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Board Action Bulletins: 2008
Prepared by the Office of Public & Congressional Affairs
NCUA Board Meeting results for November 20, 2008
NCUA 2009 budget increases 12.1 percent
The NCUA Board approved a 2009 agency operating budget of $177,863,682, which includes
1,016 full-time staff and represents a 12.1 percent increase of $19,2323,235 over
the 2008 budget. The increase accommodates inflation and program modifications to
address the turbulent economic environment.
NCUA operations are financed by an operating fee paid by federal credit unions and
an overhead transfer from the National Credit Union Share Insurance Fund.
The 2009 budget increase contains NCUA program changes that include introduction
of a 12-month examination cycle; which, when fully implemented over two years, will
add 56 positions -- 50 full-time examiner positions, 5 supervisory examiners and
1 human resource specialist. In addition, a thoroughly trained national examination
team will be created to address challenging cases that pose the most risk to the
National Credit Union Share Insurance Fund.
The categories with major budget increases in 2009 consist of employee pay and benefits,
with a projected 9.91 percent increase; travel, with a projected 34.13 percent increase;
and contracted services, with a projected 29.20 percent increase.
Details of the 2009/2010 budget are available online at
http://www.ncua.gov/GenInfo/BoardandAction/DraftBoardActions/index.aspx.
NCUSIF overhead transfer rate set at 53.8 percent
The NCUA Board established a National Credit Union Share Insurance Fund (NCUSIF)
overhead transfer rate of 53.8 percent to cover the expenses associated with insurance-related
functions of NCUA’s operations for 2009. The overhead transfer rate increased from
52.0 percent for 2008 due to additional time being spent on insurance-related functions.
The Federal Credit Union Act authorizes NCUA to transfer funds from the
NCUSIF for administrative and other expenses related to federal share insurance.
The transfer is applied to actual expenses incurred each month. While the overhead
transfer is a funding source for NCUA, it does not affect the budget amount. The
NCUA Board approves the agency budget without regard to the overhead transfer rate.
2009 operating fee assessment adopted
The NCUA Board approved an operating fee structure and assessment scale for 2009
that includes a 6.5 percent increase in asset dividing points for the federal credit
union operating fee scale, based on projected asset growth of federal credit unions
in 2008.
The 2009 federal credit union operating fee adjustment increase is 6.77 percent,
except for first and second asset tier credit unions, which pay no fee or a flat
fee of $100.
NCUA will issue a letter to federal credit unions regarding the operating fee scale
in January 2009, invoices will be distributed in March, and the operating fee is
due April 15, 2009.
Operating fee scale examples:
$1 million in assets = fee of $238.07, an increase of $15.10 or 6.77 percent
$10 million in assets = fee of $2,380.70, an increase of $151 or 6.77 percent
$100 million in assets = fee of $23,807, an increase of $1,510 or 6.77 percent
12-month examination schedule adopted
Taking a proactive approach, the NCUA Board voted to revise the NCUA risk-based
examination schedule to a 12-month program, allocate $6.8 million to initiate the
program, and provide 50 additional examiners, 45 to be added in 2009, to help execute
examinations.
Current adverse economic conditions and distress in the nation’s financial structure
places credit unions at greater risk. Indications are next year may be more difficult
for financial institutions than 2008. To effectively deal with potential challenges,
a stepped-up examination schedule will provide NCUA with more timely, relevant qualitative
and quantitative information to recognize and respond to sudden changes in credit
union performance.
FOM rule modified
The NCUA Board implemented modifications to its Chartering and Field of Membership
Manual (IRPS 08-2) to update and clarify the process for approving credit union
service to underserved areas.
The final rule includes the following modifications:
- Clarifies that an “underserved area” must qualify as a local community.
- Makes explicit the process for applying the economic “distress” criteria that determine
whether a proposed area’s geographic units are sufficiently “distressed” to qualify
it as an “investment area.”
- Updates documentation and clarifies scope requirements for demonstrating that a
proposed area has “significant unmet needs” for loans and financial services.
- Utilizes NCUA-supplied data on the location of depository institution facilities
to determine whether an area is “underserved by other depository institutions.”
The rule change is effective 30 days after publication in the Federal Register.
Post-merger net worth combines retained earnings
The NCUA Board approved a final rule revising Part 702 to expand the definition
of “net worth” for natural person credit unions for Prompt Corrective Action purposes,
and revising Part 704 to similarly expand the definition of corporate credit union
capital.
The final rule implements a statutory amendment expanding the definition of “net
worth.” It provides for an acquiring credit union, in a natural person credit union
merger, to include the merging credit union’s retained earnings with its own when
determining post-merger “net worth.” When merging corporate credit unions, the final
rule similarly redefines corporate credit union “capital” to allow an acquiring
credit union to include retained earnings of the merging credit union to determine
post-merger capital.
NCUSIF status report
Through October 31, 2008, National Credit Union Share Insurance Fund (NCUSIF) gross
income was $243.7 million, operating expense was $67.4 million, insurance loss expense
was $176.5 million, and net income was a negative $200,000 primarily the result
of insurance loss expense.
Fifteen federally insured credit unions failed through October 2008. Thirteen were
involuntary liquidations and two were assisted mergers. The number of problem code
4 and 5 credit unions has risen from 211 at year-end 2007 to 246. These institutions
represent 2.37 percent of total insured shares. Sixty-three percent of these problem
code credit unions have less than $10 million in shares.
NCUSIF insurance loss expense totaled $176.5 million through October 31, 2008, and
$268.8 million has been charged to reserves during the year. The provision for CU
losses (reserve) account totaled $163.9 million on October 31, with $39.3 million
expensed during October to accommodate the need to increase reserves.
The NCUSIF equity ratio declined from 1.28 to 1.27 percent during October, a result
of higher than anticipated insurance loss expense. The equity ratio is expected
to end the year at 1.27 percent based on estimated 6.85 percent annual insured share
growth.
Board votes are unanimous unless otherwise indicated
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