MADISON, Wis. – Wisconsin lost 10 more credit unions in 2003, bringing the number of credit unions to 298, the fewest since the 1930s, according to the Wisconsin Department of Financial Institutions. The decrease continues a trend that began in the late 1960s. But while the total number has dropped, there was "very nice growth in all areas during 2003," according to Suzanne T. Cowan, director of the Office of Credit Unions with the DFI. Assets of state-chartered credit unions increased $1.1 billion to result in total assets of $12.8 billion as of year-end 2003. The growth rate for 2003 was 9.5%. Net worth grew by $126 million or 10.3%. The number of members statewide continued to grow, reaching 12,772,532,665 in 2003. Loans increased $1.1 billion during 2003, an increase of 13.3% over 2002. Loans grew faster than savings so the loan-to-savings ratio improved from 84% in 2002 to 87% in 2003. So why are credit unions in Wisconsin consolidating? Cowan offered these observations: "In conversations with our supervisory staff, it seems like the most common reason is that the job of running a smaller credit union just gets to be too much and there isn't anyone willing to take over. The rules and regulations are overwhelming and there is something new coming all the time. "For example, even the smallest credit union has to comply with the Privacy Act, the Patriot Act and the Customer Identification Program which all came out in the last couple of years. Margins are razor thin and there is tremendous pressure to keep expenses down, so compensation suffers," says Cowan. DFI figures show that of the 298 state-chartered credit unions in Wisconsin at the end of 2003, six had assets of more than $500 million while 41 had assets of less than $1 million. The median size is slightly more than $10 million and the average size of all Wisconsin credit unions is $42.8 million. In Cowan's analysis: "Even the warm fuzzys that employees get from helping their members fade as member loyalty evaporates with increasing rate disparity in the marketplace. Throw in a sponsor downsizing or bankruptcy and you end up with a credit union that decides to merge. When the person managing the credit union decides they've had enough, there isn't anyone willing to work that hard for that amount of pay to replace them. Finally, the board decides to let someone else with more resources deal with the headaches." E.F.I. Employees Credit Union of Manitowoc was one of the 10 to disappear in 2003, absorbed into Shipbuilders Credit Union, Manitowoc, on Oct. 20. According to Amy Miller, marketing director for Shipbuilders, it was a long process but has resulted in a very smooth transition. She said the board and management of E.F.I. Employees wanted to feel comfortable with the Shipbuilders' staff and its mission. While Shipbuilders now has 5,000 members, it is not the largest in the community and Miller suggested that "not being the biggest was a good factor." E.F.I. Employees Credit Union had operated out of a mobile home on the premises of the sponsor company. Other than handling its 400 share accounts, the credit union's services were limited, said Miller. Now former EFI Employees Credit Union members are using the Shipbuilders' offices and enjoying its many services. "They pretty much have everything now and we will be introducing online banking soon," said Miller. The consolidation trend seems to be continuing in 2004. On Feb. 1, Fox Communities Credit Union of Appleton absorbed Wisconsin's Media and Center Valley credit unions. For Wisconsin's Media with its $2.9 million in assets and 647 members, it came as a decision to be proactive about its future, according to Lynn Marie Hopfensperger, former president and CEO of Wisconsin's Media. "People always seem to think that the reason a credit union merges is because it has an unhealthy situation or a sponsor company is leaving, said Hopfensperger. "We had a real strong financial picture. We were two strong credit unions – Wisconsin's Media and Fox Communities. We became part of a proactive rather than a reactive movement." Wisconsin's Media had operated out of a one-room office in The Post-Crescent, a Gannett chain newspaper in Appleton. "We were running a small shop and expenses were extremely high," said Hopfensperger, noting that it would have been difficult to ever have a separate office outside the sponsoring company's space. Wisconsin's Media had had a branch office 30 miles away in another Gannett newspaper building, but the publisher there had ownership in a bank and didn't want a credit union in the building, said Hopfensperger. "How do you combat that? We wanted to combat that before it became an issue" for the credit union itself. She says former Wisconsin's Media members now see two things. While they still have personalized service they enjoy more branches and more hours of service. The second is real time access. "Real time is unaffordable for a lot of credit unions. Under Wisconsin's Media, transactions were only recorded once a day. People got paid Friday morning but didn't see their money until Friday afternoon." DFI's Cowan said she doesn't think that most credit unions merge just to give their members better service. If the management is strong and forward-looking, she said, they find ways to offer the necessary services. "Witness the success of the jointly owned service centers and CUSOs around the state that provide members with branch offices and other services that many of the credit unions involved could not offer on their own." Cowan said credit unions also merge for financial reasons. "They just can't make enough on loans and investments to pay the bills and give their members some return on their savings or their loan losses eat up their reserves." She says most members stay with the new credit union. "Hopefully, the credit unions involved did a good job explaining the merger and nothing major went wrong during the conversion. Since we humans are subject to inertia, things have to get pretty bad to cause members to leave on a large scale," she said. "It is a real pain to set up new accounts and change over all those automatic items that come out of one's checking account. And if the merged credit union was tiny with no services, the new credit union probably offers a real upgrade in services." Wisconsin's credit unions continue to be healthy and are performing well, according to the DFI. Both Wisconsin examiners and NCUA have been hammering on asset liability management for years, Cowan said. "On the asset side, Wisconsin credit unions have a strong core of short-term consumer loans that will continue to pay down rapidly, a significant amount of adjustable rate mortgages, home equity loans and credit cards, and a lot of balloon-type second mortgages," said Cowan. "These factors will all help adjust earnings upward as rates increase. On the liability side, the combination of non-rate-sensitive savings and share draft accounts and member certificates that stretch maturities over several years will help insulate credit unions from the pressure to raise rates too rapidly. Overall, our credit unions are well positioned to take advantage of rate changes."