NCUA Board Member Todd M. Harper during a meeting of the NCUA Board
As Prepared for Delivery on February 27, 2025
Thank you to both you, Eugene, and to the dedicated team in the Office of the Chief Financial Officer for the informative presentation on the National Credit Union Share Insurance Fund’s performance in 2024.
Before discussing the Share Insurance Fund, I want to additionally thank everyone on your team and across the NCUA for, once again, ensuring the NCUA’s four funds each earned an unmodified, or “clean,” audit opinions in 2024. I also want to acknowledge the Office of Inspector General and the NCUA’s independent auditor, KPMG, for their diligent efforts during the comprehensive audit process.
Next month, the NCUA will turn 55 years old, and it’s noteworthy that the NCUA has now achieved unmodified audit opinions for more than 40 years. This consistency underscores the agency’s commitment to sound financial management and prudent stewardship of the resources entrusted to us. The NCUA remains committed to maintaining a high level of transparency and accountability for our financial operations.
Additionally, I have an important message for credit union members. Your insured share deposits are safe at your federally insured credit union up to at least $250,000. Recent government downsizing actions and media reports about potential government shutdowns have led some to question how safe their hard-earned nest eggs are. So, I cannot say this enough: No one has lost a single penny of insured deposits at a federally insured credit union. The entire NCUA Board and outstanding team of professionals at our agency is fully committed to ensuring that perfect record of protecting insured share deposits remains intact.
One key to that future success is maintaining a strong Share Insurance Fund with sufficient reserves. In that regard, the Share Insurance Fund’s performance in the fourth quarter of 2024 remained strong. As noted earlier, assets rose to more than $22.3 billion. That’s an increase in total assets of $924 million for the year. That nearly billion-dollar gain resulted from solid investment income growth, a decrease in unrealized losses on portfolio investments, and an increase in capital deposits.
That’s all good news. However, downward trends in macroeconomic factors and composite CAMELS ratings have also led to a $38 million increase in Share Insurance Fund reserves. What’s more, one year ago we had just two complex credit unions with $500 million or more in assets with composite CAMELS code 4 or 5 ratings. But, as shown on slide 11, we now have nine complex credit unions with $13.2 billion in assets in this category. That’s $11.4 billion higher than one year ago.
Moreover, the number of complex credit unions with a composite CAMELS code rating of 3 has also modestly grown over the last year. As a group, these credit unions have $128 billion in assets.
Complex credit unions pose the greatest risks to the Share Insurance Fund. And, with 78 complex credit unions holding $141.2 billion in assets rated as a composite CAMELS code 3, 4, or 5, we must ensure that we have sufficient resources in place to prevent these institutions from causing losses in the future.
Therefore, I was pleased that the equity ratio ended the year at 1.30 percent, higher than the NCUA’s initial year-end projection of 1.28 percent. This two-basis-point increase resulted from lower than forecasted share growth. And, the equity ratio has now held steady at 1.30 percent for the last three years. While the equity ratio is still three basis points below the desired normal operating level, it demonstrates that the Share Insurance Fund remains in a fairly strong position to cover any future losses without needing to immediately charge surviving credit unions a premium in a tough economy.
Today’s presentation additionally underscores that the NCUA’s current supervision program is working as intended. It also illustrates why we must maintain strong supervision of federally insured credit unions. And, any future adjustments to the agency staffing levels should not come at the expense of sacrificing safety and soundness, compliance, and fair lending examinations.
We must recognize that if exam and supervision staffing levels are lowered, we may need to increase the Share Insurance Fund’s normal operating level to maintain sufficient reserves for potential losses. That’s because less frequent supervisory contacts, less comprehensive exams, and less oversight will likely lead to more credit union failures and increased Share Insurance Fund losses.
Alternatively, we may need to alter our recordkeeping and reporting requirements to create a real-time monitoring system using innovative technology to identify risks. Regardless of the path we choose, I am committed to working with my fellow Board members to find the right balance to all these questions.
In recent quarters, the NCUA has further seen growing signs of financial strain on credit union balance sheets and consumer financial stress. More recently, credit union members impacted by federal government lay-offs or curtailed federal grants may experience financial hardship. Credit unions serving these populations should work with their impacted members while remaining vigilant of their own liquidity needs.
So, I cannot emphasize enough the importance of advance liquidity planning for financial institutions of all sizes. In fact, access to the NCUA’s Central Liquidity Facility should be part of participating credit unions’ broader liquidity risk management plans for a variety of contingencies, not just during times of crisis.
Also, credit unions should not be concerned about using the Central Liquidity Facility for fear of negative consequences as part of an examination. As a reminder, the more members and capital stock the Central Liquidity Facility has, the better it can serve the liquidity needs of credit unions. In fact, when the credit union system navigated treacherous waters in the wake of the corporate credit union crisis more than 15 years ago, the Central Liquidity Facility, along with a $6 billion congressionally authorized line of credit, helped to maintain the strength of the Share Insurance Fund.
Given the importance of maintaining such liquidity, the NCUA Board has unanimously and repeatedly called on Congress to allow corporate credit unions to purchase capital stock in the Central Liquidity Facility to help smaller credit unions access liquidity. We should continue to engage with Congress on this legislative priority and consider — going forward — other actions to ensure sufficient liquidity at individual credit unions and within the credit union system.
In closing, the NCUA has three core functions: protecting consumers, protecting members’ insured shares held at federally insured credit unions, and protecting taxpayers against Share Insurance Fund losses. That’s where I plan to focus my energy in the months ahead. As such, the NCUA Board should continue to closely monitor individual credit union and Share Insurance Fund performance, as well as engaging in a public discussion to review the methodology for setting the normal operating level as noted in the annual performance plan adopted last month.
That concludes my remarks. I now turn it back over to you, Chairman Hauptman.