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.

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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?

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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.

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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: