Defections from Federal Charter to Create Budgetary Headaches for NCUA

Defections from the federal charter are going to have budgetary implications for the National Credit Union Administration (NCUA).

Earlier this year, NCUA Board member Metsger wrote that number federal-to-state charter conversions are running at the pace of three-to-one over the last four years. Asset migration from federal to state charters is running at a faster rate of eight-to-one.

As NCUA loses federal charters and assets in federal credit unions, the agency will see a decline in operating fee revenues (assuming no change in the operating fee rate). For example, the conversion of Suncoast Credit Union (Tampa, FL) to a state charter meant that in 2015 NCUA saw a decline in operating fee revenues by approximately $400,000. The proposed conversion of Ent (Colorado Springs, CO) will cost NCUA almost $363,000 in revenues.

To address the decline in operating fee revenues, NCUA could raise the operating fee rate. But an increase in the operating fee rate could create a vicious cycle with even more conversions to state charters or even bank charters.

Another way to address budget pressures is to increase the overhead transfer rate (OTR) from the National Credit Union Share Insurance Fund. However, such a move will generate cries of outrage from state charters and lead to demands for greater say regarding NCUA's budget.

Another possibility for addressing its budgetary pressures arising from the loss of federal charters is for NCUA to control its expenses. But Credit Union Times is reporting that NCUA Chairman Debbie Matz on October 30 stated she expects the overall operating budget for the agency to increase in 2016.