Hispanic and Multi-Cultural Credit Unions Gain in Assets, Members; Other MDIs Continue to Face Challenges

Overall, the number of minority credit unions continues to decline. Hispanic and Multi-Cultural credit unions account for the largest percentage of assets held in minority depository institutions. Black American institutions still make up the largest percentage of minority depository institutions, according to data released by NCUA as part of its annual Minority Depository Institutions Report to Congress.

As of June 30, 2017, the NCUA regulated or supervised 580 federally insured credit unions that self-identified as a minority credit union or minority depository institution. This is down nearly 4 percent from 603 reported as of June 30, 2016. This net decline is less than the 7 percent decline in the number of minority credit unions observed in the prior reporting year. As in 2016, the decline in minority credit unions was attributed to mergers— including purchases and assumptions—liquidations, and net changes in self-certifications.

Collectively, these 580 minority credit unions:

  • Represented 10 percent of all federally insured credit unions;
  • Had total assets of nearly $40 billion;
  • Had 4.2 million members, with shares totaling $34.3 billion;
  • Managed about 3 percent of the total shares and assets in all federally insured credit unions; and
  • Accounted for 4 percent of the total members in all federally insured credit unions.

Here, we detail some of the trends affecting the health of minority credit unions during the reporting period of July 1, 2016, to June 30, 2017. Additional information about the financial performance of minority credit unions and NCUA’s efforts to support and preserve them can be found in our report.

Hispanic, Multi-Cultural Credit Unions Hold Largest Percentage of Assets

There is a significant difference when comparing the number of minority credit unions with the value of the assets they hold. Of the 580 minority credit unions as of June 30, 2017, 50 percent of them were Black American institutions. Yet they only account for 15 percent all of the assets in minority credit unions. Hispanic and Multi-Cultural credit unions comprised 38 percent of minority credit unions but had 74 percent of the assets. Asian American institutions had only 9 percent of the total number of minority credit unions but accounted for 11 percent of minority credit union assets.

 
 
 

Minority Credit Unions Are Concentrated in Just A Few States

 
Map of the United States showing the number of minority credit unions in each state. Texas: 92, California: 50, New York: 50, Hawaii: 40, Louisiana: 36, Illinois: 35, New Jersey: 23, Washington D.C.: 23, Virginia: 22, Mississippi: 19, Alabama: 18, New Mexico: 14, Georgia: 13, Florida: 11, Puerto Rico, Ohio, Indiana: 9, Michigan, Connecticut, South Carolina: 8, Missouri: 7, Tennessee: 6, Colorado, North Carolina, U.S. Virgin Islands: 5, Arizona, Oklahoma, Wisconsin, Minnesota, Arkansas: 3, Massachusetts, South Dakota, Delaware: 2, Washington, Idaho, Utah, Nevada, Kansas, West Virginia: 1. Alaska, Idaho, Iowa, Kentucky, Maine, Nebraska, New Hampshire, North Dakota, Oregon, Rhode Island, Vermont, Wyoming, and Guam have no minority credit unions.
 

Minority credit unions are also heavily concentrated in just few states. The states with the largest number of minority credit unions during the reporting period were:

  • Texas: 92 institutions (up from 90 in 2016)
  • California: 50 institutions (down from 57 in 2016)
  • New York: 50 institutions (down from 51 in 2016)
  • Hawaii: 40 institutions (down from 41 in 2016)
  • Louisiana: 36 institutions (down from 39 in 2016)
  • Illinois: 35 institutions (down from 37 in 2016)

Thirteen states or U.S. territories have no minority credit unions: Alaska, Idaho, Iowa, Kentucky, Maine, Nebraska, New Hampshire, North Dakota, Oregon, Rhode Island, Vermont, Wyoming, and Guam. This is unchanged from the prior reporting period.

Minority Credit Unions Tend to be Small in Size

In all, 89 percent of minority credit unions have assets under $100 million, fitting the NCUA’s definition of a small credit union. The vast majority of minority credit unions — 81 percent — have assets of less than $50 million. An additional 8 percent have assets between $50 and $100 million. There were 66 minority credit unions, or 11 percent, with assets of more than $100 million at the end of the reporting period.

The prevalence of small minority credit unions is in line with the percentage of small credit unions in the overall system, where nearly 73 percent of all federally insured credit unions have assets under $100 million. Minority credit unions account for 12 percent of all small credit unions. The challenges facing minority credit unions are similar to those facing all small credit unions, including the lack of adequate resources and the need for financial and technical assistance to expand services and grow membership.

Approximately 77 percent of minority credit unions, or 448, have the low-income designation.

 
Pie chart showing MDIs by asset size. 81 percent have less than $50 million in assets. 8 percent have $50-$100 million in assets. 10 percent have $100 million to $1 billion in assets. 1 percent have more than $1 billion in assets.
 
 

Minority Credit Unions Continue to Face A Number of Financial Challenges

As of June 30, 2017, 522 minority credit unions, or 90 percent, had a CAMEL composite rating of 1, 2 or 3. However, minority credit unions also make up a disproportionate amount of federally insured credit unions with CAMEL composite ratings of 4 or 5.

Also, it’s important to note that in a comparison between small minority credit unions (those with less than $100 million in assets) and small credit unions overall, there is a larger proportion of small minority credit unions with composite CAMEL 4 and CAMEL 5 ratings. Nine percent of small minority credit unions have a CAMEL composite rating of 4 compared to 4 percent of small credit unions. One percent of small minority credit unions have a CAMEL composite rating of 5, compared to 0.3 percent of small credit unions.

 
Chart comparing CAMEL Composite ratings for MDIs, small credit unions, and all federally insured credit unions. CAMEL rating 1: MDIs=5 percent; Small credit unions=11 percent; all credit unions=16 percent. CAMEL rating 2: MDIs=49 percent; small credit unions=61 percent; all credit unions=62 percent. CAMEL rating 3: MDIs=36 percent; small credit unions=24 percent; all credit unions=19 percent. CAMEL rating 4: MDIs=9 percent; small credit unions=4 percent; all credit unions=3 percent. CAMEL rating 5: MDIs=1 percent; small credit unions=0.3 percent; all credit unions=0.2 percent.
 

These comparisons excluded the 66 minority credit unions with assets greater than $100 million.

The majority of minority credit unions continue to have strong capital positions, which enhances their ability to sustain unanticipated losses and maintain their economic viability. According to the June 30, 2017 Call Reports, 95 percent of all minority credit unions (550 institutions) were well capitalized, with a net worth ratio of 7 percent or more, while 7 percent (17 institutions) were adequately capitalized with a net worth ratio of between 6 and 6.99 percent. The remaining 2 percent (13 institutions) were undercapitalized with net worth ratios under 6 percent. This is an increase from 1 percent in 2016.

The median return on average assets ratio among all minority credit unions for the reporting period was 0.24 percent, compared to 0.36 percent for all federally insured credit unions and 0.27 percent for all small credit unions. Among small minority credit unions, the median ratio was 0.19 percent.

Most minority credit unions earned sufficient revenue to cover their operating costs. Three hundred and seventy-eight minority credit unions, or 65 percent, experienced positive return-on-average-assets ratios, or net earnings during the reporting period. This is a slight decrease from 66 percent last year. Of the 378 minority credit unions with positive net earnings, 268 institutions (46 percent) were achieving net earnings of 0 to 1 percent of average assets, while 110 credit unions (19 percent) were achieving net earnings greater than 1 percent of average assets.

These positive net earnings strengthen capital positions, help sustain operations, and allow for investments in the future technology, products and services.

The remaining 202 institutions (35 percent) had negative return-on-average-assets, which can lead to challenges meeting their operating costs and expenses. This compares to 20 percent of all federally insured credit unions and 26 percent of small credit unions with negative return-on-average-assets, as of June 30, 2017. Thirty-eight percent of small minority credit unions have negative return on average assets, which continue to put stresses on these credit unions’ balance sheets.

The majority of minority credit unions have loan delinquency ratios in excess of 1 percent. The median loan delinquency ratio for all federally insured credit unions as of June 30, 2017, was 0.68 percent, while the median for minority credit unions was nearly double at 1.3 percent. Similarly, the median loan delinquency ratio is higher for minority credit unions than for all small credit unions — 1.3 percent versus 1.79 percent.

Improving Our Efforts to Support Minority Credit Unions

While minority credit unions, overall, show signs of vulnerability, the NCUA continues its work to help these institutions thrive. Throughout the reporting period, at no cost to these institutions, the NCUA supported minority credit unions by:

  • Offering technical assistance grants, consulting and training sessions;
  • Providing assistance and guidance on examination and compliance issues;
  • Facilitating mentor relationships between credit unions;
  • Helping locate new sponsors for field-of-membership expansions;
  • Negotiating financial support to sustain minority credit unions;
  • Delivering guidance to groups establishing new minority credit unions; and
  • Approving new charter conversions and field-of-membership expansions to facilitate new opportunities for growth.

With the agency’s realignment, the NCUA has moved its minority credit union preservation program from the Office of Minority and Women Inclusion to the newly formed Office of Credit Union Resources and Expansion. This new office’s mission is to assist credit unions with their growth and outreach strategies.

It combines the regulatory functions of new charters, charter conversions, bylaw amendments, field-of-membership expansions, and low-income designations, with resources such as the Community Development Revolving Loan Fund’s grant and loan program, FAQ+, and free, online training through the NCUA’s Learning Management Service.

This change also brings our program more in line with other financial services regulatory agencies and it provides minority credit unions more focused assistance to help them achieve their strategic goals.

For more information on the financial condition of minority credit unions and the NCUA’s efforts to support and preserve this critical institutions, please read our annual Minority Depository Institutions Report to Congress.