Research: There Are Six Distinct CU Business Models

Two researchers, John Stowe and David Stowe, identified that there are six strategic credit union groups, which are differentiated by their asset-liability management decisions.

Instead of using size, field of membership, or state versus federal charter to group credit unions, the paper, Credit Union Business Models, uses cluster analysis to group credit unions based on 41 common size balance sheet and income statement variables for 1,528 credit unions with at least $100 million in assets as of December 31, 2015. This sample of 1,528 credit unions represents almost 25 percent of all credit unions and almost 91 percent of all credit union assets.

The paper employed 16 asset variables, 9 liability-side variables, 7 revenue variables, and 9 expense variables to determine credit union clusters.

The authors found that there are six different credit union groups -- saver-oriented credit unions, traditional credit unions, auto lender credit unions, real estate lender credit unions, and other lenders. Traditional credit unions, which have investments and loans closer to the industry's overall mix, are divided into two clusters -- one with greater emphasis on real estate loans and regular shares and the other cluster has more investments.

The paper found that 67 credit unions are saver-oriented; 430 credit unions are traditional credit unions holding more investments; 192 credit unions would be identified as traditional credit unions with greater emphasis on real estate loans and regular shares; 388 credit unions are auto lenders; 403 credit unions are real estate lenders, and 48 credit unions are other lenders.

Interestingly 4 of the 5 credit unions with more than $10 billion in assets were classified as real estate lenders.

For more information about the characteristics of each of these groups, you can download the paper here.