the best ideas.

CUNA Exam Priorities

Exam Priorities Development

4

Forward Assessment Robust Internal Discussion Monitoring Industry and

Economic Trends Identifying Risk, Risk Trends

and Risk Drivers Identifying New Requirements

Exam Scope Design Review exam scope

procedures Identify needed changes Issue staff directives and train

where needed.

Industry Focus Letter Identifies area of emphasis

upcoming exam cycle Resource commitment Ideal transparency


Process Improvement Exam Flexibility

5

FCU Extended Exam Cycle must meet all of the following: Assets less than $1 billion; CAMEL code 1 or 2, in both the composite rating and the management component rating; Well capitalized under prompt corrective action regulations; No outstanding documents of resolution items related to significant recordkeeping

deficiencies; and Not operating under a formal or informal enforcement or administrative order

FISCU Exam selective based on risk and trends unless a FISCU meets any of the following: Assets > $1 Billion NCUA CAMEL Composite 4 or 5 with assets > $50 million NCUA CAMEL Composite 3 with assets > $250 million

Examination Procedure Improvement: Four weeks notice Improved alignment of information/document requests Separate pre-exam planning


A Few Notes On Supervision


Caveats Presence of risk either financial or operational can trigger accelerated contact. Growing emphasis and importance of ongoing offsite monitoring. There are no absolutes specific issues, trends or combination of trends and issues may

drive alternate supervision plan.

Offsite Supervision evolving and will grow in importance Recent Change Obtain audit report during cyclical risk reviews when audit is completed.

Preferred direct receipt Via Supervisory Committee when necessary Must be independent of management This is not an indictment of management

Ongoing work - leveraging technology, coordinating with SSAs and improving coordination with SSAs.

Background

7

FFIEC-CCIWG

Permanent Working Group

Coordinate Growing Cyber Threat to FI

Coordinated Industry and Agency Assessment

Internal Report and Action Plan

Cybersecurity Assessment Tool (CAT)

Repeatable Measurable Maturity/Capability assessment designed for community institutions

Compatible with all major frameworks

Industry, NIST and Cyber community vetted and accepted.

Automated Cyber Examination Tool (ACET)

Content matches CAT

Expands on CAT with:

Plain language definitions

Supporting materials

Mapping to other standards

Streamlined Document request list

Users guide

Addresses GAO 2015 Audit Findings

https://www.gao.gov/assets/680/671106.pdf

Addresses OIG 2017 Audit Findings

https://www.ncua.gov/About/Pages/inspector-general/documents/oig-review-ncua-it-exam-oversight-cybersecurity-programs-sept-2017.pdf

https://www.gao.gov/assets/680/671106.pdfhttps://www.ncua.gov/About/Pages/inspector-general/documents/oig-review-ncua-it-exam-oversight-cybersecurity-programs-sept-2017.pdf

What else does it do?

8

For NCUA and Supervisors Standardizes the baseline review approach using an industry recognized framework Allows for aggregation of detailed information on practices, and areas of focus in the

industry Allows for institutional and aggregated risk measurement Established a disciplined comprehensive approach we can effectively train to

For the Industry Structured approach builds appropriate discipline within the industry Full transparency with recommended risk management structure Cross references to any other risk management structure Validated against most standards Creates a common lexicon and focus between industry and regulator Purpose built for small and medium institutions Scalable and manageable


NCUA Actions to Date

9

Most training provided to examiners of any regulator (28 hours) OCC training videos provided to OCC examiners (3 hours)* Available to SSAs NCUA Cyber A and B in 2016 (8 hours) (materials available for SSAs) Cyber C in 2017 (22 modules covering CAT, Inherent Risk, And Overview (16 hours) (Available to SSAs) ACET Exam Approach (1 hour) (Training will be made available to SSAs)

ACET workbook developed in 2017 jointly with the OCC Exam tool based on the CAT. Provides significant resources to support review. Greater flexibility (removed forced binary format). Revised to include input from 2017 pilot and January 2018 RISO Summit.

Pilot test in 3rd quarter 2017 61 Institutions - Examiners, SMEs and RISOs. Data collected, survey tabulated and focus group calls for all participants

Additional refinement & testing planned for 2018. Sub-baseline most essential for smallest FICUs, Control objectives etc.) Possible NCUA version of CSET to include ACET.


Key Principles Moving Forward

10

Full Transparency with Industry Known commodity no surprises ongoing conversation

Workforce & Industry-wide implementation Culture change internally and externally

Comprehensive, authoritative, recognized Consistent with and mapped to NIST CSF & most major

standards

Harmonized and consistent with other segments of the Financial Services Industry

Collaborative (supportive and encouraging) vs Directive approach with FICUs

Thought provoking, and ongoing discussions not an emphasis on findings or DORs

Dynamic and informative by institution and in aggregate

Evolves with industry guidance, provides detail by institution and across industry


Exam Policy 2018

11

All FICU > $1 billion assets will be subject to an ACET review Can eliminate GLBA and E-Banking Core and Baseline requirements.

IT examinations remain risk focused. i.e. not limited to the ACET review.

Significant Resource Allocation to Regions to Carry out ACET examination and implementation.


12

Are examiners discovering any surprises by using the

ACET tool?

13

Should credit unions be prepared to show current IT

credentials and certifications as part of the exam?

14

What is the level of oversight of the use of third party

technology vendors by credit unions?

15

What are examiners looking for when reviewing a credit unions incident response program as it relates to

unauthorized use/access of member information.

BSA/AML Growing FICU Risk


Why? Increasing credit union expansion into member

business services Widening communities in the FOMs Technology

It is not the regulatory environment it is the changing nature of the marketplace

BSA/AML Complexity/Burden


New Book of Business = Greater Risk and

Complexity and Risk Acceptance

Old Book of Business =

Simple Consumer

Focus & Risk Avoidance

Accepting the Risk is OK. Evolving your personnel, processes, tools and procedures/controls is essential. Most common problem we find FICU do not upgrade their capabilities when accepting

new risks.

Risks we are seeing


FICU not prepared to handle complex account relationships International Remittances MSB relationships MRB relationships (30 states and counting) New services (expanding into business accounts)

Changing BSA Risk Environment


Region # MSBs1 5052 923 1784 5825 150Grand Total 1507

Count # MSB # FICU1 1082 463 214 175 116 67 68 49 310 311 212 314 116 317 118 122 124 126 240 149 151 158 164 177 1362 1Grand Total 247

Changing complexity requires increased care during exams

Migration of high risk business into CU model has proven disastrous in some cases

Business account management and monitoring is critical

CDD and Beneficial Ownership requirements effective 05/2018.

MSB and MJB will be challenges in 2018 and beyond.

State # MSBs State # MSBs State # MSBsAK 15 ME 4 OH 38AL 22 LA 11 OK 4AZ 9 MA 44 OR 13CA 93 MD 11 PA 11CO 3 ME 4 RI 11CT 12 MI 160 SC 4DE 1 MN 3 SD 3FL 4 MO 32 TN 33GA 58 MS 1 TX 457HI 3 MT 1 UT 10IA 12 NC 31 VA 19IL 25 ND 1 VT 1IN 14 NE 3 WA 7KS 26 NH 4 WI 56LA 11 NJ 10 WV 2MA 44 NM 10 WY 2MD 11 NY 213 Grand Tota 1507

113 FICU serving MJBs in 26 States More than 10 fold increase in

activity in FICU last three years FinCEN policy has not changed DOJ Policy has changed

CDD & BO


Customer Due Diligence and Beneficial Owner concepts have existed in guidance (BSA Exam Manual) for years.

FinCEN added as new 5th pillar to regulation (standard vs expectation). Policies, Procedures and Internal Controls Designated Compliance Officer Independent testing Thorough and ongoing training Customer Due Diligence

FFIEC Agencies working on exam guidance. Staff training is scheduled (April 2018)

May 2017

21

What will examiners be looking for when examining for customer due diligence

compliance?

Internal Controls & Fraud


Continues as a major cost to the NCUSIF Small Institutions are more vulnerable to institutional

capture/takeover

Inherent internal control weaknesses Mitigating controls and audit functions are critical Continued and increased focus on irregularities and fraud

detection (SCUEP, Analytics, IC Emphasis, Audit function). Total NCUSIF

Losses (as of 12/31/2017)

Total Assets in Failed CUs

Loss Rate % of Assets

# Total CU Failures

# Fraud Related CU

Failures

% of Failed CUs with Fraud Key Contributor to

Failure

NCUSIF Losses from Failed CUs with

Fraud a Key Contributor to Failure

% NCUSIF Losses from Failed CUs with

Fraud a Key Contributor to

Failure

Total Assets in Failed CUs with

Fraud a Key Contributor to

Failure

Loss Rate % of Assets for Fraud

Cases

% of Assets in Failed CUs with Fraud a Key

Contributor to Failure to Total Assets in Failed

CUs

5 year 133,910,986 720,376,744 19% 72 40 56% 120,658,926 90% 509,355,398 24% 71%10 year 936,059,625 6,802,351,281 14% 184 81 44% 407,189,973 44% 1,174,826,987 35% 17%15 Year 1,021,083,428 7,523,203,110 14% 261 109 42% 480,488,366 47% 1,612,165,670 30% 21%
NCUSIF Loss Summary3/8/18ABA divided by BCDD divided by CEE divided by AFE divided by FF divided by BTotal NCUSIF Losses (as of 12/31/2017)Total Assets in Failed CUsLoss Rate % of Assets# Total CU Failures# Fraud Related CU Failures% of Failed CUs with Fraud Key Contributor to FailureNCUSIF Losses from Failed CUs with Fraud a Key Contributor to Failure% NCUSIF Losses from Failed CUs with Fraud a Key Contributor to FailureTotal Assets in Failed CUs with Fraud a Key Contributor to FailureLoss Rate % of Assets for Fraud Cases% of Assets in Failed CUs with Fraud a Key Contributor to Failure to Total Assets in Failed CUs20035,654,24246,995,15012%13323%5,423,62296%13,277,26041%28%200411,875,745117,055,83810%21838%8,872,28675%88,554,22210%76%200514,806,12999,937,08915%15533%10,273,53469%47,017,41122%47%20066,846,24230,231,84423%16638%5,529,20081%15,617,53935%52%200745,841,446426,631,90811%12650%43,199,75294%272,872,25116%64%2008233,635,936864,893,49027%191053%26,724,41211%51,814,79552%6%2009148,666,2382,880,163,5335%27622%23,260,14616%75,616,68931%3%2010228,854,255970,799,64524%28621%184,729,89381%303,677,71461%31%201146,209,505453,313,96110%16744%9,361,12620%74,343,92713%16%2012144,782,706912,803,90816%221255%42,455,47229%160,018,46427%18%201358,219,241182,188,81632%17953%52,522,80390%74,001,92271%41%201431,677,443181,848,63517%15747%29,106,36892%130,705,71322%72%201512,568,044158,074,0888%161169%10,849,30586%135,547,5638%86%20166,999,31717,350,50240%141071%4,925,00970%9,605,37251%55%201724,446,941180,914,70314%10330%23,255,43995%159,494,82815%88%5 year133,910,986720,376,74419%724056%120,658,92690%509,355,39824%71%10 year936,059,6256,802,351,28114%1848144%407,189,97344%1,174,826,98735%17%15 Year1,021,083,4287,523,203,11014%26110942%480,488,36647%1,612,165,67030%21%Failure List 2003-PresentYearDate of FailureCharterCU NameStateRegionAssetsEstimated Loss at FailureLoss as of 12/31/2017Loss Given Failure 12/31/2017Fraud? "X" Indicates Fraud a Factor in the FailureIf Fraud, then Loss Total as of 12/31/2017Total Assets if Fraud(Last Call Report Filed)Liquidation Case #Merger Case #CategoryAssets < $30 mm20021/17/0267957Boone Electrical EmployeesMO4577,991- 0377,41165.30%2399< $2mm < $ 30mm20022/8/0262990Monteleone Employees CULA362,728- 033,63353.62%2400< $2mm < $ 30mm20023/18/0224602Oasis Community Development FCURI1967,675- 044,6434.61%2401< $2mm < $ 30mm20024/2/025223Perilli FCUCT11,283,044- 0171,07813.33%2402< $2mm < $ 30mm20024/30/0218570Unified Singers FCUGA31,341,294- 0826,70961.64%2403< $2mm < $ 30mm20025/10/0219936First Hialeah CommunityFL331,937,244- 06,145,46719.24%2404> $10mm to < $50mm20026/30/0261819Roosevelt CountyNM513,201,603- 02,687,96320.36%2406> $10mm to < $50mm < $ 30mm20028/19/0222108SMW Local #110 FCUKY35,085,089214,068214,0684.21%441> $2mm to < $10mm < $ 30mm20028/27/0224458Central BrooklynNY13,809,441- 0(13,028)-0.34%2407> $2mm to < $10mm < $ 30mm20029/18/0224048Community Enterprises FCUNY187,723- 025,65729.25%2408< $2mm < $ 30mm200210/10/0263387Tri County CUNC311,826,138- 02,684,36222.70%2409> $10mm to < $50mm < $ 30mm200210/31/029854St. Pius Tenth FCUCO52,188,536- 0729,73233.34%2410> $2mm to < $10mm < $ 30mm20031/30/0314075Puerto Rican Society FCUIL4379,589- 0108,18828.50%2413< $2mm < $ 30mm20032/28/0365946Behr Employees CUIL466,025- 0(44,622)-67.58%2414< $2mm < $ 30mm20033/21/0324619Albany Community Development FCUNY1342,52938,60038,60011.27%442< $2mm < $ 30mm20034/15/0313753Huntington Policemen's FCUWV4244,322- 0(225,797)-92.42%2415< $2mm < $ 30mm20034/17/032976Bethlehem Steelworker #2 FCUPA26,466,329395,000395,0006.11%443> $2mm to < $10mm < $ 30mm20034/30/0319705Moraine Valley FCUIL48,016,283- 0(235,961)-2.94%2416> $2mm to < $10mm < $ 30mm20035/10/0312787D. Edward WellsMA14,763,942- 03,932,48482.55%X3,932,4844,763,9422417> $2mm to < $10mm < $ 30mm20039/19/0368388South East CommunityNC35,136,573- 01,473,43828.69%X1,473,4385,136,5732418> $2mm to < $10mm < $ 30mm200311/12/0367171Canco CUID62,836,150- 05,5480.20%2419> $2mm to < $10mm < $ 30mm200311/18/0324515Tuscaloosa Community FCUAL3543,43642,09342,0937.75%444< $2mm < $ 30mm200311/30/0312861District 8 FCUCO53,376,745177,00017,7000.52%X17,7003,376,7451827> $2mm to < $10mm < $ 30mm200312/5/032496Archer DepotIL410,019,776- 047,5710.47%2420> $10mm to < $50mm < $ 30mm200312/22/0317192Blue Ridge FCUVA24,803,451100,000100,0002.08%445> $2mm to < $10mm < $ 30mm20041/1/0420154North Florida FCUFL312,364,024- 04,6960.04%2422> $10mm to < $50mm < $ 30mm20041/31/0414237Tepeyac FCUTX4194,7309,0009,0004.62%446< $2mm < $ 30mm20042/10/0418771Sorvall Empl FCUCT1372,64020,00020,0005.37%447< $2mm < $ 30mm20043/5/0424318Austin/West GarfieldIL4906,616- 0192,72321.26%2421< $2mm < $ 30mm20043/31/0416150Brooklyn Longshoremen FCUNY1541,64641,04741,0477.58%448< $2mm < $ 30mm20044/16/0464803Vestal EmployeesMO4275,923- 07,1222.58%X7,122275,9232423< $2mm < $ 30mm20044/26/0424059Brooklyn EcumenicalNY12,309,112- 0400,16917.33%2424> $2mm to < $10mm < $ 30mm20044/30/0419935Oak Cliff CommunityTX43,008,404- 01,074,95235.73%X1,074,9523,008,4042425> $2mm to < $10mm < $ 30mm20045/5/0414171Dallas Educators FCUAL3451,477- 03,685,685816.36%X3,685,685451,4772426< $2mm < $ 30mm20046/3/0468033Denver Community Development CUCO52,664,551260,174260,1749.76%449> $2mm to < $10mm < $ 30mm20046/4/046769Union Pacific Railroad EmplTX42,262,492- 01,197,33052.92%X1,197,3302,262,4922427> $2mm to < $10mm < $ 30mm20046/26/0423076HCA Georgia FCUGA3853,40225,00025,0002.93%450< $2mm < $ 30mm20046/30/0467261Community CU of MilwaukeeWI4495,855- 0145,88329.42%2428< $2mm < $ 30mm20048/9/0424577Appalachian Development FCUOH31,066,045- 0260,14824.40%2429< $2mm < $ 30mm20049/30/0424624Little Haiti Edison FCUFL31,917,771- 0243,80212.71%2430< $2mm < $ 30mm20049/30/041421Nor Car FCUPA229,850,244- 01,470,9034.93%X1,470,90329,850,2442432> $10mm to < $50mm < $ 30mm20049/30/0462606DiakoniaCO537,916,900- 0266,4070.70%X266,40737,916,9002431> $10mm to < $50mm200410/20/04292US Employees Butler CoOH33,629,412- 01,288,16235.49%2433> $2mm to < $10mm < $ 30mm200412/1/041979Henry Street Settlement FCUNY11,185,812112,656112,6569.50%452< $2mm < $ 30mm200412/16/0423764MidwoodNY15,252,688- 092,8731.77%X92,8735,252,6882434> $2mm to < $10mm < $ 30mm200412/31/0410759St Gregory's FCUTX49,536,0941,077,0131,077,01311.29%X1,077,0139,536,094451> $2mm to < $10mm < $ 30mm20051/1/054820St Roccos Parish FCUOH31,426,63055,00055,0003.86%454< $2mm < $ 30mm20051/1/058092Eagle Country FCUMI140,149,5352,400,0002,400,0005.98%453> $10mm to < $50mm20053/4/0524460KO-AM FCUCA59,570,690- 05,087,38253.16%X5,087,3829,570,6902436> $2mm to < $10mm < $ 30mm20053/30/058986Randolph County FCUWV21,200,916- 0164,58113.70%X164,5811,200,9162437< $2mm < $ 30mm20055/3/059279Miss-Lou FCUMS3504,274- 059,28111.76%2438< $2mm < $ 30mm20055/5/0523732South End FCUMA11,565,729391,834391,83425.03%455< $2mm < $ 30mm20056/1/0510575Allen FCUNY1648,56815,16615,1662.34%456< $2mm < $ 30mm20057/7/0563048Jamaican Postal CUNY11,033,865- 0151,15714.62%2439< $2mm < $ 30mm20058/8/0520429Lock Haven Area FCUPA210,580,861- 02,588,68824.47%X2,588,68810,580,8612440> $10mm to < $50mm < $ 30mm20058/18/0524319Homesteaders FCUNY14,205,981- 0998,96323.75%2441> $2mm to < $10mm < $ 30mm20058/26/0524737Jilapuhn Employees FCUGA3225,660- 075,93333.65%X75,933225,6602442< $2mm < $ 30mm200510/21/0523420Korean-American Chamber of CommerceNY1109,233- 0(6,224)-5.70%2443< $2mm < $ 30mm200511/14/0514960Lorain Sacred Heart FCUOH31,113,337- 056,3365.06%2444< $2mm < $ 30mm200511/28/0562821Good Smaritan Employees CUOH32,162,526- 0411,08219.01%2445> $2mm to < $10mm < $ 30mm200511/30/0567438Dallas County CUTX425,439,2842,356,9502,356,9509.27%X2,356,95025,439,284457> $10mm to < $50mm < $ 30mm20061/1/062355Vindicator FCUOH3147,3058,6318,6315.86%458< $2mm < $ 30mm20062/1/0668466Greater Harrisburg Community CUPA21,686,138- 0440,72826.14%2446< $2mm < $ 30mm20063/8/0663062Guadalupan CUMO4573,781- 020,0003.49%459< $2mm < $ 30mm20063/30/0613166St. John Baptist FCUNJ270,407- 06,1518.74%2447< $2mm < $ 30mm20064/3/0618166St Charles Borromeo FCUNY1350,636- 031,9339.11%X31,933350,6362448< $2mm < $ 30mm20064/6/0624625Potter's House FCUFL3233,124- 090,94539.01%2449< $2mm < $ 30mm20064/24/0619375Yankton Employees FCUSD4102,913- 022,56021.92%2450< $2mm < $ 30mm20065/1/061878Little Rock Teachers FCUAR42,620,08620,00020,0000.76%461> $2mm to < $10mm < $ 30mm20065/2/0624512Punjab & Sindh FCUNY11,105,352- 0(6,958)-0.63%X(6,958)1,105,3522451< $2mm < $ 30mm20065/18/0620973Orleans Public Schools FCULA48,426,130- 0565,9786.72%2452> $2mm to < $10mm < $ 30mm20067/26/0615360ILA 24 FCUTX44,885,304- 02,875,61058.86%X2,875,6104,885,3042453> $2mm to < $10mm < $ 30mm20067/28/0612511Dedicators FCUAL3402,696- 064,54916.03%2454< $2mm < $ 30mm200611/1/0666576Superior Postal Employees CUWI4351,72577,50077,50022.03%460< $2mm < $ 30mm200611/3/0624164La Casa FCUNJ2634,447- 0291,07345.88%X291,073634,4472455< $2mm < $ 30mm200612/19/0619940Mt. Hebron Baptist Church FCUPA260,061- 08,53214.21%X8,53260,0612456< $2mm < $ 30mm200612/19/0610559Marian Miami FCUAZ58,581,739- 02,329,01027.14%X2,329,0108,581,7392457> $2mm to < $10mm < $ 30mm20072/8/0710282State & Parish Empl Community FCULA427,532- 054,274197.13%2458< $2mm < $ 30mm20073/31/0722462D.N.C. FCUTX4150,23425,00025,00016.64%463< $2mm < $ 30mm20073/31/0716021LA Association of Educators FCULA41,378,308125,000125,0009.07%462< $2mm < $ 30mm20073/31/079593GAF FCUTX42,871,577600,000600,00020.89%X600,0002,871,577464> $2mm to < $10mm < $ 30mm20074/25/0713135Sharebuilders FCUCA5680,717- 01,691,134248.43%X1,691,134680,7172459< $2mm < $ 30mm20074/30/0765572Santa Fe CUOK45,611,7411,000,0001,000,00017.82%X1,000,0005,611,741465> $2mm to < $10mm < $ 30mm20075/15/0768189Communities United CUKS42,092,002523,001523,00125.00%466> $2mm to < $10mm < $ 30mm20076/25/0719451Cambria FCUPA22,699,115- 0793,52029.40%X793,5202,699,1152460> $2mm to < $10mm < $ 30mm20077/10/0761969New Horizons CommunityCO5149,398,628- 01,908,7161.28%2461> $100mm to < $500mm200711/2/0724685Green TreePA26,404,448- 01,631,66825.48%X1,631,6686,404,4482462> $2mm to < $10mm < $ 30mm200711/17/0762465Huron RiverMI1254,604,653- 037,483,43014.72%X37,483,430254,604,6532463> $100mm to < $500mm200712/10/0763029Homeowners AssociationIL4712,953- 05,7030.80%2464< $2mm < $ 30mm20082/29/0865118NorlarcoCO5287,221,174- 0- 00.00%2465> $100mm to < $500mm20085/3/0822523St. Luke BaptistNY149,734- 0(14,107)-28.36%X(14,107)49,7342466< $2mm < $ 30mm20085/12/0820741Father BurkeNY11,402,075- 0418,82029.87%2467< $2mm < $ 30mm20085/30/0821721Peoples FIrst ChoicePA220,262,282- 09,850,06248.61%X9,850,06220,262,2822468> $10mm to < $50mm < $ 30mm20086/30/0868512SterlentCA588,861,607- 0602,2580.68%2469> $50mm to < $100mm20086/30/0864449Cal State 9CA5102,804,092- 0203,785,267198.23%2470> $100mm to < $500mm20087/1/0860197Electrical WorkersIL43,322,76912,85012,8500.39%477> $2mm to < $10mm < $ 30mm20087/15/089377Meridian F A CT1759,017- 0323,33142.60%X323,331759,0172471< $2mm < $ 30mm20087/28/081300New London SecurityCT112,741,066- 06,498,35151.00%X6,498,35112,741,0662472> $10mm to < $50mm < $ 30mm20088/4/08138601st United CA517,827,347875,000875,0004.91%467> $10mm to < $50mm < $ 30mm20088/5/0824765Port TrustSC3507,670- 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30mm201410/10/1467881County & Municipal EmployeesTX440,274,87412,000,0005,744,40514.26%X5,744,40540,274,8742570> $10mm to < $50mm201412/3/1460993Metropolitan Church of GodMI1141,49419,34516,16711.43%2571< $2mm < $ 30mm201412/12/1463106Health OneMI114,539,682- 000.00%2572> $10mm to < $50mm < $ 30mm20151/30/153773American Bakery WorkersPA24,134,5951,740,5881,029,01324.89%2573> $2mm to < $10mm < $ 30mm20152/1/1512633New Mexico Correctional EmployeesNM4905,3912,5002,5000.28%510< $2mm < $ 30mm20153/31/1524593North Dade Community FL33,000,40823,000215,8847.20%2574> $2mm to < $10mm < $ 30mm20154/30/1512044TLCOR5109,394,2202,253,8522,020,1891.85%X2,020,189109,394,2202575> $100mm to < $500mm20157/1/1510450Kolmar NY EmployeesNY11,390,065310,137310,13722.31%X310,1371,390,065512< $2mm < $ 30mm20157/1/152396765 Family FCUNY12,271,687135,713135,7135.97%511> $2mm to < $10mm < $ 30mm20157/10/1511430TrailblazerPA24,353,7031,274,325985,15122.63%X985,1514,353,7032576> $2mm to < $10mm < $ 30mm20157/17/156577LakesideIN37,503,6071,665,4342,089,91927.85%X2,089,9197,503,6072577> $2mm to < $10mm < $ 30mm20158/28/1565263SCICAPIA42,096,7832,057,7661,811,81986.41%X1,811,8192,096,7832578> $2mm to < $10mm < $ 30mm20159/24/1560610SWCFL31,916,997211,53500.00%X01,916,9972579< $2mm < $ 30mm20159/30/1513765QuemadoTX41,252,735245,840245,84019.62%X245,8401,252,735513< $2mm < $ 30mm201510/1/1512281Northwest BaptistWA53,407,486741,792741,79221.77%X741,7923,407,486514> $2mm to < $10mm < $ 30mm201511/20/1523265HOPENJ1626,529209,000194,29431.01%X194,294626,5292580< $2mm < $ 30mm201512/1/1513149Greater AbyssiniaOH2412,775288,30097,35623.59%X97,356412,7752581< $2mm < $ 30mm201512/18/1519907BethexNY112,214,444500,000335,6292.75%2582> $10mm to < $50mm < $ 30mm201512/29/152223First Hawaiian HomesHI53,192,6633,000,0002,352,80873.69%X2,352,8083,192,6632583> $2mm to < $10mm < $ 30mm20161/1/1623948Community TrustFL36,074,5231,970,0001,970,00032.43%515> $2mm to < $10mm < $ 30mm20162/5/1668533CTK CUWI1163,19760,00050,72231.08%X50,722163,1972584< $2mm < $ 30mm20162/24/1623591Mildred MitchellWV227,0392,19115,24456.38%X15,24427,0392585< $2mm < $ 30mm20163/4/169584Education AssociationDC22,596,7011,151,1001,337,34551.50%X1,337,3452,596,7012586> $2mm to < $10mm < $ 30mm20163/29/1661907Veteran Health AdminMI12,032,5331,520,0001,232,38860.63%X1,232,3882,032,5332587> $2mm to < $10mm < $ 30mm20164/4/1622580Electrical InspectorsPA265,89459,78512,74219.34%X12,74265,8942593< $2mm < $ 30mm20164/4/1613801Cardozo LodgePA2226,485152,00000.00%X0226,4852588< $2mm < $ 30mm20164/4/163122Chester Upland School EmpPA2827,269549,000473,07757.19%X473,077827,2692590< $2mm < $ 30mm20164/4/1618599O P S EMP FCUPA21,182,927874,279593,34850.16%X593,3481,182,9272592< $2mm < $ 30mm20164/4/166761Servco FCUPA22,193,2291,730,0001,180,51253.83%X1,180,5122,193,2292589> $2mm to < $10mm < $ 30mm20165/16/1624561Triangle Interests Service CenterPA2290,098274,00029,63310.21%X29,633290,0982591< $2mm < $ 30mm20168/17/1623835Immanual Baptist ChurchCT1107,37015,69815,69814.62%516< $2mm < $ 30mm201611/1/1616424Anchor sevenFL31,487,04970,42270,4224.74%517< $2mm < $ 30mm201611/29/1623169First African BaptistPA276,18814,00018,18823.87%2594< $2mm < $ 30mm20173/17/1722380FCAMECFL31,760,664497,000526,19429.89%2595< $2mm < $ 30mm20173/31/1760775Valley StateMI119,817,9613,188,8083,320,80816.76%X3,320,80819,817,9612596> $10mm to < $50mm < $ 30mm20177/31/1724740Love Gospel Assembly FCUNY161,50630,77130,77150.03%518< $2mm < $ 30mm20178/31/1766101MADCOIL41,727,05425,00025,0001.45%519< $2mm < $ 30mm201710/2/1711263ShreveportLA384,752,5896,039,7616,938,3948.19%X6,938,39484,752,5892597> $50mm to < $100mm201710/27/17165New York State Emp NY11,891,30273,13763,0003.33%2598< $2mm < $ 30mm201710/31/1714314Tri-RiversAL313,957,612375,000375,0002.69%522> $10mm to < $50mm < $ 30mm201711/9/1712108Good Street Baptist Church TX4612,14571,53671,53611.69%520< $2mm < $ 30mm201711/30/1765270Eaton EmployeesIA41,409,592100,000100,0007.09%521< $2mm < $ 30mm201712/4/1762843RiverdaleAL354,924,2789,755,05812,996,23823.66%X12,996,23854,924,2782599> $50mm to < $100mmgraphs Total NCUSIF Losses (as of 12/31/2017) # Total CU Failures

23

What type of things do examiners look for when examining for adequate internal controls for fraud prevention/detection?

IRR Liquidity


Changing Market Conditions Increased market volatility, economic growth will cause

continued rate volatility. Refi market collapsed last quarter (BSs are more sticky) The temptation to take on more risk will continue to lure us

toward IRR mismatches.

IRR volatility will increase Assessments, and BS robustness will become a more prominent

concern esp. in LT asset laden FICUs Funding sources speak to liquidity as much as IRR

Sudden Heart Attack VS BleedingWhich is Which?

Credit Risk


Auto Lending Exposure Term limits, credit quality, point of sale/sourced loans. Significant high risk portfolios will be reviewed closely. Indicators in market of increased risk appetite.

Commercial Lending Major growing segment New regs. Remove restraints rely on sound judgment and

sound risk management Continued close attention to your risk management

processes and controls.

Credit Risk


28

Like last year, examiners are focusing on the relationship

between IRR and liquidity risk? Can you provide additional

details?

29

NCUAs supervisory priorities highlighted auto lending

portfolios. Are you seeing a lack of due diligence/ credit union

oversight in indirect auto lending programs? Any specific areas?

30

Are there any plans to reconcile 701.21 (g) with 723 and Examiner Guidance on member business loans to address non-

owner occupied investment or vacation homes that will be the principal

residence as required by 701.21? Additional clarification would be helpful to address if limits apply to 1-4 properties primary/will be primary/ or non-owner.

31

How many specialized examiners does the agency have to

conduct specialized MBL/commercial lending reviews?

What makes the examiners specialized and can you speak to

the training received?

32

What are the roles of the Board and Senior Management as it

relates to a credit unions commercial lending program?

Compliance Violations 10 Yr. Stats


Regulation Count of ViolationsB 275BSA 2026BSA-S 1774C 43CC 44COPPA 1D 14E 60FACTA 13FCRA 71FDCPA 6FDPA 200FHA 23FTCCPR 1GLBA 40HOEPA 1MLA 165OFAC 303OTHER 117P 32PCFI 1SAFE 149SCRA 97TIS 70UDAAP 3UIGEA 16X 120Z 758Grand Total 6423

Most Common gap exists in BSA/OFACOthers include Z, B, FDPA and MLA

BSA 2026BSA-S 1774Z 758OFAC 303B 275FDPA 200MLA 165SAFE 149X 120OTHER 117

Top 10 Violations

HMDA


https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/hmda-implementation/

https://www.ffiec.gov/hmda/guide.htm

https://www.federalregister.gov/documents/2017/12/27/2017-27879/home-mortgage-disclosure-regulation-c-adjustment-to-asset-size-exemption-threshold?utm_campaign=subscription%20mailing%20list&utm_source=federalregister.gov&utm_medium=email

Assets > $45 Million Asset Originated at least one mtg.

Office/Branch in an MSA 25/500 volume test.

3rd Qtr. Reviews Advisory for good faith efforts
https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/hmda-implementation/https://www.ffiec.gov/hmda/guide.htmhttps://www.federalregister.gov/documents/2017/12/27/2017-27879/home-mortgage-disclosure-regulation-c-adjustment-to-asset-size-exemption-threshold?utm_campaign=subscription%20mailing%20list&utm_source=federalregister.gov&utm_medium=email

35

What are common compliance weaknesses by credit unions in

NCUAs review of submitted/collected HMDA data?

MLA Exam Issues Exam Emphasis

Applicability of the Regulation

Evaluate Compliance Management System

Identification of Covered Borrowers

Calculation of Military Annual Percentage Rate

Mandatory Loan Disclosures

Continued focus on complying with rule Key areas include policies and

CMS sufficient to assure compliance

Possible expanded reviews if CMS not in place.

Expansive coverage Institutional Responsibility for

identifying covered persons


https://www.ncua.gov/regulation-supervision/Pages/policy-compliance/resource-centers/consumer.aspx
https://www.ncua.gov/regulation-supervision/Pages/policy-compliance/resource-centers/consumer.aspx

37

Are there any common pain points when examining credit

unions for compliance with MLA?

38

Are examiners finding that overdraft policies and procedures

arent matching up with what is specified in the account

disclosures?

Office Contact Page


Feel free to contact our office with questions or comments.

Primary Staff: Tim Segerson, Deputy Director Office of Examination and [email protected]

Office Phone: 703-518-6397

Contact meJared [email protected]

@jjihrig
NCUA Exam PrioritiesAgendaA word about examinationsExam Priorities DevelopmentProcess Improvement Exam FlexibilityA Few Notes On SupervisionBackgroundWhat else does it do?NCUA Actions to DateKey Principles Moving ForwardExam Policy 2018Slide Number 12Slide Number 13Slide Number 14Slide Number 15BSA/AML Growing FICU RiskBSA/AML Complexity/BurdenRisks we are seeingChanging BSA Risk EnvironmentCDD & BO Slide Number 21Internal Controls & FraudSlide Number 23IRR LiquidityCredit RiskCredit RiskCredit RiskSlide Number 28Slide Number 29Slide Number 30Slide Number 31Slide Number 32Compliance Violations 10 Yr. StatsHMDASlide Number 35MLA Exam IssuesSlide Number 37Slide Number 38Office Contact PageContact me

Documents

NCUA Exam Priorities - cunacouncils.org · A word about examinations 3 • Communication is key – 98% of CUs well run, interested in doing the right thing for the organization and