Monday, March 15, 2010

Cost of Recent CU Failures on NCUSIF

The only source of information regarding the cost of federally-insured credit union failures to the National Credit Union Share Insurance Fund (NCUSIF) comes from NCUA’s Office of the Inspector General (OIG).

The Federal Credit Union Act requires the OIG to review and report on any credit union material losses exceeding $10 million to the NCUSIF and a loss which is equal to or greater than 10 percent of the total assets of the failed credit union.

Reviewing published Material Loss Reviews plus the OIG’s 2010 Annual Performance Plan, I was able to identify 8 recent credit union failures that meet these de minimis thresholds.

I used the 2010 Annual Performance Report and 3 published Material Loss Reviews to obtain information on the cost of the failures. Information regarding the asset size of the credit union at failure and the timing of a credit union’s failure was obtained from NCUA press releases.

The most expensive credit union failure was Cal State 9 CU, which imposed an estimated loss on the NCUSIF of $206 million. The estimated loss rate per dollar of asset is almost 61 percent.

The following table provides information on these eight failures. (click on image to enlarge)

NCUA’s OIG stated that it expects to perform 10 to 15 material loss reviews in 2010. I will periodically update this information, as NCUA makes this information public.


  1. While some of the percentages are high, the average loss per dollar of insured shares (deposits) is less than what the FDIC is absorbing on bank failures. Those ratios are in the 25-50 percent range and costing millions and millions of dollars.

  2. whatever happened to the roughly $540million in norlarco mortgages that were written by non-members out of their colorado cuso but on homes in florida?
    how has ncua disposed of those assets?
    $540million is a whole lot more than the losses in your post.

  3. The OIG report states that Public Service CU paid a premium of $21.6 million for the assets, liabilities, and shares of Norlarco. As a result of the purchase and assumption agreement, the estimated losses to the NCUSIF was $10 million. However, the final cost to the NCUSIF will not be known until all assets are sold.

  4. thanks, thats helpful. $540million if sold at 50 cents on the dollar will be another $270million. ncua may be lucky to get "away" with just $270million in that neck of florida.

  5. All those Cal State 9 losses were generated from their failed Heloc Loan program. When the Northern California real estate market went sour the CU was left with a bunch of worthless un-collateralized 2nd mortgage HELOC loans. NCUA deserves and earned those massive losses because the CU was poorly supervised when management ran amok.



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