This week’s report on the National Credit Union Share Insurance Fund (NCUSIF) during the National Credit Union Administration’s (NCUA) monthly board meeting showed total income of $101.4 million and net loss of $37.1 million for the quarter ending June 30, 2023.
The balance sheet indicated total liabilities and net position of $20.521 billion. The fund’s reserve balance stands at $204.1 million as of the end of the second quarter, with $6.6 million being for specific reserves. Year-to-date, there have been two credit union failures, at a total cost of $1.25 million to the fund. Fraud was not a contributing factor in either of failure, both of which were CAMELS Code 5. Both of these failures occurred in the first quarter of this year.
As of June 30, the equity ratio of the fund was 1.27 percent. This is a decrease from 1.30 percent as of December 31, 2022. The Normal Operating Level (NOL) of the fund was 1.33 percent. NCUA staff estimates that the equity ratio will remain at 1.27 percent when formally updated at the end of this year.
While noting that an equity ratio of 1.27 percent is a fairly good place for the ratio to be, NCUA Chairman Todd Harper reiterated recent concerns regarding interest rate risk, liquidity risk, and emerging credit risk.
The number of CAMELS Code 4/5 credit unions increased slightly from the preceding quarter to 134; CAMELS Code 3 credit unions decreased slightly to 771, though the percentage of insured shares in CAMELS Code 3 credit unions increased by $9.5 billion. Approximately 99 percent of the 134 CAMELS Code 4/5 credit unions are under $500 million in assets; and 95 percent of the 771 CAMELS Code 3 credit unions are under $500 million.
NCUA staff noted that it would not be surprising for the trend of decreasing CAMELS Code 1/2 credit unions to continue, given the continuation of economic and other financial pressures.
Staff also said a $76 million distribution of paid-in-capital to former U.S. Central corporate member credit unions took place.
Final Rule: Loan Participation, Eligible Obligations, & Notes of Liquidating CUs
The NCUA Board adopted a final rule to amend the regulations regarding the purchase of loan participations and the purchase, sale, and pledge of eligible obligations and other loans. The rule is intended to clarify the current regulations and provide additional flexibility. The rule also amends the NCUA’s rule regarding loans to members and lines of credit to members by adding new provisions about indirect lending and leasing arrangements.
In addition, the rule removes certain prescriptive limitations and other qualifying requirements relating to eligible obligations and provides credit unions with additional flexibility to purchase eligible obligations of their members. Removing the prescriptive limitations and other qualifying requirements is intended to allow federal credit unions additional flexibility to engage with the fintech sector.
The final rule will be effective 30 days after publication in the Federal Register.