CUs Engage with Hauptman; Board Meeting Items of Interest

Kyle Hauptman, vice chairman of the National Credit Union Administration (NCUA)
Kyle Hauptman, vice chairman of the National Credit Union Administration (NCUA)

Here’s your recap of this week’s National Credit Union Administration (NCUA) board meeting for September, as well as California and Nevada credit union leaders’ conversation with NCUA Vice Chairman Kyle Hauptman.

A Virtual Conversation with Hauptman
On Tuesday, through a partnership with the Ohio Credit Union League, member credit unions of the California and Nevada Credit Union Leagues met virtually with NCUA Vice Chairman Kyle Hauptman.

The meeting provided an opportunity for an important dialogue between the new NCUA leader and credit unions. Hauptman opened with remarks that included one of his priorities, which is adding newly chartered credit unions, also known as “de novo” institutions. He also noted that the process to launch a new credit union can be difficult and take a long time.

Following his remarks, there was a great deal of open dialogue on several key topics, including capitalization requirements and premium assessments, Current Expected Credit Loss (CECL) preparation, and cryptocurrency.

A big "thank you" goes out to all credit union leaders who participated in this discussion!

Share Insurance Fund Quarterly Report
The NCUA Board’s September meeting started with a National Credit Union Share Insurance Fund (NCUSIF) report showing total income of $60 million and a net loss of $46.3 million for the quarter ending June 30. The balance sheet indicated total liabilities and net position of $19.825 billion, an increase of $52 million from the previous quarter. The fund’s reserve balance stands at $161.1 million as of the end of the second quarter, with $9.1 million being for specific reserves. So far this year, there have been three credit union failures, at a cost of $36.8 million to the fund. The number of CAMEL Code 4 and 5 credit unions decreased slightly from the preceding quarter to 144, with CAMEL Code 3 credit unions increasing slightly to 764.

As of June 30, the equity ratio of the fund is 1.23 percent, a decrease from 1.26 percent as of Dec. 31, 2020. According to staff, the six-month projection for the ratio is 1.28 percent for the period ending Dec. 31, 2021. The projected increase is a result primarily of a lower projected increase of insured shares, as well as the effect of the semi-annual capitalization deposit true up, which will be collected in October.

2021 Mid-Session Budget
The NCUA Board approved several re-programmings related to the 2021 budget, as well as the hiring of additional staff.

Approximately $28.6 million in excess budget is currently projected for 2021, absent any re-programming actions taken by the board. The approved re-programmings listed below would cost the NCUA an estimated $2.4 million in 2021, while employee leave payouts will cost approximately $1.6 million. Therefore, the residual budget balance for 2021 is currently projected to be approximately $24.6 million and can be used to offset future budget needs.

Oregon Member Business Lending Rule

The NCUA Board determined the Oregon member business lending (MBL) rule covers all of the provisions and is no less restrictive than the requirements in NCUA’s Part 723, thus exempting Oregon state-chartered credit unions from compliance with NCUA’s MBL regulation.

NCUA Board Agenda
In a 2-1 vote, with NCUA Chairman Todd Harper dissenting, the board approved NCUA Board Member Rodney Hood’s request to add the following items to the 2021 NCUA Board agenda:

  • CUSOs: CUSOs final rule (to be placed on the October board meeting agenda).
  • Field of membership: FOM Shared Facility Requirements final rule (to be placed on the November board meeting agenda).
  • Mortgage servicing: Mortgage Servicing Rights final rule (to be placed on the December board meeting agenda).

Prior to becoming chair, Harper opposed each of these proposed rules when brought to a vote by Hood (former chair). Today, Harper reiterated his concerns with these three proposed rulemakings, though signaled he could support some of them in final form if they include certain changes. While it is typically the board chair who adds items to the board agenda, the Federal Credit Unio Act permits the other members to bring items before the board.

Proposed Rule: Subordinated Debt
The NCUA Board issued a proposal to amend the Subordinated Debt rule, which becomes effective Jan. 1, 2022. The proposal would amend the definition of “Grandfathered Secondary Capital” to include any secondary capital issued to the U.S. Government, under an application approved before Jan. 1, 2022, regardless of the date of issuance.

The proposed change would benefit eligible Low Income Credit Unions (LICUs) that are either participating in the Treasury Department’s Emergency Capital Investment Program (ECIP) or other federal programs that can be used to fund secondary capital, if they do not receive the funds for such programs by Dec. 31, 2021. The proposal would also provide that the expiration of regulatory capital treatment for these issuances is the later of 20 years from the date of issuance, or Jan. 1, 2042.

NCUA will accept comments on the proposal for 30 days following publication in the Federal Register.

Pin It