This year was a transformative year for credit unions. It was ayear in which credit unions made the transition from the losses ofrecession to the stability and growth of recovery. During the year,the industry topped $1 trillion in assets and grew strongly toapproach 94 million members.

Looking at third-quarter results, the industry's performance hasbeen impressive by just about every measure. Return on averageassets reached 86 basis points, a more than four-fold increase fromthe 18 basis points at the end of 2009. Industry net income roseand lending expanded, with low-income designated credit unionsleading the lending expansion.

The industry's delinquency ratio fell from 1.84% to 1.17% andcharge-offs dropped from 1.21%  to 0.73%. The number andpercentage of troubled credit unions have declined, and we've seencontinued improvements in the performance of the share insurancefund.

In short, all the metrics are going in the right direction.

At the same time, the NCUA is adapting to the changing industrylandscape with smart, innovative regulatory reforms that encourageprudent growth and reasonable risk-taking; new tools for consumers;and a solid commitment to building on the progress we have madetogether.

This progress has resulted in a stronger, safer credit unionsystem. It all works because of better communications.

When I became NCUA board chairman, one of my top priorities wasto improve communications both internally and with ourstakeholders. To this end, we recently released the public versionof the National Supervision Policy Manual, which details NCUA'sinternal operations for supervisory staff.

This came on the heels of the six listening sessions I heldaround the country, at which credit union officials shared theirconcerns and suggestions. Many of the ideas from these sessionsformed the basis for NCUA action, particularly in providingregulatory relief.

A little over a year ago, I announced my regulatorymodernization initiative, a framework for keeping the credit unionindustry safe and sound while relieving credit unions ofunnecessary regulatory burdens. The initiative follows the spiritof President Obama's executive order, which asked independentagencies to examine their regulations, eliminate outdated orinsufficient rules and create more effective regulatory programsbetter suited to the post-recession environment.

We made real progress on the initiative in 2012. Some highlightsinclude the low-income credit union initiative. It's now easier forqualified credit unions to receive and take advantage of thelow-income designation, such as expanded member business lending,access to supplemental capital and eligibility for CommunityDevelopment Revolving Loan Fund grants and low-interest loans. Morethan 2,200 credit unions now have the designation.

In addition, this year, to keep more people in their homes, NCUAfinalized a new rule on troubled debt restructuring and loanworkouts that gives credit unions more flexibility to modify loanswithout having to immediately classify them as delinquent.

In September, the NCUA Board issued a proposed rule to updatethe definition of a “small entity” to include federally insuredcredit unions with assets below $30 million. Increasing thisthreshold from the current $10 million will require us to considerthe impact of new rules on an additional 1,600 credit unions andwill remove these additional small credit unions from the scope ofthe NCUA's final interest rate risk management rule and risk-basednet worth requirements.

In 2012, the NCUA completed a significant step in resolving thecorporate credit union crisis. Western Bridge and U.S. CentralBridge were both shuttered, after new corporates were successfullyre-capitalized to replace failed ones. This took place withoutdisrupting services to either credit unions or consumers throughoutthe transition process.

At the same time, we stepped up our efforts to hold accountablethose responsible for the crisis. The failure of five corporatecredit unions resulted from billions of dollars' worth ofmortgage-backed securities sold by large investment firms provingto be far less creditworthy than claimed. These Wall Street firmsessentially ran a bait-and-switch operation. Initially, 82% ofthese securities had a AAA rating; 74% are rated as junk today.

As liquidating agent, the NCUA has the statutory obligation toseek recoveries from the parties responsible for these catastrophiclosses. We moved deliberately to demand accountability. To date, wehave recovered more than $170 million in settlements with threefirms–Citigroup, Deutsche Bank and HSBC–and we have filed suitagainst seven others, Barclay's, Credit Suisse, Goldman Sachs, J.P.Morgan Securities, RBS Securities and UBS Securities. Net proceedsfrom our litigation efforts will help reduce the overall corporatestabilization assessment amount for credit unions in thefuture.

Rest assured, the NCUA will continue to pursue the interests ofall credit unions in this effort.

The credit union industry has accomplished much in the pastyear. In 2013, there will be more work to do and fresh challengesto meet. Given how far we've come, I look at the year ahead withconfidence. Our goals at the NCUA are to continue to communicate,to provide smart, reasonable regulation and to promote greaterstrength and stability in the credit union industry.