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NCUSIF Report Reflects Improving Economy

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ALEXANDRIA, Va. (4/19/13)--CAMEL code and corporate stabilization statistics reported during the April open board meeting "reflect an improving economy" and "a resilient credit union industry," National Credit Union Administration Chairman Debbie Matz said on Thursday at a one-item open board meeting.

Click to view larger image NCUA Chief Financial Officer Mary Ann Woodson, left, presents the quarterly insurance fund statistics during Thursday's brief board meeting. (CUNA Photo)
The number of CAMEL 4 and 5 credit unions fell by 30 during the first quarter of 2013, NCUA Chief Financial Officer Mary Ann Woodson reported during the meeting. The March 2013 total of 339 CAMEL 4 and 5 credit unions represents an 8.1% decline from the total recorded at the end of 2012. This decline crossed every asset class, Woodson noted. CAMEL Code 4 and 5 credit unions held $16.8 billion in assets.

There were 1,558 CAMEL code 3 credit unions at the end of the first quarter of 2013, a decline of 13 from the previous quarter's total. Total shares and total assets held by these credit unions totaled $101.6 billion and $114.4 billion, respectively, at the end of the first quarter. Both of those numbers are improvements when compared to the $105.9 billion in shares and $119.3 billion in assets CAMEL code 3 credit unions held in the previous quarter.

NCUA staff reported that the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio increased slightly to 1.31% as of March 31, 2013, but is expected to revert to 1.30% at the June 2013 update, at which time the capitalization deposit will be expensed. The ending reserve NCUSIF balance was $330 million, $13 million of which is allocated to specific credit unions.

The four failures that have occurred in the first quarter of 2013 cost the fund $75,000 in losses, Woodson said. This appears to be a slower credit union failure rate than the industry experienced in 2012, CUNA Deputy General Counsel Mary Dunn noted.

Altogether, CAMEL code 3, 4 and 5 credit unions held 12.6% of all credit union assets. "Assets at risk in credit unions with CAMEL codes 3, 4 and 5 have dropped for 10 straight quarters and with that, so has our level of exposure to potential losses," Matz said. "While we cannot predict the future with certainty, the growing strength of credit unions as a whole is a very positive sign," she added.

The total net position of the Temporary Corporate Credit Union Stabilization Fund was similar to the position reported in 2012's final quarter, and the Fund had $5.1 billion in outstanding borrowings with the U.S. Treasury as of March 31, 2013.

The quarterly financial report was the only item on Thursday's agenda. For more on the meeting, use the resource link.

CUNA's Dunn In Reuters: FASB Rule Would Burden CUs

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WASHINGTON (4/19/13)--Credit Union National Association Deputy General Counsel Mary Dunn highlighted credit union concerns with a developing Financial Accounting Standards Board proposal before a national audience in a recent Reuters article.

FASB has proposed credit loss reporting changes that would utilize a single "expected loss" measurement for the recognition of credit losses; this would replace the multiple existing impairment models in U.S. generally accepted accounting principles that primarily use an "incurred loss" approach.

Dunn in the Reuters piece said this proposal, if approved, would force credit unions to double their allowance accounts. "The more you put in an account like that, the less there is out there for loans and new product development because it's sitting there parked," she said.

The Reuters report notes that the FASB proposal could significantly restrict lending by many forms of financial institution.

FASB is accepting comment on the credit loss proposal until May 31, and CUNA is developing a comment letter on the issue.

CUNA has noted the proposal could impact credit unions more severely than other institutions because of the statutory restrictions on their net worth. Credit unions, which are member-owned and are not publicly traded, should not be subject to FASB's proposed credit loss reporting rules, CUNA has said.

House Passes CUNA-backed CISPA Cybersecurity Bill

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WASHINGTON (4/19/13)--The Cyber Intelligence Sharing and Protection Act (CISPA) (H.R. 624) passed the House by a 288 to 127 vote on Thursday, and the Credit Union National Association in a joint letter commended the bill's voluntary approach to information sharing.

Such an approach avoids creating additional regulatory burden for American businesses, the letter said. CISPA is the fourth cybersecurity bill CUNA has supported this week. (Use the resource link to read April 17 News Now story:  CUNA: Cybersecurity Bills Offer Coordination, Protections.)

CISPA would facilitate and increase cyber intelligence information sharing between public- and private-sector organizations. The bill would also provide privacy protections for consumers by limiting the inclusion of consumer data in shared threat information.

The bill "continues to protect an individual's privacy, while allowing for the sharing of critical threat information essential to secure the public and private sector, as well as individuals," the letter said.

CUNA co-signed the letter with the American Bankers Association, the Consumer Bankers Association, the Electronic Funds Transfer Association, the Financial Services Roundtable, the Independent Community Bankers of America, NACHA-The Electronic Payments Association and the Securities Industry and Financial Markets Association.

CUNA continues to work with the National Credit Union Administration, the U.S. Treasury's Financial Services Sector Coordinating Council, BITS, the Treasury and other entities to coordinate on cybersecurity issues, and to ensure that credit unions are not unduly impacted from the cybersecurity framework for critical infrastructure entities. The financial services sector is more prepared than most to deal with cybersecurity issues as a result of Y2K preparations, CUNA has noted.

Camp Announces Tax Hearing On Housing Provisions

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WASHINGTON (4/19/13)--Rep. Dave Camp (R-Mich.), who chairs the House Ways and Means Committee, announced Thursday that his panel will conduct an April 25 hearing on federal tax provisions that affect residential real estate. Camp said the hearing is part of the committee's ongoing work on comprehensive tax reform.

Federal tax provisions that directly affect residential real estate and the housing sector include the mortgage interest deduction and a deduction for state and local real property taxes. However, a committee release noted that the provisions do not apply to all taxpayers equally.

Other housing-related tax provisions include the exclusion of gain on the sale of a principal residence, the low-income housing tax credit, and the temporary exclusion from income of cancellation of mortgage debt.

Camp said it is "important to do a top to bottom review" of the tax code as the country works toward a "simpler and fairer" set of rules.

"Homeownership is an integral part of the American Dream, and the tax code has long provided a variety of incentives to make it easier for families to buy and own a home. Before considering any proposal, the Committee must better understand how tax reform might affect the housing sector and this hearing is an opportunity to hear directly from both academic experts and industry stakeholders," Camp said.

The hearing is slated to begin at 9:30 a.m. (ET) in Room 1100 of the Longworth House Office Building.

CUNA Backs MBL Disaster Exception Bill

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WASHINGTON (4/19/13)--Noting that credit unions often face greater business lending demand from their members in the wake of natural and other disasters, the Credit Union National Association has thrown its support behind new legislation that would give credit unions more flexibility in making those loans to aid in disaster recovery.

The bill (H.R. 1646), which was introduced by Rep. Carolyn Maloney (D-N.Y.) on Thursday afternoon, would exempt disaster loans made by credit unions from the 12.25%-of-assets member business lending (MBL) cap.

CUNA President/CEO Bill Cheney said Maloney's bill "will enable credit unions to fulfill their mission to their members in times of greatest need."

Because they are not-for-profit cooperatives, credit unions operate with a different incentive structure than banks, tending to be more risk-averse, the letter explained. "This does not translate into reduced credit availability in times of crisis; rather, it results in a counter-cyclical lending phenomenon that keeps credit unions in the market when other lenders pull back," Cheney wrote.

While CUNA supports the bill, and encouraged other House members to back it, Cheney said "the legislation is made necessary not because credit unions need encouragement to respond to their members affected by disasters, but because Congress imposed a statutory cap on credit union business lending in 1998 at the behest of the banking industry."

A more complete way to enable credit unions to serve fully their small business members would be to permit well-capitalized credit unions with significant business lending experience operating near the member business lending cap the opportunity to apply to NCUA for permission to expand business lending up to 27.5% of their total assets, Cheney wrote.

Rep. Ed Royce's (R-Calif.) bill, the Credit Union Small Business Jobs Creation Act (H.R. 688), would increase the MBL cap to 27.5% of assets, from the current 12.25%-of-assets level. Doing so would generate $14.5 billion available for MBLs--and increase jobs by 158,000 in the first year without costing the taxpayer, according to CUNA statistics. Royce's MBL bill has 89 co-sponsors.