DENVER - Several disturbing trends continue to threaten thefuture of credit unions, NCUA Board Member Debbie Matz recentlywarned. Speaking at the 27th Annual State Regulators' Conferencehosted by NCUA for regulatory members of the National Associationof State Credit Union Supervisors here, Matz shared herobservations about current threats to credit unions. Among them,stagnant membership growth, she said. More than one-third of allcredit unions are losing shares; more than one-third are losingloans; nearly half are losing assets; and return on assets is thelowest in 10 years, Matz said. "These negative trends may seem tocontradict the positive reports NCUA released with overall year-endaverages," she told attendees. "But looking beyond those averages,most individual credit unions - including the vast majority ofsmall and mid-sized credit unions - are either shrinking or limpingalong with growth in the low single digits." Credit unions are notdoing enough to increase the ethnic or age diversity of theirmembers, she added, saying "America's fastest-growing ethnic groupsare under-represented in credit union memberships, and more thanhalf of adult members have aged beyond their prime borrowingyears." "With membership growth slowing and only 5% of adultmembers entering prime borrowing years, there are very few youngmembers to sustain credit unions in the future," Matz said. Whilemany credit unions are struggling to serve everyone in their fieldsof membership, small credit unions are struggling to survive, shewarned. Last year, 288 went out of business, which accounts formore than 6% of small credit unions. "When small credit unionsfail, there are often several underlying factors: lack of training,lack of a strategic plan, and lack of internal controls. And themost common reason: not enough services to meet members' needs,"Matz said. Regulatory initiatives to increase potential membershipare a good start, but not enough, she said. "Credit unions now havegreater potential than ever to grow membership. But while largerfields of membership open the door to new members, they don'tguarantee it. Many credit unions are finding it verylabor-intensive and time-consuming to reach out to entirecommunities or underserved areas," Matz said. In this instance,regulators and examiners can be very helpful by carefully examiningthe business plan when each application is reviewed, makingsuggestions on successful outreach strategies, and "preparing eachcredit union for the enormity of the task so they don't getdiscouraged," Matz suggested. Another solution to the troublesomemembership trends is a dual chartering system, Matz offered. "If wecontinue an open federal/state dialog, we can address all of thecurrent threats to credit unions, and develop initiatives that willhelp 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."-

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