ALEXANDRIA, Va.—The Share Insurance Fund showed a net loss of $21.8 million during Q2, up from estimates of $13.2 million for the quarter. For the year, however, the fund shows $2.2 million in net income.
During NCUA’s open board meeting Thursday, CFO Rendell Jones attributed the loss, in part, to the extended low-rate environment combined with and increase in insured shares.
“We have had this low-rate environment for some time, and as it continues earnings are relatively flat,” explained Jones. “We are not earning a lot on our investments and we are not investing to chase rate.”
Expressing concern for the trend, Board Member Mark McWatters said, “This is something to keep in mind as this math here is not heading in the right direction.”
As of June 30, the fund’s calculated equity ratio, based on estimated insured shares of $993.5 billion, dropped to 1.24%, NCUA said. When the next 1% deposit capital adjustment is collected in October, the equity ratio is estimated to be 1.27%, consistent with the agency’s expectations, but the ratio may differ if loss patterns change, the agency said. NCUA said it will invoice for the adjustment in September.
Second-quarter investment and other income was $56.9 million. Operating expenses were $52.8 million. The provision for insurance losses increased by $25.9 million. Overall, the amount of assets in CAMEL code 3, 4 and 5 credit unions has decreased 54% since reaching a high of $205.6 billion in September 2010.
Other fund notes:
- The number of CAMEL code 4 and 5 credit unions declined 16.7% from the second quarter of 2015 from 251 to 209. More than half were credit unions with assets of $10 million or less.
- Assets of CAMEL code 4 and 5 credit unions were $9.5 billion, a 16.7% decline from the second quarter of 2015.
- The number of CAMEL code 3 credit unions declined 10.1% from the second quarter of 2015 from 1,336 to 1,201.
- Assets of CAMEL code 3 credit unions were $85.2 billion, a 9.5% decline from the second quarter of 2015.
Six federally insured credit union failed during the second quarter. Fraud was a contributing factor in all six failures. Year to date 11 CUs have failed with fraud accounting for 77% of the closures. The total losses associated with failures through the second quarter were $8.5 million.