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MONETT, Mo.-With credit unions' income prospects limited due to economic and regulatory factors, ProfitStars said mergers are an "obvious growth opportunity" in 2011.

Brad Dahlman, RPM product manager for ProfitStars, a division of Jack Henry & Associates, noted that as long as credit unions are limited in the types and amounts of commercial lending they can do, and as long as U.S. consumers continue to save, the outlook for loan growth will remain weak.

"Credit unions cannot support required net interest margins if they keep growing their balance sheets and decreasing loans-to-assets ratios," he said. "In terms of revenue and profitability, significant growth could come from a few different sources."

Among the areas Dahlman foresees and having potential for revenue growth: expanded product offerings, and expansion into related financial services offerings such as insurance and brokerage services. "Profitability growth could come from a greater understanding of profitability drivers-margins, fees, credit costs and expenses-and more active management of these areas to drive toward growth in profitability, which could result in additional product and services, maybe even some brick and mortar where appropriate."

ProfitStars is helping its CU clients grow, Dahlman said, by offering a set of financial tools that help credit unions better understand and measure IRR, liquidity and the profitability of the credit union, in terms of their branch structure, product offerings and member relationships.

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