​NCUA Board Removes Calendar-Year Exam Requirement, Adopts New Strategic Plan

At its July meeting, the NCUA Board unanimously approved the agency's 2017—2021 Strategic Plan, which updates NCUA's performance goals for measuring annual examinations and describes the agency's strategic goals in the areas of safety and soundness, consumer protection and financial literacy, and workforce development and diversity. The Board also received briefings from the Chief Financial Officer on the revised 2016 agency budget estimates and the performance of the National Credit Union Share Insurance Fund, which grew to more than $13 billion in the second quarter.

Strategic Plan Fulfills Commitment to Examination Flexibility

NCUA's 2017—2021 Strategic Plan, approved unanimously by the Board, updates the agency's performance goals for examinations as part of the overall effort to modernize the examination process.

“The agency's new strategic plan prioritizes continual quality improvement to make our operations both more efficient and effective rather than the adoption of new rules and regulations,” NCUA Board Chairman Rick Metsger said. “We will focus on upgrading our technology, systems and processes to improve the quality of our examinations and supervision while simultaneously reducing the onsite burden on credit unions and improving the quality of life for our examiners.”

The Board retired two agency performance goals requiring the examination each calendar year of all federally insured, state-chartered credit unions with more than $250 million in assets and every federal credit union. The Board established an interim goal of completing an efficient and effective federal and state examination process through the end of 2016.

Chairman Metsger in May established the Exam Flexibility Initiative to obtain stakeholder feedback and evaluate the agency's examination and supervision program. The Board expects to receive the group's recommendations in September.

The agency's three strategic goals described in the five-year plan are:

  • Ensuring a safe and sound credit union system;
  • Promoting consumer protection and financial literacy; and
  • Cultivating an inclusive, collaborative workplace that maximizes productivity and enhances impact.

Copies of the 2017—2021 Strategic Plan and previous strategic plans and annual performance plans are available at http://go.usa.gov/x2w3Y.

2016 Mid-Year Budget Review Estimates $2.7 Million in Less Spending

NCUA's Chief Financial Officer reported agency expenditures currently are projected to decline by approximately $2.7 million for 2016.

Several open obligations from prior years affect agency cash needs. Because the Operating Fee is partially determined by those needs, staff recommended no reduction in Operating Fee collections for 2017 at this time.

NCUA's revised 2016 operating budget estimate will be $288.2 million, including decreases in every major budget category. The largest estimated change, based on current projections of staffing trends through the end of the year, is $1.9 million in lower employee pay and benefits expenses associated with vacant positions.

Reductions in travel and administrative costs are $323,000 and $234,000, respectively. Rent, communications, and utilities costs are reduced by $30,000. Contracted services costs are reduced by $191,000.

Board members approved a rolling two-year budget at their November 2015 open meeting. The 2017 budget is scheduled to be reviewed at the Board's open meeting in November. The agency will host a stakeholders budget briefing in October on the 2017—2018 budget.

NCUA makes extensive budget information available online at http://go.usa.gov/x4ECQ.

Share Insurance Fund Maintains Consistent Trends

Because of continued improvement in the performance of federally insured credit unions, the second quarter of 2016 saw consistent trends in income and operating expenses for the Share Insurance Fund.

During the quarter, the fund had a net loss of $21.8 million, but it had $2.2 million in net income for the first half of 2016.

As of June 30, 2016, the calculated equity ratio, based on estimated insured shares of $993.5 billion, dropped to 1.24 percent. When the next one-percent deposit capital adjustment is collected in October for all federally insured credit unions with assets of $50 million or greater, the equity ratio is estimated to be 1.27 percent, consistent with the agency's expectations. That ratio may differ if loss patterns change. NCUA will invoice for the adjustment in September.

Second-quarter investment and other income was $56.9 million. Operating expenses were $52.8 million. The provision for insurance losses increased by $25.9 million. Overall, the amount of assets in CAMEL code 3, 4 and 5 credit unions has decreased 54 percent since reaching a high of $205.6 billion in September 2010.

For the second quarter of 2016, the Chief Financial Officer reported:

  • The number of CAMEL code 4 and 5 credit unions declined 16.7 percent from the second quarter of 2015 from 251 to 209. More than half were credit unions with assets of $10 million or less.
  • Assets of CAMEL code 4 and 5 credit unions were $9.5 billion, a 16.7 percent decline from the second quarter of 2015.
  • The number of CAMEL code 3 credit unions declined 10.1 percent from the second quarter of 2015 from 1,336 to 1,201.
  • Assets of CAMEL code 3 credit unions were $85.2 billion, a 9.5 percent decline from the second quarter of 2015.

Six federally insured credit union failed during the second quarter. Fraud was a contributing factor in all six failures.

There have been 11 failures in the first six months of 2016. Total losses associated with failures through the second quarter were $8.5 million.

The second-quarter Share Insurance Fund figures are preliminary and unaudited.