National Credit Union Adminstration 2018 Annual Report

[Pages:220]National Credit Union Administration

ANNUAL REPORT

2018

ANNUAL REPORT

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2018

ANNUAL REPORT

Source: NCUA

About this Report

The National Credit Union Administration's 2018 Annual Report (also referred to as the Performance and Accountability Report) provides financial and high-level performance results for the agency and demonstrates to Congress, the President and the public the agency's commitment to its mission and accountability over the resources entrusted to it. The 2018 Annual Report focuses on the NCUA's strategic goals and performance results and details the agency's major regulatory and policy initiatives, activities, and accomplishments during the January 1, 2018 through December 31, 2018 reporting period. It also contains financial statements and audit information for the four funds the NCUA administers: the National Credit Union Share Insurance Fund, the NCUA Operating Fund, the Central Liquidity Facility and the Community Development Revolving Loan Fund. This report and prior NCUA annual reports are available on the NCUA's website at . To comment on this report, email pacamail@.

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ANNUAL REPORT

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ANNUAL REPORT

Table of Contents

About this Reporti Message from the Boardv Introduction to the Report1 Management's Discussion and Analysis3

The NCUA in Brief 3 NCUA's Regional Offices 5 Organizational Chart 6 Year in Review 7 Looking Forward25 Performance Highlights30 Financial Highlights37 Management Assurances and Compliance with Laws44

Performance Results51 Performance Structure51 Performance Planning and Process53 Program Evaluation and Review53 Cross-Agency Priority Goals54 Performance Results by Strategic Goal54 Validation and Verification of Performance Data72

Financial Information75 Message from the Chief Financial Officer75 Message from the Office of Inspector General77 National Credit Union Share Insurance Fund82 National Credit Union Administration Operating Fund 126 National Credit Union Administration Central Liquidity Facility 143 National Credit Union Administration Community Development Revolving Loan Fund 156

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2018 ANNUAL REPORT NATIONAL CREDIT UNION ADMINISTRATION

Table of Contents

Other Information 169 Summary of Financial Statement Audits 169 Summary of Management Assurances 170 Civil Monetary Penalty Adjustment for Inflation 171

Statistical Data 173 Overall Trends 173 Net Worth 174 Earnings 175 Loan Distribution 176 Loan and Delinquency Trends 177 Investment Trends - Accounting Standards Codification 179 Share Trends 180 Asset-Liability Management Trends 181 Summary of Trends by Asset Group 182 National Credit Union Share Insurance Fund Ten-Year Trends 183 Credit Union Performance Five-Year Trends 185 Summary of Performance for Federally Insured Credit Unions 192

AppendixI NCUA Board Member BiosI Senior Staff Reporting to the NCUA BoardII NCUA Offices and RegionsII NCUA Leadership VI Key TermsVII List of Acronyms X List of Hyperlinks to Additional Information by Report SectionXII Contact Information XV

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2018

ANNUAL REPORT

J. Mark McWatters

Chairman

Rick Metsger

Board Member

Message from the Board

On behalf of the National Credit Union Administration, we are pleased to present our 2018 Annual Report.

The NCUA's mission is to provide, through regulation and supervision, a safe and sound credit union system, which promotes confidence in the national system of cooperative credit. Further, the agency protects consumers, insures the deposits of credit union members, and safeguards the National Credit Union Share Insurance Fund from losses. As outlined in the agency's 2018?2022 Strategic Plan, the NCUA's strategic goals are:

? Ensure a safe and sound credit union system ? Provide a regulatory framework that is transparent, efficient, and improves consumer access ? Maximize organizational performance to enable mission success

In carrying out our first strategic goal, we examine credit unions to ensure they are operating in a financially sound manner and complying with all applicable laws and regulations. This ensures that millions of Americans can confidently use credit unions for their financial needs and businesses have access to the credit they need to grow.

To meet our second strategic goal, we develop rules and regulations that strike a balance between mitigating potential risks to the credit union system while also creating an environment that encourages innovation and growth. Additionally, through our chartering and field-of-membership programs, we help millions of consumers -- including those in rural and underserved areas -- gain access to affordable financial services.

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2018 ANNUAL REPORT NATIONAL CREDIT UNION ADMINISTRATION

Message from the Board

Our third strategic goal focuses on the efficiency of the agency's operations. We understand that the resources of federal and state-chartered credit unions and their members finance our agency's budget. We endeavor to structure the agency's operations so that we operate in a more efficient, effective, transparent, and fully accountable manner. We also are making critical investments in our technology and human capital to make sure the NCUA keeps pace with a changing marketplace and technological advances.

The NCUA continued its regulatory reform and modernization efforts throughout 2018. We successfully guided these efforts by working together in a bipartisan manner, with an appreciation that reasonable minds may -- and will -- differ. The result is sound public policy that benefits credit unions, their members, and the nation as a whole.

Providing Regulatory Relief While Protecting Taxpayers

As members of the NCUA Board, we have a responsibility to ensure the Share Insurance Fund remains strong and credit unions comply with all applicable laws and regulations. We also recognize that credit unions must compete in a dynamic marketplace. As such, we completed five substantive changes to the NCUA's regulatory structure during the year that strike a balance between safety and soundness and providing credit unions with regulatory relief. These improvements included:

? Providing additional flexibility to corporate credit unions' capital standards; ? Clarifying the severance claims process for employees of credit unions that were involuntarily

liquidated;

? Improving the levels of transparency associated with voluntary mergers; ? Providing additional flexibility to federal credit unions considering a community-charter conversion or

expansion; and

? Delaying the implementation date of the agency's 2015 risk-based capital rule until 2020 and raising

the asset threshold that defines a complex credit union.

During the year, we also proposed or sought advance comment on changes that would provide credit unions with additional measures of regulatory relief by:

? Improving federal credit union bylaws; ? Clarifying the NCUA's loan maturity requirements; ? Clarifying the NCUA's limits on loans to a single borrower or group of associated borrowers; and ? Revising the NCUA's appraisal regulation to reduce its burden on credit unions and make compliance

easier.

The NCUA Board is exploring additional areas where we can improve our regulatory framework. In December 2018, our Regulatory Reform Task Force presented its second reform report. This document outlined the agency's blueprint for future regulatory reform, established priorities for future action by the Board, and developed a mechanism for the public to view our progress in meeting these goals.

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