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NCUA Priorities for Credit Unions to Consider

See which areas the NCUA is focused on in its 2025 supervisory priorities.

The loan review team at Forvis Mazars collaborates with a significant number of credit unions. Recent discussions with these clients have highlighted areas of focus by the National Credit Union Administration (NCUA), which regulates federal credit unions:

  1. Annual Reviews: There is an increased emphasis on the status of annual reviews. If a credit union is behind on these reviews, it often triggers a detailed analysis of staffing levels. Annual reviews are crucial to ensuring borrowers are being reviewed at least once a year. Delays in these reviews may result in unidentified credit risks or declining trends in borrowers that should be addressed.
  2. Risk Rating: Another critical focus is on risk rating, particularly the use of the primary source of repayment (PSOR) as the main driver of the rating. Risk grade definitions in the loan policy and the weightings in risk rating matrices should be aligned to reflect the emphasis on the PSOR. We have heard criticism that credit unions are identifying a weakness as being a potential weakness rather than a well-defined weakness. This distinction typically impacts whether a borrower is rated a classified grade or not. When the PSOR is weak or the credit union relies on the secondary or tertiary source of repayment, we recommend providing a robust rationale for this reliance and providing an in-depth analysis of this repayment source.

In addition to the items above, the NCUA published its 2025 supervisory priorities, which include:

  1. Credit Risk: The NCUA plans to keep credit risk a supervisory priority for 2025 because loan growth moderated and problem loans increased. Performance within the credit card portfolio has deteriorated more rapidly than aspects of loan portfolios. The NCUA noted the delinquency rate and rolling 12-month charge-off rate for credit card loans both exceeded the peak reached during the 2010 financial crisis. The delinquency rate and rolling 12-month charge-off rates for used vehicle loans are at the highest levels on record. While credit cards and vehicle loans are typically consumer loans, the credit risk of commercial loans also need to be closely monitored.
  1. Lending and Risk Management Practices: The NCUA will be prioritizing the review of the adequacy of credit unions’ loan underwriting standards, collection programs, allowance for credit losses reserves, charge-off practices, management and board reporting, and management of any concentration risks. The agency notes it is important for credit unions to work with borrowers encountering financial difficulties and ensure the credit union’s modification and workout strategies were reasonable and conducted with proper controls and management oversight.

The loan review team at Forvis Mazars comprises more than 50 credit professionals with an average of 25 years of credit experience. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.

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