Part I of this article focused on credit unions between $100 million and $1 billion, and it established that achieving a higher return on assets is not necessarily dependent upon size. Does the same hold true for smaller credit unions?
In a previous analysis of credit unions with assets between $100 million and $1 billion, we concluded that asset size was not a determining factor in a credit union’s ability to achieve an ROA greater than 1%.
Two main conclusions/findings of that study were:
- Within every asset-range, there are about 30% - 40% of credit unions that manage an ROA greater than 1%
- The range of ROA narrows as the credit union asset size increases.
To see whether these results were true for a larger range of credit unions, we analyzed 3,512 credit unions between $10 million and $100 million by dividing them into five peer groups based on asset size.
Credit Unions Above 1% ROA
Our analysis showed that even in these groups of smaller-sized credit unions, between 25% - 32% have an ROA greater than 1%, clearly showing that size or scale can not alone account for return on assets.
The fact that 398 credit unions with assets less than $20 million are delivering an ROA greater than 1% while 153 credit unions with assets between $80 and $100 million are not supports the conclusion that having a larger asset base does not ensure a higher ROA.
Range of ROA
While variation in ROA increased as we approached smaller asset sizes, it still remained true that the range of ROA (highest minus lowest ROA) got smaller with increases in asset size.
Since the conclusions from the previous review apply well to the smaller asset-size credit unions, the difference in credit union performance can then only be attributed to the soundness of their business models. Credit unions today need to find innovative ways to deliver value to their members while maintaining a healthy ROA and ensuring that these two are not mutually exclusive outcomes.
Top 5 Credit Unions
Credit unions in the Top 5 list have all been ranked in the top 5% of their group for December 2004, December 2005 and June 2006 to eliminate one-time star performers.
| |
State |
Credit Union |
ROA Dec 04 |
ROA Dec 05 |
ROA June 06 |
Total Assets June 06 |
| $80 ~ $100M |
PA |
CBW Schools |
2.33% |
2.32% |
2.47% |
$85,634,376 |
| NM |
Rio Grande |
2.22% |
2.77% |
2.02% |
$89,542,699 |
| ND |
Citizens Community |
1.51% |
1.59% |
1.89% |
$87,324,645 |
| AL |
Fort McClellan |
1.60% |
1.78% |
1.74% |
$92,203,961 |
| WI |
Allco |
1.43% |
1.81% |
1.61%
|
$86,430,251 |
| $60 ~ $80M |
CA |
Harbor |
1.56% |
2.16% |
2.39% |
$73,123,880 |
| MI |
Forest Area |
2.39% |
2.51% |
2.17% |
$60,254,223 |
| VA |
Park View |
1.59% |
1.85% |
1.88% |
$70,400,790 |
| NJ |
102 |
2.24% |
1.71% |
1.87% |
$76,531,018 |
| ME |
Acadia |
1.48% |
1.43% |
1.74% |
$68,211,813 |
| $60 ~ $40M |
NY |
Queens Postal |
2.10% |
1.94% |
2.29% |
$58,356,732 |
| GA |
MembersFirst |
3.52% |
2.45% |
2.11% |
$56,561,416 |
| MN |
Dawson Co-op |
2.09% |
2.12% |
2.01% |
$41,215,250 |
| LA |
Zellco |
1.60% |
1.40% |
1.90% |
$56,304,969 |
| WY |
Sunlight |
1.78% |
1.97% |
1.81% |
$52,574,359 |
| $20 ~ $40M |
TX |
Southern |
3.28% |
3.73% |
4.02% |
$25,205,242 |
| TX |
Nizari Progressive |
5.06% |
4.00% |
3.56% |
$28,293,886 |
| ID |
Lewis Clark |
1.70% |
2.33% |
2.78% |
$25,255,244 |
| VI |
St. Thomas |
3.06% |
3.00% |
2.62% |
$33,605,046 |
| MS |
1st Mississippi |
1.70% |
1.99% |
2.47% |
$39,357,759 |
| $10 ~ $20M |
TX |
Mclennan County Employees |
4.13% |
4.18% |
4.45% |
$11,358,243 |
| GA |
G. P. A. |
2.94% |
3.67% |
3.79% |
$12,761,809 |
| TX |
Dallas U.P. Employees |
2.70% |
3.60% |
3.31% |
$10,200,206 |
| NM |
Four Corners |
1.61% |
2.50% |
2.72% |
$13,722,469 |
| LA |
Federal Employees |
2.04% |
2.36% |
2.68% |
$13,059,613 |
To perform similar analysis for your peer group, try Callahan’s leading software tool Peer-to-Peer.
Where does your credit union fall in this trend? Find out with the 2007 Credit Union Directory, an indispensable research tool covering all facets of the credit union industry-from associations to regulatory information to suppliers that serve credit unions.