The federal fund that insures shares (savings) in credit unions closed 2021 at an equity ratio (reserves to insured shares) of 1.26% and is expected to dip slightly to 1.25% by June 30, agency staff told the board of the federal credit union regulator Thursday.
The fund’s current ratio, while below the 1.33% normal operating level (NOL) set by the National Credit Union Administration (NCUA) Board, is below an “ideal level” but remains “relatively stable,” said agency Chairman Todd M. Harper.
In a report Thursday during the board’s virtual open meeting, the NCUA said the National Credit Union Share Insurance Fund (NCUSIF) reported net income of $54.4 million and a net position of $20.4 billion for the first quarter of 2022. Total assets decreased from $20.7 billion to $20.6 billion from year-end 2021 to the end of the first quarter of 2022. (The agency said first-quarter figures are unaudited and preliminary.)
“The Share Insurance Fund continued to perform well in the first quarter,” Harper said in a statement. “Quarterly net income rose by approximately $42 million due to the continued reduction of expected losses associated with the remaining legacy assets of the Corporate System Resolution Program. That is positive news. We are now seeing a normalization of the Share Insurance Fund’s performance to what it was before the Board decided to fold the Temporary Corporate Credit Union Stabilization Fund into the Share Insurance Fund.”
However, Harper also noted other factors that warrant ongoing scrutiny.
“(W)e continue to see a slow, steady decline of the equity ratio due to continued elevated insured share growth and low interest rates, at least from a historical perspective,” he said. “As such, the NCUA Board must continue to monitor the Share Insurance Fund’s performance and remain ready to act. Such monitoring includes assessing the effects of the changing interest-rate environment on the Fund’s portfolio.”
Agency staff also reported that:
- The number of composite CAMEL codes 4 and 5 credit unions decreased from 129 to 125 at the end of the fourth quarter of 2021. Total assets held by these institutions decreased from $8.8 billion in the fourth quarter to $3.3 billion, or 0.2% of total assets of insured credit unions, the first quarter of 2022.
- The number of composite CAMEL code 3 credit unions decreased from 752 to 751 at the end of the fourth quarter of 2021. Their total assets increased from $43 billion in the fourth quarter to $43.8 billion, or 2.1% of total assets of insured credit unions, in the first quarter of 2022.
At the end of the first quarter of 2022, two federally insured credit union failures had cost the NCUSIF approximately $200,000 in losses, the agency said.