Thank you, Rendell, for this update on the status of the Share Insurance Fund, and for all of the work that you and your team, the Office of Examination & Insurance, the Office of General Counsel, and our external auditors have done over the past year, and particularly the last six months. I know that combining the two funds, and pulling all this data together required extra effort, including many nighttime and weekend hours. Your reward for all this extra effort is that you now only have to provide us with quarterly reports on one fund, and not two. I hope this will make your job a little easier going forward.
I also want to congratulate you on receiving unmodified, clean, audits of all four of the NCUA’s funds. For more than a quarter century, the agency has received clean audits on all of our funds from our external auditor.
This data conclusively demonstrates that the state of our Share Insurance Fund is strong. It insures more shares for more Americans, than at any point in its history.
The fund also has more assets, a higher net position, and a higher equity ratio than at any other point in history. As a result, we project that the Share Insurance Fund is now in a position to survive an adverse recession without additional premiums, and is in a position to also survive a severely adverse recession should either occur. In essence, the fund has passed its own stress test.
The other major change in the data you have presented is a significant increase in our reserve expense due largely to an increase in specific reserves. This change is dictated by accounting rules that require us to set aside specific reserves when losses are both probable and measurable. This is similar to the standards that apply to natural-person credit unions when they are accounting for their allowance for loan and lease losses. While we cannot discuss specific credit unions, recording specific reserves for losses that are both probable and measurable ensures the financial condition of fund is reflected accurately.
The good news is after this increase in reserves, the Share Insurance Fund is stronger today than it has ever been.