OCEAN CITY, Md. — Small credit unions present an anomaly and achallenge for those that regulate them.

Most credit unions nationwide have experienced unusually highshare growth since the economic downturn and correspondingconsumers' flight to safety that has tampered with their net worth.But credit unions under $10 million in assets are facing a verydifferent problem and a very real threat: Shares are declining,according to NCUA Region II Director Jane Walters.

During a general session at the Maryland & D.C. Credit UnionAssociation's annual conference last week, Walters noted that Maryland andWashington both have many small credit unions, as does Region II ingeneral.

“Every year for the last five or six years, we've seen shares godown,” the regulator said of small credit unions. So far in 2011,half of credit unions under $10 million in assets are losingshares.

While recognizing the resource challenges small credit unionsface, she also lamented that the agency was not sure how to furtherassist smaller credit unions and invited suggestions. The NCUAoffers special training workshops for small credit unions.

In response to a question on the matter, she said, “A lot oftimes, we have a lot of longtime managers who just don't want tochange. Or we have boards that way.”

Walters told the MDDCCUA that share growth for federally insuredcredit unions nationally is up around 7% annualized, and in RegionII, it's up more than twice that at approximately 15%. Washingtonin particular has experienced share growth of about 8% annualizedand Maryland is at around 13% share growth.

That share growth is demonstrated in the net worth ratios sheprovided, which are solidly near 10% nationally and in Region II,with Washington over 11% and Maryland nearing 10.5%. Back in 2007,the net worth nationwide was close to 11.5% for federally insuredcredit unions and Region II stood at 11%. At the same time,Washington was over 13% while Maryland was approaching that level.A key consideration in reviewing these numbers though is thatCalifornia has since been added to the NCUA's Region II to betterdeal with the economic crisis.

Maryland and D.C. credit unions' ROA is below the national andregional averages of 0.74% and 0.87%, respectively. Maryland's ROAsat at 0.42% and Washington credit unions' reached 0.68%. All areon an upward trajectory.

And delinquencies were heading down for all except Washington,which experienced a slight uptick. Still delinquency levels forMaryland and Washington were below the regional and nationalaverages as were charge-offs. 

Walters Takes On 'Problem' Trend

Because the NCUA has been experiencing increased insurancelosses due to fraud, examiners are going to be taking a harder lookat the general ledger, particularly in smaller shops.

“We don't examine for fraud; that's not what our job is,” NCUARegion II Director Jane Walters asserted. “But that seems to bewhat our loss is in.” As a result, in credit unions with just a fewemployees or less, examiners will be scrutinizing the generalledger more.

In 2010, there were 368 CAMEL 4 and 5 credit unions with anaggregate $43.8 billion in assets; 10 of those were over $1 billionin assets. CAMEL 3 credit unions grew to 1,827 by year-end 2010,$156.7 billion in assets and 23 of those were over $1 billion inassets.