Credit union financial performance: the impact of asset size: bigness clearly gives a credit union advantages.

As competitors in consumer financial markets, credit unions are often grouped as a monolith one-size-fits-all player. Yes, credit unions are member owned and are often smaller than their commercial bank competitors. Historically, they had field-of-membership limits that restricted participation by the general public. But today, many credit unions have grown dramatically; community charters have broadened access; and many are now full-service competitors.

The Current Competitive Situation

Credit unions are now very diverse, but asset size is probably the most significant differentiating variable. The largest credit unions rival midsize banks in all respects except for worries about earnings per share and unhappy stockholders. The smallest have risen above the proverbial "shoe box" status but still represent small memberships and very limited loan and deposit volumes, staff and facilities.

Within the credit union industry, many now compete with each other for members, deposits and loans. Competition across the financial services marketplaces has grown with large and diverse participants: commercial banks; remaining savings and loans; finance, mortgage and insurance companies; check cashing services; and many others. Nearly every financial firm has a credit union as a viable and in many ways successful competitor.

This article examines the financial differences among different asset-size groups of credit unions. Data for five years, 2003 through 2007, are used to identify dissimilarities. Important here are the size groupings. From past research and work on this project, eight size groups are used. Exhibit i shows the number of credit unions by year over five years and the distribution of industry assets for 2007. (For full data on these credit unions, see www.bankaccountingandfinance.com/RecentIssues.htm.) For study purposes, only the six largest groups are analyzed. The two smallest groups represent only 1.8 percent of total assets but 44.0 percent of all reporting credit unions. These small units include many unusual examples--some nearly inactive, others very specialized and numerous examples with extreme ratio relationships.

The total number of credit unions has shrunk by more than 1,500 since the beginning of 2003. The small-asset-size groups have decreased while the large-asset-size groups have grown. Natural growth and merger activity share the sources of growth in the large-size credit union groups.

Changes over Time