Welcome to the Twenty Twenty Analytics Blog!
I would like to personally welcome you to the Twenty Twenty Analytics Blog. The purpose of our blog is to stay up to date on credit union standards, regulations and hot topics to provide you with the information you need to know to stay current. I would encourage you to click here to subscribe to the blog to receive updates when new information is posted. Subscribing will not opt you in to receive any promotional material from our website.
Have a question? Have you come across information that you would like to know more about? Email me! Your question may be the topic of our next blog.
Thanks for reading!
-Dan Price, CPA
Twenty Twenty Analytics Blogger
NCUA Finalizes Policy on Troubled Debt Restructurings
Yesterday the NCUA Board met and finalized a new policy regarding Troubled Debt Restructurings. The purpose of the policy is largely to reduce the burden faced by credit unions in tracking these loans. It appears the final verbiage is set to be added to the federal register sometime next week, but in the meantime The NCUA has issued a press release summarizing the major changes.
We reviewed the initial policy during its comment period. If you aren’t familiar with the proposed changes you can read about them here.
Concentration Risk Policies and Concentration Risk Assessment
With concentration risk policies at the forefront of NCUA Examiner focus and relatively little specific guidance on drafting your policies, credit unions are taking some interesting approaches in determining their concentration thresholds. There are some consistencies among credit unions, such as setting thresholds as a percentage of net worth or total assets, but the disaggregation of loan products and percentage thresholds are more varied. The question is, why?
Loan Zone: Portfolio Risk Analysis
Brad Stewart, Enterprise Risk Manager for IBM Southeast Employees’ Federal Credit Union, Twenty Twenty Analytics client and faithful Twenty Twenty Blog reader, was published in Credit Union Management Magazine. His article, “Loan Zone: Portfolio Risk Analysis” discusses the challenges credit unions face in analyzing the risk of their loan portfolios and the benefits of doing so. Brad also has some kind words for the Twenty Twenty Analytics Team and our Risk Model. Thanks Brad!
A couple of excerpts from his article:
Many credit unions understand the need to identify and quantify risks within their loan portfolios, but such scarce resources as time, staffing or expertise can derail the process before it even begins. Executed properly, a risk analysis on your loan portfolio can have significant benefits and, with the right guidance, this seemingly insurmountable task can be achieved. Although hiring help is not always the answer, in our case, it was exactly what we needed.
Overall, the loan portfolio risk analysis from Twenty Twenty empowered us to not only find the answers we were looking for, but to identify new insights and opportunities that might have otherwise gone unnoticed.
If the last few years have taught us anything, it’s that we need better systems in place to understand, evaluate and act on risk. An effective risk analysis on your loan portfolio should not only help you understand your risks, but allow you to proactively make decisions and set strategies that improve your credit union’s financial health and performance.
-Dan Price, CPA
Twenty Twenty Blogger
Tackling TDR Torment
A lot of you have been anxiously awaiting an update on the NCUA’s call for comments on changes to 12 CFR Part 741 “Loan Workouts and Nonaccrual Policy, and Regulatory Reporting of Troubled Debt Restructured Loans.” Unfortunately, they’re not final yet, which means you will more than likely be preparing your 3/31/2012 Call Report the same way you always have.
In the meantime, I wanted to go over some specific examples of situations credit unions have had and go through the steps in determining whether they constitute a troubled debt restructuring. For the purposes of these examples, I will be assessing the status of the loan using the GAAP definition, which is currently in the process of being adopted by the NCUA, but not yet adopted.
To recap, a TDR is a modified loan in which there is financial difficulty on behalf of the debtor and a concession has been granted by the financial institution which it would not have considered but for the borrower’s financial difficulty. Let’s go over how that applies to some specific situations.
Twenty Twenty Analytics Teams With CUNA Strategic Services, Inc. (CSS)
Twenty Twenty Analytics has formed an alliance with CUNA Strategic Services, Inc. (CSS).
Excerpts from the press release announcing the alliance:
“Twenty Twenty Analytics’ strength is derived from the fact it works exclusively with credit unions,” said Wes Millar, CSS senior vice president. “Additionally, the company has experience working face-to-face with examiners, helping credit unions successfully navigate challenging exams.”
CSS “has a proven track record of staying in the forefront of credit union needs, and we could not ask for a better business relationship in this dynamic environment,” said Steve Miller, director of operations for Twenty Twenty Analytics.
To read the press release in full, visit CUNA News Now.
Click here to visit Twenty Twenty’s CSS Page.
-Dan Price, CPA
Twenty Twenty Analytics Blogger
Twenty Twenty Analytics to Present on Troubled Debt Restructurings
This Friday, March 16th at 2:00pm Central Time, Twenty Twenty Analytics is teaming up with CUNA’s Center for Professional Development to provide a Webinar on Troubled Debt Restructurings.
During this webinar, you will learn about the following topics:
- Overview – What Makes a TDR a TDR?
- Answers to frequently asked questions surrounding Troubled Debt Restructurings and Mortgage Modifications
- Calculating and recording impairment on TDRs
- Industry practices for reporting modifications on your 5300 (Call Report)
- How the proposed NCUA TDR guidance “Loan Workouts and Nonaccrual Policy, and Regulatory Reporting of Troubled Debt Restructurings” will affect your internal reporting
- Finance/IT considerations for efficient TDR reporting
- How FASB Update 2010-20 “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” will affect your external reporting
- Management considerations for an effective TDR program
For more information visit the Landing Page on CUNA’s Center for Professional Development Website.
-Dan Price,
Twenty Twenty Analytics Blogger
National Association of Realtors Q4 2011 Median Sales Summary
On February 9, 2012, the National Association of Realtors (NAR) released their median sales price indices of homes for metropolitan areas. The NAR saw declines from Q3 2011 to Q4 2011 in 131 of 149 major metropolitan areas measured. Below are some statistics from the data:
Regulatory Relief Coming for TDR Reporting
The NCUA has proposed an amendment to its previous TDR policy that would alleviate much of the burden credit union officials face in tracking and reporting their troubled debt restructurings. The matrix below details the original TDR rules and the NCUA proposals.
Lending Links – NCUA Exam Updates and Student Loan Speculation
Without getting too deep into any particular topic, we wanted to share a couple of interesting articles with you.
Included in this week’s Credit Union Times was an article written by NCUA Chairman Debbie Matz titled “Expect More Due Diligence, Risk Management Scrutiny” which lists the areas NCUA examiners plan to look at more closely in 2012. At this point, these should come as no surprise to you. They include Concentration Risk, Long-Term, Fixed-Rate Real Estate Loans, Yield Focus, Indirect Loans and Loan Modifications. Good luck.
An interview with Mark Greene, CEO of FICO also just popped up on my Yahoo! Finance ticker titled “Student Loan Crisis Looms: FICO Risk Survey” where he notes 67% of risk managers believe that student loan delinquencies will rise in the next year. It makes sense. With the poor job market it has become much more acceptable to take more than four years to finish college and students are using loans to fund their lifestyles. The poor job market has not influenced students to focus on jobs that are still in demand in lieu of their dream job of dolphin trainer or archaeologist. The result is kids coming out of school in more debt and less income-producing ability. I think managing these loans may become a challenge in the months (years) to come.
-Dan Price, CPA
Twenty Twenty Blogger
Government Accountability Office Report on the NCUA – Why Credit Unions Fail
The United States Government Accountability Office (GAO) recently released its Report to Congressional Committees on the NCUA titled “Earlier Actions Are Needed to Better Address Troubled Credit Unions.” You can read the full report here.
The GAO’s criticisms focused on the NCUA’s Prompt Corrective Action (PCA) program and recommended “…additional triggers for PCA that would require early and forceful regulatory action…” The GAO’s recommendation was based on research showing that credit unions subject to PCA that did not fail were more likely subject to earlier PCA action. This means the NCUA is going to have to find a way to evaluate when these triggers are hit and supervise the PCA program for a larger pool of credit unions. If you were worried about how they were going to keep all of those new examiners included in the 2012 budget busy, you can rest easy.
