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Samantha: Hello, this is Samantha Shares.

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This episode covers Semiannual
Risk Perspective from the National

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Risk Committee, Fall 2025.

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The following is an audio
version of that document.

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This podcast is educational
and is not legal advice.

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We are sponsored by Credit Union
Exam Solutions Incorporated, whose

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team has over two hundred and
forty years of National Credit

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Union Administration experience.

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We assist our clients with N C
U A so they save time and money.

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If you are worried about a recent,
upcoming, or in process N C U A

00:00:33.844 --> 00:00:38.114
examination, reach out to learn how they
can assist at Mark Treichel dot com.

00:00:38.544 --> 00:00:42.884
Also check out our other podcast called
With Flying Colors where we provide tips

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on how to achieve success with N C U A.

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And now the document.

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The strength of the federal
banking system remains sound.

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Balance sheets remain satisfactory,
with high capital and liquidity ratios

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positioned to absorb potential stress.

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Lower funding costs, moderate loan growth,
and modest expense growth contributed to

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the satisfactory earnings performance.

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Investment portfolio unrealized losses
fell to half of amounts reported in two

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thousand twenty three given the rate
environment and strategic repositioning.

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Net interest margin generally expanded
throughout the federal banking system

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and non maturity and term deposit
costs reset in line with lower rates.

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Commercial and retail loan portfolio
delinquencies, loss rates, and noncurrent

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and classified levels remain manageable.

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Liquidity remains sound.

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Deposit levels, net of brokered deposits,
continued to increase during the first

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half of two thousand twenty five.

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Contingent liquidity sources
are satisfactory and expanding.

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Noncurrent loan rates for the federal
banking system slightly increased

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from the prior year but remain
well below their long term average.

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Cyber threats remain a concern.

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The Office of the Comptroller of the
Currency has observed an increase in

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threats posed by foreign state sponsored
actors and sophisticated cybercriminal

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groups targeting the financial sector.

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These actors continue to target financial
institutions due to the sensitive

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nature of financial data and the
critical role of banks in the economy.

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Financial innovation presents
banking opportunities.

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The financial industry is in the midst
of a change in the nature and delivery

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of financial products and services.

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Innovation brings risks, but so
too does a lack of innovation.

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A lack of investment in new
technologies, products, and services

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may present material risks to
long term bank performance and the

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viability of institutions that are
slow, reluctant, or unable to evolve.

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The Office of the Comptroller of the
Currency seeks to foster a regulatory

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environment that enables banks to advance
their businesses and client interests

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while managing financial risks and
operating in a safe and sound manner.

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Commercial and retail loan portfolio
delinquencies, loss rates, and

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noncurrent and classified levels remain
manageable across most loan categories.

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Multifamily commercial real estate
experienced the most weakening in credit

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performance from the prior year, with
noncurrent loan rates above their nineteen

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ninety one to twenty nineteen average.

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This increase was driven by an outlier and
not a systemic decline in loan quality.

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For community banks, noncurrent
rates were little changed from

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historically low levels of a year
ago and remained below historical

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averages across all loan categories.

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Total loan balances for the federal
banking system were nearly four

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percent higher from a year ago.

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Loan growth was supported by property
loans such as residential real

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estate and nonfarm nonresidential
commercial real estate, as well as

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multifamily commercial real estate.

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Banks reported tighter underwriting
standards for commercial and

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industrial loans, reflecting a
more uncertain economic outlook.

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Slowing economic growth and higher
input prices could compress margins

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in some manufacturing sectors,
particularly for companies with higher

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leverage or weaker margins that cannot
pass rising costs on to customers.

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Banks also reported tighter
underwriting standards and weaker

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demand for commercial real estate
loans and residential mortgage loans.

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Where banks saw weaker demand for
commercial and industrial loans, this was

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attributed to lower customer investment
in plants and equipment and decreased

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financing needs for inventories.

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While prudent, tightening credit
standards could result in higher

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refinance risk for marginal borrowers.

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Risks in income producing commercial
real estate portfolios vary by

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property type and geography.

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Hospitality and industrial commercial
real estate are showing signs of

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weakening amid lower demand, while
retail properties remain resilient.

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Office properties are experiencing
mixed results as supply growth

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has tapered, but demand remains
sensitive to macroeconomic conditions.

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Demand for multifamily commercial
real estate continues to grow, and

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vacancies are declining in many markets.

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Market risk in the federal banking system
is generally satisfactorily managed.

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Net interest margin expanded
at many banks due to increasing

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asset yields and decreasing term
and non maturity deposit costs.

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Liquidity remains sound.

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Unrealized investment portfolio
losses remain elevated and exposed to

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higher yields along the United States
Treasury yield curve, but represent

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about half of what was reported
during two thousand twenty three.

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Some banks chose to reposition their
portfolios by selling lower yielding

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securities, realizing the loss,
and reinvesting at market yields.

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The financial industry is in the midst
of significant technological innovation.

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Banks of all sizes are exploring ways
to leverage artificial intelligence.

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Some banks are deploying sophisticated
models to improve credit underwriting,

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detect fraud in real time, and
personalize customer experience.

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Generative artificial intelligence
use cases have largely been internal

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facing, focusing on improving
employee efficiencies, coding,

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call center agent assistance,
employee knowledge base support, and

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document creation and summarization.

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Appropriate governance and risk
management are essential to mitigate

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potential risks when implementing
artificial intelligence systems.

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The United States economy
remains generally resilient,

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demonstrated by stable and positive
corporate earnings performance

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and continued consumer spending.

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The economy experienced modest gross
domestic product growth in the first

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half of two thousand twenty five,
with a first quarter contraction

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followed by a second quarter rebound.

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Job creation has slowed, but the
unemployment rate has remained

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low by historical standards.

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Market participants anticipate
further federal funds rate cuts.

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Banks remain well positioned to
absorb stress, with capital ratios and

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liquidity high by historical standards.

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This concludes the document.

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If your credit union could use assistance
with your exam, reach out to Mark Treichel

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on LinkedIn or at Mark Treichel dot com.

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This is Samantha Shares, and
we thank you for listening.