ALEXANDRIA, Va.-NCUA Chief Financial Officer Dennis Winans announced at the NCUA Board's April meeting that he anticipates 10% savings growth, bringing the National Credit Union Share Insurance Fund's equity ratio down slightly to 1.26% by year-end 2003 from 1.27% the previous year. American Share Insurance quickly came out with a statement that its projected equity level will remain at 1.31% at year-end, higher than the NCUSIF and other national deposit insurers. Competition between the two funds has heated up as debate has increased about the pros and cons of a private share insurance system. Much of the argument within the credit union community was stirred up by the conversion of $3 billion Patelco Credit Union to private insurance last year, and, adding fuel to the fire, NAFCU officially announced in February that it opposed private primary depository insurance coverage for credit unions. All three members of the NCUA board also wrote Colorado Division of Financial Institutions Commissioner David Paul in support of maintaining the requirement for solely federal insurance in the state. NCUA is legally bound to keep the NCUSIF equity ratio between 1.2% and 1.5%. The board has set the target level at 1.3%, above which dividends are paid out according to year-end data, and below which a premium may be assessed. Below 1.2%, the NCUA Board is statutorily required to assess a premium. ASI's board and advisory council have set a target equity range of between 1.3% and 1.5% per $100 of insured shares. According to ASI, the position was intentionally set higher than the NCUSIF. The equity ratios at both ASI and the NCUSIF have dropped in recent years for different reasons (See chart). The NCUSIF's equity ratio has fallen mainly due to declining interest rates for investments over the last few years, according to Winans. ASI, on the other hand, switched to risk-based premiums Dec. 31, 2000, ranging from 1.0% to 1.3% of a member's total share accounts. Additionally, in 2002, ASI also took on Patelco, which diluted its equity ratio from 1.44% in 2001 to 1.31% for 2002, according to ASI information. -

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