Y.E. Fun Facts for the large CUs and more reasons it sucks to be small!!!

If we look at the divergence in cu asset sizes ($2 -20, $20 - 50, $50 -100, $100 - 500, $500 - 1B, and 1B+) over the last 15 years, you will notice some interesting trends :

- $1B+ ROA for 2010 average = .720%  The smaller cu's ($2 -20) haven't seen those kind of ROA numbers since 2001.  In 1995 the difference in ROA between those two categories was 5 BP... It's now the largest ever at YE 2010 at 88BP.

- For Non-Interest Income as a % of total Income the spread between the largest and smallest was 268 BP in 1995.  It now stands at 611 BP.  More than double.  Rarely has a smaller asset bracket exceeded the average income of the next larger bracket over the 15 years.  Bigger is Better.

- It pays to be a member of a larger CU.  The difference in Dividends as a % of Income in 1995 was 800 BP, and now it's down to 474 BP.  In 2005 and 2007 this spread increased to over 1475 BP.  However, after the larger shops stopped their growth streak, it fell dramatically.

- The efficiency ratio is another indicator (the cost to produce $1 of income) of the advantage larger cu's enjoy.  In 1995 the large shops were $0.07 more efficient at just over $0.64.  Fast forward to 2010 and that becomes a  whopping $0.21 advantage to the largest cu.  There is some channel noise with the write-downs and subsequent reduction of ALLL, but this has been an ever-widening trend since 1995.

- Yield on Assets - Advantage smaller cu.  But, what do you expect.  If you only make signature and auto loans, you have higher yields than with Real Estate loans.  The 71 BP advantage in 1995 is now down to 5 BP.  So, small cu, enjoy it while you can.  In reviewing the entire trend, 1995 looks to be a spike.  The advantage for small shops held almost constant at 30 BP until 2008 and then it's dropped off significantly.

- Same with Net Interest Spread.  Advantage small shops, but smaller now:  124 BP to 59BP.

- THIS IS KEY - OPERATING EXPENSES AS A % OF ASSETS:  In 1995 the largest had a 96 BP advantage.  They now have 136 BP advantage.  The large shops are saving $13,600,000 per year per Billion in their office efficiency.  If a $20 M shop had this same ratio, they would be saving $272,000 in expenses each year.  Do you think they would be profitable then?  Heck Yes!!!!  This is the TRUMP RATIO that makes bigger better.  This is also the one area you have the most control over. This is where small shops need to concentrate and COLLABORATE ALREADY!!!!  DO IT FOR YOUR MEMBERS.  Your cu's very existence depends on it. 

- One more fun facet to look at.  This tells us as an industry how vulnerable we are to Non-Interest Income.
Take non-interest income away from the ROA and what do you have?  In 2000 the $100-500 category cu's bottom line went negative first.  In 2001 all the others did as well, except the $1B+ cu's.  They didn't have a negative bottom line until 2004.  That year every cu category went negative, and they all stayed there.  EXCEPT - the $1B+ became positive in 2009 and they are the only category that has remained positive since that time.  EVERY OTHER CATEGORY HAS BEEN NEGATIVE SINCE 2004, WITH THE SMALLER SHOPS SUFFERING THE MOST.  So, only the $B+ shops are making it on the spread.  They don't require NON-Interest income to turn a positive bottom line.  The rest of the shops now need 40 BP, or more, of Non-interest income - JUST TO BREAK EVEN!  Think of it this way... The large shops are standing in neck-deep water.  The rest of us are in over our heads.

So, when we hear that cu's are getting better and pulling out, let's ask which size cu's they are talking about --- The 1B+ shops or, everyone else?