The structure and growth of the credit union industry in the United States: meeting challenges in the market

American Journal of Economics and Sociology, The, April, 1994 by Surendra K. Kaushik, Raymond H. Lopez

IV

Asset Size Analysis

ANOTHER DIMENSION of the credit union industry's consolidation trend is its impact on credit union asset size. Data in Figure 4 show that the number of credit unions with less than $5 million in assets has been declining quite steadily from 1982 through 1992. In contrast, in all asset categories above the $5 million level, there has been consistent growth both in absolute size and in relative terms. Also, the larger the asset category, the larger the percentage increase over this period. The greatest relative growth was in the $100 million plus category. From 0.3 percent of all credit unions in 1980, they have grown to 4.0 percent of the total in 1992, an expansion of more than 12 times.

For the entire industry, the contraction amounted to 32.8 percent through 1992. Credit unions with assets below $2 million have declined from over 65 percent in 1980 to 38 percent in 1992. The total number of credit unions will probably decline to 10,239 by the year 2000 with the institutions under $5 million in assets experiencing all of this decrease.

The patterns of growth of credit union size exhibited in Figure 4 and Table 2 have now been observed for more than a decade. Even the three recessions of 1980, 1981-82 and 1990-91 have not altered the fundamental forces at work in the industry. Therefore, continued consolidation and the shift of assets to larger sized credit unions most likely will continue. By 1995, 31 percent of credit unions will have assets under $2 million and they will be only 23 percent of the industry in the year 2000. All other asset sizes are expected to grow in relative importance, with the $100 million plus category increasing to 6 percent at the end of the decade.

Given the growth in average credit union membership in the U.S., it is also important to examine these patterns by credit union asset size. Table 3 presents data covering the period since 1980 for members per credit union. For every asset category, the average number of members per credit union has declined in almost every year and those averages are smaller in 1992 than they were in 1980. The largest absolute declines are found in the $100 million plus asset group, while the largest percentage declines are observed in the mid range categories (assets between $5 and $50 million). These patterns are expected to continue through the 1990s and by the year 2000 average membership of almost 8,900, an increase of more than 90 percent from the 1992 level is projected.

The smallest declines in relative terms are found at the two extremes of asset size: 24.4 percent for the $100 million plus group and 27.2 percent for the under $500,000 group. Although these patterns show an element of stability between asset size categories, the overall average membership per credit union has more than doubled in the period. This reflects strong growth in larger credit unions' ability to attract new members as all credit unions expand their position in the financial services industry. In addition, there has been an absolute increase in the number of credit unions with assets over $5 million in this period.