FINAL0004Justification04-06-12

Paperwork Reduction Act Collection Justification

Revisions to NCUA Call Reports

3133-0004

March 2012

PART 1

REQUEST FOR OMB REVIEW AND APPROVAL, 3133-0004
SUMMARY OF PROPOSED CHANGES TO NCUA PROFILE DATA COLLECTION

PROPOSED CYCLE DATE: December 31, 2012

REPORT(S) IMPACTED: NCUA Call Report Form, NCUA Profile Form

OMB FORM #: 3133-0004 (Expires 12/31/2014)

CALL REPORT PAGE(S) IMPACTED: Delinquency – Page 8, Charge offs and Recoveries – Page 9, Specialized Lending, Section 5 – Page 15

PROFILE PAGE(S) IMPACTED: Contacts – Pages 4 - 10, Regulatory – Page 16

SUPPORTING ATTACHMENTS: December 2012 Proposed Profile Form.xlsx, March 2012 Profile Form.xlsx, March 2012 Call Report_Final.xlsx

DESCRIPTION OF NCUA PROFILE: The online system includes an area called the credit union profile. The profile contains information about the credit union that infrequently changes. This area includes some read-only chartering information as well as some data we formerly collected on the 5300 Call Report and Report of Official including the following categories:

• Report of Officials and other key contacts at the credit union,

• The main office and any branch offices,

• Information systems and technology services and structure,

• Disaster recovery information,

• Programs and services credit unions offer to their members,

• Regulatory compliance to include the annual financial statement audit, member account verification, and annual meeting dates, etc.

• Grants the credit union has received and any credit union partnerships they have (optional reporting),

• Credit Union Service Organizations they use and have a financial interest in.

Once a credit union enters their initial data, input is only required for additions, deletions, and changes. Under NCUA Rule and Regulations Section 741.6(a)(1), credit unions are required to update this information within ten days of the election or appointment of officials or thirty days of any other change. This data is editable by credit unions at any time through the online system. This area of NCUA’s data collection is less of a burden on the credit union than the data collected through the quarterly 5300 Call Report since there is not a quarterly reporting requirement and the data infrequently changes.

The proposed changes for December 2012 would be added to the Call Report and profile area of NCUA’s data collection.

DESCRIPTION OF CHANGE:

Profile Changes

Background
In 2010, NCUA approved changes to NCUA Rules and Regulations part 701.4 General authorities and duties of Federal Credit Union directors to clarify and document the important duties of board of directors of federal credit unions including the requirement for Directors to have a working familiarity with basic finance and accounting practices. The source of a Director’s knowledge may come from vendors, trade organizations, college courses, NCUA, life experience, internal credit union training or other resources.

Proposed New Data Collection
NCUA planned to add 1 new account to the Contacts section of the profile to identify the initial date of election or appointment of each official. This question was proposed to help NCUA assess the longevity of credit union board members. NCUA invited public comments on these changes. Only one comment was received and the commenter “did not believe these changes to the profile section are necessary”. The concern was “that such information may be used by credit union opponents and others to mischaracterize a particular credit union or the industry as a whole”. After considering the comment, NCUA has removed the data element in the Profile related to the date of election/appointment. Additionally, NCUA is planning to add a question to the Regulatory section of the profile where credit unions will be required to certify their compliance with Part 701.4 of NCUA Rules and Regulations. Credit unions will also be required to recertify compliance when new Board members are elected or appointed.

NCUA believes the remaining question will not be a significant reporting burden on credit unions. The question would be added to the profile section and once a credit union provides a response for each Director and certifies compliance, they are only required to update this information if it changes. Additionally, for the 97% of credit unions who use the online data collection system, NCUA provides dropdown menus to alleviate confusion and simplify reporting.

Call Report Changes

Background

In January 2012, the NCUA Board approved the Interpretative Ruling and Policy Statement (IRPS) to modify NCUA Rules and Regulation 741.3 to clarify reporting and guidelines for troubled debt restructured (TDR) loans.

Proposed Data Collection Changes

The IRPS states the NCUA will revise the regulatory reporting requirements by eliminating the data collection on modified loans and target data collection efforts on loans meeting the definition of a TDR under Generally Accepted Accounting Principles (GAAP). NCUA is planning to remove the 78 account codes related to modified loans on pages 8, 9, and 15. It is NCUA’s intent to collect similar data about TDRs that we currently collect on modified loans to include delinquency, loan loss, charge off, and number and amount of TDR loans outstanding.

Paperwork Reduction Act Collection Justification

Revisions to NCUA Call Reports

3133-0004

March 2012

PART 2

1. Explain the circumstances that make the collection of information necessary, including identification of any legal or administrative requirements that necessitate the collection.

Sections 106 and 202 of the Federal Credit Union Act require federally insured credit unions to make financial reports to the National Credit Union Administration (NCUA). Copies of these sections are attached as enclosures (1) and (2).

Section 741.6 of the NCUA Rules and Regulations (enclosure 3) requires all federally insured credit unions to submit a Call Report quarterly (enclosure 4) . The financial and statistical information is essential to NCUA in carrying out its responsibility for supervising federal credit unions. The information also enables the NCUA to monitor credit unions whose share accounts are insured by the National Credit Union Share Insurance Fund (NCUSIF).

2. Indicate how, by whom, and for what purpose the information is to be used and the actual use the agency has made of the information received from the current collection.

The information collected from these Call Reports is used by the National Credit Union Administration to fulfill its mission of supervising credit unions and by the Federal Reserve Board to monitor and control the nation's money supply and the system of financial institutions. The information is also used by Congress and by the various state legislatures to monitor, regulate, and control credit unions and financial institutions. The data collected by NCUA is also pertinent to the development of the U.S. Department of Commerce's calculation of the nation's Gross Domestic Product.

The changes made to the profile and Call Report form for December 2012 are to help the National Credit Union Administration assess the longevity of credit union board members and provide data to assess financial risks and loan practices of the credit union.

NCUA's Call Report data is also used to create a Financial Performance Report (FPR) for each reporting credit union. These reports are created for and distributed to all federal credit unions; all federally insured state chartered credit unions, and any non-federally insured credit union which voluntarily provides NCUA with Call Report data. NCUA examiners and State Supervisory Authorities (SSAs) also receive copies of the FPRs. The FPRs provide extremely useful financial and managerial information to users which could not otherwise be provided without the collection of information via the Call Report.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology (e.g., permitting electronic submission of responses) and the basis for the decision for adopting this means of collection. Also describe any consideration of using information technology to reduce burden.

The individual credit union is the sole source of information regarding the sum of its financial information, statistics and operations. As of December 31, 2011, 97% of all federally insured credit unions use NCUA’s web-based data collection system to submit their data. The other 3% of credit unions do not have Internet access and submit their data to NCUA via a paper form of the appropriate Call Report. The data is ultimately uploaded to NCUA's computer network. NCUA’s computers perform a series of sophisticated edits and calculations, thereby minimizing the amount of information required, and reducing the burden to reporting credit unions.

Credit Union Profile
The online system includes an area called the credit union profile. The profile contains information about the credit union that infrequently changes. This area includes some read-only chartering information as well as some data we formerly collected on the 5300 Call Report and Report of Official including the following categories:

• Report of Officials and other key contacts at the credit union,

• The main office and any branch offices,

• Information systems and technology services and structure,

• Disaster recovery information,

• Programs and services credit unions offer to their members,

• Regulatory compliance to include the annual financial statement audit, member account verification, and annual meeting dates, etc.

• Grants the credit union has received and any credit union partnerships they have (optional reporting),

• Credit Union Service Organizations they use and have a financial interest in.

Once a credit union enters their initial data, input is only required for additions, deletions, and changes. Under NCUA Rule and Regulations Section 741.6(a)(1), credit unions are required to update this information within ten days of the election or appointment of officials or thirty days of any other change. This data is editable by credit unions at any time through the online system. This area of NCUA’s data collection is less of a burden on the credit union than the data collected through the quarterly 5300 Call Report since there is not a quarterly reporting requirement and the data infrequently changes. The proposed changes for December 2012 include two accounts that would be added to the profile area of NCUA’s data collection.

We continue to collect credit union financial data through the 5300 Call Report quarterly.

Manual Credit Unions vs. Online Filers

Although majority of credit unions have the capability to use the online system, there are a small number of credit unions that do not have Internet access and will be unable to input their information. These credit unions will be identified as manual filers and will receive a Profile Form and a 5300 Call Report Form each quarter. Both forms will be completed by the credit union and sent to the NCUA or State Supervisory Authority representative for input into the online system. After the initial input of profile information, the examiner will only have to update this information with any changes. Online filing credit unions only receive a letter from NCUA each cycle. Approximately 3% of federally insured credit unions file manually each cycle.

4. Describe efforts to identify duplication.

Aside from the Call Report data gathering cycles, NCUA makes no other comprehensive collection of data. There is no duplication of effort at the federal level. At the state level, NCUA works in close cooperation with the National Association of State Credit Union Supervisors (NASCUS), which represents the SSAs in all states. This cooperative relationship with NASCUS representatives, and with individual SSAs as necessary, results in a mutually beneficial effort to develop the forms and one complete collection of data that can be used by both federal and state regulators. NCUA freely offers to collect all the data, process it, and to provide the information in a convenient electronic format back to the SSAs.

5. If the collection of information involves small businesses or other small entities, describe the methods used to minimize burden.

The burden to small credit unions is minimized in a number of ways. NCUA's online data collection program is utilized to perform extraneous calculations where appropriate and necessary to derive various balance sheet items, produce ratios, compare peer groups, etc. The burden is further minimized by using a format and terminology that are familiar to credit union personnel.

Manual Credit Unions vs. Online Filers

Although majority of credit unions have the capability to use the online system, there are a small number of credit unions that do not have Internet access and will be unable to input their information. These credit unions will be identified as manual filers and will receive a Profile Form and a 5300 Call Report Form each quarter. Both forms will be completed by the credit union and sent to the NCUA or State Supervisory Authority representative for input into the online system. After the initial input of profile information, the examiner will only have to update this information with any changes. Online filing credit unions only receive a letter from NCUA each cycle. Approximately 3% of federally insured credit unions file manually each cycle.

6. Describe the consequence to the federal program or policy activities if the collection were not conducted or were conducted less frequently, as well as any technical or legal obstacles to reducing burden.

Current economic conditions impose a tremendous responsibility on NCUA for reacting quickly to protect the accounts of the nation’s credit union membership (over 89 million people). Being able to act quickly to prevent financial loss, both to credit union members and the NCUSIF, requires frequent monitoring and surveillance. NCUA approved quarterly reporting for all federally insured credit unions to better utilize supervision resources and assess risk to the National Share Insurance Fund (NCUSIF). NCUA instituted innovations to its examination program that reduced the frequency of on-site contacts for credit unions meeting certain criteria.

The consequences of non-collection would be severe. Neither the SSAs nor NCUA would have the means to effectively conduct off-site monitoring nor supervision of their respective credit unions, and the credit unions themselves would lose the valuable information contained on the FPR. The FPR has become an indispensable tool of financial management, especially in light of today’s complex and changing economy.

7. Explain any special circumstances that require the collection to be conducted in a manner inconsistent with the guidelines on 5 CFR 1320.6.

The collection is conducted entirely within the guidelines outlined in 5 CFR 1320.6.

8. Provide a copy and identify the date and page number of publication in the Federal Register of the agency’s notice, required by 5 CFR 1320.8(d), soliciting comments on the information collection prior to submission to OMB. Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, the frequency of collection, the clarity of instructions and record keeping, the disclosure, or reporting format, and the data elements to be recorded, disclosed, or reported.

NCUA has an ongoing commitment to communicate and interact with the SSAs, through NASCUS and on an individual basis, as well as with the various credit union trade associations. Typically, NCUA receives comments and suggestions from the SSAs and trade associations throughout the year. All comments are considered when the Call Report form is revised each year or the frequency of collection is changed.

Solicitations for comments were published in the Federal Register on May 25, 2012 (77 FR 31400) and October 24, 2012 (77 FR 65018). Only one public comment was received, from the National Association of Federal Credit Unions (NAFCU). In summary, NAFCU “does not believe the changes to the Profile section are necessary”. NAFCU was “concerned that such information may be used by credit union opponents and others to mischaracterize a particular credit union or the industry as a whole”. NCUA considered the comment regarding the profile section and has removed the data element in the Profile related to the date of election/appointment. NAFCU’s comment letter went on to “support the NCUA’s action to follow-up on its announced intent to update the portions of the Call Report that pertain to TDRs”.

9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.

No payment, gift, or remuneration is provided for completion of the required Call Report. Call Report submission is required by law (see item 1).

10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulation, or agency policy.

Call Report data, for most parts, is public information subject to release under the Freedom of Information Act. This information is made available to the general public via NCUA’s website (www.ncua.gov). However, certain Call Report and profile information and any information obtained by and reports issued as part of NCUA’s supervisory process are confidential and exempt from release under the Freedom of Information Act.

The proposed changes for December 2012 will be released to the public except for the certification with NCUA Rules and Regulations Part 701.4 as it relates to NCUA’s supervision program.

11. Provide additional justification for any questions of a sensitive nature, etc.

The question related to NCUA Rules and Regulations 701.40 is being captured to identify compliance.

12. Provide estimates of the hour burden of the collection of information. The statement should provide the number of respondents, frequency of response, annual hour burden, and an explanation of how the burden was estimated.

We estimate the average amount of time needed to complete the forms to be 6.6 hours. We applied this average to 7,093 credit unions. The following costs are estimated for the proposed rule:

Staff time – 6.6 hours per reporting unit per reporting cycle.

Of these 6.6 hours, 1 hrs is contributed to inputting the initial December 2012 profile changes. See Section number 15 for detailed information on these changes.

TOTAL ANNUAL RESPONDENTS' COST IN HOURS:	187,255 hours
TOTAL ANNUAL RESPONDENTS' COST IN DOLLARS:	$5,495,934

(Dollar cost is estimated using a computed average hourly wage from Call Report data. The computed average hourly wage is $29.35)

The source of information for the majority of the questions on the form is the monthly financial statements and reports prepared by all credit unions in their normal course of business. Furthermore, NCUA provides advance notification to credit unions of the revisions or changes to reporting frequency in order for them to take the necessary steps to modify their automated or manual record keeping systems as necessary before the actual collection of data begins.

13. Provide an estimate of the total annual cost burden to respondents or record keepers resulting from the collection of information. (Do not include the cost of any hour burden shown in Items 12 and 14.)

Any and all equipment needed to collect and prepare Call Report data is equipment used for the customary and usual business of the credit union. No special or additional equipment is required; therefore, there is no additional cost.

14. Provide estimates of annualized cost to the Federal Government. Also, provide a description of the method used to estimate cost, which should include quantification of hours; operational expenses, such as equipment, overhead, printing, and support staff; and any other expense that would not have been incurred without this collection of information.

Staff

Central Office:

Analyst staff - 2 full-time persons $250,000

Technical data processing support staff $1,001,880

Regional Offices:

Regional office staff – 320 hours @ $55/hr. $17,600

Examiner field staff – 46,160 hours @ $38/hr. $1,754,080

Printing, Assembly, and Mailing $90,000

TOTAL ANNUAL FEDERAL GOVERNMENT COST: $3,113,560

The estimate of annual costs to the Federal Government includes all costs associated with the collection, processing, and distribution of information. However, these costs are offset through the implementation of NCUA’s Risk Based Examination Scheduling program. The program permits the deferral of a number of federal credit union examinations for one examination cycle for credit unions that meet certain safety and soundness criteria. NCUA’s monitoring of financial trends helps reduce the risk to the NCUSIF for losses in an ever-changing economic environment.

15. Explain the reasons for any program changes or adjustments reported in Items 13 or 14 of the OMB Form 83-I.

Item 13 of OMB Form 83-I notes a decrease of 4,515 hours from the last submission (2011). The decrease is noted as an adjustment of the number of credit unions completing Form 5300 from 7,264 federally insured credit unions to 7,093. This decline is due strictly to credit union mergers or credit unions being liquidated.

Item 14 of OMB Form 83-I notes no program changes; however, the hours estimated for the NCUA Examiners includes a one hour per credit union Financial Performance Report (FPR) analysis for all federally insured credit unions. The FPR is generated after the 5300 Report is validated and entered into NCUA’s database. The total hours for the 5300 portion actually declined from 18,188 to 17,788 due to natural decline in total number of charters due to mergers and liquidations. Additionally, only Federal Charters (4,447 charters) are part of the actual NCUA Examiner field staff costs associated with the 5300 program. Only in special circumstances does NCUA validate the state-chartered, federally insured credit union 5300 reports. However, the FPR portion does include analysis of all federally insured credit unions. The FPR portion totals 28,372 hours annually (7,093 FICUs x 4 cycles). In summary then, the total Examiner hours of 46,160 listed under Item 14 comes from adding 17,788 hours for the 5300 portion (4,447 FCUs x 4 cycles) and 28,372 (7,093 FICUs for the FPR portion x 4 cycles).

IMPACT OF DECEMBER 2012 CHANGES

Additionally, NCUA is planning to add a question to the Regulatory section of the profile where credit unions will be required to certify their compliance with Part 701.4 of NCUA Rules and Regulations. Credit unions will also be required to certify compliance when new Board members are elected or appointed.

In January 2012, the NCUA Board approved the Interpretative Ruling and Policy Statement (IRPS) to modify NCUA Rules and Regulation 741.3 to clarify reporting and guidelines for troubled debt restructured (TDR) loans.

The IRPS states the NCUA will revise the regulatory reporting requirements by eliminating the data collection on modified loans and target data collection efforts on loans meeting the definition of a TDR under Generally Accepted Accounting Principles (GAAP). NCUA is planning to remove the 78 account codes related to modified loans on pages 8, 9, and 15. It is NCUA’s intent to collect similar data about TDRs that we currently collect on modified loans to include delinquency, loan loss, charge off, and number and amount of TDR loans outstanding.

16. For collections of information whose results are planned to be published, outline plans for tabulation and publication. Address any complex analytical techniques that will be used. Provide the time schedule for the entire project, including beginning and ending dates of the collection of information, completion of report, publication dates, and other actions.

The Financial and Statistical Report/Call Report project timetable (The 22nd of each quarter is an approximate date) is:

March 31 Collection

April 22 Forms Due

April 22 - May 6 Forms Processed

May 7 - May 21 Reports Prepared

May 7 - June 4 Data Finalized and Distributed

June 30 Data Collection

July 22 Forms Due

July 22 - August 5 Forms Processed

August 6 - August 20 Reports Prepared

August 6 -September 3 Data Finalized and Distributed

September 30 Collection

October 22 Forms Due

October 22 - November 5 Forms Processed

November 8 - November 22 Reports Prepared

November 8 - December 7 Data Finalized and Distributed

December 31 Data Collection

January 24 Forms Due

January 25 - February 7 Forms Processed

February 8 - February 22 Reports Prepared

February 8- March 7 Data Finalized and Distributed

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.

This action is not requested.

18 Explain each exception to the certification statement identified in Item 19, “Certification for Paperwork Reduction Act Submissions,” of OMB Form 83-I.

There are no exceptions to the certification statement.

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