NCUA Update Alaska Credit Union League 42 nd Annual Meeting Elizabeth A. Whitehead, Region V Director National Credit Union Administration

NCUA Update AGENDA Credit Union Statistics Supervision Priorities/Risks on the Horizon NCUA Regulatory Relief Resource Reminders 1

NCUA Update Statistics 2 Alaska Credit Union Overview Alaska Region Total Number of Credit Unions FICUs <=50 million FICUs >= 250 million Low-Income FICUs Current Members (in Millions) Potential Members (in Millions) Assets (in Billions)$6.8$7.4$7.8$8.2$8.8$257.7

NCUA Update Net Worth Ratio Trends 3

NCUA Update Return on Average Assets (ROA) Comparison 4

NCUA Update Alaska Loan Composition 5

NCUA Update Alaska Delinquency by Type 6

NCUA Update Delinquency Comparison 7

NCUA Update Alaska Share Composition 8

NCUA Update Supervision Priorities  Cybersecurity  Interest Rate Risk  Part Incident Response Programs and BSA Compliance  TILA-RESPA  CUSO Reporting Examiners will be focusing on… 9

NCUA Update Cyber Threats Cyber Thieves – Target:Large Institutions – Tactic:Attack Individual Systems – Objective: Steal Money Cyber Terrorists – Target:Vulnerable Entry Points (Small Credit Unions) – Tactic:Infiltrate Interconnected Systems – Objective: Cripple or Destroy the U.S. Economy 10

NCUA Update Cyber Security – What Can You Do? Get educated. Share cyber-security best practices.  Participate in local, state and national information- sharing forums. Ensure your CU systems are secure.  Implement risk mitigation controls: vendor due diligence, strong password policies, proper patch management, employee training, and network monitoring. 11

NCUA Update Questions to Ask about Cyber Security Year-End 2009Year-End RD Qtr  What are the potential vulnerabilities of hackers using the credit union as an entry point to gain access to larger interconnected systems?  Has staff done due diligence to evaluate the cybersecurity of every vendor and every payment system with which the credit union has a digital relationship?  How could the new national cybersecurity standards further protect the credit union and members?  How could the credit union change cybersecurity protocols based on guidance from FFIEC?

NCUA Update Balance Sheet Risk Interest Rate and Liquidity Long Term Assets, Short Term Funding Earnings at Risk When Rates Rise Contingency Funding Arrangements - Interagency Policy Statement on Funding and Liquidity Risk Management OTS Letters to Credit Unions (4): - 00-CU-13, 01-CU-08, 03-CU-11, 10-CU-14 All references available at 13

NCUA Update Questions to Ask about Interest Rate Risk Year-End 2009Year-End RD Qtr  How should the CU’s interest rate risk policy be updated to reflect the new Fed interest rate forecast?  How is the credit union measuring interest rate risk exposure?  What has been learned from shock testing?  What changes should be considered in the credit union’s balance sheet, product pricing or investment strategy to avoid excessive interest rate risk?  What internal controls ensure the CU will follow the board’s interest rate risk policy?

NCUA Update Operational Risk New Risks Require Enhanced Internal Controls Deter Fraud Detect Fraud Earlier / < Losses Detect / Reduce Errors Detect Other External Threats Reduce Reputation Risk Strong Audits are a Must!! 15

NCUA Update Operational Risks – Fraud Hot Spots Poor Accounting Controls/Un-reconciled Books – Ensure Clean Timely Records and Effective Monitor Financial Activity Fictitious and Fraudulent Loans – Monitor New loans, Charge off loans, Due Dates, Subsidiary vs Control Account Un-cleared Overdrafts – Ensure Timely Bank Reconcilements, review general ledger, access controls and override reports Dormant/inactive share accounts – Monitor and clear inactive accounts – Control reports Unrecorded shares – Segregate activity and limit access control – Monitor bank activity False Expenditures – Unsupported expenditures – Budget/financial statement monitoring 16

NCUA Update NCUA Regulatory Relief Adding Supplemental Capital Expanding Fields of Membership Removing Fixed Asset Limits Permitting Asset Securitization Easing Member Business Lending 17

NCUA Update Resource Reminders AIRES Questionnaires 18

NCUA Update 19

NCUA Update Automatic notifications from NCUA website postings Replaces most paper mailings You can choose which NCUA communications you receive. All you need to sign up is an address. Sign up free of charge at: Express.aspx Express.aspx 20

NCUA Update Contacting the Regional Director/Office Regional Director:Elizabeth A. Whitehead Regional Phone: Feel free to contact our office with questions or comments. Resources for all Supervisory Priorities available at