Apr 19 2016

Credit Unions: Financial Sustainability and Scale


In this report, we define credit unions’ financial sustainability as their being able (1) to offer attractive terms and interest rates indefinitely for a broad range of financial products, (2) to remain relevant in the financial lives of their members, and of Americans as a whole, by maintaining constant, or growing, market shares, and (3) to maintain capital per asset ratios that are sufficiently high to withstand periodic shocks, such as economy-wide increases in loan losses.

Luis Dopico
Luis Dopico
Report Number 401

Executive Summary

U.S. credit union system trends are clear and consistent: consolidation is steady, regulatory pressures are increasing, the largest credit unions perform better as a group than their smaller counterparts and the service demands of consumers and regulators continues to expand. During the last two decades credit union performance has begun to diverge markedly across asset size ranges. Smaller credit unions bear far higher non-interest expenses per assets than their larger peers and struggle to offer comparable interest rates and to maintain similar asset growth rates.

Filene has consistently identified sustainable growth as one of the biggest challenges facing credit unions. The unique constraints of capital structure make sustainable growth difficult for the best credit unions and virtually impossible for many others. To best serve their members credit unions must balance short-term and long-term goals.