ARLINGTON, Va.—Nearly 40% of credit unions who received a Document of Resolution (DOR) during their last exam felt it was unjustified, and nearly 15% of CUs said their examiners appeared less competent than in the past.
That data comes from NAFCU's latest "Economic & CU Monitor," which found that nearly 42% of respondents would be more likely to appeal the results of their last examination if an independent appeals process were in place.
The report from the trade group, which focuses on April data, includes a special section focused on the exam process, following NCUA's January "Letter to Credit Unions" identifying interest rate risk and student lending as areas of concern, along with a statement from the agency that it was looking for ways to streamline the exam process by allowing examiners to determine the scope of individual exams based on the operations and risk at individual CUs.
More than 43% of respondents said they received a Document of Resolution (DOR) from NCUA during their last exam, with 37.5% of those responding that they felt the DOR was not justified. With 41.7% saying they would appeal those results if an impartial system were in place.
When it comes to evaluating the exam process, fewer than 3% of respondents said their examiners were more competent than in the past, thought 14.7 said their most recent exam was better than previous examinations.
An equal percentage said their most recent exam was worse. NAFCU reported that more than 25% of survey participants said that they operational impact of their most recent exams resulted in added costs for their credit union.
While the median duration for exams was 10 days, the median response in advance of an exam was 40 days, though one-third of respondents said they were not told which areas the exam would focus on. In instances when DORs were issued, NAFCU said the median length of time to resolve a DOR was 53 days. The agency said in its report that the high level of interest in an impartial review process illustrates the need for an independent appeals process.
Other Findings
Respondents to NAFCU's survey noted that interest rate risk and cybersecurity threats (75% and 53.6%, respectively) were chief among credit union concerns, whereas 56% said asset liability management was the greatest area of focus during their most recent exam, followed by credit risk management (40%) and member business lending (20%).
Among the report's other findings:
- April saw member growth of 5.2%, while year-over-year share growth rose to 5%.
- Vehicle loans led the way in lending growth, but all areas saw increases
- Average delinquency ratios increased by eight basis points to 0.88%, with delinquencies rising in all lending categories during April except real estate. Chargeoffs declined by two basis points, from 0.51% to 0.49%
- Average capital ratios grew by three basis points to 10.83%
- Net interest margins remained essentially unchanged, falling by one basis point in April, with survey respondents expecting them to stay flat during the next year
- All regions expect equal or accelerated loan growth during the next year.
