Jul 29 2007

Thriving Midsize and Small Credit Unions

Why do many midsize and small credit unions thrive while others struggle with declining membership, shriveling real assets, and anemic earnings? This important question is addressed the report, Thriving Midsize and Small Credit Unions, by Robert F. Hoel, Filene Fellow in Residence and former executive director of the Institute.

Hoel examines growth rates, financial data, and product and service information for 3,390 midsize and small U.S. credit unions operating continuously over a five-year period beginning January 2001. The research compares midsize and small credit unions with the fastest asset growth rates against peers with the slowest growth The author culls these insights into the following nine qualities of thriving midsize and small credit unions:

  • They are highly effective lenders.
  • Their members use their credit union extensively.
  • They pay members higher rates for savings than similar-sized credit unions do.
  • They emphasize high-payoff product and service offerings.
  • They manage their expenses aggressively.
  • Their high deposit and loan balances per member cut their operating costs.
  • They do not rely solely on low loan rates to generate loans.
  • They usually generate more fee income than their peers.
  • They invest their capital in growth.

Low-performing credit unions are almost always in sharp contrast to thrivers. Laggards tend to have low loan-share ratios, and while thrivers manage their expenses assiduously, laggards are more lax on cost controls