NCUA: FCU Meeting Flexibility, Capitalization, Diversity, Budget, SIF

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Below is this week's regulatory update on actions by the National Credit Union Administration (NCUA), including the extension of COVID-19 regulatory flexibilities, the capitalization of interest proposed rule, NCUA Board briefing on credit union diversity and self-assessment, a briefing on the agency's 2020 budget update and reprogramming, and an update on the National Credit Union Share Insurance Fund (NCUSIF) Quarterly Report. 

FCU Meeting Flexibility During the COVID-19 Pandemic
The NCUA issued a Letter to Federal Credit Unions, 20-FCU-02, Federal Credit Union Meeting Flexibility During the COVID-19 Pandemic indicating that it is extending the relief measures outlined in the guidance the NCUA issued in March 2020 regarding virtual meetings.

Under this authority, a federal credit union (FCU) may adopt, by a two-thirds vote of its board of directors, the bylaw amendment to Article IV without additional approvals by the NCUA. The NCUA is also adding optional language related to board of directors’ meetings to the amendment. An FCU may choose to adopt the amendment with or without the underlined language indicated in the guidance related to board of directors’ meetings.

FCUs choosing to adopt the following amendment (with or without the language related to board of directors’ meetings) should ensure that the cross-citations conform to their version of the bylaws.

As indicated in the recent LTFCU, 20-FCU-02, the NCUA notifies all FCUs that, if they have adopted this bylaw amendment, it is appropriate to invoke its provisions at any point in 2021 for meetings occurring in that year, if a majority of the board of directors so resolves for each such meeting. General quorum requirements must still be met for all-virtual meetings.

FCUs are reminded to refer to Letter to Federal Credit Unions, 20-FCU-02, NCUA Actions Related to COVID-19 – Annual Meeting Flexibility for specific directions on how a FCU can postpone its annual meeting, how to amend the date of its annual meeting by using the fill-in-the-blank provision in its bylaws, and quorum requirements.

Proposed Rule: Capitalization of Interest (Part 741, Appendix B)
The NCUA Board issued a proposed rule to allow the capitalization of interest in connection with loan workouts and modifications. The proposal would remove the current prohibition on capitalizing interest, which according to the agency “may be overly burdensome and, in some cases, hamper a federally insured credit union’s good-faith efforts to engage in loan workouts with borrowers facing difficulty because of the economic disruption that the COVID-19 event has caused.”

The proposed rule would establish documentation requirements to help ensure that the addition of unpaid interest to the principal balance of a mortgage loan does not hinder the borrower’s ability to become current on the loan. The proposed change would apply to workouts of all types of member loans, including commercial and business loans.

The agency will accept public comments on the proposal for 60 days following publication in the Federal Register.

Board Briefing: State of CU Diversity and 2019 Diversity Self-Assessment
The board received a briefing on the state of credit union diversity, equity, and inclusion. The NCUA staff discussed the annual voluntary diversity self-assessment, which is critical to collecting information on credit union diversity.

NCUA staff further discussed the results of the 2019 diversity self-assessment, which was completed by 118 credit unions, compared to 81 self-assessments submitted in 2019.  A majority (56 percent) of these credit unions reported a leadership and organizational commitment to diversity, and 48 percent reported taking steps to implement employment practices that demonstrate that commitment. Approximately 200 unique credit unions submitted a self–assessment to the NCUA’s Office of Minority and Women Inclusion (OMWI) for at least one of the four years the assessment has been available. Credit unions that submitted the self-assessment more than once showed marked improvement in their diversity and inclusion levels from year to year.

The NCUA now accepts self-assessments year-round. The cutoff date for annual submissions is Jan. 15 of the following year. Credit unions can visit the NCUA’s Credit Union Diversity Self-Assessment page which outlines best practices for demonstrating a commitment to diversity and inclusion.

Board Briefing: 2020 Budget Update and Reprogramming
The NCUA Board was provided an update on the 2020 agency budget.

The board approved the agency’s 2020 reprogramming of $4.3 million from the agency’s projected unspent 2020 travel budget to fund pandemic response activities. This includes COVID-related renovations to the NCUA’s central office building, such as updating the building’s HVAC system.

The agency's Office of the Chief Financial Officer updated its mid-session projection for travel-related spending and now estimates at least $18 million will remain unspent due to the COVID-19 pandemic. The office previously projected $13 million of unspent travel for 2020.

Board Briefing: Share Insurance Fund Quarterly Report
The NCUA Board also received a report on the NCUSIF, which showed $19.2 billion in assets as of the third quarter of 2020. The fund also reported $46.6 million in net income year-to-date.

The Share Insurance Fund in October received additional capitalization deposits of approximately $1.5 billion from insured credit unions after the NCUA invoiced for its semi-annual contributed capital adjustment for credit unions with $50 million or more in assets.

Additionally, for the third quarter of 2020:

  • The number of CAMEL codes 4 and 5 credit unions decreased 1.8 percent from the end of the second quarter, from 166 to 163. Assets for these credit unions decreased 5 percent for the same period from $10.3 billion to $9.7 billion.
  • The number of CAMEL code 3 credit unions decreased 2.3 percent from the end of the second quarter, from 785 to 767. Assets for these credit unions decreased 8.9 percent for the same period from $44.6 billion to $40.6 billion.

There were no federally insured credit union failures in the third quarter that caused a loss to the Share Insurance Fund. Total year-to-date losses associated with one failure in 2020 is $1.6 million.

The third-quarter figures are preliminary and unaudited.

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