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

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

3. NCUA Update Statistics 2 Alaska Credit Union Overview Alaska Region 5 20112012201320142015 Total Number of Credit Unions 12 722 FICUs <=50 million 33332324 FICUs >= 250 million 44444183 Low-Income FICUs22222252 Current Members (in Millions).65.68.72.76.8119.8 Potential Members (in Millions) 10.710.810.911.212.9563.4 Assets (in Billions)$6.8$7.4$7.8$8.2$8.8$257.7

4. NCUA Update Net Worth Ratio Trends 3

5. NCUA Update Return on Average Assets (ROA) Comparison 4

6. NCUA Update Alaska Loan Composition 5

7. NCUA Update Alaska Delinquency by Type 6

8. NCUA Update Delinquency Comparison 7

9. NCUA Update Alaska Share Composition 8

10. NCUA Update Supervision Priorities  Cybersecurity  Interest Rate Risk  Part 748 - Incident Response Programs and BSA Compliance  TILA-RESPA  CUSO Reporting Examiners will be focusing on… 9

11. 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

12. 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

13. NCUA Update Questions to Ask about Cyber Security Year-End 2009Year-End 2010 3 RD Qtr. 2012  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?

14. 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-2010-0005 Letters to Credit Unions (4): - 00-CU-13, 01-CU-08, 03-CU-11, 10-CU-14 All references available at www.ncua.govwww.ncua.gov 13

15. NCUA Update Questions to Ask about Interest Rate Risk Year-End 2009Year-End 2010 3 RD Qtr. 2012  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?

16. 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

17. 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

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

19. NCUA Update Resource Reminders AIRES Questionnaires 18

20. NCUA Update 19

21. NCUA Update Automatic email 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 email address. Sign up free of charge at: www.ncua.gov/Pages/NCUA Express.aspx www.ncua.gov/Pages/NCUA Express.aspx 20

22. NCUA Update Contacting the Regional Director/Office Regional Director:Elizabeth A. Whitehead lizw@ncua.gov@ncua.gov Regional Office:region5@ncua.gov Phone:602-302-6000 Feel free to contact our office with questions or comments. Resources for all Supervisory Priorities available at www.ncua.gov