Risk-Focused Supervision Tools

When performing risk-focused supervision of a credit union, examiners look for areas of increased risk or other sources of concern. Based on their findings and using their professional judgment, examiners prioritize risks by the magnitude of the potentially adverse effect on the credit union’s earnings and net worth.

The primary risk-focused supervision tools are:

Additionally, on a case-by-case basis, examiners may find it useful to review the following:

  • Board and committee meeting minutes
  • The credit union’s monthly financial statements
  • IRR and liquidity management reports
  • Credit risk management reports
  • Operational policies and procedures (with respect to the credit union’s lending, collections, strategic plans, etc.)
  • Electronic information sources (such as the credit union’s website)
  • Supervisory committee audit reports and workpapers

Examiners review a credit union’s financial reports to identify potential adverse trends, unusual growth patterns, or growing concentrations that may serve as triggers of changing risk levels. But the risk-focused supervision approach also encourages examiners to use other sources of information: trade associations, credit union leaders, industry news reports, and other examiners, for example.

Examiners are encouraged to stay abreast of developments within their district credit unions and in the various industries or communities that affect those credit unions. Whenever an examiner identifies a development that could adversely impact a credit union in their district, they should inform their supervisor.

Call Report

During the examination, and as part of each Call Report cycle, the examiner must verify the accuracy of the Call Report. The risk-focused program places heavy reliance on the accuracy of the data in this report; inaccuracies may result in misleading conclusions. Examiners should stress to the credit unions the importance of reporting accurate information on the Call Report.

Offsite reviews of quarterly Call Reports alone will not allow the examiner the level of detail needed to identify areas of concern or emerging trends. Examiners should use other tools, such as the FPR, to identify any fluctuations or adverse trends.

CUOnline Profile

Credit unions certify the profile annually and are expected to make changes as needed and on a timely basis. Examiners should review and verify the accuracy of information reported by the credit union. Key information in the report includes:

  • Emergency contact information
  • Board and committee information
  • CUSO information
  • Main office and branch locations
  • Programs and services offered by the credit union
  • Information security and technology information (for example, accounting software, data processing, payment systems), and
  • Regulatory information (for example, last member verification, last audit, disaster recovery test, bond provider)

Examiners receive a notification whenever a credit union in their district makes a change to its profile information. Material changes should be reviewed further at the next scheduled examination.

Financial Performance Reports

NCUA produces the FPR from quarterly Call Report data that credit unions submit to the agency. The FPR presents the data in the form of ratios, percentages, dollar amounts, and graphs. FPRs also present peer ratios for comparison to credit unions of similar asset size.

NCUA, SSAs, and others use the customizable FPR to measure financial performance and key trends for a credit union or a group of credit unions. FPRs are publicly available on the Financial Performance Report page of NCUA’s website.

NCUA does not guarantee FPR data accuracy nor is it responsible for the conclusions that may be drawn because it relies on credit unions to submit correct, yet unverified, financial information.

There are two types of FPR:

1. Standard

Standard FPRs are automatically emailed to credit unions each cycle, and include the following information:

  • Summary financial information
  • Ratio analysis
  • Assets
  • Liabilities, shares, equity
  • Income and expenses
  • Delinquent loans
  • Loan losses, bankruptcies, and troubled debt restructured loans
2. Customized

Credit unions can customize their FPR to include specific information by using the online FPR Application. In addition to the standard pages discussed above, the FPR can be tailored to include the following information:

  • Indirect and participation lending
  • Real estate loans
  • Member Business Loans
  • Investments, cash, and cash equivalents
  • Supplemental share information
  • Off balance sheet
  • Borrowings
  • Miscellaneous information about programs and services
  • Information systems and technology

These components are discussed in greater detail in the FPR User's Guide.

Risk Analysis and Trending Evaluation Tool

The RATE tool is available to NCUA examiners through NSPM Tools. It is a dashboard that presents information from the FPR, risk report, key ratios, scope module final risk assessment, and CAMELS rating. It can be helpful in identifying red flags in the credit union’s operations or financial position.

An important component of the RATE dashboard is the Risk Report section. This section lists a series of risk thresholds and identifies potential areas of risk or regulatory violations. (These are identified with a “Y” highlighted in orange.) Whenever “Y”s are present, examiners should pull up the relevant Risk Report by clicking on the current quarter or previous year to determine why the threshold was triggered. For more information, see Risk Reports below.

Examiners are required to complete the RATE review on a quarterly basis. As part of this review, examiners should focus on any red flags on the risk report or emerging risk areas. As instructed in the NSPM, examiners must comment on any changes in risk and document any resulting changes in supervision plans in the appropriate comment fields in the RATE dashboard.

Risk Reports

Risk reports are an analytical tool that is available to help staff conduct offsite monitoring. The data in quarterly risk reports is derived from Call Reports received by NCUA. The data is presented with a standard set of parameters, which can be modified by an examiner. These reports identify credit unions that meet or exceed certain risk thresholds or criteria and, therefore, may need closer supervision. They are available to NCUA and state regulator staff.

Risk reports present key financial ratios and identify potential areas of risk and regulatory violations (for example, excessive loan growth, large or growing concentrations, delinquency trends, lack of audit, or lack of member account verification). Risk reports can be generated for an individual credit union or groups of credit unions. These reports can be accessed through the RATE dashboard (for individual credit unions).

Risk reports will identify areas where risk thresholds have been breached. Examiners are expected to review these areas to determine why the threshold was breached, the resulting risk exposure to the credit union, and whether or not the area should be evaluated further at the next scheduled examination.

Workpapers and Resources

See Also

Last updated October 11, 2016