The earnings of U.S. credit unions fell last year, but industry experts are shrugging it off.

While federally insured commercial banks were boosting their aggregate income by 9%, to a record $48.8 billion, credit unions suffered a 3% decline, to $3.4 billion.

For the 100 largest credit unions, which control 27% of the $311 billion of assets at 11,887 institutions, net income fell 4%, to $883 million. (Industry rankings and summary tables, based on data from Callahan & Associates, begin on page 8.)

"Generally speaking, it was a really good year for credit unions," said Keith Peterson, economist with Credit Union National Association, Madison, Wis. "Deposit levels were up in '95, and loan growth, which was extremely strong in '94, dropped back to more normal levels.

"Compared to 1994, the past year was a return to normal."

Growth in total assets was up from 1994, but not by much. The top 100 credit unions registered a 7.81% increase in assets, just ahead of 1994's 6.3% increase, the lowest growth rate in the decade. For the industry as a whole, assets grew by 5.14%, up from 4.7%, which was the slowest rate since 1989's low point, 0.6%.

The 1995 decline in net income could be traced to credit unions' response to interest rate changes, said Tun Wai, director of research and analysis at the National Association of Federal Credit Unions, Alexandria, Va.

"Generally, credit unions don't change their rates with the same frequency that banks do," Mr. Wai said. "As a result, the cost of funds may be higher than that of other competitors, which will usually cause a decline in net income."

Credit union balance sheets may also be less susceptible to swings.

"Banks certainly have the capacity to make more money than credit unions, and they also have the capacity to lose more money than credit unions," said Jeff Wells, vice president of Santa Cruz Community Federal Union, Santa Cruz, Calif.

"When all is going well economically, as it was last year, it's natural for banks to be able to post record profits," he said. "It isn't that credit unions were doing bad so much as that banks were doing extremely well."

A few credit unions did experience unusually heavy losses. The $470 million-asset Educational Employees Credit Union, Fresno, Calif., saw its net income fall 45%, to $4.1 million. The $3.9 billion-asset State Employees Credit Union of Raleigh, N.C., the industry's second-largest, was off 38%, to $19.2 million.

Defense cutbacks affected many institutions linked to either military contractors or bases. Earnings declined by more than 30% at McDonnell Douglas West Federal Credit Union, Huntington Beach, Calif.; Lockheed Federal Credit Union, Burbank, Calif.; Tinker Federal, serving Tinker Air Force Base in Oklahoma; and Newport News (Va.) Shipbuilding Credit Union.

"One of the unique aspects of our industry is that credit unions are especially liable to sponsor problems," Mr. Wai said. "Work stoppages and layoffs can have a tremendous impact. Credit unions have a unique membership, and the economic makeup of that membership directly affects the credit union."

Other institutions, however, did quite well. Among the gainers, $755 million-asset Bank Fund Staff Federal Credit Union, Washington, had the biggest percentage increase in net income, at 134%. It serves the staffs of the World Bank and International Monetary Fund.

Leading other growth categories were San Antonio Federal Credit Union, increasing its total assets by 23%, outstripping the industrywide average of 5%; OmniAmerican Federal Credit Union, Fort Worth, boosting total loans by 37%, compared with the industry average of 10%; ENT Federal Credit Union in Colorado Springs, raising capital by 49%, compared with 15% for the industry; and Jax Navy Federal Credit Union, Jacksonville, Fla., raising its membership by 24%, compared with 5% for the industry.

Mr. Wai said he was not comfortable forecasting 1996 performance.

"If rates are increasing, that means credit unions will have lower rates than banks and will have trouble attracting deposits," he said. "If rates are falling, credit unions will have higher rates, which will work to their benefit in attracting deposits."

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