BALTIMORE NCUA continues to express concerns over the declining viability of small credit unions, with NCUA Chairman Debbie Matz saying more than one-third of all credit unions with less than $50 million in assets are unprofitable.
“That means they are losing capital, and if they are losing capital, they are in danger of falling below the Prompt Corrective Action threshold,” said Matz during remarks to the National Federation of Community CUs here Friday.
Once that happens, Matz said, a credit union faces long odds against recovering while remaining independent. She pointed out that after 42 small credit unions fell below the PCA threshold in 2007, two-thirds were gone by 2012, either through merger, purchase and assumption, or liquidation.
“To protect your future, I strongly encourage you to keep a capital cushion well above 7%,” she told representatives of the CDCUs, most of which have less than $50 million in assets. To build capital for the future, Matz urged credit union directors and management to “develop a sound strategic plan, design strong internal controls and practice thorough due diligence.”
The latest NCUA data shows the majority of growth continues in the biggest credit unions. The 423 largest credit unions had a return on average assets of 1% for the quarter. In comparison, 2,279 credit unions with less than $10 million in assets had an ROA of negative 0.14%, and 3,007 credit unions with $10 million to $100 million in assets had an ROA of just 30 basis points.
Smaller credit unions continued to have higher net worth, but lagged way behind in earnings, net worth, loan and membership growth.
The largest credit unions, those with more than $500 million in assets, had net worth growth of 10.5%, loan growth of 3.1%, and membership growth of 5%. As a whole, the industry had net worth growth of 2%, loan growth of 0.4%, and membership growth of 0.9% for the quarter.
