Jan 01 1996

The Effects of Member Income Levels on Credit Union Financial Performance


This monograph evaluates how member income levels affect a credit union’s financial performance. It does this in two ways: 1) by evaluating the financial performance of three credit unions that had been identified in earlier research as following a conscious policy of expanding service to low and moderate income households, and 2) by analyzing the financial performance of 75 credit unions for which data was available on member income distributions.

The research indicates that the three credit unions that had consciously expanded service to low and moderate income households had performance similar to or above credit unions generally of similar size. Furthermore, of the 75 credit union studied in 2), those that had more lower income members had charge-off rates and delinquencies very similar to the rest of the credit unions. They did have higher operating expenses per dollar of assets, but this was more than offset by higher average loan rates and in some cases higher fees. Overall, the credit unions with more lower income members had a slightly higher net income than credit unions with more affluent memberships.

Report Number 19