BALTIMORE, Md. (June 7, 2013) – Community development credit unions and small credit unions are lifelines for low-income and underserved consumers, and National Credit Union Administration Board Chairman Debbie Matz said NCUA will continue to support them.
Matz made her remarks in a speech today to the National Federation of Community Development Credit Unions.
In voicing her strong support, Matz also discussed obstacles facing small credit unions and offered guidance to help them address those challenges.
“NCUA will continue to recognize that community development and small credit unions are vitally important,” Matz assured. “You promote economic empowerment. You are often the only federally insured institutions in low-income communities.”
Matz noted several NCUA initiatives to assist community development and small credit unions: regulatory relief, shorter examinations, streamlined low-income designations, and expanded services from the Office of Small Credit Union Initiatives.
Turning to challenges faced by small credit unions, Matz expressed concerns about capital losses.
“More than a third of credit unions under $50 million in assets are unprofitable,” Matz said. “That means they’re losing capital, and if they’re losing capital, they’re in danger of falling below the Prompt Corrective Action (PCA) threshold.”
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 seven percent,” Matz emphasized. 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.”
Despite the obstacles, Matz said there is ample good news, particularly for credit unions with a low-income designation.
“Low-income credit unions are out-performing all others,” Matz said. “Low-income credit unions continue to lead the nation in loan growth, while charge-offs remain below the national average. Among credit unions that have had a low-income designation since 2009, return on average assets doubled.”
Since NCUA launched its low-income designation initiative last summer, nearly 800 credit unions, with nearly 10 million members, have accepted the designation. Today more than 1,900 low-income credit unions are serving 16.7 million members.
“Your mission is more important than ever,” Matz told community development credit union representatives. “As long as you stay true to your mission of member service, while NCUA stays true to our mission of safety and soundness, the future will be as rewarding as the past.”
NCUA is the independent federal agency created by
the U.S. Congress to regulate, charter and supervise
federal credit unions. With the backing of the full
faith and credit of the United States, NCUA operates
and manages the National Credit Union Share
Insurance Fund, insuring the deposits of nearly 100
million account holders in all federal credit
unions and the overwhelming majority of
state-chartered credit unions. At
Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues.