National Credit Union Administration Chairman Debbie Matz said last week that the agency would support community development credit unions and institutions that operate in underserved, low-income areas.
“NCUA will continue to recognize that community development and small credit unions are vitally important,” Matz said during a speech before the National Federation of Community Development Credit Unions. “You promote economic empowerment. You are often the only federally insured institutions in low-income communities.”
Matz pointed to several NCUA initiatives aimed at bolstering community development and small credit unions, including regulatory relief, expanded services, enhanced low-income designations and shorter examinations.
Additionally, Matz expressed concern about capital losses—a challenge faced by many small credit unions.
“More than [one-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 threshold.”
Matz said after a credit union falls below the PCA threshold, it is likely to face a difficult recovery and may have trouble maintaining its independence. After 42 small credit unions fell below the PCA threshold in 2007, two-thirds of them had disappeared by the end of last year through mergers, purchase and assumption or liquidation.
“To protect your future, I strongly encourage you to keep a capital cushion well above seven percent,” Matz said, urging credit union directors and management to “develop a sound strategic plan, design strong internal controls and practice thorough due diligence.”
Matz said low-income credit unions have seen return on average assets double since 2009.
“Your mission is more important than ever,” Matz said. “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.”