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The NCUA received a Quarterly Report on the Share Insurance Fund, adopted a Final Rule on the Community Development Revolving Loan Fund, adopted the 2017/2018 Operating Budget, and held two Board Briefings on the 2017 Overhead Transfer Rate and the Share Insurance Fund Equity Ratio Projections and 2017 Premium Range.
Share Insurance Fund Quarterly Report.
The Board received a Quarterly Report on the NCUSIF indicating Total Income of $171.6 Million and Net Loss of $40 Million for the quarter ending September 30, 2016. The Balance Sheet showed Total Liabilities and Net Position of $13,322.6 Million. The number of problem Credit Unions CAMEL Code 4/5 decreased to 201 although the percentage of Camel Code 4/5 Shares to Total Insured Shares increased from 0.85% to 0.85%. The number of CAMEL Code 3 reduced to 1,164. The number of credit union failures in 2016 sits at 12. The Board noted 10 of those were as a result of fraud.
Final Rule, Part 705, Community Development Revolving Loan Fund.
The Board adopted a final rule making several technical amendments to NCUA's rule governing the Community Development Revolving Loan Fund. The amendments will provide regulatory relief and make the rule more succinct and update it to improve its transparency, organization, and ease of use by credit unions. The underlying substantive portion of the Community Development Revolving Loan Fund did not change only the procedures surrounding the implementation.
2017/2018 Operating Budget
The Board approved the 2017 Operating Budget of $298.2 million and 1,230 FTEs, and the 2018 Operating Budget of $312.1 million and 1,208 FTEs; the Capital Budget of $15.8 million and the 2018 Capital Budget of $15.4 million; and the 2017 budget of $4.1 million and 2018 budget of $4.2 million for oversight of the Temporary Corporate Credit Union Stabilization Fund as required by the Corporate System Resolution Program.
The Board further adopted the ten recommendations outlined in the Examination Flexibility Initiative Report which includes the extended examination cycle for those credit union under $1 billion in assets and CAMEL 1 and 2 Ratings (and other criteria).
Board Briefing, 2017 Overhead Transfer Rate
The Board received a Board Briefing on the establishment of the Overhead Transfer Rate which is one of two mechanisms used to fund the NCUA’s budget, the other being the Operating Fee. For 2017 the Overhead Transfer rate is set at 67.7%, a drop from the rate of 73.1% in 2016. By contrast the Operating Fee charged only to Federal Credit Unions is slated to increase by an Average Rate Adjustment of 25.46%. The Operating Fee had decreased over the past several years. NCUA notes that FCUs through the Operating Fee and the OTR pay approximately 67% of the NCUAs budget while Federally Insured Credit Unions portion is approximately 33%.
The Board noted that it is in the process of re-evaluating the OTR in an attempt to devise a simpler and fair mechanism in allocating costs and staff plans to deliver an analyses and related options and recommendations to the Board by the end of January 2017. The OTR was placed out for comment with the Board receiving 40 letters addressing various issues on the OTR.
Board Briefing, Share Insurance Fund Equity Ratio Projections and 2017 Premium Range.
The Board received a briefing on the Share Insurance Fund Equity Ratio Projections and 2017 Premium Range. A copy of the report can be viewed here. The presentation noted that it estimates that 2017 NCUSIF premiums are estimated to fall within the range of 3-6 bps, although the actual amount is required to be determined by action by the NCUA Board prior to credit unions being billed. The Year-end Equity Ratio (using a fully-funded 1% contributed capital deposit) would likely range between 1.24% and 1.27% before any premium. The Normal Operating Level is 1.30 percent of insured deposits. Credit Unions should not accrue for these expenses until the Board determines to charge a premium but are providing the estimates for planning purposes.
The Board noted that with a premium range of 3 bps – 6 bps between 110 and 219 credit unions will be in a negative Net Income situation after the Premium is assessed.
The presentation took pains to note that the FDIC is headed to a 2.00 deposit reserve ratio. Dodd Frank increased the FDIC minimum from 1.15% to 1.35% and removed its upper limit. They have a requirement for their DRR to reach 1.25% by 9/30/2020.
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