NCUA Board Member Tanya F. Otsuka Statement on the Share Insurance Fund 2024 Third Quarter Update

As Prepared for Delivery on November 21, 2024

Thank you, Eugene, for the briefing.

Being stewards of the National Credit Union Share Insurance Fund is one of NCUA's primary jobs-a critical component of our duty to protect members' shares at credit unions. Thus, I continue to be encouraged by the strong performance of the Share Insurance Fund.

The trend of fewer failing credit unions combined with higher yields is consistent and we are still seeing substantial net income for the Fund. Since September 2023, the Fund's net income has grown by approximately $88 million. And the Fund continues to have strong yields. This quarter the fund's yield was 2.48 percent, a bit lower than last quarter's but still above previous record-breaking levels.

"Being stewards of the National Credit Union Share Insurance Fund is one of NCUA's primary jobs-a critical component of our duty to protect members' shares at credit unions. Thus, I continue to be encouraged by the strong performance of the Share Insurance Fund."

Eugene, can you provide any context for the decrease in yield from last quarter? In June it was 2.54 percent and now it is 2.48 percent. Not a cause for concern, but helpful for the Board and stakeholders to know.

Thank you, Eugene.

As I mentioned in May, my primary concern is the growth in asset size among riskier credit unions, those with a CAMELS 3 rating and higher. Between June and September of this year, the percentage of shares held by CAMELS 3 credit unions stayed steady at 8.3 percent. The fact that it has not increased, which has happened over the last four consecutive quarters, is a positive sign. However, it is still at the highest level we have seen since 2017.

Furthermore, the percentage of assets for credit unions with a CAMELS 4 or 5, remains elevated at 0.8 percent. The last publicly available quarterly data summary showed a decrease in net income for credit unions of 10 percent when comparing the first half of 2023 to the first half of 2024. The delinquency rate was also up 21 basis points when comparing Q2 of 2023 to Q2 of 2024. And there are signs of weakness in credit card lending, auto loans, and mortgage lending.

"While there are many signs that show stability and growth of the Share Insurance Fund, now is the time to think about what can go wrong and how to safeguard against those scenarios, especially as we enter a period of changing interest rates. It is important we, as the Board, continue to keep a close eye on potential stressors to the Fund to ensure credit union members are ultimately protected."

Kelly, putting all of this together, what steps can we take to further safeguard the fund in case these trends persist?

Thank you, Kelly.

While there are many signs that show stability and growth of the Share Insurance Fund, now is the time to think about what can go wrong and how to safeguard against those scenarios, especially as we enter a period of changing interest rates. It is important we, as the Board, continue to keep a close eye on potential stressors to the Fund to ensure credit union members are ultimately protected.

Thank you, I have no further questions.