NASCUS Summary: NCUA Board Meeting

May 26, 2022  — The board meeting opened with a moment of silence in light of the recent tragedies across the country. The meeting agenda included one item for discussion – NCUA’s quarterly update on the National Credit Union Share Insurance Fund.

The Share Insurance Fund reported a net income of $54.4 million and a net position of $20.4 billion for the first quarter of 2022. The Fund’s total assets decreased to $20.6 billion at the end of the quarter from $20.7 billion at the end of the fourth quarter of 2021.

“The Share Insurance Fund continued to perform well in the first quarter,” NCUA Chairman Todd M. Harper said. “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.”

There were two credit union failures in the first quarter, both saw fraud as a contributing factor. The board noted that as a remote posture continues for many across the industry,  the continued concern over fraud remains top of mind.

The NCUSIF equity ratio is projected to be 1.25% for the period ending June 30, 2022. While not at the statutory level of 1.3% it is not at a level low enough to trigger the requirement for a premium assessment.

“Although the equity ratio sits below an ideal level, it remains relatively stable,” said Chairman Harper. “Nevertheless, we 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. 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.”

It was reported that they are now seeing a normalization of share insurance performance. The equity ratio remains relatively stable, but the NCUA board must continue to monitor its performance

  • Assessing effects of the interest rate environment
  • Investment portfolio is valued based on the market
  • Changes in the value of assets are expected
  • Unrealized losses do not impact ratio nor trigger requirement for premium assessment

Additionally, the NCUA is working with its Investment Committee to develop a new Investment Policy which is expected to be presented to the Board by Q4 2022. As well as adjusting its investment strategy from a 7 to a 10-year ladder due to the rate environment.

At the Q2 NCUSIF update, it was noted that the report will the data from the implementation of the “S” Sensitivity rating to the CAMELS rating. It was also discussed and noted that NCUA is developing guidance for examiners to work with credit unions regarding the sensitivity to market risk and will continue to treat all credit unions equitably.

Finally, the Board gave a quick update on the latest NCUA LTCU 2022-CU-07

NCUA expects CUs to exercise sound judgment and that the considerations in the letter should not be considered all-inclusive. The Board expects the letter to lead to follow-up conversations and the NCUA expects greater FinTech rulemaking in the future.

Read the NCUA Board Action Bulletin here.