Losses Mount For NCUSIF

Credit Union Journal | Monday, September 15, 2008

ALEXANDRIA, Va. – NCUA said losses for the National CU Share Insurance Fund continued to grow in July, as the credit union deposit insurance fund reported its biggest single-month loss ever of more than $225 million.

The July losses include more than $200 million accrued for two of the biggest credit union failures ever: Cal State 9 CU, a one-time $460 million credit union in Concord, Calif., and Sterlent CU, a one-time $150 million credit union in nearby Pleasanton, Calif. The remnants of the two California failures were purchased by San Francisco-based Patelco CU, while NCUA assumed the failed assets, mostly real estate loans.

July’s NCUSIF losses include the charge off of a $100 million loan made to Cal State 9, the largest loan ever charged off by the credit union insurance fund.

Growing losses by the deposit fund have depleted its reserve ratio to 1.22% (dollars reserved per $100 of insured deposits), below NCUA’s minimum level. NCUA projects the reserve ratio will rise by year end. However, several large credit unions have reported big losses in recent months and are teetering on the brink of either an NCUA emergency loan or assisted merger or failure.

If the fund ends the year under a 1.25% ratio, NCUA is required to charge credit unions a premium to replenish the reserves.

NCUA has not charged a premium since 1990-1991 – the last crisis in the credit union industry when dozens of failures depleted the fund’s reserves.