On-Site Coverage: NCUA Officials Offer Bleak News on Finances
ALEXANDRIA, Va. -- There is a good chance that the reserves set aside for losses in the NCUSIF "won't be sufficient," to cover the losses at some of the large credit unions, NCUA Office of Examination and Insurance Director Melinda Love told the NCUA Board today.
And Deputy Executive Director Larry Fazio told the board that the assessments from the Temporary Corporate Credit Union Stabilization Fund will be affected by the timing and amount of bond defaults within corporate credit unions, with current estimates calling for $7.6 billion in defaults over the next two years. The stabilization fund has $6.4 billion set aside for current estimates of losses that would be incurred by the fund over the life of the securities, and must repay the Treasury Department $690 million in outstanding borrowings. Congress gave the NCUA a $6 billion line of credit last year but the agency has only used $1 billion to date.
Love said the financial reports of credit unions have shown "very mixed results." While the increase of CAMEL 3, 4 and 5 credit unions has slowed, some of the larger credit unions have continued to experience difficulty because of the economy's difficulties.
She added that the agency's staff needs to review second quarter results before determining what assessment level to recommend to the full board and the recommendation will come to the board this fall.
Through April, the NCUSIF had lost $138.1 million this year, although that is lower than the projected $218 million loss that the agency projected. But the agency has increased its reserve balance to $896.3 million, from $726.7 at the beginning of April.
Fazio said that the staff will have a recommendation on the assessment for the TCCUSF this summer.
NCUA Chief Financial Officer Mary Ann Woodson told the NCUA Board that 19.25% of insured shares were in credit unions with a rating of CAMEL 3 of higher at the end of April, compared with 19.5% at the end of February. The NCUSIF equity ratio was at 1.24%, compared with 1.26% at the end of March.
There have been 12 failures of federally insured credit unions this year, compared with 28 in all of 2009.