MADISON, Wis. — More than two dozen billion-dollar credit unions reported a drop in membership in the first quarter even as the movement continued to grow its overall base.
According to CUNA Mutual Group's latest Credit Union Trends Report, which cites data from CUNA statistics, 3,721 credit unions reported year-to-date drops in membership. These credit unions account for 25% of assets at the end of the first quarter. The group also includes 27 of the 132 billion-dollar credit unions, said Dave Colby, chief economist at CUNA Mutual.
Delving deeper into the data, at the end of the first quarter, 132 credit unions reported assets of $1 billion or more.These same credit unions have added 1.3 million members over the past year for 5% annual growth, Colby said. Of the 132 billion dollar credit unions, 23 reported membership declines over the past year with 14 reporting a decrease in the first quarter. These credit unions held 11% of the assets in the billion-dollar segment and 10% of the members.
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Taking it a step further, 27 of the billion-dollar credit unions reported membership declines in the first three months of 2008.These credit unions held 13% of the segment's assets and members. In total, they reported a net decline of roughly 36,000 members versus a gain of 315,000 for the group as a whole.
Colby said he would not describe the drop in membership at some larger credit unions as earth shattering. "I don't see this as a major event, but rather a sign of the times," he offered. "When the industry's [return on assets] moves from 100 basis points to 50 basis points, the value of an ROA basis point doubles. Credit unions are more actively managing all expenses and their membership rolls are a very significant component to expenses."
The reasons for the decline, Colby pointed out, are varied and in many instances, are not statistically significant.
Still, one of the top reasons continues to be culling membership rolls of low balances or inactive members, Colby said. Eliminating the statement expense alone could add to a credit union's bottom line, he provided.
"Credit unions will give a member the opportunity to expand their relationship or return [their] share deposit–in many cases, $20 or less," Colby said.
The drop in membership at larger credit unions may also be tied to a sharp reduction in indirect lending and the payoff of existing indirect loans, he said.
"New members gained through the indirect vehicle lending channel have proved to be price-only shoppers and very few deepened their credit union relationship beyond the vehicle loan," Colby said. "As the loans are paying off, the members are being removed from the membership counts."
Indeed, in looking at the 23 credit unions reporting membership declines over the past year, 13 reported declines in the number of indirect loans outstanding, Colby said. In total, the decline in the number of indirect loans for these credit unions equaled 50% of the reported membership decline.
"Every ROA basis point is even more important the lower the ROA goes," Colby said. "Looking at the 23 credit unions reporting membership declines, all but four had ROAs below the peer average for the billion-dollar segment."
The bigger picture paints a more optimistic view. Through April, credit unions have generated a net increase of nearly 1.2 million members, the report noted. That's compared to the year-to-date increase in 2007, which was revised down to 0.5 million and the full year gain was 1.1 million, Colby noted. Total membership at the end of April was an estimated 90.5 million.
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