Most previous studies of credit union growth used data from the 1990s. This study uses 2002-2004 data from mid-sized cities, in order to be more representative of distinct local markets. In addition, two new independent variables, used vehicle loans rates and loan-to-total asset ratios, were included. Some studies have found that small credit unions grow faster than large ones, while others find the opposite is true. Bank growth studies report mixed results as well. Our model includes variables used in other growth studies, such as credit union size, previous growth, ratio of loans charged off, operating expense ratio, capital-asset ratio, and the ratio of fee income to total assets. In addition, the two new independent variables listed above add to our knowledge of factors that influence credit union growth.
When comparing average growth rates of different size credit unions, large credit unions grew faster than small credit unions. However, the regression results show that once we hold other factors constant, small credit unions grew faster. In other words, differences in growth rates may be explained by characteristics other than size alone.
Of the two variables not previously tested in other studies, the loan-to-asset ratio, as expected, had a positive effect on growth. This suggests that credit unions with tighter liquidity are more aggressive in attracting deposits, which leads to higher growth rates. However, higher used vehicle loan rates were associated with higher growth -- an unexpected finding.
Robert Tokle and Joanne Tokle. "Credit Union Growth in Mid-sized Markets." New York Economic Review. vol. 41, Fall 2010, p. 45-56
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