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How Much Have Credit Unions Invested In NCUA Guaranteed Notes?

Year-end data reveals how much, or how little, credit unions are participating in the NCUA Guaranteed Notes program.

A new line item on the 5300 Call Report shows at December 31, 2010 how much credit unions invested in NCUA’s Guaranteed Notes (NGN) program. NCUA began issuing these notes in October 2010 to refinance investments transferred to liquidation estates from the corporate credit unions that NCUA had taken over. In December, NCUA said it issued $17.75 billion, or approximately 60% of the $30 billion in expected securitizations, in NGNs in 2010.

The $1.1 billion that credit unions have obtained in these offerings represents 6.2% of the total NGN notes sold as of yearend. More than 93%

of the yields on these investments that were once owned by the credit union system have gone to Wall Street investors.

NCUA has touted the “robust demand” these offerings have generated. After NCUA completed the first transaction, it said investors included “credit unions, banks, broker-dealers, insurance companies, money management funds, pension funds, and government agencies.” The strong demand is not surprising as the notes are providing competitive returns and are backed by the full faith and credit of the United States government. Even with government backing, NCUA is still paying for the issues to be rated as well.

How Much Are Credit Unions Investing?

Credit unions invested in almost 10% of the first NGN offering, according to NCUA. Subsequent NCUA press releases have not identified the portion that credit unions received. We now know 197 credit unions have invested nearly $1.1 billion in NGNs. The individual totals range from $2,000 to more than $200 million. Slightly more than 82% of the investments are in the adjustable rate note offerings.

The credit unions with the 10 largest amounts invested in NGNs are:

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