The NCUA has raised the plight of many smaller credit unions but has said it doesn't know what to do about it. While the potential individual hits to the insurance fund do not amount to much, the potential cumulative effect could present a major safety and soundness concern. Right now, potential merger partners are scared to take on bad assets, Bartoo explained. Instead of an increase of credit union mergers over the crisis, the industry is actually experiencing a decrease.

Over the last decade, there has been a 34% decrease in credit unions under $100 million in assets. By contrast, credit unions over that size have experienced a 44% increase. Interestingly banks with less than $100 million in assets have decreased 48%, while larger banks only by 11%. This is somewhat apples to oranges though, given that the largest quartile of credit unions encompasses those over $29.8 million in assets, while banks' largest quartile comprises those over $220 million in assets.

Unless a credit union needing a merger partner is a perfect fit for the institution taking it over and holds high-quality assets, the NCUA might need to sweeten the pot to make the deal. In 2009, there were 28 failed credit unions; 16 were liquidated and 12 were assisted mergers, according to the NCUA. The total cost to the insurance fund was $124.2 million on nearly $3 billion in credit union assets, or 4% of assets on average. (Keep in mind one of those was the merger of $1.6 billion Eastern Financial into similarly sized Space Coast. The NCUA couldn't have paid a whole lot for that one.)

However, in 2010 the NCUA said the assets of failed credit unions only reached $577 million, but the total cost of the 18 liquidations and 10 assisted mergers tallied $220.7 million, equaling and average of 38% of the assets. For 2011, the NCUA has shut down 11 credit unions totaling $396.6 million in assets at a cost of $40.1 million for an average loss of 10%.

On average over the two-and-a-half years, the NCUA has liquidated these credit unions at a 17% loss ratio. At the same time, the FDIC took median hits (I know median is not the same as average, but I'm working with the data I have) of 23% for 2011, 23% for 2010 and 29% in 2009, according to SNL Financial.

Getting back to that 17% figure of deposit insurance losses for failed credit unions, let's look at the now $1.5 billion Texans Credit Union, which is under NCUA conservatorship. The credit union is so large and geographically confined, it's limited in potential merger partners. At 17%, which would be historic average over the last few years, that could be a $255 million hit to the NCUSIF, greater than the $170 million hit from St. Paul Croatian's failure.

Now take that 17% and let's extrapolate that out to the current CAMEL 4 and5 credit unions. The NCUA reported that as of June 30, troubled credit unions' assets totaled nearly $40 billion. That equals a potential for $6.8 billion in losses to the insurance fund. Obviously, some of the troubled credit unions will climb out and some will fail but that's a snapshot of the potential. The NCUSIF's reserve balance stands at nearly $1.2 billion.

But looking at the NCUA's budgeted loss expectations to the actual, are these credit unions really that bad off? How troubled are the CAMEL 4 and 5s? Is the NCUA putting off liquidating or merging some credit unions? How is it that year-to-date the NCUA had budgeted $325 million for insurance losses yet the actual has been $6.2 million?