ALEXANDRIA, Va. — On July 25, the NCUA Board approved a 0.08% 2013 assessment to federally insured credit unions for the Temporary Corporate Credit Union Stabilization Fund. Those eight basis points represent the lowest end of the NCUA’s estimate of eight to 11 basis points announced in November 2012 and will generate at least $700.9 million when the funds are collected in October. It is the lowest corporate assessment credit unions have paid since making their first payment in 2009.
According to the NCUA’s board action memorandum, the agency will apply $650 million toward payment on outstanding borrowings to the Treasury, which will reduce the total amount outstanding to not more than $4.075 billion. The payment will increase the NCUA’s available credit line to $1.925 billion, which would cover unexpected contingencies for both corporate stabilization and the National Credit Union Share Insurance Fund.
After applying the 2013 assessment, the NCUA estimates the remaining corporate stabilization assessments range from $900 million to $3.2 billion.
Director of the Office of Examination and Insurance Larry Fazio told Chairman Debbie Matz and Board Member Michael Fryzel that as the range decreases and narrows, the NCUA “could get to a point where it looks like the performance has improved enough that future boards my choose to slow down or discontinue assessments for a time.”
However, Fazio said, that decision will take into account remaining Treasury borrowings and the overall still-negative net position of the corporate stabilization fund.
The assessment will drop the aggregate return on average assets for federal insured credit unions from 0.83% to 0.76%, and cause 328 of them to become unprofitable. Aggregate net worth will drop from 10.31% to 10.25%.
Additionally, 31 credit unions will see their net worth drop below 7%, subjecting them to the earnings retention requirement of prompt corrective action. Eight credit unions will see their net worth drop below 6%, forcing them to file a net worth restoration plan. However, no credit union will drop below 2% net worth, the NCUA said.
Although the NCUA will invoice the assessment in September to be due by mid-October, credit unions should expense the assessment in July and report the entire expense on their September 30 call report, the NCUA said in its board memo.
The board also approved a $2.6 million decrease in its 2013 operating budget, resulting in a revised total budget of $248.8 million.
Because federally insured credit unions have already paid 2013 operating fees, the excess funds will be used to offset 2014 operating budget requirements, which will be revealed in November.
Budget tweaks include a $6,263,449 net decrease in employee pay and benefits after the NCUA scrapped its budgeted 7.5% pay and benefits increase that would have cost $9.5 million and replaced it with an average of increase 3%, which will come in the form of a one-time, performance-based lump sum totaling $3.6 million. An additional $100,000 will be doled out to employees who aren’t union members to correct a locality pay disparity that resulted from a three-year pay freeze.
All NCUA employees last received merit increases and locality pay adjustments in 2010. In 2011, only employees covered under the NCUA-National Treasury Employees Union and nonbargaining union employees received merit increases. However, in 2011, only union members received local adjustments. Senior staffers received no increases in 2011. And, no employees received pay increases or locality adjustments in 2012 or during the first half of 2013.
NCUA Board Chairman Debbie Matz said the NCUA is required per the Federal Credit Union Act to maintain compensation parity with other regulatory agencies, and it has not.
“It really does pain me that [NCUA employees] work so hard and have done such a tremendous job, and don’t realize any pay increases,” Matz said.
Other changes to the budget include a $3.8 million net increase in contracted services that will upgrade information technology systems and strengthen cyber security.
The increase will also deploy an Emergency Notification Management System and a new travel management system the agency said will increase efficiency and reduce paperwork.
The travel budget was decreased by $198,500. Rent, communications and utilities saw a net increase of $85,950 due to larger and longer examiner meetings and training. And participation in the Federal Financial Institutions Examination Council training resulted in a net budget increase of $27,943.