At the Thursday, February 15 meeting of the NCUA board, the directors opted to maintain the Normal Operating Level (NOL) at 1.33%. During a presentation by NCUA CFO Eugene Scheid, the National Credit Union Share Insurance Fund (NCUSIF) equity ratio was shown to sit at 1.30% as of year-end 2023, below the approved NOL of 1.33%.

Under the FCU Act, a distribution to credit unions is required if the equity ratio exceeds NOL at the end of the calendar year and other statutory conditions are met.

Credit unions and trade groups have in the past expressed a desire to set the Normal Operating Level at 1.30%, which historically has proven adequate to ensure the safety and soundness of the Fund.

However, despite a stronger than expected performance in 2023—NCUA expected the equity ratio to be 1.27% at year end—they would not budge on the NOL.

“Overall, the Share Insurance Fund’s performance in the fourth quarter of 2023 was strong,” Chairman Harper said. “While we should recognize those positive things, today’s presentation also illustrates why we cannot become complacent in the supervision of federally insured credit unions. In recent quarters, the NCUA has seen growing signs of financial strain on credit union balance sheets and consumer financial stress. And, we continue to see that financial stress manifest itself in the number of credit unions and the percentage of assets held by composite CAMELS code 3, 4, and 5 credit unions.”

While the FCU Act allows the NCUA to set the NOL anywhere from 1.2-1.5%, prior to 2017 the standard had been 1.30%. It has not reached that number since then, and some argue this is costing credit unions dividends.