Numbers Show Declining Market Growth

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Credit unions have been a constant target of tough competition from other regulated depositories, and nothing makes that clearer than the declining market growth over the last few years.

According to SNL DataSource, market growth for credit unions fell from 12.09% in 2001 to register 3.09% as of Sept. 30, 2004. According to SNL, this may be mainly due to the fact that the total number of credit unions has not changed considerably over the years and stands at approximately 9,275. This is also reflected in the lack of median capital growth for credit unions that has been steadily declining from 7.51% in 2000 to 4.71% at Sept. 30th, SNL noted.

Banks and thrifts that offer more services may be affecting smaller credit unions in terms of source of funding since the median number of current members has declined rapidly as members may be demanding more services that smaller credit unions may not be able to provide, said SNL. Compared to other regulated depositories, though loan growth has increased over the years, competing institutions are outpacing credit unions since 2000.

"We should note that this list of regulated depositories also includes major bank holding companies that have a foothold in most regions in the United States. Credit unions have been attractive to depositors as median growth has outpaced other institutions for most of the periods," SNL said (see chart on deposit growth).

Even while competing against some of the larger bank holding companies, credit unions have maintained strong performances and profitability especially maintaining the median net interest margins to above 4.00%. With FMOC regulations continuing on from third quarter of 2004, squeezing bank and thrift's profitatibility in terms of margins, credit unions may continue to outperform and one could even expect a widening gap between median margins.

SNL said that credit unions have been able to keep expenses for generating funds lower compared to other regulatory institutions as indicated (see chart for cost of funds). Returns for both banks and thrifts and credit unions have been steady over the years with median credit union ROAA at September 30th was 0.61%.

Source: SNL Financial, Charlottesville VA, 434.977.1600,

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