ALEXANDRIA, Va.—No Share Insurance Fund premium will be needed now to bolster the NCUSIF, the NCUA board stated Thursday, as the equity ratio of the fund stood at 1.23% at the close of the second quarter and is projected to be 1.28% at year-end.
However, two board members shared concerns over the fund’s status.
The 1.28% is eight basis points away from the 1.20% statutory floor for the fund, when a restoration plan would be required.
NCUA reported second quarter financial statistics show the NCUSIF recorded net income of $46.3 million and total income of $60 million. Operating expenses were $51.1 million for the quarter.
Vice Chairman Kyle Hauptman said it is “indisputably uncomfortable for the fund to again be so close to our lower limit of 1.2%. Neither credit unions nor NCUA staff would enjoy an existence where we’re constantly on edge, worried that we’re one small dip away from announcing a mandatory restoration plan. So, if our projections are accurate, we’ll have soon have some breathing room and thus be able to reassess the fund’s status after all the pandemic-related factors fade away.”
Hauptman lamented the fact funds invested by the NCUSIF continue to earn low returns in the low rate environment.
“That’s something we have to deal with, and our low returns add pressure that is not the fault of NCUA or credit union members,” he said. “Given their importance to the health of the SIF, I’d like to call on the board to formally review the current investment policy…A review of our investment policy, operating procedures and oversight is just part of sound management. Although the current low-rate environment presents challenges, reviewing our investment policy is something that could be worthwhile and it is incumbent upon us to look for every extra dollar we can find.”
Board Member Rodney Hood called for raising the Normal Operating Level (NOL) to 1.30%.
“I believe the fund is in a good position this year unless there is another black swan event,” stated Hood. “The NCUSIF resources are credit unions' resources. I believe the board should act on this in November or December to set the NOL at 1.30%. And, ultimately, this discussion should be about what the operating level of the fund should be.”