What Passes for 'Big' Is Getting Bigger: A Closer Look at CU Asset Size

The large credit unions keep getting larger faster, making the definition of “large” an ever-moving target.

The NCUA has asset classes that are artifacts of statutes from the late 20th century, starting with an asset class of less than $10 million and moving up to the largest class of $500 million or more. As of June 30, credit unions with assets of less than $500 million accounted for 16% of the credit union movement’s assets.

Recently it has begun reporting results that use a $1 billion asset threshold for its largest group.

In early 2020, CU Times started using new thresholds based on the recognition that size is relative, and the relations change with time.

Three groups were devised with the intent that each have roughly the same assets in aggregate. But the thresholds were picked to be round, easily remembered numbers.

The number of classes was three and named to conform to U.S. size standards for ordering soft drinks at a drive-thru: Small, medium and large.

Here was the breakdown as of Dec. 31, 2019:

• Small (less than $1 billion in assets) had collectively $510 billion in assets (32% the movement’s $1.58 trillion in assets as of December 2019) and 46.8 million members.
• Medium ($1 billion to less than $4 billion) had $517.3 billion in assets (33%) and 38.1 million members.
• Large ($4 billion or more) had $557.5 billion in assets (35%) and 36.8 million members.

Those thresholds were designed based on assets as of June 30, 2019, when the distribution was closer to 33% each. So credit unions that had $1 billion or less in assets were 34% of the movement’s total assets as of June 30, 2019, but that asset class had fallen to just 26% of total assets by June 30, 2022.

With the third quarter ending Friday, it seemed like as good a time as any to roll out new thresholds:

• Small (Less than $2 billion): These 4,727 credit unions had $827 billion in assets (38% of the total $2.16 trillion) and 56.8 million members as of June 30. This group’s assets have grown 20% since June 2020.
• Medium ($2 billion to less than $7 billion): These 188 credit unions had $637.8 billion in assets (30%) and 36.7 million members. Their assets have grown 24% in the past two years.
• Large ($7 billion or more): These 41 credit unions had $693.8 billion in assets (32%) and 40.3 million members. Their assets have grown 25% in the past two years.

The “small” asset class is now outsized, but past trends showed it is likely to shrink back towards 33%, while the big will get bigger.

As with past size definitions, earnings improve with size — whether using traditional annualized earnings as a percent of average assets (ROA), or operating ROA, which excludes the volatile, managed number of provisions for loan losses and instead substitutes it with net charge-offs.

Total credit unions’ ROA in the second quarter was 0.84%, down 32 bps from a year earlier, while operating ROA was 0.84%, down 17 bps. By size groups, earnings were:

• Small credit unions’ ROA in the second quarter was 0.68%, down 16 basis points from a year earlier, while operating ROA was 0.69%, down 9 bps.
• Medium credit unions’ ROA for medium-sized credit unions was 0.85%, down 35 bps from a year earlier, while operating ROA was 0.84%, down 28 bps.
• Large credit unions’ ROA in the second quarter was 1.03%, down 51 bps from a year earlier, while operating ROA was 1.03%, down 16 bps.