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Weekly Recap — NCUA moves toward more relaxed on-site exam schedule

The weekly recap featuresnews on regulatory actions, mergers and other issues facing the credit unionspace. Send tips, ideas and chatter to ken.mccarthy@spglobal.com.

News

* Asthe Republican National Convention unfolded last week in Cleveland andDemocrats prepare to convene in Philadelphia this week, credit unions aroundthe U.S. are left to wonder which outcome in the would benefit themmost. The wildcard this time around is the lack of a political voting recordfrom Republican presidential nominee Donald Trump, said Geoff Bacino, a creditunion consultant and a former board member at the National Credit Union Administration.Bacino said Republican credit union leaders he has spoken with are a bitunnerved because they are not sure what a Trump presidency would mean for theindustry. "For this election, it's a tough call because of the debate onwhat Trump might do as he doesn't have any real track record because he's neverbeen elected," he said.

*Mortgage rates have fallen recently due to Brexit and other factors, and U.S.credit unions have taken advantage of it by putting significantly more mortgagerefinance loans ontheir books. The national average for 30-year fixed mortgage rates at creditunions stood at 3.63% on July 15, an S&P Global Market Intelligence studyfound. At July 1, the rate was 3.70% and a month ago it was 3.75%. These ratesrepresent those reported by credit unions that may or may not use discountpoints in their rate reporting. The refinance share of mortgage activityincreased to 64.2% of the total application volume from 64% in the previousweek, the Mortgage Bankers Association reported July 20.

*U.S. District Court Judge John Jones III sentenced former HD York Federal Credit Union CEO and Manager SherryGarner to 24 months in federal prison for evading $19,069 in federal incometaxes on money she embezzled from the York, Pa.-based credit union. A July 20news release from the U.S. Attorney's Office quoted U.S. Attorney Peter Smithas saying that Garner previously pleaded guilty Feb. 19 to a criminalinformation charging her with bank larceny and tax evasion. Between 2010 and2013, Garner embezzled $252,106 from the credit union. She failed to report$70,983 in stolen income on her federal income tax return for 2011.

Regulation/legislation

*The National Credit Union Administration will spend more on technology as itcontinues to work toward a more sensible and relaxed for creditunions. During the regulator's July 21 meeting, the board approved a proposed5-year strategic plan that, among other things, will focus on upgradingtechnology and processes to improve exam quality while simultaneously reducingthe on-site burden for credit unions. Chairman Rick Metsger said those changeswill require an up-front investment for hardware and software, but thelong-term benefits will outweigh the cost "many times over." Theimprovements will help the agency detect and defeat cyber threats to its ownsystems and to credit unions' systems, he said.

*Also during the NCUA's July 21 meeting, the regulator's CFO reported that expendituresare projected to decline by approximately $2.7 million for 2016, based oncurrent projections of the agency's needs. But while the agency projects areduction in 2016 spending, several open obligations from prior years affectthe amount of cash needed. Because the operating fee is partially determined bythe agency's cash needs, the staff recommended no reduction in operating feecollections for 2017.

*National Association of Federal Credit Unions President and CEO Dan Berger, ina comment letter to the NCUA, opposed the interagency proposed rule onincentive-basedcompensation and urged its withdrawal. "This is the latestexample of a Dodd-Frank rule being unnecessarily applied to credit unions. Itis widely-acknowledged, credit unions neither caused the financial crisis, norused any of the risk-inducing IBC arrangements contemplated by this rule,"said Berger. He urged the NCUA to revise the rule so that requirements arebased on actual risks and not on a credit union's asset size.

M&A

*The NCUA approved 16 credit unionmergers in June, according to the agency's latest Insurance Reportof Activity. The NCUA listed "expanded services" as the reason behind12 of the mergers. Three mergers were attributed to "poor financialcondition," and one merger was due to "inability to obtain officials."

*The proposed mergerbetween Middletown, Pa.-based Mid-Atlantic Corporate Federal Credit Union andGreensboro, N.C.-based FirstCarolina Corporate Credit Union received approvals from the NCUAand the North Carolina state regulator, according to a July 21 press releaseposted on CUInsight.com. The combined entity will operate under the NorthCarolina state charter once the merger has taken place.

*Midlothian, Texas-based TrustUSFederal Credit Union and Arlington, Texas-based plan tomerge, according to anews release posted July 18 on CUInsight.com. The press release added thatTrustUS FCU's members as well as regulators have approved the merger. Thepartnership will commence in September when a new Midlothian branch opens.

*Olympia, Wash.-based TulipCooperative Credit Union is expected to into Lakewood, Wash.-basedHarborstone CreditUnion by Sept. 1, TheOlympian reported July 18. The pending merger requires regulatory approval.According to the news story, Harborstone has 78,000 members and assets of $1.2billion, while Tulip has 1,200 members and assets of $2.6 million.