Perhaps the most interesting thing to come across our desks in some time was last week’s letter from the CUNA Small Credit Union Committee to the NCUA’s Director of the Office of Examination and Insurance. The letter bemoans the fact that, in our industry, “more than 90% of all mergers are credit unions under $100 million in assets.” And, if the trend continues, only 60% of today’s CUs will still be standing in 2027.
This whale-for-minnow trend threatens to eviscerate the great work that the smaller institutions do so well every day on behalf of their members and their respective communities. And, the letter challenges the NCUA to “truly weigh” the effects of the continued loss of small institutions. For example, the group questions whether fewer small firms will: (1) make the defense of a preferable tax status less tenable, (2) equate to greater concentration risk on the share insurance fund, or (3) lead to changes in NCUA operating structure that overly burden the fewer remaining small CUs.
Importantly, the letter also highlights the very practical burden smaller credit unions feel with the upcoming uncertainty of CECL. As one small credit union leader reminded us:
“CECL is a big unknown and feared by many in our industry which may lead to more credit unions giving up because of the continuing regulation burden on smaller CUs.”
Of course, it is also worth remembering that the ALLL policy of CUs was not the cause of the economic downturn a few years back.
Finally, the letter makes a plea for the NCUA to raise the maximum non-member deposit limit to benefit small and large credit unions with tight liquidity. With credit union liquidity as tight as it has ever been, and with liquidity-seeking CUs turning increasingly to the less transparent world of loan participations for a solution, this seems more than sensible.
We applaud the Committee for its thoughtful and smart letter and for its work on behalf of credit unions across the land.