ALEXANDRIA, Va.–The NCUA board has been given an update on the health of the National Credit Union Share Insurance Fund (NCUSIF) during its meeting here. One point of note: the percentage of NCUSIF assets (4%) in CAMEL Code 3, 4 and 5 credit unions is at one of its lowest points in many years.
NCUA CFO Rendell Jones said the fund closed Q2 with total assets of $16.2 billion.
During the second quarter the fund reported charges for liquidations of $38.6 million, bringing the mid-year figure for liquidations to $41.5 million.
The fund’s equity ratio closed June at 1.33%, down from 1.39% at year-end 2018, in large part to $160 million in dividends returned to credit unions that were paid out during the week of May 21.
The NCUSIF, in total, insures $1.2 trillion in member shares.
Other statistics reported by Jones for the NCUSIF as of June 30:
- The number of CAMEL Code 4 and 5 CUs increased by two during Q2 to 204. Approximately 89% have less than $100 million; 2% have more than $500 million in shares. Those CUs represent about .58% of all insured shares, or $9.8 billion in shares.
- The number of CAMEL Code 3 credit unions declined to 872 as of June 30, down from 905 as of March 31. Those CUs represent about $44 billion in insured shares. Of those, the vast majority are again in CUs below $100 million in assets. There are five CUs rated CAMEL 3 of more than $1 billion in assets.
- There was one failure in the second quarter that led to a $40-million hit (most likely C B S Employees Credit Union in California). Fraud was a contributing factor to the credit union that led to the loss for the insurance fund. There were eight failures that caused a loss to the NCUSIF during 2018, and 10 in 2017.
Questions From Board
Both NCUA Chairman Rodney Hood and Board Member Todd Harper posed questions to Jones about the NCUSIF’s investment strategy, especially whether the fund is going too long in chasing yield at a time when NCUA is cautioning credit unions against doing the same thing.
Jones said yield is a secondary objective to other objectives established for the fund.
Asked whether it is prudent to extend the weighted average life of investments, Jones said an extension of the weighted average life is already underway. The fund has an average weighted life of two years and a weighted average yield of 2.03%.
NASCUS Response
Following the release of the latest NCUSIF numbers, NASCUS President Lucy Ito said, "We note the National Credit Union Share Insurance Fund’s net income of $79.1 million and the agency’s stewardship of credit unions’ funds. We anticipate NCUA’s overhead transfer rate review in 2020 and are hopeful that the agency will continue to employ a “principles-based approach” while balancing emerging systemic risks and returning excess funds to credit unions.”