ARLINGTON, Va.—It has been a “fairly uneventful year” for the NCUA Operating Fund and Share Insurance Fund (SIF), according to NAFCU, which is advocating for the agency to take steps to drive improved investment performance.
As CUToday.info reported here, the NCUA board last week received an update on the state of the insurance fund.
In its latest Economic & CU Monitor, NAFCU noted that the biggest issue it has related to the NCUA’s management of the SIF was to extend the duration of the SIF investment portfolio from seven to ten years, which aligns with the NCUA’s approach prior to 2017.
NAFCU said it believes that extending the duration of the portfolio will increase the fund’s yield roughly 30 basis points per year. However, the monitor noted that share growth slowed from 22% in the first quarter of 2021 to 7% at the end of the second quarter in 2022.
“At a recent NCUA board meeting, agency staff indicated that it expects negative share growth over the second half of 2022,” the Monitor stated. “If that forecast plays out, year-over-year share growth will fall below 3% by the end of the calendar year. That would represent the slowest pace of insured share growth since 2006.”
SIF Ratio Projected to Rise Slightly
As CUToday.info also reported, NCUA is forecasting that SIF equity ratio will rise by four basis points by the end of the year to 1.30%, while a contraction in insured shares would result in a refund in many credit union’s capitalization deposit accounts. NAFCU said it believes the equity ratio will remain above the 1.20 statutory minimum for at least the next several years if conditions hold.
Regarding the NCUA Operating Fund, this month’s Monitor noted the fund “has been flush with cash in recent years.”