Matz Continues to Warn Credit Unions of Troubling Membership Trends, Dual Chartering System Can Counter Stagnant Numbers

DENVER – Several disturbing trends continue to threaten the future of credit unions, NCUA Board Member Debbie Matz recently warned. Speaking at the 27th Annual State Regulators’ Conference hosted by NCUA for regulatory members of the National Association of State Credit Union Supervisors here, Matz shared her observations about current threats to credit unions. Among them, stagnant membership growth, she said. More than one-third of all credit unions are losing shares; more than one-third are losing loans; nearly half are losing assets; and return on assets is the lowest in 10 years, Matz said. “These negative trends may seem to contradict the positive reports NCUA released with overall year-end averages,” she told attendees. “But looking beyond those averages, most individual credit unions – including the vast majority of small and mid-sized credit unions – are either shrinking or limping along with growth in the low single digits.” Credit unions are not doing enough to increase the ethnic or age diversity of their members, she added, saying “America’s fastest-growing ethnic groups are under-represented in credit union memberships, and more than half of adult members have aged beyond their prime borrowing years.” “With membership growth slowing and only 5% of adult members entering prime borrowing years, there are very few young members to sustain credit unions in the future,” Matz said. While many credit unions are struggling to serve everyone in their fields of membership, small credit unions are struggling to survive, she warned. Last year, 288 went out of business, which accounts for more than 6% of small credit unions. “When small credit unions fail, there are often several underlying factors: lack of training, lack of a strategic plan, and lack of internal controls. And the most common reason: not enough services to meet members’ needs,” Matz said. Regulatory initiatives to increase potential membership are a good start, but not enough, she said. “Credit unions now have greater potential than ever to grow membership. But while larger fields of membership open the door to new members, they don’t guarantee it. Many credit unions are finding it very labor-intensive and time-consuming to reach out to entire communities or underserved areas,” Matz said. In this instance, regulators and examiners can be very helpful by carefully examining the business plan when each application is reviewed, making suggestions on successful outreach strategies, and “preparing each credit union for the enormity of the task so they don’t get discouraged,” Matz suggested. Another solution to the troublesome membership trends is a dual chartering system, Matz offered. “If we continue an open federal/state dialog, we can address all of the current threats to credit unions, and develop initiatives that will help credit unions grow even stronger in the future,” Matz said. State regulators have told Matz that “they have learned from NCUA, and we at NCUA have adopted best practices from state regulators.” -