Category: NCUSIF

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NCUA’s  Financial Fairy Tales

It is a leader’s deeds, more than words, that create confidence in those who rely on an organization’s performance.

Chairman Hauptman became the only NCUA board member and its primary  publicly accountable leader when President Trump fired his two other board members in April 2025. That Presidential executive  action is still in litigation.

Hauptman has repeatedly stated that his solo leadership will be business as usual at NCUA even citing  previous precedents. One would assume a single point of authority could result in more direct  staff outcomes. Constituent credit unions could have clear direction. No need to compromise to gain board approvals.

However Hauptman’s leadership intentions are not clear.  Are his priorities to implement executive orders from Trump to show his political fealty?  The administration has made no secret of its intent to take a wrecking ball to government agencies.

Or is he motivated by the circumstances  of the cooperative system which NCUA regulates?

How will his previous statements as a minority board member shape his current priorities on regulatory burden or the NCUSIF’s financial structure?

He is a lame duck whose term has expired . He has already been nominated to a board position at the PCAOB for twice his $156,000 NCUA salary.   Does agency staff have any incentive to implement changes knowing a new leader or full board may be just months in the future?

What interest and capability do Hauptman and his team have in managing Agency outcomes? Or are results staff’s responsibility and he is just an orchestra conductor, waving his verbal policy arms?

Hauptman’s  First Leadership Test

It was with great interest, and some trepidation that Chairman Hauptman’s first significant  initiative was to implement the President’s executive order to reduce agency headcount  by at least 20% in 2025.

Later in the year the agency proclaimed  targeted staff cuts had been exceeded.  Moreover,  NCUA was still fully capable of doing its work even with much reduced staff resources.

The Reveal: Annual Costs Went Up, Not Down

On April 1 ,  2026, the NCUA’s 2025 Annual Report of almost 200 pages was published.  The press release included Chairman  Hauptman’s statement:  “As promised, we’ve delivered millions in cost savings to credit unions. Our agency-wide effort on efficiencies has paid off, as NCUA will emerge from our reorganization a nimbler, more focused agency. . .”

However a day later Credit Union Times released an analysis that showed there had been zero cost savings,  In fact the agency spent more on salaries and benefits than the prior year.  Here are some excerpts from the article: NCUA Report Shows Highter Costs for Fewer Workers.

The NCUA’s 2025 annual report released Wednesday showed the agency spent more money on fewer employees last year.

The NCUA went from 1,211 employees on Dec. 31, 2024 to 940 on Dec. 31, 2025 after instituting a voluntary separation program. . . a 23% headcount reduction. . .

The article’s writer created a spread sheet because operating numbers for 2024 had been omitted from the current edition.  His analysis showed the following comparison for NCUA’s most recent two years salaries and benefits:

Employee wages and benefits were $121.7 million in 2025, up nearly 10% from $111.1 million in 2024. Those expenses rose 8% to $102.772 million in 2024 as its workforce grew by four employees.

Based on year-end employment, the NCUA spent an average of $129,461 per employee in 2025, up 41% from $91,718 in 2024.If you divide by the year’s average employment (averaging the year’s starting and ending employment), average pay rose 23% to $113,150.

Overall, the NCUA’s operating fund expenses grew 6% to $160.7 million.  (bolding added)

Subsequent Events in 2026

The Times article quoted an NCUA spokesperson explaining that there were multiple incentives paid to meet the agency’s staff reduction goals.  In essence NCUA had to spend more to save money.

I followed up this explanation across all three funds whose costs are paid by credit unions.  So far the trends in total salaries and benefits are exactly the same as in the article-higher costs for fewer employees.

Operating Fund salary and benefits for January 2026 versus 2025:

2026: $ 10,791 million versus 2025: $10.112 million  a 6.7% increase.

NCUSIF does not show separate salary and benefits expense.  However the OTR for 2026 increased by .1% and presumably the salary pass throughs would show he same increase.

The CLF presented its annual budget at the January 2026 board meeting. The initial slide was highlighted by the statement:  CLF’s 2026 Budget is 12% BELOW its 2025 Budget

The CLF will spend less, right? No, instead it will spend more! Through February 2026, salaries and benefits are $329k versus $267k in 2025, or a 23%  increase.   Not the forecasted message of a cost reduction.  This increase funded by almost $1 billion in credit union capital for a facility that has played no role in credit unions since 2008.

The Bottom Line

NCUA is spending more on salaries and benefits so far in 2026 after a 23% reduction in total headcount  at the end of 2025.

The failure to actually reduce expenses shows a lack of management oversight at the highest level of the agency.   One of the truisms of government reorganization when delegated to staff, and not overseen by top leadership, is that success in the staff’s terms is not about cutting back, but about getting more.

If Chairman Hauptman’s words about millions of dollars in cost savings to credit unions is not correct from the agency’s  own numbers, one has to be skeptical of more subjective claims  such as, being a more nimble and focused agency.

If NCUA leadership does not manage their own internal financial trends, what does that suggest about their knowledge of the most critical credit union issues?  Are changes in credit union merger payoffs and fintech investments  leaving regulators in the dust?

Are the current multiple public announcements of NCUA deregulation proposals any more than agency PR “proceduralism”? That is government pretense for appearing to seek change, but nothing is different in the end.

For if NCUA really sought to reduce burden then the largest, most involved and unsubstantiated rule ever imposed on coops, risk based capital, would be at the top of the “burden” list. Or at a bare minimum resetting the NCUSIF’s NOL at its historical 1.30%. This has been the outcome for the prior four years as shown on page 165 of the Annual Report.  But no dividends have been paid to credit unions as board keeps the NOL at 1.33%.

This is Chairman Hauptman’s time at the helm.  There are no other board members to appease.  He proclaims NCUA is doing business as usual. The question is, what does usual mean?

This could be a special opportunity to align agency priorities with actual, urgent cooperative  system needs. Or usual may just be more words, fairy tales, to curry political points or create a  flawed impression of leadership.

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A Chance for NCUA Chairman Hauptman to Make His Mark

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 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.

 

 

 

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The Origins of the Cooperative NCUSIF

History matters.  Especially when an institution like the NCUSIF occuoies such a vital role in the integrity of he cooperative system.  Following are important  facts in understanding the unique value of share insurance today.

On April 15, 1983 NCUA sent a Report to Congress on the origins and future of the NCUSIF.  It is required reading for anyone who wants to learn of the unique role of share insurance for the cooperative system and the basis for its restructure in 1984.

While all three federal funds responded to the special  Congress’s request, only the NCUA’s proposals were adopted in the Deficit Reduction Act in 1984 changing the whole approach to cooperative share insurance.

Moreover, only the NCUSIF has continued to function in this financial structure  for 40+ years.  The FSLIC failed and was merged into the FDIC.  The FDIC has reported negative net worth during several subsequent banking crises and experimented with  multiple adjustments in its premium based financial model.

In Chairman Callahan’s April 15 cover letter he made four important points:

  1. All credit unions, including FCU’s should have a choice of share insurance, either state authorized or NCUSIF.
  2. Financially restructure the core design of the NCUSIF with a one-time 1% deposit of insured shares which would be adjusted annually thereafter.
  3. The membership share required of members to join should be uninsured and be part of a credit union’s reserves (net worth).
  4. NCUA opposed consolidation of the three federally managed funds.

The Report was a unique document.  It was based on comments from multiple cooperative organizations, historical facts, operational realities, not academic theory or untried alternatives.

It points out FCU’s operations had grown dramatically without federal insurance from 1934 to 1970.

CUNA and leagues  opposed federal insurance for many years as incompatible with cooperative principles.  Some of the reasons for opposition included:

  • It was unneeded and add to the cost of operations. No credit unions had failed during the bank holiday of 1932 and studies showed minimal losses when liquidations occurred.
  • Federal insurance would not get at the causes of failures and undermine the roles of supervisory and audit committees.
  • Most importantly, federal insurance would reduce the number of credit unions in operation, put an end to new charters and introduce a “federalization” of the dual chartering system.

Why Congress Approved the NCUSIF

When NAFCU and CUNA were able to compromise on a common bill in 1971, the environment was entirely different from the circumstances that led to the creation of the FDIC and FSLIC four decades earlier.  The Congressional Report on the bill noted in part:

Despite the lack of insurance, credit unions have grown to the point where there are now more credit unions than all (other) financial institutions combined. Despite this remarkable and rapid growth, credit unions have maintained an outstanding record of safeguarding member shares.  Your committee wishes to make clear . . .”federal insurance) should be considered as a reward for the outstanding job performed by credit unions.  

The Purpose of Cooperative Insurance

At the time of this 1983 Report, there were a range of options available to credit unions reflecting the multiple efforts to provide system resources in the event of institutional problems.  Several states or Leagues had created “stabilization funds” to assist troubled credit unions.  Central credit unions were used to facilitate mergers and purchase of assets if credit unions failed. The private insurers developed in parallel with NCUSIF’s initial years covered 3,150 state charters with $12.4 billion in assets.

The Role of the NCUSIF Today

The purpose of insurance and its multiple cooperative predecessors was not to facilitate liquidations.  The intent was to have a common pool of credit union capital resources to resolve problem situations both collectively and individually.

This collective role was used in 1982 when almost 100 credit unions that had invested in Penn Square Bank’s CD’s above in FDIC insured limit received non- earning “receiver;s certificates” with an estimated recovery value of 80%.  Both the CLF and NCUSIF stepped in to prevent any institution from becoming insolvent.

NCUSIF capital was injected into multiple large problem credit unions from the turnaround at San Diego Navy FCU (the 9th largest in 1980), to the recovery of San Antonio FCU in 1990.

Because there is no private ownership or capital at risk, unlike the FDIC, credit unions’ collective insurance is more akin to a cooperative hedge fund.  The purpose is always to find the most effective way to continue operations and credit union service, not to liquidate or induce mergers for someone else to figure out solutions.

That ability requires judgment, creativity and concern for the members’ and cooperative system’s future not just problem resolution.

There are other critical aspects of the NCUSIF’s operations versus FDIC’s approach.  These include the safeguards put in legislation to address the concerns credit unions raised about federal insurance which were included in the 1984 redesign.  Those will be in a later post using the latest data from the two federal funds.

 

 

 

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Every Member Has a Story

Two stories of a credit union going the extra mile to help members with  card problems.   From a CEO’s monthly staff briefing, used with permission.

The stories are long and show the team efforts needed to resolve difficult circumstances in the member’s best interest.

A Blocked Card and a Member In Transit

Our member called in on Thursday, Jan 22, 2026, because his debit card wasn’t working. When our CC representative, Kristen, took a look at his debit card, it was discovered that it was restricted due to suspicious activity, and she confirmed that the transactions were fraudulent.

After explaining that the card would need to be blocked, he became very frantic and upset as he was working out of town. His company was sending him home due to the incoming weather. However, he was going to be stranded in South Texas without a debit card, no gas, and no access to funds. The closest shared branch was 75 miles from where he was.

Kristen went to Jami, her supervisor, to see if there was anything that could be done to help this member. Jami reached out to RISK and asked if an exception could be made for us to un-restrict the member’s debit card long enough so that he could go to an ATM and withdraw funds, and then immediately block it when he was done, so that the credit union could maintain operating control.

When Kristen got back on the phone and told the member the good news, he was elated, and Hope took the place of despair. Kristen stayed on the phone with the member until he got to an ATM. She then coached him on how to get as many funds as he could from the ATM (the limit for that specific ATM was $200 per transaction). The member had to do multiple transaction withdrawals wich Kristen walked him through. After the member pulled what funds he could out, Kristen immediately blocked the card.

The entire team did the right thing by this member and found a way to enact our Principles of Operating Control while realizing that Every Person Has a Story.  The credit union  was able to deliver a happy ending by enabling him to get gas, necessities, and a hotel room so that he could make it home safely in time to avoid the bad weather.

An Overdrawn Credit Card in Default

A member and his mother came to the local Member Relationship Center after a frustrating experience related to a credit card that had been charged off. The member believed he had only been an authorized user on the account, added by his father when he was 18, to help build credit. Sadly, his father later passed away after struggling with alcoholism, leaving an $8,000+ balance that began reporting negatively on the member’s credit. It was later confirmed that the member had signed as a co-applicant, making the debt legally his responsibility.

Prior attempts to resolve the issue had been unsuccessful, leaving the member and his mother extremely upset. Joley from the Contact Center supported them during an emotional call and proactively coordinated with member service reps Allison and Bella to ensure the branch team was prepared. Bella also followed up based on a prior review, providing the card provider the deceased accounts contact information and continuing to advocate for support.

When mother and son  arrived the next day, emotions were high. During a lengthy call with the card provider, we verified account details and requested a higher up review. While the conversation was tense at times, the focus remained on de-escalation, empathy, and finding a solution. After nearly an hour and multiple conversations, the credit card proviider’s recovery agent agreed to accept a one-time $1,000 settlement on the balance.

The mother who is on Social Security with limited savings, was prepared to pay the settlement that day. By the end of the meeting, both she and her son were visibly emotional—this time from relief. They shared that they had felt stuck for a long time and were deeply grateful for the advocacy, time, and teamwork that helped them reach a manageable resolution.

A Comment

This is the credit union difference in practice, not a PR slogan.   These members were treated like owners whose special circumstances were recognized and resolved as a standard operating procedure (SOP).

Tomorrow I will show how this individual approach, intrinsic to cooperative design and purpose, carried over into the 1984 restructuring  of credit union’s unique insurance saety net, the NCUSIF.

 

 

 

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Will NCUA’s Journey Be From Chartering a COOP Movement to a Regulatory Dead End?

What kind of financial regulator would be most effective to carry on the purpose of the credit union system stated in the FCU ACT? (see note on Congressional purpose at end)

Should the credit union system be overseen by a regulator of cooperatives or of financial institutions?

The arc of federal regulation from 1934 to today is simple.  The federal regulator evolved from the role of chartering, promoting and supervising cooperatives to just another financial supervisor safeguarding an insurance fund.

The coop design is unique in American financial options. The users are the sole owners of the service.  The intent was to create shared community resources not private wealth.  The structure was to be perpetual with the common equity always “paid forward” to benefit future generations.

Moreover, financial soundness was underwritten by  this shared purpose of borrowers and savers.  Governance was democratic–each member-owners had one vote. No proxies.

The Impact of NCUSIF On Coop Regulation

The  turning point in cooperative regulation was the 1970 passage of a federal deposit insurance (NCUSIF) option modeled after the FDIC and FSLIC.  The banking funds were created in the early 1930’s in response to the  “banking holiday” failures in the depression.   The nascent state chartered credit union movement had no such system failures.  Deposit insurance was not  part of  the FCU act passed in 1934. It wasn’t needed.

The need for the NCUSIF was much debated by credit unions in the lated 1960’s.  CUNA opposed the option arguing such an institution would eventually dominate the system’s functioning.  A new trade association, NAFCU, was formed to lobby for and pass this federal option for cooperatives.

The NCUSIF was not created because of system failures.  Rather it was a recognition that cooperatives, while different in design, were just as safe as any for-profit banking option.

As NCUSIF insurance spread, so did federal regulation mimicking other banking regulations.

From Cooperative Partner to Financial Overseer

When implementing deregulation from 1981-1985, NCUA Chairman Callahan asserted credit unions were unique.  The so-called level playing field arguments, he believed, would undermine the cooperative advantages of member-ownership.

Callahan believed regulations should promote cooperative purpose and collaborative actions.  Both tenets were key tp the financial restructure of the NCUSIF and achieving 100% credit union participation in the unique CLF’s-coop system liquidity partnership.

But the bureaucratic pull of Washington prompted later NCUA leaders to emulate the example and practices of banking regulators.  Safety and soundness, not member service, became the regulator’s mantra.

Both NCUA and credit unions sought Congressional hearing seats at the tables with the titans of America’s financial services.

Today NCUA has copied banking regulators with rules such as risk-based capital and, expanding market sources of capital.  New charters are non-existent.  Cooperative purpose is never mentioned in supervisory priorities.

NCUA oversight has fluctuated between laissez faire (let the free market decide) to embracing the administration’s political ideology from DEI to government downsizing.

The absence of any reference to coop design is that there is no protection for for member-owner rights or their collective savings.  NCUA like the banking regulators has reduced their oversight to merely offering a $250,000 payout in the event of institutional failure.

This neglect of member-owners’ rights has resulted in boards staying in power perpetually.  Owners are kept out of any governance or voting role.  Bylaws are modified with NCUA approval to prevent member initiatives.  Boards and CEO’s feel free to take a credit union’s business model and its billions in legacy assets in any direction they choose.

Transparency for cu leaders’ conduct is non-existent.  Director fiduciary duties flouted. Accountability for outcomes occurs only after a financial crisis. Then the system’s leadership shortcomings are quickly swept under the rug via mergers.

When new CEO’s arrive from outside the coop system, often former for-profit financial professionals, they bring their prior experiences with them. They act like teenagers given a new high-powered formula 1 car.  With board assent, they jump into the driver’s seat and try to see how fast they can make their new institution grow.

The NCUA’s Future

Today NCUA acts and sounds like the other banking regulators.   Credit unions applaud the Trump adminisration policy of government tear down and relaxed o exam oversight.    NCUA appears  alongside the other financial overseers in Congressional hearings, states all is well, and makes no effort to describe how the tax exempt coop system is fulfilling any public duty.

The consequence is that credit unions no longer see their organization as part of an interdependent financial system. Institutional success is celebrated versus cooperative’s  ability to create better financial solutions for those who have the least or know the least about personal finances.

Individual credit union priorities look more and more like capitalist business plans.  They attempt to acquire, not support their peers, via merger takeovers.  If that fails, just buy a bank.

With self-perpetuating board oversight, regulatory withdrawal, no transparency about transfers using tens of millions of member-owners’ capital, the cooperative system may lack the capacity for self-correction.  Industry hegemony, not cooperative purpose, becomes the institution’s endgame.

How much longer will Congress or public policy think tanks not pose the existential questions: Why does America need a financial system that emulates its competitors, but with a tax exemption?  Will NCUA become part of Treasury’s financial oversight, just like the OCC?  Why have two federally managed deposit insurance funds that provide the same function?

“It Makes No Sense:” One Analyst’s Assessment

Yesterday’s post gave a brief history of federal regulatory evolution, It  tracked the various federal governmental departments that shepard credit union’s evolution.  And subsequent events under NCUA as an independent agency. This is that author, Ancin Coolley’s  concern, about where the coop movement stands today.

 When you read credit union regulatory  history and go back to the arguments, it keeps bringing me to this point: the FDIC and other agencies did not want credit unions. And it calls to mind the question, why did they not want them? 

They did not want them because credit unions were not treated the same way as other financial institutions. They were viewed as something that drifted into a social-services posture.   

And honestly, the more I dig into the history and the legal history, the more it feels like I’m finding out Santa Claus isn’t real. The more I learn about the lack of standing for members in court, and the reality that there’s often no remedy for members against directors who effectively give away capital, the more disorienting it feels.  

It’s like there’s the reality I want to believe in, and then there’s the legal reality of what a credit union actually does.  

And what I can’t even begin to reconcile conceptually is this: credit unions want to maintain their tax exemption while also purchasing banks. In good conscience, I can’t even argue against someone who says, “How are you going to maintain your tax exemption if you’re buying a bank, when you were originally given a tax exemption for not being a bank?”   

It makes absolutely no sense.  

Editor’s Note on Cooperative Purpose:

Congress added the following language to the Federal Credit Union Act on August 7, 1998.

The text was included as part of the Congressional Findings in Section 2 of Public Law 105–219, also known as the Credit Union Membership Access Act.

This specific language was crafted to affirm the Mission and reassert that credit unions serve people of “modest means.”

The Congress finds the following:

  1. The American Credit Union movement began as a cooperative effort to serve the productive and provident credit needs of individuals of modest means.
  2. Credit unions continue to fulfill this public purpose, and current members and membership groups should not face divestiture from the financial services institution of their choice as result of recent court action.
  3. To promote thrift and credit extension, a meaningful affinity and bond among members, manifested by a commonality of routine interaction, shared and related work experiences, interests, or activities, or of an otherwise well understood sense of cohesion or identity is essential to the fulfillment of the public mission of credit unions.
  4. Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most state taxes, because they are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means.
  5. Improved credit union safety and soundness provisions will enhance the public benefit that citizens receive from these cooperative financial services institutions.
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Balancing the Old With the New in 2026

When implementing NCUA’s practice of turning around problem credit unions versus liquidations or paying to  merge, the key success factor was finding experienced capable turnaround managers. One name was frequently mentioned as an example by  NCUA Regional Directors (RD) in this talent quest.   Only after leaving NCUA did I meet him.

Jeff Farver was the CEO of San Antonio Federal Credit Union (SACU), now  Credit Human, for almost 22 years–July 1990 to retirement January 2012.

In early 1990 Farver was asked by  NCUA RD John Ruffin to take over NCUA’s largest problem conserved  credit union.  By 1995 this insolvent  $650 million coop had achieved a 6% net worth.

Becoming a Problem Solver

SACU was not Jeff’s first rodeo.  In the 1970’s, he had joined a small Florida bank as comptroller just as interest rate turmoil upended traditional assumptions about investment management.  At Eglin FCU in Florida, he resolved a deeply flawed investment strategy as investment manager.

Based on this success he was hired as CEO of Chattanooga TVA FCU.  Upon arrival, total assets were earning 8% and the cost of funds was  8.25%.  The investment portfolio in 1981 was $5 million underwater due to Fed Chair Volcker’s rapid double digit increase in short term interest rates.

His success in these three previous problem situations caused NCUA’s new Region 5 RD John Ruffin to again reach out to takeover San Antonio Credit Union, the industry’s largest problem case. The credit union was $25 million insolvent with troubled business loans, fixed rate real estate loans underwater and no proactive recovery strategy.  He took 90 days to assess the situation and then negotiated a partnership with NCUA to inject a NCUSIF capital note, incentive targets and forbearance for time to implement product and business changes to restore solvency.  By yearend 1995 he had achieved his 6% net worth objective set in his workout goals with NCUA.

Recently Jeff shared thoughts from a decade of post-retirement  mentoring college business students.

I describe his advice from five decades as balancing the tried and true with the new.  A timely quest  at the beginning of the year.

A Turnaround CEO’s Learned Wisdom

The reason I bring the balanced scorecard concept  is that I do believe in balance!   If an organization and its leadership “over-plays” diversification of its customer base and takes away resources and  “pricing values” from its existing customers,  it is putting at risk the customer base that brought its current success.  

Further, the question must be answered how  diversification impacts existing customers in the short term and more importantly in the long run.    Leadership must articulate the pros and cons of growth for growth’s sake.

In 2000, SACU’s  indirect auto lending was 60% of our earning assets and 70% of gross income.   I recognized that gas price hikes or recessions could adversely impact our delinquencies, charge offs and financial workout.   Also real estate lending was a commoditized market with narrow interest spreads and Interest rate risks causing surges in demand or declines of loan volume. 

Entering a New Market

By luck I interacted with several manufactured home lenders  in trouble financially. With GNMA’s help,  SACU took over the servicing of their GNMA  loans, hired their staff and entered this new line of lending. 

Months later Jamie Dimon in the Bank One merger chose not to continue the Manufactured Home lending business. I went to Seattle and convinced 34 Western region mobile home lenders to become credit union employees.  They generated $200 million in new mobile home loans the next year.

These new business lines generated improved Interest rate spreads, allowing us to pay our existing members better savings & CD interest rates.  Moreover, our manufactured home loans averaged 200 basis points less than bank or other lenders’ interest rates.   

When I retired in 2011,  SACU had $1 billion in indirect auto loans and $1 billion in manufactured home loans.   SACU’s diversification  was a win for our member savers and  our new  MH Loan borrowers.  It is the cooperative model at its best.

Don’t Forget the Core

The key issue still today is how do mergers, expanded market  reach, bank or third party loan acquisitions, and new services provide value to existing members whose loyalty created the basis for further expansion? Without balance, credit unions could lose the relationship advantage that is the basis for their continued success. 

 

 

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Tomorrow’s NCUA Board Meeting-A Special Opportunity

There are two agenda item’s for Thursday’s meeting:  approval of the 2026/7 NCUA budget and a report on the financial status of the NCUSIF.

This will be the first board meeting since September 18.  Chairman Hauptman has implemented a practice of holding meetings only when needed versus. a fixed monthly event.

The Critical Decisions for the NCUSIF

This year end financial estimate for credit union’s unique cooperative fund is more than a financial update. In the past, this meeting has set the upper cap on the Normal Operating Level (NOL)which determines when the surplus from fund  earnings must be returned to credit unions as a dividend.

A dividend from NCUSIF operations has not been paid since 2008.  The dividend demonstrates  stable performance by the industry.  It also acknowledges credit union’s evergreen commitment to main 1% of insured shares as the principal earning asset for the fund. In contrast the FDIC relies primarily on open-ended premiums assessments for its revenue.

The Latest NCUSIF Financials

As of the October 2025 financials posted yesterday, the fund’s full year outlook is very positive after the first ten months.

Net income of $222 million is $10 million greater than the same period last year with operating expenses near the same level at $204 million.  The provision for future losses is funded to $240 million up  $10 million from a year earlier.

The fund’s yearend external audit is underway.   Assuming no surprises, it is straight forward to forecast the probable yearend outcome and the ratio of fund equity to insured shares.

This dynamic spread sheet model using actual data for the first ten months, estimates a yearend ratio of .3101 of retained earnings to insured shares.  The historical upper cap from 1984 initial implementation to 2017 in the NCUSIF was .30.   This cap was only raised in 2017 to accommodate temporarily an influx of funds from merging the TCCUSF surplus. This current projected earnings would result in a dividend of $200-$250 million with a30 NOL cap.

A Unique Leadership Opportunity

After the year end true-up of insured shares, the total ratio of 1.3% means the NCUSIF is fully funded.  In addition, there is more than $240 million in reserves, already expensed, to cover insured losses.

Chairman Hauptman is in a unique position to re-establish he NCUSIF’s historical cap of 1.3%.  Until the 2017 short term incease in the 1.3% cap, the  upper limit was unchagned even in the 2008/9  financial crisis, Dividends were a regular outcome in the first thirty years following the 1984 redesign.

The federal credit union act authorizes three board members.  As the lone member currently, Hauptman has a chance to restore the fund’s historical cap.  Sooner or later via court action or administration appointments, additional board members will be in place. It is now possible to reaffirm the original legal compact with credit union for supporting the 1% open-ended funding model in return for a stable upper NOL limit.

Restoring the 1.3% NOL cap authorizes  returning  credit union funds to credit members.  It demonstrate the administration’s intent tp limit the inherent tendency of government to always seek greater amounts of money to spend.

Most importantly it reinforces the unique cooperative model of the NCUSIF for credit union members and the public.  Credit union’s collective fund is different-by design.

Finally such action would implement Hauptman’s intention to return to the fund to its 1.3 NOL as stated in December 15, 2022 NCUA board discussion of this issue.  From his statement on the issue that meeting:

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.  (link)

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Live Video of the Largest Credt Union Conference

In my December 9th post I included a preview from NCUA’s Video Network of the largest credit union conference ever held to that point in time.

That short 20 minute overview gave NCUA staff’s instructions for the meeting plus an introduction to the content for examiners and credit union attendees.

After the event was over,  video highlights were edited and shared in NCUA’s Edition 18:  The December 1984 National Examiners Conference in Las Vegas. 

The 55 minute of outtakes focuses on three topics: common bond, the role of the regulator and the future of credit unions. Speakers include  state regulators, CU CEOs, NCUA staff and other federal supervisors such as  Richard Breeden, Martha Seeger, Ricard Pratt. NCUA Chair Ed Callahan provides opening and closing remarks, plus comments on what makes credit union’s truly unique. 

The conference is also covered in depth in NCUA’s 1984 Annual Report.  However the video captures the events live  including reactions from among the 3,000 attendees.

Why This Event Is Relevant Today

Although this special gathering concluded 41 years ago, the event still speaks to credit unions today in that:

* It demonstrates the multiple participants within the movement working  in shared purpose.
* Speakers showcase  leaders of the coop system– regulators, credit union professionals and experts in financial services.
* Critical issues in this era overlap those today: mergers, taxation, competition, innovation and the fundamental  advantage of cooperative design.

History Matters

From the truism “there is nothing new under the sun, to history never repeats, but does rhyme” there are multiple ways to learn from past events.

This video shows cooperative leaders in their most articulate and thoughtful approaches to the future. NCUA’s conference agenda of over 300 sessions of breakouts and general panels captured the movement’s advantage of sharing expertise and experience for everyone’s benefit.

Comments were sometimes controversial and often in disagreement, for example the need for a common bond.  Or, “Trust in a financial institution is like virginity; once you lose it, it’s hard to get back.”

The conference was also a celebration.  Just two months earlier  the NCUA board approved regulations implementing a completly different approach to the NCUSIF’s financial structure.  Instead of copying the other federal insuers annual premium approach, the new design used  cooperative experience to create a new m;odel built centered upon  an “evergreen” 1% deposit.
Most critically it showed how a credit union regulator and the movement can work together for enhancing the future for tens of million member-owners.

What  Attendees Remember Today

Clifford Rosenthal: A personal memory of the big conference in Las Vegas. It was a big deal for me; I was new to my role serving as head of the National Federation. I still have the little lucite piece that was given to attendees.

Paul Horgan: (credit union  CEO) Two recollections: NCUA and the Vegas meeting.

The meeting was innovation at its best.  Communication was the key feature.  Goodness, that was 41 years ago.

On Ed Callahan: Don’t remember the exact month and year but recall having the privilege of driving Ed from the Brainerd, MN airport to the league meeting…on the long drive I criticized the capitalization plan, he really listen then replied “Okay tell me your better idea.”  

I guess today’s takeaway is “enjoy your friends before it’s too late.”

Mark Wolff (former NCUA  employee):

Thank you for your post about the National Examiners Conference and for sharing the promotional video. Wow, watching it (and me in it!) was like going back in a time machine!

Being in the NCUA public affairs office at the time, I remember the sustained promotional effort to generate awareness and attendance. Along with the video I seem to recall regularly highlighting the conference in our newsletters and press releases  that NCUA sent to credit unions at the time and in board members’ speeches to CU groups.

During the conference I remember being struck by how many people had attended and how crowded the hallways were between breakout sessions. At the time I’d never seen anything like it. We all had a nice feeling of accomplishment afterward.

The CODA

Three months later at the 1985 CUNA GAC conference, Chairman Callahan announced that he, Bucky and I would leave the agency.  His term as Chair still had two and one half years remaining.  His explanation was, “We’ve done what we came here to accomplish.”
He said his future goal was to work with credit unions to develop the opportunities presented by deregulation.  One of those outcomes was the founding of Callahan & Associates.
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An NCUA Camelot Era

Everyone has highs and lows in their personal and professional endeavors.

Some  of my most fulfilling moments were the ten years Ed, Bucky and I worked together in credit union regulation.  First in Illinois, and then at NCUA for three and a half years (October 1981-May 1985).

One of the educational communication efforts we launched was the NCUA Video Network.  The initial film was in partnership with the Illinois Credit Union League, What is Deregulation?, periodic productions chronicle NCUA’s priorities and information vital for credit unions to be aware of.

The final Edition XX was called The Callahan Years.  It is a live, unscripted interview by a moderator with Ed, Bucky and me.  It responds to criticisms, some voiced about our leaving two plus years before Ed’s term expired.  More importantly, it is a discussion of the many ways the agency changed to meet the new era of open competition versus government assigned charter franchises.

This 30-minute review captures the joy and learning that happens when people work well together.  I was fortunate to be a part of a team that stayed together even as we went our separate ways after founding Callahan & Associates in 1985.

The ten years we spent learning from each other  and from movement leaders was a Credit Union Camelot experience for me.

Listen to this summary of this pivotal period in NCUA and credit union history.  It is a moment of remembrance and thanks for this special professional interlude.

(https://www.youtube.com/watch?v=DrfG5PiObB0)

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Federal Government Shuts Down-The Importance of Options

In this latest test of political masculinity in Washington DC, the federal government has shut down.

NCUA says it is still open for business.  As evidence  the agency  reissued this guidance from over 14 years ago:

11-CU-05 / April 2011
Planning and Preparedness for a Potential Government Shutdown

This  test of political will and messaging on both sides has an open-ended feeling about it.  No one knows for how long or at what cost this standoff will continue.

This event and its aftermaths will only add to the many economic, financial and consumer uncertainties now infecting future outcomes.

This is not the first era of credit union’s navigating broad events outside their control. Recalling previous periods of change can remind that one of the most useful responses is to have options–not merely  hunker down to weather the storms.

When Options Matter

The headline reads:  Federal Credit Unions Eyeing State Charters as Rate Ceiling Hurts. It is from the Business & Finance section of the January 18, 1980 edition of the Washington Star newspaper.

The opening paragraphs:

Some federally chartered credit unions are trying to switch to state charters because the government’s 12 percent interest rate ceiling is shutting down their loan business. . .

In the last year, the 12 percent ceiling on loans has either shut down lending at some credit unions or generally restricted granting of loans in others.

Energizing the Options-NOW

Leadership is the art of changing before you have to.  The Trump administration’s one consistent theme is disruption, if not the destruction, of traditional government functions.

Recently in an NCUA board meeting the single member Kyle Hauptman suggested that it was possible the agency might have no board members in the future.

Whether that was just a hypothetical musing or confirming his interest in another government position is unknown.

But assume that scenario.  No board at NCUA.  What would the administration do?  What it has done with other vacancies, appoint an “acting Chairman” likely from Treasury.  And then begin a process of assimilation like the OCC under that Department for the agency’s future.

Just one of many possibilities created when the status quo is not longer as political checks and balances are completely gone.

To protect the independence, integrity and unique role of credit unions, it may be necessary to go back to where the movement started and gained its credibility–the state chartered system.

State regulators (NASCUS), state insurance options, trade associations and every credit union, whether state or federal, should now be assessing the ability of the states to be their primary regulatory choice.

It is critical to reinvigorate the state chartering system as a real option as the federal government and NCUA seem to be careening away from any stable leadership and certain future.

Credit unions created the dual chartering system that has evolved into serving tens of milions owners.  It may end up being their best hope for the future.  That is just one history lesson from the 1980’s.