WASHINGTON - Callahan and Associates' recently released year-end `99 stats show small credit unions didn't grow much at all last year.
"Looking at growth rates by asset size, smaller credit unions have had negative or zero share growth for all of 1999," said Chip Filson, president of Callahan's.
"These credit unions have the least amount of resources to compete. But the changes limiting their growth will also begin to impact larger credit unions," said Filson.
The changes Filson refers to are credit union members giving more business to diverse financial services firms that offer a wide variety of products and services.
Like others following the financial trends in the industry, Filson also believes that credit unions are losing deposits to the stock market.
"Savings are going directly to the market," he said. With a booming stock market, insured deposits look less attractive to members seeking out the best yield for their dollars.
While larger credit unions have the ability to offer more products and services through CUSOs and other vehicles, small credit unions aren't in that league.
Filson said the key safety and soundness categories were strong in `99. Capital-to-assets were healthy at 11.6%, delinquency at .75% and return on assets at 94 basis points. The biggest challenge Filson sees is from the new competitive threats from financial modernization and the Internet channel.
"Credit unions' role in the future will be different. They may not provide all the options on their balance sheet, but they can be involved in helping their members find good solutions."
Filson said the industry should be concerned about revenue growth when compared to operating expenses. In `99 revenue increased by 5%, but operating expenses went up by 9.1%. "That difference can't continue if credit unions are going to compete," said Filson.
The shining star for the industry in `99 was the 10.6% increase in loans. Membership growth was also strong at about 1.8 million new members. -