10,538 active credit unions at yearend. The largest 100 receive,
because of their size, much more attention than any other 1% of
These 100 now
total over $130 billion or 29.3% of all credit union assets. By
comparison, the largest 100 banks and the largest 100 thrifts each
hold just over 72% of their industry's assets. The credit union
system is much less concentrated in larger organizations.
Within the credit
union top group, 43 each manage over $1 billion in assets. The total
membership however is smaller than the asset share. 21% of all members
are with these leaders, an indication that the average relationship
is greater than in the rest of the credit union system.
Do these size
leaders have any significant differences from their smaller brethren?
Are these credit unions doing something unusual that helps them
grow? Is there an advantage in size?
A Look at
of the growth rates of the top 100 with the numbers for all credit
unions suggest some minor, but consistent variances. The chart below
compares the operating results for 2000 of these two groups.
With the exception
of the expense ratio, almost all differences in financial performance
are minor. The lower operating expense ratio does suggest that there
are some economies of scale. Part of this benefit is passed back
to members who receive a higher proportion of total revenue in dividends
at 48.35%, as compared to members at all credit unions-43.00%. This
fact may explain the slightly faster share and member growth rates.
concluding that economies of scale work for everyone, it should
be noted that several of the top 100 had very slow share growth
rates-less than 1%. Also the range of earnings as measured by the
ROA shows a wide variation from a low of 44 basis points to a high
of 2.28%. Size does not automatically guarantee a certain result.
is that while larger credit unions may have a lower cost structure-on
average-the financial model that defines all credit unions also
still applies to the top 100.
Ways in Which
Size Can Matter
se does not automatically create a different performance model but
size can have other impacts. Larger does mean more visibility in
many geographically defined markets. The press frequently prefers
to write about credit unions that more readers have heard of.
Size can also
mean the ability to apply more resources quickly to an issue. When
political clout or market scale is needed, larger credit unions
can get to the starting line with more dollars faster.
resources to deploy larger credit unions tend to begin initiatives
faster as well as be the primary focus for vendor innovations. It
is more efficient to sell one large credit union a program than
to gain 10 smaller credit union sales with the same total outcome.
For example 88% of the top 100 have a third party mutual fund program,
versus just 11% of all credit unions. All but one of the largest
100 has a web site, but only 3,300 out of the 10,538 report a web
site address in the December call reports.
credit unions tend to be more visible in their changes, they can
provide de facto business and movement leadership even if that is
not the intention of their actions. When a large credit union installs
ATM machines in an alliance with McDonalds the event is industry
news. When a small credit union has an earlier but more limited
program, the story does not carry the same weight.
In many areas
of the country the largest credit union in a city or a state may
have more staff expertise than the trade organization or smaller
credit unions in the same geographic area. This reality means that
the involvement, or lack thereof, from large credit unions in initiatives
such as shared branching, ATM networks or even CUSO's for real estate
or data processing services can mean the success or failure of cooperative
or avoided, many large credit unions define the agenda and the priorities
for the credit unions in their operational area. This implicit role
is real even if the credit union chooses to go it alone from the
rest of the system. Indirect lending programs are an example of
an initiative that a large credit union can undertake on its own
or in concert with other area credit unions. However if a car dealer
lending program is not a joint one, then the smaller credit unions
will often be forced to create an alternative just to protect their
own share of the market. By not cooperating a large credit union
can energize its own competition.
Does Not Make a Difference
So the top
100 are special in that they receive a disproportionate amount of
attention and expectations for leadership. In the total scheme however,
even a large credit union is not big. The $130 billion in total
assets of the largest 100 would only place this group as 7th in
a listing of the largest banks. In fact, the largest bank, Bank
of America with $584 billion, has more assets than the entire credit
union market by over $140 billion! No matter the size advantage
a credit union has versus its brethren in a local market, there
will often be a major bank or thrift than can make better bids for
ATM placement, auto dealer loans or first mortgage referrals. In
the context of markets, local or national, there are no large credit
A second observation
is that there is virtually nothing a large credit union does, that
a much smaller credit union cannot also do. From both legal and
practical standpoints, the range of activities for the system is
virtually identical. Whether the issue is technology investments
or marketing innovations, size does not prohibit participation.
is often about change, learning a new process or business faster
than a competitor. In some areas, significant change can often start
in smaller settings and once found to be feasible, can be extended
to a wider group. Field of membership definitions, changes in share
insurance or regulator can more easily be implemented in less visible
organizations. A large size may mean that turning the ship requires
more time and encounters more resistance.
So while size
confers some resource advantages, it does not automatically mean
competitive advantage. Large and small can be leaders in information
based, advice centered member value strategies. Digital assets,
that is member information, are available to all credit unions more
or less equally. The only limit to their use is each credit union's
mindset, not assets.