ALEXANDRIA, Va.–The National Credit Union Share Insurance Fund paid out nearly three-quarters of a billion dollars during the third quarter to cover losses related to failed credit unions.
There have been six credit union failures to date in 2018, two of which were caused by fraud, according to NCUA CFO Rendell Jones. During remarks before the NCUA board meeting, Jones did not identify what led to the other failures, but it is presumed they are CUs that made taxi medallion loans and have since been liquidated and merged into other credit unions.
The NCUSIF closed out the third quarter with a net position of $15.8 billion, a decrease of nearly $743.4 million from the previous quarter, according to Jones.
That the fund was likely to take a huge hit from losses due to failures has been no secret, as the agency has previously moved to significantly boost its reserves. When agency officials have been pressed for why additional money wasn’t paid out as part of the distribution from the closure of the Temporary Corporate Credit Union Stabilization Fund, and for why the Normal Operation Level of the NCUSIF has been increased, those same officials have hinted that big writedowns were coming.
Liquidations to Date
To date, NCUA has liquidated CUs this year representing about $500 million in assets, although there total losses are actually larger due to negative positions on taxi medallion loans in which the collateral has sharply declined in value.
Just one credit union specializing in taxi medallions remains in operations, Progressive Credit Union in New York. Melrose CU and LOMTO FCU were closed this year by NCUA, and Montauk CU was merged into Bethpage FCU in 2016.
NCUA Chief Financial Officer Rendell Jones said for Q3 the share insurance fund recorded net income of $93.5 million, and $159.2 million year to date. Most of that income is from investments.
The provision for insurance losses decrease by $57.4 million for the quarter.
The NCUSIF equity ratio stood at 1.35% as of Sept. 30.
Other Metrics
Other CU performance metrics as of Sept. 30, according to Jones:
- Some 203 credit unions are rated CAMEL Code 4/5, a decline of seven from the previous quarter. They represent .91% of all insured shares, according to Jones. By asset size, Jones reported there is one credit union with assets of more than $1 billion ($2.7 billion) currently rated as CAMEL Code 4/5.
- CAMEL Code 3 CUs total 1,001 and represent 4.32% of insured shares, a decline from 4.61% in the prior quarter. Those same CUs represented 11.19% of insured shares as of year-end 2013. Of those, NCUA said there are three credit unions rated CAMEL Code 3 as of Sept. 30 that represent $4.5 billion in total assets. There are 446 CAMEL Code 3 credit unions with $10 million in assets or less.
“We took the reserve and we recognized the loss,” said NCUA Chairman J. Mark McWatters during the meeting. “These are big numbers and the important takeaway to me is all this happened without an assessment to the credit union community.”