ALEXANDRIA, Va.–Congratulating NCUA on reducing its total NCUSIF and operating expenses by more than $65 million during 2020, one analyst said the “million-dollar question now is whether the exam efficiencies and exam oversight improvements can be sustained.
Chip Filson, who previously served as NCUA’s Director of the Office of Programs (CLF, NCUSIF, and Examination Policy) and later helped to start Callahan & Associates, said on his blog the NCUA board deserves a “shout-out” for the budget accomplishment, but expressed concern over whether “instinct” at the agency might make up for “lost expenditures” take over?
“The agency’s operating expenses, after OTR transfer, fell by $3.2 million from 2019. However, the $116.3 million total was still $40.6 million, or 54% higher, from five years earlier. At least for one year this inexorable upward trend was reversed,” Filson wrote.
Filson’s analysis found the greater savings were in the NCUSIF, where administrative expenses fell by more than $10 million to $181 million, which is the lowest level since 2014.
“The largest amount was in the net cash losses (payments less recoveries) for credit union failures. Net cash losses are a more accurate reflection of real performance as the provision expense has shown little or no correlation to actual losses for the past 13 years,” he stated.
“This positive recovery was in a year of the worst economic downturn since the Great Recession,” Filson wrote. “These NCUSIF savings due to a $51 million loss turnaround, plus $10 million in administrative expense reduction added to the $3 million in lower operating costs, together total $64 million.”
Lessons Learned?
“These numbers are a tribute to credit union resilience and the ability of all segments of the cooperative system to pivot to virtual management,” Filson continued. “The critical test is whether these virtual gains can be incorporated as ongoing activities so they are maintained when the COVID adjustments are over. Doing so would mean lessons learned that can bring benefits for years to come.”