ALEXANDRIA, Va.--The Temporary Corporate Credit Union Stabilization Fund for the first time reported a positive net position in the second quarter of 2014.
At its monthly board meeting Thursday, the National Credit Union Administration said the fund had a net position of $51.2 million as of June 30, up from a negative $40.4 million at the end of the first quarter of the year.
The stabilization fund achieved this milestone while also repaying $300 million in borrowed funds from the U.S. Treasury. The CCUSF, however, still owes Treasury $2.65 billion.
"The improvement in the net position is primarily due to the improvement in the anticipated cash flows of legacy assets in the Asset Management Estates," NCUA chief financial officer Mary Anne Woodson said during the meeting.
She pointed out the cash flows are based on estimates made by Blackrock and reviewed by NCUA. There are still "uncertainties surrounding amounts that will ultimately be collected on those assets, which may cause future results to change from the current projections," Woodson told the board,
Board chairman Debbie Matz
Generally, the fund retains $200 million to $300 million in case there are any short-term liquidity needs. "Whenever we exceed that, we make payments to Treasury," Woodson said.
McWatters noted that the CCUSF is holding $2.4 billion in legacy assets. He asked Woodson if the value of those assets would decline when interest rates go up.
Is interest rate risk a "problem or are interest rates hedged on these assets?" he asked.
Woodson noted the estimate of the recoveries on the corporate credit union assets is based on a number of macro-economic assumptions, including interest rates.
"Most of the legacy assets have variable rates" she said. So when interest rates go up, recoveries for the fund should increase.
McWatters stressed that there is "still uncertainty" with respect to the performance of the legacy assets. The CFO agreed.
Charter Expansion Approved
At Thursday's meeting, the NCUA Board also approved a charter request by First Service Federal Credit Union to expand its footprint outside of Franklin County, Ohio, so it can serve several surrounding counties.
The $135 million, Groveport, Ohio-based institution offers products that will benefit low-income and minority residents in the new counties, according to Matz. First Service competes against 34 banks and 25 other credit unions in the area and none of them opposed expansion of its community charter.
"They have committed to building a branch in the outlying county and I want us to stay on top and make sure that occurs," Matz said.
McWatters pressed NCUA staff about what actions the agency takes when it finds CUs don't live up to their promises. But he did not seem satisfied with the answers. He indicated that future approves should have "some teeth" to ensure commitments are kept.
Also during the meeting, the board approved a final rule to make technical changes to NCUA regulation regarding its new field office structure and its changes to its payday lending regulations mandated by the Dodd-Frank Act of 2010.
"The board is amending NCUA's payday alternative loans regulations to replace all the references to 'short-term, small amount loans' and 'STS loans' with corresponding references to 'payday alternative loans' and 'PAL loans.' The later terms more accurately reflect the nature and purpose of this loan product," according to the final rule.
Matz noted the changes were so technical that NCUA did not have to issue the rule for public comment.
