Australian Unity is reviewing the market position of its under-performing banking arm - Big Sky Building Society - after a steady outflow of retail deposits last year.Banking Day understands that the customer-owned financial services group is mulling a proposal to rebrand the banking operation to "Australian Unity Bank" as part of a wider plan to stem run-off in its deposit-taking and lending activities.Financial accounts lodged with ASIC show that Big Sky's retail deposit base fell by A$34 million in the 12 months to June last year, as term depositors with maturing accounts took their funds elsewhere.The slide in deposit funding appears to have triggered a tightening of lending activity, with total loan assets reducing by $33.2 million to $698 million.The building society's net profit in 2017 was sliced by 46 per cent to $1.8 million.However, the adoption of new accounting policies eroded the valuation of reserves and retained earnings by $5 million, forcing Australian Unity to inject an additional $7 million of equity capital last year.Australian Unity told members in the group's 2017 annual report that "competitive market conditions" had squeezed net interest margins."Big Sky responded to these conditions proactively by targeting lower levels of lending and a stable balance sheet size," the parent said in its annual report.The potential problem with this commentary is that the size of the balance sheet is shrinking, rather than stable.Since the end of June 2016, Big Sky's total assets have fallen from $861.6 million to $784.8 million.Regulatory disclosures made Big Sky since July last year indicate that lending activity continued to slide in the six months to the end of December.The value of gross mortgage exposures reported to APRA stood at $540 million at the end of December - down almost $43 million on June 30.While this decline is significant, in risk-weighted terms the fall was marginal for the overall loan book because the building society increased its exposure to commercial borrowers in the December half.One of Big Sky's risk management challenges is the geographic concentration of its members in Victoria and Western Australia.In 2016 about 29 per cent of its retail lending book was exposed to borrowers in the WA market, a state economy that has struggled since the end of the mining boom.The WA exposure was reduced to around 26 per cent of retail lending in 2017.The contraction of Big Sky's deposit and loan bases appears to be a curiosity in the mutual banking sector.Like-sized industry peers such as G&C Mutual, Hume Bank and the NSW-based Maitland Mutual Building Society have consistently grown deposits and loans over the last two years.If Big Sky converts to bank status, the industry will be left with only two building societies - Maitland Mutual and Newcastle Permanent.Rebranding the business might be a sensitive issue for thousands of Big Sky members who were acquired in 2012 by Australian Unity's Lifeplan Building Society.Big Sky has its origins in credit unions that serviced employees of BHP and BP Petroleum and members of the Royal Automobile Club of Victoria.Banking