NCUA leadership is critical to the integrity and character of the cooperative system.
The board whether one, two or three members is responsible for setting priorities and precedents that are the foundation of NCUA’s relationship with the credit union community.
As a regulator of cooperatives and overseer of the system’s mutual solutions, NCUA’s role is much different than other financial regulators.
A critical example of this innovative industry collaboration was the redesign of the NCUSIF as the system’s collective capital fund. It was a joint effort with all parties making commitments to each other about their future stewardship of this unique federal model.
Many of these undertakings were so vital they were included in the enabling legislation as well as described in detail in the Agency’s Annual Reports and other official communications.
An important agreement to the 1% open-ended funding was the requirement that credit unions receive a dividend when the yearend fund balance exceeds the normal operating level (NOL) fund cap. The cap was set at 1.3% by law.
In the credit union Membership Access Act, the board was given flexibility to raise the NOL to as much as 1.50%. In 2017 the board elected to do this to accommodate the surplus funds from the Temporary Corporate Stabilization Fund merger. Those excess funds were then used to write off losses in the taxi medallion failures. But the NOL was never set back to its historical level.
Hauptman’s NCUSIF Oversight Statement
A critical role of the NCUA board is setting the annual the Normal Operating Level (NOL) cap of the fund. Earnings beyond this level are distributed as a dividend to credit unions recognizing not only their collective performance but also their open-ended funding commitment with the 1% true-up of their capital deposit.
Kyle Hauptman explained his understanding of this board’s responsibility in a December 2022 board meeting when Vice Chair. (link) This is the text.
Just to review, the Normal Operating Level (NOL), as described in the Federal Credit Union Act, can be set by the NCUA Board from 1.20 percent to 1.50 percent. The NOL is our desired level of equity in the Share Insurance Fund.
The NCUA Board has the discretion to assess a premium when the equity ratio falls below 1.30, but only to bring the ratio up to 1.30 as allowed by the Federal Credit Union Act.
The 1.33 Normal Operating Level represents the point at which the Share Insurance Fund is required to return funds back to insured credit unions should the equity ratio exceed 1.33.
Now a few months back, I voted, along with the rest of the Board, to lower the NOL to 1.33 from 1.38, where it had been for several years. Now I don’t pretend to know that 1.33 is the magic, perfect Net Operating Level. I do know that, for the moment, moving it from 1.38 to 1.33 is a moot point because the Fund isn’t close to either number.
And if someday we wind up back in that range, the correct NOL level will be a high-class problem to worry out. Given the current rate environment, I do not believe any of us believes we will be getting close to that number. That said, every basis point over 1.30 represents money credit unions could put to good use.
I appreciate the additional information on how the Normal Operating Level is calculated. We need more of this kind of transparency. In the spirit of more transparency, I ask that we acknowledge our responsibility to show why 1.30 is not adequate — as I said, every basis point over 1.30 is money credit unions could be investing in their members.
It’s worth emphasizing that credit unions are doing their part. I would like us to recognize this fact via finding ways to factor actual losses incurred into our loss reserves calculation. After all, the higher the loss reserves, the lower the equity ratio. More importantly, the actual losses incurred year-over-year may be a decent predictor of the fund’s reserve needs. But of course, I acknowledge that insurance isn’t about normal circumstances. The whole point of insurance is for the unexpected, the unusual, the chaotic.
One additional factor in determining the adequate level of the fund’s equity is how well we manage our budget. Coincidentally, the budget is also on today’s agenda. The cost of managing the risk in the fund directly impacts the equity ratio. The more NCUA spends on itself, the lower the equity ratio. NCUA can’t, in good conscience, spend additional millions on programming for ourselves, the 1,200 NCUA employees, while also claiming our Insurance Fund needs more cash.
I realize today’s briefing is strictly about the Normal Operating Level calculation, but I hope you’re picking up what I’m putting down. (underlining added)
Hauptman’s Opportunity
The NCUA stopped presenting any analysis justifying an NOL above 1.3% for the past three years. In the December 2025 NCUSIF update there was no mention of reviewing the NOL.
I asked NCUA’s public affairs office how and when the NOL for 2026 was set:
The reply: Regarding Normal Operating Level for the NCUSIF:
- The current NOL remains unchanged and is available on NCUA’s website. Determining the Normal Operating Level | NCUA
The latest update of this referenced NOL process is shown as: Last modified on 01/25/22. However, the last two times staff provided their analysis and assumptions for a 1.33 NOL cap the model when run supported a lower cap.
Hauptman’s second factor in NCUSIF’s net income is NCUA’s operating expenses transferred via the Overhead Transfer Ratio (OTR). Chair Hauptman’s view is clear: The more NCUA spends on itself, the lower the equity ratio.
The public affairs office’s March 17, 2026 response when asked about the OTR rate:
- The final 2026 OTR is 61.8 percent, 0.1 percentage point higher than the 2025 OTR. The remaining 38.2 percent of the 2026 budget is collected through the operating fee billed to federal credit unions. Based on a $2.16 million average asset exemption, the operating fee charged to federal credit unions in 2026 will decrease by approximately 24.65 percent compared to 2025. (underline added)
As the sole board member Chairman Hauptman is uniquely able to implement his views on the NOL, or as he stated, “Pick up what he put down.”
That would be a legacy worth noting and a mutual commitment reestablished. Or as he so clearly argued: every basis point over 1.30 is money credit unions could be investing in their members.