CU Failures Cost Share Insurance Fund $785 Million in 2018

Eight credit union failures drained $785 million from the NCUA’s Share Insurance Fund in 2018— a $760.6 million increase over the previous year.

In 2017, ten credit unions failed; in 2018, eight credit unions failed, but they were some of the larger credit unions, the NCUA said in its 2018 financial report.

The report also states that at the end of the year, the NCUA’s Normal Operating Level stood at 1.39%. The NCUA had set the operating level at 1.38% late last year.

As a result, the agency report said that it might be possible to provide a distribution to credit unions.

A large portion of the share insurance fund losses can be attributed to the failures of Melrose Credit Union and LOMTO Federal Credit Union.

Both of those credit unions faced millions of dollars in losses for loans made with taxi medallions as collateral. Ride-sharing services have caused the value of those medallions to plummet.

Teachers Federal Credit Union took over both of those credit unions but did not take on any of the taxi-related loans.

The NCUA’s Office of Inspector General must conduct “Material Loss Reviews” for any credit union that causes a drain of at least $25 million to the Share Insurance Fund.

The office has not yet released any reports on the credit unions that failed in 2018.

An NCUA spokesman said that during the fourth quarter of 2018, the Radio, Television and Communication Federal Credit Union was liquidated. In addition, he said, there was one assisted merger–the Bay Ridge Federal Credit Union.

NAFCU officials said that they are optimistic about the possiblity of a distribution to credit unions as a result of the Normal Operating Level.

“As a result of the NCUA reducing its NOL from 1.39 to 1.38%, NAFCU estimates that the agency will return between $55 million to $160 million to credit unions via shared insurance fund distributions in 2019,” NAFCU Chief Economist and Vice President of Research Curt Long said

He added that the trade group continues to push for the operating level to be set at its previous level of 1.30%.

“Every dollar returned is a dollar available to be lent to credit union members,” Long added.