WEBVTT NOTE This file was generated by Descript 00:00:00.470 --> 00:00:02.340 Samantha: Hello, this is Samantha Shares. 00:00:02.970 --> 00:00:08.330 This episode covers N C U A's approval of its 2025 and 2026 Budget. 00:00:09.104 --> 00:00:12.674 The following is an audio version of that action, in their own words. 00:00:13.194 --> 00:00:16.364 This podcast is educational and is not legal advice. 00:00:16.814 --> 00:00:20.804 We are sponsored by Credit Union Exam Solutions Incorporated, whose 00:00:20.804 --> 00:00:23.874 team has over two hundred and Forty years of National Credit 00:00:23.874 --> 00:00:25.744 Union Administration experience. 00:00:26.254 --> 00:00:29.934 We assist our clients with N C U A so they save time and money. 00:00:30.324 --> 00:00:34.274 If you are worried about a recent, upcoming or in process N C U A 00:00:34.274 --> 00:00:38.614 examination, reach out to learn how they can assist at Mark Treichel DOT COM. 00:00:39.084 --> 00:00:43.464 Also check out our other podcast called With Flying Colors where we provide tips 00:00:43.464 --> 00:00:46.014 on how to achieve success with N C U A. 00:00:46.772 --> 00:00:48.162 And now the Budget approval. 00:00:48.544 --> 00:00:55.154 The second and last item on our agenda is the NCUA's budgets for 2025 and 2026. 00:00:55.759 --> 00:01:00.849 Staff presenting this item are Eugene Sheed Chief Financial Officer, and Melissa 00:01:00.849 --> 00:01:03.399 Loudon, Deputy Chief Financial Officer. 00:01:03.749 --> 00:01:07.039 Joining Eugene and Melissa to answer questions is Jim Holm, 00:01:07.359 --> 00:01:10.399 Supervisory Budget Analyst, Office of the Chief Financial Officer. 00:01:10.779 --> 00:01:12.439 Good morning to all three of you. 00:01:12.509 --> 00:01:13.629 Please begin when you are ready. 00:01:14.879 --> 00:01:18.459 Good morning Chairman Harper, Vice Chairman Hoffman, and Board Member Otsuka. 00:01:18.969 --> 00:01:23.649 We are here to present the final recommendation for the 2025 2026 00:01:23.649 --> 00:01:28.649 Operating Capital and Share Insurance Fund Administrative Expense Budgets. 00:01:30.049 --> 00:01:34.359 The staff draft budget justification posted on the NCUA's website on October 00:01:34.399 --> 00:01:38.159 30th and an identical version was published in the Federal Register on 00:01:38.159 --> 00:01:41.389 November 4th, 2024 for public comment. 00:01:42.824 --> 00:01:47.704 The NCOA conducted additional analysis of the budget and considered the 00:01:47.704 --> 00:01:49.424 public comments that we received. 00:01:50.114 --> 00:01:54.234 The recommended final budget includes various adjustments as a result. 00:01:55.434 --> 00:01:58.364 The net impact of these adjustments in comparison to 00:01:58.364 --> 00:02:00.334 the staff draft are as follows. 00:02:01.374 --> 00:02:06.254 First lower, it lowered the recommended 2025 operating budget. 00:02:06.794 --> 00:02:09.834 37 million and six positions. 00:02:10.484 --> 00:02:15.384 Second, we've lowered the recommended 2025 capital budget by 0. 00:02:15.384 --> 00:02:16.774 8 million. 00:02:17.254 --> 00:02:21.524 And finally there's a small increase proposed in the final 2025 share 00:02:21.524 --> 00:02:26.634 insurance fund administrative expense budget of 172, 000. 00:02:28.014 --> 00:02:34.174 The recommended 2025 combined final budgets total 395. 00:02:34.174 --> 00:02:37.564 4 million and 1, 255 positions. 00:02:38.274 --> 00:02:39.654 This is 37. 00:02:39.654 --> 00:02:44.314 7 million and six positions lower than the draft budget. 00:02:45.314 --> 00:02:49.654 The recommended 2026 combined budget is 419. 00:02:49.654 --> 00:02:53.474 5 million and 1, 263 positions. 00:02:54.099 --> 00:02:59.929 This is 49 million in nine positions lower than proposed in the draft budget. 00:03:00.849 --> 00:03:04.089 Even though the board adopts it to your budget for planning purposes, it 00:03:04.089 --> 00:03:08.119 is the practice to revisit each year's budget before that budget year begins. 00:03:09.599 --> 00:03:13.539 Attachment one to the staff to the board action memorandum includes 00:03:13.549 --> 00:03:17.179 the summary budget tables for the operating capital and share insurance 00:03:17.179 --> 00:03:19.189 fund, administrative expense budgets. 00:03:19.799 --> 00:03:24.429 Detailed budgetary tables for each office in the NCOA, an updated chart 00:03:24.429 --> 00:03:28.309 showing the distribution of the budget between amounts paid by federal and 00:03:28.309 --> 00:03:33.249 federally insured state chartered credit unions, an updated worksheet showing 00:03:33.259 --> 00:03:36.899 the operating fee rates that will be charged to the federal credit unions. 00:03:38.009 --> 00:03:39.669 Changes to the staff draft budget. 00:03:40.479 --> 00:03:45.569 The recommended 2025 combined funding level is approximately 2. 00:03:45.569 --> 00:03:49.269 5 percent higher than the Then the board approved 2024 budget, 00:03:49.779 --> 00:03:51.099 which is down from the 12. 00:03:51.099 --> 00:03:57.569 2 percent increase that was reflected in the staff draft staffing in 2025 00:03:57.579 --> 00:03:59.299 will be reduced by six positions. 00:03:59.299 --> 00:04:05.219 Net as compared to the staff draft for the operating budget, specific 00:04:05.219 --> 00:04:09.979 changes to the staff draft that in the final budget before you today include. 00:04:10.479 --> 00:04:16.079 An additional 7 million in expected surplus now projected for the end of 2024 00:04:16.159 --> 00:04:20.769 for a total of 12 million in carryover funding for the operating budget that 00:04:20.769 --> 00:04:23.899 will be used to offset 2025 requirements. 00:04:24.749 --> 00:04:25.959 An additional 70. 00:04:26.089 --> 00:04:31.579 5 million in total budgetary resources has been identified, of which 27 million 00:04:31.579 --> 00:04:36.269 is An unallocated cash from prior year collections of the operating fee 00:04:36.539 --> 00:04:41.889 and $43.5 million is the associated overhead transfer rate that will result 00:04:41.889 --> 00:04:43.809 from spending the unallocated cash. 00:04:44.449 --> 00:04:48.339 This combined amount has been used to lower the overall level of the 00:04:48.339 --> 00:04:56.559 operating budget by $28.2 million for 2025 and $42.3 million for 2026. 00:04:58.009 --> 00:05:01.279 The budget for agency travel expenses was increased $1.1 00:05:01.279 --> 00:05:03.079 million in the final proposal. 00:05:03.444 --> 00:05:05.624 for 2025 and 2. 00:05:05.624 --> 00:05:10.354 4 million for 2026, reflecting expectations for certain remote 00:05:10.354 --> 00:05:13.514 staff to increase in office work. 00:05:14.944 --> 00:05:18.044 The budget for contracted services was reduced 1. 00:05:18.084 --> 00:05:23.464 2 million to reflect savings from postponing until 2026 00:05:23.494 --> 00:05:27.404 contracting updates for information technology support services. 00:05:28.594 --> 00:05:33.064 The recommended final budget eliminates two new positions and related funding 00:05:33.074 --> 00:05:36.494 that was requested to establish a new office of the executive secretary. 00:05:37.594 --> 00:05:41.004 One new position proposed for the office of the ombudsman was eliminated. 00:05:41.984 --> 00:05:45.754 Two new positions proposed for the office of external affairs and 00:05:45.754 --> 00:05:47.234 communications were eliminated. 00:05:48.304 --> 00:05:53.244 One new executive position has been added to the office of the executive director in 00:05:53.244 --> 00:05:57.214 a previously authorized executive position in the same office has been upgraded. 00:05:57.994 --> 00:05:58.764 And reductions totaling 0. 00:05:58.764 --> 00:06:04.574 9 million net were made to several offices lowering the proposed budget 00:06:04.864 --> 00:06:08.834 for things such as the student loan repayment program the agency's proposed 00:06:08.834 --> 00:06:13.574 year round intern program, and eliminating travel for a proposed training forum. 00:06:14.664 --> 00:06:18.564 Some additional adjustments were made to funding levels from the staff draft 00:06:18.814 --> 00:06:23.364 for corrections as well as to reflect updated information that was not available 00:06:23.364 --> 00:06:25.054 at the time the draft was published. 00:06:26.064 --> 00:06:29.284 For the capital budget, the recommended final 2025 capital 00:06:29.284 --> 00:06:31.294 budget is approximately 0. 00:06:31.324 --> 00:06:33.734 8 million lower than the staff draft. 00:06:34.254 --> 00:06:38.894 After reviewing the status of capital projects that this we identified 00:06:38.904 --> 00:06:43.594 balances from completed capital projects that are being used to offset 00:06:43.594 --> 00:06:49.304 the 2025 requirements for the share insurance fund administrative budget. 00:06:49.314 --> 00:06:56.104 The final recommended budget for 2025 and 2026 is higher than the staff draft. 00:06:56.104 --> 00:07:01.064 As I mentioned by 172, 000 in both years due to a reestimate of travel 00:07:01.064 --> 00:07:03.404 expenses for state supervisory authority. 00:07:03.809 --> 00:07:06.399 Examiners attending NCOA sponsored training. 00:07:07.609 --> 00:07:11.139 Turning now to comments that we received from the public, as 00:07:11.139 --> 00:07:16.379 required by the Act, the NCOA held a public briefing on November 22, 00:07:16.379 --> 00:07:18.109 2024 to discuss the draft budget. 00:07:18.839 --> 00:07:22.209 At that meeting, representatives from four different associations 00:07:22.229 --> 00:07:24.049 presented their views on the draft. 00:07:24.049 --> 00:07:28.669 The NCOA also received written statements from 14 organizations 00:07:28.909 --> 00:07:33.179 or individuals that did not make presentations at the budget meeting. 00:07:34.104 --> 00:07:37.414 In all, 18 written submissions are posted on regulations. 00:07:37.424 --> 00:07:38.654 gov's website. 00:07:40.014 --> 00:07:43.894 Many of the general comments received from the public related to operations 00:07:43.894 --> 00:07:47.804 and programming matters rather than specific budgetary matters. 00:07:48.264 --> 00:07:51.444 The agency will provide these comments directly to the appropriate 00:07:51.464 --> 00:07:55.074 NCOA senior executives responsible for those relevant programs. 00:07:55.074 --> 00:07:58.434 Nine commenters expressed concern about the 12. 00:07:58.434 --> 00:08:02.264 2 percent annual growth rate in the 2025 draft budget. 00:08:03.144 --> 00:08:08.004 As I've stated, the recommended 2025 combined final budget is 37. 00:08:08.034 --> 00:08:10.354 7 million lower than the staff draft. 00:08:10.754 --> 00:08:11.194 This is a 2. 00:08:11.194 --> 00:08:14.534 5 percent annual growth rate, which is 9. 00:08:14.574 --> 00:08:19.324 7 percent lower than the draft and approximately 9. 00:08:19.374 --> 00:08:22.054 8 percent lower than the 12. 00:08:22.054 --> 00:08:26.574 3 percent increase that was approved by the board for 2025 as 00:08:26.574 --> 00:08:28.974 a part of the 2024 2025 budget. 00:08:31.544 --> 00:08:34.944 The changes, as I've already mentioned, were largely driven by reductions 00:08:34.944 --> 00:08:38.964 in positions that were proposed in the draft budget, as well as the 00:08:38.964 --> 00:08:43.314 additional surplus funds and unspent cash that had been identified, 00:08:43.564 --> 00:08:45.884 which offset 2025 funding needs. 00:08:47.024 --> 00:08:51.594 Seven commenters remarked on the staff draft budget's increase for the Office 00:08:51.594 --> 00:08:53.434 of Consumer Financial Protection. 00:08:54.234 --> 00:08:56.884 Five of the commenters opposed the increase, while two of the 00:08:56.884 --> 00:08:58.514 commenters supported the addition. 00:08:59.344 --> 00:09:02.214 The additional positions add, added in the staff draft. 00:09:02.564 --> 00:09:06.794 I support N C's responsibility to ensure a safe, sound viable 00:09:06.794 --> 00:09:10.814 system of cooperative credit that protects con credit union members. 00:09:11.364 --> 00:09:15.844 While the consumer Financial Protection Bureau examines federally insured credit 00:09:15.844 --> 00:09:21.364 unions with assets more than $10 billion, the CFPB is not the only federal regulator 00:09:21.424 --> 00:09:25.834 responsible for administering federal consumer financial protection laws. 00:09:26.274 --> 00:09:29.904 The NCOA is responsible for consumer financial protection for credit unions 00:09:29.904 --> 00:09:31.974 with less than $10 billion in assets. 00:09:32.304 --> 00:09:35.624 Which represents over 99 percent of the federal credit unions. 00:09:36.674 --> 00:09:40.544 One of the commenters also raised concern that the budget for the 00:09:40.544 --> 00:09:46.284 additional financial protection staff Would be unfairly paid by state 00:09:46.284 --> 00:09:48.484 chartered credit unions through the OTR. 00:09:49.004 --> 00:09:54.104 The OTR methodology does not include the cost of OCFP's consumer financial 00:09:54.104 --> 00:09:58.744 protection activities and personnel As insurance related except for the 00:09:58.744 --> 00:10:03.134 consumer assistance center, which fields calls related to insured credit unions 00:10:03.424 --> 00:10:08.114 Including at times calls related to share insurance Five commenters were 00:10:08.114 --> 00:10:12.474 concerned about the overall increase in the ncaa staffing level In the staff 00:10:12.474 --> 00:10:16.574 draft budget specifically commenters expressed concern about the additional 00:10:16.574 --> 00:10:20.754 administrative staff The recommended final budget reduces the number of 00:10:20.754 --> 00:10:23.624 new staff in by six positions net. 00:10:24.884 --> 00:10:28.314 Three commenters noted that although the staff draft budget generally does a 00:10:28.314 --> 00:10:33.264 good job describing costs of proposals and initiatives and programs, that 00:10:33.274 --> 00:10:36.874 more information could be provided to explain the benefit of such 00:10:36.874 --> 00:10:38.774 investments to the credit union system. 00:10:39.134 --> 00:10:43.514 In future budgets, the NCA will work to make clear any obligation 00:10:43.514 --> 00:10:48.014 the agency must satisfy driving initiatives and programs or any benefits 00:10:48.064 --> 00:10:49.574 that they are intended to provide. 00:10:50.989 --> 00:10:54.679 One commenter expressed support for the examination cycle time revisions 00:10:54.679 --> 00:10:58.259 included in the staff draft budget, which would generally extend the 00:10:58.269 --> 00:11:02.229 time between examinations for very well managed credit unions. 00:11:02.729 --> 00:11:06.859 The exam cycle revisions and related resource levels presented in the 00:11:06.859 --> 00:11:10.769 final budget are the same as those presented in the draft budget and 00:11:10.769 --> 00:11:14.714 are detailed in attachment two to the board action memorandum. 00:11:16.114 --> 00:11:20.494 Three commenters noted the importance for support to small and minority 00:11:20.554 --> 00:11:24.984 depository institutions and that the NCOA should continue and deepen this work. 00:11:25.004 --> 00:11:26.984 The final budget maintains resources. 00:11:27.409 --> 00:11:31.839 That were in the staff draft budget for this purpose and finally two letters 00:11:31.839 --> 00:11:35.969 express concern about the operating fee and the burden that it has on credit 00:11:35.969 --> 00:11:41.929 unions based on the staff draft, the operating fee would have increased by 9. 00:11:41.929 --> 00:11:42.359 02%. 00:11:42.639 --> 00:11:46.109 However, based on the revised lower budget, the operating fee 00:11:46.109 --> 00:11:49.239 for 2025 will now decrease by 1. 00:11:49.289 --> 00:11:49.689 17%. 00:11:50.659 --> 00:11:53.129 The board action memorandum includes additional discussion 00:11:53.129 --> 00:11:54.149 on the budget feedback. 00:11:54.679 --> 00:11:56.349 We received during the comment period. 00:11:57.099 --> 00:12:00.209 Melissa will now present on the overhead transfer rate and 00:12:00.249 --> 00:12:01.469 the financing of the budget. 00:12:02.919 --> 00:12:03.809 Thank you, Eugene. 00:12:04.569 --> 00:12:08.939 In December 2023, the NCUA board requested comment on the OTR 00:12:08.939 --> 00:12:13.189 methodology and provided additional detail and transparency to the 00:12:13.189 --> 00:12:15.609 public on the OTR calculation. 00:12:16.569 --> 00:12:19.729 NCOA received comments from four trade groups. 00:12:19.899 --> 00:12:24.289 The comments centered on the transparency and clarification provided in the notice, 00:12:24.509 --> 00:12:30.319 the method of requesting comments on the OTR, whether the NCOA has legal authority 00:12:30.329 --> 00:12:34.869 in using the share insurance fund to fund the operating budget, and whether the 00:12:34.879 --> 00:12:40.239 allocation used in the OTR calculation for third party vendors and QSOs should 00:12:40.249 --> 00:12:42.369 be attributed to safety and soundness. 00:12:43.624 --> 00:12:48.184 Commenters also favored the current process NCOA uses to request comment 00:12:48.194 --> 00:12:52.514 on the OTR every three years and emphasized the need to retain 00:12:52.514 --> 00:12:55.934 the comment period associated with the annual budget briefing. 00:12:56.654 --> 00:13:01.554 The NCOA did not identify any need to update the OTR methodology at that time, 00:13:02.204 --> 00:13:06.234 but the agency remains committed to requesting comment from the public on 00:13:06.234 --> 00:13:08.394 the OTR methodology every three years. 00:13:09.794 --> 00:13:13.134 Next, I will discuss how the NCOA's programs are financed. 00:13:14.459 --> 00:13:18.629 The NCOA expenses are funded primarily through annual operating 00:13:18.629 --> 00:13:22.219 fees paid by federal credit unions and monthly transfers from the 00:13:22.219 --> 00:13:24.339 share insurance fund using the OTR. 00:13:25.539 --> 00:13:30.019 The approved methodologies for calculating the OTR and the operating fees are 00:13:30.019 --> 00:13:34.399 applied to determine the amount of the budget that will be financed by each. 00:13:35.309 --> 00:13:38.439 The staff draft includes a discussion of these methodologies 00:13:38.469 --> 00:13:40.949 on pages 36 through 42. 00:13:42.599 --> 00:13:45.279 The final 2025 OTR is 61. 00:13:45.279 --> 00:13:52.229 7%, the same level as the staff draft and the 2024 OTR. 00:13:53.524 --> 00:13:54.264 The residual 38. 00:13:54.264 --> 00:13:59.764 3 percent of the 2025 budget will be collected through the Operating 00:13:59.764 --> 00:14:01.924 Fee Bill to Federal Credit Unions. 00:14:03.074 --> 00:14:07.704 Consumer Federal Credit Unions with assets equal to or less than 2. 00:14:08.444 --> 00:14:14.794 08 million will not be assessed an Operating Fee in 2025 pursuant 00:14:14.844 --> 00:14:17.844 to the approved Operating Fee Schedule methodology. 00:14:18.774 --> 00:14:23.324 For consumer federal credit unions with assets greater than 2. 00:14:23.324 --> 00:14:28.144 08 million, the NCUA establishes a three tiered scale to compute 00:14:28.194 --> 00:14:29.904 the operating fee charged. 00:14:30.694 --> 00:14:34.804 The specific steps used to determine the operating fee and the scale 00:14:34.804 --> 00:14:38.144 for rates charged to different asset sized federal credit unions 00:14:38.184 --> 00:14:42.014 1 of the Board Action Memorandum. 00:14:43.389 --> 00:14:47.009 The operating fee charged to federal credit unions in 2025 00:14:47.059 --> 00:14:48.679 will decrease approximately 1. 00:14:48.679 --> 00:14:53.979 17 percent compared to 2024, which is a 10. 00:14:54.009 --> 00:14:58.819 19 percentage point reduction from the estimate provided in the staff draft. 00:15:00.749 --> 00:15:03.899 There are two reasons for the change to the operating fee amount from 00:15:03.899 --> 00:15:07.089 the estimate, estimate reflected in the staff draft budget. 00:15:07.594 --> 00:15:12.854 First, the operating and capital budgets were reduced by approximately 37. 00:15:12.884 --> 00:15:16.914 8 million compared to the amounts that were presented in the staff draft. 00:15:17.694 --> 00:15:22.684 Second, the updated fee is based on average credit union assets presented 00:15:22.684 --> 00:15:28.444 in the four quarters call reports ending September 30, 2024, rather 00:15:28.444 --> 00:15:32.139 than the estimated asset growth Used for the staff draft budget. 00:15:33.359 --> 00:15:36.809 This concludes our presentation, and we're happy to answer your questions. 00:15:37.309 --> 00:15:38.329 Thank you, Eugene. 00:15:38.329 --> 00:15:39.139 Thank you, Melissa. 00:15:39.139 --> 00:15:39.889 Thank you, Jim. 00:15:39.889 --> 00:15:43.039 And thank you to the teams and the office of the Chief Financial Officer, 00:15:43.069 --> 00:15:47.469 as well as the office of the executive director for developing and finalizing 00:15:47.469 --> 00:15:52.269 the budgets for the NCUA in 2025 and 2026. 00:15:52.699 --> 00:15:56.149 Moreover, my heartfelt thanks to Vice Chairman Hauptmann, Board 00:15:56.149 --> 00:16:00.529 Member Otsuka, Sarah Bang, Renita Marcellin, and Catherine Galicia. 00:16:01.019 --> 00:16:05.059 The level of collaboration and consensus reaching efforts amongst the three board 00:16:05.059 --> 00:16:09.659 offices was instrumental in arriving at the budget agreement before us today. 00:16:09.989 --> 00:16:14.129 I appreciate the many hours spent by all, including much 00:16:14.129 --> 00:16:15.569 time over this last weekend. 00:16:16.169 --> 00:16:19.099 Also, thank you to the many stakeholders who participated in this year's 00:16:19.099 --> 00:16:22.939 budget briefing and those who provided written comments on the draft budget. 00:16:23.259 --> 00:16:26.879 Your feedback was helpful to the agency and analyzing where to pair 00:16:26.879 --> 00:16:28.839 costs and established priorities. 00:16:29.319 --> 00:16:35.419 As Eugene noted in his presentation, recommended 2025 combined final budget. 00:16:35.679 --> 00:16:38.279 Of the operating capital and share insurance fund. 00:16:38.279 --> 00:16:40.449 Administrative expense budgets is 395. 00:16:40.449 --> 00:16:45.559 4 million and 1255 positions. 00:16:45.959 --> 00:16:50.459 This final budget is nearly 38 million dollars and 6 positions 00:16:50.479 --> 00:16:54.929 lower than the 2025 staff draft budget proposed in October. 00:16:55.064 --> 00:16:58.724 The 2026 combined budget is 419. 00:16:58.754 --> 00:17:02.584 5 million and 1, 263 positions. 00:17:02.964 --> 00:17:08.084 This budgeted amount is 49 million and 9 positions lower 00:17:08.084 --> 00:17:10.654 than the 2026 staff draft budget. 00:17:11.369 --> 00:17:14.579 As noted in the presentation, the year over year increase in 00:17:14.579 --> 00:17:17.119 the 2025 budget is now just 2. 00:17:17.119 --> 00:17:18.429 5%. 00:17:18.759 --> 00:17:22.089 That's nearly 10 percentage points lower than initially proposed. 00:17:22.459 --> 00:17:25.079 And the 2026 budget has dropped as well. 00:17:25.389 --> 00:17:28.359 Whereas staff once projected an annual increase of 8. 00:17:28.419 --> 00:17:33.819 2%, the final 2026 budget is now projected to increase 6. 00:17:33.819 --> 00:17:34.304 1%. 00:17:34.834 --> 00:17:38.584 Even with the sizable downward adjustments in spending and staffing, the 2025 and 00:17:38.584 --> 00:17:44.374 2026 budgets still prudently invest in the areas of cyber security and 00:17:44.374 --> 00:17:45.994 fraud detection and credit unions. 00:17:46.324 --> 00:17:49.814 The budgets also provide for new staff positions in the areas of 00:17:49.814 --> 00:17:51.214 consumer financial protection. 00:17:51.629 --> 00:17:55.009 Artificial intelligence, examiner training, as well as 00:17:55.009 --> 00:17:56.679 climate related financial risk. 00:17:57.149 --> 00:18:00.529 On that note, I appreciate my board colleagues working with me to add 00:18:00.529 --> 00:18:03.719 this new position to our Office of Examination and Insurance. 00:18:04.159 --> 00:18:06.939 This position will develop a toolkit for credit unions to 00:18:06.939 --> 00:18:10.534 monitor, measure, and mitigate their climate related financial risks. 00:18:10.984 --> 00:18:16.634 It will also aid in updates to the NCOA's 2006 Disaster Preparedness Guidelines 00:18:16.904 --> 00:18:21.034 to reflect the lessons learned from hurricanes like Helene and Milton. 00:18:21.444 --> 00:18:24.454 And it will support the creation of training for examiners to help 00:18:24.454 --> 00:18:27.474 them better understand the lending risks found with solar panels for 00:18:27.474 --> 00:18:29.384 homes and electronic vehicles. 00:18:30.259 --> 00:18:34.749 Many industry stakeholders commented that the NCOA's operating fees have been 00:18:34.769 --> 00:18:36.919 unreasonably burdened on credit unions. 00:18:37.299 --> 00:18:40.589 Whereas the staff draft budget projected an operating fee increase 00:18:40.609 --> 00:18:46.269 of approximately 9 percent in 2025, this final budget actually decreases 00:18:46.299 --> 00:18:48.429 the operating fee by nearly 1. 00:18:49.169 --> 00:18:49.179 2%. 00:18:49.659 --> 00:18:53.099 What's more, the NCOA's operating expenses account for less than 00:18:53.099 --> 00:18:57.154 1 percent of total credit union administrative expenses regardless 00:18:57.174 --> 00:18:59.484 of credit union assets, asset size. 00:19:00.094 --> 00:19:02.864 Some stakeholders critical of the NCUA have also asserted that 00:19:02.864 --> 00:19:05.974 the agency's budget is growing faster than the rate of inflation. 00:19:06.604 --> 00:19:11.564 NCUA's economists have examined this issue and found that the NCUA's 2025 budget, 00:19:11.764 --> 00:19:16.224 when compared to the 2020 16 budget, has grown by approximately that rate 00:19:16.224 --> 00:19:19.304 of inflation over that period of time. 00:19:19.304 --> 00:19:22.954 The agency is not inflating its budgets for its own purposes. 00:19:23.264 --> 00:19:26.584 The NCUA is simply adjusting its budget to reflect the real 00:19:26.584 --> 00:19:28.354 world cost of its operations. 00:19:29.729 --> 00:19:32.379 and priorities as an agency of the federal government. 00:19:33.069 --> 00:19:36.169 The NCOA has a proven track record of managing the resources entrusted 00:19:36.169 --> 00:19:40.599 to it prudently, and the agency will continue to do so now and in the future. 00:19:41.299 --> 00:19:44.259 In closing, give and take is an essential part of any organization's 00:19:44.259 --> 00:19:48.029 policymaking and budgeting processes, and the budget before us 00:19:48.029 --> 00:19:49.749 reflects that principle in action. 00:19:50.169 --> 00:19:53.769 This funding plan demonstrates that the NCUA's strong, demonstrates the 00:19:53.769 --> 00:19:57.619 NCUA's strong financial stewardship, and it will allow the agency to 00:19:57.619 --> 00:20:01.009 effectively execute its safety and soundness, consumer financial 00:20:01.009 --> 00:20:05.359 protection, Thank you and other statutory responsibilities over the next two years. 00:20:05.719 --> 00:20:10.629 As such, I will support this NCOA 2025 and 2026 budget agreement. 00:20:10.969 --> 00:20:14.289 With that, I look forward to a productive 2025. 00:20:14.679 --> 00:20:15.769 That concludes my remarks. 00:20:15.769 --> 00:20:17.069 I now recognize Vice Chairman. 00:20:18.369 --> 00:20:18.869 Thank you, sir. 00:20:19.119 --> 00:20:19.939 And thank you, everyone. 00:20:21.084 --> 00:20:23.654 This budget looks significantly different than where we started. 00:20:23.654 --> 00:20:25.374 We went from a proposed 12. 00:20:25.374 --> 00:20:27.874 2 percent staff draft budget to 2. 00:20:27.874 --> 00:20:29.184 5 percent today. 00:20:29.674 --> 00:20:30.774 That's excellent news. 00:20:30.894 --> 00:20:34.974 These adjustments reflect hard work from our staff, thoughtful input from the 00:20:34.974 --> 00:20:39.034 stakeholders the chairman mentioned, and good faith discussions among the board. 00:20:39.034 --> 00:20:41.564 I want to thank Chairman Harper for fostering an environment of 00:20:41.564 --> 00:20:45.224 open and constructive communication amongst the board offices. 00:20:45.224 --> 00:20:46.924 I don't think anybody had an agenda. 00:20:48.084 --> 00:20:50.504 that was unrelated that can bog these things down. 00:20:50.504 --> 00:20:52.244 Nobody was trying to stick it to anybody. 00:20:52.244 --> 00:20:54.434 Nobody was trying to pull one over on somebody. 00:20:54.744 --> 00:20:56.604 And I think that's how you get good results. 00:20:56.934 --> 00:21:00.074 I want to thank those who provided comments, 18 formal comments and 00:21:00.074 --> 00:21:03.184 then we had the budget hearing that provided some very productive exchanges. 00:21:03.644 --> 00:21:07.364 I believe these efforts benefited all parties. 00:21:07.984 --> 00:21:09.434 My view on the budget has been consistent. 00:21:09.444 --> 00:21:12.464 The dramatic increase we saw in the staff draft budget is the result 00:21:12.464 --> 00:21:14.484 of our process and of human nature. 00:21:14.969 --> 00:21:16.219 Not anything unique to N. 00:21:16.219 --> 00:21:16.269 C. 00:21:16.279 --> 00:21:16.469 U. 00:21:16.469 --> 00:21:16.709 A. 00:21:17.299 --> 00:21:20.779 Government budgets are most often written by those receiving the 00:21:20.779 --> 00:21:22.949 funds, not by those funding them. 00:21:23.469 --> 00:21:26.179 In addition, there's little downside for any department head that 00:21:26.199 --> 00:21:27.789 asked for more and more resources. 00:21:28.179 --> 00:21:32.149 Naturally, those receiving the cash see their request is more 00:21:32.149 --> 00:21:34.229 reasonable than those paying the bill. 00:21:35.179 --> 00:21:37.509 If you compare the initial 12 12. 00:21:37.509 --> 00:21:39.099 2 percent budget to the inflation rate of 2. 00:21:39.099 --> 00:21:43.149 7 percent and the projected asset growth in credit unions of 4. 00:21:43.179 --> 00:21:43.549 2%. 00:21:44.079 --> 00:21:47.349 You can see why credit unions thought the original budget was out of step. 00:21:47.889 --> 00:21:50.909 I have and will approach the budget with a focus on the process. 00:21:51.409 --> 00:21:54.809 Nearly 75 percent of our budget is put towards compensation and benefits. 00:21:54.809 --> 00:21:57.429 That's a large compounding expense. 00:21:58.109 --> 00:22:01.249 And CUA's process seems to inherently need to lead to more 00:22:01.249 --> 00:22:03.399 requests for more and more staff. 00:22:03.969 --> 00:22:07.269 When we asked our 23 offices in June what they needed to be most 00:22:07.269 --> 00:22:10.529 effective, out of 23 offices, not a single one requested fewer staff. 00:22:11.599 --> 00:22:14.509 That said, I want to thank the offices that achieved their missions without the 00:22:14.509 --> 00:22:16.509 addition of new positions or overhires. 00:22:16.969 --> 00:22:19.189 It can be difficult to show budgetary restraint in the 00:22:19.189 --> 00:22:22.469 absence of market pressures, like those faced by credit unions. 00:22:23.729 --> 00:22:26.199 So I appreciate the restraint it took for the offices that 00:22:26.199 --> 00:22:27.799 did not request new staff. 00:22:28.429 --> 00:22:31.599 Let me be clear, this agency's greatest assets are its dedicated people. 00:22:32.169 --> 00:22:35.439 It's certainly a useful exercise to solicit staff 00:22:35.509 --> 00:22:36.859 from our staff on their needs. 00:22:37.334 --> 00:22:39.814 But like credit unions and private businesses, we must balance those 00:22:39.814 --> 00:22:43.934 needs against income projections, priorities, and fiscal constraints. 00:22:43.934 --> 00:22:48.014 We owe it to America's credit unions and their members to ensure our priorities 00:22:48.014 --> 00:22:50.734 align with the difficult decisions that they have to make every day. 00:22:51.554 --> 00:22:54.804 The initial staff budget also included the creation of a new office of the executive 00:22:54.824 --> 00:22:57.104 secretary and two additional positions. 00:22:57.104 --> 00:23:00.819 That would have increased our number of departments from 23 to 24. 00:23:01.999 --> 00:23:04.349 I'm pleased to note that office is not in this budget today. 00:23:04.899 --> 00:23:10.299 One way to look at what we've accomplished is that a 100 million credit union as 00:23:10.299 --> 00:23:15.599 an example, 100 million credit union will get a bill that's about 200 lower 00:23:16.029 --> 00:23:19.739 than the bill they paid this year, not lower than inflation, not lower than 00:23:19.879 --> 00:23:22.679 insured asset growth, numerically lower. 00:23:22.999 --> 00:23:27.819 I guess that there are other insurance costs like property and casualty insurance 00:23:27.919 --> 00:23:29.389 will not be going down next year. 00:23:30.289 --> 00:23:33.899 So in closing, I want to thank the staff management, my fellow board members 00:23:33.899 --> 00:23:35.179 for their willingness to work together. 00:23:35.649 --> 00:23:38.249 I'm grateful to stakeholders who took the time to digest that 00:23:38.249 --> 00:23:39.989 initial budget and offer ideas. 00:23:40.489 --> 00:23:41.629 So thank you to you all. 00:23:41.699 --> 00:23:42.509 Just one question. 00:23:42.739 --> 00:23:46.799 I mentioned the bills which holding insured shares constant 00:23:47.169 --> 00:23:50.069 would be lower than last year if you had the exact same amount. 00:23:50.779 --> 00:23:51.529 When did they get the bill? 00:23:51.529 --> 00:23:52.139 Remind us of that. 00:23:52.549 --> 00:23:52.809 Sure. 00:23:52.859 --> 00:23:57.299 The operating fee invoices will be sent as part of the cycle one billing process. 00:23:57.449 --> 00:24:01.119 They go out March 2025 and due back April 2025. 00:24:01.179 --> 00:24:02.459 That concludes my remarks. 00:24:02.479 --> 00:24:02.779 Thank you. 00:24:03.979 --> 00:24:04.419 Thank you. 00:24:04.419 --> 00:24:06.109 Board member Otsuka, you're now recognized. 00:24:06.914 --> 00:24:07.624 Thank you, chair. 00:24:07.674 --> 00:24:08.164 Harper. 00:24:08.234 --> 00:24:09.114 Thank you to the staff. 00:24:09.124 --> 00:24:12.364 Thank you guys for your presentation and more importantly, for seeing 00:24:12.364 --> 00:24:13.774 us through the budget process. 00:24:13.864 --> 00:24:15.854 I know every year we do this in your office. 00:24:16.169 --> 00:24:17.339 Embarks on this exercise. 00:24:17.339 --> 00:24:18.839 I know it's not easy, so thank you. 00:24:19.249 --> 00:24:22.579 Also wanna thank the office of the executive director, chairman's office, 00:24:22.579 --> 00:24:26.399 the Vice Chairman's office and all the staff that have collaborated 00:24:26.399 --> 00:24:30.169 to work on this, really appreciate everyone's work in collaboration and 00:24:30.169 --> 00:24:31.669 getting us to this final product. 00:24:31.669 --> 00:24:33.349 So thank you to my fellow board members. 00:24:34.039 --> 00:24:38.719 Also wanna echo, my colleagues, thank you to the public commenters and 00:24:38.719 --> 00:24:42.639 stakeholders who provided feedback and were engaged in this process. 00:24:42.989 --> 00:24:45.889 I think I think that process is helpful for us. 00:24:46.279 --> 00:24:49.819 And it's also helpful to understand where the public's priorities are. 00:24:50.929 --> 00:24:54.909 The final budget for 2025 and 2026 represents investments in 00:24:54.909 --> 00:24:59.469 our agency's mission, workforce, infrastructure, and ultimately 00:24:59.479 --> 00:25:01.039 our system of cooperative credit. 00:25:01.269 --> 00:25:01.769 That is. 00:25:02.229 --> 00:25:06.689 The whole point here, the additional investment in our staff who are there 00:25:06.689 --> 00:25:10.629 to carry out this important mission and technological investments into 00:25:10.629 --> 00:25:14.429 examine chartering software and other infrastructure will help the N. 00:25:14.429 --> 00:25:14.519 C. 00:25:14.519 --> 00:25:14.659 U. 00:25:14.659 --> 00:25:14.829 A. 00:25:14.839 --> 00:25:18.549 Better protect the share insurance fund and credit union members. 00:25:19.739 --> 00:25:24.219 For example, the new positions requested by ones are office that examines the 00:25:24.219 --> 00:25:26.239 largest and most complex credit unions. 00:25:26.779 --> 00:25:30.859 will allow us to better support credit unions in the 5 to 10 billion range as 00:25:30.859 --> 00:25:33.379 they prepare for more robust examinations. 00:25:34.189 --> 00:25:38.189 Ensuring credit unions this size are safe and sound is paramount to the 00:25:38.189 --> 00:25:42.169 health of the share insurance fund and the entire system of cooperative credit. 00:25:43.214 --> 00:25:46.314 At the public budget meeting earlier this year, I mentioned the work 00:25:46.314 --> 00:25:49.004 we need to do to further build out our consumer compliance program. 00:25:49.604 --> 00:25:52.464 The additional staff in the Office of Consumer Financial Protection 00:25:52.464 --> 00:25:53.904 is a step in that direction. 00:25:54.444 --> 00:25:58.314 And as I have said and will continue to say, the NCUA cannot do its job 00:25:58.314 --> 00:26:01.754 as a safety and soundness regulator if we overlook consumer compliance. 00:26:01.984 --> 00:26:03.364 They are interrelated. 00:26:04.174 --> 00:26:06.944 As Eugene has pointed out in his presentation, we have managed to 00:26:06.944 --> 00:26:10.144 make investments and fund much needed expenditure, expenditures, 00:26:10.144 --> 00:26:12.014 excuse me, while still lowering. 00:26:12.739 --> 00:26:15.789 This is still requiring a lower percentage in fees from credit unions. 00:26:16.419 --> 00:26:19.629 Credit unions of all sizes, assuming their growth remains stable and they 00:26:19.629 --> 00:26:24.459 stay in the same category, will pay a lower operating fee to the NCUA 00:26:24.469 --> 00:26:26.479 next year than they did in 2024. 00:26:27.169 --> 00:26:30.189 This is the direct result of our prudent spending in prior years 00:26:30.579 --> 00:26:33.869 and the surplus we can now use to lower our overall budget cost. 00:26:34.239 --> 00:26:36.859 So this lower operating fee is a win for credit unions. 00:26:38.054 --> 00:26:39.234 It is important that the N. 00:26:39.234 --> 00:26:39.354 C. 00:26:39.354 --> 00:26:39.524 U. 00:26:39.524 --> 00:26:39.794 A. 00:26:39.844 --> 00:26:43.184 Is a good steward of the funds we received to protect the credit union system 00:26:43.214 --> 00:26:47.944 and ensure share accounts that deposit insurance part is really important to 00:26:48.294 --> 00:26:52.254 the Americans out there who put their money in credit unions, and the N. 00:26:52.254 --> 00:26:52.354 C. 00:26:52.354 --> 00:26:52.464 U. 00:26:52.464 --> 00:26:52.534 A. 00:26:52.574 --> 00:26:55.334 Can only do its job as a strong, effective and independent. 00:26:55.404 --> 00:26:55.704 Really? 00:26:56.284 --> 00:26:57.784 and independent regulator. 00:26:58.184 --> 00:27:01.314 If we make the necessary investments in our infrastructure and our 00:27:01.314 --> 00:27:02.734 staff to carry out that mission. 00:27:03.544 --> 00:27:06.494 I think that this budget strikes the right balance and I plan to support it. 00:27:06.494 --> 00:27:08.904 And thank you again to my colleagues for their collaboration. 00:27:09.134 --> 00:27:11.304 Thank you to the staff and thank you to the public stakeholders. 00:27:12.094 --> 00:27:12.784 Thank you so much. 00:27:12.784 --> 00:27:14.554 Board member Otsuka, Vice Chairman Hoffman. 00:27:14.554 --> 00:27:15.344 Is there a motion? 00:27:15.884 --> 00:27:20.094 I move that the board approved the entry of 2025 2026 budget as attached 00:27:20.094 --> 00:27:21.124 to the board action memorandum. 00:27:21.254 --> 00:27:22.574 Is there a second to the motion? 00:27:23.199 --> 00:27:23.529 Second. 00:27:23.739 --> 00:27:25.099 There is a sufficient second. 00:27:25.139 --> 00:27:26.419 All those in favor say aye. 00:27:26.479 --> 00:27:26.739 Aye. 00:27:26.829 --> 00:27:27.229 Aye. 00:27:27.679 --> 00:27:28.999 All those opposed say nay. 00:27:29.319 --> 00:27:33.219 The ayes have it and let the record show that the motion passes three to zero. 00:27:33.759 --> 00:27:35.589 Samantha: This concludes the budget approval 00:27:36.277 --> 00:27:40.477 If your Credit union could use assistance with your exam, reach out to Mark Treichel 00:27:40.477 --> 00:27:43.177 on LinkedIn, or at mark Treichel dot com. 00:27:43.747 --> 00:27:46.397 This is Samantha Shares and we Thank you for listening.