NCUA: Corporate Stabilization Fund Earns Clean Audit
The NCUA announced on Monday the Temporary Corporate Credit Union Stabilization Fund received a clean audit opinion for the fifth consecutive year. The agency had previously announced on Feb. 18 it also received clean audits for the NCUSIF, Operating Fund, Community Development Revolving Loan Fund and Central Liquidity Facility.
“KPMG LLP, the independent firm that audits the stabilization fund’s financial statements, issued an unmodified audit opinion with no reportable findings,” the agency said on Monday.
The NCUA also said the stabilization fund’s financial condition remained stable throughout 2013, “maintaining sufficient available liquidity to meet its obligations while its deficit net position continued to decline."
The NCUA applied $1.073 billion to the stabilization fund as a result of the settlement with JP Morgan in November of last year.
“With the settlements and the continued improvement in the performance of the legacy assets underlying the NGN Program, insured credit unions are not currently expected to be charged another special premium assessment,” said the financial statement audit report. “Should adverse conditions develop, such as a severe economic downturn, the NCUA Board may impose a special premium assessment.”
The report also revealed that despite improved loss projections on corporate credit union legacy assets, the credit quality of residential mortgage backed securities continues to decline. (Click on the chart at left to expand.)
According to the audit report, 88% of residential mortgage backed securities, which represent 73% of legacy assets were below investment grade in 2012, which increased to 91% in 2013. In 2012, 5% were rated AA, which declined to 1% in 2013.
Likewise, the share of commercial mortgage backed securities in the legacy asset portfolio also experienced an increase in securities that fell below investment grade. However, CMBS, which make up 21% of legacy assets, also saw an increase in AA-rated bonds, from 21% in 2012 to 30% in 2013. The NCUA’s Chief Financial Officer will provide a more detailed report on the stabilization fund at the agency’s monthly board meeting on Thursday.
“KPMG’s latest report, following the board’s announcement last November that we do not expect an assessment in 2014, demonstrates the agency’s planning and management are prudent and that we are maintaining transparency as we work to complete the resolution of the corporate credit union crisis,” NCUA Board Chairman Debbie Matz said.