Stabilization Fund's Net Income in Second Quarter Tops $425 Million

At its September open meeting, the NCUA Board received a briefing from the Office of Examination and Insurance on the rapidly changing nature of cybersecurity (see page 1). The agency’s Chief Financial Officer also briefed the Board on the performance of the Temporary Corporate Credit Union Stabilization Fund, which performed well in the first half of 2016.

Stabilization Fund Continues Positive Net Position

For the quarter ending June 30, 2016, the Stabilization Fund’s net position increased from $618.6 million to just over $1 billion.

“NCUA, from the outset, has been committed to reaching a resolution of the corporate crisis at the lowest cost to credit unions,” NCUA Board Chairman Rick Metsger said. “We’re doing this by managing the Stabilization Fund with the utmost prudence. The continuing improvements in the Stabilization Fund’s performance is evidence we’re doing our job well and staying on the right course.”

The Board briefing on the performance of the Stabilization Fund was based on the best available preliminary and unaudited information.

The change in the Stabilization Fund’s net position resulted primarily from legal recoveries and improvements in projected cash flows relating to the legacy assets that secure the NCUA Guaranteed Notes Program.

A $419.3 million reduction to insurance loss expense and $8.2 million from guarantee fees contributed to the Stabilization Fund’s $425.7 net income for the second quarter.

A $700 million payment from available cash to the U.S. Treasury in May decreased outstanding Treasury borrowings to $1 billion during the second quarter from $1.7 billion in the first quarter.

While the Stabilization Fund continues to have a positive net position for 2016, no funds are available to provide federally insured credit unions with an immediate rebate. NCUA must first repay the $1 billion in outstanding Treasury borrowings. Future changes in the economy or the performance of the legacy assets securing the NCUA Guaranteed Notes are likely to change the value of the assets the agency and the Stabilization Fund can eventually access at the end of the NCUA Guaranteed Notes Program.

Created by Congress in 2009, the Stabilization Fund has reduced the impact on credit unions of the costs of resolving the corporate credit union crisis. It is scheduled to expire in 2021.

Based on current projections, NCUA expects no future Stabilization Fund assessments.