Office of Small Credit Union Initiatives
Martha Ninichuk, Deputy Director
Challenges and Opportunities for
Small Credit Unions
Many small credit
unions are struggling to
survive and thrive
Presentation Title
2
Challenges
Strategic
Presentation Title
Operational
Regulatory
3
Challenges
 Shrinking fields of
membership
 Loss of income (loan,
investment and fees)
 Inability to obtain and
maintain credit union staff
 Retiring CEOs/Managers
 Lack of Succession Plans
Presentation Title
Strategic
4
Challenges
• Failure to update computer
systems
• Ability to offer relevant
products and services
• Or try to offer products and
services when the credit
union isn’t ready
Presentation Title
Operational
5
Challenges
• New Small Credit Union
Exam Program
• Fraud, Fraud, Fraud
• Call report
Regulatory
– Late filing penalties
– Electronic filing requirement
• Home Credit Union Rule
Presentation Title
6
Impact on Small Credit Unions
Challenges and Opportunities
7
Credit Unions by Asset Class
2003 vs 2013
7558
8,000
7,000
6,000
4484
1,000
2003
2254
2013
2230
2269
1930
3,000
2934
4,000
2,000
4624
5,000
0
Challenges and Opportunities
8
Number of Small Credit Unions (Assets less than $10 million), 2000-2013
2000-2011
7,000
6,000
5,864
5,350
4,969
5,000
-224
4,576
4,254
4,020
4,000
-94
3,805
3,599
3,275
2,994
3,000
2,782
2,572
2,348
2,254
2,000
1,000
0
2000
2001
2002
2003
2004
Challenges and Opportunities
2005
2006
2007
2008
2009
2010
2011
2012 2013
9
Membership Trends at Small CUs
2003 - 2013
CUs with less than $10MM in Assets
Potential Members
Members
Millions
Millions
Members
CUs with less than $50MM in Assets
32
Potential Members
200
24
150
16
100
50
8
Challenges and Opportunities
10
Net Worth Growth 2003-2013
89%
100%
75%
NW Growth
Per Credit
Union
2003 to 2013
61%
50%
27%
25%
NW Per Asset
Class
2003 to 2013
16%
6%
0%
-25%
-50%
Challenges and Opportunities
-25%
-19%
-44%
11
How it Shakes Out
SMALL CUS FROM 2000-2013 (Q3)
251
Liquidated
59
Assisted Merger
3313
Merged
597
Shrunk
3686
Grew
836
Grew Big
0
500
Challenges and Opportunities
1000
1500
2000
2500
3000
3500
4000
12
What can be done to stop the decline?
Challenges and Opportunities
13
Let’s Look at the Facts
• Small credit unions need to update their
current business model.
• Define the credit union’s niche market. Who has the
need?
• How does your credit union become relevant in your
community?
• What do they need? Check Cashing, small loans, financial
education
• In other words, how do you plan to survive?
• Who can assist you?
Challenges and Opportunities
14
What about Collaboration?
Not merging, partnering.
Challenges and Opportunities
15
Benefits to Collaboration
Small Asset Credit Unions
• Ability to provide a
product or service not
otherwise able to
• Assistance in HR,
Compliance/Regulation,
Back Office, etc.
Presentation Title
Large Credit Unions
• Fee income opportunity
• Mission Oriented
• Small credit unions ARE
needed to continue tax
exemption
16
Collaboration at Work
Awarded NCUA’s First Collaboration
Grant in April, 2013
$50,000
NCUA Awards $50,000 Collaboration Grant to South Carolina Credit
Unions
Group Will Create Talent Management Project for Small Credit Unions
ALEXANDRIA, Va. (April 16, 2013) – A group of South Carolina credit
unions are collaborating on a groundbreaking project to improve talent
management with the support of a $50,000 National Credit Administration
(NCUA) collaboration grant.
Health Facilities Federal Credit Union, a low-income credit union located in
Florence, will collaborate with South Carolina Federal Credit Union, located
in North Charleston, and its credit union service organization (CUSO),
Optimal Talent Solutions, to provide free talent management consulting and
training in areas including succession management, recruitment,
performance management, and diversity and inclusion.
Two other credit unions, Greenwood Municipal Credit Union, Greenwood,
and Spartan Federal Credit Union, Spartanburg, will also participate.
NCUA’s Office of Small Credit Union Initiatives (OSCUI) manages the
process used by the agency to award the grant.
Challenges and Opportunities
Participating Partners
Purpose: Focus on the Human Resource Needs of 3
small
credit unions
South
Carolina
Federal
Credit Union
Health
Facilities
Federal
Credit Union
Greenwood
Municipal
Credit Union
Spartan
Federal
Credit Union
Assets
$1,306,358,502
$24,905,031
$35,955,714
$11,800,377
#of Members
151,357
8,680
5,825
2,769
# of Staff
384
14
16
4 FT; 3PT
Field of
Membership
Community
Multiple
common bond primarily health
care
Multiple
common bond primarily federal,
state, local
government
Community
credit unions
Low Income
Designation?
No
Yes
No
No
• Optimal Talent Solutions
Challenges and Opportunities
Why HR?
Typically, small credit unions do not have
the resources and means to support a
human resource staff, leaving the credit
union at a major disadvantage.
Challenges and Opportunities
The Collaboration
• Corporate Culture
• Human Resources
• Performance and Development
• Succession Planning
Challenges and Opportunities
Collaboration Makes Sense
Uses the services and expertise of a larger credit union to
provide HR services to 3 very small credit unions.
The larger credit union has the HR professionals already
familiar with a credit union and the associated HR challenges.
These professionals have the resources to provide the needed
analytics and training the small credit unions could not affordin either costs or time.
Robert Harris, CEO of Health Facilities FCU in Florence, SC
Challenges and Opportunities
Why Collaborate?
The larger credit union uses the capacity of its
staff to provide services for a small credit union
which could not afford the services.
The larger credit union helps to offset it’s costs
with fee income paid by the small credit union
for the services.
Challenges and Opportunities
Obstacles?
Small credit unions
fear large credit
unions will take-over
opportunity.
Part of due diligence
is to investigate and
become comfortable
with any partner.
Challenges and Opportunities
Building the Collaboration
• Look for partner credit unions
– Attend League functions, Chapter Events
– What are commonalities of need?
– Determine Collaborative effort
• Find larger credit union that may be a good potential
partner
– Look at websites and call reports.
– Ask your peer credit unions.
• Get to know the CEO. See if they have extra capacity.
• Be open with your needs and wants.
Challenges and Opportunities
Collaboration Opportunities
•
•
•
•
•
•
Back office
Collections
Marketing
Products & Services
Training
Shared executive officers
Challenges and Opportunities
Think of Alternatives
• What may be an expense for you may be
an opportunity for someone else or, the
expense for one may be an opportunity
for you.
• Look at every aspect of your operation.
What is draining your desire to better
serve your members? How can you
release yourself of that burden?
Challenges and Opportunities
Available Assistance
Presentation Title
27
Are you a Low Income Designated Credit
Union?
Low-Income Designated Credit Unions Per Year
2000
1800
1600
1400
1200
1000
800
600
400
200
0
1990
1995
Challenges and Opportunities
2000
2005
2010
28
Low-Income Designation
NCUA Designation
• A federal credit union qualifies for LID when a
majority of its membership (50% + one member)
qualifies as Low-Income
• Low income members are those who earn 80
percent or less than the median family income for
the metropolitan area where they live
• or the national metropolitan area, whichever is
greater.
• State chartered credit unions must work through
their SSA
Challenges and Opportunities
29
BENEFITS OF LID
1. Non Member Deposits
2. Office of Small CU Initiatives
1. Loans
2. Grants
3. Consulting Services
3. Transactional services to potential members
4. Member Business Loans (MBL)
5. Secondary Capital Accounts
Challenges and Opportunities
30
Challenges and Opportunities
31
Grants and Loans
Challenges and Opportunities
32
2014 Grant Round 1
Initiative
CDFI Certification
Student Internship
New Product
Applicants
108
167
247
Next Grant
Round
June 14
Amount Requested
$270,000
$646,640
$1,673,000
$2,589,640 Requested from 320 Applicants!
Grants and Loans
33
Consulting Enrollment
• Nomination cut offs are May 31 (for consulting in the third
and fourth quarters of each year) and November 30 (for
consulting in the first two quarters).
• www.ncua.gov/OSCUI/Consulting
Challenges and Opportunities
34
FOCUS Sign Up
Challenges and Opportunities
35
Other Grant Programs
• Many low-income credit unions also obtain assistance from the
Treasury by qualifying as Community Development Financial
Institutions.
As of December 15, 2013, there are 808
certified CDFIs; 177 are credit unions
2013: 38 cu’s received an aggregate
$26,322,093
2012: 25 cu’s received an aggregate
$17,191,358
www.cdfi.gov
Challenges and Opportunities
OSCUI will be releasing CDFI
information videos in May.
36
Other Resources
State Leagues/Associations
National Federation of Community Development Credit Unions
www.cdcu.coop
National Credit Union Foundation www.ncuf.coop
Filene Research Institute www.filene.org
Challenges and Opportunities
37
NCUA OSCUI Contact Page
Feel free to contact our office with questions:
Consulting
OSCUIConsulting@ncua.gov.
Grants & Loans
OSCUIApps@ncua.gov.
Partnerships & Outreach Partners@ncua.gov.
Training
Challenges and Opportunities
OSCUITraining@ncua.gov.
38