NCUA Leadership to Region V Credit Unions: Expect Exam Modifications

Association and league presidents from across Region V joined other key credit union leaders at the National Credit Union Administration (NCUA) regional office in Tempe, Ariz., on Tuesday to discuss mutual concerns and advocate for changes, part of a broad plan to modify the examination process for all credit unions.

Regional Director Liz Whitehead started the meeting with an overview of Region V. She reiterated that the “New NCUA” is focusing on bringing in new talent, with a goal of supporting a thriving credit union industry. Credit unions reported record earnings in 2012, when assets, membership and net worth all rose while delinquencies fell.

The region’s credit unions also reported a combined 21 percent drop in the number of CAMEL 3, 4, and 5 credit unions for the year ending December 31, 2012. Associate Regional Director Cherie Freed pointed out that management is a leading indicator of how a credit union will do in challenging economic times.

The introductions and overviews were followed by a full agenda that included regional exam discrepancies, concerns about the examination process, communication, the NCUA’s role in state-chartered exams, small credit union changes, and a handful of additional state-specific issues. Topics were identified by association committees, common themes from member surveys, and stories shared directly by members with their associations.

Whitehead addressed the exam survey issues head on, indicating that examiners will be given clear guidance on how to use documents of resolution (DORs), examiner findings, and supplementary facts, and how to offer informal discussion items and general recommendations. The director told advocates that DORs will only be used for issues that have the potential to cause the failure of the credit union—a clarification that Northwest Credit Union Association (NWCUA) Director of Regulatory Advocacy John Trull said should significantly reduce how often they are used. This initiative will begin taking place in the near future, and by year’s end credit unions can expect to see a more consistent approach.

“This is exciting news with the potential to make future exams be more productive and less adversarial,” said Gayle Gustafson, lending leader at Rivermark Credit Union and chair of the NWCUA’s Regulatory Advisory Committee.

Gustafson also posed an interesting question during the meeting, asking what the regional office was doing to encourage innovation and risk-taking among credit unions. Region V senior management provided a nuanced response. Examiners, they said, want to see that the credit union has done its due diligence and that it truly understands the risks associated with any new program. A credit union should have policies and procedures in place that limit exposure, and it needs be able to answer examiners’ questions related to risk. If an examiner expresses concerns, credit unions are encouraged to push back on the examiner and ask for an explanation of their concerns.

Immediately following the Region V meeting, the NCUA released a supervisory letter to all field staff giving guidance on establishing a uniform examination approach to reviewing loan workouts, nonaccruals and regulatory reporting of troubled debt restructured loans. The guidance should help reduce the number of citations examiners issue related to problem loan management and allowance for loan and lease loss because the expectations are laid out clearly and concisely.

“We continue to make exam modifications based on feedback from the credit union community,” Whitehead said. “These meetings are really valuable to continue our good working relationship.”

Attendees at the meeting learned that Region V got Nevada back this year, and are evaluating California returning to Region V in 2014. They were also informed that examiner expertise has increased significantly in recent years.

“Director Whitehead is committed to improving examiner interactions and would really like more credit unions to finish an exam feeling like the process was helpful,” Trull said. “I believe that attitude is reflected in the approach of the field staff.”

NCUA Associate Regional Director Mike Dyer weighed in as well, indicating that examiners intend to be flexible when scheduling an exam and are doing their best to give longer lead times.

“I remember a couple of years back when problems with troubled debt restructuring were the only topic of conversation. Now it has been addressed, and it did not even come up at the Region V meeting,” said Troy Stang, president and CEO of the NWCUA. “These dialogues have led to beneficial changes. Next year, the overused Documents of Resolution will be a thing of the past.”


The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions about these or any regulatory issues, please contact Director of Regulatory Advocacy John Trull at, or at 503.350.2209.

Posted in Compliance News, Compliance News, NCUA.